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On December 30, the Senate confirmed Carol Galante as Assistant Secretary of Housing and Urban Development and Federal Housing Administration Commissioner. Ms. Galante, who was nominated for the position in October 2011, has been serving in an acting role. Her confirmation was made possible after certain Senators, including Bob Corker (R-TN), who had expressed concerns about the pace of reforms at the FHA, secured a commitment from Ms. Galante to (i) place a moratorium on the full drawdown reverse mortgage program, (ii) substantially increase underwriting criteria for borrowers with FICO scores between 580 and 620 by establishing a meaningful maximum debt-to-income ratio, (iii) increase the down payment requirement and the insurance pricing for loans between $625,000 and $729,000, and (iv) increase underwriting requirements for borrowers who have been foreclosed upon within the last seven years. On January 1, as described in media reports, the Senate confirmed Joshua Wright as FTC Commissioner and Mignon Clyburn as FCC Commissioner, and also confirmed Richard Berner for the new position of Director of the Treasury Department’s Office of Financial Research.
Last week, Treasury Under Secretary for Terrorism and Financial Intelligence, David Cohen, and new FinCEN Director Jennifer Shasky Calvery addressed the American Bankers Association/American Bar Association Money Laundering Enforcement Conference. Ms. Calvery and Mr. Cohen announced the formation of an interagency anti-money laundering (AML) task force comprised of Treasury officials, federal banking regulators, and enforcement agencies charged with conducting a comprehensive review of the AML regulatory and enforcement structure to address any gaps, redundancies or inefficiencies in the framework. Ms. Calvery further explained that the Bank Secrecy Act Advisory Group is exploring ways to reduce the variance between compliance risk and illicit financing risk. Ms. Calvery also stressed the importance of electronic filings, and urged financial institutions to adopt the new FinCEN reports before the April 1, 2013 deadline. Mr. Cohen discussed a proposed customer due diligence regulation, which would extend customer due diligence obligations by requiring institutions to collect information on an account’s beneficial owner. In connection with that rulemaking, FinCEN this week announced the last in a series of roundtable discussions to gather information from stakeholders and discuss key issues relating to the proposed rule. This final roundtable will be held on December 3, 2012, at the Miami Branch of the Federal Reserve Bank of Atlanta.
On September 10, federal banking regulators, the CFPB, and the FHFA conducted a webinar on federal servicemember financial protections, recent changes to the Servicemembers' Civil Relief Act (SCRA), and recent changes to Fannie Mae and Freddie Mac short sale procedures for servicemembers and loan modification options for servicemembers. The event featured compliance and enforcement updates from the CFPB, the DOJ, and the OCC. Ann Thompson from the CFPB Office of Nonbank Supervision described recent joint agency guidance regarding servicemembers with Permanent Change of Station (PCS) Orders as an extension of the CFPB's mortgage servicing exam procedures. Ms. Thompson explained that the CFPB will look at bank and nonbank servicers' policies and procedures to determine their adequacy for handling servicemembers with PCS orders. If there are deficiencies, the CFPB may take supervisory or enforcement actions to support implementation of the guidance. Eric Halperin from the DOJ's fair lending unit provided an update on enforcement activity and described a recent SCRA enforcement action against a national bank that covered all aspects of SCRA, not just foreclosure protections, as the model for the DOJ moving forward. Finally, Kimberly Hebb from the OCC offered some considerations for institutions seeking to comply with SCRA. She explained that the SCRA compliance process need not stand alone. For example, with regard to the law's rate reduction requirements, compliance steps could be incorporated into existing processes for error resolution. Ms. Hebb also stressed documentation and record keeping, pointing out that while the law does not include a specific record retention requirement, examiners will want to see the full scope of compliance processes documented for use in determining compliance.
On August 17, the U.S. Department of Treasury announced new steps to accelerate the wind down of Fannie Mae’s and Freddie Mac’s (the GSEs) government-backed portfolios. Treasury is modifying its Preferred Stock Purchase Agreements with the FHFA to wind down the GSEs’ portfolios at an annual rate of fifteen percent, moving up the time by which the portfolios must meet the existing $250 billion target. The amended agreements also (i) require that each GSE submit an annual plan on actions to reduce taxpayer exposure to mortgage credit risk and (ii) replace the current ten percent dividend payments to Treasury with a quarterly sweep of every dollar of profit made by each GSE.
FHFA Decides Fannie Mae and Freddie Mac Will Not Offer Principal Forgiveness; Updates Other Borrower Assistance Efforts
On July 31, FHFA announced that it will not direct Fannie Mae and Freddie Mac to offer principal reduction assistance to troubled borrowers, concluding that a principal forgiveness policy does not “clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today.” The Treasury Department immediately objected, countering that FHFA’s cost concerns could be alleviated with Treasury assistance to pay for additional administrative implementation costs. With its announcement, FHFA released correspondence to members of Congress explaining FHFA’s decision and providing a detailed assessment of the principal forgiveness policy option. FHFA also reported that it is working with Fannie Mae and Freddie Mac on a series of other borrower assistance efforts including (i) an update to Freddie Mac's refinance program to align it with Fannie Mae’s policy for refinancing mortgages with loan-to-value ratios equal to or less than 80%, (ii) new requirements expected in September related to representations and warranties, which will shift the loan quality review closer to the time of loan origination, (iii) a single, aligned short sale program for Fannie Mae and Freddie Mac with more flexible terms, (iv) a new set of adjustments to guarantee fee pricing, expected to be announced in August and to take effect later in the year, and (v) closing on the first set of REO pilot transactions in August.
This week, the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) each published annual reports to Congress, as mandated by the Dodd-Frank Act. This is the first such report the OFR has prepared. The FSOC annual report surveys the macroeconomic environment within which the U.S. economy exists, identifies risks to U.S. financial stability, reports on implementation of the Dodd-Frank Act and activities of FSOC, and provides a series of recommendations for policymakers. The FSOC’s recommendations fall into four categories: (i) reforms to address structural vulnerabilities, (ii) heightened risk management and supervisory attention, (iii) housing finance reforms, and (iv) implementation and coordination of financial reform. Within the housing finance category, the FSOC notes recent efforts to encourage private capital to re-enter the market in the near term but stresses the continued need for long-term housing finance reform. This section also reviews federal efforts to alter mortgage servicing standards and recommends that federal agencies finalize comprehensive servicing standards. The OFR report summarizes the OFR’s efforts to (i) analyze threats to financial stability, (ii) conduct research on financial stability, (iii) address data gaps, and (iv) promote data standards. According to the report, over the next year, the OFR will focus on the migration of financial activities into the so-called shadow banking system, and will continue to build on research related to threats to financial stability, stress tests, and risk management.
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: The CFPB’s proposed debt collection rule
- Buckley Webcast: Trends in e-discovery technology and case law
- Brandy A. Hood to discuss "What the flood? Don’t get washed away by a flood of changes" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Mitigating the risks of banking high risk customers" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano, Kari K. Hall, Brandy A. Hood, and H Joshua Kotin to discuss "Regulations that matter in a deregulatory environment" at the American Bankers Association Regulatory Compliance Conference Power Hour
- Buckley Webcast: Data breach litigation and biometric legislation
- Daniel P. Stipano to discuss "A first anniversary: Assessing the CDD final rule’s first year" at a ACAMS webinar
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Christopher M. Witeck and Moorari K. Shah to discuss "The latest in vendor management regulations" at a Mortgage Bankers Association webinar
- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium