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  • CFPB Updates Guide to TRID Forms

    Agency Rule-Making & Guidance

    On December 6, the CFPB published an updated version of the TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure Forms. The updated guide reflects the amendments issued by the CFPB on July 7 of this year (previously covered by a Buckley Sandler Special Alert). These include changes resolving a number of significant ambiguities that generated concerns about the liability of lenders and purchasers of mortgage loans.

    Agency Rule-Making & Guidance CFPB TRID TILA RESPA

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  • Senate Banking Committee Approves Financial Regulatory Relief Bill

    Federal Issues

    On December 5, the Senate Banking Committee approved bill S.2155, Economic Growth, Regulatory Relief, and Consumer Protection Act, which would alter certain financial regulations under the Dodd-Frank Act of 2010. While not as sweeping as previous legislative relief proposals (see previous InfoBytes coverage on House Financial CHOICE Act of 2017), the bill was introduced and passed the Committee with bipartisan support. The bill’s highlights include, among other things:

    • Consumer Access to Credit. The bill deems mortgage loans held in portfolios by insured institutions with less than $10 billion in assets to be “qualified mortgages” under TILA, and removes the three-day waiting period for TILA-RESPA Integrated Disclosures if the second credit offer is a lower rate. The bill also instructs the CFPB to provide “clearer, authoritative guidance” on certain issues such as the applicability of TRID to mortgage assumptions and construction-to-permanent loans. Additionally, the bill eases appraisal requirements on certain mortgage loans and exempts small depository institutions with low mortgage originations from certain HMDA disclosure requirements.
    • Regulatory Relief for Certain Institutions. The bill exempts community banks from Section 13 of the Bank Holding Company Act if they have, “[i] less than $10 billion in total consolidated assets, and [ii] total trading assets and trading liabilities that are not more than five percent of total consolidated assets” – effectively allowing for exempt banks to engage in the trading of, or holding ownership interests in, hedge funds or private equity funds. Additionally, the bill raises the threshold of the Federal Reserve’s Small Bank Holding Company Policy Statement and the qualification for certain banks to have an 18-month examination cycle from $1 billion to $3 billion.
    • Protections for Consumers. Included in an adopted “manager’s amendment,” the bill requires credit bureaus to provide consumers unlimited free security freezes and unfreezes. The bill also limits certain medical debt information that can be included on veterans’ credit reports.
    • Changes for Bank Holding Companies. The bill raises the threshold for applying enhanced prudential standards from $50 billion to $250 billion.

    The bill now moves to the Senate, which is not expected to take up the package before the end of this year.

    Federal Issues Senate Banking Committee Dodd-Frank Federal Legislation TILA RESPA TRID Federal Reserve OCC FDIC Mortgages HMDA Credit Reporting Agency

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  • FTC Settles With Dallas Auto Dealer for Alleged Deceptive Advertisements

    Lending

    On December 1, the FTC announced a proposed order to settle with a Dallas, Texas auto dealership for alleged deceptive advertisements containing loan and lease terms in Spanish-language newspapers. According to the FTC, the dealership violated the FTC Act by prominently displaying advantageous loan and lease terms in Spanish and qualifying those terms in smaller-print English at the bottom of the page. The FTC alleges the dealership misrepresented (i) the total cost of purchasing or leasing; (ii) the underwriting restrictions for the advertised loan or lease; and (iii) the availability of the inventory advertised. Additionally, the FTC alleged that the dealership violated Truth in Lending Act and the Consumer Leasing Act by failing to “clearly and conspicuously” disclose credit and lease terms. The proposal requires the dealership to cease the allegedly deceptive conduct and comply with all applicable advertisement regulations in the future. The proposal is published in the Federal Register and is open for public comment until January 2, 2018.

    Lending Auto Finance FTC Settlement FTC Act TILA CLA Federal Register

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  • Agencies Announce Changes to Threshold Amounts for Truth in Lending Act and Consumer Leasing Act

    Agency Rule-Making & Guidance

    On November 8, the CFPB and the Federal Reserve Board (Board) finalized the annual dollar threshold adjustments that govern the application of Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) to credit transactions as required by the Dodd-Frank Act. Each year the thresholds must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2018, based on the annual percentage increase in the CPI-W, is now $55,800 or less, except for private student loans and loans secured by real property, which are subject to TILA regardless of the amount.

    Additionally, on November 8, the OCC, along with the CFPB and the Board, finalized amendments to the official interpretations for the regulations implementing section 129H of TILA, which determines the threshold amount for a small loan’s exemption from the special appraisal requirements that apply to higher-priced mortgage loans. The threshold for 2018, based on the annual percentage increase in the CPI-W, is now $26,000.         

    Agency Rule-Making & Guidance CFPB Federal Reserve OCC TILA CLA

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  • FTC Fines California Auto Dealer for Violating Order About Disclosures

    Lending

    On November 6, the FTC announced a settlement of $1.4 million with a Southern California auto dealership for violating a 2014 administrative order (Order). The Order prohibited the dealership from misrepresenting the cost to finance or lease a vehicle. In issuing the Order, the FTC alleged that the dealership had violated the FTC Act by using advertisements that deceptively stated a $0 up-front lease option while excluding other fees and costs, and also that the dealership’s advertisements violated disclosure requirements of the Consumer Leasing Act (CLA) and TILA.

    The new settlement resolves a complaint in which the FTC alleged the auto dealership “routinely violated” the Order requiring the dealership to, among other things, (i) accurately represent costs and terms of financing or leasing vehicles; (ii) conform its advertisements to the requirements of the CLA and TILA; and (iv) maintain necessary records and make those records available to the agency. In addition to the monetary penalty and the prohibition of similar practices, the settlement also subjects the dealership to strong compliance and reporting requirements.

    Lending Auto Finance FTC Enforcement Settlement. FTC Act CLA TILA Disclosures

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  • District of Columbia Adopts Student Loan Borrower Bill of Rights

    Lending

    On October 11, the District of Columbia (DC) released a student loan borrower bill of rights (Bill) pursuant to the Student Loan Ombudsman Establishment and Servicing Regulation Amendment Act of 2016. The Bill sets out basic principles and protections for student loan borrowers, covering:

    • Pricing and Terms. Lenders to comply with TILA; specifically, to focus on clear and plain-English disclosures of the APR and other key pricing terms.
    • Loan Products. Lenders should avoid extending abusive loan products to borrowers; including, not extending new credit to borrowers who are unable to repay existing loans.
    • Underwriting. Lenders should exercise fair and responsible underwriting; including offering loans that are affordable and meet the borrower’s needs. It also encourages lenders to engage in responsible credit reporting.
    • Collection Activities. Lenders and servicers to abide by the spirit of the Fair Debt Collection Practices Act, as well as, maintain accurate and complete information about borrowers’ loans.
    • Customer Service. Servicers should have responsible complaint management, be easily accessible, and avoid discrimination of any protected borrower classification.

    The Bill became effective on September 8.

    Lending Student Lending TILA Regulation Z FDCPA

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  • Illinois Governor Enacts Amendments to Predatory Lending Database Article

    State Issues

    On September 15, Illinois Governor Bruce Rauner signed into law amendments to the state’s Residential Real Property Disclosure Act to change provisions under its Predatory Lending Database Article. Public Act 100-0509 sets forth the following changes, among others: (i) certificates of compliance or certificates of exemption must now contain at least “one of the borrower’s names on the mortgage loan and the property index number for the subject property”; (ii) amends the definitions of “counseling” by removing the reference to “telephone counseling” and “originator” to reference “mortgage loan originator”; (iii) eliminates the requirement that originators shall provide information regarding affiliated or third party service providers or monies received from a broker or originator for inclusion in the predatory lending database; and (iv) provides additions to the information that must be collected and submitted by the title insurance company or closing agent for inclusion in the predatory lending database, such as a detailed list of all notices provided to the borrower at closing, including information in connection with the Integrated Closing Disclosure and the Integrated Loan Estimate Disclosure required under TILA-RESPA. The amendments took effect September 15, 2017.

    State Issues State Legislation Anti-Predatory Lending Mortgages TRID TILA RESPA GFE Mortgage Origination

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  • District Court Grants Preliminary Settlement Approval in SCRA Class Action Suit

    Courts

    On September 13, the U.S. District Court for the Eastern District of North Carolina granted preliminary approval to settle a class-action suit resolving allegations that a national bank overcharged military families on interest and fees related primarily to mortgage and credit card accounts in violation of the Servicemembers Civil Relief Act (SCRA). The order also, in the context of the proposed settlement only, preliminarily certifies the class, which is comprised of members who—after September 11, 2001—were entitled to “additional compensation related to military reduced interest rate benefits from [the bank].” The plaintiffs filed the complaint against the bank in 2015 claiming alleged violations of the SCRA, TILA, and the North Carolina Unfair and Deceptive Trade Practices Act. In May 2016, the court denied the defendants’ motion to dismiss the first amended complaint, and at the end of 2016, the parties agreed to mediation. A second amended complaint—now the operative complaint—was filed just prior to the motion for preliminary approval. While the bank has not admitted any wrongdoing, it has agreed to refrain from using an “interest subsidy method for interest benefits calculations for a five-year period,” which, plaintiffs pleaded, can lead to higher costs.

    According to the terms of the memorandum in support of the motion for preliminary approval, class members will receive payments based on the strength of their individual claims, considering such factors as: (i) loan type; (ii) whether they previously received remediation from the bank, and how much; and (iii) the eligible period for interest rate refunds. The memorandum further stipulates that approximately $15.4 million of the nearly $42 million overall settlement will be provide to class members who have not received or deposited any payments from the bank. Unclaimed amounts from the first round will be pooled with the remainder of the settlement to be allocated as outlined in the distribution plan. A final approval hearing is scheduled for February of next year.

    Courts SCRA TILA Servicemembers Mortgages Credit Cards Class Action Litigation Settlement

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  • CFPB Issues Summary of Changes and Clarifications to 2017 TILA-RESPA Rule

    Agency Rule-Making & Guidance

    On August 30, the CFPB released “2017 TILA-RESPA Rule: Detailed Summary of Changes and Clarifications” to assist the mortgage industry in implementing the disclosure requirements of the CFPB’s recently finalized TILA-RESPA Rule. The summary provides an in-depth outline of modifications to the rule, and explains and corrects certain provisions.

    Topics covered by the summary include:

    • “Effective date and mandatory compliance date”;
    • “Coverage,” specifically with respect to cooperative units, trusts, and housing assistance loans;
    • “Good faith requirement (i.e., tolerances) and revised disclosures”;
    • “Shopping for settlement services”;
    • “Disclosure of principal reductions (also known as principal curtailments)”;
    • “Total of payments disclosure”;
    • “Simultaneous subordinate lien loans”;
    • “Construction loans”;
    • “Use of positive and negative numbers for certain disclosures in the Loan Estimate and Closing Disclosure”;
    • “Rounding”;
    • “Calculating cash to close”;
    • “Disclosure of payoffs of existing liens, and unsecured debt”;
    • “Disclosure of estimated value when no sales price or appraised value”;
    • “Separation of consumer and seller information on Closing Disclosures”;
    • “Other disclosures in the Loan Estimate”;
    • “Other disclosures in the Closing Disclosure”; and
    • “Other minor changes” (including correcting typographical errors).

    In addition to the summary, the CFPB also provided additional reference materials to help industry participants to comply with the rule. The rule becomes effective on October 10.

    Agency Rule-Making & Guidance CFPB RESPA TILA TRID Mortgages

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  • CFPB Publishes Final Rule Amending Annual Dollar Threshold in TILA Regulations

    Lending

    On August 30, the CFPB issued a final rule amending Regulation Z, which implements the Truth in Lending Act (TILA), under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the Dodd-Frank ability-to-repay and qualified mortgage provisions (ATR/QM). The CFPB is required to make adjustments to dollar amounts in the Regulation Z provisions implementing these laws based on the annual percentage change reflected in the Consumer Price Index effective June 1, 2017. For open-end consumer credit plans under TILA, the minimum interest charge disclosure threshold will remain unchanged at $1.00 in 2018. For open-end consumer credit plans under the CARD Act amendments, the adjusted dollar amount for the safe harbor for a first violation penalty fee will remain unchanged at $27 in 2018, and the adjusted dollar amount for the safe harbor for a subsequent violation penalty fee will remain unchanged at $38 in 2018. For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2018 will increase to $21,032, and the adjusted points and fees dollar trigger for high-cost mortgages in 2018 will be $1,052. To satisfy the underwriting requirements under the ATR/QM rule, the maximum thresholds for total points and fees for qualified mortgages in 2018 will be: (i) 3 percent of the total loan amount for loans greater than or equal to $105,158; (ii) $3,155 for loan amounts greater than or equal to $63,095 but less than $105,158; (iii) 5 percent of the total loan amount for loans greater than or equal to $21,032 but less than $63,095; (iv) $1,052 for loan amounts greater than or equal to $13,145 but less than $21,032; and (v) 8 percent of the total loan amount for loan amounts less than $13,145. The final rule is effective January 1, 2018.

    Lending Agency Rule-Making & Guidance CFPB TILA Credit Cards HOEPA Ability To Repay Qualified Mortgage Federal Register Regulation Z Mortgages

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