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Financial Services Law Insights and Observations

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  • CFPB files action against mortgage lender for unlawful practices

    Federal Issues

    On January 15, the CFPB announced a complaint filed in the U.S. District Court for the District of Connecticut against a mortgage lender and four executives (collectively, “defendants”) alleging the defendants engaged in unlawful mortgage lending practices in violation of TILA, FCRA, ECOA, the Mortgage Acts and Practices—Advertising Rule (MAP Rule), and the CFPA. According to the complaint, from as early as 2015 until August 2019 (i) unlicensed sales people would take mortgage applications and offer and negotiate mortgage terms, in violation of TILA and Regulation Z; (ii) company policy regularly required consumers to submit documents for verification before receiving a Loan Estimate, in violation of TILA and Regulation Z; (iii) employees would deny consumers credit without issuing an adverse action notice, as required by the FCRA or ECOA; and (iv) defendants regularly made misrepresentations about, among other things, the availability and cost savings of a FHA streamlined refinance loan, in violation of the MAP Rule. The Bureau is seeking an injunction, as well as, damages, redress, disgorgement, and civil money penalties.

    Federal Issues CFPB Enforcement Courts ECOA FCRA CFPA TILA Regulation Z MAP Rule Mortgages

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  • FHFA seeks to implement minimum GSE liquidity and funding requirements

    Federal Issues

    On December 17, the FHFA announced a notice of proposed rulemaking (NPRM) regarding liquidity and funding requirements for Fannie Mae and Freddie Mac (GSEs). The NPRM seeks to, among other things, implement two cash-flow based requirements and two long-term liquidity and funding requirements. These new requirements include (i) a short-term, 30-day liquidity requirement—based on a cumulative net cash outflow analysis plus requiring an additional $10 billion cushion of highly liquid assets; (ii) a 365-day liquidity requirement “extending the short-term cumulative cash outflow analysis to a full year”; (iii) a requirement that the “ratio of long-term unsecured to less-liquid assets must be greater than 120 percent”; and (iv) a requirement that the “ratio of the spread duration of unsecured debt to the spread duration of retained portfolio assets must be greater than 60 percent.” FHFA notes that the NPRM is intended to help ensure the GSEs “have enough liquid assets to continue supporting the mortgage market during times of severe stress.” The NPRM also supports FHFA oversight of GSE “prudential management, including compliance with standards pertaining to ‘adequacy and maintenance of liquidity and reserves.’” Comments on the NPRM are due 60 days after publication in the Federal Register.

    Federal Issues FHFA Mortgages GSE Fannie Mae Freddie Mac

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  • VA re-extends foreclosure and eviction moratorium for borrowers affected by Covid-19

    Federal Issues

    On December 28, the Department of Veterans Affairs issued Circular 26-20-40, which further extends foreclosure and eviction relief for borrowers affected by Covid-19 (previously covered here). Specifically, all properties secured by VA-guaranteed loans, including those previously secured by VA-guaranteed loans but currently in the VA’s REO (real estate owned) portfolio, are subject to a moratorium on foreclosure and eviction through February 28, 2021. With the exception of abandoned or vacant property, the moratorium applies to the initiation of foreclosures, the completion of foreclosures in process and evictions.

    Federal Issues Covid-19 Department of Veterans Affairs Military Lending Foreclosure Evictions Mortgages

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  • HUD re-extends procedures to address Section 232 mortgage insurance issues

    Federal Issues

    On December 28, the U.S. Department of Housing and Urban Development issued Mortgagee Letter 2020-50, which extends interim procedures regarding site access issues related to Section 232 mortgage insurance applications during the Covid-19 pandemic (previously covered here, here and here). The guidance provides temporary modifications pertaining to third-party site inspections conducted for Section 232 FHA-insured healthcare facilities. The modifications are effective through March 31, 2021. The letter also provides guidance on other aspects relating to Section 232 properties, including regarding lender underwriter site visits, appraisals, and inspections on new construction, among other things.

    Federal Issues Covid-19 HUD Mortgages Mortgage Insurance

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  • Fannie Mae extends Covid-19 forbearance delegation for multi-family units through March 2021

    Federal Issues

    On December 22, Fannie Mae issued Supplement 20-16 extending the expiration of its Covid-19 forbearance delegation for servicers of multi-family units until March 31, 2021. The forbearance delegation authorizes servicers to grant initial forbearances of up to 3 months, and extensions for an additional 3 months, subject to various requirements.  Specific forms are provided for servicer’s use in granting forbearances and extensions.

    Federal Issues Covid-19 Fannie Mae Mortgages

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  • FHA extends Covid-19 foreclosure moratorium and other flexibilities

    Federal Issues

    On December 21, FHA announced the extension of several Covid-19-related flexibilities, which were set to expire on December 31. Specifically, FHA further extended its foreclosure and eviction moratorium through February 28. The moratorium applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, excluding legally vacant or abandoned properties. Additionally, FHA extended the date by which borrowers must engage with their servicer to obtain an initial Covid-19 forbearance to February 28 (details on the Covid-19 forbearance covered by InfoBytes here), and requires that mortgage servicers provide up to 6 months of forbearance or an additional 6 month extension of the initial Covid-19 forbearance. The FHA also extended (i) the timeframe for providing an insurance endorsement on single family mortgages in forbearance through March 31; (ii) the temporary re-verification of employment guidance and exterior-only appraisal inspection option through February 28; and (iii) temporary provisions for verification of self-employment, rental income, and 203(k) Rehabilitation Mortgage escrow accounts through February 28.

    Federal Issues Covid-19 FHA Foreclosure Mortgages Forbearance Loss Mitigation

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  • Special Alert: CFPB redefines Qualified Mortgage; “GSE Patch” to expire

    Federal Issues

    The Consumer Financial Protection Bureau last week released two final rules further defining what types of loans can be a “qualified mortgage loan” for purposes of the bureau’s Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule). The General QM Final Rule substantially revamps the general rules defining what constitutes a General QM and removes the existing debt-to-income threshold over which a loan cannot be considered a General QM.  The Seasoned QM Final Rule creates a new class of QM that allows certain rebuttable presumption QMs and non-QMs to achieve “safe harbor” QM status three years after origination provided the consumer has strong repayment history. 

    Importantly, the “GSE Patch,” which provides QM status to loans qualifying for sale to Fannie Mae or Freddie Mac, expires for applications submitted before July 1, 2021, at which point the General QM Rule will take effect (although compliance with both rules is permitted 60 days after publication in the Federal Register).

    Federal Issues Special Alerts CFPB Qualified Mortgage Ability To Repay Seasoned QM GSE Patch Fannie Mae Freddie Mac Mortgages Agency Rule-Making & Guidance

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  • Nevada governor issues an emergency directive regarding evictions

    State Issues

    On December 14, the governor of Nevada issued Declaration of Emergency Directive 036, relating to the implementation of Senate Bill 1 (previously covered here). The directive provides that, effective December 15 through March 31, 2021, certain residential unlawful detainer or summary eviction actions against covered persons are stayed. Emergency Directives 008, 025, and 031 (covered herehere, and here) had previously prohibited such evictions through October 14.

    State Issues Covid-19 Nevada Mortgages Evictions

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  • Illinois reissues and extends several Covid-19 executive orders

    State Issues

    On December 11, the governor of Illinois issued Executive Order 2020-74, which extends several executive orders through January 9, 2021 (previously covered hereherehere, and here). Among other things, the order extends: (i) Executive Order 2020-07 regarding in-person meeting requirements, (ii) Executive Order 2020-23 regarding actions by individuals licensed by the Illinois Department of Financial and Professional Regulation engaged in disaster response, (iii) Executive Order 2020-25 regarding garnishment and wage deductions (previously covered here), (iv) Executive Order 2020-30 regarding residential evictions (previously covered here and here), and (v) Executive Order 2020-72 regarding the residential eviction moratorium (previously covered here, herehere, and here).

    State Issues Covid-19 Illinois Debt Collection Mortgages Evictions

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  • CFPB amends General QM loan definition, creates definition for Seasoned QMs

    Agency Rule-Making & Guidance

    On December 10, the CFPB issued two final rules related to qualified mortgage (QM) loans. The first of the two final rules, the General QM Final Rule, amends Regulation Z and revises the definition of a General QM by eliminating the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replacing it with bright-line price-based thresholds. The General QM Final Rule also eliminates QM status resulting solely from loans meeting qualifications for sale to Fannie or Freddie Mac (GSEs), known as the so-called “GSE Patch.” The Bureau’s second final rule, the Seasoned QM Final Rule, creates a new category of safe-harbor QMs applicable to first-lien, fixed-rate mortgages that are held in portfolio by the originating creditor or first purchaser for a 36-month period while meeting certain performance requirements, and comply with general restrictions on product features and points and fees.

    Both final rules become effective 60 days after publication in the Federal Register. The mandatory compliance date for the General QM Final Rule is July 1, 2021; however, the Bureau notes that, between the effective date and the mandatory compliance date, there will be an optional early compliance period during which creditors will be able to use either the current General QM definition or the revised General QM definition. In addition, the GSE Patch will be available only for transactions where the creditor receives the consumer’s application before July 1, 2021 (or earlier if the GSEs exit conservatorship). Further, the Seasoned QM Final Rule applies to covered transactions for which creditors receive an application on or after the effective date, but will not apply retroactively to loans already in a lender’s portfolio.

    Buckley will follow up with a more detailed summary of the final rules soon.

    Agency Rule-Making & Guidance CFPB GSE Patch GSE Qualified Mortgage Mortgages Ability To Repay Regulation Z

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