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  • FHFA Announces Multiple New Policy Initiatives

    Lending

    On June 15, the FHFA published a Notice of Proposed Rulemaking regarding state and local Property Assessed Clean Energy (PACE) programs, as required by a preliminary injunction issued by the Northern District of California in a lawsuit challenging the FHFA’s direction to Fannie Mae and Freddie Mac not to purchase mortgages subject to first-lien PACE obligations, and to the Federal Home Loan Banks to limit exposure to first-lien PACE programs. Under the PACE programs, local governments provide property-secured financing to property owners for the purchase of energy-related home improvement projects. The FHFA believes such financing arrangements present safety and soundness concerns. Several states challenged the FHFA actions in court. While most of the cases were dismissed, California succeeded in forcing the FHFA to conduct a formal rulemaking on the issue. Comments on the proposed rule are due by July 30, 2012.

    On June 18, the FHFA announced an initiative to supplement fraud reporting by the entities it supervises. Under the Suspended Counterparty Program, Fannie Mae, Freddie Mac, and the Federal Home Loan Banks are required to notify the FHFA whenever an individual or company with whom they do business is adjudicated to have engaged in fraud or other financial misconduct. The FHFA also will consider information it receives from other government sources. Based on the reported information, the FHFA will make a determination as to whether the individual or business will be suspended from doing business with the supervised entities. The new program takes effect August 15, 2012.

    On June 19, the FHFA published a Notice and Request for Comment regarding a proposed new rating system to be used in conducting safety and soundness examinations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The proposal seeks to implement a single risk-focused examination system for all three entities that would be similar to the “CAMELS” rating system used by federal prudential regulators for depository institutions. The FHFA is accepting comments on the proposed system through July 19, 2012.

    Freddie Mac Fannie Mae Mortgage Origination Mortgage Servicing FHFA

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  • State Law Update: North Carolina, Connecticut, Ohio Update Banking, Mortgage Laws

    Lending

    North Carolina Alters Mortgage Regulation Funding Mechanism. On June 20, North Carolina enacted Senate Bill 806, which creates a new funding mechanism for mortgage regulation. The new law replaces the current licensing fee, which offsets the state’s regulatory costs, with an assessment structure similar to the one currently applicable to banks. The change takes effect October 1, 2012.

    Connecticut Enacts Bill to Update State Banking Laws. On June 8, Connecticut enacted Senate Bill 67, which makes numerous revisions to the state banking laws. Among the changes, the law (i) alters mortgage licensing requirements to exempt “housing finance agencies” and nonprofit groups, (ii) requires certain lender and broker employees to be licensed as mortgage loan originators, (iii) requires banks to review a mortgage loan before excusing the borrower from amortization of the principal, (iv) requires that banks consider an obligor’s credit exposure arising from a derivative transaction when determining the obligor’s liability limitations, (v) exempts from certain requirements “loan production offices.” The law also gives new investigatory powers to the state banking commissioner and allows the commissioner to require, without seeking a court order, restitution and disgorgement for banking law violations. Most of the law’s provisions take effect October 1, 2012.

    Ohio Levels Playing Field for State Banks. Recently, Ohio Governor John Kasich signed House Bill 322, permits Ohio-chartered banks, savings banks, savings and loan associations, and credit unions to charge the same or lower rates or amounts of interest, fees, and other charges under a revolving credit agreement that their out-of-state counterparts may charge Ohio customers. The change does not apply to residential mortgages.  It takes effect September 4, 2012.

    Mortgage Licensing Bank Compliance

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  • CFPB Launches Consumer Complaint Database

    FinTech

    On June 19, the CFPB released a beta version of its consumer complaint database. The database includes credit card complaints received on or after June 1, 2012. The CFPB plans to add credit card complaint data received prior to June 1, 2012 by the end of 2012. The database provides summary information related to (i) the issue identified in each complaint, (ii) the date of the complaint, (iii) the company named in the complaint, and (iv) the status and timeliness of the resolution. The credit card complaint database is governed by a CFPB Final Policy Statement, which addresses comments received in response to a 2011 version of the statement. Concurrent with the database launch, the CFPB released for public comment a Notice of Proposed Policy Statement that would extend the scope of the database to include all other financial services and products within the CFPB’s jurisdiction. The CFPB is accepting comments on the proposed expanded policy through July 19, 2012.

    Credit Cards CFPB

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  • Fannie Mae Announces Private Transfer Fee Covenant Policy, Revises Loan Modification Agreement

    Lending

    Telia Company, a Swedish telecommunications company, disclosed in its Third Quarter Interim Report that it has set aside $1.45 billion to settle investigations conducted by Dutch and U.S. authorities regarding alleged bribery in Uzbekistan. Telia disclosed that the authorities have proposed a global resolution that includes a financial sanction of $1.45 billion, although the company noted that further discussion and negotiation is necessary; the timing and amount of payment is uncertain at this time.

    Fannie Mae Mortgage Origination Mortgage Servicing RMBS

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  • OCC Adopts Interim Final Lending Limit Rule

    Consumer Finance

    Embraer S.A., a Brazilian aircraft manufacturer, will pay more than $205 million to the SEC and the DOJ to resolve alleged FCPA violations stemming from payments made through its third-party agents to officials in the Dominican Republic, Saudi Arabia, and Mozambique that allegedly resulted in more than $83 million in profits for the company. Pursuant to a Deferred Prosecution Agreement with DOJ, Embraer must pay a penalty of more than $107 million and must retain an independent corporate compliance monitor for three years. Embraer will also pay more than $98 million in disgorgement and interest to the SEC, but it may receive a credit of up to a $20 million depending on the amount of disgorgement it pays in a parallel civil proceeding in Brazil. Additional FCPA Scorecard coverage of the Embraer investigation can be found here, here, and here.

    OCC Bank Compliance

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  • CFPB Announces Senior Staff Changes

    Consumer Finance

    On June 19, the CFPB announced a series of senior leadership changes and additions. Meredith Fuchs will now serve as General Counsel. She replaces Leonard Kennedy, who will now serve as Senior Advisor and Counselor to Director Richard Cordray. Ms. Fuchs had been serving as CFPB Chief of Staff and, prior to that, served as Principal Deputy General Counsel. Garry Reeder, who had been Senior Advisor to the Deputy Director, will now serve as Acting Chief of Staff. Steven Antonakes has been promoted to Associate Director for Supervision, Enforcement, and Fair Lending. The Assistant Director of Large Bank Supervision position that he leaves behind will be filled on an “acting” basis by Paul Sanford, who has been serving as Chief of Staff for Large Bank Supervision. In addition, Wendy Kamenshine has transitioned from Acting Ombudsman to Ombudsman, Clifford Rosenthal joined the CFPB as Assistant Director of Financial Empowerment, and Camille Busette was hired as Assistant Director of the Office of Financial Education.

    CFPB

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  • FDIC Supplements Proposed Orderly Liquidation Authority Rule

    Consumer Finance

    On June 18, the FDIC published a Supplemental Notice of Proposed Rulemaking to amend the definition of “financial activities” included in a March 2011 Notice of Proposed Rulemaking regarding the Orderly Liquidation Authority (OLA). The March 2011 proposal sought to establish a comprehensive framework for the priority payment of creditors and procedures for filing and pursuing claims under the OLA created by the Dodd-Frank Act. Among other things, the proposal defined “financial companies” that may be subject to resolution under the OLA as those that are "predominantly engaged" in financial activities. To be "predominately engaged" in financial activities, the company must have derived at least 85 percent of its total consolidated revenue from financial activities over the two most recent fiscal years. In this supplemental notice, the FDIC delineates the categories of “financial activities” for purposes of the March 2011 proposal.

    FDIC Dodd-Frank

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  • CFPB Seeks Information on Compliance Costs

    Consumer Finance

    On June 14, the CFPB published a Notice and Request for Comment on its proposal to collect qualitative information from industry participants regarding the compliance costs and other effects of CFPB rules on providers and consumers. The CFPB plans to use structured interviews, focus groups, conference calls, and written questionnaires to obtain supplemental information about industry compliance burdens. The CFPB frames the proposal as part of its ongoing effort to streamline inherited regulations, and has asked that comments on the proposed information collection be submitted by August 13, 2012.

    CFPB Bank Compliance

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  • NTIA Announces First Privacy Stakeholder Meeting

    FinTech

    On June 15, the National Telecommunications and Information Administration (NTIA) announced that the first meeting of a privacy multistakeholder process will be held on July 12, 2012. The meeting is the first in a series intended to produce a code of conduct that will provide transparency in the handling of personal data by mobile application and services companies. The multistakeholder process derives from the White House’s Privacy Blueprint released in February 2012, which set forth a Consumer Privacy Bill of Rights and designed the multistakeholder process to develop legally enforceable codes of conduct across diverse business contexts.

    Mobile Commerce Privacy/Cyber Risk & Data Security

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  • HUD Rescinds Disputed Accounts and Collection Accounts Guidance

    Lending

    On September 29, 2016, the DOJ issued two declination letters concerning suspected FCPA violations, closing their investigations of HMT LLC and NCH Corporation.  The DOJ claims that its investigation of HMT found that the company’s employees paid approximately $500,000 in bribes to Venezuela and China government officials in order to influence those officials’ purchasing decisions and thereby secure approximately $2.7 million in profits. With respect to its investigation of NCH, DOJ claims that the company’s China subsidiary provided approximately $45,000 worth of benefits to China government officials to obtain sales which generated profits of approximately $335,000.  In connection with the issuance of the declination letters, the companies agreed to the disgorgement of their profits from the sales associated with their purportedly illegal conduct.

    The declinations were made pursuant to the FCPA Pilot Program, a one-year program launched in April 2016 to encourage companies to voluntarily self-disclose FCPA-related misconduct, cooperate with DOJ, and make appropriate remediation efforts.  The DOJ’s decision to close the investigations was based on a number of factors including the companies’ (1) voluntary disclosures, (2) thorough internal investigations, (3) full cooperation in providing DOJ with information about the individuals responsible for the purported misconduct, (4) agreement to disgorge all profits made from the purported misconduct, (5) enhancement of compliance programs and internal accounting controls, and (6) remediation in the form of terminating or sanctioning employees responsible for the purported misconduct.  These are the fourth and fifth declination letters issued under the Pilot Program.

    The disgorgement of profits in connection with the declination letters to HMT and NCH raises the question of whether such disgorgement may be a prerequisite to obtaining a declination letter under the Pilot Program. Companies that previously received declination letters under the Pilot Program were required to disgorge profits as part of settling related SEC enforcement actions. Past FCPA Scorecard coverage of the Pilot Program and associated declination letters may be found here.

    HUD

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