InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
CSBS announces FTC access to non-confidential NMLS licensing information
On January 18, the Conference of State Bank Supervisors (CSBS) announced it will start sharing non-confidential licensing information obtained through the Nationwide Multistate Licensing System (NMLS) with the FTC. Once implemented, the FTC will have access to regulated companies’ ownership information, and public FTC enforcement actions will be added to the NMLS database and made available to state regulators and to the public. According to the FTC, access to this type of information will improve consumer protection investigation efficiency and coordination with state law enforcement partners. Currently, select NMLS data is shared with the Office of Financial Research, CFPB, Financial Crimes Enforcement Network, and FHA.
New York Senate bill proposes replacing online lending task force with study
On January 8, the New York State Senate Committee on Rules voted to amend legislation to authorize the New York Department of Financial Services (NYDFS) to conduct a study about online lending. The original legislation, S6593A, signed into law by Governor Cuomo on December 29, 2017, created a seven-person task force responsible for analyzing online lending activity in the state. The proposed amendments to this legislation, S07294 and A8938, which would be effective immediately if passed by both houses of the New York legislature and signed into law, remove the requirement for a task force, and instead authorize NYDFS to direct the study and produce a public report with recommendations prior to July 1. According to the amendments, the study should analyze (i) lending practices of the online lending industry and primary differences between online lenders and traditional lenders; (ii) types of credit products available online; (iii) a review of available complaints, actions and investigations related to online lenders; and (iv) a survey of existing state and federal laws that apply to the online lending industry.
City of Philadelphia’s discriminatory lending lawsuit moves forward
On January 16, a federal judge in the U.S. District Court for the Eastern District of Pennsylvania denied a national bank’s motion to dismiss the City of Philadelphia’s (City) claims that the bank engaged in alleged discriminatory lending practices in violation of the Fair Housing Act (FHA). As previously covered in InfoBytes, the City filed a complaint in May of last year against the bank alleging discrimination under both the disparate treatment and disparate impact theories. The City asserted that the bank’s practice of offering better terms to similarly-situated, non-minority borrowers or refusing to make loans in minority neighborhoods has led to foreclosures and vacant homes, which in turn, has resulted in a suppression of property tax revenue and increased cost of providing services such as police, fire fighting, and other municipal services. In support of its motion to dismiss, the bank argued, among other things, that the City’s claim (i) is time barred; (ii) improperly alleges the disparate impact theory; and (iii) fails to allege proximate cause as required by a recent U.S. Supreme Court ruling (see previous Special Alert here).
While the court expressed “serious concerns about the viability of the economic injury aspect of the City’s claim with regard to proximate cause,” the court found that the bank “has not met its burden to show why the City’s entire FHA claim should be dismissed.” Consequently, the court held that the case may proceed to discovery beyond the two-year statute of limitations period for FHA violations in order to provide the City an opportunity to prove whether the bank’s policy caused a racial disparity that constituted a violation continuing into the limitations period.
Fed terminates foreclosure enforcement actions, fines five banks CMPs
On January 10, the Federal Reserve Board (Fed) announced the termination of ten enforcement actions for legacy mortgage loan servicing and foreclosure processing activities, along with the issuance of more than $35 million in combined civil money penalties (CMPs) against five of the ten banks. Combined with penalties previously assessed against other supervised firms (see previous InfoBytes coverage here), the Fed’s mortgage servicing enforcement actions have totaled approximately $1.1 billion in penalties. The CMPs assessed against the five banks range from $3.5 million to $14 million.
According to the Fed, the termination of the ten enforcement actions is a result of “evidence of sustainable improvements in the firms’ oversight and mortgage servicing practices.” Under the terms of the previously issued consent orders, in addition to the CMPs, the banks were required to (i) improve residential mortgage loan servicing oversight, and (ii) correct deficiencies in residential mortgage loan servicing and foreclosure processing for banks with Fed supervised-mortgage servicing subsidiaries.
The Fed also announced the termination of two related joint enforcement actions (see here and here) with the OCC, FDIC and FHFA (a party to only one of the actions) against key mortgage servicing service providers. According to the announcement, the terminations were a result of proof of “sustainable improvements” in the companies’ foreclosure-related practices.
Ohio Governor Signs Residential Mortgage Lending Act
On December 22, Ohio Governor John Kasich signed legislation enacting amendments to the state’s residential mortgage lending act. HB 199, among other things, (i) updates certain definitions, such as modifying the definition of “nationwide mortgage licensing system and registry” to broadly include “persons providing non-depository financial services”; (ii) provides limits on the application of the current law to “unsecured loans and loans secured by other than residential real estate”; and (iii) updates requirements for applicants registering for mortgage loan originator licenses. The amended act takes effect March 23.
Fannie Mae Updates Selling Guide with Underwriting Information on Borrower Credit Freezes
On December 19, Fannie Mae announced updates to its Selling Guide, including guidance related to underwriting a loan for borrowers who have frozen their credit files at one or more of the three national credit repositories. The Selling Guide now states that a credit report is acceptable for manual underwriting or “Desktop Underwriter” when a borrower’s credit information is frozen at only one of the credit repositories as long as credit data is available from two repositories, a credit score is obtained from at least one of those two repositories, and the lender requested a three in-file merged report. If the borrower’s credit file is frozen at two or more of the credit repositories, the loan will not be eligible for either form of underwriting. Other notable updates to the Selling Guide include, (i) adding requirements on premium pricing to the mortgage eligibility policy; (ii) relief from the enforcement of selling representations and warranties for mortgages that are subject to a disaster-related forbearance plan, where the disaster impacting the loan occurred on or after August 25, 2017 and other requirements are met; (iii) additional details about minimum requirements for internal audit and management controls for all seller/servicers; and (iv) consolidation in the Selling Guide of individual mortgage loan file records retention provisions from the Servicing Guide (as previously covered by InfoBytes here).
Freddie Mac Issues New Guidance on Borrowers Qualifying Income
On December 14, Freddie Mac issued Guide Bulletin 2017-28, providing updates and reminders to sellers regarding income used for qualifying borrowers and other matters. The bulletin expands the options for sellers when qualifying a borrower with income that starts after the date of the mortgage note, including increasing the allowable gap from 60 days to 90 days between the note date and the commencement of income, allowing for a “no-cash-out” refinance as a potential transaction type, and permitting fully approved future salary increases from a current employer as income. It also relaxes certain requirements in the event the income commences prior to the delivery date. In addressing other topics, the bulletin allows for relief from the enforcement of selling representations and warranties for mortgages that are subject to a disaster-related forbearance plan. The relief extends through the later of the applicable payment history period end date or the date the mortgage transitions out of the disaster-related forbearance plan and is brought current. Among other issues, the updates and reminders cover the eligibility of Land Trust Mortgages and “Texas Equity Mortgages” for sale to Freddie Mac, and incorporation of the new 2018 FHFA base conforming and super conforming loan limits (previously covered by InfoBytes here).
Freddie Mac Issues Guidance on Reporting Imminent Default Data; Fannie Mae Updates Servicing Guide
On December 13, Freddie Mac issued Guide Bulletin 2017-27, providing updates and reminders to servicers regarding the imminent default evaluation requirements. The bulletin includes specifics on how servicers should process and report imminent default data using the “Workout Prospector” web-based application. According to the bulletin, servicers are must implement the new requirements by July 1, 2018. The bulletin also incorporates the additional non-discrimination guide language announced for sellers in Guide Bulletin 2017-26 (previously covered by InfoBytes here).
On December 13, Fannie Mae announced that it has updated its Servicing Guide. One such update includes the removal of requirements related to individual mortgage loan file records retention. Instead, the information will be available solely in Fannie Mae’s Selling Guide, which it expects to be updated on December 19. Another notable update is the Servicing Guide’s extension of the $30 maximum expense reimbursement “for each insured loss repair inspection required on a current or delinquent mortgage loan” to all mortgages, and not just those affected by disasters.
California Department of Business Reaches $1.1 Million Settlement With South Carolina-Based Mortgage Lender and Servicer
The California Department of Business Oversight (DBO) announced on December 11 that it had reached a $1.1 million settlement with a South Carolina-based mortgage lender and servicer to resolve allegations that the company (1) violated California’s statutory restriction on per diem interest and (2) serviced loans without a California license. This settlement marks the second time in five years that examiners discovered alleged per diem overcharges in the company’s loans. Under California law, lenders are prohibited from charging interest on mortgage loans prior to the last business day that immediately precedes the day the loan proceeds are disbursed. In addition, it is a violation of state law to service residential mortgage loans without obtaining proper licensure.
According to the terms of the settlement—which resolves violations identified during a 2016 supervisory examination—the company must: (i) refrain from loan servicing activities until licensed by the state; (ii) pay $1 million in penalties to DBO for past violations; (iii) pay $125 for each additional violation identified by an independent audit of its loan originations; and (iv) issue per diem interest refunds totaling more than $141,000 to at least 1,347 borrowers. The company has also agreed to revise its policies and procedures to prevent future violations of California law.
DOJ Announces Settlement With Mortgage Lender to Resolve Alleged False Claims Act Violations
The DOJ announced a $11.6 million settlement on December 8 with a Louisiana-based direct endorsement mortgage lender and certain affiliates to resolve allegations that the lender violated the False Claims Act by falsely certifying compliance with federal requirements in order to obtain insurance on mortgage loans from the Federal Housing Administration (FHA). According to the DOJ’s press release, between January 2005 and December 2014, the lender (i) certified loans that failed to meet HUD’s underwriting and origination requirements for FHA insurance; (ii) paid incentives to underwriters in violation of the “underwriter commission prohibition,” and continued to make incentive payments even after HUD notified the lender of commission prohibition noncompliance in 2010; and (iii) failed to, in a timely manner, “self-report material violations of HUD requirements” or perform quality reviews. The settlement also fully resolves a False Claims Act qui tam lawsuit that had been pending in the United States District Court for the Eastern District of Arkansas.