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Fannie and Freddie update Covid-19 Selling FAQs
On September 2, Fannie Mae updated its Covid-19 FAQs for sellers to reflect updates to FHFA’s temporary policy that allows Fannie Mae and Freddie Mac (GSEs) to purchase qualified single-family mortgages in forbearance that meet specific eligibility criteria due to the Covid-19 pandemic (covered by InfoBytes here), and to add a new question covering Covid-19 appraisal flexibilities. On August 27, Freddie Mac updated its Covid-19 selling-related FAQs to include substantially the same new question and response with respect to Covid-19 appraisal flexibilities.
CFPB examines early effects of Covid-19 on consumer credit
On August 31, the CFPB released a report on the early effects of the Covid-19 pandemic on consumer credit outcomes. The report analyzed a “nationally representative sample of approximately five million de-identified credit records maintained by one of the three nationwide consumer reporting agencies,” and examined trends in delinquency rates, payment assistance, credit access, and account balance measures. According to the report, trends showed that there was an overall decrease in delinquency rates since the start of the pandemic among auto loans, first-lien mortgages, student loans, and credit cards; however, the Bureau emphasized that the analysis takes a deeper dive “into measuring how these outcomes differed based on consumer and geographic characteristics compared to earlier work.” Highlights from the report include: (i) new delinquencies fell between March and June of 2020; (ii) borrower assistance appeared to be concentrated in areas that were more severely affected by the pandemic, with sharp increases in the number of accounts reporting zero payment due despite a positive balance; (iii) financial institutions closed existing lines of credit and halted credit limit increases for open accounts primarily for borrowers with high credit scores or for inactive cards; and (iv) credit card balances decreased by roughly 10 percent between March and June, which, according to the report, is consistent with other data that shows a decline in consumer spending.
CFPB says it will submit important research to peer review
On August 28, the CFPB announced a new external peer review process of its “important technical and scientific research” in order to ensure its quality. The Bureau noted it is following guidance from the Office of Management and Budget (OMB), which encourages federal agencies to seek peer review of “‘influential scientific information’ and ‘highly influential scientific assessments,’” specific terms defined by OMB in the guidance. The Bureau notes that it will use the Academic Research Council (ARC)—a panel of outside researchers with expertise in consumer finance—to conduct the peer reviews of its research. The Bureau has a dedicated webpage where it will post the original report, its peer review request, the ARC’s report, and if necessary, a revised report addressing the ARC’s review.
The first report subject to peer review is the Bureau’s February report titled, “Disclosure of Time-Barred Debt and Revival: Findings from the CFPB’s Quantitative Disclosure Testing.” A copy of the report and the ARC’s review report are now available on the Bureau’s webpage.
FDIC encourages regulatory relief for California borrowers affected by wildfires
On August 28, the FDIC issued FIL-85-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of California affected by wildfires that began on August 14. In the guidance, the FDIC notes that, in supervising institutions affected by the wildfires, the FDIC will consider the unusual circumstances those institutions face. The guidance suggests 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 notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain reporting and publishing requirements.
Find continuing InfoBytes coverage on disaster relief guidance here.
CFPB releases more 2019 HMDA data
On August 27, the CFPB issued a new analysis of the 2019 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions, which follows an initial release from the CFPB and the Federal Financial Institutions Examinations Council (FFIEC) earlier in June (covered by InfoBytes here). The newly released report groups the new and revised HMDA data points into seven major categories: (i) open-end and reverse mortgage flags; (ii) expanded or revised demographic information; (iii) property type; (iv) loan purpose and characteristics; (v) applicant/borrower characteristics and property characteristics; (vi) pricing outcomes and components; and (vii) miscellaneous data points. The report breaks down the data points in each category by providing a definition and basic reporting requirements, as well as a statistical overview of the reported information.
ARRC updates fallback language for bilateral business loans
On August 27, the Alternative Reference Rates Committee (ARRC) released updated recommended fallback language for market participants to use for new originations of LIBOR-referenced bilateral business loans. The proposed language is intended to align with revisions made to the recommended fallback language for syndicated loans (covered by InfoBytes here). The updated fallback language amends the previously proposed “hardwired” and the “hedged loan” approaches. ARRC emphasizes that “cash markets will benefit by adopting a more consistent, transparent and resilient approach to contractual fallback arrangements for new LIBOR products,” and reminds financial market participants that it does not recommend waiting “until a forward-looking term [Secured Overnight Financing Rate] SOFR exists to begin using SOFR in cash products.”
FDIC releases July enforcement actions
On August 28, the FDIC released a list of administrative enforcement actions taken against banks and individuals in July. During the month, the FDIC issued nine orders, consisting of “one consent order under 8(b) [of the Federal Deposit Insurance Act], one order of prohibition under 8(e) [of the Federal Deposit Insurance Act], six Section 19 orders, and one order terminating deposit insurance.” The consent order, issued against a New Jersey state bank, relates to alleged weaknesses in its Bank Secrecy Act and anti-money laundering (BSA/AML) compliance program. Among other things, the bank was ordered to (i) increase its supervision and direction of its BSA/AML policies, procedures, and processes to ensure compliance with the applicable laws and regulations; (ii) implement a revised BSA compliance program to address BSA/AML deficiencies, including improvements in suspicious activity monitoring and reporting and in customer due diligence; (iii) implement an effective BSA training program for appropriate personnel regarding specific compliance responsibilities; (iv) review and analyze Office of Foreign Assets Control-issued regulations to ensure timely and complete compliance; (v) conduct a look back review to ensure certain reportable transactions and suspicious activities were appropriately identified and reported; and (vi) establish a directors’ BSA/AML compliance committee.
FHA issues mortgagee letter extending guidance on employment reverification and appraisals
On August 28, the FHA issued Mortgagee Letter 2020-28, which re-extends the effective date of Mortgagee Letter 2020-05, previously covered here, here, and here. The re-extension of appraisal guidance in Mortgagee letter 2020-05 is effective immediately for appraisals with an effective date on or before October 31, 2020. The extension of re-verification of employment guidance is effective immediately for cases closed on or before October 31, 2020.
Agencies extend foreclosure moratorium and other Covid-19 flexibilities
On August 27, Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will extend their moratorium on single-family foreclosures and real estate owned (REO) evictions until at least December 31 (which was set to expire on August 31, previously covered here). The foreclosure moratorium applies to homeowners with an Enterprise-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.
FHA also further extended its foreclosure and eviction moratorium through December 31 (also set to expire on August 31 and previously covered here). The moratorium applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, excluding legally vacant or abandoned properties (previously discussed here and here). Additional details can be found in Mortgagee Letter 2020-27.
Additionally, on August 26, FHFA announced an extension of a temporary policy that allows Fannie Mae and Freddie Mac (GSEs) to purchase qualified single-family mortgages in forbearance that meet specific eligibility criteria due to the Covid-19 pandemic. The policy is now extended for loans originated through September 30. As previously covered by InfoBytes, in an effort to provide liquidity to ensure continued lending during the Covid-19 pandemic, FHFA is allowing the GSEs to buy certain mortgages that enter forbearance within the first month after loan closing, prior to delivery to the GSEs.
FHFA also extended several loan origination flexibilities put in place to assist borrowers during the Covid-19 pandemic. Specifically, FHFA has further extended until September 30, the following provisions: “(i) alternative appraisals on purchase and rate term refinance loans; (ii) alternative methods for documenting income and verifying employment before loan closing; and (iii) expanding the use of power of attorney to assist with loan closings.”
OCC says banks affected by wildfires and storms can close
On August 24 and 25, the OCC issued two proclamations (available here and here) permitting OCC-regulated institutions, at their discretion, to close offices affected by the California and Colorado wildfires and the severe weather along the U.S. Gulf Coast “for as long as deemed necessary for bank operation or public safety.” The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions. According to the 2012 Bulletin, only bank offices directly affected by potentially unsafe conditions should close and institutions should make every effort to reopen as quickly as possible to address customers’ banking needs.
Find continuing InfoBytes coverage on disaster relief here.