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CFPB issues TRID interpretive rule, ECOA FAQ
On April 29, the CFPB issued an interpretive rule (IR) “clarifying that consumers can exercise their rights to modify or waive certain required waiting periods” in order to allow borrowers impacted by Covid-19 to access mortgage credit faster. The IR states that if, as a result of the Covid-19 pandemic, a mortgage borrower determines that a mortgage transaction must be completed prior to the end of the waiting period for either the TRID Rule or the Regulation Z right of rescission rule, the borrower may waive the waiting period. Further, the IR asserts that the Covid-19 pandemic qualifies as a “changed circumstance” for purposes of certain TRID Rule provisions, permitting the use of revised estimates of settlement charges. In addition, the Bureau issued a frequently asked question that addresses the Equal Credit Opportunity Act Valuations Rule, which states that a first-lien loan borrower may also waive the requirement that a lender provide the borrower with appraisals and valuations at or before settlement of the loan.
UK FCA extends LIBOR benchmark deadline
On April 29, the United Kingdom’s Financial Conduct Authority (FCA) issued a follow-up statement that allows firms the ability to use the LIBOR interest rate benchmark in new sterling LIBOR linked loans for an addition six months due to the Covid-19 pandemic. The FCA acknowledges that due to challenges presented by the current operating environment, it is not feasible for lenders to complete the transition from LIBOR across all new sterling LIBOR linked loans before the original Q3 2020 target end date. The FCA provides several recommendations including: (i) lenders should be in a position to offer non-LIBOR linked products by the end of Q3; (ii) from Q3 onward, lenders and borrowers should agree on a process to facilitate conversion to an alternative rate prior to the end of 2021; and (iii) all new issuances of sterling LIBOR-referencing loan products that expire after the end of 2021 should cease by the end of Q1 2021. The announcement also reiterates the FCA’s previously stated position that the central assumption that firms cannot rely on LIBOR being published after the end of 2021 remains unchanged (covered by InfoBytes here).
Find continuing InfoBytes coverage on LIBOR here.
State AGs, U.S. senators urge CRAs to protect credit scores during Covid-19 crisis
On April 28, New York Attorney General Letitia James and Pennsylvania Attorney General Josh Shapiro, along with the attorneys general of 19 other states and the District of Columbia sent letters to the three credit reporting agencies (CRAs) stating their intention to protect consumer credit and ensure fair and accurate reporting on consumer credit reports during the Covid-19 crisis. The letter calls attention to the obligations of the CRAs under the FCRA and state credit-reporting laws and further states that the attorneys general intend to enforce compliance of all related requirements. Notwithstanding the CFPB’s announcement that it will ease the FCRA’s 30 or 45-day time restrictions for CRAs to investigate consumer complaints, the letter insists that the attorneys general will enforce the FCRA deadlines. Pursuant to the CARES Act amendment of the FCRA—which requires that consumer accounts be reported by furnishers as current if the consumer was current prior to the grant of a CARES Act accommodation—the letter asserts that its signors will actively monitor for compliance to this amendment. Finally, the letter expresses appreciation for the CRAs’ compliance and cooperation.
On April 27, Senator Elizabeth Warren (D-MA) and Senator Brian Schatz (D-HI) sent letters to the same CRAs also urging the agencies to protect consumer credit reports by complying with the CARES Act amendment to the FCRA. In addition, the Senators request that the CRAs reply to six questions included in the letters to assist the Senators in understanding all efforts the CRAs are taking to protect consumer credit scores during the Covid-19 crisis.
SEC releases agenda for Small Business Capital Formation Committee meeting
On April 28, the SEC released the agenda for the May 8, 2020, meeting of its Small Business Capital Formation Advisory Committee, which will be hosted via video conference. The committee will discuss the capital formation proposal and how small businesses are coping with Covid-19, among other topics.
SBA issues IFR on PPP loan disbursement requirements
On April 28, the Small Business Administration (SBA) issued an interim final rule (IFR) regarding disbursements under the SBA’s Paycheck Protection Program (PPP). The IFR explains that PPP lenders must fund loans to approved small businesses—those that were issued an SBA loan number—in one disbursement. Borrowers may not request multiple disbursements to delay their eight weeks of coverage. Further, the start date for the eight weeks of coverage for any loans that were approved but are not fully disbursed is the date of the first disbursement. The IFR makes clear that funds must be disbursed within 10 days of a borrower’s loan approval date, and that the 10 days starts on April 28 for any loans that were previously approved but not disbursed prior to the issuance of the IFR. PPP lenders are not responsible for disbursement delays based on the failure of the borrower to submit required documents, and a borrower’s loan will be cancelled if all required documents are not submitted within 20 days of loan approval. The IFR further instructs that in order to receive the lender processing fee, PPP lenders must disburse each loan and submit SBA Form 1502 within 20 days of loan approval. As this form has not yet been released, the deadline for submitting the form for previously approved loans is May 18. The IFR states that lenders will not receive the processing fee for loans that are: (i) cancelled by the borrower prior to disbursement of loan funds; or (ii) cancelled and repaid by the borrower after disbursement of loan funds. The IFR is effective immediately, and comments must be submitted by June 3.
U.S. Supreme Court announces May oral arguments to be delivered via teleconference
On April 28, the U.S. Supreme Court announced that on May 4-6 and 11-13, the Court will hear a number of the oral arguments that were previously postponed for March and April due to the Covid-19 pandemic. Counsel will present arguments to the Court via telephone conference as the Chief Justice prompts them, and the next case will follow immediately after the first ends.
Rhode Island attorney general: CARES Act recovery rebates exempt from seizure
On April 28, the attorney general of Rhode Island issued guidance to financial institutions, credit unions, creditors and debt collectors announcing that, in the attorney general’s view, all CARES Act recovery rebates are exempt from attachment and execution under Rhode Island law. The attorney general also warned that if a creditor attempts to attach a CARES Act recovery rebate, the attorney general’s office may bring a civil action or seek injunctive relief.
Rhode Island regulator extends guidance for lenders
On April 28, the Rhode Island Department of Business Regulation, Banking Division, amended previous guidance (previously covered here) issued to mortgage loan originators, lenders, loan brokers and exempt company registrants. The previous guidance permitted working at home, even if the home is located outside of Rhode Island or is not a licensed branch. The department extended this guidance until June 30, 2020.
Pennsylvania State Department revises guidance for real estate industry
On April 28, the Pennsylvania Department of State issued revised guidance for real estate professionals, appraisers, notaries, title companies, and home inspectors in light of the Covid-19-related closures of non-essential businesses. The revised guidance limits in-person residential real estate activities to transactions related to existing homes under contract prior to March 18, 2020, new construction homes under a contract calling for closing or delivery on or after March 18, 2020, where a buyer can demonstrate that they had entered into an agreement for sale of their prior residence prior to March 18, 2020 or where a property subject to sale, home equity loan or home equity refinancing is located in certain regions of Pennsylvania.
SEC charges company and CEO for misleading statements concerning N95 masks
On April 28, the SEC announced that it filed suit in the U.S. District Court for the Southern District of Florida against a company and its CEO (defendants) for violating the Securities Exchange Act of 1934 by making false and misleading statements concerning their ability to source and supply N95 masks for the Covid-19 virus. The SEC alleges that the defendants’ actions sought to mislead investors because they “never had either a single order from any buyer to purchase masks, or a single contract with any manufacturer or supplier to obtain masks, let alone any masks actually in its possession.” Following regulatory inquiries (and an SEC March 26 order that temporarily suspended trading in the securities of the company), the SEC alleges in the complaint that the CEO issued a press release stating that the company never had masks available to sell. The SEC seeks injunctive relief and civil penalties against the defendant, as well as an officer-and-director bar against the CEO.