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Federal Reserve Board issues flood insurance enforcement action against New York bank
On August 28, the Federal Reserve Board (Board) announced an enforcement action against a New York state bank for allegedly violating the National Flood Insurance Act (NFIA). The consent order assesses a $16,000 penalty against the bank, but does not specify the number or nature of the alleged violations. The maximum civil money penalty under that NFIA is $2,000 per violation.
FDIC releases July enforcement actions
On August 31, the FDIC announced a list of administrative enforcement actions taken against banks and individuals in July. The 15 orders include “three Section 19 orders; four removal and prohibition orders; one civil money penalty; three terminations of consent orders; and four adjudicated decisions.” The FDIC assessed a $10,800 civil money penalty against a New Mexico-based bank for alleged violations of the Flood Disaster Protection Act in connection with alleged failures to (i) obtain flood insurance coverage on loans at or before origination or renewal; (ii) maintain flood insurance; (iii) notify borrowers that they were required to obtain flood insurance; and (iv) obtain flood insurance on a borrower’s behalf when the borrower did not obtain insurance within 45 days after receiving such notification. There are no administrative hearings scheduled for September 2018. The FDIC database containing all 15 enforcement decisions and orders may be accessed here.
President Trump signs National Flood Insurance Program extension
On July 31, President Trump signed the “National Flood Insurance Program (NFIP) Extension Act of 2018” into law (see Public Law 115-225/S. 1182). The NFIP was set to expire that day. The short-term extension, which the Senate passed earlier that day, reauthorizes the NFIP through November 30, and provides Congress additional time to establish a long-term financial solution.
Visit here for continuing InfoBytes coverage on the NFIP.
House passes National Flood Insurance Program extension
On July 25, the House passed a bill by a vote of 366 - 52 to extend the National Flood Insurance Program (NFIP) through November 30. The “National Flood Insurance Program Extension Act of 2018” (S. 1182) is a short-term fix to extend coverage for lenders and borrowers during the upcoming hurricane season. As previously covered in InfoBytes, last November the House passed H.R. 2874, which would amend and reauthorize the NFIP through fiscal year 2022; however, the Senate Banking Committee has yet to act on the measure. The Senate must now pass S. 1182 to ensure the NFIP does not expire at the end of July.
Freddie Mac and Fannie Mae release updates to servicing guides
On June 13, Freddie Mac released Guide Bulletin 2018-9, which among other things, updates servicer requirements for short-term, long-term, and unemployment forbearance plans and consolidates the offerings into a single plan. Effective December 1, the streamlined plan will allow servicers to approve forbearance plans lasting up to six months without requiring eligible borrowers to submit a Borrower Response Package. Servicers may also offer consecutive forbearance plans that do not exceed 12 months in total to qualifying borrowers. Separately, the Bulletin includes the introduction of Freddie Mac’s NextJob re-employment services company designed to serve high-needs areas and provide job search skills and training for unemployed or underemployed borrowers who have requested loss mitigation assistance.
On the same day, Fannie Mae updated its Servicing Guide to consolidate and simplify its forbearance policies into a single plan, and encouraged servicers to implement the changes immediately, but no later than December 1. Fannie Mae clarified, however, that forbearance plans “entered into prior to the servicer’s implementation would adhere to existing policy until the expiration of such forbearance plan.” Additional changes to the Servicing Guide include: (i) clarifications to the escrow advances reimbursement policy for real estate taxes and flood/property insurance premiums; and (ii) updates to be implemented by August 1 for when servicers are required to notify Fannie Mae that a mortgage loan has been placed under military indulgence.
FDIC releases April enforcement actions, including flood insurance and BSA/AML violations
On May 25, the FDIC released a list of 35 administrative enforcement actions taken against banks and individuals in April. Civil money penalties were assessed against several individuals and one bank. The FDIC assessed a $5,000 civil money penalty against a New Jersey-based bank, citing violations of the Flood Disaster Protection Act for allegedly failing to ensure 20 properties were adequately covered by flood insurance for the term of the loan. Additionally, the FDIC issued two consent orders, one against a South Dakota-based bank for unsafe or unsound banking practices or violations of law or regulation. The FDIC ordered the bank to, among other things, (i) retain qualified management; (ii) develop an independent external loan review program; and (iii) develop a plan to address the weaknesses in the bank’s audit and internal controls. The second consent order alleges violations of the Bank Secrecy Act and anti-money laundering (BSA/AML) rules by a Maryland-based bank. The bank is ordered to, among other things, (i) perform an enhanced risk assessment of the bank’s operations; (ii) revise and implement internal controls for BSA/AML compliance; and (iii) take necessary steps to correct or eliminate all cited violations.
Also on the list are 11 Section 19 orders, which allow applicants to participate in the affairs of an insured depository institution after having demonstrated “satisfactory evidence of rehabilitation,” and four terminations of consent orders.
There are no administrative hearings scheduled for June 2018. The FDIC database containing all 35 enforcement decisions and orders may be accessed here.
FDIC releases March enforcement actions, fines banks for flood insurance violations
On April 27, the FDIC released a list of 20 administrative enforcement actions taken against banks and individuals in March. Civil money penalties were assessed against several banks including one against a Michigan-based bank citing violations of the Flood Disaster Protection Act (FDPA) for allegedly: (i) failing twice “to obtain flood insurance on a building securing a designated loan at the time of origination”; (ii) failing to obtain flood insurance on a borrower’s behalf in multiple instances, in addition to twice failing to maintain adequate flood insurance; and (ii) failing to follow force placed flood insurance procedures for several loans. A second civil money penalty was assessed against a New Jersey-based bank for allegedly engaging in a pattern of violating requirements under the FDPA and the National Flood Insurance Act, which included (i) failing to notify borrowers that they were required to purchase flood insurance; and (ii) failing to obtain flood insurance on a borrower’s behalf in a timely fashion for those borrowers who failed to obtain insurance within 45 days after receiving notification.
Also on the list are seven Section 19 orders, which allow applicants to participate in the affairs of an insured depository institution after having demonstrated “satisfactory evidence of rehabilitation,” and six terminations of consent orders, among others.
There are no administrative hearings scheduled for May 2018. The FDIC database containing all 20 enforcement decisions and orders may be accessed here.
FDIC fines banks for flood insurance violations, releases January enforcement actions
On February 23, the FDIC released a list of 12 administrative enforcement action orders taken against banks and individuals in January. Civil money penalties were assessed against two banks, including one against a Michigan-based bank citing violations of the Flood Disaster Protection Act (FDPA) and the National Flood Insurance Act (NFIA) for allegedly: (i) failing to obtain flood insurance on a borrower’s behalf at origination in multiple instances, and twice failing to maintain adequate flood insurance; (ii) failing twice to follow force placed flood insurance procedures; and (iii) failing to notify borrowers in multiple instances that the “collateral for the loan was in a designated special flood hazard area.” The other civil money penalty was assessed against a Wisconsin-based bank for allegedly engaging in a pattern of violating requirements under the FDPA and the NFIA, which included failing to provide borrowers with a “Notice of Special Flood Hazard and Availability of Federal Disaster Relief Assistance” in a timely fashion.
Also on the list are four Section 19 orders, which allow applicants to participate in the affairs of an insured depository institution after having demonstrated “satisfactory evidence of rehabilitation,” and three terminations of consent orders, among others.
There are no administrative hearings scheduled for March 2018. The FDIC database containing all 12 enforcement decisions and orders may be accessed here.
President Trump releases 2019 budget proposal; key areas of reform include appropriation shifts, cybersecurity, and financial crimes
On February 12, the White House released its fiscal 2019 budget request, Efficient, Effective, Accountable, an American Budget (2019 budget proposal), along with Major Savings and Reforms (MSR) and an Appendix. The mission of the President’s budget sets forth priorities, including imposing fiscal responsibility, reducing wasteful spending, and prioritizing effective programs. However, the 2019 budget proposal has little chance of being enacted as written and does not take into account a two-year budget agreement Congress passed that the President signed into law on February 9. Notable takeaways of the 2019 budget are as follows:
CFPB. Under the MSR’s “Restructure the Consumer Financial Protection Bureau” section, Congress and the current administration would implement a broad restructuring of the Bureau to “prevent actions that unduly burden the financial industry” by restricting its enforcement authority over federal consumer law. Among other things, the proposed budget would cap the Federal Reserve’s (Fed) transfers this year at $485 million (an amount equivalent to its 2015 budget) and eliminate all transfers by 2020, at which point the Bureau’s appropriations process would shift to Congress.
Commodity Futures Trading Commission (CFTC). As stipulated in the Appendix, the budget proposes legislation, which would authorize the CFTC to collect $31.5 million in user fees to fund certain activities and would bring the Commission’s budget to $281.5 million for 2019. According to the administration, if the authorizing legislation is enacted, it would be “in line with nearly all other Federal financial and banking regulators.”
Cybersecurity. The 2019 budget proposal requests funding for the Department of Homeland Security (DHS) and the Department of Defense (DOD) to execute efforts to counter cybercrime. The DOD funds would go towards efforts to sustain the Cyber Command’s 133 Cyber Mission Force Teams, which “are on track to be fully operational by the end of 2018.” Furthermore, the administration states it “will improve its ability to identify and combat cybersecurity risks to agencies’ data, systems, and networks.”
Financial Stability Oversight Council (FSOC). Currently FSOC (which is comprised of the heads of the financial regulatory agencies and monitors risk to the U.S. financial system) and the Office of Financial Research (OFR) (FSOC’s independent research arm) receive funding through fees assessed on certain bank holding companies with assets of at least $50 billion as well as nonbanks supervised by the Fed. However, the 2019 budget proposal would require FSOC and OFR to receive their funding through the normal congressional appropriations process.
Flood Insurance. Outlined in the MSR is a budget request that would reduce appropriations for the National Flood Insurance Program's flood hazard mapping program by $78 million. The funding reduction is designed to “preserve resources for [DHS]’s core missions”; however, the administration plans to work to “improve efficiency in the flood mapping program, including incentivizing increased State and local government investments in updating flood maps to inform land use decisions and reduce risk.” Additionally, contained within the Appendix is a proposal for a “means-tested affordability program” that would determine assistance for flood insurance premium payments based on a policyholder's income or ability to repay, rather than a home's location or date of construction.
Government Sponsored Enterprises. Noted within the MSR, the budget proposes doubling the guarantee fee charged by Fannie Mae and Freddie Mac to loan originators from 0.10 to 0.20 percentage points from 2019 through 2021. The proposal is designed to help “level the playing field for private lenders seeking to compete with the GSEs” and would “generate approximately $26 billion over the 10-year Budget window.”
HUD. The 2019 budget proposal eliminates funding for the following: (i) the CHOICE Neighborhoods program (a savings of $138 million), on the basis that state and local governments should fund strategies for neighborhood revitalization; (ii) the Community Development Block Grant (a savings of $3 billion), over claims that it “has not demonstrated a measurable impact on communities”; (iii) the HOME Investment Partnerships Program (a savings of $950 million); and (iv) the Self-Help and Assisted Homeownership Opportunity Program Account (a savings of $54 million). The budget also proposes reductions to grants provided to the Native American Housing Block Grant and plans to reduce costs across HUD’s rental assistance programs through legislative reforms. Rental assistance programs generally comprise about 80 percent of HUD’s total funding.
SEC. As stipulated in the MSR, the budget proposes eliminating the SEC’s mandatory reserve fund and would require the SEC to request additional funds through the congressional appropriations process starting in 2020. According to the Appendix, the reserve fund is currently funded by collected registration fees and is not subject to appropriation or apportionment. Under the proposed budget, the registration fees would be deposited in the Treasury’s general fund.
SIGTARP. As proposed under MSR, the 2019 budget would reduce funding for the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) “commensurate with the wind-down of TARP programs.” According to the proposal, “Congress aligned the sunset of SIGTARP with the length of time that TARP funds or commitments are outstanding,” which, Treasury estimates, will be in 2023. This will mark the final time payments are expected to be made under the Home Affordable Modification Program (HAMP). As previously covered in InfoBytes, SIGTARP delivered a report to Congress last month, which identified unlawful conduct by certain of the 130 financial institutions in TARP’s Making Home Affordable Program as the top threat to TARP and, thus, the agency’s top investigative priority.
Student Loan Reform. Under the 2019 budget proposal, a single income-driven repayment plan (IDR) would be created that caps monthly payments at 12.5 percent of discretionary income. Furthermore, balances would be forgiven after a specific number of repayment years—15 for undergraduate debt, 30 for graduate. In doing so, the Public Service Loan Forgiveness program and subsidized loans will be eliminated, and reforms will be established to “guarantee that all borrowers in IDR pay an equitable share of their income.” These proposals will only apply to loans originated on or after July 1, 2019, with the exception of loans provided to borrowers in order to finish their “current course of study.”
Treasury Department. Under the 2019 budget proposal, safeguarding markets and protecting financial data are a top priority for the administration, and $159 million has been requested for Treasury’s Office of Terrorism and Financial Intelligence to “continue its critical work safeguarding the financial system from abuse and combatting other national security threats using non-kinetic economic tools. These additional resources would be used to economically isolate North Korea, complete the Terrorist Financing Targeting Center in Saudi Arabia, and increase sanctions pressure on Iran, including through the implementation of the Countering America’s Adversaries Through Sanctions Act.” The budget also requests a $3 million increase from 2017 to be applied to the Financial Crimes Enforcement Network’s authority to administer the Bank Secrecy Act and its work to prevent the financing of terrorism, money laundering, and other financial crimes.
FDIC Fines Puerto Rican Bank for Flood Insurance Violations, Releases November Enforcement Actions
On December 29, the FDIC released a list of 29 administrative enforcement action orders taken against banks and individuals in November, as well as one termination order issued in October. The FDIC assessed a $153,000 civil money penalty against a Puerto Rican bank, citing 321 violations of the Flood Disaster Protection Act (FDPA) and the National Flood Insurance Act (NFIA) for (i) failing to notify borrowers that they were required to purchase flood insurance; and (ii) failing to obtain flood insurance on a borrower’s behalf in a timely fashion for those borrowers who failed to obtain insurance within 45 days after receiving notification. A second civil money penalty was issued against an Ohio-based bank for allegedly engaging in a pattern of violating requirements under the FDPA and NFIA, including by failing to obtain flood insurance at the time of origination.
Also on the list are consent orders issued against two banks related to unsafe or unsound banking practices, four Section 19 orders allowing applicants to participate in the affairs of an insured depository institution after having demonstrated “satisfactory evidence of rehabilitation,” five terminations of consent orders, and two adjudicated decisions, among others.
There are no administrative hearings scheduled for January 2018. The FDIC database containing all 30 enforcement decisions and orders may be accessed here.