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Senators question FHFA on adverse market refinance fee
On August 19, a group of Democratic Senators wrote to FHFA Director Mark Calabria expressing concern over the newly announced adverse market refinance fee of 50 basis points, or 0.5 percent, on certain refinance mortgages (covered by InfoBytes here). The letter acknowledges that throughout the Covid-19 pandemic, Fannie Mae and Freddie Mac (GSEs) “have adopted policies to ease purchase and most refinance transactions,” to assist homeowners. However, the new refinance fee “that will be implemented just three weeks after it was announced” was a “surprise to see,” according to the letter. The senators stress that the new fee “will shift more of a financial burden to consumers,” which would contradict the GSEs’ purpose of providing stability in the secondary mortgage market.
The letter follows an August 14 letter from the Chair of the Senate Banking Committee, Mike Crapo (R-ID), which expresses similar concern for consumers but also notes that the short window before the effective date can complicate the refinance process for current buyers and negatively impact community lenders who already have closed loans that cannot be delivered before September 1.
Both letters request Calabria provide more information on the policy change, including details regarding the market conditions that would be addressed by the fee and how the fee amount was determined.
FHA releases electronic appraisal technology for single family submissions
On August 18, HUD announced the availability of a new electronic appraisal delivery module on the FHA Catalyst platform. According to the announcement, the “FHA Catalyst: Electronic Appraisal Delivery” module can be used by lenders to electronically submit, track, and manage single family appraisal reports and updates for FHA Single Family Title II forward mortgages. Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade noted that the new electronic appraisal module is “one more way FHA is supporting the housing market with innovative technology during the COVID-19 economic recovery.” Among other details, Mortgagee Letter 2020-26 states that lenders may begin using the new module on or after September 1.
Fannie Mae issues Covid-19-related selling updates
On August 12, Fannie Mae updated its Covid-19 frequently asked questions regarding the underwriting and loan eligibility for sellers. Fannie Mae’s FAQs (previously discussed here) were updated to address questions on selling loans in forbearance. The FAQs cite to Lender Letter 2020-06 (covered by InfoBytes here), stating that Fannie Mae will purchase loans that go into forbearance after loan closing before sale that became eligible for sale beginning May 1 and have note dates on or before August 31 and are delivered by October 31. Additionally, the FAQs state there are no plans to further extend the August 31 date.
Agencies clarify BSA/AML enforcement
On August 13, the OCC, the Federal Reserve Board, the FDIC, and the NCUA (collectively, the “agencies”) issued a joint statement, which clarifies how the agencies apply the enforcement provisions of the Bank Secrecy Act (BSA) and related anti-money laundering (AML) laws and regulations. Specifically, the statement discusses the conditions that require the issuance of a mandatory cease and desist order under sections 8(s) and 206(q). According to the agencies, there are no new exceptions or standards created by document. Among other things, the statement:
- Provides examples of when an agency shall issue a cease and desist order in accordance with sections 8(s)(3) and 206(q)(3) for “[f]ailure to establish and maintain a reasonably designed BSA/AML Compliance Program. The statement notes that an institution would be subject to a cease and desist order when the one component of their compliance program “fails with respect to either a high-risk area or multiple lines of business… even if the other components or pillars are satisfactory.”
- Describes circumstances in which an agency may use its discretion to issue formal or informal enforcement actions related to unsafe or unsound BSA-related practices. The statement notes that the “form and content” of the enforcement action will depend on a variety factors, including “the capability and cooperation of the institution’s management.”
- Describes how the agencies incorporate customer due diligence regulations and recordkeeping requirements as part of the internal controls pillar of an institutions BSA/AML compliance program.
- Discusses the treatment of isolated or technical compliance program requirements that are generally not issues resulting in an enforcement action.
SCRA’s lease protections expanded for stop movement orders
On August 14, President Trump signed S.3637, which amends the Servicemembers Civil Relief Act (SCRA) to expand the lease protections for servicemembers under stop movement orders in response to the Covid-19 pandemic. Specifically, the SCRA’s lease termination protections are expanded to include situations in which a servicemember executes a residential or motor vehicle lease upon the receipt of military orders for a permanent change of station or deployment and then subsequently receives a stop movement order “in response to a local, national, or global emergency, effective for an indefinite period or for a period of not less than 30 days,” which would prevent the servicemember from occupying the residence or using the vehicle. The amendments are retroactively effective and apply to stop movement orders issued on or after March 1.
SBA issues new PPP FAQs and clarifies appeals process
On August 11, the Small Business Administration (SBA) updated the Paycheck Protection Program (PPP) FAQs to include two new questions clarifying that (i) payment or nonpayment of fees of an agent or other third party will not affect the guarantee of a PPP loan or the SBA’s payment of lender fees; and (ii) vision and dental benefits are included in the payments required for the provision of group health care benefits. The SBA also published three new FAQs on PPP loan forgiveness, addressing PPP loan forgiveness when the borrower has also received an Economic Injury Disaster Loan (EIDL) advance. Additionally, the SBA issued a new interim final rule, which informs PPP borrowers and lenders of the appeal process for certain SBA loan review decisions under the PPP to the SBA Office of Hearings and Appeals.
Fed announces new details of the FedNow Service
On August 6, the Federal Reserve Board (Board) announced details of its new payment clearing system, the FedNow Service, which the Board plans to implement through a phased approach with a target launch date sometime in 2023 or 2024. As previously covered by InfoBytes, in August 2019, the Board issued a request for information on a “round-the-clock real-time payment and settlement service,” seeking feedback on how the service might be designed in order to support payment system stakeholders and the general functioning of the U.S. payment system. The Board notes that the newly released details are based on the input received from stakeholders. The Federal Register notice discusses the phased released approach, noting that the “approach will ensure the core features and functionality are delivered as quickly as possible,” even if “certain desirable features” are not available in the initial release. Highlights of the core features of the “24x7x365” FedNow Service include, among other things, (i) a payment flow where the receiver’s bank has an opportunity to confirm that it holds a valid account for the receiver and intends to accept the payment message, before interbank settlement occurs; (ii) the use of the “widely accepted ISO 20022 standard and adopt other industry best practices” for payment message format; (iii) a transaction limit that will be “consistent with market practices and needs at the time” of the launch of service; and (iv) a liquidity-management tool that will allow participants to transfer funds to each other to support the liquidity needs of instant payments. After the initial launch, the Board intends to offer additional features related to fraud prevention, error resolution and case management.
Fannie and Freddie announce new refinance fee
On August 12, Fannie Mae and Freddie Mac announced a new adverse market refinance fee of 50 basis points, or 0.5 percent, on certain refinance mortgages. According to Freddie Mac’s Guide Bulletin 2020-32, the refinance fee applies to cash-out and no cash-out refinance mortgages “except for Construction Conversion Mortgages that qualify for single-closing Interim Construction Financing and Permanent Financing.” The Bulletin notes that the fee is a result of economic and market uncertainty due to the Covid-19 pandemic. Fannie Mae’s Lender Letter LL-2020-12 notes that the new fee applies to limited cash-out refinances and cash-out refinances but provides a limited exception for certain single-closing construction-to-permanent loans.
The new fee is effective for applicable refinance mortgages with settlement dates on or after September 1.
Federal Reserve Board announces revised pricing for its Municipal Liquidity Facility
On August 11, the Federal Reserve Board announced revised pricing for its Municipal Liquidity Facility. The revised pricing reduces the interest rate spread on tax-exempt notes for each credit rating category by 50 basis points and reduces the amount by which the interest rate for taxable notes is adjusted relative to tax-exempt notes. The MLF, originally covered here, was one of several facilities intended to support the flow of credit in the economy.
U.S.-UK Financial Innovation Partnership reports on progress
On August 6, the U.S. Treasury Department provided an overview of a recent meeting of the U.S.-UK Financial Innovation Partnership (FIP) where Regulatory and Commercial Pillars participants exchanged views on “deepening U.S.-UK ties in financial innovation.” As previously covered by InfoBytes, the FIP was created in 2019 as a way to expand bilateral financial services collaborative efforts, study emerging fintech innovation trends, and share information and expertise on regulatory practices. Topics discussed included digital payments, cross-border testing of innovative financial services, regulatory and supervisory technology, connections between financial technology firms and financial institutions, and the upcoming 2021 U.S. financial services trade mission to the UK. Participants recognized “the importance of the ongoing partnership in monitoring and analyzing trends in global financial innovation, as well as being an integral component of the U.S.-UK financial services cooperation.”