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Education Dept. extends student loan moratorium
On December 22, the Department of Education announced a 90-day extended pause on student loan repayment, interest, and collections through May 1, 2022, which will allow the Biden Administration “to assess the impacts of the Omicron variant on student borrowers and provide additional time for borrowers to plan for the resumption of payments and reduce the risk of delinquency and defaults after restart.” As previously covered by InfoBytes, in August 2021, President Biden announced the extension of the moratorium on collecting student loans until January 31, 2022. According to the Department, the extended pause will assist 41 million borrowers in saving $5 billion per month and “[b]orrowers are encouraged to use the additional time to ensure their contact information is up to date and to consider enrolling in electronic debit and income-driven repayment plans to support a smooth transition to repayment.”
FDIC announces Alabama disaster relief
On December 23, the FDIC issued FIL-82-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Alabama affected by severe storms and flooding. The FDIC acknowledged the unusual circumstances faced by institutions and their customers affected by the weather and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
FinCEN issues final rule replacing obsolete BSA civil penalty regulations
On December 23, the Financial Crimes Enforcement Network (FinCEN) published a final rule amending the Bank Secrecy Act civil penalty regulations concerning requirements for reporting foreign financial accounts and transactions with foreign financial agencies. Specifically, the final rule removes civil penalty language that was made obsolete by the American Jobs Creation Act of 2004’s enactment of statutory revisions to the computation of a civil money penalty, which included provisions for increasing the maximum penalty for willful violations. The final rule took effect immediately.
FTC settles with mortgage analytics company
On December 22, the FTC announced the final approval of a settlement with a mortgage industry data analytics firm (defendant) for allegedly failing to develop, implement, and maintain a comprehensive information security program and ensure third-party vendors are capable of implementing and maintaining appropriate safeguards for customer information in violation of the Gramm-Leach Bliley Act’s Safeguards Rule. As previously covered by InfoBytes, in December 2020, the FTC alleged that a vendor hired by the defendant stored the unencrypted contents of mortgage documents on a cloud-based server without any protections to block unauthorized access, such as requiring a password. According to the FTC, because the vendor did not implement and maintain appropriate safeguards to protect customer information, the cloud-based server containing the data was improperly accessed approximately 52 times. The FTC claimed, among other things, that the defendant failed to adequately vet its third-party vendors and never took formal steps to evaluate whether the vendors could reasonably protect the sensitive information. Moreover, the defendant’s contracts allegedly did not require vendors to implement appropriate safeguards, nor did the defendant conduct risk assessments of its vendors.
The settlement requires the defendant to, among other things, implement a comprehensive data security program and undergo biennial assessments conducted by a third party on the effectiveness of its program. Additionally, the defendant must report any future data breaches to the FTC no later than 10 days after it provides notice to any federal, state, or local government entity.
FTC Commissioner Rebecca Kelly Slaughter provided a lone dissenting statement.
CFTC revises LIBOR transition no-action letters
On December 22, the CFTC announced that the Division of Clearing and Risk (DCR), Division of Market Oversight (DMO), and Market Participants Division each issued revised no-action letters (see 21-26, 21-27, and 21-28) to swap dealers and other market participants associated with the transition from swaps that reference LIBOR and other interbank rates to swaps that reference alternative benchmarks. As previously covered by InfoBytes, the United Kingdom’s Financial Conduct Authority announced the dates that all LIBOR settings will cease to be provided by any administrator and will no longer be representative. All sterling, euro, Swiss franc and Japanese yen settings, and one-week and two-month U.S. dollar settings ceased immediately after December 31, 2021, while all remaining U.S. dollar settings will cease immediately after June 30, 2023. Therefore, according to the recent CFTC announcement, the DMO and the DCR letters are effective until June 30, 2023 “for swaps otherwise covered by such letters to the extent such swaps reference one of the 2023 USD LIBOR Settings.”
DOJ solicits additional comments on bank mergers
On December 17, the DOJ announced that its Antitrust Division is soliciting additional public comments regarding the potential revision of the 1995 Bank Merger Competitive Review Guidelines (Banking Guidelines) as part of a continuing effort by the federal agencies responsible for banking regulation and supervision. According to the announcement, the division will utilize “additional comments to ensure that the Banking Guidelines reflect current economic realities and empirical learning, ensure Americans have choices among financial institutions, and guard against the accumulation of market power.” The division had previously announced in September 2020 that it was soliciting comments regarding the Banking Guidelines’ potential revision. The call for public comment contained specific questions, including whether: (i) any new guidance should be bank-specific; (ii) any new bank merger guidance should be jointly issued; (iii) the 1800/200 Herfindahl-Hirschman Index screen should be updated; and (iv) there should be a de minimis exception. The announcement also noted that “[b]uilding on the responses, the updated call for comment focuses on whether bank merger review is currently sufficient to prevent harmful mergers and whether it accounts for the full range of competitive factors appropriate under the laws.” The announcement further noted that the division will continue working with the Federal Reserve, OCC, and the FDIC, and will consider comments from the public.
CFPB releases annual HMDA and TILA adjustments
On December 23, the CFPB announced final rules adjusting the asset-size thresholds under HMDA (Regulation C) and TILA (Regulation Z). Both rules took effect January 1, 2022. Under HMDA, institutions with assets below certain dollar thresholds are exempt from the collection and reporting requirements. The final rule increases the asset-size exemption threshold for banks, savings associations, and credit unions from $48 million to $50 million, thereby exempting institutions with assets of $50 million or less as of December 31, 2021, from collecting and reporting HMDA data in 2022. TILA, likewise, exempts certain entities from the requirement to establish escrow accounts when originating higher-priced mortgage loans (HPMLs), including entities with assets below the asset-size threshold established by the CFPB. The final rule increases this asset-size exemption threshold from $2.230 billion to $2.336 billion, thereby exempting creditors with assets of $2.336 billion or less as of December 31, 2021, from the requirement to establish escrow accounts for HPMLs in 2022.
States say FHA must require servicers to comply with Covid-19 loss mitigation options
On December 21, a coalition of attorneys general from 20 states and the District of Columbia sent a letter to the FHA urging the agency to address mortgage servicers’ alleged failure to adequately implement Covid-19 recovery loss mitigation options for eligible borrowers. As previously covered by InfoBytes, FHA issued Mortgagee Letter 2021-18 in July, which required mortgage servicers to offer a zero-interest subordinate lien option to eligible homeowners who can resume their existing mortgage payments under the “COVID-19 Recovery Standalone Partial Claim” option. For borrowers that are unable to resume their monthly mortgage payments, FHA established the “COVID-19 Recovery Modification” option, which extended the term of a mortgage to 360 months at market rate and targeted a 25 percent principal and interest reduction for all eligible borrowers. At the time, FHA informed servicers that they could start offering the options as soon as operationally feasible but were required to use the new options within 90 days.
The AGs alleged in their letter that several servicers of FHA-insured loans are reportedly failing to adequately implement these Covid-19 relief programs, and are instead “routinely sending borrowers letters that fail to include the Covid-19 Recovery Modification as an available option, are requiring paperwork and imposing qualifications that are not necessary under the FHA’s guidelines, and are instructing borrowers during customer-service phone calls that this option does not exist.” The AGs expressed deep concerns over these reports and requested that FHA take immediate action to ensure that FHA’s loss mitigation options, including the Covid-19 Recovery Modification, are fully implemented, and that borrowers receive accurate, up-to-date information. The AGs asked that FHA-approved lenders and servicers be required to demonstrate that they are taking affirmative actions to implement these Covid-19 relief options and requested training for all customer service staff to ensure borrowers receive the necessary information.
Agencies release 2020 CRA data
On December 21, the three federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC) with Community Reinvestment Act (CRA) responsibility—the Federal Reserve Board, the FDIC, and the OCC—announced the release of the 2020 small business, small farm, and community development CRA data. The analysis contains information from 687 lenders about originations and purchases of small loans (loans with original amounts of $1 million or less) in 2020, a 1.2 percent decrease from the 695 lenders that reported data in 2019. According to the analysis, the total number of originated loans decreased by approximately 1.7 percent from 2019, with the dollar amount of originations increasing by roughly 7.9 percent. The analysis further noted that 621 banks reported community development lending activity totaling nearly $169 billion in 2020, a 52 percent increase from 2019.
NCUA extends Covid-19 regulatory relief
On December 21, the NCUA unanimously approved an extension to the effective date of a temporary final rule, which granted regulatory relief to federally insured credit unions during the Covid-19 pandemic. In 2020, the NCUA issued the final rule to temporarily raise “the maximum aggregate amount of loan participations that a [federally insured credit union (FICU)] may purchase from a single originating lender to the greater of $5,000,000 or 200 percent of the FICU’s net worth.” The final rule also temporarily suspended certain “limitations on the eligible obligations that a federal credit union [] may purchase and hold.” Required timeframes related to the occupancy or disposition of certain properties not in use for federal credit union business or that were abandoned were also suspended. The temporary final rule’s modifications will remain in effect through December 31, 2022.