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Washington issues updated guidance to residential mortgage loan servicers
On February 12, the Director of the Washington Department of Financial Institutions issued their fourth amended guidance to residential mortgage loan servicers. The guidance reminds residential mortgage loan servicers to take all necessary precautions to help prevent the spread of Covid-19, including allowing them to continue working from home (previously discussed here.) It also urges servicers to take “reasonable and prudent actions” to support consumers by:
- Forbearing mortgage payments;
- Refraining from reporting late payments to credit rating agencies;
- Offering mortgagors additional time to complete trial loan modifications, and ensuring that late payments do not affect their ability to obtain permanent loan modifications;
- Waiving late payment fees and online payment fees;
- Postponing foreclosures;
- Ensuring that the closure of the mortgage servicer’s office does not disrupt services to borrowers; and
- Proactively reaching out to mortgagors via app announcements, text, email or otherwise to explain the assistance being offered to mortgagors.
The guidance also notes that efforts to assist mortgagors will not be subjected to examiner criticism.
New York expands commercial lending disclosure coverage
On February 16, the New York governor signed S898, which amends the state’s recently enacted commercial financing disclosure law to expand its coverage and delay the effective date. As previously covered by InfoBytes, in December 2020, the governor signed S5470, which establishes consumer-style disclosure requirements for certain commercial transactions under $500,000. The law exempts (i) financial institutions (defined as a chartered or licensed bank, trust company, industrial loan company, savings and loan association, or federal credit union, authorized to do business in New York); (ii) lenders regulated under the federal Farm Credit Act; (iii) commercial financing transactions secured by real property; (iv) technology service providers; and (v) lenders who make no more than five applicable transactions in New York in a 12-month period. The law is currently set to take effect on June 21, which is 180 days after the December 23, 2020 enactment. As noted by the sponsor memo, prior to signing the law, the governor “expressed concerns about the reach of the bill and the time needed to implement the required rulemaking.” After enactment, the legislature introduced S898, which contains the “negotiated change to the underlying chapter [to] address[] those concerns.”
S898 increases the coverage of the consumer-style disclosure requirements to commercial transactions under $2.5 million and creates a new exemption for certain vehicle dealers. The law also extends the effective date to January 1, 2022.
States reach $4.2 million settlement to resolve credit card interest overcharges
On February 8, state attorneys general from Pennsylvania, Iowa, Massachusetts, New Jersey, and North Carolina entered into an assurance of voluntary compliance with a national bank to resolve allegations that it overcharged credit card interest for certain consumers. According to the investigating states, between February 2011 and August 2017, the bank allegedly failed to properly reevaluate and reduce the annual percentage rate (APR) for certain consumer credit card account holders who were entitled to a reduction, as required by the CARD Act and state consumer protection laws. The announcement follows a 2018 CFPB settlement, in which the bank agreed to provide $335 million in restitution to affected consumers (covered by InfoBytes here). At the time, the Bureau noted that it did not assess civil monetary penalties due to efforts undertaken by the bank to self-identify and self-report violations to the Bureau. The states also acknowledged that the bank self-identified issues with its APR reevaluation process through an internal compliance program. The bank denied liability or that it violated the states’ consumer protection laws and has agreed to pay $4.2 million to approximately 25,000 current and former affected consumers, which will be limited to consumers who received a payment of $500 or more in restitution from the bank for the original violation.
NYDFS says climate-based activities may qualify for state CRA credit
On February 9, NYDFS issued new guidance stating that financing activities that support the climate resiliency of low- and moderate-income (LMI) and underserved communities may receive credit under the New York Community Reinvestment Act (the “New York CRA”). The industry letter notes that LMI and underserved communities are “disproportionally affect[ed]” by climate change because they “tend to be more susceptible to flooding and heat waves” and have “fewer resources to recover from natural disasters.” NYDFS reminds institutions that one way banking institutions subject to the New York CRA are evaluated is the extent to which their activity revitalizes or stabilizes both LMI geographies and underserved geographies, and that financing climate resiliency actions “may help mitigate climate change risks and at the same time revitalize or stabilize those geographic areas.” Accordingly, NYDFS outlines a non-exhaustive list of specific examples that may qualify for credit under the New York CRA, including (i) “renewable energy, energy-efficiency and water conservation equipment or projects for affordable housing…”; (ii) “microgrid or battery storage projects in LMI areas with high flood and/or wind risk…”; and (iii) “installation of air conditioning in multifamily buildings offering affordable housing….” Moreover, NYDFS states that banking institutions may also receive credit for climate resiliency promoting investments or loans to Community Development Financial institutions, among others.
California Department of Real Estate reissues FAQs regarding licensing process
On February 10, the California Department of Real Estate reissued FAQs regarding licensing and examination processes of the department during Covid-19. The FAQs respond to questions regarding, among other things, capacity limitations at exam centers, how to reschedule a cancelled exam, the best way to complete a renewal of an expiring real estate license, completing continuing education requirements, how the shelter in place orders affect the fingerprinting process, and whether the DRE will accept electronic signatures on licensing documents.
Florida reminds lenders of their credit reporting requirements under the CARES act
On February 10, the Florida Office of Financial Regulation released a set of “Compliance Tips” reminding lenders and their servicers that they may be required to report certain delinquent loans as “current” pursuant to the CARES Act. The guidance reminds lenders and loan servicers that under the federal CARES Act, those consumers who were not delinquent as of April 1, 2020 and who subsequently received an accommodation and are complying with the accommodation agreement should be reported as “current.” The tips also urged lenders to be proactive with borrowers to resolve credit reporting errors. Lastly, the tips advised lenders to seek out how reporting errors may have been made, and implement additional internal controls to ensure similar errors do not reoccur.
NYDFS details redlining issues from nonbank lenders
On February 4, NYDFS released a report on redlining in the Buffalo metropolitan area, concluding that there is a “distinct lack of lending by mortgage lenders, particularly non-depository lenders” to majority-minority populations and to minority homebuyers in general. Among other things, the report concluded that (i) while minorities in the Buffalo region comprise about 20 percent of the population, they receive less than 10 percent of total loans made in the region; (ii) nonbank lenders lent at a lower rate in majority-minority neighborhoods than depository institutions did; and (iii) several of the nonbank mortgage lenders did not have adequate fair lending compliance programs and do not make an effort to serve majority-minority neighborhoods. The report made numerous recommendations, including a recommendation to amend the New York Community Reinvestment Act (CRA) to cover nonbank mortgage lenders and a request that the OCC and the CFPB investigate federally regulated institutions serving the Buffalo area for violations of fair lending laws.
Additionally, NYDFS announced a settlement with a nonbank lender in connection with its lending to minorities and in majority-minority neighborhoods in Buffalo and Syracuse, New York. The settlement agreement found no evidence of intentional discrimination or fair lending law violations but rather weaknesses in the lender’s compliance program. The agreement outlines efforts the lender will take to “provide more meaningful access to residential loans and financing for minorities and individuals living in majority-minority neighborhoods” in Western and Central New York. Among other things, the lender will (i) develop a compliance management plan; (ii) increase marketing to majority-minority census tracts; (iii) create a $150,000 special financing program to increase loan originations for residents of majority-minority neighborhoods; and (iv) increase annual training.
NYDFS issues Cybersecurity Insurance Risk Framework
On February 4, NYDFS issued a framework outlining industry best practices for state-regulated property/casualty insurers writing cyber insurance. The new Cyber Insurance Risk Framework provides guidance for effectively managing cyber insurance risk and is the first guidance released by a U.S. regulator on this topic. In recognizing the growing risk and the challenges insurers face when trying to manage that risk, NYDFS advised insurers to “establish a formal strategy for measuring cyber insurance risk that is directed and approved by its board or other governing entity[.]” According to the guidance, the insurer’s strategy should be proportionate to the insurer’s risk and take into account “the insurer’s size, resources, geographic distribution, and other factors.” NYDFS also advised insurers to:
- Eliminate exposure to “silent” cyber insurance risk resulting from a cyber incident that an insurer is obligated to cover even though its policy “does not explicitly mention cyber incidents.”
- Evaluate systemic risk, including how catastrophic cyber events impact third-party vendors.
- Measure and assess potential cybersecurity gaps and vulnerabilities through a data-driven approach.
- Educate insureds and insurance producers on the value of cybersecurity measures, as well as the uses and limitations of cyber insurance.
- Recruit and hire employees with cybersecurity experience.
- Include a requirement in cyber insurance policies that victim-insureds notify law enforcement when a cyber attack occurs.
Wyoming executive order instructing cooperation with federal agencies to implement Emergency Rental Assistance Program
On February 8, the governor of Wyoming issued Executive Order 2021-02, which instructs the Wyoming Department of Family Services (WDFS) to prepare for the implementation of the federal Emergency Rental Assistance Program (ERAP.) Section (b) specifically charges WDFS to enter into “formal or informal” cooperative agreements with any necessary federal agency, including the Department of Housing and Urban Development, for “information-sharing, planning, and technical assistance” related to rolling out ERAP.
DFPI requests comment on CCFPL regulations
On February 4, the California Department of Financial Protection and Innovation (DFPI) released an Invitation for Comments on a proposed rulemaking to implement the California Consumer Financial Protection Law (CCFPL). As previously covered by InfoBytes, in September 2020, the governor signed AB 1864, which enacts the CCFPL and established the DFPI name change from the Department of Business Oversight. The CCFPL authorizes DFPI to establish rules relating to the covered persons, service providers, and consumer financial products or services outlined in the law. The invitation for comments describes specific topics for stakeholder consideration when providing comments, but DFPI notes that commenters may provide feedback on “any potential area for rulemaking.” Highlights of the topics for comment include:
- Exemptions. Whether or not DFPI should clarify the scope of the entities exempt from CCFPL.
- Registration Requirements. What industries should be required to first register with DFPI and what rules should be established to facilitate industry oversight, including records and reporting requirements.
- Complaint Handling. What requirements DFPI should establish with regard to timely responses to consumer complaints and inquiries, including timelines and substance of response.
- Consumer UUDAAP. Description of acts or practices that stakeholders believe qualify as “unlawful, unfair, deceptive, or abusive” in consumer transactions, including suggested “requirements DFPI should adopt to prevent the act or practice.”
- Commercial UDAAP and Data Collection. Description of acts or practices that stakeholders believe qualify as unfair, deceptive, and abusive in the commercial space, and whether or not DFPI should define specific acts or practices as unfair, deceptive, or abusive. Additionally, whether or not DFPI should require the collection and reporting of commercial financing data.
- Disclosures. Whether or not DFPI should prescribe rules covering the features of consumer financing disclosures and if so, what the requirements should cover.
- California Credit Cost Limitations. Whether or not DFPI should clarify the applicability of state credit cost limitations, including rate and fee caps, to consumer financial products and services.
Comments must be submitted by March 8.