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Fannie Mae updates Servicing Guide with HomeStyle Renovation policy changes
On March 14, Fannie Mae updated its Servicing Guide to include industry best practices for servicing HomeStyle Renovation Mortgage Loans (Renovation Loans). According to Fannie Mae SVC-2018-02, the updates to the Servicing Guide include, among other changes, new requirements to: (i) conduct property inspections for all Renovation Loans before escrow draw requests may be approved; (ii) ensure that all subcontractors are licensed in jurisdictions where licensing applies; (iii) perform updated appraisals when repairs deviate materially from the original plan; and (iv) provide a certificate of occupancy upon completion. Additional changes to the requirements for Renovation Loans may also be found in Fannie Mae’s recently updated Selling Guide, covered by InfoBytes here.
The updates to the Servicing Guide also include an update to the Allowable Foreclosure Attorney Fees Exhibit, which changes the maximum allowable fees for loans secured by properties in certain states. The Servicing Guide requirements for determining the modified terms under the Fannie Mae Cap and Extend Modification for Disaster Relief have also been updated.
Senate passes bipartisan financial regulatory reform bill
On March 14, by a vote of 67-31, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) (the bill)—a bipartisan regulatory reform bill crafted by Senate Banking, Housing, and Urban Affairs Committee Chairman Mike Crapo, R-Idaho—that would repeal or modify provisions of Dodd-Frank and ease regulations on all but the biggest banks. (See previous InfoBytes coverage here.) The bill’s highlights include:
- Improving consumer access to mortgage credit. The bill’s provisions state, among other things, that: (i) banks with less than $10 billion in assets are exempt from ability-to-repay requirements for certain qualified residential mortgage loans; (ii) appraisals will not be required for certain transactions valued at less than $400,000 in rural areas; (iii) banks and credit unions that originate fewer than 500 open-end and 500 closed-end mortgages are exempt from HMDA’s expanded data disclosures (the provision would not apply to nonbanks and would not exempt institutions from HMDA reporting altogether); (iv) amendments to the S.A.F.E. Mortgage Licensing Act will provide registered mortgage loan originators in good standing with 120 days of transitional authority to originate loans when moving from a federal depository institution to a non-depository institution or across state lines; and (v) the CFPB must clarify how TRID applies to mortgage assumption transactions and construction-to-permanent home loans, as well as outline certain liabilities related to model disclosure use.
- Regulatory relief for certain institutions. Among other things, the bill simplifies capital calculations and exempts community banks from Section 13 of the Bank Holding Company Act if they have less than $10 billion in total consolidated assets. The bill also states that banks with less than $10 billion in assets, and total trading assets and liabilities not exceeding more than five percent of their total assets, are exempt from Volcker Rule restrictions on trading with their own capital.
- Protections for consumers. Included in the bill are protections for veterans and active-duty military personnel such as: (i) permanently extending the protection that shields military personnel from foreclosure proceedings after they leave active military service from nine months to one year; and (ii) adding a requirement that credit reporting agencies provide free credit monitoring services and credit freezes to active-duty military personnel. The bill also addresses general consumer protection options such as expanded credit freezes and the creation of an identity theft protection database. Additionally, the bill instructs the CFPB to draft federal rules for the underwriting of Property Assessed Clean Energy loans (PACE loans), which would be subject to TILA consumer protections.
- Changes for bank holding companies. Among other things, the bill raises the threshold for automatic designation as a systemically important financial institution from $50 billion in assets to $250 billion. The bill also subjects banks with $100 billion to $250 billion in total consolidated assets to periodic stress tests and exempts from stress test requirements entirely banks with under $100 billion in assets. Additionally, certain banks would be allowed to exclude assets they hold in custody for others—provided the assets are held at a central bank—when computing the amount such banks must hold in reserves.
- Protections for student borrowers. The bill’s provisions include measures to prevent creditors from declaring an automatic default or accelerating the debt against a borrower on the sole basis of bankruptcy or cosigner death, and would require the removal of private student loans on credit reports after a default if the borrower completes a loan rehabilitation program and brings payments current.
The bill now advances to the House where both Democrats and Republicans think it is unlikely to pass in its current form.
FTC settles credit card laundering lawsuit
On March 9, the FTC entered into a settlement with a credit card merchant and its individual officer (collectively, “defendants”) relating to an allegedly deceptive credit card telemarketing operation. According to the FTC’s amended complaint, the defendants violated the FTC Act and the Telemarketing Sales rule by assisting a telemarketing company in masking its identity by processing the company’s credit card payments through multiple fictitious companies. The FTC previously had banned the telemarketing company from selling fraudulent “work-at-home” opportunities in 2015. The settlement, among other things, prohibits the defendants from processing payments or acting as an independent sales organization. The order also stipulates a judgment of approximately $1.3 million, which will be suspended unless it is determined that the financial statements defendants submitted to the FTC contain any inaccuracies.
Financial Stability Board releases supplementary guidance on sound compensation practices
On March 9, the Financial Stability Board (FSB) announced the release of its Supplementary Guidance to the FSB Principles and Standards on Sound Compensation Practices (Supplementary Guidance) relating to FSB’s Principles and Standards published in 2009. The Supplementary Guidance arises out of a 2015 workplan implemented to address concerns about compensation practices that could create misaligned incentives within financial institutions. The Supplementary Guidance, which does not contain new or additional principles and standards, provides recommendations presented in three parts: (i) “governance of compensation and misconduct risk”; (ii) “effective alignment of compensation with misconduct risk”; and (iii) “supervision of compensation and misconduct risk.” The Supplementary Guidance notes that “inappropriately structured compensation arrangements can provide individuals with incentives to take imprudent risks,” which may lead to potential harm for financial institutions and their customers or stakeholders. The Supplementary Guidance suggests that financial institutions use compensation tools as part of an overall strategy to limit risks and address misconduct, and cautions that “compensation should be adjusted for all types of risk.”
Fannie and Freddie extend temporary suspension of foreclosure sales
On March 7, Fannie Mae, in Lender Letter LL-2018-01, and Freddie Mac, in Guide Bulletin 2018-04, extended the suspension of foreclosure sales through May 31 of mortgaged properties in FEMA-declared disaster areas in Puerto Rico and the U.S. Virgin Islands due to Hurricanes Irma and Maria.
Find continuing InfoBytes coverage on Disaster Relief here.
Department of Education: states do not have the authority to regulate student loan servicers
On March 12, the U.S. Department of Education published an Interpretation in the Federal Register, which takes the position that state regulation of servicers of loans made under the William D. Ford Federal Direct Loan Program (Direct Loans) and the Federal Family Education Loan Program (FFEL Program Loans) is preempted by Federal law. Specifically, the Department noted that state “regulation of the servicing of Direct Loans” is preempted because it “impedes uniquely Federal interests,” and state regulation of the servicing of FFEL Program Loans “is preempted to the extent that it undermines uniform administration of the program.” The Interpretation was issued in response to several states having recently enacted regulatory regimes, or sought to apply existing consumer protection statutes, imposing additional requirements on such student loan servicers. The Ranking Member of the House Committee on Education and the Workforce, Representative Bobby Scott, D-VA, issued a statement following the notice of publication on March 9, disagreeing with the Department’s Interpretation: “Congress has not given the Secretary the authority to preempt state consumer protection law for student borrowers. . . . I urge the Secretary to reverse this egregious overreach of Federal authority to rescind states’ ability to protect student borrowers and hold unscrupulous servicers accountable.”
CFPB releases RFI on rulemaking process
On March 7, the CFPB released its seventh Request for Information (RFI) in a series seeking feedback on the Bureau’s operations. This RFI solicits public comment regarding “the overall efficiency and effectiveness of its rulemaking processes.” The RFI emphasizes that the Bureau is not seeking information related to the particular content of any proposed or final rule—existing rules will be addresses in separate RFIs—or information related to elements of the rulemaking process which are required by law. Specifically, the RFI requests feedback regarding the discretionary aspects of the Bureau’s rulemaking processes, including (i) mechanisms (such as RFIs) the Bureau uses to gather information from stakeholders in advance of initiating a rulemaking; (ii) the Small Business Regulatory Enforcement Fairness Act (SBREFA) panel process; (iii) the content and structure of notices of proposed rulemaking (NPRMs); (iv) the NPRM comment process, including time periods and feedback mechanisms; and (v) the content and structure of notices of final rules. The RFI is expected to be published in the Federal Register on March 9. Comments will be due 90 days from publication.
House passes several bills focused on regulatory relief
On March 6, the House passed H.R. 2226, the “Portfolio Lending and Mortgage Access Act,” amending TILA and expanding the safe harbor provisions provided to qualified residential mortgages held in portfolio by banks with less than $10 billion in assets. Under the bill, a mortgage lender would not be subject to civil liability for violating specified ability-to-repay requirements if, among other things, the loan was originated and held continuously in portfolio by a covered institution and complies with certain limitations and requirements related to prepayment penalties and points and fees..
On the same day, the House also passed H.R. 4725, the “Community Bank Reporting Relief Act,” to amend the Federal Deposit Insurance Act to reduce the regulatory reporting burden on community banks. Specifically, federal banking agencies would be required to issue regulations allowing qualified depository institutions with less than $5 billion in assets to submit abbreviated call reports (consolidated reports of condition and income) every other quarter rather than submitting full call reports every quarter.
Finally, by a vote of 264-143, the House passed H.R. 4607, the “Comprehensive Regulatory Review Act,” a measure to amend the Economic Growth and Regulatory Paperwork Reduction Act of 1996’s regulatory review process. Among other things, the bill requires federal financial regulators to perform a comprehensive review at least every seven years, instead of every ten years as currently required, to identify regulations that may be tailored to limit burdens on insured depository institutions.FHA and VA extend foreclosure moratoriums on certain disaster areas
On March 1, the Federal Housing Administration (FHA) released Mortgagee Letter ML 2018-02 (ML 2018-02), which extends the 180-day foreclosure moratorium on FHA-insured properties in Puerto Rico & the U.S. Virgin Islands affected by Hurricane Maria for an additional 60-days. The foreclosure moratorium is now in effect until May 18.
The Department of Veterans Affairs (VA) also released updates to VA circulars 26-17-23, 26-17-27, and 26-17-28, extending the foreclosure moratorium on VA-insured properties affected by Hurricanes Harvey, Irma, and Maria from 180 days to 270 days.
Find continuing InfoBytes coverage on disaster relief here.
Fannie Mae updates Selling Guide with HomeStyle Renovation policy changes
On February 27, Fannie Mae updated its Selling Guide including changes to its HomeStyle Renovation (Renovation) policy. According to Fannie Mae SEL-2018-02, the updates to the Selling Guide include, among other changes, the following: (i) sellers/servicers no longer need to be approved for the Renovation loan through Fannie Mae if they choose to wait to deliver all Renovation loans until after renovations are complete; (ii) fixed-rate mortgages for one-unit, principle residences now have a maximum allowable LTV ratio of 97% if the loan is underwritten through Desktop Underwriter; (iii) manufactured homes that do not require structural changes are eligible for Renovation loans; and (iv) removal of the requirement that the renovation must add value to the property. Lenders are required to be in compliance with the Renovation policy changes by September 1, 2018.
The Selling Guide also (i) added flexibilities in the HomeStyle Energy policy to allow for increased utilization of the program; (ii) added definitions and requirements for business continuity and disaster recovery procedures; and (iii) updated age of document requirements for loans securing properties impacted by a natural disaster.