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Financial Services Law Insights and Observations

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  • HUD increases FHA loan limits in 2020

    Agency Rule-Making & Guidance

    On December 3, HUD announced the maximum FHA loan limits for 2020, issuing Mortgagee Letter 19-19 for FHA-insured forward mortgage case numbers and Mortgagee Letter 19-20 for FHA-insured Home Equity Conversion Mortgage (HECM) case numbers. The general one-unit property limits “floor” increased to $331,760, and the “ceiling” increased to $765,600, while the HECM claim amount also increased to $765,600, effective January 1, 2020.

    Agency Rule-Making & Guidance FHA HUD HECM Mortgages Reverse Mortgages

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  • FDIC posts enforcement actions manual

    Agency Rule-Making & Guidance

    On December 2, the FDIC announced the release of its full enforcement manual (manual). According to Financial Institution Letter (see FIL-76-2019), the manual, which was posted to the FDIC website, is meant to “support the work of field office, regional office, and Washington office staff involved in processing and monitoring enforcement actions.” The letter states that the manual was released to promote “greater transparency” to FDIC-insured institutions and other concerned parties as to the agency’s enforcement policies and procedures. Additionally, the letter cautions that the manual “does not interpret any law or regulation” nor does it “establish supervisory requirements” or “industry guidance.”

    Agency Rule-Making & Guidance FDIC Banking Enforcement

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  • FSOC issues final guidance on nonbank designations; highlights key risks in annual report

    Agency Rule-Making & Guidance

    On December 4, the Financial Stability Oversight Council (FSOC) issued final interpretive guidance to revise and update 2012 guidance concerning nonbank financial company designations. According to Treasury Secretary Steven T. Mnuchin, the guidance “enhances [FSOC’s] ability to identify, assess, and respond to potential risks to U.S. financial stability. . . by promoting careful analysis and creating a more streamlined process.” Among other things, the guidance (i) implements an activities-based approach for identifying, assessing, and addressing potential risks and threats to financial stability in the U.S., allowing FSOC to work with federal and state financial regulators to implement appropriate actions when a potential risk is identified; (ii) enhances the analytic framework for potential nonbank financial company designations, which includes a cost-benefit analysis and a review of the likelihood of a company’s material financial distress determined by its vulnerability to a range of factors; and (iii) enhances the efficiency and effectiveness of the nonbank financial company designation process by condensing the process into two stages and increasing “engagement with and transparency to” companies under review, as well as their regulators, through the creation of pre- and post-designation off ramps.

    FSOC also released its 2019 annual report to Congress, which reviews financial market developments, identifies emerging risks, and offers recommendations to enhance financial stability. Key highlights include:

    • Cybersecurity. FSOC states that “[g]reater reliance on technology, particularly across a broader array of interconnected platforms, increases the risk that a cybersecurity event will have severe consequences for financial institutions.” Among other things, FSOC recommends continued robust, comprehensive cybersecurity monitoring, and supports the development of public and private partnerships to “increase coordination of cybersecurity examinations across regulatory authorities.”
    • Nonbank Mortgage Origination and Servicing. The report adds the increasing share of mortgages held by nonbank mortgage companies to its list of concerns. FSOC notes that of the 25 largest originators and servicers, nonbanks originate roughly 51 percent of mortgages and service approximately 47 percent—a notable increase from 2009 where nonbanks only originated 10 percent of mortgages and serviced just 6 percent. FSOC states that risks in nonbank origination and servicing arise because most nonbanks have limited liquidity as compared to banks and rely more on short-term funding, among other things. FSOC recommends that federal and state regulators continue to coordinate efforts to collect data, identify risks, and strengthen oversight of nonbanks in this space.
    • Financial Innovation. The report discusses the benefits of new financial products and practices, but cautions that these may also create new risks and vulnerabilities. FSOC recommends that these products and services—particularly digital assets and distributed ledger technology—should be continually monitored and analyzed to understand their effects on consumers, regulated entities, and financial markets. 

    Agency Rule-Making & Guidance FSOC Nonbank Mortgages Mortgage Origination Mortgage Servicing Privacy/Cyber Risk & Data Security Fintech

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  • Regulators issue joint statement on using alternative data in underwriting

    Agency Rule-Making & Guidance

    On December 3, the Federal Reserve, the CFPB, the FDIC, the NCUA, and the OCC (agencies) issued an Interagency Statement on alternative data use in credit underwriting, highlighting applicable consumer protection laws and noting risks and benefits. (See press release here). According to the statement, alternative data use in underwriting may “lower the cost of credit” and expand credit access, a point previously raised by the CFPB and covered in InfoBytes. Specifically, the potential benefits include: (i) increased “speed and accuracy of credit decisions”; (ii) lender ability to “evaluate the creditworthiness of consumers who currently may not obtain credit in the mainstream credit system”; and (iii) consumer ability “to obtain additional products and/or more favorable pricing/terms based on enhanced assessments of repayment capacity.” “Alternative data” refers to information not usually found in traditional credit reports or typically provided by customers, including for example, automated “cash flow evaluation” which evaluates a borrower’s capacity to meet payment obligations and is derived from a consumer’s bank account records. The statement indicates that this approach can improve the “measurement of income and expenses” of consumers with steady income over time from multiple sources, rather than a single job. The statement also recognizes that the way in which entities use alternative data—for example, implementing a “Second Look” program, where alternative data is only used for applicants that would otherwise be denied credit—can increase credit access. The statement points out that use of alternative data may increase potential risks, and that those practices must comply with applicable consumer protection laws, including “fair lending laws, prohibitions against unfair, deceptive, or abusive acts or practices, and the Fair Credit Reporting Act.” Therefore, the agencies encourage entities to incorporate appropriate “robust compliance management” when using alternative data in order to protect consumer information.

    Agency Rule-Making & Guidance CFPB Consumer Finance OCC FDIC NCUA Federal Reserve Underwriting Alternative Data

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  • CFPB to amend Remittance Transfer Rule

    Agency Rule-Making & Guidance

    On December 3, the CFPB issued a Notice of Proposed Rulemaking (NPRM) relating to the Remittance Transfer Rule (Rule), which implements the Electronic Fund Transfer Act’s (EFTA) protections for consumers sending international money transfers, or remittance transfers. The NPRM makes three proposals. First, the Bureau proposes to increase the Rule’s safe harbor threshold, mitigating compliance costs for financial institutions. The EFTA and the Rule consider a “remittance transfer provider” to include “any person that provides remittance transfers for a customer in the normal course of business.” However, the Rule currently includes a “safe harbor” provision that excludes persons that process 100 or fewer remittance transfers annually. The NPRM proposes increasing this threshold from 100 to 500 international remittance transfers per year. According to the Bureau’s announcement, the change would “reduce the burden on over 400 banks and almost 250 credit unions that send a relatively small number of remittances—less than .06 percent of all remittances.”

    Second, the NPRM proposes adopting two permanent exceptions. The first is a permanent statutory exception that would allow certain insured institutions to estimate exchange rates and money transfer fees they are required to disclose, rather than provide consumers with exact costs when they send money abroad. Such an exemption would only apply in instances where a remittance payment is made in the local currency of the designated recipient’s country and the insured institution processing the transaction made 1,000 or fewer remittance payments to that country in the previous calendar year. An identical exemption provision is currently set to expire July 21, 2020. (Previous InfoBytes coverage here.) The NPRM proposes adopting a second permanent exception to allow insured institutions to estimate covered third-party fees for remittance transfers to a recipient’s institution provided, among other things, the insured institution made 500 or fewer remittance transfers to the recipient’s institution the prior calendar year.

    Third, the NPRM requests comments on a list of safe harbor countries for which providers may use estimates for remittance transfers.

    Comments must be received 45 days after publication in the Federal Register. In conjunction with the NPRM, the Bureau also released a summary of the NPRM, a table of contents, and an unofficial redline of the proposed amendments to the Rule.

    Agency Rule-Making & Guidance CFPB Remittance Transfer Rule EFTA Regulation E Remittance

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  • Special Alert: Banks no longer required to file SARs for hemp-related businesses

    Agency Rule-Making & Guidance

    Federal and state banking regulators confirmed in a December 3 joint statement that banks are no longer required to file a suspicious activity report on customers solely because they are “engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations.”

    * * *

    Click here to read the full special alert.

    For questions about the alert and related issues, please visit our Bank Secrecy Act/Anti-Money Laundering practice page, or contact a Buckley attorney with whom you have worked in the past.

    Agency Rule-Making & Guidance Federal Reserve FDIC FinCEN OCC CSBS Department of Agriculture Bank Secrecy Act SARs Hemp Businesses Special Alerts

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  • FHFA increases conforming loan limits for 2020

    Agency Rule-Making & Guidance

    On November 26, the FHFA announced that it will raise the maximum conforming loan limits for mortgages purchased in 2020 by Fannie Mae and Freddie Mac from $484,350 to $510,400. In high-cost areas, such as Los Angeles, New York, San Francisco, and Washington, D.C., the maximum loan limit will be $765,600. For a county-specific list of the maximum loan limits in the U.S., click here.

    Agency Rule-Making & Guidance FHFA Mortgages Mortgage Lenders Fannie Mae Freddie Mac Conforming Loan

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  • FCRA allowable disclosure charge remains unchanged

    Agency Rule-Making & Guidance

    On November 27, the CFPB announced that the ceiling on the maximum allowable charge for disclosures by a consumer reporting agency to a consumer pursuant to section 609 of the FCRA will remain unchanged at $12.50 for the 2020 calendar year. The final rule announcing the amount was published the same day in the Federal Register.

    Agency Rule-Making & Guidance CFPB FCRA Disclosures Consumer Reporting Agency

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  • Special Alert: OCC and FDIC propose rules to override Madden

    Agency Rule-Making & Guidance

    On November 18, 2019 the Office of the Comptroller of the Currency (“OCC”) issued a proposed rule to clarify that when a national bank or savings association sells, assigns, or otherwise transfers a loan, the interest permissible prior to the transfer continues to be permissible following the transfer. The very next day, the Federal Deposit Insurance Corporation (“FDIC”) followed suit with respect to state chartered banks. The proposals are intended to address problems created by the U.S. Court of Appeals for the Second Circuit in Madden v. Midland Funding, LLC, a decision that cast doubt, at least in the Second Circuit states, about the effect of a transfer or assignment on a bank loan’s stated interest rate that was nonusurious when made. Comments on these proposals are due 60 days following publication in the Federal Register, and as noted below, the case for robust banking industry comment is more compelling than is typically the case.

    * * *

    Click here to read the full special alert.

    If you have any questions about the alert or other related issues, please visit our Fintech practice page or contact a Buckley attorney with whom you have worked in the past.

    Agency Rule-Making & Guidance OCC FDIC Fintech Usury Madden Interest Rate Special Alerts

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  • CFPB publishes fall 2019 rulemaking agenda

    Agency Rule-Making & Guidance

    On November 20, the Office of Information and Regulatory Affairs released the CFPB’s fall 2019 rulemaking agenda. According to a Bureau announcement, the information released represents regulatory matters it “reasonably anticipates having under consideration during the period from October 1, 2019, to September 30, 2020.”

    Key rulemaking initiatives include:

    • Property Assessed Clean Energy (PACE) Financing: As previously covered by InfoBytes, the Bureau published an Advanced Notice of Proposed Rulemaking (ANPR) in March 2019 seeking feedback on the unique features of PACE financing and the general implications of regulating PACE financing under TILA. The Bureau notes it is currently reviewing comments as it considers next steps.
    • Small Business Rulemaking: On November 6, the Bureau held a symposium on small business lending to gather information for upcoming rulemaking (previously covered by InfoBytes here). The Bureau emphasized it will focus on rulemaking that would not impede small business access to credit by imposing unnecessary costs on financial institutions. According to the Bureau, materials will be released prior to convening a panel under the Small Business Regulatory Enforcement Fairness Act to consult with businesses that may be affected by future rulemaking.
    • HMDA/Regulation C: The Bureau plans to finalize the permanent thresholds for reporting data on open-end lines of credit and closed-end mortgage loans in March 2020, and expects to issue a Notice of Proposed Rulemaking (NPRM) to govern the collection of HMDA data points and the disclosure of this data in July 2020. Both initiatives follow an NPRM and an ANPR issued by the Bureau in May (previously covered by InfoBytes here).
    • Payday, Vehicle Title, and Certain High-Cost Installment Loans: As previously covered by InfoBytes, the Bureau published two NPRMs related to certain payday lending requirements under the final rule titled “Payday, Vehicle Title, and Certain High-Cost Installment Loans.” Specifically, the Bureau proposed to rescind the portion of the rule that would make it an unfair and abusive practice for a lender to make covered high-interest rate, short-term loans or covered longer-term balloon payment loans without reasonably determining that the consumer has the ability to repay, and to delay the rule’s compliance date for mandatory underwriting provisions. The Bureau notes it is currently reviewing comments and expects to issue a final rule in April 2020.
    • Debt Collection: Following an NPRM issued in May concerning debt collection communications, disclosures, and related practices (previously covered by InfoBytes here), the Bureau states it is currently “engaged in testing of consumer disclosures related to time-barred debt disclosure issues that were not addressed in the May 2019 proposal.” Once testing has concluded, the Bureau will assess the need for publishing a supplemental NPRM related to time-barred debt disclosures.
    • Remittance Transfers: The Bureau expects in December to issue a proposed rule to address the July 2020 expiration of the Remittance Rule’s temporary exception for certain insured depository institutions from the rule’s disclosure requirements related to the estimation of fees and exchange rates. (Previously covered by InfoBytes here.)
    • GSE Patch: The Bureau plans to address in December the so-called GSE patch, which confers Qualified Mortgage status for loans purchased or guaranteed by Fannie Mae and Freddie Mac while those entities operate under FHFA conservatorship. The patch is set to expire in January 2021, or when Fannie and Freddie exit their conservatorships, whichever comes first. (See Buckley Special Alert here.)

    The Bureau further notes in its announcement the addition of entries to its long-term regulatory agenda “to address issues of concern in connection with loan originator compensation and to facilitate the use of electronic channels of communication in the origination and servicing of credit card accounts.” 

    Agency Rule-Making & Guidance CFPB Rulemaking Agenda PACE Programs Small Business Lending HMDA Regulation C Payday Lending Payday Rule Debt Collection Remittance Transfer Rule GSE Qualified Mortgage

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