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Texas regulators update emergency-related home equity lending guidance
On November 30, the Texas Department of Banking, Department of Savings and Mortgage Lending, Office of Consumer Credit Commissioner, and Credit Union Department issued updated guidance on emergency measures for home equity lenders to consider in response to the COVID-19 pandemic. The guidance covers emergency measures in relation to the refinance and modification of home equity loans. The guidance also indicates that lenders are permitted to close loans in any area located at the permanent physical address of the lender, attorney, or title company, including outdoor settings such as parking lots.
Texas agencies issue revised emergency guidance for home equity lenders
On November 30, the Texas joint financial regulatory agencies (Department of Banking, Department of Savings and Mortgage Lending, Office of Consumer Credit Commissioner, and Credit Union Department) issued guidance to replace its April 22, 2020 guidance (previously discussed here) regarding emergency measures for home equity lenders to consider in response to the COVID-19 pandemic. The agencies encouraged lenders to work with borrowers to help borrowers recover and provide an opportunity to repay their debt. However, lenders must ensure that they comply with Texas law to have a valid home equity lien. The agencies reiterated guidance regarding authorized closing locations and noted that lenders should consider ways to close loans in accordance with social distancing recommendations.
HUD issues mortgage letters extending temporary guidance permitting endorsement despite forbearance and guidance on self-employment and rental income
On November 25, HUD issued Mortgage Letters 2020-39 and 2020-40 extending its temporary guidance for endorsement of mortgages where the borrower has been granted a Covid-related forbearance from ML 2020-16 (previously covered here) and for verification of self-employment, rental income, and 203(k) Rehabilitation Escrow Accounts from ML 2020-24 (previously covered here). The guidance is extended through December 31, 2020.
SBA must release PPP and EIDL borrower information by December 1
On November 24, the U.S. District Court for the District of Columbia denied the U.S. Small Business Administration’s (SBA) request for stay and ordered the release of the names, addresses, and precise loan amounts of all Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) by December 1. As previously covered by InfoBytes, the court ordered the SBA to supplement their July disclosure and release the “names, addresses, and precise loan amounts of all individuals and entities that obtained PPP and EIDL COVID-related loans by November 19, 2020,” concluding that the SBA’s claimed FOIA exemptions do not cover the requested information disclosures. The SBA moved to stay the order to “preserve [the] SBA’s right to appeal and to avoid irreparable harm to [the] SBA and to privacy and business confidentiality interests of the millions of individuals and businesses….” The court initially granted a temporary stay to review the motion (covered by InfoBytes here). Upon review, the court denied the stay, concluding that staying the disclosure through an appeal “would deprive the public of information critical to an ongoing national debate of considerable importance, as well as basic details surrounding an unprecedented federal relief effort financed by taxpayer dollars.” The SBA must release the supplemental information by December 1, however, the court noted that “nothing in this decision prevents SBA from seeking its desired relief in the Court of Appeals before that date.”
Updated PPP loan data available here.
Agencies provide regulatory relief to community banks
On November 20, the Federal Reserve Board, the OCC, and the FDIC issued an interim final rule providing temporary relief from certain regulation and reporting requirements for community banking organizations. Specifically, the interim final rule—which applies to community banking organizations and financial institutions with less than $10 billion in total assets as of December 31, 2019—gives community banks relief from expanded regulation and reporting requirements that may have been triggered due to participation in federal coronavirus response programs. The agencies note that programs, such as the Paycheck Protection Program and other lending facilities, may cause rapid and unexpected increases in the community bank’s size. The agencies expect these increases to be temporary and thus, the rule states that asset growth in 2020 or 2021 will not trigger new regulatory requirements for applicable community banking organizations until January 1, 2022, at the earliest. The rule is effective upon publication in the Federal Register.
Washington governor extends suspension of consumer garnishment
On November 20, the Washington governor issued a proclamation extending a previous moratorium on garnishment for consumer debts until the earlier of December 7, 2020 or the termination of Washington’s Covid-19 State of Emergency. See here, here and here for previous coverage. The suspension applies to garnishment of consumer bank accounts, wages and income to satisfy consumer debt judgments.
Treasury: Expenses paid from PPP loans are not deductible
On November 18, the U.S. Treasury Department and Internal Revenue Service (IRS) clarified the tax treatment of expenses where a Paycheck Protection Program (PPP) loan has not been forgiven by the end of the year the loan was received. According to the IRS revenue ruling, businesses are not taxed on the proceeds of a forgiven PPP loan, thus the business expenses paid from those proceeds are not deductible. The revenue ruling illustrates multiple taxpayer scenarios, which conclude that if the PPP loan has not yet been forgiven by the end of 2020, but the business reasonably believes the loan will be forgiven in the future, the expenses are not deductible. This applies whether the business has filed for forgiveness yet or not. However, if a PPP loan was expected to be forgiven, and was not, the expenses are deductible.
FTC says mobile banking app is deceptive
On November 18, the FTC filed a complaint against a mobile banking app operator alleging the defendants violated the FTC Act by deceiving users about their high-interest bank accounts and falsely promising users “24/7” access to their funds. The FTC’s complaint alleges that the defendants represented that users would receive “‘minimum base’ interest rates” of at least 0.2 percent or 1.0 percent, but that users actually received a starting interest rate of 0.04 percent and stopped earning any interest if they requested that their funds be returned. Additionally, the complaint claims that while the defendants promised users 24/7 access to their funds and represented they could make transfers out of their accounts and receive the requested funds within three to five business days, some users waited weeks or months to receive their funds despite submitting repeated complaints to the defendants. Other users claimed they never received their money. Moreover, some users claimed that the defendants blamed the failure to deliver the requested funds on “unspecified issues with unspecified ‘banking partners’ or ‘technology partners’ and promised the delays were temporary.
The FTC seeks an injunction against the defendants, along with monetary relief including “rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief.”
FHFA finalizes GSE capital framework
On November 18, the FHFA announced a final rule, which establishes a new regulatory capital framework for Fannie Mae and Freddie Mac (GSEs) to ensure safety and soundness. The final rule is similar to the proposed rule published earlier this year (covered by InfoBytes here), and it generally makes the following notable modifications in response to comments: (i) increases the dollar amount of capital relief for the GSEs’ credit risk transfers; (ii) reduces the credit risk capital requirements for single-family mortgage exposure subject to Covid-19 related forbearance; and (iii) increases the exposure level risk-weight floor for single-family and multifamily mortgage exposures to 20 percent.
According to a fact sheet released in conjunction with the announcement, the final rule preserves key enhancements contained within the proposed rule. These include, among other things, (i) ensuring each GSE “maintains high-quality regulatory capital by including a set of supplemental capital requirements based on the U.S. banking framework’s definitions of [common equity tier 1], tier 1, and total capital”; (ii) strengthening the quality of regulatory capital; (iii) including backstop leverage requirements; and (iv) addressing pro-cyclicality through measures such as capital buffers and single-family mortgage exposure countercyclical adjustments.
The final rule takes effect 60 days after publication in the Federal Register.
Agencies finalize certain 2021 thresholds
On November 18, the CFPB, OCC, and the Federal Reserve Board announced a final rule, which increases the TILA smaller loan exemption threshold for the special appraisal requirements for higher-priced mortgage loans (HPMLs). TILA requires creditors to obtain a written appraisal before making a HPML unless the loan amount is at or below the threshold exemption. Each year the threshold 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 2021 is $27,200, which remains at the same level it was in 2020.
Additionally, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of TILA (Regulation Z) and Consumer Leasing Act (Regulation M) (available here and here), as required by the Dodd-Frank Act. The exemption threshold for 2021, based on the annual percentage increase in the CPI-W, remains unchanged at $58,300 or less, except for private education loans and loans secured by real or personal property used or expected to be used as the principal dwelling of a consumer, which are subject to TILA regardless of the amount.
The final rules take effect on January 1, 2021.