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On March 6, Fannie Mae issued Servicing Guide Lender Letter LL-2012-02 to all single-family servicers to provide guidance in connection with transition assistance programs under the Hardest-Hit Fund (HHF). Effective immediately, servicers must facilitate the borrowers’ receipt of HHF funds in connection with transition assistance programs on Fannie Mae loans, including those held in a Fannie Mae portfolio or those in an MBS pool with the special servicing option or a shared-risk MBS pool for which Fannie Mae markets the acquired property. The Lender Letter also clarifies policies related to implementation of the HHF unemployment, reinstatement, and loan modification assistance programs, including clarifications regarding (i) collection and solicitation activity, (ii) foreclosure actions, and (iii) servicer obligations when dealing with housing finance agencies.
On May 7, the DOJ charged two employees of a U.S. broker-dealer and a senior official in Venezuela’s state economic development bank for their alleged roles in what the DOJ describes as a “massive international bribery scheme.” According to an unsealed criminal complaint, the DOJ accuses the broker-dealer employees and the foreign official of violating the FCPA by conspiring to pay $5 million in bribes to the foreign official in exchange for her directing the economic development bank’s trading business to the broker-dealer, which yielded millions more in mark-ups and mark-downs for the broker-dealer. The government alleges that commissions paid on the directed trades were split with the foreign official through monthly kickbacks and that some of the trades executed for the bank had no discernible business purpose. To further conceal the scheme, the government claims, the kickbacks often were paid using intermediary corporations and offshore accounts, the assets of which the government is pursuing through a separate civil forfeiture action. On the same day, the SEC announced a parallel civil action against the two broker-dealer employees and two other individuals who allegedly participated in and profited from the scheme. The investigations and subsequent criminal and civil charges stemmed from a routine periodic SEC examination of the broker-dealer. The DOJ warned others in the financial services industry, particularly brokers, about engaging in similar activities, and the SEC’s conduct in this case suggests its examiners are focused on conduct that potentially violates the FCPA.
- United States of America v. Clarke et al. Complaint
- Securities and Exchange Commission v. Clarke et al. Complaint
On March 5, the CFPB’s student loan ombudsman, Rohit Chopra, acknowledged in a blog post that the CPFB had launched its student loan complaint system. The CFPB outlined its expectations regarding financial institution response and resolution times. It expects institutions to respond to complaints with fifteen days, and resolve complaints within sixty days. Concurrent with the opening of the complaint system, the CFPB sent a letter to university officials advising them of this new resource available for their students and alumni.
On March 2, the U.S. Court of Appeals for the Ninth Circuit held that a parens patriae suit brought by Nevada’s Attorney General (AG) related to mortgage modification and foreclosure practices could not be removed from state court under the Class Action Fairness Act (CAFA). Nevada v. Bank of America Corp., No 12-15005, 2012 WL 688552 (9th Cir. Mar. 2, 2012). The AG alleges that Bank of America Corp. (BAC) violated state law by misleading Nevada consumers about the terms and operation of its home mortgage modification and foreclosure processes, and that it violated a consent judgment entered between the state and several of its subsidiaries. BAC removed the case to federal court under CAFA. The district court denied the state’s motion to remand, finding that (i) it had jurisdiction over the suit as a CAFA “class action,” but not as a “mass action,” and (ii) it had federal question jurisdiction because the allegations require interpretation of the federal HAMP program and the Fair Debt Collections Practices Act. On appeal, the Ninth Circuit consistent with its opinion in Washington v. Chimei Innolux Corp., 659 F.3d 842 (9th Cir. 2011), which was issued after the district court ruled on Nevada’s motion, held that a parens patriae suit does not qualify as a class action removable under CAFA, and does not otherwise satisfy CAFA’s “mass action” requirements. The court reasoned that Nevada is the real party in interest and therefore held that the case could not qualify as a mass action removable under CAFA. The Ninth Circuit also held that, because only state law causes of action are alleged and there is no overriding federal interest, the district court does not have federal question jurisdiction.
On March 1, Virginia enacted two mortgage-related bills, both effective July 1, 2012. HB 570 exempts employees of bona fide nonprofit organizations from licensing and registration requirements applicable to mortgage loan originators. It also, among other things, (i) adds definitions for dwelling and residential mortgage loan, (ii) revises the definitions for loan processor or underwriter, mortgage loan originator, real estate brokerage activities, registered mortgage loan originator, and unique identifier, (iii) revises the licensing requirement for mortgage loan originators and adds exemptions for certain individuals, and (iv) prohibits licensees from using unique identifiers for any purpose other than the SAFE Act and the Virginia Mortgage Loan Originators law. HB 572 exempts from licensure under the NMLS persons who make loans or extend credit for any part of the purchase price of real property that the person owns.
On March 2, the Federal Reserve Board released guidance describing the factors that it will employ to evaluate whether to upgrade a community banking organization’s supervisory ratings. The guidance explains that examiners should use balanced judgment to assess demonstrated improvement and where improvement is likely to continue. The guidance also lists specific considerations, including, among others, the extent to which (i) the level of capital and capital planning process are appropriate relative to risk characteristics, (ii) core earnings have improved, and this trend is demonstrably sustainable, and (iii) asset quality is improving, as evidenced by a material decline of adversely classified and nonperforming assets, and this trend is expected to continue.
Federal Reserve Extends Comment Period on Proposed Rules for Oversight of Largest Banks and Systemically Important Nonbanks
On March 2, the Federal Reserve Board extended from March 31, 2012 to April 30, 2012 the comment period on its proposed rules related to supervision and regulation of (i) all U.S. bank holding companies with assets of $50 billion or more, and (ii) nonbank financial firms designated as systemically important by the Financial Stability Oversight Council.
On March 2, the Financial Crimes Enforcement Network (FinCEN) advised financial institutions and their lawyers that the contents of Suspicious Activity Reports (SARs) must remain confidential. Private parties increasingly are attempting to obtain SARs in civil litigation and other matters, but financial institutions, as well as their current and former directors, officers, employees, agents, and contractors are prohibited from disclosing SARs or any information that would reveal the existence of a SAR. FinCEN reminded covered financial institutions and individuals that unauthorized disclosure could subject them to civil and criminal penalties.
On February 28, HUD issued Mortgagee Letter 2012-3 to address multiple underwriting changes for case numbers assigned on or after April 1, 2012. These changes include: (i) new documentation for self-employed borrowers for all FHA insured loans except non-credit qualifying streamline refinance loans and Home Equity Conversion Mortgage loans, (ii) new guidance for handling of disputed accounts or public records for all FHA insured loans except non-credit qualifying streamline refinances, and (iii) new definition of family member for the purpose of Identity of Interest Transactions for all FHA insured loans. A second letter, Mortgagee Letter 2012-4, issued on March 6, 2012 details recently announced changes to FHA single family mortgage insurance premiums.
Recently, HUD published a notice of administrative actions taken by the Mortgagee Review Board for the period of February 14, 2011 through July 20, 2011. The notice provides the cause and description of settlement agreements, civil money penalties, withdrawals of FHA approval, suspensions, probations, reprimands, and administrative payments imposed on fifteen mortgagees. The notice also lists six mortgagees that entered into settlement agreements that required each to pay $3,500 in civil money penalties, without admitting fault or liability, for failing to timely comply with HUD's annual recertification requirements.
- Benjamin W. Hutten to discuss "Understanding OFAC sanctions" at a NAFCU webinar
- Warren W. Traiger to discuss "Key takeaways from proposed CRA modernization" at the New York Bankers Association Technology, Compliance & Risk Management Forum
- Garylene D. Javier to discuss "Navigating workplace culture in 2020" at the DC Bar Conference