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FHFA extends foreclosure moratorium
On December 2, the FHFA announced that Fannie Mae and Freddie Mac (GSEs) will extend their moratorium on single-family foreclosures and real estate owned (REO) evictions until at least January 31, 2021 (which was set to expire on December 31, previously covered here). The foreclosure moratorium applies to homeowners with a GSE-backed, single-family mortgage, and the REO eviction moratorium applies to properties that were acquired by the GSEs through foreclosure or deed-in-lieu of foreclosure transactions.
OCC updates Comptroller’s Licensing Manual
On November 23, the OCC announced a new Comptroller’s Licensing Manual booklet, “Mutual to Stock Conversions,” which incorporates provisions of revised regulation 12 CFR Part 192. The new booklet, among other things, “provides an overview of policy considerations and decision criteria that the OCC considers when reviewing applications by federal savings associations to convert from a mutual to stock form of ownership under 12 CFR 192.” The new booklet also outlines requirements for covered institutions when filing conversion applications, as well as references and information resources for prospective filers.
FinCEN, federal banking agencies clarify CDD requirements for charities and non-profit organizations
On November 19, the Financial Crimes Enforcement Network (FinCEN), in concurrence with the Federal Reserve Board, FDIC, NCUA, and OCC (collectively, “federal banking agencies”), released a fact sheet clarifying that Bank Secrecy Act (BSA) customer due diligence (CDD) requirements for charities and nonprofit organizations (NPOs) should be based on the money laundering risks posed by customer relationships. FinCEN and the federal banking agencies remind banks that “the application of a risk-based approach for charities and other NPOs is consistent with existing CDD and other [BSA/anti-money laundering] compliance requirements.” The fact sheet further emphasizes that while “the U.S. government does not view the charitable sector as a whole as presenting a uniform or unacceptably high risk of being used or exploited for money laundering, terrorist financing [], or sanctions violations,” banks must adopt risk-based procedures for conducting CDD that will allow banks to (i) understand the nature and purpose of a customer relationship in order to develop a customer risk profile, and (ii) conduct ongoing monitoring for the purposes of identifying and reporting suspicious transactions “on a risk basis, to maintain and update customer information.” The fact sheet does not alter existing BSA/AML legal or regulatory requirements, nor does it establish new supervisory expectations. (See also OCC Bulletin 2020-101 and FDIC FIL-106-2020.)
FTC reaches $62 million settlement with student loan debt relief operation
On November 19, the FTC entered into a settlement with defendants accused of engaging in deceptive practices when marketing and selling student loan debt relief services. As part of its enforcement initiative, Operation Game of Loans (covered by InfoBytes here), the FTC alleged that the defendants violated the FTC Act and Telemarketing Sales Rule (TSR) by, among other things, charging illegal up-front fees to enroll consumers in debt relief programs, accepting monthly payments that were not applied towards student loans, and collecting monthly fees that consumers believed were being applied to their loans but instead were going towards unrelated “financial education” programs (see previous InfoBytes coverage here). Under the terms of the order, the defendants are permanently banned from providing secured and unsecured debt relief products and services, and are prohibited from (i) engaging in unlawful telemarketing practices and violating the TSR; (ii) misrepresenting financial products and services; (iii) making unsubstantiated claims; and (iii) collecting, or assigning any right to collect, payments from consumers for products sold by the defendants. The defendants are also ordered to pay $62 million in monetary relief.
CFPB settles with auto loan company over deceptive sales practices
On November 20, the CFPB announced a settlement with a Florida-based nonbank and the nonbank’s founder (collectively, “defendants”), resolving allegations that the defendants violated the Consumer Financial Protection Act by making misleading statements in disclosures and advertisements for their auto loan payment accelerator program. According to the Bureau, the defendants’ program automatically deducts partial payments on a bi-weekly basis from consumers’ bank accounts and then forwards those payments every month to consumers’ lenders or servicers. As a result, enrolled consumers end up making the equivalent of 13 monthly payments each year instead of 12. While the program is marketed as an opportunity for consumers to save money, the Bureau claimed that the defendants misrepresented the amount consumers would save by not disclosing a $399 enrollment fee in the savings calculations presented to consumers. Due to the enrollment fee, the program’s costs “ordinarily exceed[ed] any savings,” the Bureau alleged, noting that the defendants had no basis for claiming that thousands of consumers saved money by enrolling in the program.
The consent order requires the defendants to pay a $1 civil money penalty and $9.3 million in consumer redress, which is suspended upon payment of $900,000 based on the defendants’ demonstrated inability to pay the full judgment. The Bureau noted in its press release that harmed consumers may be eligible to receive additional relief from the Bureau’s Civil Penalty Fund. The defendants are also prohibited from making any deceptive misrepresentations about the payment program or any other payment accelerator programs.
OCC releases recent enforcement actions
On November 19, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included among the actions is an October 9 consent order to resolve the OCC’s claims that a Washington, D.C.-based branch of a Caribbean bank (bank) engaged in Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program violations. According to the consent order, the OCC identified “critical deficiencies” in certain elements of the bank’s BSA/AML compliance program, including failure to implement a compliance program that “adequately covered the required BSA/AML program elements,” and failure to timely file Suspicious Activity Reports (SARs). Among the compliance program failures, the consent order states that the bank had (i) “systemic deficiencies in its transaction monitoring systems and alert management processes, which resulted in monitoring gaps”; (ii) “systemic deficiencies in its customer due diligence, enhanced due diligence, and customer risk rating processes”; and (iii) “an inadequate system of internal controls, ineffective independent testing, a weak BSA Officer function, and insufficient staffing and training.” The consent order requires the bank to pay a $5 million civil money penalty as a result of the deficiencies.
Fed extends some Covid-19 lending facilities through March 2021
On November 30, the Federal Reserve Board announced the extension of the Commercial Paper Funding Facility (CPFF), the Money Market Liquidity Facility (MMLF), the Primary Dealer Credit Facility (PDCF), and the Paycheck Protection Program Liquidity Facility (PPPLF) through March 31, 2021, while many other Covid-19 lending facilities will terminate at the end of the year.
Earlier this month, Treasury Secretary Steven T. Mnuchin sent a letter to Federal Reserve Board Chairman Jerome Powell stating that he intends to let several Covid-19-related lending facilities that rely on Coronavirus Aid, Relief, and Economic Security (CARES) Act funding expire at the end of the year, while requesting a 90-day extension for facilities that do not rely on Treasury’s funding. Specifically, Mnuchin stated that the lending facilities that used CARES Act funding—the Primary Market Corporate Credit Facility (PMCCF), the Secondary Market Corporate Credit Facility (SMCCF), the Municipal Liquidity Facility (MLF), the Main Street Lending Program (MSLP), and the Term Asset-Back Securities Loan Facility (TALF)—“have clearly achieved their objective,” noting that “[b]anks have the lending capacity to meet the borrowing needs of their corporate, municipal, and nonprofit clients.” Mnuchin stated that while portions of the economy are still in need of fiscal support, “financial conditions have responded” and the use of the CARES Act-reliant facilities “has been limited.” Thus, Mnuchin requested that the Federal Reserve return the unused facility funds to Treasury so that Congress can “re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds.” Mnuchin, however, in “an abundance of caution,” requested a 90-day extension on facilities that do not require Treasury funding—the CPFF, MMLF, PDCF, and the PPPLF.
In response, the Federal Reserve Bank of Boston updated the Main Street Lending Program For-Profit Business and Nonprofit Organization FAQs to address the Main Street facilities at the end of this year. The update advises that (i) lender registration should be initiated by December 4; (ii) eligible loans should be submitted to the Main Street Portal for participation by December 14, and the Fed “will make efforts to process the loans submitted [] by December 14, 2020, in order to effect the purchase of eligible participation interests in advance of the termination date”; and (iii) the Main Street Special Purpose Vehicle will cease issuing commitment letters as of December 23.
HUD issues mortgage letters extending temporary guidance permitting endorsement despite forbearance and guidance on self-employment and rental income
On November 25, HUD issued Mortgage Letters 2020-39 and 2020-40 extending its temporary guidance for endorsement of mortgages where the borrower has been granted a Covid-related forbearance from ML 2020-16 (previously covered here) and for verification of self-employment, rental income, and 203(k) Rehabilitation Escrow Accounts from ML 2020-24 (previously covered here). The guidance is extended through December 31, 2020.
Agencies provide regulatory relief to community banks
On November 20, the Federal Reserve Board, the OCC, and the FDIC issued an interim final rule providing temporary relief from certain regulation and reporting requirements for community banking organizations. Specifically, the interim final rule—which applies to community banking organizations and financial institutions with less than $10 billion in total assets as of December 31, 2019—gives community banks relief from expanded regulation and reporting requirements that may have been triggered due to participation in federal coronavirus response programs. The agencies note that programs, such as the Paycheck Protection Program and other lending facilities, may cause rapid and unexpected increases in the community bank’s size. The agencies expect these increases to be temporary and thus, the rule states that asset growth in 2020 or 2021 will not trigger new regulatory requirements for applicable community banking organizations until January 1, 2022, at the earliest. The rule is effective upon publication in the Federal Register.
Treasury: Expenses paid from PPP loans are not deductible
On November 18, the U.S. Treasury Department and Internal Revenue Service (IRS) clarified the tax treatment of expenses where a Paycheck Protection Program (PPP) loan has not been forgiven by the end of the year the loan was received. According to the IRS revenue ruling, businesses are not taxed on the proceeds of a forgiven PPP loan, thus the business expenses paid from those proceeds are not deductible. The revenue ruling illustrates multiple taxpayer scenarios, which conclude that if the PPP loan has not yet been forgiven by the end of 2020, but the business reasonably believes the loan will be forgiven in the future, the expenses are not deductible. This applies whether the business has filed for forgiveness yet or not. However, if a PPP loan was expected to be forgiven, and was not, the expenses are deductible.