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9th Circuit affirms some of Oakland’s claims against national bank
On August 26, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the district court’s decision to partially dismiss an action brought by the City of Oakland, alleging a national bank violated the Fair Housing Act (FHA) and California Fair Employment and Housing Act. As previously covered by InfoBytes, Oakland alleged that the national bank violated the FHA and the California Fair Employment and Housing Act by providing minority borrowers mortgage loans with less favorable terms than similarly situated non-minority borrowers, leading to disproportionate defaults and foreclosures causing (i) decreased property tax revenue; (ii) increases in the city’s expenditures; and (iii) reduced spending in Oakland’s fair-housing programs. The district court dismissed the City’s municipal expenditure claims, but allowed claims based on decreased property tax revenue to continue. The district court also held that the City could pursue its claims for injunctive and declaratory relief.
On appeal, the 9th Circuit affirmed the court’s denial of the bank’s motion to dismiss as to Oakland’s claims for decreased property tax revenue and the court’s dismissal of Oakland’s claims for increased city expenditures. Specifically, with respect to claims for reduced tax revenue, the appellate court concluded that the “FHA’s proximate-cause requirement is sufficiently broad and inclusive to encompass aggregate, city-wide injuries.” Based on allegations that the City could use statistical regression analysis “to precisely calculate the loss in property values in Oakland’s minority neighborhoods that is attributable to foreclosures caused by [the bank’s] predatory loans,” the 9th Circuit found that Oakland’s claim for decreased property tax revenues “has some direct and continuous relation to [the bank]’s discriminatory lending practices.” Regarding the City’s alleged municipal expenditure injuries, the appellate court agreed with the district court that Oakland’s complaint failed to account for independent variables that may have contributed or caused such injuries and that those alleged injuries therefore did not satisfy the FHA’s proximate-cause requirement. Finally, the appellate court held that the City’s claims for injunctive and declaratory relief were also subject to the FHA’s proximate-cause requirement, and that on remand, the district court must determine whether Oakland’s allegations satisfied this requirement.
CFPB says it will submit important research to peer review
On August 28, the CFPB announced a new external peer review process of its “important technical and scientific research” in order to ensure its quality. The Bureau noted it is following guidance from the Office of Management and Budget (OMB), which encourages federal agencies to seek peer review of “‘influential scientific information’ and ‘highly influential scientific assessments,’” specific terms defined by OMB in the guidance. The Bureau notes that it will use the Academic Research Council (ARC)—a panel of outside researchers with expertise in consumer finance—to conduct the peer reviews of its research. The Bureau has a dedicated webpage where it will post the original report, its peer review request, the ARC’s report, and if necessary, a revised report addressing the ARC’s review.
The first report subject to peer review is the Bureau’s February report titled, “Disclosure of Time-Barred Debt and Revival: Findings from the CFPB’s Quantitative Disclosure Testing.” A copy of the report and the ARC’s review report are now available on the Bureau’s webpage.
FDIC encourages regulatory relief for California borrowers affected by wildfires
On August 28, the FDIC issued FIL-85-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of California affected by wildfires that began on August 14. In the guidance, the FDIC notes that, in supervising institutions affected by the wildfires, the FDIC will consider the unusual circumstances those institutions face. The guidance suggests that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain reporting and publishing requirements.
Find continuing InfoBytes coverage on disaster relief guidance here.
CFPB releases more 2019 HMDA data
On August 27, the CFPB issued a new analysis of the 2019 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions, which follows an initial release from the CFPB and the Federal Financial Institutions Examinations Council (FFIEC) earlier in June (covered by InfoBytes here). The newly released report groups the new and revised HMDA data points into seven major categories: (i) open-end and reverse mortgage flags; (ii) expanded or revised demographic information; (iii) property type; (iv) loan purpose and characteristics; (v) applicant/borrower characteristics and property characteristics; (vi) pricing outcomes and components; and (vii) miscellaneous data points. The report breaks down the data points in each category by providing a definition and basic reporting requirements, as well as a statistical overview of the reported information.
ARRC updates fallback language for bilateral business loans
On August 27, the Alternative Reference Rates Committee (ARRC) released updated recommended fallback language for market participants to use for new originations of LIBOR-referenced bilateral business loans. The proposed language is intended to align with revisions made to the recommended fallback language for syndicated loans (covered by InfoBytes here). The updated fallback language amends the previously proposed “hardwired” and the “hedged loan” approaches. ARRC emphasizes that “cash markets will benefit by adopting a more consistent, transparent and resilient approach to contractual fallback arrangements for new LIBOR products,” and reminds financial market participants that it does not recommend waiting “until a forward-looking term [Secured Overnight Financing Rate] SOFR exists to begin using SOFR in cash products.”
FDIC releases July enforcement actions
On August 28, the FDIC released a list of administrative enforcement actions taken against banks and individuals in July. During the month, the FDIC issued nine orders, consisting of “one consent order under 8(b) [of the Federal Deposit Insurance Act], one order of prohibition under 8(e) [of the Federal Deposit Insurance Act], six Section 19 orders, and one order terminating deposit insurance.” The consent order, issued against a New Jersey state bank, relates to alleged weaknesses in its Bank Secrecy Act and anti-money laundering (BSA/AML) compliance program. Among other things, the bank was ordered to (i) increase its supervision and direction of its BSA/AML policies, procedures, and processes to ensure compliance with the applicable laws and regulations; (ii) implement a revised BSA compliance program to address BSA/AML deficiencies, including improvements in suspicious activity monitoring and reporting and in customer due diligence; (iii) implement an effective BSA training program for appropriate personnel regarding specific compliance responsibilities; (iv) review and analyze Office of Foreign Assets Control-issued regulations to ensure timely and complete compliance; (v) conduct a look back review to ensure certain reportable transactions and suspicious activities were appropriately identified and reported; and (vi) establish a directors’ BSA/AML compliance committee.
Nevada governor issues directive regarding evictions
On August 31, the Nevada governor issued Declaration of Emergency Directive 031, relating to the implementation of Senate Bill 1, previously covered here. The directive provides that, effective immediately through October 14, 2020, the initiation of a nonpayment of rent summary eviction action through service of a pay or quit notice pursuant to Section 40.253 of the Nevada Revised Statutes is prohibited. Emergency Directives 008 and 025 (covered here and here) had previously prohibited such evictions through August 31.
California governor signs legislation providing tenant and landlord protections
On August 31, the California governor signed AB 3088, which provides relief from eviction and foreclosure due to the economic impacts of Covid-19. Pursuant to AB 3088, a tenant may not be evicted before February 1, 2021 if a Covid-19-related hardship caused the tenant to miss a rent payment accruing between March 4 and August 31, 2020, if the tenant provides a declaration of hardship that complies with certain timelines set forth in the legislation. For hardships that accrue between September 1, 2020, and January 1, 2021, tenants must pay a portion of the rent due to avoid eviction. Among other things, the legislation also extends anti-foreclosure protections in the Homeowners Bill of Rights to small landlords.
Colorado regulator updates guidance to real estate businesses with new mask requirements
On August 31, the Colorado Department of Regulatory Agencies updated its Safer at Home: Additional Guidance for Real Estate Brokers & Servicers, previously covered here and here, to note that the executive order creating a statewide mask ordinance was extended by Executive Order D 2020 164. Real estate businesses and professionals are encouraged to review the guidance, which responds to frequently asked questions related to real estate services, including field services.
FHA issues mortgagee letter extending guidance on employment reverification and appraisals
On August 28, the FHA issued Mortgagee Letter 2020-28, which re-extends the effective date of Mortgagee Letter 2020-05, previously covered here, here, and here. The re-extension of appraisal guidance in Mortgagee letter 2020-05 is effective immediately for appraisals with an effective date on or before October 31, 2020. The extension of re-verification of employment guidance is effective immediately for cases closed on or before October 31, 2020.