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  • House passes bipartisan bill granting Federal Reserve exclusive authority to implement Volcker Rule

    Federal Issues

    On April 13, the House passed H.R. 4790, the “Volcker Rule Regulatory Harmonization Act,” by a vote of 300-104. The bipartisan bill designates the Federal Reserve Board (Fed) as the exclusive regulatory authority to implement and amend rules under Section 13(b) of the Bank Holding Company Act. (Currently the Fed, the OCC, the FDIC, the SEC, and the CFTC share rulemaking authority under the rule.) H.R. 4790 also provides clear exemptions for banking entities with $10 billion or less in consolidate actions or those comprised of five percent or less of trading assets and liabilities. A similar exemption is included in the bipartisan Senate financial regulatory reform bill, S.2155, which passed the Senate in March (previously covered by InfoBytes here). According to a press release issued by the House Financial Services Committee, while H.R. 4790 does not repeal the Volcker Rule—which restricts banking entities from engaging in proprietary trading or entering into certain relationships with hedge and private equity funds—it does create a streamlined, efficient framework to provide increased regulatory clarity for entities required to comply with the rule.

    Federal Issues Federal Legislation U.S. House Volcker Rule Federal Reserve Bank Holding Company Act

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  • Houses passes two bipartisan bills to ease stress test requirements and nonbank challenges to SIFI designations

    Federal Issues

    On April 11, by a vote of 245-174, the House passed H.R. 4293, the “Stress Test Improvement Act of 2017,” which would amend the Dodd-Frank Act to modify stress test requirements for bank holding companies and certain nonbank financial companies. Among other things, H.R. 4293 prohibits the Federal Reserve Board’s (Board) to object to a company’s capital plan “on the basis of qualitative deficiencies in the company’s capital planning process” when conducting a Comprehensive Capital Analysis and Review (CCAR), and reduces the frequency of stress testing from semiannual to annual. As previously covered in InfoBytes, on April 10, the Board issued its own proposed changes intended to simplify the capital regime applicable to bank holding companies with $50 billion or more in total consolidated assets by integrating the Board’s regulatory capital rule and CCAR and stress test rules.

    Separately on April, 11, the House passed H.R. 4061 by a vote of 297-121. The bipartisan bill, “Financial Stability Oversight Council (FSOC) Improvement Act of 2017,” would require FSOC to consider the appropriateness of subjecting nonbank financial companies (nonbanks) designated as systemically important to prudential standards “as opposed to other forms of regulation to mitigate the identified risks.” Among other things, the bill would also require FSOC to allow nonbanks the opportunity to meet with FSOC to present relevant information to contest the designation both during an annual reevaluation, as well as every five years after the date of final determination.

    Federal Issues Federal Legislation U.S. House Stress Test Dodd-Frank Federal Reserve FSOC SIFIs Nonbank Supervision

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  • Fannie Mae and Freddie Mac release updates to servicing guides

    Federal Issues

    On April 11, Fannie Mae updated its Servicing Guide, regarding servicing transfer welcome calls. Pursuant to Fannie Mae SVC-2018-03, transferee servicers are no longer required to, among other things, initiate welcome calls within five days of the transfer of servicing. Transferee servicers may now implement their own processes for borrower contact as long as the servicer remains in compliance with applicable laws. Fannie Mae also updated the Servicing Guide to add flexibility in connection with the collection of escrow shortages during a mortgage modification.  Under the amendment to the Servicing Guide, servicers may spread repayment of the shortage amount over a term of up to 60 months, unless the borrower decides to pay up-front. Additionally, Fannie Mae released a revised Reverse Mortgage Loan Servicing Manual, which includes updates to expense reimbursement claim submissions and mortgage loan status codes.

    On the same day, Freddie Mac released Guide Bulletin 2018-6, which, among other things, updates servicer requirements on Subsequent Transfers of Servicing (STOS) and borrower-paid mortgage insurance. Effective July 23, transferor servicers must use the automated STOS request system and new transfer requests must be submitted at least 45 days and no more than 60 days prior to the effective date of the transfer. The Bulletin also provides additional details on initiating the electronic STOS and executing the STOS agreement. There will be a temporary moratorium on STOS requests and modifications to existing requests from July 9 through July 20, in order for Freddie Mac to implement the new process.

    Separately, the Bulletin includes various changes to streamline servicer responsibilities in canceling borrower-paid mortgage insurance, such as now allowing servicers to process a borrower’s verbal request to cancel mortgage insurance and simplifying the process to determine current value.  

    Consistent with the Fannie updates, Freddie Mac also modified its escrow shortage collection requirements to allow repayment to be spread over up to 60 months.

    Federal Issues Fannie Mae Freddie Mac Servicing Guide Mortgages Mortgage Modification Mortgage Servicing Reverse Mortgages Mortgage Insurance

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  • CFPB Succession: Mulvaney pleads for Congress to restructure the CFPB; oral arguments held in English litigation

    Federal Issues

    On April 11 and 12, acting Director of the CFPB, Mick Mulvaney, testified before the House Financial Services Committee and the Senate Banking Committee regarding the Bureau’s semi-annual report to Congress. (Previously covered by InfoBytes here). Mulvaney’s prepared testimony, which was submitted to both committees, covers the salient points of the semi-annual report but also includes the same request to Congress that he made in the report: change the law “in order to establish meaningful accountability for the Bureau.” This request, which includes four specific changes (such as, subjecting the Bureau to the Congressional appropriations process and creating an independent Inspector General for the Bureau), was the focus of many of Mulvaney’s responses to questions posed by members of each committee. Specifically, during the House Financial Services hearing, Mulvaney encouraged the members of the committee to include the CFPB restructure in negotiations with the Senate regarding the bipartisan regulatory reform bill, S.2155, which passed the Senate last month. (Previously covered by InfoBytes here).

    Mulvaney also fielded many questions regarding the Bureau’s announcement that it plans to reconsider the final rule addressing payday loans, vehicle title loans, and certain other extensions of credit (Rule); however, his responses gave little indication of what the Bureau’s specific plans for the Rule are. As previously covered by InfoBytes, resolutions have been introduced in the House and the Senate to overturn the rule under the Congressional Review Act. Additionally, on April 9, two payday loan trade groups filed a lawsuit in the U.S. District Court for the Western District of Texas asking the court to set aside the Rule because, among other reasons, the CFPB is unconstitutional and the Bureau’s rulemaking failed to comply with the Administrative Procedure Act. The complaint alleges that the Rule is “outside the Bureau's constitutional and statutory authority, as well as unnecessary, arbitrary, capricious, overreaching, procedurally improper and substantially harmful to lenders and borrowers alike.” The complaint also argues that the rule is a product of an agency that violates the Constitution’s separation of powers due to the Bureau’s structure of a single director who may only be removed by the president “for cause.” A similar argument in CFPB v. PHH Corporation was recently rejected by the U.S. Court of Appeals for the D.C. Circuit (covered by a Buckley Sandler Special Alert).

    Additionally, on April 12, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in English v. Trump. In this suit, Leandra English, the current deputy director of the CFPB, challenges Mulvaney’s appointment as acting director. Unlike previous arguments, which focused on the president’s authority to appoint Mulvaney under the Federal Vacancies Reform Act (FVRA), the court spent considerable time discussing Mulvaney’s concurrent role as head of the Office of Management and Budget (OMB), and whether that dual role is inconsistent with the independent structure of the Bureau, as established by the Dodd-Frank Act.

    Federal Issues CFPB Succession Payday Lending Senate Banking Committee House Financial Services Committee Appellate D.C. Circuit CFPB

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  • Department of Education restores accreditor’s federal recognition pending review of its 2016 petition

    Federal Issues

    On April 3, Department of Education (Department) Secretary, Betsey DeVos restored the Accrediting Council for Independent Colleges and Schools’ (ACICS) status as a federally recognized accrediting agency, effective as of December 12, 2016. The order follows the U.S. District Court for the District of Columbia’s March 23, 2018 remand of the former Secretary’s December 2016 decision withdrawing recognition. The order states that while federal recognition is restored, the Department will review ACICS’ January 2016 petition to determine whether continued recognition is warranted. As previously covered by InfoBytes, a coalition of state Attorneys General urged the Department to reject ACICS’ application to regain recognition, citing to what the Attorneys General called “ACICS’ systemic accreditation failures.”

    Federal Issues Student Lending Department of Education State Attorney General

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  • FFIEC joint statement addresses role of cyber insurance in risk management programs

    Federal Issues

    On April 10, the Federal Financial Institutions Examination Council (FFIEC) members issued a joint statement advising financial institutions to consider the role of cyber insurance as a component of their overall risk management programs in light of the increasing number of sophisticated cyber-attacks. While financial institutions are not required to have cyber insurance, the FFIEC stated that it can be an effective tool to help mitigate risk. However, the FFIEC emphasized that cyber insurance does not diminish the need for a sound control environment; rather, it “may be a component of a broader risk management strategy that includes identifying, measuring, mitigating and monitoring cyber risk exposure.” Additionally, cyber insurance may offset financial losses resulting from data breaches that may not be covered by traditional insurance policies. Considerations for financial institutions assessing the costs and benefits of adding cyber insurance include: (i) involving multiple stakeholders in the decision, (ii) conducting proper due diligence to understand coverage and identify any gaps; and (iii) reviewing cyber insurance as part of a financial institution’s annual insurance review and budgeting process.

    Federal Issues FFIEC Privacy/Cyber Risk & Data Security Cyber Insurance Risk Management

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  • CFPB releases RFI on consumer complaints and inquiries

    Federal Issues

    On April 11, the CFPB released its twelfth (and apparently final) Request for Information (RFI) in a series seeking feedback on the Bureau’s operations. This RFI solicits public comment to assist the Bureau in assessing its handling of consumer complaints and consumer inquiries. Pursuant to the Dodd-Frank Act, the CFPB is required to “facilitate the centralized collection of, monitoring of, and response to consumer complaints regarding consumer financial products or services.” According to the RFI, a “consumer complaint” relates to an issue a consumer has with an identifiable entity, whereas a “consumer inquiry” is a consumer request for information from the CFPB regarding a financial product or service, a CFPB action, or the status of a complaint. While the Bureau is seeking feedback on all aspects of its consumer complaints and consumer inquiries processes, the RFI specifically seeks comments related to (i) how the Bureau distinguishes between complaints and inquiries, including if there should be a process for companies to reclassify consumer submissions; (ii) the complaint submission process, including the channels of submission and whether consumers should be allowed to authorize a third-party to submit on their behalf; and (iii) whether the Bureau should develop a process for companies to provide responses to consumer inquiries. The RFI is expected to be published in the Federal Register on April 16. Comments will be due 90 days from publication.

    The CFPB sought information on the publication of complaints in the Consumer Complaint Database and other forms of complaint reporting in an earlier RFI, previously covered by InfoBytes here.

    Federal Issues RFI CFPB Succession Consumer Complaints Consumer Finance

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  • Court denies national bank’s motion to dismiss FDIC action seeking deposit insurance payments

    Federal Issues

    On April 4, the U.S. District Court for the District of Columbia denied a national bank’s motion to dismiss or strike an FDIC complaint seeking $1.12 billion in deposit insurance payments. In January 2017, the FDIC filed a complaint against the national bank for $542 million based on the bank’s alleged failure to pay sufficient mandatory assessments under the Federal Deposit Insurance Act (FDIA) for the second quarter of 2013 through the fourth quarter of 2014. In April 2017, the FDIC filed an amended complaint to add a claim of unjust enrichment and allege that the national bank owes an additional $583 million for underpayments predating the second quarter of 2013. In denying the bank’s motion, the court concluded that (i) the FDIC could plead alternative theories of liability at this stage and therefore could allege a claim for unjust enrichment even when an adequate legal remedy is available under the FDIA; (ii) the FDIC adequately pleaded a claim for unjust enrichment; and (iii) it was premature to determine if the FDIC’s FDIA and unjust enrichment claims are time-barred.

    Federal Issues Federal Deposit Insurance Act FDIC Courts

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  • CFPB releases RFI on financial education programs

    Federal Issues

    On April 4, the CFPB released its eleventh Request for Information (RFI) in a series seeking feedback on the Bureau’s operations. This RFI solicits public comment to assist the Bureau in “assessing the overall efficiency and effectiveness of its consumer financial education programs.” Pursuant to the Dodd-Frank Act, the CFPB develops education programs to educate and empower consumers to make better informed financial decisions, and to improve consumers’ financial literacy. The Bureau develops programs for the general public as well as programs designed for special populations. While the Bureau is seeking feedback on all aspects of its financial education initiatives, the RFI specifically seeks comments related to (i) the topics and delivery functions of the programs; (ii) the effectiveness of the programs, including how the Bureau should measure program success; and (iii) how to avoid duplication and improve coordination with other federal agencies. The RFI is expected to be published in the Federal Register on April 9. Comments will be due 90 days from publication.

    Federal Issues RFI CFPB Succession Consumer Finance Consumer Education Dodd-Frank Federal Register

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  • Fannie Mae updates Selling Guide with lender contribution clarifications

    Federal Issues

    On April 3, Fannie Mae updated its Selling Guide, including changes to clarify its lender contribution policy and add the option of full-service certificate custodians (FCCs). According to Fannie Mae SEL-2018-03, lender-sourced contributions to fund closing are permitted as long as the contribution is not (i) used to fund any portion of the down payment; (ii) subject to repayment requirements; or (iii) sourced from a third party. While the contribution cannot exceed borrower-paid closing costs, there is otherwise no limit on the amount of the lender contribution unless the lender is an interested party to the transaction. If the lender is an interested party, the contribution is subject to the Interested Party Contributions policy. Additionally, the Selling Guide includes information related to lenders’ option to use a Fannie Mae approved FCC for whole loans and for loans in mortgage-backed securities. The updated information includes (i) documentation and delivery requirements for loans delivered to FCCs; (ii) certification process for loans delivered to FCCs; and (iii) recognition of the new Master Custodial Agreement, which will govern the relationships involved. The Selling Guide also clarifies transaction timing related to whether a single-closing construction-to-permanent transaction is processed as a purchase or a refinance.

    Federal Issues Fannie Mae Selling Guide Mortgages

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