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FCC publishes Restoring Internet Freedom Order overturning net neutrality
On February 22, the FCC formally published its Restoring Internet Freedom Order (Order) to overturn the 2015 Title II Order (known as, “Net Neutrality” rules). As previously covered in InfoBytes, the FCC voted last December to remove the restrictions barring internet service providers (ISPs) from slowing down or speeding up web traffic based on business relationships. Among other things, the Order’s “light-touch regulatory framework” will require ISPs to “publicly disclose accurate information regarding the network management practices, performance characteristics, and commercial terms of its broadband internet access services sufficient to enable consumers to make informed choices regarding the purchase and use of such services and entrepreneurs and other small businesses to develop, market, and maintain internet offerings. Such disclosure shall be made via a publicly available, easily accessible website or through transmittal to the Commission.” The Order takes effect April 23. The FCC will publish a separate document in the Federal Register announcing the effective date of certain delayed amendatory instructions and the Declaratory Ruling, Report and Order, and Order.
As discussed previously in InfoBytes, two governors signed executive orders last month designed to protect net neutrality in their states.
FFIEC releases 2018 HMDA reporting guide
On February 21, the Federal Financial Institutions Examination Council (FFIEC) issued the 2018 edition of the “A Guide to HMDA Reporting: Getting it Right!” which reflects updates to the Home Mortgage Disclosure Act (HMDA) rule, effective January 1, 2018. The HMDA reporting guide is updated annually to assist institutions with their reporting requirements for the specified calendar year. Additionally, the CFPB recently launched their 2018 Loan/Application Register (LAR) Formatting Tool to assist small volume lenders in creating an electronic file to submit to the FFIEC HMDA platform, previously covered by InfoBytes here.
FDIC adopts final rule to remove references to external credit ratings from international banking regulations
On February 15, the FDIC announced it adopted a final rule, which removes references to external credit ratings from its international banking regulations related to permissible investment activities and the pledging of assets. According to FIL-9-2018, among other things, the amended final rule (adopted February 14) modifies the FDIC’s definition of “investment grade” under FDIC Rules and Regulations Part 347 by replacing references to external credit ratings with standards of creditworthiness that conform to Section 939A of the Dodd-Frank Act. As FIL-9-2018 explains, the final rule defines “investment grade” as a security issued by an entity that has adequate capacity to meet financial commitments for the projected life of the exposure. And as the final rule itself explains, this revision was made to “encourage regular, in-depth analysis by the banking organization of credit risks of securities, which is a prudent practice already expected of banks.” The final rule takes effect on April 1.
Fannie and Freddie update charge-off recommendations in servicing guides
On February 14, Fannie Mae issued Servicing Guide Announcement SVC-2018-01 which, in addition to other items, updates the requirements for servicer charge-off recommendations, as directed by the Federal Housing Finance Agency (FHFA). According to Fannie Mae’s announcement, effective August 1, a servicer may submit a request to cease collection efforts and charge off a delinquent loan when either (i) a servicer deems the debt uncollectable and all appropriate measures to collect on the debt have been exhausted; or (ii) for certain mortgage loans, a foreclosure sale cannot be completed and at least one situation outlined in section D1-1-02 of the Servicing Guide applies. Freddie Mac also issued Bulletin 2018-2, which covers similar policy changes. According to both announcements, the change in charge-off policies reflects FHFA’s desire to avoid “neighborhood blight” for vacant properties.
VA issues guidance for IRRRL loans
On February 1, the Department of Veterans Affairs released Circular 26-18-1, which informs lenders about new policy guidance for Interest Rate Reduction Refinance Loans (IRRRL) disclosures. Effective April 1, lenders are required to provide the Veteran’s Statement disclosure and the Lender Certification disclosure (if applicable) with the initial disclosure documents, which should be no later than three business days after receiving an application, and should confirm delivery in the Loan Guaranty Certificate process. According to the circular, the early disclosure of the Veteran’s Statement will assist the borrower in making informed decisions about whether the IRRRL is in their best interest. The circular also provides details for lenders about what specific information needs to be included in the Veteran’s Statement throughout the loan process.
CFPB releases HMDA formatting tool and updates filing instructions
On February 1, the CFPB launched their 2018 Loan/Application Register (LAR) Formatting Tool (the “Tool”). According to the website, the Tool is intended to assist small volume lenders in creating an electronic file to submit to the HMDA Platform. The Tool is only intended to be used by institutions that are not able to format their HMDA data into a “pipe delimited text file.” The Bureau also announced minor updates to the 2018 Filing Instructions Guide for HMDA. As previously covered by InfoBytes, the CFPB’s supervisory examinations of 2018 HMDA data will be “diagnostic” to help “identify compliance weaknesses, and will credit good-faith compliance efforts.” The CFPB does not intend to impose penalties with respect to errors reported in the 2018 data.
Ginnie Mae updates MBS program risk parameters
On January 25, Ginnie Mae issued an All Participant Memorandum (APM 18-02) announcing updates to multiple chapters of their MBS Guide. According to the memo, effective immediately, Chapters 3, 5, 9, 10, and 18 now provide expanded information about acceptable risk parameters for Ginnie Mae portfolios and applicable non-compliance consequences. Specifically, Chapter 3 is updated to include examples of violations of program requirements that Ginnie Mae considers outside of acceptable risk parameters, such as:
- “Rates of delinquency that are above the thresholds published in Chapter 18(3)(C) or that otherwise pose a risk to an Issuer’s responsibility to advance P&I payments to security-holders”;
- “‘Run-off’ portfolios, or business models that involve the recurring sale of substantially all the servicing created by issuance”;
- “Heavily-concentrated portfolios”; and
- “Recurring issuance of multi-issuer program packages that exhibit prepayment activity that is substantially different from that of comparable packages.”
Chapter 3 also includes examples of non-compliance restrictions that may be imposed, including but not limited to, requiring an Issuer’s portfolio to be recalibrated to fall within acceptable risk parameters.
Other MBS Guide updates include:
- Chapter 5. Expansion on risks associated with non-compliance of MBS program requirements, such as, (i) “denial of authority to issue additional securities;” and (ii) “the imposition of civil money penalties.”
- Chapter 9. Participation in a multiple Issuer pool is considered an event of non-compliance if Ginnie Mae has restricted, in writing, the Issuer’s ability to participate.
- Chapter 10. GinnieNET must be used for paperless electronic processing of pools submitted for immediate transfer of Issuer responsibility. Ginnie Mae reserves the right to reevaluate an Issuer’s participation in the Pools Issued for Immediate Transfer (PIIT) program based on compliance with Chapter 3’s applicable risk parameters.
Chapter 18. Failure to maintain delinquency rates may result in denial of participation in multiple Issuer pools, the PIIT program, and/or the imposition of additional financial obligations.
CFPB finalizes prepaid rule updates; moves effective date
On January 24, the CFPB released updates to the final rule governing prepaid accounts (Rule) delaying the effective date of the rule by one year, to April 1 2019. In December, as previously covered by InfoBytes, the Bureau announced its plan to delay the effective date and adopt final amendments to the Rule. In addition to certain clarifications and other minor adjustments, the updates include: (i) finalizing that the requirement for consumers to register their accounts to receive fraud and error protection benefits will only be applied prospectively, after a consumer’s identity has been verified; and (ii) creating a limited exception to certain provisions of the Rule for instances where traditional credit card accounts, subject to Regulation Z open-end credit rules, are linked to digital wallets.
Agencies offer CRA credit for certain disaster relief efforts
On January 25, the FDIC, OCC, and the Fed (collectively “Agencies”) issued an interagency statement on the availability of Community Reinvestment Act (CRA) credit for financial institution activities that “help revitalize or stabilize the U.S. Virgin Islands and Puerto Rico, which were designated as major disaster areas by the President because of Hurricane Maria.” Provided financial institutions continue to be responsive to the community needs of their own CRA assessment areas, the Agencies will now give “favorable consideration” to community development activities, such as assistance to displaced people, in the areas impacted by Hurricane Maria. The Agencies state that they may give higher consideration to activities aimed at assisting the low- and moderate-income affected areas but that general consideration will be given regardless of median or personal income.
CFPB plans to reconsider payday rule
On January 16, the CFPB announced plans to reconsider its final rule addressing payday loans, vehicle titles loans, and certain other extensions of credit (previously covered in a Buckley Sandler Special Alert) by engaging in a rulemaking process. While the announcement was made on the effective date of the final rule, most provisions do not require compliance until August 19, 2019. However, the deadline for submitting a preliminary approval to become a registered information system is April 16, 2018. The Bureau noted that it will consider waiver requests from potential applicants.
Notably, this marks the second recent announcement in which the agency refers to itself as “the Bureau of Consumer Financial Protection,” instead of the more-commonly used “Consumer Financial Protection Bureau.” Both titles are used in the text of the Dodd-Frank Act, though the sections of the Dodd-Frank Act authorizing creation of the CFPB used the “Bureau of Consumer Financial Protection” naming convention. The agency also previously updated its mission statement located at the bottom of each release.
For more InfoBytes coverage on the latest CFPB changes, click here.