Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • CFPB issues summer supervisory highlights

    Federal Issues

    On June 29, the CFPB released its summer 2021 Supervisory Highlights, which details its supervisory and enforcement actions in the areas of auto loan servicing, consumer reporting, debt collection, deposits, fair lending, mortgage origination and servicing, payday lending, private education loan origination, and student loan servicing. The findings of the report, which are published to assist entities in complying with applicable consumer laws, cover examinations that generally were completed between January and December of 2020. Highlights of the examination findings include:

    • Auto Loan Servicing. Bureau examiners identified unfair acts or practices related to lender-placed collateral protection insurance (CPI), including instances where servicers charged unnecessary CPI or charged for CPI after repossession. Examiners also identified unfair acts or practices related to payoff amounts where consumers had ancillary product rebates due, and also found unfair or deceptive acts or practices related to payment application.
    • Consumer Reporting. The Bureau found deficiencies in consumer reporting companies’ (CRCs) FCRA compliance related to the following requirements: (i) accuracy; (ii) security freezes applicable to certain CRCs; and (iii) ID theft block requests. Specifically, examiners found that CRCs continued to include information from furnishers despite receiving furnisher dispute responses that “suggested that the furnishers were no longer sources of reliable, verifiable information about consumers.” Additionally, the report noted instances where furnishers failed to update and correct information or conduct reasonable investigations of direct disputes.
    • Debt Collection. The report found that examiners found instances of FDCPA violations where debt collectors (i) made calls to a consumer’s workplace; (ii) communicated with third parties; (iii) failed to stop communications after receiving a written request or a refusal to pay; (iv) harassed consumers regarding their inability to pay; (v) communicated, and threatened to communicate, false credit information to CRCs; (vi) made false representations or used deceptive collection means; (vii) entered inaccurate information regarding state interest rate caps into an automated system; (viii) unlawfully initiated wage garnishments; and (ix) failed to send complete validation notices.
    • Deposits. The Bureau discussed violations related to Regulation E and Regulation DD, including error resolution violations, issues with provisional credits, failure to investigate, failure to remediate errors, and overdraft opt-in and disclosure violations.
    • Fair Lending. The report noted instances where examiners cited violations of HMDA/ Regulation C involving HMDA loan application register inaccuracies, and instances where lenders, among other things, violated ECOA/Regulation B “by engaging in acts or practices directed at prospective applicants that would have discouraged reasonable people in minority neighborhoods in Metropolitan Statistical Areas (MSAs) from applying for credit.”
    • Mortgage Origination. The Bureau cited violations of Regulation Z and the CFPA related to loan originator compensation, title insurance disclosures, and deceptive waivers of borrowers’ rights in security deed riders and loan security agreements.
    • Mortgage Servicing. The Bureau cited violations of Regulation X, including those related to dual tracking violations, misrepresentations regarding foreclosure timelines, and PMI terminations.
    • Payday Lending. The report discussed violations of the CFPA for payday lenders, including falsely representing an intent to sue or that a credit check would not be run, and presenting deceptive repayment options to borrowers that were contractually eligible for no-cost repayment plans.
    • Private Education Loan Origination. Bureau examiners identified deceptive acts or practices related to the marketing of private education loan rates.
    • Student Loan Servicing. Bureau examiners found several types of misrepresentations servicers made regarding consumer eligibility for the Public Service Loan Forgiveness (PSLF) program, and identified unfair acts or practices related to a servicer’s “failure to reverse negative consequences of automatic natural disaster forbearances.” Additionally, examiners identified unfair act or practices related to failing to honor consumer payment allocation instructions or providing inaccurate monthly payment amounts to consumers after a loan transfer.

    The report also highlights recent supervisory program developments and enforcement actions.

    Federal Issues CFPB Supervision Consumer Finance Consumer Reporting Redlining Foreclosure Auto Finance Debt Collection Deposits Fair Lending Mortgage Origination Mortgage Servicing Mortgages Payday Lending Student Lending

  • FHA extends Covid-19 flexibilities

    Federal Issues

    Recently, FHA announced the extension of several Covid-19-related flexibilities for single-family lenders and servicers. Specifically, Mortgagee Letter 2021-16 will “allow industry partners additional opportunity to utilize flexible guidance related to” self-employment and rental income verification for case numbers assigned on or before September 30. Both extensions are applicable to Single Family Title II forward and Home Equity Conversion Mortgages. FHA is also extending temporary flexibilities for “the administration of 203(k) Rehabilitation Escrow guidance for borrowers in forbearance” for open escrow accounts through September 30. Additionally, Mortgagee Letter 2021-17 updates Single Family Quality Control (QC) requirements for appraisal field reviews and evaluation of property and appraisal documentation. FHA notes that the updated guidance applies to mortgages selected for Property and Appraisal QC review on or after July 1.

    Federal Issues FHA Covid-19 Mortgages Servicing Mortgages

  • FHFA expands use of interest rate reduction

    Federal Issues

    On June 30, FHFA announced changes to loan modification terms for borrowers impacted by the Covid-19 pandemic with mortgages backed by Fannie Mae or Freddie Mac who need payment reduction. According to FHFA, ​flex modification terms will be adjusted for Covid-19 hardships, which will make “interest rate reduction possible for eligible borrowers, regardless of the borrower’s loan-to-value ratio.” Previously, only borrowers with mark-to-market loan-to-value ratios (which compare the balance remaining on a mortgage to the current market value of a home) greater than or equal to 80 percent were eligible for an interest rate reduction. FHFA acting Director Sandra L. Thompson noted that more families qualifying for interest rate reduction will “prevent unnecessary foreclosures, help strengthen the Enterprises’ books of business, and make sustainable homeownership a reality for more families currently living with the uncertainty of forbearance.”

    Federal Issues FHFA Interest Rate Covid-19 Fannie Mae Freddie Mac GSEs Mortgages

  • FHA extends Covid-19 foreclosure moratorium and other flexibilities

    Federal Issues

    On June 25, FHA announced the extension of several Covid-19-related flexibilities in Mortgagee Letter 2021-15, which extends the foreclosure and eviction moratorium in connection with the Covid-19 pandemic, expands the Covid-19 forbearance and the home equity conversion mortgage (HECM) extension, and establishes the Covid-19 advance loan modification (Covid-19 ALM). As previously covered by InfoBytes, in December 2020, FHA first extended its foreclosure and eviction moratorium through February 28. In the most recent extension, FHA further extended its foreclosure and eviction moratorium for all FHA-insured single family mortgages, excluding vacant or abandoned properties, through July 31. For FHA’s Covid-19 forbearance policy, FHA expanded the date to request an initial Covid-19 forbearance from June 30 to September 30 and provided an additional three-month extension to the forbearance for borrowers who began their initial forbearance between July 1, 2020, and September 30, 2020. FHA also established the Covid-19 ALM, which, among other things, “offers borrowers who are currently 90 or more days delinquent, or at the end of their COVID-19 forbearance, the opportunity for a 30-year rate and term mortgage modification that will bring their mortgage current and reduce the principal and interest portion of their monthly mortgage payment by at least 25 percent” and establishes a Default Code. FHA also expanded the HECM Covid-19 extensions by “providing an additional three-month extension to HECM borrowers, where an initial HECM extension period began between July 1, 2020, and September 30, 2020.”

    Federal Issues Covid-19 FHA Foreclosure Mortgages Forbearance Loss Mitigation CARES Act

  • VA issues circular on pandemic-affected borrowers

    Federal Issues

    On June 25, the Department of Veterans Affairs issued Circular 26-21-10, which provides an update for servicers on assisting borrowers who are affected by the Covid-19 pandemic. According to the circular, servicers should continue reporting the Electronic Default Notification with “National Emergency Declaration” as the default reason in cases that involve borrowers who are financially affected by the pandemic. In addition, “servicers are to continue to make every reasonable effort to assist borrowers who are experiencing financial difficulties due to the national emergency.” These efforts must be documented in servicers’ loan systems and are to include a servicer review of relevant loan files and consideration of all possible home retention options and alternatives to foreclosure. For borrowers who have not received a Covid-related forbearance, servicers should allow these borrowers to receive a such forbearance if the borrower makes the request by September 30. The circular also establishes that all properties securing VA-guaranteed loans are subject to moratoriums on foreclosures and evictions through July 31, 2021. excluding vacant or abandoned properties. The circular is rescinded effective July 1, 2023.

    Federal Issues Covid-19 Department of Veterans Affairs Forbearance

  • Waters urges foreclosure moratoria extension

    Federal Issues

    On June 21, Chairwoman of the House Financial Services Committee Maxine Waters (D-CA) sent a letter to several federal agencies “urging them to administratively extend their moratoria on foreclosures at least until the CFPB is able to finalize and implement its pandemic recovery mortgage servicing rule.” As previously covered by a Buckley Special Alert, the Bureau issued a proposed rule in April that would broadly halt foreclosure initiations on principal residences from August 31, 2021 until 2022, and change servicing rules to promote consumer awareness and processing of Covid-relief loss mitigation options. The proposed rule also would create new and detailed obligations for communicating with borrowers to ensure they are aware of their loss mitigation options for pandemic-related hardships.

    The letter, which was sent to the secretaries of HUD, the Department of Agriculture, the Department of Veterans Affairs, as well as the director of FHFA and the acting director of the CFPB, stresses that many homeowners will face the risk of foreclosure when the emergency federal foreclosure mortarium expires on June 30, as the Bureau’s proposed rule is not expected to take effect until August. This gap in critical protections, Waters cautions, “could result in servicers expediting efforts to initiate foreclosures before a final rule takes effect, especially for borrowers who have not been able to access forbearance options during the pandemic[.]” The letter requests not only an extension of the current foreclosure moratoriums but also urges the Bureau to finalize the rule (or issue an interim final rule if necessary) as soon as possible to prevent unnecessary foreclosures and ensure homeowners have the opportunity to finalize affordable loan modifications. Additionally, Waters urges the Bureau to alert servicers of the consequences should they, among other things, fail to notify homeowners about their post-forbearance options, unnecessarily delay reviewing loan modification applications, engage in improper foreclosure-related activity, unlawfully discriminate against borrowers, or provide inaccurate, adverse information to credit reporting agencies.

    Federal Issues House Financial Services Committee Covid-19 Mortgages Mortgage Servicing Consumer Finance Foreclosure CFPB HUD Department of Agriculture Department of Veterans Affairs FHFA

  • FHFA further extends foreclosure moratorium

    Federal Issues

    On June 24, FHFA announced that Fannie Mae and Freddie Mac (GSEs) will extend their moratorium on single-family foreclosures and real estate owned (REO) evictions until July 31. The current moratoriums were set to expire June 30. The foreclosure moratorium applies only to homeowners with a GSE-backed, single-family mortgage, and the REO eviction moratorium applies only to properties that have been acquired by the GSEs through foreclosure or deed-in-lieu of foreclosure transactions. Additional details on Covid-19 forbearance plan terms and payment deferrals are covered by InfoBytes here and here. The extensions are implemented in Fannie Mae Lender Letter LL-2021-02 and Freddie Mac Guide Bulletin 2021-23. The same day, the CDC also announced an extension of its current moratorium on residential evictions for non-payment of rent through July 31, also stating in the announcement that “this is intended to be the final extension of the moratorium.”

    Federal Issues FHFA Covid-19 Fannie Mae Freddie Mac GSE Forbearance Foreclosure Mortgages Consumer Finance CDC

  • CFPB provides update on housing insecurity during pandemic

    Federal Issues

    On June 22, the CFPB issued a release with data updating its March report on the effects of the Covid-19 pandemic on housing insecurity, finding some improvement but still elevated risks for borrowers relative to prior periods. The report summarized data and research regarding the impact of the pandemic on the rental and mortgage market, and specifically its effects on low income and minority households. According to the report, as of December 2020, 11 million renter and homeowner households were significantly overdue on their regular housing payments, which placed them, especially Black and Hispanic households, at a heightened risk of their homes being subjected to foreclosure or eviction. The report also indicated that as of January 2021, there were 2.7 million borrowers in active forbearance. As of June 2021, 600,000 fewer consumers were in mortgage forbearance than in January 2021, with forbearance rates significantly decreasing in April when many borrowers exited forbearance after reaching 12 months. According to the CFPB, this was a positive indication because many of these borrowers would have qualified for longer extensions of total forbearance. The release also notes, however, that for borrowers who have exited forbearance, payment deferrals or partial claims were the most common repayment option, and that “[o]f the borrowers still in forbearance, many may face a precarious financial situation upon exiting.” Additionally, while indicating that foreclosure rates remained at historic lows during the first quarter of 2021, with 0.54 percent of mortgages in foreclosure, the release also notes that the CARES Act and direction from Fannie Mae and Freddie Mac (GSEs), FHA, VA, and USDA “have prohibited lenders and servicers of GSE and federally-backed loans from beginning or proceeding with foreclosures.” Seriously delinquent mortgage borrowers remain approximately three times higher than before the pandemic, with 1.9 million mortgage borrowers over three months behind on mortgage payments or in active foreclosure, with more than one in 10 borrowers with an FHA loan remaining seriously delinquent on their mortgage, a rate higher than the peak during the Great Recession. The release also notes that during the pandemic, mortgage forbearance and delinquency have been significantly more common in communities of color and lower-income communities (covered by Infobytes here).

    Federal Issues CFPB Covid-19 Mortgages Forbearance CARES Act Consumer Finance

  • VA establishes VAPCP requirements

    Federal Issues

    On May 28, the Department of Veterans Affairs (VA) published a final rule in the Federal Register, which establishes the “COVID–19 Veterans Assistance Partial Claim Payment” (VAPCP) program to help veterans resume making normal loan payments on VA-guaranteed loans after exiting forbearance due to the Covid-19 pandemic. The final rule incorporates several revisions in response to comments submitted by veterans, lenders, servicers, consumer groups, and trade associations on the VA’s proposed rule published last December (covered by InfoBytes here). Under the final rule, the partial claim maximum limit is increased from the proposed 15 percent to 30 percent of the unpaid principal balance of the guaranteed loan as of the date the veteran entered into a Covid-19 forbearance. The timeframe for servicers to submit partial claim payment requests to the VA also was increased from 90 to 120 days. Additionally, the final rule will allow servicers to use the Covid-VAPCP program “even if other home retention options are feasible, provided the partial claim payment option is in the veteran’s financial interest.” For a loan to qualify for a Covid-VAPCP, among other things, (i) the guaranteed loan must have been either current or less than 30 days past due on March 1, 2020, or made on or after March 1, 2020; (ii) the veteran must have received a Covid-19 forbearance and missed at least one scheduled monthly payment; (iii) at least one unpaid scheduled monthly payment must remain that the veteran did not make while under a Covid-19 forbearance; (iv) the veteran must indicate the ability to “resume making scheduled monthly payments, on time and in full, and that the veteran occupies, as the veteran’s residence, the property securing the guaranteed loan for which the partial claim is requested”; and (v) the veteran must timely execute all necessary loan documents in order to establish an obligation to repay the partial claim payment.

    Notably, the final rule strikes the following requirements that were included in the proposed rule: (i) veterans will not be required to repay the partial claim within 120 months; (ii) interest will not be charged on the Covid-VAPCP; and (iii) servicers will not have to complete financial evaluations of veterans in the program.

    The rule is effective July 27.

    Federal Issues Department of Veterans Affairs Mortgages Covid-19 Agency Rule-Making & Guidance CARES Act Loss Mitigation Forbearance

  • OCC examines effects of Covid-19 on federal banking system

    Federal Issues

    On May 18, the OCC released its Semiannual Risk Perspective for Spring 2021, which reports on key risk areas posing a threat to the safety and soundness of national banks and federal savings associations. While, overall, banks maintained sound capital and liquidity levels throughout 2020, the OCC noted that bank profitability remains stressed as a result of low interest rates and low loan demand.

    Key risk themes identified in the report include:

    • Credit risk. The OCC reported that credit risk is evolving a year into the Covid-19 pandemic, specifically as the economic downturn continues to affect some borrowers’ ability to service debts and government assistance programs start to expire.
    • Strategic risk. Strategic risk associated with how bank manage net interest margin compressions and earnings is elevated. The OCC suggested that banks attempting to improve earnings could implement various measures, including cost cutting and increasing credit risk.
    • Operational risk. Elevated operational risk can be attributed to complex operating environments and increased cybersecurity threats. A flexible, risk-based approach, including surveillance, reporting, and managing third-party risk, is important for banks to be operationally resilient, the OCC stated.
    • Compliance risk. Compliance risk is also elevated due to the expedited implementation of a number of Covid-19-related assistance programs, including the CARES Act Paycheck Protection Program and federal, state, and bank-initiated forbearance and deferred payment programs. These programs, the OCC noted, require “increased compliance responsibilities, high transaction volumes, and new fraud typologies, at a time when banks continue to respond to a changing operating environment.”

    Federal Issues OCC Covid-19 SBA Compliance Risk Management Fintech Net Interest Margin Bank Regulatory

Pages

Upcoming Events