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On February 15, HUD released Mortgagee Letter 2019-01, which provides guidance on the use of Third Party Verification (TPV) services for FHA-insured mortgages. Effective immediately, FHA now allows mortgagees to use TPV services for verification of a borrower’s employment, income, and asset information. The Letter provides specific requirements for each category of information but, in all circumstances, a borrower must authorize the mortgagee’s use of a TPV vendor for the verification (whether direct or electronic).
On February 15, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. The new enforcement actions include a civil money penalty order against an individual, a notice of prohibition against an individual, and three removal and prohibition consent orders against individuals, and a cease and desist consent order described below.
On January 7, the OCC entered into a consent order with a federal savings bank related to allegations of unsafe or unsound banking practices. The OCC alleges the bank failed to implement and maintain an effective compliance management system, risk governance framework, and information technology (IT) program. Among other provisions, the order requires the bank to develop written plans to strengthen the compliance, risk governance, and IT programs, and requires the Board to ensure the bank has adopted and implemented all the corrective actions required by the order. The bank neither admits nor denies the allegations and the OCC did not assess any monetary penalties against the bank.
On February 14, the FDIC released its 2018 Annual Report, which includes, among other things, the audited financial statements of the Deposit Insurance Fund and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund. The report also provides an overview of key FDIC initiatives, performance results, and other aspects of FDIC operations, supervision developments, and regulatory enforcement. Highlights of the report include: (i) the FDIC’s efforts to adopt and issue proposed rules on key regulations under the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA); (ii) efforts to strengthen cybersecurity oversight and help financial institutions mitigate cyber risk; (iii) supervision focus on Bank Secrecy Act/Anti-Money Laundering compliance; and (iv) financial institution letters providing regulatory relief to institutions affected by natural disasters. The report also highlights the FDIC’s monitoring of financial technology developments through its various research groups and committees to better understand how technological efforts may affect the financial market. Lastly, the report covers the agency’s efforts to encourage de novo bank applications, including the December 2018 request for information soliciting comments on the deposit insurance applications process (covered by InfoBytes here).
On February 13, the U.S. Attorney for the Eastern District of California announced a $3.67 million joint settlement with HUD and the Fair Housing Administration (FHA) to resolve allegations that a mortgage lender violated the False Claims Act by falsely certifying compliance with FHA mortgage insurance requirements. According to the settlement agreement, between 2007 and 2009, the mortgage lender, a participant in HUD’s Direct Endorsement Lender program, allegedly knowingly submitted false claims to the FHA loan insurance program by failing to ensure the loans qualified for FHA insurance when they were originated. The announcement notes that the settlement relates solely to allegations, and that there has been no determination of actual liability by the mortgage lender, which did not admit to liability in the settlement.
On February 12, the CFPB issued its semi-annual report to Congress covering the Bureau’s work from April 1, 2018, through September 30, 2018. The report, which is required by the Dodd-Frank Act, addresses issues including problems faced by consumers with regard to consumer financial products or services; significant rules and orders adopted by the Bureau; and various supervisory and enforcement actions taken by the Bureau when acting Director Mick Mulvaney was still in office. The report is the first to be released under Kathy Kraninger, who was confirmed as Director in December 2018. In her opening letter, Kraninger emphasized that during her tenure the Bureau will “vigorously and even-handedly enforce the law,” and will make sure the financial marketplace “is innovating in ways that enhance consumer choice.” Among other things, the report focuses on credit invisibility and mortgage shopping as two significant problems faced by consumers, noting that credit invisibility among adults tends to be concentrated in rural and highly urban areas and, based on recent studies, more than 75 percent of borrowers report applying for a mortgage with only one lender.
The report also includes an analysis of the efforts of the Bureau to fulfill its fair lending mission. The report highlights the most frequently cited violations of Regulation B (ECOA) and Regulation C (HMDA) in fair lending exams during the reporting period and emphasizes that during the reporting period the Bureau did not initiate or complete any fair lending public enforcement actions or refer any matters to the DOJ with regard to discrimination.
On February 12, the Federal Reserve Board, Farm Credit Administration, FDIC, National Credit Union Administration, and the OCC issued a joint final rule amending regulations governing loans secured by properties in special flood hazard areas to implement the provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 concerning private flood insurance. As previously covered by InfoBytes, the provisions, among other things, require regulated lending institutions to accept policies that meet the statutory definition of “private flood insurance,” and clarify that lending institutions may choose to accept private policies that do not meet the statutory criteria for “private flood insurance,” provided the policies meet certain criteria and the lending institutions document that the policies offer “sufficient protection for a designated loan, consistent with general safety and soundness principles.” The final rule takes effect July 1.
On February 6, Fannie Mae and Freddie Mac each issued selling policy updates through SEL-2019-01 and Bulletin 2019-4, respectively. According to Fannie Mae’s Selling Guide announcement, the Guide has been updated to include (i) a change from the Quality Assurance System to the Loan Quality Connect platform for post-purchase reviews; (ii) changes to reflect the retirement of the Cost of Funds Index in January 2020; and (iii) a clarification that completion escrow accounts, which are required for construction that is not complete when the related mortgage is delivered to Fannie Mae, must be custodial accounts that satisfy the criteria in the Fannie Mae Servicing Guide.
Freddie Mac’s Bulletin included selling updates regarding, among other things, (i) changes to the Condominium Project requirements; (ii) updates to commission income treatment based on tax law changes; and (iii) updates to the Certificate of Incumbency forms for sellers and servicers.
On February 11, the DOJ announced a $2.5 million settlement with a South Carolina university to resolve allegations that the university violated the False Claims Act (FCA) by submitting false claims to the U.S. Department of Education. According to the announcement, between 2014 and 2016, the university hired a company, which was partially owned by the university, to recruit students to the university and paid the company based on the number of students who enrolled in university programs, in violation of the prohibition on paying incentive compensation in Title IV of the Higher Education Act. The co-owner of the company originally brought a qui tam lawsuit against the university and will receive $375,000 from the settlement.
On February 11, the OCC released a statement from Comptroller of the Currency Joseph Otting supporting the CFPB’s proposed rule rescinding certain requirements relating to underwriting standards for short-term small-dollar loans. (Covered by InfoBytes here.) Calling the proposal “important and courageous,” Otting praised the Bureau, noting that it was “[t]he shrinking supply and steady demand” that “drove up prices and promoted much less favorable terms.” He continued to state that a framework of rules that allows responsible lenders to compete in the market will make the market “work better for everyone.”
As previously covered by InfoBytes, in May 2018, the OCC released a Bulletin encouraging banks to meet the credit needs of consumers by offering short-term, small-dollar installment loans subject to the OCC’s core lending principles.
On February 7, the DOJ announced a $750,000 settlement with a New Jersey-based mortgage company resolving allegations that the company violated the Servicemembers Civil Relief Act (SCRA) by foreclosing on homes owned by servicemembers without first obtaining the required court orders. The complaint, which was filed on the same day as the settlement, alleges that between 2010 and 2012 the company foreclosed on six homes of SCRA-protected servicemembers. Under the SCRA, lenders must obtain a court order before foreclosing on a servicemember’s home during, or within one year after, active military service, provided that the mortgage originated before the servicemember’s period of military service. The settlement requires the company to, among other things, (i) pay $125,000 to each affected servicemember; (ii) provide staff training to prevent unlawful foreclosures in the future; and (iii) notify the DOJ of future SCRA complaints.
- Daniel P. Stipano to discuss "Dynamic customer due diligence and beneficial ownership from KYC to ongoing CDD and the new rule implementation" at the Puerto Rican Symposium of Anti-Money Laundering
- Michelle L. Rogers to discuss "Preparing for servicing exams in the current regulatory environment" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jon David D. Langlois to discuss "Regulatory risks of convenience fees" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- APPROVED Webcast: NMLS Annual Conference & Ombudsman Meeting: Review and recap
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Melissa Klimkiewicz to discuss "Servicing super session" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jessica L. Pollet to discuss "Law & compliance speedsmarts" at the American Financial Services Association Law & Compliance Symposium
- Daniel P. Stipano to discuss "Lessons learned from recent high profile enforcement actions" at the Florida International Bankers Association AML Compliance Conference
- Moorari K. Shah to provide "Regulatory update – California and beyond" at the National Equipment Finance Association Summit
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program