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RHS finalizes changes to Single-Family Housing Guaranteed Loan Program
On August 31, the Rural Housing Service (RHS) issued a final rule in the Federal Register announcing changes to the Single-Family Housing Guaranteed Loan Program (SFHGLP). The final rule, among other things, updates the requirements for federally supervised lenders, minimum net worth and experience for non-supervised lenders, approved lender participation requirements, handling of applicants with delinquent child support payments, and builder credit requirements. Specifically, the rule establishes that lenders not supervised by federal banking agencies must have “a minimum adjusted net worth of $250,000, or at least $50,000 in working capital plus one percent of the total volume in excess of $25 million in guaranteed loans originated, serviced or purchased during the lender’s prior fiscal year, up to a maximum $2.5 million.” The final rule also requires one or more lines of credit with a minimum aggregate of $1 million, and clarifies that lenders must meet applicable requirements in order to begin and continue participation in the SFHGLP. The final rule is effective November 29.
Texas updates guidance for tax lenders, continuing to urge them to work with consumers and allowing employees to work remotely
On April 15, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin (previously discussed here, here, here, here, and here) urging property tax lenders to continue to work with consumers during the Covid-19 crisis. Among other measures, the regulator urges licensees to increase consumer communication regarding the effects of Covid-19 on the licensees’ business, work out modifications for payment difficulties, and review policies for fees, late fees, and delinquency practices, to help support successful repayment. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures, and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through May 31, 2021, unless withdrawn or revised.
Michigan regulators, business associations urge underserved businesses to apply for PPP loans
On March 15, the Michigan Department of Insurance and Financial Services, the Michigan Bankers Association, Community Bankers of Michigan, the Michigan Credit Union League and the National Business League urged minority-owned and other underserved businesses in Michigan to apply for forgivable loans through the Paycheck Protection Program (PPP) prior to the March 31, 2021 deadline. The announcement highlighted that community development financial institutions offer specialized support to underserved communities and can assist customers with limited or no credit history to obtain a PPP Loan.
California delays implementation of tax treatment law for forgiven PPP loans
On March 12, California Governor Gavin Newsom issued a joint statement along with the California Senate president pro tempore and Assembly speaker related to the tax treatment of Paycheck Protection Program (PPP) loans. California intends to delay those portions of Assembly Bill 1577 that was signed into law on September 9, 2020 relating to forgiven PPP loans, pending detailed guidance from the U.S. Treasury Department regarding certain provisions in the American Rescue Plan Act.
Texas updates guidance for property tax lenders to work with consumers
On February 18, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin urging property tax lenders to work with consumers during the Covid-19 crisis (previously discussed here, here, here, and here) Among other measures, the regulator urges licensees to increase consumer communication regarding the effects of Covid-19 for licensees, work out modifications for payment difficulties, and review policies for fees, late charges, delinquency practices, and repossessions. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures, and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through March 31, 2021, unless withdrawn or revised.
Texas updates guidance for regulated lenders
On February 18, the Texas Office of the Consumer Credit Commissioner issued updated guidance (previously covered here, here, here, here, and here) for regulated lenders relating to the Covid-19 crisis. The guidance: (1) encourages lenders to work with consumers, including by working out modifications to assist with payments, and reviewing policies for fees, late charges, delinquency practices, and repossessions, among other things; (2) reminds lenders of legal requirements for using electronic signatures; and (3) permits lenders to conduct regulated lending activity from unlicensed locations, subject to certain conditions. The guidance is in effect through March 31, 2021, unless withdrawn or revised.
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.
California appellate court concludes lender’s arbitration provision unenforceable
On January 11, the Court of Appeals of the State of California affirmed the denial of an auto lender’s motion to compel arbitration, concluding that the arbitration clause was invalid and unenforceable. According to the opinion, in May 2019, consumers filed a class action complaint alleging the lenders charged unconscionable interest rates in violation of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA). The company moved to compel arbitration, which the consumers opposed, arguing that the agreement was “procedurally and substantively unconscionable,” and that the California Supreme Court decision in McGill v. Citibank, N.A. (covered by a Buckley Special Alert here, holding that a waiver of the plaintiff’s substantive right to seek public injunctive relief is not enforceable) applied. The trial court denied the motion to compel arbitration, concluding that the McGill rule applied and that the injunctive relief provision could not be severed from the rest of the arbitration agreement because severability did not apply to the class waiver provision.
On appeal, the state appellate court agreed with the trial court, concluding that the McGill rule applied. Specifically, the appellate court concluded that the injunctive relief the consumers were seeking “encompasses all consumers and members of the public,” and “an injunction under the CLRA against [the lender]’s unlawful practices will not directly benefit the Customers because they have already been harmed and are already aware of the misconduct.” Moreover, the appellate court determined that there is no precedent holding that “the remedy of public injunctions under CLRA and UCL should be limited to false advertising claims.” The court further concluded that the class waiver was not severable, stating that the lender’s argument that the arbitration agreement could not be determined void until after an appellate court reviews the viability of the class waiver was “illogical.” Accordingly, the appellate court affirmed the denial of the motion to arbitrate.
Rhode Island extends its work from home provisions for lenders
On December 22, 2020, the Rhode Island Department of Business Regulation extended interim guidance permitting mortgage loan originators, lenders, loan brokers, and exempt company registrants to work from home, even if the home is not a “licensed branch” or located outside of Rhode Island (previously covered here, here, and here.) To take advantage of this exemption, the individual must maintain certain specified data security provisions. This extension is set to expire March 31, 2021.
Rhode Island regulator extends work from home guidance for lenders
On September 28, the Rhode Island Department of Business Regulation, Banking Division, extended previous guidance (previously covered here and here) issued to mortgage loan originators, lenders, loan brokers, and exempt company registrants. The guidance permits working from home, even if the home is located outside of Rhode Island or is not a licensed branch, so long as specified data security provisions are met. The department extended this guidance until December 31, 2020.