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Chopra shares prepared remarks about the lessons from 2008
In his recent address at the Better Markets Conference and his address at the Mortgage Collaborative National Conference, CFPB Director Rohit Chopra reflected on lessons from the 2008 financial crisis, discussing the regulatory failures exemplified by mortgage entities’ risky practices and emphasized the post-crisis reforms, including the creation of the CFPB. Chopra highlighted the CFPB's role in implementing crucial mortgage industry standards and its positive impact on borrower protections. He also mentioned the challenges facing the mortgage market today and the legal battles over CFPB rules, touching upon an upcoming Supreme Court case challenging the CFPB's constitutionality and its potential consequences for financial stability, underlining the importance of regulatory rules for financial markets and household finances. Chopra highlighted the CFPB's role in implementing standards for ensuring borrowers' ability to repay through the qualified mortgage and ability-to-repay rule, which granted legal immunity to compliant lenders. As a result of the financial crisis, Congress set requirements related to mortgage data, mortgage servicing, and mortgage lender compensation. Much of the authority that had been held by the OCC, the Fed, and the Office of Thrift Supervision were transferred to the nascent CFPB. In his remarks, Chopra also outlined areas where further action is needed, including open banking, financial data rights, bank mergers, the effectiveness of "living wills" for large financial firms, and the regulation of shadow banks.
California AG announces settlement with mortgage servicer
On September 1, California Attorney General (AG) Rob Bonta announced a settlement with a mortgage servicer for its alleged failure to properly process and grant mortgage deferment requests from California military reservists called to active duty. California’s Military and Veterans Code, which includes the California Military Families Financial Relief Act, allows reservists to delay paying mortgages, credit cards, property taxes, car loans, utility bills, and student loans. To defer payment, they must submit a written request and their military orders to the entity to which their payments are due. The AG noted that the California Department of Justice investigated the mortgage servicer’s processes for handling mortgage deferment requests and found that the servicer delayed granting the deferment requests, requested information for eligibility review outside of the 30-day timeframe to do so, and improperly denied deferment requests, on at least 10 occasions. Furthermore, the servicer allegedly attempted to collect payment from some borrowers during the requested deferral period by making calls and sending notices that warned that the servicer would foreclose on the borrowers’ properties if they failed to pay. The servicer also allegedly incorrectly charged some borrowers late fees and other charges for nonpayment of payments that should have been deferred. Finally, the servicer allegedly provided incorrect negative credit information to credit reporting agencies.
Under the terms of the settlement, the servicer agreed to, among other things, (i) pay $58,000 in civil money penalties; (ii) “remediate consumer harm”; (iii) disclose deferment request status to borrowers; and (iv) provide annual reports to the AG documenting compliance with the injunctive terms.
Federal and state financial regulatory agencies issue joint statement on the effects of Hurricane Idalia on supervisory practices
On September 1, the FDIC, Fed, NCUA, OCC and CSBS issued a joint statement recognizing the serious impact of Hurricane Idalia on the customers and operations of many financial institutions in the effected area.
The guidance discusses the following aspects of financial institution operations:
- Lending: The agencies encourage financial institutions to work constructively with borrowers in affected communities, including prudent efforts to adjust existing loan terms, and declares that the agencies will not subject such efforts to examiner criticism. “The agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound practices as well as in the public interest.”
- Temporary Facilities: The agencies understand that many financial institutions face staffing, power, telecommunications, and other challenges in re-opening facilities and will expedite, as appropriate, any request to operate in temporary facilities.
- Publishing Requirements: The agencies understand that the damage that the hurricane caused may affect compliance with publishing and other requirements for branch closings, relocations, and temporary facilities. Impacted institutions should contact their primary federal and/or state regulator.
- Regulatory Reporting Requirements: Impacted institutions that expect to encounter difficulty meeting the agencies' reporting requirements should contact their primary federal and/or state regulator to discuss their situation.
- Community Reinvestment Act: Financial institutions may receive CRA consideration for community development loans, investments or services that revitalize or stabilize federally designated disaster areas.
- Investments: The agencies encourage financial institutions to monitor municipal securities and loans affected by the hurricane, including those related to local government projects.
OCC allows institutions in Florida affected by Hurricane Idalia to temporarily close
On August 29, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices in areas of Florida affected by Hurricane Idalia “for as long as deemed necessary for bank operation or public safety.” In issuing the proclamation, the OCC noted that only bank offices directly affected by potentially unsafe conditions should close, and that banks should make every effort to reopen as quickly as possible to address customers’ banking needs. The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on natural disasters and other emergency conditions.
Find continuing InfoBytes coverage on disaster relief here.
OCC announces Tropical Storm Hilary disaster relief
On August 21, the OCC issued a proclamation providing discretion to OCC-regulated institutions to close offices affected by Tropical Storm Hilary in California, Nevada, and Arizona “for as long as deemed necessary for bank operation or public safety.” The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions. According to the OCC, only bank offices directly affected by potentially unsafe conditions should close, and institutions should make every effort to reopen as quickly as possible to address customers’ banking needs.
Find continuing InfoBytes coverage on disaster relief here.
OCC releases enforcement actions and terminations
On August 17, 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 civil money penalty orders, formal agreements, and prohibition orders, each issued with the consent of the parties. The OCC also announced a termination of an existing enforcement action against a bank. Included in the release is a formal agreement entered into with a Minnesota-based bank on June 27 in connection with OCC findings of alleged unsafe or unsound practices relating to, among other things, consumer compliance and third party risk management. In connection to violations of certain Flood Disaster Protection Act rules, the agreement requires the bank to (i) establish a compliance committee to monitor the bank’s progress in complying with the agreement’s provisions; (ii) report such progress to the bank’s board of directors on a quarterly basis; and (iii) implement a written consumer compliance program. This program must also include procedures and guidance for compliance with all consumer protection laws, rules, and regulations to which the bank should adhere, an independent audit program, a comprehensive training program for bank personnel in the consumer protection laws, rules, and regulations as appropriate, and policies to manage risks in the credit process. It also separately requires revisions to the third-party risk management program addressing due diligence and monitoring of third parties, including monitoring for compliance with consumer protection-related laws and regulations.
Agencies announce guidance regarding institutions affected by Hawaiian wildfires.
On August 17, the Federal Reserve Board, the FDIC, the Hawaii Department of Commerce and Consumer Affairs’ Division of Financial Institutions, the NCUA, and the OCC issued a joint interagency statement covering supervisory practices for financial institutions affected by the Hawaiian wildfires. The agencies announced that, among other things, the regulators would expedite requests made by institutions for temporary operating facilities. The regulators noted that in most cases, “telephone notice to the primary federal and/or state regulator will suffice” for such requests. The agencies also encouraged financial institutions to work with borrowers in affected communities, explaining that “prudent efforts” to adjust terms on existing loans should not be subject to examiner criticism, in light of the unusual circumstances faced by the financial institutions.
Further, the agencies announced that they understood that damage caused by the wildfires may affect the ability of institutions to comply with publishing requirements for branch closings, relocations, or temporary locations, and instructed institutions experiencing such difficulties to contact their primary federal and/or state regulator. The agencies additionally instructed institutions that face difficulty meeting reporting requirements due to the wildfires to contact their primary federal and/or state regulator, explaining that the agencies “do not expect to assess penalties or take other supervisory action” against institutions that take reasonable steps to comply with reporting requirements. The agencies also announced that financial institutions may receive CRA consideration for loans, investments, or services that revitalize or stabilize federally designated disaster areas. Finally, the agencies encouraged financial institutions to monitor any municipal securities and loans affected by the Hawaii wildfires.
SBA offers disaster assistance to businesses and residents
On August 16, the Small Business Administration (SBA) announced the availability of low-interest disaster loans available to businesses and residents across the nation.
- Mississippi – In light of damage from severe storms, straight-line winds, and flooding that occurred between June 14-19, certain private non-profit businesses (PNP) that do not provide critical services of a governmental nature are eligible to apply for low-interest disaster loans. PNP organizations may borrow up to $2 million with an interest rate of 2.375% to repair or replace damage. SBA is also offering economic injury disaster loans to help meet the needs of PNP organizations. The filing deadline is Oct 11, and the deadline to submit economic injury applications is May 13, 2024.
- Illinois – Following the announcement of the presidential disaster declaration due to severe storms and flooding June 29-July 2, SBA is offering affected businesses and residents in Illinois low-interest loans. SBA detailed that disaster loans up to $500,000 are available to homeowners to replace or repair damage, and “[i]nterest rates are as low as 4% for businesses, 2.375% for nonprofit organizations, and 2.5% for homeowners and renters, with terms up to 30 years.” The filing deadline is Oct 16, and the deadline to submit economic injury applications is May 13, 2024.
- New Jersey – In light of damage from severe storms and flooding that occurred June 14-19, certain PNP organizations that do not provide critical services of a governmental nature are eligible to apply for low-interest disaster loans. PNP organizations may borrow up to $2 million with an interest rate of 2.375% with terms up of to 30 years to repair or replace damage. SBA is also offering economic injury disaster loans to help meet the needs of PNP organizations. The filing deadline is Oct 10, and the deadline to submit economic injury applications is May 13, 2024.
- Oklahoma – SBA is making low-interest federal disaster loans available for certain PNP organizations in certain counties following the announcement of the presidential disaster declaration. PNP organizations may borrow up to $2 million with an interest rate of 2.375% with terms of up to 30 years to repair or replace damage. “SBA can also lend additional funds to help with the cost of improvements to protect, prevent or minimize the same type of disaster damage from occurring in the future.”
OCC updates bank accounting guidance
On August 15, the OCC released an annual update to its Bank Accounting Advisory Series (BAAS) which is intended to address a variety of accounting topics and promote consistent application of accounting standards and regulatory reporting among OCC-supervised banks. The BAAS reflects updates to clarify the accounting standards issued by the Financial Accounting Standards Board related to, among other things, the elimination of recognition and the measurement of troubled debt restructurings by creditors, loan modifications, and credit losses. The August 2023 edition also includes answers to frequently asked questions from industry and bank examiners. Additionally, the OCC notes that the BAAS does not represent OCC rules or regulations but rather “represents the Office of the Chief Accountant’s interpretations of generally accepted accounting principles and regulatory guidance based on the facts and circumstances presented.”
OCC allows Hawaii institutions to temporarily close, SBA offers loans
On August 10, the OCC issued a proclamation permitting OCC-regulated institutions to close offices in areas affected by the wildfires in Hawaii. In issuing the proclamation, the OCC noted that only bank offices directly affected by potentially unsafe conditions should close, and that institutions should make every effort to reopen as quickly as possible to address customers’ banking needs. The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions.
In addition, the Small Business Association (SBA) announced that it is offering low-interest federal disaster loans to Hawaii businesses and residents and California businesses and residents affected by the severe winter storms, straight-line winds, flooding, landslides and mudslides that occurred February 21 – July 10.
Interest rates for these loans can be as low as 4% for businesses, 2.375% for private nonprofit organizations and 2.375% (2.5% for Hawaii) for homeowners and renters with terms up to 30 years. Loan amounts and terms are set by SBA and are based on each applicant’s financial condition, with loans up to $500,000 for homeowners to repair or replace damaged or destroyed real estate and $100,000 to repair or replace damaged or destroyed personal property, including personal vehicles. The loans are part of the SBA’s commitment to “providing federal disaster loans swiftly and efficiently, with a customer-centric approach to help businesses and communities recover and rebuild.”
Find continuing InfoBytes coverage on disaster relief here.