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On January 1, Freddie Mac is launching a pilot program intended to improve the quality of performing loans for sellers. This pilot program, titled “Fee-Based Repurchase Alternative for Performing Loans,” is the fourth initiative from Freddie Mac’s Pilot Transparency programs, which included pilot programs on appraisal modernization, shared equity conversion, and asset and income modeler for direct deposits. This fee-based repurchase alternative pilot program for 2024 focuses on replacing Freddie Mac’s current repurchase policy for defective performing loans. “[L]enders will not be subject to repurchases on most performing loans and will instead be subject to a fee-based structure based on non-acceptable quality (NAQ) rates.” According to Freddie Mac, the fee-based structure will be more efficient and transparent and rewards lenders that deliver high-quality loans. Freddie Mac also notes that loans that are non-performing in 36 months or have life of loan defects could be repurchased. The pilot program is active; accordingly, the fee structure will begin rolling out in early 2024 to targeted lenders.
On November 13, FHFA released an advisory bulletin on the FHLBank Framework for Pilot and Voluntary Programs. The desire for FHFA to develop innovative pilot programs is to support “affordable housing, equity advancement, and community development for underserved and financially vulnerable populations.” The pilot programs would be implemented and then analyzed to determine if they should continue, be expanded, or stop altogether. Some pilot programs may be to “test and learn” while some end because they do not meet FHLBank objectives. What the FHFA disallows from its pilot programs are “[p]roducts, programs, and services implemented under established FHFA statutory and regulatory authorities.” However, voluntary programs have included “grants, down payment assistance programs, and special purpose credit programs.”
The FHFA guidance recommends that FHLBank’s board of directors establish specific parameters for pilot and voluntary programs by March 29, 2024. This bulletin was a result of public input phases of the “FHLBank System at 100: Focusing on the Future” initiative, as previously covered by InfoBytes here. Stakeholder feedback claimed that “FHLBanks should do more to support the affordable housing and community development components of their mission, especially in addressing the needs of underserved or financially vulnerable populations.”
On May 10, the California Department of Financial Protection and Innovation (DFPI) issued a notice of approval of amendments to regulations under the California Financing Law (CFL) related to the agency’s pilot program for increased access to responsible small-dollar loans (RSDL program). The RSDL program, which became operative in 2014, allows finance lenders licensed under the CFL and approved by the DFPI commissioner to charge specified alternative interest rates and charges, including an administrative fee and delinquency fees, on loans subject to certain requirements.
The approved amendments, among other things, increase the upper dollar loan limit from $2,500 to $7,500, require applicants to submit mandatory policies and procedures for addressing customer complaints and responding to questions from loan applicants and borrowers, require lenders report additional information about the finders they use, and allow lenders to use qualified finders to disburse loan proceeds, collect loan payments, and issue notices and disclosures to borrowers. (See also DFPI’s final statement of reasons, which outlines specific revisions and discusses the agency’s responses to public comments.) The amendments are effective July 1.
On November 6, 2019 the FDIC published a notice and request for public comment in the Federal Register seeking input on a new collection of information titled “Information Collection for Innovation Pilot Programs.” The FDIC notes that the innovation pilot program framework is a continuation of the agency’s efforts to engage and collaborate “with innovators in the financial, non-financial, and technology sectors to, among other things, identify, develop, and promote technology-driven innovations among community and other banks in a manner that ensures the safety and soundness of FDIC-supervised and insured institutions.” The framework is intended to provide a regulatory environment to facilitate the testing of innovative and novel approaches or applications involving a variety of banking products and services that may lead to cost reductions, increased access to financial services, and a decrease in operational, risk management, or compliance costs for insured depository institutions. While the FDIC plans on announcing additional details and the framework’s parameters at a later date, the agency stated that “innovators (banks and firms in partnership with banks) will be invited to voluntarily propose time limited pilot programs, which will be collected and considered by the FDIC on a case-by-case basis.”
Comments on the proposal are due January 6, 2020.