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  • Fed announces flood insurance violations

    Federal Issues

    On July 1, the Federal Reserve Board announced an enforcement action against a Tennessee-based bank for alleged violations of the National Flood Insurance Act (NFIA) and Regulation H. The consent order does not specify the number or the precise nature of the alleged violations of the NFIA or Regulation H, and the bank was assessed a $8,000 civil money penalty for an alleged pattern or practice of violations.

    Federal Issues Federal Reserve Enforcement Flood Insurance National Flood Insurance Act Regulation H Mortgages Bank Regulatory

  • FHFA releases policy statement on fair lending

    Federal Issues

    On July 1, FHFA released a policy statement on its commitment to “comprehensive” fair lending oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (collectively, “regulated entities”), in addition to expanding FHFA’s fair lending program. The statement describes FHFA’s position on monitoring and information gathering, supervisory examinations, and administrative enforcement regarding ECOA, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act. FHFA noted the purpose of the policy statement is “to provide a foundation for possible future interpretations and rulemakings by the agency for its regulated entities.” FHFA also issued an order on fair lending reporting that requires Fannie Mae and Freddie Mac to submit quarterly fair lending reports and data. Comments on the policy statement are due 60 days after publication in the Federal Register.

    Federal Issues FHFA Fannie Mae Freddie Mac GSE ECOA Fair Housing Act Mortgages

  • CFPB issues summer supervisory highlights

    Federal Issues

    On June 29, the CFPB released its summer 2021 Supervisory Highlights, which details its supervisory and enforcement actions in the areas of auto loan servicing, consumer reporting, debt collection, deposits, fair lending, mortgage origination and servicing, payday lending, private education loan origination, and student loan servicing. The findings of the report, which are published to assist entities in complying with applicable consumer laws, cover examinations that generally were completed between January and December of 2020. Highlights of the examination findings include:

    • Auto Loan Servicing. Bureau examiners identified unfair acts or practices related to lender-placed collateral protection insurance (CPI), including instances where servicers charged unnecessary CPI or charged for CPI after repossession. Examiners also identified unfair acts or practices related to payoff amounts where consumers had ancillary product rebates due, and also found unfair or deceptive acts or practices related to payment application.
    • Consumer Reporting. The Bureau found deficiencies in consumer reporting companies’ (CRCs) FCRA compliance related to the following requirements: (i) accuracy; (ii) security freezes applicable to certain CRCs; and (iii) ID theft block requests. Specifically, examiners found that CRCs continued to include information from furnishers despite receiving furnisher dispute responses that “suggested that the furnishers were no longer sources of reliable, verifiable information about consumers.” Additionally, the report noted instances where furnishers failed to update and correct information or conduct reasonable investigations of direct disputes.
    • Debt Collection. The report found that examiners found instances of FDCPA violations where debt collectors (i) made calls to a consumer’s workplace; (ii) communicated with third parties; (iii) failed to stop communications after receiving a written request or a refusal to pay; (iv) harassed consumers regarding their inability to pay; (v) communicated, and threatened to communicate, false credit information to CRCs; (vi) made false representations or used deceptive collection means; (vii) entered inaccurate information regarding state interest rate caps into an automated system; (viii) unlawfully initiated wage garnishments; and (ix) failed to send complete validation notices.
    • Deposits. The Bureau discussed violations related to Regulation E and Regulation DD, including error resolution violations, issues with provisional credits, failure to investigate, failure to remediate errors, and overdraft opt-in and disclosure violations.
    • Fair Lending. The report noted instances where examiners cited violations of HMDA/ Regulation C involving HMDA loan application register inaccuracies, and instances where lenders, among other things, violated ECOA/Regulation B “by engaging in acts or practices directed at prospective applicants that would have discouraged reasonable people in minority neighborhoods in Metropolitan Statistical Areas (MSAs) from applying for credit.”
    • Mortgage Origination. The Bureau cited violations of Regulation Z and the CFPA related to loan originator compensation, title insurance disclosures, and deceptive waivers of borrowers’ rights in security deed riders and loan security agreements.
    • Mortgage Servicing. The Bureau cited violations of Regulation X, including those related to dual tracking violations, misrepresentations regarding foreclosure timelines, and PMI terminations.
    • Payday Lending. The report discussed violations of the CFPA for payday lenders, including falsely representing an intent to sue or that a credit check would not be run, and presenting deceptive repayment options to borrowers that were contractually eligible for no-cost repayment plans.
    • Private Education Loan Origination. Bureau examiners identified deceptive acts or practices related to the marketing of private education loan rates.
    • Student Loan Servicing. Bureau examiners found several types of misrepresentations servicers made regarding consumer eligibility for the Public Service Loan Forgiveness (PSLF) program, and identified unfair acts or practices related to a servicer’s “failure to reverse negative consequences of automatic natural disaster forbearances.” Additionally, examiners identified unfair act or practices related to failing to honor consumer payment allocation instructions or providing inaccurate monthly payment amounts to consumers after a loan transfer.

    The report also highlights recent supervisory program developments and enforcement actions.

    Federal Issues CFPB Supervision Consumer Finance Consumer Reporting Redlining Foreclosure Auto Finance Debt Collection Deposits Fair Lending Mortgage Origination Mortgage Servicing Mortgages Payday Lending Student Lending

  • FHA extends Covid-19 flexibilities

    Federal Issues

    Recently, FHA announced the extension of several Covid-19-related flexibilities for single-family lenders and servicers. Specifically, Mortgagee Letter 2021-16 will “allow industry partners additional opportunity to utilize flexible guidance related to” self-employment and rental income verification for case numbers assigned on or before September 30. Both extensions are applicable to Single Family Title II forward and Home Equity Conversion Mortgages. FHA is also extending temporary flexibilities for “the administration of 203(k) Rehabilitation Escrow guidance for borrowers in forbearance” for open escrow accounts through September 30. Additionally, Mortgagee Letter 2021-17 updates Single Family Quality Control (QC) requirements for appraisal field reviews and evaluation of property and appraisal documentation. FHA notes that the updated guidance applies to mortgages selected for Property and Appraisal QC review on or after July 1.

    Federal Issues FHA Covid-19 Mortgages Servicing Mortgages

  • FHFA expands use of interest rate reduction

    Federal Issues

    On June 30, FHFA announced changes to loan modification terms for borrowers impacted by the Covid-19 pandemic with mortgages backed by Fannie Mae or Freddie Mac who need payment reduction. According to FHFA, ​flex modification terms will be adjusted for Covid-19 hardships, which will make “interest rate reduction possible for eligible borrowers, regardless of the borrower’s loan-to-value ratio.” Previously, only borrowers with mark-to-market loan-to-value ratios (which compare the balance remaining on a mortgage to the current market value of a home) greater than or equal to 80 percent were eligible for an interest rate reduction. FHFA acting Director Sandra L. Thompson noted that more families qualifying for interest rate reduction will “prevent unnecessary foreclosures, help strengthen the Enterprises’ books of business, and make sustainable homeownership a reality for more families currently living with the uncertainty of forbearance.”

    Federal Issues FHFA Interest Rate Covid-19 Fannie Mae Freddie Mac GSEs Mortgages

  • Special Alert: CFPB specifies pandemic foreclosure protections and signals tight supervision and enforcement around servicer efforts

    Federal Issues

    The Consumer Financial Protection Bureau’s Covid-relief mortgage servicing rule issued yesterday steered away from a nationwide foreclosure freeze as initially proposed, instead creating heightened protections for those borrowers who became seriously delinquent during the pandemic. The distinction may not prove to be a game-changer for servicers, however, which will be obligated to carefully document outreach efforts and decisions to advance borrowers into foreclosure — with little margin for error.

    The bureau’s final rule, which takes effect Aug. 31, obligates a servicer to continue specifying, with substantial detail, any loss mitigation options that may help the borrower resolve their delinquency. It also largely preserves the proposed streamline modification option on the basis of an incomplete loss mitigation application, although most servicers already have been offering many of these modifications since the early days of the pandemic.

    Federal Issues CFPB Special Alerts Mortgages Foreclosure Supervision Enforcement Mortgage Servicing Consumer Finance Covid-19

  • FHFA announces CFPB final rule

    Federal Issues

    On June 29, FHFA announced that Fannie Mae and Freddie Mac (GSEs) will not be permitted to make a first notice or filing for foreclosure that would be prohibited by the CFPB’s “Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X” final rule prior to the rule’s effective date. As previously covered by a Buckley Special Alert, the Bureau’s final rule, which takes effect August 31, obligates a servicer to continue specifying, with substantial detail, any loss mitigation options that may help borrowers resolve their delinquencies. GSEs are required to follow the CFPB’s new protections a month before the CFPB rule takes effect, which will protect borrowers from foreclosure and provide certainty for servicers regarding GSE expectations. According to FHFA, “[s]ervicers will still be able to make a notice or filing for foreclosure on abandoned properties and those that had a foreclosure referral prior to March 2020, along with certain other exceptions.” FHFA’s action eliminates the gap between the expiration of its current moratoriums for single family foreclosures and real estate owned (REO) evictions that will expire on July 31 (covered by InfoBytes here) and the effective date of the CFPB’s rule, which is a month later.

    Federal Issues FHFA Covid-19 Fannie Mae Freddie Mac GSE Forbearance Foreclosure Mortgages Consumer Finance CDC CFPB Mortgage Servicing Loss Mitigation

  • FDIC releases May enforcement actions

    Federal Issues

    On June 25, the FDIC released a list of administrative enforcement actions taken against banks and individuals in May. During the month, the FDIC issued 10 orders and one notice consisting of “two Orders to Pay Civil Money Penalties, four Section 19 Applications, three Orders Terminating Consent Orders, one Order of Prohibition from Further Participation, and Notice of Intention to Prohibit from Further Participation, one Notice of Assessment of Civil Money Penalties, Findings of Fact, Conclusions of Law, Order to Pay, and Notice of Hearing.” Among the orders is a civil money penalty imposed against an Oregon-based bank concerning allegations of unfair and deceptive practices related to a wholly-owned subsidiary’s debt collection practices for commercial equipment financing. As previously covered by InfoBytes, the bank’s subsidiary allegedly violated Section 5 of the FTC Act by, among other things, unfairly and deceptively charging various undisclosed collection fees—such as collection call and letter fees and third-party collection fees—to borrowers with past due accounts. The bank, which did not admit or deny the violations, agreed to voluntarily pay an approximately $1.8 million civil money penalty.

    The FDIC also imposed a civil money penalty against an Iowa-based bank related to alleged violations of the Flood Disaster Protection Act. Among other things, the FDIC claimed that the bank (i) “[m]ade, increased, extended or renewed loans secured by a building or mobile home located or to be located in a special flood hazard area without requiring that the collateral be covered by flood insurance”; (ii) “[f]ailed to timely notify the borrower that the borrower should obtain flood insurance, at the borrower’s expense, upon determining that the collateral was not covered by flood insurance at some time during the term of the loan”; and (iii) “[f]ailed to timely purchase flood insurance on the borrower’s behalf when the borrower failed to do so within 45 days of being advised to obtain adequate flood insurance.” The order requires the payment of a $8,000 civil money penalty.

    Federal Issues FDIC Enforcement FTC Act UDAP Unfair Deceptive Flood Insurance Flood Disaster Protection Act Mortgages Bank Regulatory

  • FHA extends Covid-19 foreclosure moratorium and other flexibilities

    Federal Issues

    On June 25, FHA announced the extension of several Covid-19-related flexibilities in Mortgagee Letter 2021-15, which extends the foreclosure and eviction moratorium in connection with the Covid-19 pandemic, expands the Covid-19 forbearance and the home equity conversion mortgage (HECM) extension, and establishes the Covid-19 advance loan modification (Covid-19 ALM). As previously covered by InfoBytes, in December 2020, FHA first extended its foreclosure and eviction moratorium through February 28. In the most recent extension, FHA further extended its foreclosure and eviction moratorium for all FHA-insured single family mortgages, excluding vacant or abandoned properties, through July 31. For FHA’s Covid-19 forbearance policy, FHA expanded the date to request an initial Covid-19 forbearance from June 30 to September 30 and provided an additional three-month extension to the forbearance for borrowers who began their initial forbearance between July 1, 2020, and September 30, 2020. FHA also established the Covid-19 ALM, which, among other things, “offers borrowers who are currently 90 or more days delinquent, or at the end of their COVID-19 forbearance, the opportunity for a 30-year rate and term mortgage modification that will bring their mortgage current and reduce the principal and interest portion of their monthly mortgage payment by at least 25 percent” and establishes a Default Code. FHA also expanded the HECM Covid-19 extensions by “providing an additional three-month extension to HECM borrowers, where an initial HECM extension period began between July 1, 2020, and September 30, 2020.”

    Federal Issues Covid-19 FHA Foreclosure Mortgages Forbearance Loss Mitigation CARES Act

  • Certain FHA Covid-19 guidance to expire June 30

    Federal Issues

    On June 22, FHA published an announcement with a reminder that certain relaxed Covid-19-related standards that had allowed for single-family lenders and servicers to limit face-to-face contact as part of the mortgage origination process for FHA loans would expire as intended on June 30. The temporary guidance, which was first announced last March to provide flexibility related to the re-verification of employment guidance and the exterior-only appraisal scope of work option, was extended several times during the pandemic (covered by InfoBytes here). FHA noted that due to low usage it believes that the expiration of the guidance will have minimal impact on the industry.

    Federal Issues FHA Mortgages Covid-19 HUD Mortgage Origination Servicing

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