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  • Virginia AG Endorses Electronic Signatures for Voter Registration

    State Issues

    On September 26, Virginia Attorney General Mark Herring issued a letter declaring that the Virginia State Board of Elections is not legally precluded from directing general registrars to accept voter registration applications with electronic signatures. “It is my opinion that, although no law requires the acceptance of mailed voter registration applications with electronic signatures, the State Board of Elections is not precluded from directing that general registrars accept such applications, and the State Board, in its discretion, may do so[.]” The letter also stated that the Board of Elections also has authority to establish standards to ensure the security of voter information and to verify the authenticity and validity of the electronic signatures. The letter validates the Board of Election’s decision to accept electronic signatures during the 2013 gubernatorial election.

    Electronic Signatures

  • CFPB RESPA Enforcement Action Targets Marketing Services Agreements

    Consumer Finance

    On September 30, the CFPB announced a consent order with a Michigan-based title insurance company to address allegations that the company’s marketing services agreements (MSAs) with several real estate brokers violated the Real Estate Settlement Procedures Act’s (RESPA) prohibition against kickbacks in connection with real estate settlement services. According to the CFPB, the MSAs provided that the company would pay the real estate brokers for performing marketing services promoting the company. Specifically, although the MSAs provided for payment to the brokers based on the marketing services provided to the company, according to the CFPB the brokers were actually paid, in part, based on the number of referrals to the company they generated. Also, the CFPB asserted that the company entered the MSAs “as a quid pro quo for the referral of business.” In addition, the CFPB alleged that brokers that had entered into a MSA with the company referred a “statistically significant” higher amount of business than brokers who had not entered into a MSA. According to the terms of the consent order, the company must pay a $200,000 civil monetary penalty, immediately terminate any existing MSAs, and not enter into any MSAsthe future, providing a very broad and novel definition of MSAs that includes agreements with any person in a position to refer business providing for endorsements, joint advertising, access to counterparty and its employees, or marketing of the company’s services to others. However, the company may still purchase consumer-oriented advertising from companies that do not offer settlement services such as newspapers or television or radio stations, provided that the publisher does not endorse the company as part of the advertisement.

    CFPB RESPA

  • CFPB Publishes White Paper On Manufactured-Housing

    Consumer Finance

    On September 30, the CFPB published a white paper claiming that manufactured-home owners typically pay higher interest rates for their loans than site-built borrowers. The white paper cites data in support showing that a greater share of manufactured-housing loans are classified as higher-priced mortgage loans or “high-cost” loans. The white paper further discusses the CFPB’s findings that: (i) manufactured homeowners are likely to be older, live in a rural area, and have a lower net worth than site-built borrowers; (ii) manufactured homes typically cost less than site-built homes; (iii) about three-fifths of manufactured-housing residents who own their home also own the land it is sited on; (iv) approximately 65 percent of borrowers who own their land and financed the purchase of their manufactured home between 2001 and 2010 did so using a chattel loan (rather than a manufactured-housing loan); and (v) manufactured-housing production contracted in the 2000s. The white paper does not propose any formal rule or guidance related to manufactured-housing. Rather, it indicates that the CFPB will continue to analyze facets of the manufactured-housing market to identify ways to fill in gaps in available data about that market. For example, the white paper states that the CFPB is considering adding a data field to the Home Mortgage Disclosure Act’s reporting requirements that would indicate whether a manufactured-housing loan is secured by real or personal property.

    CFPB HMDA Manufactured Housing

  • DOD Proposes Expanded Coverage Of Military Lending Act Protections

    Consumer Finance

    On September 29, a proposed amendment to the U.S. Department of Defense’s regulation that implements the Military Lending Act (MLA) was published in the Federal Register, with comments due by November 28. Most importantly, the amendment expands the protections of the MLA by defining “consumer credit” to be consistent with closed- and open-end credit products already regulated under TILA, which would include all forms of payday loans, vehicle title loans, refund anticipation loans, deposit advance loans, installment loans, unsecured open-end lines of credit, and credit cards. Currently, the MLA only applies to (i) closed-end payday loans up to $2,000 with a term of 91 days or fewer; (ii) closed-end auto title loans with a term of 181 days or fewer; and (iii) closed-end tax refund anticipation loans. However, the proposed regulation would continue to exclude residential mortgages and purchase-money loans for personal property from coverage, including motor vehicles. The MLA was passed in 2006 and provides active duty servicemembers and their dependents with, among other protections, a 36% interest rate cap, military-specific disclosures, and a prohibition on creditors against requiring the servicemember to submit to arbitration in the event of a dispute.

    TILA Military Lending Act

  • Deputy Treasury Secretary Remarks On Student Loans Include Focus On Delinquent Borrower

    Consumer Finance

    On September 29, Deputy Treasury Secretary Sarah Bloom Raskin delivered remarks on student loans and their macroeconomic consequences at the National Association for Business Economics. With over $1 trillion in outstanding student loan debt, the U.S. has the highest level of student loan debt when compared to any country in the world. Deputy Treasury Secretary Raskin indicated that student loans surpassed credit cards and auto loans as the largest source of unsecured consumer debt. Recognizing that student loan debt is not inherently bad, Deputy Treasury Secretary Raskin emphasized that its impact on the economy cannot be understood without considering both the economic and societal benefits of a more educated workforce. Deputy Treasury Secretary Raskin expressed concern that student loan debt has become a “serious burden for far too many borrowers,” noting that student loan delinquency and default could undermine the country’s economic growth by “crowding out other kinds of investment.” She commented on the number of complaints and testimonials reported by distressed borrowers and advocated for “accuracy and fairness in the loan servicing industry, and transparency and disclosure for borrowers in the loan process.”

    Student Lending Department of Treasury

  • FHA Updates its Single Family Housing Policy Handbook

    Lending

    On September 30, the FHA published updates to several sections of its Single Family Housing Policy Handbook. The updates only apply to loans originated on or after June 15, 2015 and are a result of FHA’s attempt to create a consolidated Handbook that is intended to be a single authoritative source of relevant FHA policy. The updates relate to a variety of policies including origination/processing of loan applications, underwriting, and mortgage closing requirements. They also relate to several specific programs and products including refinances, ARM loans, new construction, weatherization, and solar and wind technologies. Future updates are anticipated regarding (i) doing business with FHA; (ii) servicing and loss mitigation; (iii) claims and disposition; and (iv) quality control, oversight, and compliance issues.

    FHA Loss Mitigation

  • President Signs Nondepository Examination and Supervisory Privilege Parity Bill

    Consumer Finance

    On September 26, President Obama signed into law H.R. 5062, which amends the Consumer Financial Protection Act of 2010 to specify that the CFPB is to coordinate its supervision of certain nondepositories with state agencies that license, supervise, or examine the offering of consumer financial products or services. The Act already requires the CFPB to coordinate its supervisory activities with prudential regulators and state bank regulatory authorities. The bill also amends the Act to provide that the sharing of information with such regulators, authorities, and agencies does not constitute a waiver of any privilege or confidentiality that may be asserted regarding such information (except with respect to the CFPB and such regulators, authorities, and agencies).

    CFPB

  • FINRA Issues Notice on Comprehensive Automated Risk Data System

    Securities

    On September 30, FINRA issued Regulatory Notice 14-37 requesting comments on a proposed rule to implement the Comprehensive Automated Risk Data System (CARDS). FINRA has described CARDS as a rule-based program that would allow FINRA to collect on a standardized, automated, and regular basis, account information, as well as account activity and security information that a firm maintains as part of its books and records. This would exclude the collection of personally identifiable information for customers, including account name, account address and Social Security number. The rule proposal would be implemented in two phases. The first phase would require carrying or clearing firms (approximately 200 firms) to periodically submit in an automated, standardized format specific information that is part of the firms' books and records relating to their securities accounts and the securities accounts for which they clear. The second phase of CARDS would require fully-disclosed introducing firms to submit specified account profile-related data elements either directly to FINRA or through a third party. The comment period on the proposed rule expires December 1, 2014.

    FINRA

  • Federal Reserve Announces Quantitative Impact Study for Insurance Holding Companies

    Consumer Finance

    On September 30, the Federal Reserve Board announced that it will begin a quantitative impact study (QIS) in order to better understand the potential effects of its revised regulatory capital framework. The study will focus on the effects on savings and loan holding companies, as well as nonbank financial companies that are supervised by the Federal Reserve and significantly engaged in insurance underwriting activity. In July 2013, the Federal Reserve finalized its revised regulatory capital framework in order to implement the Basel III capital rules for bank holding companies, certain savings and loan holding companies, and state member banks. In order to give the Federal Reserve time to adapt the capital rules for savings and loan holding companies substantially engaged in insurance underwriting activity, such entities were excluded from the 2013 framework. The QIS is being conducted in order to provide the Federal Reserve with a better understanding of how to design a capital framework for the insurance holding companies that is consistent with safety and sounds principles and the requirements of section 171 of Dodd-Frank (the Collins Amendment). The results of the QIS will allow the Federal Reserve to explore and address areas of concern raised by commenters during the proposal stage of the revised regulatory capital framework rulemaking. The Federal Reserve has contacted the insurance holding companies subject to its supervision and has requested their participation in the QIS. The requested information should be submitted by December 31, 2014.

    Federal Reserve Basel

  • SEC Delegates Authority to Invest Whistle-Blower Fund

    Securities

    On September 26, the SEC amended its rules to delegate authority to its CFO, Kenneth Johnson, to request that the Treasury Secretary invest a portion of the SEC’s Investor Protection Fund. The fund, comprised of over $439 million as of FY 2013, is used to award whistleblowers and fund certain IG activities. Johnson’s discretion includes determining what portion of the Fund’s monies are not required to meet current needs and thus available for investment as well as which investment maturities are most suitable. The SEC anticipates this amendment, effective September 29, 2014, will “streamline” its operations.

    SEC Whistleblower

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