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Federal Reserve Board Issues Statement on Deposit Advance Products
On April 25, the Federal Reserve Board issued a policy statement on deposit advance products. The statement came on the same day that the OCC and the FDIC proposed more formal guidance for such products. The Board statement identifies potential “significant risks” associated with deposit advance products, including UDAP risk and other consumer compliance risk. The statement directs examiners to thoroughly review any deposit advance products offered by supervised institutions for compliance with Section 5 of the FTC Act and reminds banks of their responsibility for vendors hired to offer deposit advance products.
President Obama Nominates New FHFA Director
On May 1, President Obama announced the nomination of Representative Mel Watt (D-NC) to serve as Director of the FHFA. Mr. Watt has represented portions of Charlotte and other North Carolina communities since 1993 and currently is a member of the House Committees on Financial Services and Judiciary. He would replace FHFA Acting Director Edward DeMarco, who federal and state Democratic policymakers and housing groups have called on to be replaced, in part based on his decision to not direct Fannie Mae and Freddie Mac to engage in broad principal reduction programs. On the same day as the President’s announcement, the Congressional Budget Office released a report that examined three options for Fannie Mae and Freddie Mac to use principal forgiveness, which the CBO finds would be likely to (i) result in small savings to the government, (ii) slightly reduce mortgage foreclosure and delinquency rates, and (iii) slightly boost overall economic growth.
FHFA Updates Securitization Platform, Contractual and Disclosure Framework Progress
On April 30, the FHFA published a progress report on the current design principles and functions on the common securitization platform for residential mortgage-backed securities that it is building. The report explains that Fannie Mae, Freddie Mac, and the FHFA are working to (i) establish an initial ownership and governance structure, (ii) design dedicated resources and establish an independent location site for the platform team, (iii) develop the design, scope and functional requirements for the platform’s modules and develop the initial business operational process model, (iv) develop a multi-year plan for building, testing and deployment of the system, and (v) develop and begin testing the platform. The report also reviews the status of the alignment of Fannie Mae’s and Freddie Mac’s securitization contracts and standards, including ongoing efforts to align (i) solicitation of borrower refinances of loans in a pool, (ii) repurchases and substitutions of loans from a pool, (iii) representations and warranties, and (iv) pooling practices. According to the report, the FHFA also will continue to (i) identify and develop standards in data, disclosure and seller/servicer contracts, (ii) develop and execute work plans for alignment activities with regard to common standards and creation of legal/contractual documents to facilitate varied credit risk transfer transactions, and (iii) engage with the public in a variety of forums to seek feedback and incorporate revisions and support FHFA progress reports to the public. The report also discusses efforts to respond to concerns about non-guaranteed residential mortgage-backed securities.
Fannie Mae Releases Loan Performance Data
On April 30, Fannie Mae released loan performance data on a portion of its single-family mortgage loans, which includes a subset of Fannie Mae’s 30-year, fully amortizing, full documentation, single-family, conventional fixed-rate mortgages. The initial population is comprised of loans acquired between January 1, 2000 and March 31, 2012 with corresponding monthly performance data as of December 31, 2012. The loan performance data is divided into two files for each acquisition quarter: (i) the “Acquisition file” includes static data at the time of a mortgage loan’s origination and delivery to Fannie Mae; and (ii) the “Performance” file contains monthly performance data of each mortgage loan from the time of Fannie Mae’s acquisition up until its current status as of the previous quarter, until the mortgage loan has been liquidated, or until it has become 180 days or more delinquent. Fannie Mae expects to update the acquisitions data each quarter to include a new quarter of acquired mortgage loans as of the prior year in addition to updated performance data as of the previous quarter. Certain data attributes also will be updated to reflect new terms, if applicable, as a result of a modification.
Fannie Mae Announces Miscellaneous Servicing Policy Changes
On May 1, Fannie Mae issued Servicing Guide Announcement SVC-2013-10, which includes numerous servicing policy changes. The announcement informs servicers that they must (i) conduct regular testing of compliance with applicable laws in all jurisdictions in which they service mortgage loans for Fannie Mae, (ii) provide test results to senior management and, upon request, to Fannie Mae, and (iii) maintain evidence of any corrective actions. For eMortgages, the Announcement explains that servicers must obtain special approval to service such mortgages by contacting their Servicing Consultant, Portfolio Manager, or Fannie Mae’s National Servicing Organization’s Servicing Solutions Center. The Announcement also (i) provides new requirements for repayments of escrow deficits and shortages for all conventional loan modifications, (ii) requires servicers to obtain the results of property valuation order requests for the purposes of bidding instructions through HomeSaver Solutions® Network within 7 to 10 calendar days from the date the servicer submits the request, (iii) clarifies delinquency management and default prevention policies outlined in SVC-2012-18, (iv) removes Guide language regarding temporary possession of mortgage notes, and (v) incorporates a recent change to Moody’s rating system.
HUD Supplements Guidance on FHA Lender Insurance Program
On May 1, HUD issued Mortgagee Letter 2013-12, which updates and replaces another recently issued letter – 2013-10 – on the FHA’s Lender Insurance Program. The letter explains enhancements to that program, which allows high-performing mortgagees to conduct pre-endorsement reviews and insure loans. Those enhancements were implemented by a January 2012 HUD rule. The letter summarizes changes made by that rule, reviews mortgagee eligibility requirements for participation in the Lender Insurance program, and outlines the initial application process. Among other things, the letter also discusses the conditions under which a mortgagee’s lender insurance authority can be terminated or suspended and explains how mortgages with such authority are subject to a revised indemnification policy.
North Dakota Amends UCC to Require Electronic Recording
On April 30, North Dakota enacted HB 1136, which compels the Secretary of State to provide an electronic means for filing any record required to be filed under the state Uniform Commercial Code. The bill also, among other things, directs the Secretary to establish an electronic system and requires electronic filing to obtain or amend certain liens, including repairman’s liens and other non-mortgage liens. The changes become effective August 1, 2015. If the Secretary makes a report to the legislative management and to the information technology committee certifying that the electronic filing system is ready for implementation, these changes will become effective ninety days following the completion of the certificate requirement.
California Federal Court Holds Online Purchase Transactions for Shipped Merchandise Not Covered by Song-Beverly Credit Card Act
On April 30, the U.S. District Court for the Central District of California held that Section 1747.08 of the Song-Beverly Credit Card Act, which prohibits retailers from requiring personal information as a condition to completing credit card transactions, does not apply to online purchase transactions in which the merchandise is shipped or delivered to the customer. Ambers v. Buy.com, No. 13-196, slip op. (C.D. Cal. Apr. 30, 2013). The ruling extends a recent holding by the California Supreme Court in Apple Inc. v. Sup. Ct. Los Angeles, which held that the Song-Beverly provisions do not apply when the item purchased is downloaded via the Internet. In this case, the customer claimed on behalf of a putative class whose claims could total $500 million that Apple created a standard that applies the Song-Beverly protections whenever the retailer has “some mechanism” to verify the customer’s identity. The plaintiff argued that the retailer’s request as part of the purchase transaction for a phone number in addition to the shipping address violated the statutory privacy protection. The court reasoned that as explained in Apple, the state legislature intended to allow retailers to verify that a person making a card purchase is authorized to do so, and stated that the shipping address alone would not work as an anti-fraud mechanism because a person who buys merchandise online may direct shipments to addresses not related to the credit card billing address. As such, the court held that Song-Beverly privacy protection does not apply to online purchases where the merchandise is being shipped or delivered, and granted the retailer’s motion to dismiss.
CFPB, FTC Announce Roundtable on Data Integrity in Debt Collection
On May 1, the FTC and the CFPB announced a roundtable to “examine the flow of consumer data throughout the debt collection process” and discuss (i) the amount of documentation and other information currently available to different types of collectors and at different points in the debt collection process, (ii) the information needed to verify and substantiate debts, (iii) the costs and benefits of providing consumers with additional disclosures about their debts and debt-related rights, and (iv) information issues relating to pleading and judgment in debt collection litigation. The event will be held on June 6, 2013 in Washington, DC and is open to the public.
CFPB Announces Consumer Advisory Board Meeting
On May 1, the CFPB announced its next Consumer Advisory Board Meeting, scheduled for May 15, 2013 in Los Angeles, CA. The meeting agenda includes a public session that will feature remarks from CFPB Director Cordray and comments from consumer groups, community and industry representatives, and members of the public.