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  • Freddie Mac and Fannie Mae release updates to servicing guides

    Federal Issues

    On June 13, Freddie Mac released Guide Bulletin 2018-9, which among other things, updates servicer requirements for short-term, long-term, and unemployment forbearance plans and consolidates the offerings into a single plan. Effective December 1, the streamlined plan will allow servicers to approve forbearance plans lasting up to six months without requiring eligible borrowers to submit a Borrower Response Package. Servicers may also offer consecutive forbearance plans that do not exceed 12 months in total to qualifying borrowers. Separately, the Bulletin includes the introduction of Freddie Mac’s NextJob re-employment services company designed to serve high-needs areas and provide job search skills and training for unemployed or underemployed borrowers who have requested loss mitigation assistance.

    On the same day, Fannie Mae updated its Servicing Guide to consolidate and simplify its forbearance policies into a single plan, and encouraged servicers to implement the changes immediately, but no later than December 1. Fannie Mae clarified, however, that forbearance plans “entered into prior to the servicer’s implementation would adhere to existing policy until the expiration of such forbearance plan.” Additional changes to the Servicing Guide include: (i) clarifications to the escrow advances reimbursement policy for real estate taxes and flood/property insurance premiums; and (ii) updates to be implemented by August 1 for when servicers are required to notify Fannie Mae that a mortgage loan has been placed under military indulgence.

     

    Federal Issues Freddie Mac Fannie Mae Servicing Guide Mortgages Loss Mitigation Flood Insurance Escrow

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  • CFPB fines installment lender $5 million for improper collection and credit reporting practices

    Federal Issues

    On June 13, the CFPB ordered a South Carolina-based installment lender and its subsidiaries to pay $5 million in civil money penalties for allegedly making improper in-person and telephonic collection attempts in violation of the Consumer Financial Protection Act (CFPA) and inaccurately furnishing information to credit reporting agencies in violation of the Fair Credit Reporting Act (FCRA). According to the consent order, between 2011 and 2016, the company and its subsidiaries (i) initiated collection attempts at consumers’ homes and places of employment; (ii) routinely called consumers at work to collect debts, sometimes after being told they were not allowed to receive calls; and (iii) contacted third parties and disclosed or were at risk of disclosing the existence of the consumer’s debt. The CFPB also alleges that the company and its subsidiaries failed to implement reasonable credit reporting procedures and failed to correct inaccurate information furnished to credit reporting agencies. In addition to the $5 million civil money penalty, the company and its subsidiaries must (i) cease improper collection practices; (ii) correct the credit reporting errors; and (iii) develop a comprehensive compliance plan.

    Federal Issues CFPB CFPA UDAAP FCPA Enforcement Debt Cancellation

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  • FHFA proposes rule on capital requirements for Freddie and Fannie

    Federal Issues

    On June 12, the Federal Housing Finance Agency (FHFA) announced a proposed rulemaking, which implements a regulatory capital framework for Freddie Mac and Fannie Mae (the Enterprises) including (i) a new framework for risk-based capital requirements; and (ii) two alternative approaches to setting minimum leverage capital requirements. Regulatory capital requirements for the Enterprises have been suspended since the Enterprises were placed in conservatorship in September 2008, and these new requirements would continue to be suspended while the Enterprises remain under conservatorship. FHFA stated that the purpose of the rulemaking effort is to develop a risk measurement framework to better evaluate each Enterprise’s business decisions while in conservatorship. As a result, the proposed risk-based capital requirements would “provide a granular assessment of credit risk specific to different mortgage loan categories, as well as market risk, operational risk, and going-concern buffer components.” The two options for minimal leverage capital requirements include (i) requiring the Enterprises to hold capital equal to 2.5 percent of total assets and off-balance sheet guarantees related to securitization activities; and (ii) requiring the Enterprises to hold capital equal to 1.5 percent of trust assets and 4 percent of non-trust assets. Comments on the proposed rulemaking must be submitted within 60 days of publication in the Federal Register.

    Federal Issues FHFA Fannie Mae Freddie Mac GSE Capital Requirements

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  • FTC bans mortgage relief defendant from future debt relief activities

    Federal Issues

    On June 7, the FTC announced a settlement with an individual who allegedly operated a mortgage relief scheme, which charged distressed homeowners thousands in upfront fees while falsely promising foreclosure prevention or payment modifications. According to the FTC, the defendant, operating through multiple company names, falsely suggested the businesses were endorsed by the federal government and encouraged consumers not to communicate with their mortgage company and to stop making monthly mortgage payments. The settlement order imposes a judgment of more than $15.5 million but suspends the judgment due to the individual’s inability to pay. The settlement prohibits the individual from, among other things, (i) advertising, marketing, promoting, offering, or selling debt relief services or products; and (ii) misrepresenting, or assisting others in misrepresenting information relating to the offering of financial products and services. Additionally, the settlement bars the individual from disclosing or benefitting from the information collected from the consumers through the business operations.

    Federal Issues FTC Debt Relief Mortgages Mortgage Modification Foreclosure

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  • Federal banking agencies release policy statement on interagency notification of enforcement actions

    Federal Issues

    On June 12, the OCC, Federal Reserve, and FDIC (collectively, “Federal Banking Agencies” or “FBAs”) published in the Federal Register a policy statement on interagency notification of formal enforcement actions to assure ongoing coordination after the Federal Financial Institutions Examination Council rescinded its 1997 revised policy statement on “Interagency Coordination of Formal Corrective Action by the Federal Bank Regulatory Agencies.” According to the new policy statement, when making a determination to bring a formal enforcement action, an FBA should evaluate whether a potential enforcement action involves the interests of another FBA and if so, should notify the agency prior to notifying the financial institution about the pending action. The notice to the FBA should contain enough information for the agency to take necessary action to examine or investigate the financial institution.  The statement clarifies that the policy is not intended to substitute or replace the informal communication that routinely occurs between FBAs in advance of an enforcement action.

    Federal Issues FFIEC FDIC Federal Reserve OCC Enforcement

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  • CFPB publishes quarterly consumer credit trends: End-of-year credit card borrowing

    Federal Issues

    On June 7, the CFPB released the latest quarterly consumer credit trends report, which focuses on credit card borrowing patterns at the end of the year using data from the CFPB’s Consumer Credit Panel. The report notes that consumer spending peaks each year during the “holiday shopping season” in November and December, with retail sales more than $50 billion higher in December than any other month. The CFPB highlighted some key findings regarding credit card borrowing and repayment patterns around this time: (i) credit card and retail store card debt steadily rise before the end of the calendar year and then gradually fall through March; (ii) consumers with subprime credit scores do not experience the same “seasonality” in borrowing that consumers with superprime credit scores do—they are much more likely to have higher utilization rates of available credit before the holiday shopping season; and (iii) seasonal delinquency patterns may indicate financial distress at the end of the year for some credit card users.

    Federal Issues CFPB Credit Cards Consumer Finance Payments

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  • CFPB dismisses PHH suit and removes all members of three advisory councils

    Federal Issues

    On June 7, acting Director of the CFPB, Mick Mulvaney, dismissed the Bureau’s action against PHH, which spawned years of litigation and a constitutional challenge to the CFPB’s structure. In January, the U.S. Court of Appeals for the D.C. Circuit issued its en banc decision concluding the CFPB’s structure is constitutional but affirmed the October 2016 panel opinion that the CFPB misinterpreted RESPA and its statute of limitations (covered by a Buckley Sandler Special Alert). The $109 million penalty imposed on PHH by the CFPB was vacated and the case was sent back to CFPB leadership for review. On June 6, in response to an order by Mulvaney, PHH and the Bureau’s enforcement counsel filed a joint statement addressing whether further proceedings were necessary and jointly recommended dismissal of the matter.

    On June 6, Mulvaney reportedly removed all current members of the Consumer Advisory Board (CAB), the Community Bank Advisory Council (CBAC), and the Credit Union Advisory Council (CUAC). In a blog post, the Bureau’s policy associate director for external affairs noted that the changes to the advisory boards were in response to the comments received from the Bureau’s Request for Information (RFI) on external engagements (previously covered by InfoBytes here). The comment period for the RFI closed on May 29. According to the blog, the Bureau will still continue its statutory obligation under the Dodd-Frank Act to convene the CAB and provide forums for the CBAC and the CUAC. The councils will be re-staffed with a smaller membership from the 2018 application and selection process. The changes come only a few days after it was reported that Mulvaney canceled his meeting with the CAB for the second time since he took on the acting director role.

     

    Federal Issues CFPB Succession CFPB PHH v. CFPB RESPA RFI

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  • Fannie Mae issues Selling Guide updates, announces MH Advantage program

    Federal Issues

    On June 5, Fannie Mae issued Selling Guide update SEL-2018-05, which announces, among other things, the MH Advantage initiative. MH Advantage is a manufactured home that meets specific construction, design, and efficiency standards. Fannie Mae offers a number of flexibilities on loans secured by these properties, including higher loan-to-value ratios and standard mortgage insurance. The Selling Guide is updated to include the requirements for loans secured by MH Advantage homes, such as property eligibility, appraisal, and underwriting requirements. The requirements for MH Advantage loans are effective immediately. Additionally, the Selling Guide includes updates to (i) HomeStyle Energy loans in Desktop Underwriter; (ii) HomeStyle Renovation loan forms; and (iii) project standards updates to condo, co-op, and PUD project policies.

    Federal Issues Fannie Mae Selling Guide Manufactured Housing Mortgage Insurance Mortgages

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  • Sixteen State Attorneys General urge the CFPB to maintain the public consumer complaint database

    Federal Issues

    On June 4, the New York Attorney General, Barbara Underwood, along with fourteen other state Attorneys General submitted a comment letter in response to the CFPB’s Request for Information (RFI) on the public reporting of consumer complaints, previously covered by InfoBytes here. The Attorneys General highlight the utility of the CFPB’s consumer complaint database, stating it “has been an invaluable resource for identifying trends and patterns,” and noting its usefulness in investigations into certain companies “whose misconduct was initially brought to [their] attention through a critical mass of complaints filed with the CFPB.” The letter also comments on the database’s benefit to the public for (i) empowering consumers to educate themselves; (ii) incentivizing companies to treat consumers fairly; and (iii) potentially revealing patterns of widespread misconduct. The coalition concludes the letter by urging the CFPB to maintain the public database.

    Additionally, on the same day, the New Jersey Attorney General, Gurbir Grewal, responded to the same RFI with similar sentiments but also emphasized that eliminating or reducing the public availability of the database “would conflict with the open-government principles of the Freedom of Information Act” (FOIA) because FOIA requires government agencies to proactively disclose frequently requested records. According to Grewal, the Bureau receives a substantial number of requests for consumer complaint records and this number will likely increase without the public database.

    Federal Issues State Issues State Attorney General Consumer Complaints CFPB RFI

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  • FTC reports on certain 2017 enforcement activities to the CFPB

    Federal Issues

    On May 17, in response to a request from the CFPB, the FTC transmitted a letter summarizing its 2017 enforcement activities related to Regulation Z (TILA), Regulation M (Consumer Leasing Act), and Regulation E (Electronic Fund Transfer Act) for the CFPB’s use in preparing its 2017 Annual Report to Congress. The FTC highlighted numerous activities related to the enforcement of the pertinent regulations, including:

    • Payday Lending. The FTC acknowledged the continued litigation against two Kansas-based operations and their owner for allegedly selling lists of counterfeit payday loan debt portfolios to debt collectors in violation of the FTC Act, previously covered by InfoBytes here.
    • Military Protection. The FTC identified the July 2017 military consumer financial workshop and the launch of the new Military Task Force (previously covered by InfoBytes here and here) among the activities the agency engaged in related to protecting the finances of current and former members of the military. The FTC also noted continued participation in the interagency group working with the Department of Defense on amendments to its rule implementing the Military Lending Act.
    • “Negative Option.” For actions under the Regulation E/EFTA, the FTC highlighted numerous “negative option” enforcement actions, in which the consumer agrees to receive goods or services from a company for a free trial option, but if the consumer does not cancel before the trial period ends, the consumer will incur recurring charges for continued goods or services. Among the actions highlighted is a case in which the FTC imposed a $179 million judgment (suspended upon the payment of $6.4 million) settling allegations that the online marketers’ offers of “free” and “risk free” monthly programs for certain weight loss and other products were deceptive.
    • Auto Loans. The letter highlighted, among others, the FTC action against a Southern California-based group of auto dealerships that allegedly violated a prior consent order with the FTC by misrepresenting the cost to finance or lease a vehicle, previously covered by InfoBytes here.

    Federal Issues FTC Act Payday Lending FTC Auto Finance Enforcement Military Lending Act Department of Defense CFPB TILA Consumer Leasing Act EFTA Congress

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