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President Obama Announces Plan to Nominate Federal Reserve Board Governor For Deputy Treasury Secretary
On July 31, President Obama announced that he will nominate Federal Reserve Board Governor Sarah Bloom Raskin as Deputy Treasury Secretary. Ms. Raskin was appointed to her current position by President Obama in October 2010, and her term is not due to end until January 2016. Prior to joining the Federal Reserve Board, Ms. Raskin served as Maryland’s Commissioner of Financial Regulation and before that was Managing Director at the Promontory Financial Group. She is a lawyer and previously served as the Banking Counsel for the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
Fannie Mae Announces Standard and Streamlined Modifications Rate Adjustment
On July 31, Fannie Mae announced that as of September 1, 2013, the rate for standard and streamlined modifications is 4.625%, an increase from the 4% applicable to modifications with approved dates between December 1, 2012 and August 31, 2013. The notice reminds servicers that the interest rate used for the permanent loan modification must be the same interest rate reflected in the borrower’s Trial Period Plan.
Fannie Mae, Freddie Mac Announce Uniform Dataset to Support CFPB Closing Disclosures
On July 30, Fannie Mae and Freddie Mac announced that they are developing a standardized dataset to support the consolidated closing disclosure forms expected to be finalized by the CFPB in the coming months. The new Uniform Closing Dataset (UCD) is a component of the broader Uniform Mortgage Data Program currently being implemented by Fannie Mae and Freddie Mac, which is designed to standardize the way loan data is defined, captured, and delivered. The enterprises are currently obtaining input from select industry participants and will release the UCD after the CFPB finalizes its rule.
D.C. Federal District Court Vacates Federal Reserve Board's Interchange Fee Rule
On July 31, the U.S. District Court for the District of Columbia held that the Federal Reserve Board’s 2011 final rule implementing the so-called Durbin Amendment is invalid under the Administrative Procedures Act (APA). NACS v. Bd. of Govs. Of the Fed. Res. Syst., No. 11-2075, slip op. (D.D.C. Jul. 31, 2013). Several retailers and their trade associations filed suit to challenge the Federal Reserve Board’s rule that set a 21-cent cap on interchange fees – the fees payment networks charge merchants on each debit card transaction to compensate the card issuer – and required that only two unaffiliated networks be available for each debit card. The court found that the Board exceeded its authority under the Durbin Amendment by adjusting the fee cap in the Final Rule to include costs (such as network processing fees and fraud losses) that were not permitted to be considered. The court also concluded that the Board violated the APA by not requiring that all debit transactions be able to run over at least two unaffiliated networks, regardless of authorization method (i.e., signature or PIN). The court further noted that the Board did not provide merchants the ability to choose the network on which they would process transactions. The court vacated the Board’s interchange transaction fee and network non-exclusivity regulations as arbitrary, capricious or otherwise not in accordance with law and remanded them to the Board for further action. However, in order to avoid disrupting commerce, the court allowed the current regulations to remain in place temporarily. The court invited further briefing on the appropriate length of the stay and whether the current standards should remain in place until they are replaced or the Board should develop interim standards sufficient to allow the court to lift the stay.
Fannie Mae, Freddie Mac Alter Servicing Incentives
This week, Fannie Mae (SVC-2013-15) and Freddie Mac (Bulletin 2013-14) announced that they are altering certain servicing incentives. Effective for all collection periods with a start date on or after August 1, 2013, the two entities are eliminating the complete Borrower Response Package and Delinquency improvement performance standard and the related incentive and compensatory fee structure. Servicers still must collect the package when required to do so by the enterprises’ respective guides. In addition, for mortgages with HAMP modification effective dates on or after April 1, 2014, the entities are increasing the servicer incentive by $500 if the modification is completed in accordance with the Guide.
Federal Reserve Board Announces Additional Foreclosure Review Settlement
On July 26, the Federal Reserve Board released an amended consent order with one of the several financial institutions that entered into a consent order in April 2011 to resolve allegations that the institutions engaged in improper mortgage servicing and foreclosure processing practices. The agreement follows numerous others released earlier this year. Under this latest agreement the institution will pay roughly $230 million, including $32 million to satisfy its obligation to provide loss-mitigation assistance since it no longer owns a significant residential mortgaging portfolio. Together, all the amended consent orders will provide approximately 4.4 million borrowers a total of more than $3.8 billion in cash compensation while an additional $5.8 billion will be provided by the servicers in commitments for loss-mitigation assistance, such as loan modifications and forgiveness of deficiency judgments. For the participating servicers, the amendments also replace the requirements related to the Independent Foreclosure Review process set out under the original consent orders.
Fannie Mae Announces Lender Quality Control Requirements, Other Selling Guide Updates
On July 30, Fannie Mae announced in Selling Guide Announcement SEL-2013-05 significant revisions to its Lender Quality Control Requirements, including specific requirements related to lender’s ongoing quality control (QC) assessment of loan origination activities and associated procedures, with the aim of reducing the risk of repurchases. The announcement provides a table of numerous revised requirements and highlights several new requirements, including that lenders (i) ensure that the QC vendor complies with the lender’s QC plan and Fannie Mae’s requirements, (ii) review at least 10% of the loans reviewed by vendors, (iii) only use Fannie Mae’s appraisal field review forms, and (iv) provide to Fannie Mae upon request a copy of QC audits and audits of the QC process. The announcement also includes numerous other Selling Guide updates related to, among other things (i) compensatory fees, (ii) field reviews, and (iii) authorizations to transfer funds.
Prudential Regulators Propose Stress Test Guidance for Mid-Size Institutions
On July 30, the OCC, the FDIC, and the Federal Reserve Board proposed guidance for stress tests conducted by institutions with more than $10 billion but less than $50 billion in total consolidated assets. Under Dodd-Frank Act mandated regulations adopted by the regulators last October, such firms are required to conduct annual company-run stress tests starting in October 2013. The guidance discusses supervisory expectations for stress test practices, provides examples of practices that would be consistent with those expectations, and offers additional details about stress test methodologies. It also underscores the importance of stress testing as an ongoing risk management practice that supports a company’s forward-looking assessment of its risks and better equips the company to address a range of macroeconomic and financial outcomes. Comments on the proposed guidance are due by September 25, 2013.
FinCEN Introduces New Form for Authorizing FBAR Filing by Spouses and Third Parties
On July 29, FinCEN released a new form for filers who submit Reports of Foreign Bank and Financial Accounts (FBARs) jointly with spouses, or who wish to submit them via third-party preparers. Filers interested in using the form would obtain it from FinCEN or the IRS, and filers and account owners would maintain the form but would not submit it to FinCEN. FinCEN also announced (i) technical adjustments to ease FBAR filing and allow for enhancements such as introducing new space on the form for filers to provide reasons for late filing as well as the addition of third party preparer information, and (ii) the availability of batch filing capability for testing. FinCEN anticipates the revised electronic FBAR and batch capability will be available for general use by September 30, 2013.
Federal Privacy Stakeholder Meeting Addresses Mobile Application Transparency
Recently, the multi-stakeholder process established in connection with the White House’s February 2012 privacy report met to discuss mobile application transparency, including a voluntary code of conduct for mobile application developers. The code covers mobile application short form notices intended to provide consumers enhanced transparency about data collection and sharing practices. Application developers that choose to adopt the voluntary code would employ short form notices that describe (i) the collection of types of certain data – including biometrics, browser history, phone or text log, financial information, location, and more – whether or not consumers know that it is being collected, (ii) a means of accessing a long form privacy policy, if any exists, (iii) the sharing of user-specific data, if any, with certain third parties – e.g. consumer data resellers, data analytics providers, ad networks, and government entities, and (iv) the identity of the entity providing the application. In addition to being voluntary, the code exempts common application collection and sharing activities for operational purposes.