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Financial Services Law Insights and Observations


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  • Education Dept. releases IDR proposal

    Federal Issues

    On January 10, the Department of Education (DOE) announced a notice of proposed rulemaking (NPRM) to reduce the cost of federal student loan payments. According to the DOE, the regulations fulfill President Biden’s plan to provide student debt relief for approximately 40 million borrowers and to make the student loan system more manageable for student borrowers. As previously covered by InfoBytes, the three-part debt relief plan was announced in August to provide, among other things, up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the DOE, and up to $10,000 in debt cancellation to non-Pell Grant recipients for borrowers making less than $125,000 a year or less than $250,000 for married couples. Plaintiffs, whose loans are ineligible for debt forgiveness under the program, sued the DOE and the DOE secretary claiming the agency violated the Administrative Procedure Act’s notice-and-comment rulemaking procedures and arbitrarily decided the program’s eligibility criteria. Plaintiffs further contended that the DOE secretary does not have the authority under the HEROES Act to implement the program. Specifically, the NPRM would establish that those making less than $30,577 as an individual or a family of four making less than $62,437 would have their monthly payments reduced to $0.

    According to the NPRM, the DOE is proposing to amend the regulations governing income-contingent repayment plans by amending the Revised Pay as You Earn (REPAYE) repayment plan. The NPRM noted that the DOE is looking to restructure and rename the repayment plan regulations under the William D. Ford Federal Direct Loan Program, including combining the Income Contingent Repayment (ICR) and the Income-Based Repayment (IBR) plans under the umbrella term of IDR plans. The NPRM would ensure that a borrower’s balance would not grow due to accumulation of unpaid interest if the borrowers otherwise make their monthly payments. Additionally, the NPRM would also establish that for individuals who borrow $12,000 or less, loan forgiveness can occur after making the equivalent of 10 years of payments. That period increases by one year for each additional $1,000 that is borrowed. The DOE released a Fact Sheet on increasing college accountability, which clarifies information on identifying the lowest-financial-value programs, protecting students and delivering value through greater accountability, increasing collaboration with accreditors, and building a record of action.

    The DOE also released a request for information (RFI) to solicit comments on identifying the best ways to calculate the metrics that may be used to identify low-financial-value programs and inform technical considerations. Finally, the DOE released a Fact Sheet on transforming IDR. Among other things, the Fact Sheet discusses decreasing undergraduate loan payments, stopping unpaid interest accumulation, and lowering the number of monthly payments required to receive forgiveness for borrowers with smaller loan balances. Comments are due 30 days after publication in the Federal Register.

    Federal Issues Agency Rule-Making & Guidance Department of Education Student Lending Income-Driven Repayment Federal Register Administrative Procedure Act HEROES Act Consumer Finance

  • GSEs must seek FHFA preapproval for new products

    Agency Rule-Making & Guidance

    On December 20, FHFA announced a final rule requiring Fannie Mae and Freddie Mac to provide advance notice of new activities and to obtain prior approval before launching new products. (See also fact sheet here.) Among other things, the final rule establishes that FHFA will determine which new activities merit public notice and comment and would be treated as new products subject to prior approval. Specifically, the final rule establishes that once a Notice of New Activity is deemed received, FHFA has 15 calendar days to determine if the new activity is a new product that merits public notice and comment. Additionally, the final rule establishes a public disclosure requirement for FHFA to publish its determinations on new activity and new product submissions. Among other things, if the agency “determines that a new activity is a new product, the final rule requires FHFA to publish a public notice soliciting comments on the new product for a 30-day period.” The final rule is effective 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Issues FHFA GSEs Fannie Mae Freddie Mac Federal Register

  • FHFA to host “tech sprints” on housing finance fintech solutions


    On November 2, FHFA published a notice in the Federal Register announcing plans to hold a series of competitions called “Tech Sprints” to solicit innovative solutions on ways to advance housing finance fintech in a safe, sound, responsible, and equitable manner. Recognizing the significant effects that regulated entities’ potential use of fintech products and innovations could have on the mortgage market and market participants, FHFA said it wants to gather information about new and emerging technologies that may have applications in the mortgage space. Two tech sprints are planned each year over the next three years, with participation expected from housing finance industry members as well as other industries, such as tech companies, mortgage companies, academia, industry groups, and other members of the public. FHFA is accepting comments through January 3, 2023, on the necessity of the information collection, the burden of such collection, and ways to minimize the burden on members and project sponsors when providing information on ways to enhance the quality, utility, and clarity of the information collected from the Tech Sprints.

    Fintech Federal Issues FHFA Federal Register

  • SEC says exchanges must have policies on incentive compensation given in error


    On October 27, the SEC announced final rules requiring securities exchanges to adopt listing standards that require issuers to develop and implement policies providing for the recovery of erroneously awarded incentive-based compensation received by executive officers. The final rules require a listed issuer to file the policy as an exhibit to its annual report and to include disclosures related to its recovery policy and recovery analysis where a recovery is triggered. The SEC first proposed new rules for executive compensation disclosure in 2015, but they were not finalized. The SEC reopened consideration of the rules last year, and in August, adopted a new requirement that a reporting company’s proxy statement and other disclosures include a table showing executive compensation and financial performance measures.

    According a statement released by SEC Chairman Gary Gensler, the new rules will “strengthen the transparency and quality of corporate financial statements, investor confidence in those statements, and the accountability of corporate executives to investors.” Commissioner Hester M. Peirce also released a statement, where she noted that implementing the statutory clawbacks mandate is “commendable,” but “doing it—expansively, inflexibly, and impractically—is not.” Peirce noted that the final rule “does not permit company boards, guided by their fiduciary duty, to determine when clawing back compensation makes sense,” and that “[s]uch an approach would have served shareholders by ensuring that companies claw back erroneously awarded compensation when doing so yields a net benefit to shareholders.” The final rules will become effective 60 days after publication in the Federal Register. Exchanges will be required to file proposed listing standards no later than 90 days following publication of the release in the Federal Register, with listing standards effective no later than one year following such publication.

    Securities Federal Register Executive Compensation Incentive Compensation Agency Rule-Making & Guidance SEC Clawback

  • CFPB seeks comments on mortgage refinance and forbearance standards

    Agency Rule-Making & Guidance

    On September 27, the CFPB issued a notice in the Federal Register requesting input from the public regarding (i) the availability of refinance loans for borrowers with smaller mortgage loan balances, and (ii) options for mortgage forbearance. Specifically, the Bureau sought ways to: (i) “facilitate mortgage refinances for consumers who would benefit from refinancing, especially consumers with smaller loan balances”; and (ii) “reduce risks for consumers who experience disruptions in their financial situation that could interfere with their ability to remain current on their mortgage payments.” The Bureau also noted that some stakeholders have suggested that changes to the Bureau’s ability-to-repay/qualified mortgage rule (ATR–QM rule) may play a role in facilitating beneficial refinances through targeted and streamlined programs, noting that the current rule references “frictions” in the refinance process tied to QM standards. Comments are due by November 28.

    Agency Rule-Making & Guidance Federal Issues CFPB Mortgages Refinance Consumer Finance Federal Register Ability To Repay Qualified Mortgage

  • CFPB rescinds no-action letter and sandbox policies

    Agency Rule-Making & Guidance

    On September 27, the CFPB issued a statement in the Federal Register rescinding its No-Action Letter Policy and its Compliance Assistance Sandbox Policy. As previously covered by InfoBytes, in September 2019, the CFPB issued three final innovation policies: the No-Action Letter (NAL) PolicyCompliance Assistance Sandbox (CAS) Policy, and Trial Disclosure Program (TDP) Policy. The NAL policy provided a NAL recipient assurance that the Bureau will not bring a supervisory or enforcement action against the company for providing a product or service under the covered facts and circumstances. The CAS policy evaluated a product or service for compliance with relevant laws and offered approved applicants a “safe harbor” from liability for certain covered conduct during the testing period under TILA, ECOA, or the EFTA. Following the rescission, the statement noted that the Bureau will no longer accept NAL or CAS applications by September 30, but will continue to accept and process requests under the TDP. Entities that have made submissions under the NAL or CAS policies will be notified if the Bureau intends to take additional steps on their submissions. According to the statement, the Bureau “determined that the Policies do not advance their stated objective of facilitating consumer-beneficial innovation” and “that the existing Policies failed to meet appropriate standards for transparency and stakeholder participation.”

    Agency Rule-Making & Guidance Federal Issues CFPB Consumer Finance Regulatory Sandbox TILA EFTA Federal Register ECOA

  • CFPB seeks better refi, loss-mitigation options

    Federal Issues

    On September 22, the CFPB issued a request for information (RFI) regarding ways to improve mortgage refinances for homeowners and how to support automatic short-term and long-term loss mitigation assistance for homeowners who experience financial disruptions. According to the Bureau, refinancing volume has decreased almost 70 percent from last year as interest rates have risen. Additionally, periods of economic turmoil, such as the Covid-19 pandemic, can pose significant challenges for mortgage borrowers, the Bureau noted. Throughout the pandemic, 8.2 million borrowers entered a forbearance program, and as of July 2022, 93 percent have exited. Of those who have exited forbearance, five percent are delinquent or in active foreclosure. The Bureau is interested in the features of pandemic-related forbearance programs that should be made more generally available to borrowers. Specifically, the RFI requests information regarding, among other things: (i) targeted and streamlined refinance programs; (ii) innovative refinancing products; and (iii) automatic forbearance and long-term loss mitigation assistance. Comments are due 60 days after publication in the Federal Register.

    Federal Issues Agency Rule-Making & Guidance CFPB Consumer Finance Mortgages Refinance Forbearance Federal Register

  • SEC proposes new rules for clearing agencies


    On September 14, the SEC announced a proposed rule regarding risk management practices for central counterparties in the U.S. Treasury Department market. Among other things, the proposed rule would update the membership standards required of covered clearing agencies for the Treasury market with respect to a member’s clearance and settlement of specified secondary market transactions. Specifically, the proposal would require that clearing agencies in the U.S. Treasury market adopt policies and procedures designed to require their members to submit for clearing certain specified secondary market transactions, which would include: “all repurchase and reverse repurchase agreements collateralized by U.S. Treasury securities entered into by a member of the clearing agency; all purchase and sale transactions entered into by a member of the clearing agency that is an interdealer broker; and all purchase and sale transactions entered into between a clearing agency member and either a registered broker-dealer, a government securities broker, a government securities dealer, a hedge fund, or a particular type of leveraged account.” According to a statement by SEC Chair Gary Gensler, the proposed rule would “reduce risk across a vital part of our capital markets in both normal and stress times.” The SEC also released a Fact Sheet providing more information on the proposal. Comments are due 60 days after publication in the Federal Register.

    Securities Agency Rule-Making & Guidance SEC Department of Treasury Federal Register Risk Management

  • Fed issues final rule revising delegations of authority

    On August 29, the Federal Reserve Board published a final rule in the Federal Register revising rules regarding delegation of authority. Among other things, the Fed noted that the final rule “enhances transparency, improves usability, and relieves burden on regulated institutions, practitioners before the Board, and Federal Reserve staff.” Specifically, the final rule “codifies and revises delegations of authority previously approved by the Board, makes technical changes, and rescinds moot or superseded delegations.” The final rule also notes that its rules regarding delegation of authority implement section 11(k) of the Federal Reserve Act and enumerate the actions that the Fed has determined to delegate. Section 11(k) authorizes the Fed to delegate, by published order or rule and subject to the Administrative Procedure Act, any of its functions, other than those related to rulemaking or pertaining principally to monetary and credit policies. By delegating actions that do not raise significant legal, supervisory, or policy issues, the Fed can respond more efficiently to applications, requests, and other matters. The final rule is effective September 1.

    Bank Regulatory Agency Rule-Making & Guidance Federal Issues Federal Reserve Federal Register

  • SEC publishes amendments on disclosures failures


    On August 25, the SEC announced proposed amendments to its rules requiring registrants to disclose information reflecting the relationship between executive compensation actually paid by a registrant and the registrant’s financial performance. According to the final rule, registrants would be required to provide a table disclosing specified executive compensation and financial performance measures for their five most recently completed fiscal years. In regard to the measures of performance, a registrant will be required to report its total shareholder return (TSR), the TSR of companies in the registrant's peer group, its net income, and a financial performance measure chosen by the registrant. Using the information presented in the table, registrants will be required to disclose the relationships between the executive compensation actually paid and each of the performance measures, as well as the relationship between the registrant’s TSR and the TSR of its selected peer group. Specifically, large companies would be required to disclose details on executive compensation for the past five fiscal years, and small companies would be required to report the past three fiscal years. Additionally, small companies would be exempt from disclosing details on pensions and peer groups. They also are exempt from new language requiring companies to list the three to seven most important measures linking executive compensation to company performance. Emerging growth companies, registered investment companies, and foreign private issuers are not required to provide the disclosure. The final rules are effective 30 days after publication in the Federal Register, and registrants must comply with the new disclosure requirements in proxy and information statements that are required for fiscal years ending on or after December 16. The same day, the SEC published a fact sheet clarifying, among other things, the final rules implementing the pay versus performance requirement as required by Congress in the Dodd-Frank Act.

    Securities Agency Rule-Making & Guidance SEC Federal Register Executive Compensation Dodd-Frank


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