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  • Native American tribes to forfeit $3 million in profits made from payday lending scheme

    Federal Issues

    On June 26, the Department of Justice (DOJ) filed two forfeiture complaints, which cover agreements with two Native American tribes to forfeit a combined $3 million in profits made from their involvement in an allegedly fraudulent payday lending scheme (see here and here). As previously covered by InfoBytes, in October 2016, the FTC required a Kansas-based operation and its owner to pay more than $1.3 billion for allegedly violating Section 5(a) of the FTC Act by making false and misleading representations about costs and payment of the loans. The business owner and his attorney were subsequently found guilty in October 2017 of operating a criminal payday loan empire. As part of the agreements, the two tribes admit that representatives filed affidavits containing false statements in the legal actions against the payday loan scheme. If the tribes comply with agreement requirements, the DOJ will not pursue criminal action for the specified violations.

    In February, multiple federal agencies entered into a $613 million deferred prosecution agreement over Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance program deficiencies with a national bank, which included allegations that the bank was on notice of the owner’s use of the bank to launder proceeds from his fraudulent payday lending scheme. (Previously covered by InfoBytes here.)

    Federal Issues DOJ Payday Lending FTC Consumer Finance Bank Secrecy Act Anti-Money Laundering FTC Act

  • House Financial Services Committee examines implications of “de-risking”

    Federal Issues

    On June 26, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing titled, “Examining the International and Domestic Implications of De-Risking,” which examined financial institutions terminating “high risk” relationships to minimize compliance exposure. The press release notes that high-risk entities can also include legitimate businesses such as firearms sellers and payday lenders. Subcommittee Chairman, Blaine Luetkemeyer (R-MO), stated that the termination of these relationships has “resulted in the elimination of consumer and small business access to financial products and services, a decrease in the availability of money remittances, and reduced flow of humanitarian aid globally.” Agreeing with the Chairman, many witnesses emphasized the impact de-risking has on the international financial system, including access to banking in the U.S. southwest border region and in the Caribbean and Central America. While recognizing the importance of anti-money laundering regulations and financial sanctions policies, the witnesses encouraged Congress to consider opportunities to ensure equal access to the financial system for legitimate businesses.

    Federal Issues House Financial Services Committee Anti-Money Laundering Financial Crimes Sanctions

  • House passes bill allowing for reporting of rental, telecom, and utility payments to CRAs

    Federal Issues

    On June 25, the House passed H.R. 435, the “The Credit Access and Inclusion Act of 2017.” The bill would amend the Fair Credit Reporting Act to include a section allowing a person or the Department of Housing and Urban Development to furnish information to credit reporting agencies relating to the payment performance of a residential lease agreement, contract for a utility, or contract for a telecommunications service. The bill does not allow an energy utility to furnish information related to the usage of utility services or information related to an outstanding consumer balance if the consumer has entered into a payment plan and is meeting the obligations of the payment plan. Civil liability for violations of the Consumer Credit Protection Act do not apply to violations of the bill.

    Federal Issues Credit Reporting Agency Information Furnisher FCRA U.S. House Federal Legislation HUD

  • Federal Reserve releases stress test results

    Federal Issues

    On June 21, the Federal Reserve Board released the results of stress tests conducted on 35 financial institutions, representing 80 percent of the assets of all banks operating in the U.S. The results are from the eighth round of stress tests led by the Fed since 2009 and the sixth round under the Dodd-Frank Act. Under the most severe scenario tested by the Fed, consisting of a severe global recession with unemployment rising to 10 percent and a steepening Treasury yield curve, the Fed projected losses at the 35 institutions would total $578 billion and the aggregate common equity tier 1 capital ratio would fall from an actual 12.3 percent in the fourth quarter of 2017 to 7.9 percent. The Fed also noted that several factors, including higher credit card balances and changes to the tax code, affected the post-stress capital ratios this year.

    Federal Issues Stress Test Dodd-Frank Federal Reserve

  • OCC releases 2018 first quarter mortgage performance results

    Federal Issues

    On June 19, the OCC announced the release of the “OCC Mortgage Metrics Report, First Quarter 2018,” its quarterly report of the performance of seven national bank mortgage servicers, which includes data for over one third of all outstanding U.S. residential mortgages. As explained in the Report, foreclosure activity for the first quarter of 2018 increased by 8 percent from the previous quarter but was down 21.5 percent compared to the first quarter of 2017. Overall, mortgage performance remained unchanged from the first quarter of 2017, with 95.6 percent of mortgages current and performing as of the end of the quarter. Servicers initiated 37,300 new foreclosures in the first quarter of 2018 and completed 23,427 mortgage modifications, with most modifications involving a reduction in borrower monthly payments. The OCC further noted, among other things, that the number of home forfeiture actions during the quarter—completed foreclosure sales, short sales, and deed-in-lieu-of-foreclosure actions—decreased by 32.5 percent compared to the first quarter of 2017.

    Federal Issues OCC Mortgages Foreclosure Mortgage Modification

  • White House proposes to fully privatize GSEs in broad government reorganization plan

    Federal Issues

    On June 21, the White House announced a government reorganization plan titled, “Delivering Government Solutions in the 21st Century: Reform Plan and Reorganization Recommendations.” The plan covers a wide-range of government reorganization proposals, including several related to the federal government’s involvement in mortgage finance. Among other things, the White House is proposing to end the conservatorship of Fannie Mae and Freddie Mac (GSEs) and fully privatize the companies. The plan notes that a “[f]ederal entity with secondary mortgage market experience would be charged with regulatory oversight” of the GSEs, but does not state whether this would be done by the Federal Housing Finance Agency (FHFA), the GSEs current primary regulator. According to the proposal, this structure would ensure the government’s role “is more transparent and accountable to taxpayers,” as HUD would assume the primary responsibility for affordable housing, and the GSEs would solely focus on secondary market liquidity.

    Federal Issues Trump GSE Fannie Mae Freddie Mac FHFA

  • Agencies issue disaster relief guidance for volcanic activity in Hawaii and severe storm in Maine

    Federal Issues

    On June 19, the FDIC issued Financial Institution Letter FIL-33-2018 to provide regulatory relief to financial institutions and facilitate recovery in areas of Hawaii affected by volcanic eruption and earthquakes. The FDIC is encouraging institutions to consider, among other things, extending repayment terms and restructuring existing loans that may be affected by the natural disasters. Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act (CRA) consideration for certain development loans, investments, and services in support of disaster recovery.

    On June 14, the Department of Veterans Affairs issued Circular 26-18-16, requesting relief for veterans impacted by Maine’s severe storm and flooding. Among other things, the Circular (i) encourages loan holders to extend forbearance to borrowers in distress because of the storms; (ii) requests that loan holders establish a 90-day moratorium on initiating new foreclosures on loans affected by the major disaster; and (iii) waives late charges on affected loans. The Circular is effective until July 1, 2019.

    Find more InfoBytes disaster relief coverage here.

    Federal Issues Department of Veterans Affairs Disaster Relief Mortgages FDIC

  • HUD publishes ANPR on Disparate Impact Regulation

    Agency Rule-Making & Guidance

    On June 20, HUD published an advance notice of proposed rulemaking (ANPR) in the Federal Register seeking comment on potential amendments to its the 2013 Disparate Impact Regulation, which implements the Fair Housing Act’s disparate impact standard, as well as the 2016 Application of the Fair Housing Act’s Discriminatory Effects Standard to Insurance (supplement). The notice requests comments on whether the 2013 regulation and the 2016 supplement are consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.  (Covered by a Buckley Sandler Special Alert.) While HUD is seeking feedback on any potential changes to the regulation, the agency is particularly interested in, among other things, (i) whether the burden-shifting framework appropriately assigns burdens of production and persuasion; and (ii) whether the regulation should provide defenses or safe harbors to claims of liability. Comments on the notice are due by August 20. 

    Agency Rule-Making & Guidance Federal Issues HUD FHA Disparate Impact Fair Lending U.S. Supreme Court

  • Comptroller Otting discusses regulatory priorities during congressional testimonies

    Federal Issues

    On June 13 and 14, Comptroller of Currency Joseph Otting appeared before the House Financial Services Committee and the Senate Committee on Banking, Housing, and Urban Affairs to discuss his priorities as Comptroller. As highlighted in the identical press releases for both House and Senate hearings, Otting testified about the OCC’s achievements and efforts since being sworn in as Comptroller in November 2017. Among other things, Otting discussed the agency’s efforts to (i) modernize the Community Reinvestment Act (CRA); (ii) promote compliance with the Bank Secrecy Act and anti-money laundering regulations (BSA/AML); and (iii) simplify the Volcker Rule, particularly for small and mid-size banks. Otting emphasized in his written testimony that his priority is to reduce the regulatory burden on financial institutions, specifying that the CRA requirements have become "too complex, outdated, cumbersome, and subjective." To that end, Otting stated that the OCC, in coordination with other federal agencies, is preparing an advance notice of proposed rulemaking to gather information on potential CRA updates, which, in Otting’s view, should include (i) expanding the types of activities that are eligible for CRA credit; (ii) changing assessment areas so they are not based solely on where the bank has a physical presence; and (iii) providing clearer metrics. As for BSA/AML, Otting noted this was his “number two issue” behind reforming the CRA and the working group—the OCC, FinCEN, the FDIC, the Federal Reserve, and NCUA— will likely address key issues like de-risking and improvement of transparency over the next three to six months. Otting noted his pleasure with the Volcker Rule changes in the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155/ P.L. 115-174) but cautioned that fine-tuning may be necessary as the OCC proceeds with implementation.

    Federal Issues OCC Bank Supervision Compliance Volcker Rule CRA Bank Secrecy Act Anti-Money Laundering EGRRCPA

  • Trump intends to nominate Kathleen Kraninger to be director of the CFPB

    Federal Issues

    On June 18, the White House announced President Trump’s selection of Kathleen Kraninger to be the director of the CFPB for a five-year term. Kraninger currently serves as the associate director for general government at the Office of Management and Budget (OMB). Prior to OMB, Kraninger worked at the Department of Homeland Security and in Congress on the House and Senate Committees on Appropriations. Mick Mulvaney, the acting director of the Bureau and director of OMB, supervises Kraninger in her current role. In a statement commending the selection, Mulvaney emphasized that Kraninger is likely to follow his example, “I have never worked with a more qualified individual than Kathy… I know that my efforts to rein in the bureaucracy at the [Bureau] to make it more accountable, effective, and efficient will be continued under her able stewardship.” While the Federal Vacancies Reform Act (FVRA) required the president to nominate a new director prior to June 22nd, Mulvaney is likely to remain the acting Bureau director for the foreseeable future, as FVRA allows Mulvaney to continue in the acting capacity until the Senate confirms or denies Kraninger’s nomination. If Kranginger’s nomination fails, FVRA would allow Mulvaney to restart a new 210-day period as acting director of the Bureau and to continue serving if the president makes another nomination before that period ends.

    Federal Issues CFPB Succession Trump OMB

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