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  • Fannie and Freddie Extend Foreclosure Suspension for Puerto Rico and U.S. Virgin Islands

    Federal Issues

    On December 20, Fannie Mae, in Lender Letter LL-2017-11, and Freddie Mac, in Guide Bulletin 2017-29, extended the suspension of foreclosure sales through March 31, 2018 of mortgaged properties in FEMA-declared disaster areas in Puerto Rico and the U.S. Virgin Islands due to Hurricanes Irma and Maria. The extension does not apply to any other jurisdictions similarly designated.

    Find continuing InfoBytes coverage on Disaster Relief here.

    Federal Issues Disaster Relief Fannie Mae Freddie Mac Mortgages Foreclosure

  • Financial Regulators Issue Joint Supervisory Guidance for Disaster Areas; VA Announces Wildfire Relief

    Federal Issues

    On December 15, the FDIC, Fed, OCC, and NCUA issued Interagency Supervisory Examiner Guidance for Institutions Affect by a Major Disaster (Guidance). The Guidance provides information on assessing the financial condition of institutions affected by a “major disaster with individual assistance” as declared by the President. The Guidance also encourages institutions affected by such disasters to discuss relevant issues with their examiners and notes that the supervisory agencies will consider extending report filing deadlines and rescheduling exams. Additionally, the Guidance states that examiners should consider factors related to the disaster, such as asset losses and staffing issues, when assessing capital adequacy and management capability requirements. And when considering the supervisory response to an institution that receives a lower component or composite rating, the Guidance provides that examiners should recognize the extent to which any weaknesses are related to the major disaster.

    The Department of Veterans Affairs (VA), on December 12, announced additional special relief following the California wildfires in Circular 26-17-42. The Circular encourages VA loan holders to extend forbearance to borrowers affected by the wildfires and VA loan servicers to continue solicitation of the VA Disaster Loan Modification program (as previously covered by InfoBytes here). Additionally, for affected borrowers and loans, the Circular suggests that loan holders follow the 90-day foreclosure moratorium and that servicers consider waiving late charges and suspending credit reporting. The Circular is effective until January 1, 2019.

    Find continuing InfoBytes coverage on Disaster Relief here.

    Federal Issues Disaster Relief Department of Veterans Affairs FDIC OCC NCUA Federal Reserve Mortgages

  • OCC Recent Enforcement Actions Target BSA/AML Compliance Programs and National Flood Insurance Act Violations

    Federal Issues

    On December 14, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such parties. The new enforcement actions include cease and desist orders, civil money penalty orders, removal/prohibition orders, and restitution orders. The list also includes recently terminated enforcement actions.

    Cease and Desist Order. On November 9, the OCC issued a consent order (2017 Order) two days after converting a Japanese bank’s two New York branches under the supervision of the New York Department of Financial Services (NYDFS) to federally licensed branches under the supervision of the OCC. As part of the OCC’s approval process, the bank’s federal branches and New York branches agreed to the issuance of the 2017 Order, which requires adherence to “remedial provisions . . . substantively the same as those” in consent orders entered into in 2013 and 2014 with NYDFS. The previously issued consent orders addressed deficiencies related to the bank’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) sanctions compliance programs, specifically concerning the removal of key warnings to regulators on transactions with sanctioned countries.

    The 2017 Order, among other things, requires the bank to: (i) submit an action plan on enhancing internal controls and updating policies and procedures to correct BSA/AML deficiencies, address provisions applicable under the Office of Foreign Assets Control’s requirements, and implement requirements outlined in the 2013 and 2014 consent orders; (ii) ensure adherence to the action plan and 2017 Order under the direction of the bank’s general manager; (iii) submit a management oversight plan designed to improve and enhance the bank’s sanctions compliance programs; and (iv) prevent the retention or future engagement of any individual identified and “barred by the 2014 Consent Order from engaging, directly or indirectly, in any duties, responsibilities, or activities at or on behalf of the [b]ank or the [b]ank’s affiliates that involve their banking business in the [U.S.].” The 2017 Order does not require the bank to pay a civil monetary penalty.

    Civil Monetary Penalty. On October 10, the OCC assessed a $452,000 civil monetary penalty against a national bank lender for alleged violations of the National Flood Insurance Act and/or the Flood Disaster Protection Act. The bank agreed to pay the penalty without admitting or denying any wrongdoing. 

    Federal Issues OCC Enforcement Compliance Bank Secrecy Act Anti-Money Laundering OFAC NYDFS Financial Crimes Flood Insurance Sanctions National Flood Insurance Act Flood Disaster Protection Act

  • Seventeen State AGs Express Mulvaney Concerns to Trump and Emphasize AG Consumer Protection Authority

    State Issues

    On December 12, seventeen state attorneys general sent a letter to President Trump expressing concern about OMB Director Mulvaney leading the CFPB. The AGs emphasize Mulvaney’s past criticisms of the Bureau as evidence that Mulvaney should be disqualified from the position, even in the acting capacity. Notably, the AGs stress their statutory authority to enforce state and federal consumer protection laws, noting they “will continue to enforce those laws vigorously regardless of changes to CFPB’s leadership or agenda.” They go on to state that if the CFPB does not do the job, the states will “redouble our efforts at the state level to root out such misconduct and hold those responsible to account.”

    The letter, led by New York AG Eric Schneiderman, was signed by the following state AGs: California, Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Mexico, North Carolina, Oregon, Vermont, Virginia, and Washington State.

    State Issues Federal Issues CFPB Succession State Attorney General

  • Federal Reserve Requests Comments on Proposals Seeking Transparency Increases in Stress Testing Programs

    Agency Rule-Making & Guidance

    The Federal Reserve Board (Fed) issued a request for comments on three proposals designed to increase stress testing transparency while also testing the resiliency of large, complex banks. Earlier in June, Fed Chair Janet Yellen underscored the Fed’s understanding of the need to provide transparency in its Comprehensive Capital Analysis and Review (CCAR) process and stress test scenarios. (See previous InfoBytes coverage here.) The first December 7 proposal, “Enhanced Disclosure of the Models Used in the Federal Reserve’s Supervisory Stress Test,” announces the Fed’s plans to publicly release, for the first time, information concerning the models and methodologies used during supervisory stress tests, including those applied in the CCAR, including:

    • “enhanced descriptions of supervisory models, including key variables;”
    • “modeled loss rates on loans grouped by important risk characteristics and summary statistics associated with the loans in each group;” and,
    • “portfolios of hypothetical loans and the estimated loss rates associated with the loans in each portfolio.”

    The information will offer banks expanded details as to how the Fed’s models treat different types of loans under stress, along with insight into the determination of annual stress test results.

    The second request for comments concerns the “Stress Testing Policy Statement,” which elaborates on prior disclosures and outlines details on the principles and policies that govern the Fed’s development, implementation, and validation of its stress testing models.

    Finally, the Fed issued a proposed policy statement to request comments on introduced amendments to the design of its annual hypothetical economic scenarios framework. The “Amendments to Policy Statement on the Scenario Design Framework for Stress Testing” is intended to enhance transparency and provide clarification on hypothetical economic scenarios, including the direction of housing prices, as well as the Fed’s commitment to exploring additional variables to test for funding risks.

    All comments must be received by January 22, 2018.

    Agency Rule-Making & Guidance Federal Issues Federal Reserve Stress Test CCAR

  • FDIC’s OIG Issues Evaluation of Agency’s Implementation of ATR/QM and Loan Originator Rules

    Federal Issues

    On December 6, the FDIC’s Office of Inspector General (OIG) released an evaluation report to examine how the agency implements certain consumer protection rules concerning consumers’ ability to repay mortgage loans and limits for loan originator compensation. The OIG report, FDIC’s Implementation of Consumer Protection Rules Regarding Ability to Repay Mortgages and Compensation for Loan Originators (EVAL-18-001), focused on the FDIC’s Division of Depositor and Consumer Protection (DCP), which is responsible for implementing the Ability to Repay/Qualified Mortgage (ATR/QM) and Loan Originator rules and tracking violations of the rules. The report found that the DCP “incorporated these rules into its examination program, trained its examiners, and communicated regulatory changes to FDIC-supervised institutions.” However, based on a sample of 12 examinations, the OIG also determined that examination workpapers generally needed improvement, finding (i) inconsistent documentation by examiners on decisions to exclude compliance testing for the ATR/QM and Loan Originator rules, and (ii) in certain circumstances, incomplete, incorrect, or improperly stored examiners’ workpapers, “which would preclude someone independent of the examination team from fully understanding examination findings and conclusions, based on the workpapers alone.”

    OIG further noted that, because DCP’s examination practices did not include tracking the number of institutions subject to the rules or recording how frequently examiners tested for compliance, any identified variances among the FDIC’s six regional offices could not be assessed for significance due to lack of context.

    As a result of these findings, the OIG made several recommendations for the DCP to strengthen its compliance examination process, including:

    • “research potential reasons for the regional variances in the number of rule violations by banks in the FDIC’s six regional offices”;
    • “track the aggregate number of FDIC-supervised institutions in each region that are subject to the rules”;
    • “track how often examiners test for compliance with the rules”; and
    • ‘‘take steps to improve workpaper documentation and retention.”

    The DCP agreed to implement these recommendations June 30, 2018.

    Federal Issues OIG FDIC Ability To Repay Qualified Mortgage Consumer Finance Loan Origination Mortgages Examination

  • OCC Allows Closure of Certain Financial Institutions Affected by Wildfires in California

    Federal Issues

    The OCC issued a proclamation on December 7 allowing national banks and federal savings associations affected by wildfires in California to close. The OCC encouraged the affected offices to make every effort to reopen as quickly as possible and to consult OCC Bulletin 2012-28 for guidance on certain actions the institutions should consider implementing for customers in affected disaster areas, previously covered by InfoBytes here

    Federal Issues OCC Disaster Relief Consumer Finance

  • FHA Will Stop Insuring Mortgages With Pace Loans

    Federal Issues

    In ML 2017-18, FHA announced that it will no longer insure mortgages encumbered by Property Assessed Clean Energy (PACE) obligations due to their superior lien status. The December 7 letter is a reversal of the policies outlined in ML 2016-11, which allowed for, in certain circumstances, the continued payment obligation to PACE on foreclosed FHA-insured properties. The new guidance is effective 30 days after issuance of the letter. 

    Federal Issues FHA Mortgages PACE Programs

  • Ginnie Mae Imposes Tougher Pooling Standards on Certain Refinance Loans

    Federal Issues

    Last week, Ginnie Mae announced an All Participants Memorandum, APM 17-06, regarding pooling eligibility for refinance loans. According to Ginnie Mae, the purpose of the December 7 Memorandum is to expand the pooling restrictions announced last year in APM 16-05 to address frequent loan churning and quick prepayments. Specifically, for pool issuances on or after April 1, 2018, all streamline and cash-out refinance loans are eligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools only if (i) six consecutive borrower monthly payments are made; and (ii) the first payment due date of the refinance loan must be at least 210 days after the first payment due date on the original loan. Refinance Loans that are fully underwritten and meet certain criteria will not be subject to the new pooling restrictions.

    APM 16-05 remains effective until APM 17-06 becomes effective on April 1, 2018. Ginnie Mae will continue active monitoring for unusually rapid prepayment rates and will institute sanctions for noncompliance. Ginnie Mae also plans to publish revised pooling standards for premium rate loans in early 2018.

    Federal Issues Refinance Mortgages Ginnie Mae

  • Continuing Resolution Extends National Flood Insurance Program Deadline to December 22

    Federal Issues

    As previously reported in InfoBytes, the House voted 237-189 on November 14 to pass legislation reforming and reauthorizing the National Flood Insurance Program (NFIP) for five years before it expired at the beginning of December. A continuing resolution (H.J. Res. 123), passed by both the Senate and House and signed into law by President Trump on December 8, amended the expiration date of Fiscal Year 2018 appropriations to December 22, and extended the NFIP another two weeks. The Senate Banking Committee is still waiting to act on a flood insurance bill. 

    Federal Issues OCC Bank Regulatory National Flood Insurance Program Trump

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