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Fed lowers Main Street Lending Program minimum loan size
On October 30, the Federal Reserve Board (Fed) announced an adjustment to the terms of the Main Street Lending Program (MSLP) in order to expand support to smaller businesses during the Covid-19 pandemic. Specifically, the Fed reduced the minimum loan size for the three Main Street facilities from $250,000 to $100,000 and adjusted the associated fees.
Additionally, the Fed and the U.S. Department of Treasury issued an FAQ clarifying that up to $2 million of Paycheck Protection Program (PPP) loans may be excluded for purposes of determining the maximum loan size under the MSLP. If a borrower has applied for forgiveness, the amount that is eligible for forgiveness may be excluded from the “existing outstanding and undrawn available debt” calculation under the MSLP program. If the borrower has not yet applied for forgiveness, the amount to be excluded from the calculation is the amount that “its principal executive officer has a reasonable, good-faith basis to believe will be forgiven in accordance with applicable PPP requirements.”
Divided FCC says net neutrality reversal won't hurt public safety
On October 27, the FCC voted 3-2 to adopt an Order on Remand in response to a 2019 decision issued by the U.S. Court of Appeals for the D.C. Circuit (covered by InfoBytes here). The D.C. Circuit’s decision mostly ratified the Commission’s 2017 Restoring Internet Freedom Order that reversed the net neutrality rules barring internet service providers from slowing down or speeding up web traffic based on business relationships, however it remanded three “discrete issues” for the FCC’s further consideration, including how the reversal of the net neutrality rules could affect public safety issues. A Fact Sheet accompanying the Order on Remand stated that the FCC found “no basis to alter” its conclusions in the Restoring Internet Freedom Order, noting that, among other things, “[n]either the Commission’s decision to return broadband Internet access service to its longstanding classification as an information service, nor its decision to eliminate the Internet conduct rules, is likely to adversely impact public safety.”
CFPB settles with ninth lender on misleading VA advertising
On October 26, the CFPB announced a settlement with a ninth mortgage lender for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, the lender allegedly sent false, misleading, and inaccurate direct-mail advertisements for VA guaranteed mortgage loans to servicemembers and veterans in violation of the CFPA, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Among other things, the Bureau alleged the advertisements (i) stated credit terms that the lender was not actually prepared to offer, such as the interest rate and annual percentage rate applicable to the advertised mortgage; (ii) made misrepresentations about “the existence, nature, or amount of cash or credit available to the consumer in connection with the mortgage”; (iii) failed to include required disclosures; (iv) gave the false impression that the mortgage products would help eliminate or reduce debt; and (v) made misleading comparisons in advertisements involving actual or hypothetical loan terms.
The settlement imposes a civil money penalty of $1.8 million and bans the lender from future advertising misrepresentations similar to those identified by the Bureau. Additionally, the settlement requires the lender to use a compliance official to review mortgage advertisements for compliance with consumer protection laws, and to comply with certain enhanced disclosure requirements.
The latest enforcement action is part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. Previously, the Bureau issued consent orders against eight other mortgage lenders for similar violations, covered by InfoBytes here, here, here, and here.
DOJ reaches $25 million settlement with mortgage lender to resolve false claims allegations
On October 20, the DOJ announced a nearly $25 million settlement with a California-based mortgage lender in connection with alleged violations of the False Claims Act (FCA) related to originating and underwriting mortgages insured by the Federal Housing Administration (FHA). According to the DOJ, the lender “knowingly approved ineligible loans that later defaulted and resulted in claims to FHA for mortgage insurance,” failed to comply with material program rules requiring lenders to maintain quality control programs to prevent underwriting deficiencies, and failed to self-report identified materially deficient loans. The mortgage lender agreed to pay the DOJ $24.9 million to resolve the FCA claims. In addition, a whistleblower will receive nearly $5 million under the settlement. The DOJ’s press release noted that the claims “are allegations only, and [that] there has been no determination of liability.”
OCC says banks affected by Hurricane Zeta may close
On October 27, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by Hurricane Zeta “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 2012 Bulletin, 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.
CFPB settles with bank for HMDA filing errors
On October 27, the CFPB announced a settlement with a national bank, resolving allegations that the bank reported inaccurate HMDA data for 2016 and 2017 mortgage transactions. According to the consent order, the bank allegedly violated HMDA, Regulation C, and the Consumer Financial Protection Act by failing to report accurate data among the 7,000 mortgage applications reported in 2016 and 2017. Specifically, the Bureau alleged that the submissions contained “significant errors,” with an internal audit of the 2016 filing identifying a 40 percent error rate and the Bureau’s review of the 2017 filing identifying a 16 percent error rate. The Bureau asserted that the 2016 errors were caused by “a lack of appropriate staff, insufficient staff training, and ineffective quality control,” while the 2017 errors were “directly related to weaknesses in [the bank]’s compliance-management system (CMS).” In 2013, the bank entered into a consent order with the Bureau for similar issues; thus, the Bureau concluded the 2016 and 2017 errors were “intentional and not bona fide” as the bank allegedly failed to maintain a “CMS with procedures reasonably adapted to avoid” the errors since the previous order.
The consent order requires the bank to, among other things, pay a $200,000 civil money penalty and develop a HMDA compliance-management system that includes policies, procedures, and an internal audit program that regularly tests the HMDA data integrity.
FHA issues mortgagee letter extending guidance on employment reverification and appraisals
On October 28, FHA issued Mortgagee Letter 2020-37, which re-extends the effective date of the employment reverification guidance in Mortgagee Letter 2020-05, previously covered here, here, here, and here. The Mortgagee Letter also updates the appraisal scope of work inspection option providing for exterior-only appraisals, which limits face-to-face contact for certain transactions affected by Covid-19. The updated appraisal guidance is effective on November 1, 2020 and is applicable to appraisals with an effective date on or before December 31, 2020. The extension of the employment reverification guidance is effective immediately for cases closed on or before December 31, 2020.
CFPB releases education ombudsman’s annual report
On October 28, the CFPB Private Education Loan Ombudsman published its annual report on consumer complaints submitted between September 1, 2019 and August 31, 2020. The report is based on approximately 7,000 complaints received by the Bureau relating to federal and private student loans. Of these complaints, roughly 1,700 were related to debt collection, while approximately 500 mentioned Covid-19. The Bureau’s press release notes that the continued decrease in both federal and private student loan complaints may be attributed to factors such as “borrower education and outreach by federal and state agencies and regulators; borrower education and outreach by consumer advocates; and continued maturation of some industry participants’ compliance management systems, complaint monitoring systems, and their internal consumer advocate and ombudsman offices.” Topics discussed within the report include (i) an analysis of socio-economic and racial gaps in the student loan market; (ii) supervisory examinations and prioritized assessments of federal student loan servicers; (iii) enforcement actions taken against student loan debt relief companies and a student loan trust; (iv) borrower education and outreach; and (v) the impact of Covid-19 on student loan borrowers, including CARES Act relief for federally held federal student loans. The report also discusses a Memorandum of Understanding reached with the Department of Education at the beginning of the year, which clarifies the roles and responsibilities for each agency and permits the sharing of student loan complaint data and other information and recommendations (covered by InfoBytes here).
The report provides several recommendations, including that policymakers—when addressing near-term and long-term repayment issues—“may wish to consider simplifying the various loan repayment plans and the various forgiveness, discharge, and cancellation programs,” as well as examine ways to (i) enhance data sharing between federal agencies; (ii) enroll debtors who file for bankruptcy in income driven repayment plans; (iii) revisit the undue hardship bankruptcy test; (iv) assess socio-economic and racial gaps in student loan debt load and degree attainment; and (v) pursue student loan debt relief scams.
Fed targets flood insurance violations
On October 15, the Federal Reserve Board announced an enforcement action against a New York-based bank for alleged violation of the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assessed a $546,000 penalty against the bank for an alleged pattern or practice of violations of Regulation H, but did not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.
FDIC announces hurricane and wildfire relief
On October 23, the FDIC issued FIL-100-2020 and FIL-101-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Louisiana and California. Specifically, FIL-100-2020 outlines relief for areas of Louisiana affected by Hurricane Delta from October 6 through October 10, and FIL-101-2020 provides relief for areas of California affected by wildfires since September 4 .
The guidance notes that the FDIC will consider the unusual circumstances faced by institutions affected by the hurricane and wildfires. The guidance suggests that institutions work with impacted borrowers to, among other things: (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain reporting and publishing requirements.