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  • FDIC Releases List of Enforcement Actions Taken Against Banks and Individuals in April 2017

    Courts

    On May 26, the FDIC released its list of 18 administrative enforcement actions taken against banks and individuals in April. Among the consent orders on the list are civil money penalties for violations of the Flood Disaster Protection Act of 1973 and its flood insurance requirements. Also on the list are a cease and desist order and a civil money penalty assessment issued to a Louisiana-based bank (Bank) for violations of the Bank Secrecy Act (BSA), EFTA, RESPA, TILA, HMDA, and the National Flood Insurance Program. According to the cease and desist order, the FDIC Board of Directors agreed with the Administrative Law Judge’s recommended decision that the Bank engaged in unsafe or unsound practices, which warranted a cease and desist order and civil money penalty. The order also addressed a number of shortcomings identified by the Bank’s examiners, including the following: (i) the Bank’s BSA program lacked adequate internal controls to ensure compliance; (ii) it failed to provide correct and compete electronic funds transfer disclosures to consumers; (iii) borrowers were provided “untimely and improperly completed” good faith estimates; and (iv) the Bank repeatedly failed to accurately report required HMDA information to federal agencies.

    An additional eight actions listed by the FDIC related to unsafe or unsound banking practices and breaches of fiduciary duty, including five removal and prohibition orders. There are no administrative hearings scheduled for June 2017. The FDIC database containing all of its enforcement decisions and orders may be accessed here.

    Courts Consumer Finance Enforcement FDIC Litigation National Flood Insurance Program Bank Secrecy Act EFTA RESPA TILA HMDA

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  • Financial Services Associations Comment on CFPB’s HMDA Proposal

    Agency Rule-Making & Guidance

    As previously covered in an InfoBytes Special Alert, the CFPB issued a request for comment on its proposal to amend the 2015 HMDA rule, which would incorporate changes primarily for the purpose of clarifying data collection and reporting requirements. The request, which closed for public comment on May 25, received 46 public comments from several banking and credit union industry associations.

    Mortgage Bankers Association (MBA). On May 25, the MBA—a national association representing the real estate financial industry—submitted a comment letter outlining outstanding issues and calling upon the Bureau to provide clarifying and technical corrections to Regulation C, which implements HMDA. The MBA outlined the following points, among others, for consideration:

    • delay the effective date of the Final Rule and amendments pending completion of key actions in the following areas: “HMDA data collection portals; publication and implementation of data quality edits; geocoder production release and integration specs; data privacy concerns; resubmission expectations; updated filing instructions guides; guidance on reporting and collection issues; impacts of the proposed amendments; uniform residential loan application; government monitoring information”;
    • address recommendations pertaining to multifamily lending: (i) “multifamily loans should not be subject to HMDA reporting”; (ii) “purchases and assumptions of multifamily loans should be exempt from introductory rate period reporting”; (iii) “the CFPB should accept simplified reporting from smaller-volume HMDA reporters, particularly smaller-volume multifamily reporters”; and (iv) “further consideration and clarification of the multifamily definition is needed”; and
    • a one-year delay would allow the CFPB to address privacy concerns that “might dictate that certain data not be disclosed publicly,” thereby giving the Bureau time to “reconsider whether the many data points required under Dodd-Frank . . . should be required.”

    According to the CFPB’s request for comment, most of the amendments in the Final Rule are to go into effect January 1, 2018; however, the MBA noted that data collection must commence in 2017 for loan applications that may become reportable in 2018. Therefore, the MBA urged the Bureau to delay implementation for at least one year to allow sufficient time for data collection and reporting which would give the CFPB “time to provide much-needed information and materials, and to allow HMDA reporters more time to finalize and implement the changes effectively.”

    American Bankers Association (ABA). Separately, on May 25, the ABA submitted a comment letter opining that many of the Bureau’s “technical corrections, clarifying amendments or minor changes” are “substantive in nature” and require a more comprehensive and formal process to “identify industry questions and proposed solutions.” Specifically, among other things, the ABA emphasized the following recommendations:

    • the January 1, 2018 effective date of the Final Rule should be “suspended immediately” in order to “promote the orderly, coordinated, and thorough consideration and resolution of all the interrelated issues presented and to make sure that all of the privacy and security issues are adequately addressed”;
    • the CFPB should consider updating, rather than discontinuing, its reference tool for lenders entitled A Guide to HMDA: Getting it Right;
    • several categories require further clarification: loans in process or loans originated before but purchased after the rule’s effective date; multifamily dwellings; home improvement loans; temporary financing; the threshold for reporting; counteroffers; applicant or borrower’s reported income; the annual percentage rate; rate spreads and rate set dates; reporting when there are no closing disclosures; corrected disclosures; the unique loan identifier; the geocoding tool’s use; and information pertaining to ethnicity and race; and
    • pending guidance on error resolution and software required for reporters should be finalized “as soon as possible,” and regulations on privacy and data security should be proposed “with the utmost speed.”

    “Piecemeal corrections based on informal and anecdotal evidence only adds to regulatory burden, which adds costs to borrowers and reduces access to mortgage credit,” the ABA noted.

    Agency Rulemaking & Guidance Lending HMDA Mortgage Origination CFPB ABA

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  • Legislation Proposed to Require Study on Homeowners’ Privacy of Collected HMDA Information

    Federal Issues

    On April 27, Reps. Randy Hultgren (R-Ill.) and Andy Barr (R-Ky.) reintroduced legislation to “protect against the misuse of consumers’ sensitive financial information” collected under the Home Mortgage Disclosure Act (HMDA). According to a May 5 press release issued by Rep. Hultgren’s office, the Homeowner Information Privacy Protection Act (H.R. 2204) would require the Comptroller General of the United States to conduct a study to determine whether the data required to be published, made available, or disclosed under HMDA could result in: (i) exposing the mortgagor’s or applicant’s identity; (ii) exposing the mortgagor or applicant to identity theft or loss of personal, sensitive information; (iii) marketing or selling unfair, deceptive, or abusive financial products based on such information; (iv) personal financial loss or emotional distress resulting from the exposure to identify theft or the loss of sensitive personal financial information; and (v) “the potential legal liability facing the Bureau and market participants in the event the data required to be published, made available, or disclosed under the final rule leads or contributes to identity theft or the capture of sensitive personal financial information.” The bill further provides that the Comptroller will submit reports detailing the findings and conclusions as well as any recommendations for legislative and regulatory actions to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. In addition, the bill proposes to delay the effective date of the new reporting requirements set forth in the 2015 HMDA rule to January 1, 2019.

    As previously covered in InfoBytes Special Alerts (see here and here), the CFPB has proposed amendments to the 2015 HMDA rule, which clarifies the collection and reporting requirements for several data points, among other things.

    Federal Issues Congress HMDA Privacy/Cyber Risk & Data Security

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  • American Bankers Association White Paper Addresses Concerns Over HMDA Expansion

    Agency Rule-Making & Guidance

    On May 2, the American Bankers Association (ABA) issued a white paper to the Treasury Department on the implementation of the 2015 Home Mortgage Disclosure Act (HMDA) rule as part of its continuing response to President Trump’s executive order outlining “core principles” for financial regulation (see previously issued Special Alert here). The white paper, HMDA – More Really is Less: The Data Fog Frustrates HMDA, presents several views held by the ABA including that the CFPB should (i) rescind requirements to collect any data fields not expressly required by HMDA; (ii) suspend the effective date of the 2015 HMDA rule until privacy and security concerns are addressed (see previously issued Special Alert here); (iii) exclude commercial loans from HMDA coverage; and (iv) revoke the new HMDA data elements added by the Dodd-Frank Act. The ABA noted that the Dodd-Frank Act added more than 13 new categories to the statutory HMDA data fields lenders are required to collect, and in the implementing regulation, Regulation C, the CFPB added 25 new data fields to the existing 23 fields. The ABA noted that the CFPB estimates that, in addition to existing costs of HMDA compliance, the additional annual costs of operations will be approximately $120.6 million conservatively (more if reporting quarterly) and lenders will incur a one-time additional cost of between $177 million and $326.6 million. Furthermore, the ABA states there still remains a need to address the “significant” privacy issues presented by the “vast trove of data points added by Dodd-Frank,” and that “the collection and transfer and warehousing of greatly increased and more sensitive data will necessitate even more robust and costlier private sector and government systems.” However, the ABA noted the Bureau has not initiated rulemaking to address the privacy issues presented.

    Notably, last month, the CFPB issued a proposal in the Federal Register to amend the 2015 HMDA rule (see previously issued Special Alert here). The changes are primarily for the purpose of clarifying data collection and reporting requirements, and most of the clarifications and revisions would take effect in January 2018. The deadline to submit comments on the CFPB’s proposal is May 25, 2017.

    Agency Rulemaking & Guidance HMDA CFPB ABA

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  • Special Alert: CFPB Proposes Amendments to 2015 HMDA Rule

    On April 13, the Consumer Financial Protection Bureau (CFPB) issued a proposal to amend the 2015 Home Mortgage Disclosure Act (HMDA) rule. The changes are primarily for the purpose of clarifying data collection and reporting requirements, and most of the clarifications and revisions would take effect in January 2018. Comments on the CFPB’s proposal are due 30 days after publication in the Federal Register.

    The CFPB describes the changes as being non-substantive in nature, noting that the proposal is meant to provide “clarifications, technical corrections, or minor changes.” While we describe the more significant proposed amendments below in greater detail, highlights of the proposal include:

    • Clarification of the definitions of “automated underwriting system,” “closed-end mortgage loan” (specifically, extension of credit), “dwelling” (specifically, multifamily residential structures and communities), “home improvement loan,” and “home purchase loan” (specifically, construction and permanent financing)
    • Permission for institutions to report “not applicable” for loan purpose and the loan originator’s Nationwide Mortgage Licensing System and Registry ID when reporting certain purchased loans originated before Regulation Z’s loan originator rules took effect
    • Clarification of the exclusions for temporary financing and construction loans, commercial or business purpose loans, financial institutions that do not meet the loan-volume threshold, and new funds in advance of consolidation with New York State consolidation, extension, and modification agreements (CEMA)
    • Provision of a safe harbor for bona-fide errors related to incorrect census tract reporting if the institution properly uses the geocoding tool published on the CFPB website

    ***
    Click here to read full special alert.

    If you have questions about the amendments or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a Buckley Sandler attorney with whom you have worked in the past.

    HMDA CFPB

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  • CFPB Proposes Amendment to Regulation C to Clarify HMDA Rule

    Agency Rule-Making & Guidance

    On April 13, the CFPB announced the release of its proposal to amend Regulation C (12 CFR Part 1003), the regulation that implemented the Home Mortgage Disclosure Act (HMDA) and requires lenders to collect, report and disclose data on home loan applications, originations, and purchases of mortgage loans. On October 15, 2015, the Bureau updated the HMDA reporting requirements to expand the data collection scope, while simultaneously streamlining certain existing requirements (see Special Alert: CFPB Adopts Significant Expansion of HMDA Reporting Requirements). According to the Bureau’s press release, the 2017 proposed amendment is intended to “help financial institutions comply with the 2015 HMDA Final Rule by clarifying the information they are required to collect and report about their mortgage lending.” Specifically, the regulation, as amended, will establish “transition rules” for both “loan purpose” and the “unique identifier” for the loan originator. The transition rules will also allow financial institutions to report “not applicable” for these two data points. Furthermore, the proposal will make additional amendments to clarify certain key terms, such as “temporary financing” and “automated underwriting system,” and create a new reporting exception for certain transactions associated with New York State agreements. Comments on the proposal will be due within 30 days of its publication in the Federal Register.

    Additional information and materials covering the new HMDA Rule (amending Regulation C) can also be found in Buckley Sandler’s HMDA Resource Center.  And, as recently covered by InfoBytes, the CFPB has also made available two webinars and various "Quick Reference" guides that help explain the HMDA.

    Agency Rulemaking & Guidance Lending HMDA Regulation C CFPB

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  • CFPB Proposes Amendment to Regulation B to Harmonize Regulation B with Other Mortgage Lending Regulations

    Agency Rule-Making & Guidance

    On March 24, the CFPB announced the release of its proposal to amend Regulation B (12 CFR Part 1002), which implements the ECOA, a federal civil rights law that protects applicants from discrimination by lenders. According to the Bureau, the proposed amendment is intended to “provide additional flexibility for mortgage lenders concerning the collection of consumer demographic information.” Specifically, the regulation, as amended, would allow lenders to use the updated Uniform Residential Loan Application form adopted by Fannie Mae and Freddie Mac in 2016, rather than the 2004 version currently included in Regulation B, along with additional changes that would permit lenders to employ more uniform practices.

    As explained in a March 24 CFPB blog post, a core justification for the proposed change is consistency and clarity with respect to other Bureau rules. While ECOA and Regulation B generally prohibit creditors from asking loan applicants about their race, religion, ethnicity, national origin, or gender, in some cases, such as mortgage loans, other regulations (i.e., Regulation C and the HMDA) require creditors to specifically ask for some of the very same information – including, for instance, race and ethnicity. To address this issue, the proposed amendments would allow institutions not subject to HMDA reporting requirements to choose on an “application-by-application basis” between two approaches to collecting personal demographic data from applicants: either the more limited, aggregate race and ethnicity categories required by Regulation B, or the disaggregated and more expansive categories required for HMDA-reporting institutions under revisions to Regulation C effective in 2018. The new rule would also create a safe harbor allowing for the collection (in certain circumstances) of data previously barred by Regulation B, establish consistent race and ethnicity categories that could be used in complying with both Regulation B and C.

    Comments on the proposal will be due within 30 days of its publication in the Federal Register.

    Agency Rulemaking & Guidance CFPB Regulation B ECOA Mortgage Lenders HMDA

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  • CFPB Issues Largest HMDA Fine in Bureau History Against Nonbank Mortgage Lender

    Lending

    On March 15, the CFPB announced a consent order assessing a $1.75 million civil money penalty against a national mortgage lender for failing to accurately report mortgage data in violation of the Home Mortgage Disclosure Act (“HMDA”). The Bureau alleged that, during the supervision process, it found the lender’s HMDA compliance systems to be flawed, and that the flaws led to the generation of “significant, preventable” errors in its mortgage lending data. The following violations were also alleged: (i) a failure to “maintain detailed HMDA data collection and validation procedures”; (ii) a failure to “implement adequate compliance procedures”; and (iii) a failure to “consistently define data among its various lines of business,” which resulted in data discrepancies.  As reported by the Bureau, the size of the penalty reflects the lender’s market size, the magnitude of the errors, and its history of violations. The terms of the consent order require the lender to pay a $1.75 million penalty, develop an effective compliance management system to prevent future violations, and review and correct HMDA reporting inaccuracies for the defined time period. Notably, the consent order does not provide for consumer redress.

    Later that day, the mortgage lender issued a statement announcing the resolution of the Bureau’s examination and highlighting the company’s efforts “over the past two years” to “proactively ma[ke] substantial investments in new staff, training and technology to enhance all of [their] HMDA-related processes and controls.”

    Lending CFPB Mortgage Lenders HMDA Data Collection / Aggregation

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  • CFPB Releases Second Webinar on New HMDA Rule

    Lending

    On February 14, the CFPB announced the availability of a second Webinar on the New Home Mortgage Disclosure Act (HMDA) Rule (amending Regulation C), a Rule that was itself finalized in late 2015 but that is predominantly not effective until January 1, 2018, or later. The new Webinar, with audio and closed-captioning over a slide-deck, focuses solely on identifiers and other “data points,” including the race and ethnicity of an applicant or borrower, which must be collected under the New HMDA Rule. In August 2016, the CFPB released an initial Webinar on the same Rule, covering a broader range of topics and without the focus on data points in the newer Webinar.

    In addition, the Bureau has now made available a one-page chart to summarize the options a financial institution has for collecting and reporting ethnicity and race information under current Regulation C, Regulation C effective January 1, 2018, and the Bureau’s Official Approval Notice (issued on September 23, 2016). All of the above-mentioned resources and many more related materials (such as an unofficial transcript we prepared of the initial Webinar) can also be found in Buckley Sandler’s HMDA Resource Center.

    Lending Consumer Finance CFPB HMDA Regulation C

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  • CFPB Releases Annual Report to Congress on Transparency, Accountability in 2016

    Federal Issues

    On January 3, the CFPB announced the release of its annual report to the Senate and House Committees on Appropriations for 2016. The report—which covers October 1, 2015 through September 30, 2016—identifies the specific responsibilities that the Dodd-Frank Act tasked to the CFPB and explains how the Bureau has attempted to meet those responsibilities. Among other things, the report describes Bureau regulations and guidance related to the Dodd-Frank Act including, but not limited to: (i) a proposed rule on arbitration; (ii) a proposed rule related to payday loans, vehicle title loans, and other similar credit products; (iii) a final rule to amend various provisions of the mortgage servicing rules implementing the Real Estate Settlement Procedures Act and the Truth in Lending Act; and (iv) a final rule amending Regulation C, implementing the Home Mortgage Disclosure Act. The report also includes descriptions of the Bureau’s supervisory activities and enforcement actions undertaken by in the 2016 fiscal year.

    Federal Issues Mortgages Consumer Finance CFPB Dodd-Frank RESPA HMDA U.S. Senate U.S. House Truth in Lending Act Regulation C

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