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Federal Reserve issues flood insurance enforcement action against Illinois bank
On November 13, the Federal Reserve Board announced an enforcement action against an Illinois state bank for allegedly violating the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses a $15,000 penalty against the bank, but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty for a pattern or practice of violations under the NFIA is $2,000 per violation.
11th Circuit holds filed-rate doctrine bars class actions relating to lender-placed insurance
On September 24, the U.S. Court of Appeals for the 11th Circuit affirmed the district court’s dismissal of two class actions on grounds that the “filed-rate doctrine” precludes the plaintiffs’ claims. In their complaints, the plaintiffs alleged that their loan servicers charged “inflated amounts” for lender-placed insurance by receiving “rebates” or “kickbacks” from an insurance company without passing the savings on to consumers. The district court dismissed the actions with prejudice, holding that the filed-rate doctrine barred the plaintiffs’ claims. On appeal, the 11th Circuit upheld the lower court’s decision, finding that the plaintiffs’ allegations challenged the insurance company’s filed rate. As a result, the court determined that the plaintiffs’ allegations were textbook examples of claims barred by the nonjusticiability principle, which provides that duly-empowered administrative agencies have exclusive say over the rates charged by regulated entities because agencies are more competent than the courts at the rate-making process.
Federal Reserve Board issues flood insurance enforcement action against New York bank
On August 28, the Federal Reserve Board (Board) announced an enforcement action against a New York state bank for allegedly violating the National Flood Insurance Act (NFIA). The consent order assesses a $16,000 penalty against the bank, but does not specify the number or nature of the alleged violations. The maximum civil money penalty under that NFIA is $2,000 per violation.
FDIC releases July enforcement actions
On August 31, the FDIC announced a list of administrative enforcement actions taken against banks and individuals in July. The 15 orders include “three Section 19 orders; four removal and prohibition orders; one civil money penalty; three terminations of consent orders; and four adjudicated decisions.” The FDIC assessed a $10,800 civil money penalty against a New Mexico-based bank for alleged violations of the Flood Disaster Protection Act in connection with alleged failures to (i) obtain flood insurance coverage on loans at or before origination or renewal; (ii) maintain flood insurance; (iii) notify borrowers that they were required to obtain flood insurance; and (iv) obtain flood insurance on a borrower’s behalf when the borrower did not obtain insurance within 45 days after receiving such notification. There are no administrative hearings scheduled for September 2018. The FDIC database containing all 15 enforcement decisions and orders may be accessed here.
President Trump signs National Flood Insurance Program extension
On July 31, President Trump signed the “National Flood Insurance Program (NFIP) Extension Act of 2018” into law (see Public Law 115-225/S. 1182). The NFIP was set to expire that day. The short-term extension, which the Senate passed earlier that day, reauthorizes the NFIP through November 30, and provides Congress additional time to establish a long-term financial solution.
Visit here for continuing InfoBytes coverage on the NFIP.
House passes National Flood Insurance Program extension
On July 25, the House passed a bill by a vote of 366 - 52 to extend the National Flood Insurance Program (NFIP) through November 30. The “National Flood Insurance Program Extension Act of 2018” (S. 1182) is a short-term fix to extend coverage for lenders and borrowers during the upcoming hurricane season. As previously covered in InfoBytes, last November the House passed H.R. 2874, which would amend and reauthorize the NFIP through fiscal year 2022; however, the Senate Banking Committee has yet to act on the measure. The Senate must now pass S. 1182 to ensure the NFIP does not expire at the end of July.
Freddie Mac and Fannie Mae release updates to servicing guides
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.
FDIC releases April enforcement actions, including flood insurance and BSA/AML violations
On May 25, the FDIC released a list of 35 administrative enforcement actions taken against banks and individuals in April. Civil money penalties were assessed against several individuals and one bank. The FDIC assessed a $5,000 civil money penalty against a New Jersey-based bank, citing violations of the Flood Disaster Protection Act for allegedly failing to ensure 20 properties were adequately covered by flood insurance for the term of the loan. Additionally, the FDIC issued two consent orders, one against a South Dakota-based bank for unsafe or unsound banking practices or violations of law or regulation. The FDIC ordered the bank to, among other things, (i) retain qualified management; (ii) develop an independent external loan review program; and (iii) develop a plan to address the weaknesses in the bank’s audit and internal controls. The second consent order alleges violations of the Bank Secrecy Act and anti-money laundering (BSA/AML) rules by a Maryland-based bank. The bank is ordered to, among other things, (i) perform an enhanced risk assessment of the bank’s operations; (ii) revise and implement internal controls for BSA/AML compliance; and (iii) take necessary steps to correct or eliminate all cited violations.
Also on the list are 11 Section 19 orders, which allow applicants to participate in the affairs of an insured depository institution after having demonstrated “satisfactory evidence of rehabilitation,” and four terminations of consent orders.
There are no administrative hearings scheduled for June 2018. The FDIC database containing all 35 enforcement decisions and orders may be accessed here.
FDIC releases March enforcement actions, fines banks for flood insurance violations
On April 27, the FDIC released a list of 20 administrative enforcement actions taken against banks and individuals in March. Civil money penalties were assessed against several banks including one against a Michigan-based bank citing violations of the Flood Disaster Protection Act (FDPA) for allegedly: (i) failing twice “to obtain flood insurance on a building securing a designated loan at the time of origination”; (ii) failing to obtain flood insurance on a borrower’s behalf in multiple instances, in addition to twice failing to maintain adequate flood insurance; and (ii) failing to follow force placed flood insurance procedures for several loans. A second civil money penalty was assessed against a New Jersey-based bank for allegedly engaging in a pattern of violating requirements under the FDPA and the National Flood Insurance Act, which included (i) failing to notify borrowers that they were required to purchase flood insurance; and (ii) failing to obtain flood insurance on a borrower’s behalf in a timely fashion for those borrowers who failed to obtain insurance within 45 days after receiving notification.
Also on the list are seven Section 19 orders, which allow applicants to participate in the affairs of an insured depository institution after having demonstrated “satisfactory evidence of rehabilitation,” and six terminations of consent orders, among others.
There are no administrative hearings scheduled for May 2018. The FDIC database containing all 20 enforcement decisions and orders may be accessed here.
FDIC fines banks for flood insurance violations, releases January enforcement actions
On February 23, the FDIC released a list of 12 administrative enforcement action orders taken against banks and individuals in January. Civil money penalties were assessed against two banks, including one against a Michigan-based bank citing violations of the Flood Disaster Protection Act (FDPA) and the National Flood Insurance Act (NFIA) for allegedly: (i) failing to obtain flood insurance on a borrower’s behalf at origination in multiple instances, and twice failing to maintain adequate flood insurance; (ii) failing twice to follow force placed flood insurance procedures; and (iii) failing to notify borrowers in multiple instances that the “collateral for the loan was in a designated special flood hazard area.” The other civil money penalty was assessed against a Wisconsin-based bank for allegedly engaging in a pattern of violating requirements under the FDPA and the NFIA, which included failing to provide borrowers with a “Notice of Special Flood Hazard and Availability of Federal Disaster Relief Assistance” in a timely fashion.
Also on the list are four Section 19 orders, which allow applicants to participate in the affairs of an insured depository institution after having demonstrated “satisfactory evidence of rehabilitation,” and three terminations of consent orders, among others.
There are no administrative hearings scheduled for March 2018. The FDIC database containing all 12 enforcement decisions and orders may be accessed here.