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Financial Services Law Insights and Observations

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  • FHA offers further relief to eligible borrowers in disaster areas

    Federal Issues

    On February 22, the Federal Housing Administration (FHA) announced it will extend its foreclosure relief for borrowers with FHA-insured mortgages whose homes were affected by presidentially-declared natural disasters in 2017. Under Mortgagee Letter ML 2018-01 (ML 2018-01), the new “Disaster Standalone Partial Claim” loss mitigation option will allow borrowers whose property or employment is located in designated disaster areas to cover up to 12 months of missed mortgage payments through an interest-free second loan on the mortgage without a required trial payment plan. The second loan will become payable only when the borrower sells the home or refinances. Additionally, the loss mitigation option will streamline income documentation and other requirements to expedite relief to eligible borrowers struggling to pay their mortgages. ML 2018-01 instructs mortgagees to implement the policies set forth no later than May 1.

    Find more InfoBytes disaster relief coverage here.

    Federal Issues Disaster Relief FHA Mortgages Loss Mitigation

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  • Agencies offer CRA credit for certain disaster relief efforts

    Agency Rule-Making & Guidance

    On January 25, the FDIC, OCC, and the Fed (collectively “Agencies”) issued an interagency statement on the availability of Community Reinvestment Act (CRA) credit for financial institution activities that “help revitalize or stabilize the U.S. Virgin Islands and Puerto Rico, which were designated as major disaster areas by the President because of Hurricane Maria.” Provided financial institutions continue to be responsive to the community needs of their own CRA assessment areas, the Agencies will now give “favorable consideration” to community development activities, such as assistance to displaced people, in the areas impacted by Hurricane Maria. The Agencies state that they may give higher consideration to activities aimed at assisting the low- and moderate-income affected areas but that general consideration will be given regardless of median or personal income.

    Agency Rule-Making & Guidance CRA Disaster Relief FDIC OCC Federal Reserve

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  • Fannie and Freddie Extend Foreclosure Suspension for Puerto Rico and U.S. Virgin Islands

    Federal Issues

    On December 20, Fannie Mae, in Lender Letter LL-2017-11, and Freddie Mac, in Guide Bulletin 2017-29, extended the suspension of foreclosure sales through March 31, 2018 of mortgaged properties in FEMA-declared disaster areas in Puerto Rico and the U.S. Virgin Islands due to Hurricanes Irma and Maria. The extension does not apply to any other jurisdictions similarly designated.

    Find continuing InfoBytes coverage on Disaster Relief here.

    Federal Issues Disaster Relief Fannie Mae Freddie Mac Mortgages Foreclosure

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  • Freddie Mac Issues New Guidance on Borrowers Qualifying Income

    Lending

    On December 14, Freddie Mac issued Guide Bulletin 2017-28, providing updates and reminders to sellers regarding income used for qualifying borrowers and other matters. The bulletin expands the options for sellers when qualifying a borrower with income that starts after the date of the mortgage note, including increasing the allowable gap from 60 days to 90 days between the note date and the commencement of income, allowing for a “no-cash-out” refinance as a potential transaction type, and permitting fully approved future salary increases from a current employer as income. It also relaxes certain requirements in the event the income commences prior to the delivery date. In addressing other topics, the bulletin allows for relief from the enforcement of selling representations and warranties for mortgages that are subject to a disaster-related forbearance plan. The relief extends through the later of the applicable payment history period end date or the date the mortgage transitions out of the disaster-related forbearance plan and is brought current. Among other issues, the updates and reminders cover the eligibility of Land Trust Mortgages and “Texas Equity Mortgages” for sale to Freddie Mac, and incorporation of the new 2018 FHFA base conforming and super conforming loan limits (previously covered by InfoBytes here).

    Lending Freddie Mac Mortgages Disaster Relief

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  • Financial Regulators Issue Joint Supervisory Guidance for Disaster Areas; VA Announces Wildfire Relief

    Federal Issues

    On December 15, the FDIC, Fed, OCC, and NCUA issued Interagency Supervisory Examiner Guidance for Institutions Affect by a Major Disaster (Guidance). The Guidance provides information on assessing the financial condition of institutions affected by a “major disaster with individual assistance” as declared by the President. The Guidance also encourages institutions affected by such disasters to discuss relevant issues with their examiners and notes that the supervisory agencies will consider extending report filing deadlines and rescheduling exams. Additionally, the Guidance states that examiners should consider factors related to the disaster, such as asset losses and staffing issues, when assessing capital adequacy and management capability requirements. And when considering the supervisory response to an institution that receives a lower component or composite rating, the Guidance provides that examiners should recognize the extent to which any weaknesses are related to the major disaster.

    The Department of Veterans Affairs (VA), on December 12, announced additional special relief following the California wildfires in Circular 26-17-42. The Circular encourages VA loan holders to extend forbearance to borrowers affected by the wildfires and VA loan servicers to continue solicitation of the VA Disaster Loan Modification program (as previously covered by InfoBytes here). Additionally, for affected borrowers and loans, the Circular suggests that loan holders follow the 90-day foreclosure moratorium and that servicers consider waiving late charges and suspending credit reporting. The Circular is effective until January 1, 2019.

    Find continuing InfoBytes coverage on Disaster Relief here.

    Federal Issues Disaster Relief Department of Veterans Affairs FDIC OCC NCUA Federal Reserve Mortgages

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  • OCC Allows Closure of Certain Financial Institutions Affected by Wildfires in California

    Federal Issues

    The OCC issued a proclamation on December 7 allowing national banks and federal savings associations affected by wildfires in California to close. The OCC encouraged the affected offices to make every effort to reopen as quickly as possible and to consult OCC Bulletin 2012-28 for guidance on certain actions the institutions should consider implementing for customers in affected disaster areas, previously covered by InfoBytes here

    Federal Issues OCC Disaster Relief Consumer Finance

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  • VA Releases New Disaster Loan Modification Option

    Federal Issues

    On November 27, the Department of Veterans Affairs (VA) announced a new Disaster Loan Modification option via circular 26-17-39. In addition to the existing VA Disaster Loan Modification process, which allows servicers to extend permanent payment relief to disaster-impacted borrowers without a completed application, the VA will now allow servicers the option to waive the three-month trial period payment (TPP) requirement. According to the circular, servicers will be able to waive the TPP requirement to extend the term of the new loan by the number of months the borrower is delinquent, and must waive any accrued delinquent interest. Additionally, the loan must have been current at the time of the disaster and the VA must approve any term extensions greater than 12 months.

    Find more InfoBytes disaster relief coverage here.

    Federal Issues Disaster Relief Department of Veterans Affairs Mortgages Mortgage Modification

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  • House Passes Flood Insurance Bill Reforming and Reauthorizing National Flood Insurance Program

    Federal Issues

    On November 14, the House voted 237-189 to pass legislation reforming and reauthorizing the National Flood Insurance Program (NFIP) for five years before it expires next month. As previously covered in InfoBytes, President Trump signed a three-month extension to the NFIP at the beginning of September in order to provide Congress additional time to establish a long-term financial solution for the program. The 21st Century Flood Reform Act (H.R. 2874) is designed to better facilitate compliance and clarify guidance for lenders and borrowers, and will, among other things, (i) change annual limits on premium increases for insurance obtained through the NFIP; (ii) require FEMA to consider the differences in flood risk between coastal and inland flood hazards when establishing premium rates; (iii) require FEMA to clearly communicate to policyholders the full flood risk to, and flood claims history of their property, and the effect of filing any additional claims; (iv) allow private insurers to continue selling policies on behalf of the NFIP, while also being allowed to sell their own private flood coverage; (v) revise federal flood mapping requirements, establish premium rates based on applicable flood insurance rate maps, and revise and clarify aspects of the appeals process; (vi) amend the Biggert-Waters Flood Insurance Reform Act of 2012 to clarify the time periods within which communities may consult with FEMA regarding mapping changes and submit data for consideration by the agency; (vii) revise the Flood Mitigation Assistance program to provide assistance for additional multiple loss properties; and (viii) amend the Flood Disaster Protection Act of 1973 to increase penalties against lenders and GSEs for violations of the mandatory purchase requirement from $2,000 to a maximum of $5,000 per violation.

    H.R. 2874 now heads to the Senate.

    Federal Issues U.S. House Flood Insurance National Flood Insurance Program Federal Legislation Disaster Relief Trump

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  • Fannie and Freddie Introduce Extended Modifications for Disaster Relief

    Federal Issues

    On November 2, at the direction of the Federal Housing and Finance Authority (FHFA), Fannie Mae introduced in Lender Letter LL-2017-09 (Letter) a temporary forbearance mortgage loan modification (Extend Mod) for servicers with mortgage loans affected by the recent disasters. The Letter covers the requirements for an Extend Mod, including outlining loan eligibility criteria. Among other requirements, the loan must (i) be located in a FEMA-Declared Disaster Area; (ii) be less than 31 days delinquent when the disaster occurred and complete the forbearance plan while between 31 days delinquent and 360 days delinquent; (iii) not be delinquent after being previously modified with an Extend Mod from the same disaster; (iv) not be insured or guaranteed by a federal government agency; and (v) not be subject to a recourse or indemnification arrangement, another workout option, or a current repayment plan that is performing. The Letter also provides information on disbursing hazard loss draft proceeds, reimbursement for property inspections, and payment records for borrower-initiated termination of mortgage insurance.

    Under the same FHFA direction and in coordination with Fannie Mae, Freddie Mac issued Guide Bulletin 2017-25 announcing the servicing requirements for the Freddie Mac Extend Modification for Disaster Relief. Both Fannie and Freddie note the deadline for implementing the Extend Mod is February 1, 2018.

    Find more InfoBytes disaster relief coverage here.

    Federal Issues Disaster Relief Mortgages Mortgage Modification Mortgage Servicing FHFA Fannie Mae Freddie Mac

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  • FinCEN Warns of Fraudulent Disaster Relief Schemes

    Financial Crimes

    On October 31, the Financial Crimes Enforcement Network (FinCEN) issued an advisory to financial institutions to warn of the potential for fraudulent activity related to recent disaster relief efforts. The advisory cautions financial institutions to pay particularly close attention to benefits fraud, charities fraud, and cyber-related fraud. Accordingly, it lists several red flags to assist in spotting these fraudulent schemes, including, among others:

    • The cashing or depositing of multiple emergency assistance checks by the same individual;
    • The payee organization having a name similar to, but not identical to, a well-known or reputable charity; or
    • The use of money transfer services to receive donations.

    The advisory also reminds financial institutions to file a Suspicious Activity Report (SAR) if there is reason to believe any fraudulent activity may be taking place.

    Find more InfoBytes disaster relief coverage here.

    Financial Crimes Disaster Relief FinCEN Fraud SARs

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