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On May 13, the FTC announced a $1.2 million settlement with a group of telemarketing companies and their owners (collectively, “defendants”) for an allegedly deceptive e-commerce scheme in violation of the FTC Act, the Telemarketing Sales Rule (TSR), and the Consumer Review Fairness Act (CRFA). According to the complaint filed in the U.S. District Court for the Western District of Washington, the defendants sold products and services to consumers trying to start at-home internet-based businesses, which the defendants claimed would “substantially increase the visibility of and drive customer traffic to consumers’ ecommerce websites on the Internet.” The defendants would allegedly obtain leads by using a service that produces leads of consumers who have recently registered websites. The defendants would contact the consumers by telephone to sell services and would typically continue to call consumers to “upsell” additional products. The FTC argues that “[c]ontrary to [d]efendants’ representations, many consumers who purchase [d]efendants’ products and services do not end up with a functional website, earn little or no money, and end up heavily in debt.” The complaint alleges that the defendants violated the FTC Act, the TSR, and the CRFA by, among other things, (i) making unsubstantiated and false earnings and product claims; (ii) making false claims about business affiliations; and (iii) using contract provisions that restrict consumers’ ability to review or complain about purchased products or services.
The settlement with two of the entities and one owner includes a monetary judgment of over $16 million, which is partially suspended due to an inability to pay, and requires the defendants to surrender over $900,000. In separate settlements with the other two owners, large monetary judgments are also partially suspended due to an inability to pay, with one required to surrender over $100,000, and the other required to surrender over $200,000.
On May 15, the Small Business Administration (SBA) in consultation with the Treasury Department announced the release of the Paycheck Protection Program (PPP) Loan Forgiveness Application that borrowers must complete in order to have their loans forgiven at the conclusion of the eight-week covered period, which begins upon loan disbursement. The application provides specific instructions, including several measures designed to reduce compliance burdens and simplify the process. These include: (i) “[o]ptions for borrowers to calculate payroll costs using an ‘alternative payroll covered period’ that aligns with borrowers’ regular payroll cycles”; (ii) the flexibility to count any eligible payroll and non-payroll expenses paid or incurred during the eight-week period after the disbursement of a borrower’s PPP loan; (iii) clear instructions on how to perform calculations to confirm eligibility for loan forgiveness as required by the CARES Act; (iv) a safe harbor from forgiveness reduction for borrowers that were able to rehire employees by June 30; and (v) the addition of a new exemption from forgiveness reduction “for borrowers who have made a good-faith, written offer to rehire workers that was declined[.]” The SBA announced it “will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.”
On May 15, the CFPB and Conference of State Bank Supervisors jointly issued a Consumer Relief Guide to provide information to homeowners with federally-backed mortgage loans regarding their rights to relief under the CARES Act. The Guide outlines steps for requesting forbearance and provides additional resources for borrowers who need assistance when understanding their options or working with their mortgage servicers. The Bureau also refers borrowers to its centralized webpage, which covers consumer financial resources for the Covid-19 pandemic (covered by InfoBytes here), as well as its joint housing assistance website launched in coordination with the Federal Housing Finance Agency and the Department of Housing and Urban Development (covered by InfoBytes here).
On May 15, the FDIC, Federal Reserve Board (Fed), and the OCC announced an interim final rule (IFR) that temporarily permits depository institutions to choose to exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the supplementary leverage ratio (SLR) to provide flexibility during the Covid-19 pandemic. The exclusion would enable depository institutions to expand their balance sheets to provide additional credit to households and businesses. The SLR and the IFR apply to depository institution subsidiaries of U.S. systemically important bank holding companies and depository institutions subject to Category II or Category III capital standards. According to the FDIC’s Financial Institution Letter FIL-57-2020, if a depository institution elects to exclude U.S. Treasury securities and deposits from the SLR, it, among other things, (i) must notify its primary federal banking regulator within 30 days after the IFR is effective; (ii) may choose to reflect the exclusion as if the IFR has been in effect the entire second quarter of 2020; and (iii) must obtain approval from its primary federal banking regulator before making a distribution or creating an obligation to make a distribution, beginning in the third quarter of 2020 through March 2021, so long as the temporary exclusion is in effect. The IFR goes into effect upon publication the Federal Register and is effective through March 31, 2021.
On May 14, the Department of Veterans Affairs issued Circular 26-20-18, which extends the foreclosure moratorium for borrowers affected by Covid-19 through June 30. Properties secured by VA-guaranteed loans are subject to a moratorium on the initiation of foreclosures, and the completion of foreclosures in process.
On May 14, Ginnie Mae issued APM 20-06 on the treatment of mortgage delinquency ratios for users affected by Covid-19. Under the Mortgage Backed Securities Guide, an issuer that fails to maintain delinquency rates below certain specified threshold levels may be subject to sanctions. Recognizing that Covid-19 related hardships may cause issuers to experience delinquency rates that exceed the maximum thresholds, effective immediately, Ginnie Mae will exclude any new issuer delinquencies occurring on or after April 2020 when calculating the delinquency ratios. This exclusion will automatically apply to issuers that had delinquency rates below the applicable thresholds as reflected by their April 2020 investor accounting report, reflecting March 2020 servicing data. Issuers that were not compliant with these provisions as of their April 2020 report must contact their Account Executive to determine their eligibility for this exclusion. The exemptions and delinquent loan exclusions automatically expire on December 31, 2020, unless rescinded earlier or extended by Ginnie Mae, or the end of the national emergency, whichever comes earlier.
Small Business Administration requires lenders to review loans in CAFS for accuracy and completeness
On May 14, the Small Business Administration announced that it had launched a new search functionality within the E-Tran Servicing section of the Capital Access Financial System (CAFS) to assist Paycheck Protection Program lenders with reviewing loans in their portfolios. Lenders are required to review all fields in these files for accuracy and completeness by no later than 5:00pm EDT on May 15, 2020. The SBA also provided updated instructions on how to access CAFS and update records in “Research” status.
On May 14, the FHA issued Mortgage Letter 2020-14, which extends the effective period of the guidance in Mortgagee Letter 2020-05 allowing for flexibility relating to employment reverification and appraisal protocols for FHA single family programs affected by Covid-19 until June 30.
On May 14, Freddie Mac issued Bulletin 2020-16 providing temporary servicing guidance related to Covid-19. The bulletin provides clarity in the following areas: (i) the extension of the Covid-19 foreclosure moratorium announced in Bulletins 2020-4 and 2020-10 until June 30, (ii) property inspections for delinquent mortgages, (iii) default reporting for mortgages impacted by Covid-19, (iv) property valuations for short sales and deeds-in-lieu of foreclosure, (v) Home Affordable Modification Program (HAMP) good standing for mortgages on a Covid-19 forbearance plan, repayment plan, or Covid-19 payment deferral, and (vi) the National Emergency Declaration effective date.
Fannie Mae updates guidance on payment deferrals and loan modifications after a forbearance and extends foreclosure moratorium
On May 14, Fannie Mae updated Lender Letter 2020-02 to provide updates regarding the reclassification process for certain pooled loans in response to the CARES Act. The letter (previously discussed here) also provides guidance on evaluating a borrower for a payment deferral or mortgage loan modification after a forbearance and extend its foreclosure moratorium until June 30. The guidance on post-forbearance evaluations provides certain flexibility with respect to achieving quality right party contact (QRPC). Fannie Mae has eliminated the requirement that the servicer determine the occupancy status of the property and will consider the servicer as having achieved QRPC for purposes of evaluating a borrower who has experienced a hardship arising from Covid-19 if the servicer takes certain steps. Fannie Mae also extended the availability of certain post-disaster mortgage loan modifications in the Servicing Guide to borrowers impacted by Covid-19. The letter also extends Fannie Mae’s suspension of foreclosure-related activities until June 30.
- Jeffrey P. Naimon to provide a "Washington update" at the Mortgage Bankers Association Live: Legal Issues and Regulatory Compliance Conference
- Brandy A. Hood to discuss "Ongoing challenges of TRID compliance" at the Mortgage Bankers Association Live: Legal Issues and Regulatory Compliance Conference
- Daniel R. Alonso to discuss "Resisting temptation in a crisis: How to make sure ethics and compliance don't get diluted under financial strain" at a New York City Bar webcast
- Daniel P. Stipano to discuss "BSA for BSA seasoned officers" at an NAFCU webinar
- Jon David D. Langlois to discuss "LIBOR transition: Preparations for legal professionals" at a Mortgage Bankers Association webinar
- Garylene D. Javier to discuss "Navigating workplace culture in 2020" at the DC Bar Conference