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CFPB Issues Draft Monthly Mortgage Statement, Outlines Future Mortgage Servicing Rules
On February 13, the CFPB released a draft model monthly mortgage statement designed to help implement Dodd-Frank Act amendments to the Truth in Lending Act that require such statements. The CFPB acknowledges that many financial institutions already provide monthly statements to borrowers. However, the Dodd-Frank Act requires specific information to be provided in regular statements, including (i) the principal amount, (ii) the current interest rate, (iii) the interest rate reset date, (iv) a description of late or prepayment fees, (v) housing counselor information, (vi) certain contact information, and (vii) other information prescribed by CFPB regulations. The CFPB has been testing the draft model statement with consumers and now is seeking broader public comment though its website. After this informal comment period ends, the CFPB will proceed to a formal rulemaking through which it will set the requirements for monthly statements and provide a model form for use in complying with the new rules. Institutions will have some flexibility to adjust the model. One day prior, CFPB Director Richard Cordray published an op-ed in which he outlined additional agency efforts regarding mortgage servicing, including future rules that would restrict the use of force-placed insurance and require additional disclosures relating to hybrid adjustable rate-mortgages.
FFETF Launches Federal-State Financial Fraud Consumer Protection Working
On February 10, the Financial Fraud Enforcement Task Force (FFETF) launched the Consumer Protection Working Group, which is charged with coordinating federal and state law enforcement and regulatory efforts to address consumer financial fraud, including fraud targeting unemployed persons, students, active-duty military personnel and veterans. The group is co-chaired by Assistant Attorneys General Tony West and Lanny Breuer, U.S. Attorney for the Central District of California André Birotte, Director of the FTC Bureau of Consumer Protection David Vladek, and CFPB Director of Enforcement Kent Markus. The Department of Justice’s press release states that meeting participants set priorities for the group as it seeks to address fraud in (i) payday lending, (ii) high-pressure telemarketing and Internet scams, (iii) business opportunity schemes, (iv) for-profit colleges, and (v) third-party payment processors. The meeting also addressed plans to establish a best-practices tool kit, policy initiatives (including legislative and regulatory proposals), and an information-sharing structure for Working Group participants.
FTC Submits Information Regarding 2011 Enforcement Actions and Planned 2012 Activities
On February 10, the FTC released a letter it recently submitted to the Federal Reserve Board (FRB) that reviews the FTC’s efforts in 2011 to enforce certain consumer financial services laws. The information provided in the letter will be used by the FRB in its 2011 Annual Report to Congress. In addition to reviewing past activity, the letter also outlines the FTC’s plans to exercise new authorities provided by the Dodd-Frank Act, including new or enhanced authority with regard to payment cards, motor vehicles, and mortgage disclosures.
Banking Agencies Extend Deadline to Request Independent Foreclosure Review
On February 15, the Federal Reserve Board and the Office of the Comptroller of the Currency announced that the deadline for borrowers to seek review of their mortgage foreclosures under the Independent Foreclosure Review program has been extended to July 31, 2012. Under the program, an eligible borrower can have his or her foreclosure reviewed by independent consultants to determine whether the borrower was financially injured due to errors, misrepresentations, or other deficiencies in the foreclosure process. An injured borrower may be eligible for compensation or other remedies.
FinCEN Issues Advisory Regarding Foreign-Located Money Services Businesses
On February 15, the Financial Crimes Enforcement Network (FinCEN) issued guidance regarding anti-money laundering (AML) programs for financial institutions that provide services to foreign-located money services businesses (MSB) or engage in transactions with such businesses. The guidance follows FinCEN’s July 2011 regulations issued under the Bank Secrecy Act that amended the definition of MSB to include businesses that conduct activities in the U.S. even if the business does not have any agents, agencies, branches, or offices physically located in the U.S. The advisory reviews the July regulations, reminds institutions about their obligations to file suspicious activity reports, and suggests that financial institutions update their AML programs using prior guidance on doing business with MSBs and on informal value transfer systems.
Federal Reserve Releases Mortgage Servicing Monetary Sanction Orders
On February 13, the Federal Reserve Board (FRB) released the consent orders requiring five major mortgage servicing companies to pay a combined $766.5 million in monetary sanctions. The consent orders were entered in connection with the $25 billion multi-party mortgage servicing settlement announced on February 9, and that total settlement amount includes the FRB sanctions.
Senate Banking Chairman Requests Audits of Community Bank and Credit Union Exam Processes
On February 10, Senator Tim Johnson, Chairman of the Senate Banking Committee, sent a letter to the inspectors general of the Department of Treasury, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the National Credit Union Administration seeking audits of each agency's exam process for community banks and credit unions. The letter cites community bank and credit union complaints of unclear standards and inconsistent application of policies and procedures. Sen. Johnson asked that the audit review (i) the overall exam process, (ii) examination timelines, and (iii) the ability of an institution to question or appeal exam results. The House Financial Services Committee has been considering legislation, H.R. 3461, that would mandate changes to the examination process. To date, no corresponding bill has been introduced in the Senate.
HUD Withdraws Rule Proposed to Allow Farm Credit System Institutions to Participate in FHA Mortgage Insurance Program
On February 13, HUD withdrew its proposed rule that would have allowed Farm Credit System direct lenders to participate in FHA mortgage insurance programs as FHA-approved mortgagees and lenders in an effort to increase housing credit available in rural areas. The withdrawal notice states that the rule would conflict with the Obama administration’s policy of reducing the FHA’s market share and bringing private capital back into the housing finance market.
HUD Clarifies Requirements Regarding Closing a Loan in the Name of an FHA-Approved Mortgagee Acting as a Sponsored Third Party Originator
On February 10, HUD issued Mortgagee Letter 2012-2 to clarify the requirements for the origination, closing, and submission for FHA insurance endorsement of loans via the sponsored third-party origination process. The Letter states that all third-party originators must be sponsored by an FHA-approved Direct Endorsement lender, and that sponsoring lenders are responsible for ensuring that the originators they sponsor adhere to FHA requirements. Sponsored third-party originator compliance failures may result in administrative action against the sponsoring mortgagee. Moreover, compliance failures by an FHA-approved mortgagee acting as a third-party sponsored originator may result in administrative action against both the sponsoring mortgagee and the FHA-approved mortgagee.
HUD Announces Multifamily Low Income Housing Tax Credit Pilot Program
On February 3, HUD issued Mortgagee Letter 2012-1 to launch a new pilot program to streamline FHA mortgage insurance applications for projects with equity from the Low Income Housing Tax Credit program. The program utilizes a separate application and processing system and during its first phase will provide permanent financing for low risk transactions. The Letter outlines eligibility requirements and the application process for the program and notes that the three-year rule waiver set to expire this month is extended for an additional year for tax credit projects that participate in the pilot. According to HUD’s press release, the pilot program is being launched in Chicago, Detroit, Boston, and Los Angeles.