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Financial Services Law Insights and Observations

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  • CFPB issues semi-annual report to Congress

    Federal Issues

    On November 9, the CFPB issued its semi-annual report to Congress, covering the Bureau’s work from October 1, 2017 to March 30, 2018. The report, which is required by the Dodd-Frank Act, addresses, among other things, problems faced by consumers with regard to consumer financial products or services; significant rules and orders adopted by the Bureau; and various supervisory and enforcement actions taken during the majority of acting Director Mick Mulvaney’s tenure. Specifically, the report includes (i) a summary of five “significant” state Attorney General actions pursuant to Section 1042 of the Dodd-Frank Act, which allows states to enforce the federal law; (ii) a review of the Bureau’s fair lending efforts, noting that it “conducted fewer fair lending supervisory events. . .than in the prior period,” but “cleared a substantially higher number of MRAs or MOU items from past supervisory events than in the prior period”; (iii) a discussion of non-prime and secured credit cards marketed to consumers; and (iv) a list of upcoming initiatives, which includes requests for information regarding, among other things, the Bureau’s consumer complaint and consumer inquiry handling processes, the Bureau’s inherited regulations and inherited rulemaking authorities, the Bureau’s adopted regulations and new rulemaking authorities, Bureau rulemaking processes, Bureau public reporting practices of consumer complaint information, Bureau external engagements, the Bureau’s supervision program, and the Bureau’s enforcement processes.

    Notably, the report also discusses the budget for FY 2018, acknowledging the unusual January 2018 request for zero dollars in funding for the Bureau’s quarterly operations (previously covered by InfoBytes here). As for FY 2019, Mulvaney most recently requested nearly $173 million for Q1, which is still significantly below former Bureau Director Richard Cordray’s FY 2017 Q1 request of $217 million.

    Federal Issues CFPB Supervision Enforcement Fair Lending SAFE Act CFPB Succession

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  • Federal Reserve seeks to repeal SAFE Act regulations to reflect CFPB authority

    Agency Rule-Making & Guidance

    On September 21, the Federal Reserve Board (Board) issued a notice of proposed rulemaking seeking comment on the repeal of certain provisions of regulations that incorporate the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), which the Board states are intended to reflect the transfer of rulemaking authority to the CFPB by the Dodd-Frank Act. Specifically, the Board proposes amending Regulation H (Membership of State Banking Institutions in the Federal Reserve System) and Regulation K (International Banking Operations) to repeal the provisions that incorporate the SAFE Act because of the change in rulemaking authority and because the CFPB finalized a rule that is substantially identical to the Board's regulations. Comments on the proposal are due within 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Issues Federal Reserve CFPB SAFE Act Licensing Mortgages

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  • OCC requests comments on registration of mortgage loan originators

    Lending

    On February 6, the OCC published a notice and request for comment in the Federal Register concerning its information collection entitled, “Registration of Mortgage Loan Originators.” Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), any person employed by a regulated entity, who is engaged in the business of residential mortgage loan origination, must register with the Nationwide Mortgage Licensing System and Registry (NMLS), obtain a unique identifier, and adopt policies and procedures to ensure compliance with the SAFE Act’s requirements. The NMLS is structured to, among other things, (i) improve information sharing between regulators; (ii) increase mortgage loan originator accountability; and (iii) provide consumers easy access to background information on mortgage loan originators, including publicly adjudicated disciplinary and enforcement actions. The OCC retains enforcement authority under the SAFE Act for financial institutions (including federal branches of foreign banks) with total assets of $10 billion or less. Comments on the notice must be received by April 9.

    Lending OCC Loan Origination NMLS Mortgages SAFE Act

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  • CFPB Publishes Ninth Semi-Annual Report to Congress

    Consumer Finance

    On June 30, the CFPB published its ninth Semi-Annual Report to Congress covering supervisory and enforcement actions, rulemaking activities, newly designed consumer tools, and published reports from October 1, 2015 through March 31, 2016. The Semi-Annual Report provides an overview of relevant topics addressed in previous CFPB reports and bulletins, including monthly Consumer Complaint reports, Supervisory Highlights, and the February 2016 compliance bulletin regarding Regulation V. The report outlines, among other things, the CFPB’s (i) efforts to monitor the effectiveness of the SAFE Act; (ii) fair lending activities, including its risk-based fair lending prioritization process and recent public enforcement actions; and (iii) ongoing efforts to define larger participants in markets for consumer financial services and products which are subject to the Bureau’s supervisory authority. According to the report, the Bureau’s supervisory actions during the six month period covered in the report provided over $44 million in compensation to over 177,000 consumers, while enforcement actions in the same time period resulted in “approximately $200 million in total relief for consumers who fell victim to various violations of consumer financial protection laws, along with over $70 million in civil money penalties.”

    CFPB Fair Lending Enforcement Consumer Complaints SAFE Act

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  • Illinois Adopts National SAFE MLO Test

    Lending

    On June 1, the Conference of State Bank Supervisors announced that the Illinois Department of Financial and Professional Regulation (IDFPR) will now use the National SAFE Mortgage Loan Originator (MLO) Test with Uniform State Content, making it the 52nd state agency to adopt the test. Under the new process, Illinois licensees who pass the SAFE MLO Test with Uniform State Content no longer need to take an additional, state-specific test. IDFPR Secretary Bryan Schneider commented on the streamlined test process saying, “[b]y providing a more effective regulatory experience, we foster the creation of a regulatory environment conducive to strong economic growth and opportunity.”

    Mortgage Licensing CSBS SAFE Act

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  • U.S. House Passes SAFE Transitional Licensing Act to Give Greater Job Mobility to Mortgage Loan Originators

    Lending

    On May 23, the U.S. House of Representatives unanimously passed by voice vote H.R. 2121, the SAFE Transitional Licensing Act of 2015. Congressman Steve Stivers (R-OH) introduced H.R. 2121 in April 2015 with the purpose of “providing regulatory relief for loan originators in an effort to make a smooth employment transition between bank and non-bank entities.” As passed, H.R. 2121 would amend the SAFE Mortgage Licensing Act of 2008 to give eligible mortgage loan originators (MLOs) the ability to continue originating loans while awaiting a decision on their application for a state originator license. This temporary authority would apply when MLOs switch jobs (i) from a depository institution, where a state originator license is not required, to a state-licensed non-bank lender, where such a license is required; or (ii) from a state-licensed lender in one state to a state-licensed lender in another state, where a new state originator license is required. In both cases, this temporary authority would expire upon the grant, denial, or withdrawal of the license application, or, if an application is deemed incomplete, 120 days after the application was submitted.

    U.S. House SAFE Act

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  • Thirty-Five State Agencies Now Using Uniform Mortgage Test

    Lending

    On October 1, the Conference of State Bank Supervisors announced that five additional state agencies have implemented the new national SAFE MLO test, bringing the total number of participating state agencies to 35. The new test, which was announced in January and launched in April, includes a uniform state component to replace the state-specific component in adopting states.

    Mortgage Licensing NMLS CSBS SAFE Act

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  • CFPB Bulletin Supports Uniform State Test for Mortgage Loan Originators

    Lending

    On May 20, the CFPB issued Bulletin 2013-05, which clarifies that the Uniform State Test (UST) developed by the NMLS may constitute a qualified written test under the federal SAFE Act for state-licensed mortgage loan originators if the UST covers all required areas, including state laws and regulations. The Bulletin further explains that a separate test for each state covering the particular laws and regulations of that state plus a National Test Component developed by the NMLS may also meet the qualified written test requirement under the SAFE Act.

    Mortgage Licensing NMLS SAFE Act

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  • State Law Update: Idaho Amends Mortgage Licensing Provisions

    Lending

    On March 13, Idaho enacted HB 10, a bill to amend the licensing provisions of the Idaho Residential Mortgage Practices Act. The bill (i) provides a license exemption for individuals who originate mortgages on behalf of federal, state, or local government housing agencies, (ii) removes language inconsistent with federal interpretation of the SAFE Act relating to an exclusion from the definition of "mortgage loan originator," and (iii) makes it a prohibited practice for a person to violate license-related testing or education procedures. The bill also authorizes the director to subpoena records related to unlicensed activity by any person and also clarifies licensing exemptions for Idaho attorneys and accountants. By state rule, the law is set to take effect on July 1, 2013.

    Mortgage Licensing SAFE Act

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  • State Law Update: Virginia Amends Mortgage Originator Licensing Statute

    Lending

    On February 20, Virginia enacted HB 1803, which conforms Virginia law to federal SAFE Act regulations, as recommended by the Virginia Housing Commission. The bill (i) expands the definition of a mortgage loan originator to include an individual who represents to the public that he can or will take an application for, or offer or negotiate the terms of, a residential mortgage loan, (ii) exempts from licensing requirements any individual acting as a loan originator in financing the sale of his or her own residence, (iii) specifies conditions under which an attorney engaged in mortgage loan origination activities is exempt from licensing requirements, (iv) removes the definition of "federal banking agencies", and (v) defines the term "employee."

    Mortgage Licensing SAFE Act

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