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FHFA announces 2022 confirming loan limits
On November 30, FHFA announced that it will raise the maximum conforming loan limits (CLL) for mortgages purchased in 2022 by Fannie Mae and Freddie Mac from $548,250 to $647,200 (the 2021 CLL limits were covered previously by InfoBytes here). In most high-cost areas, the maximum loan limit for one-unit properties will be $970,800. According to FHFA, due to generally rising home values, “the CLLs will be higher in all but four U.S. counties or county equivalents.” A county-specific list of 2022 conforming loan limits for all counties and county-equivalent areas in the U.S. can be accessed here.
HUD issues 2022 mortgage and HECM limits
On November 30, HUD issued Mortgagee Letter 2021-28, which provides the 2022 nationwide forward mortgage limits. According to HUD, FHA calculates forward mortgage limits based on the median house prices in accordance with the National Housing Act (NHA). Additionally, FHA sets these limits at or between the low-cost area and high-cost area limits based on the median house prices for the area and publishes the updated limits each calendar year. Among other things, HUD noted that the FHA national low-cost area mortgage limits are set at 65 percent of the national conforming limit of $647,200 for a one-unit property, and, for high-cost area mortgage limits, the FHA national high-cost area mortgage limits are set at 150 percent of the national conforming limit of $647,200 for a one-unit property. Forward mortgage limits for 2022 are effective for case numbers assigned on or after January 1, 2022.
The same day, HUD issued Mortgagee Letter 2021-29, which provides the 2022 home equity conversion mortgage (HECM) limits. According to the letter, the HECM maximum claim amount limits for traditional HECM, HECM for purchase, and HECM-to-HECM refinances are governed by the maximum claim amount limitation in the NHA. For the period of January 1, 2022, to December 31, 2022, the maximum claim amount for FHA-insured HECMs is $970,800 (150 percent of Freddie Mac’s national conforming limit of $647,200).
Freddie says cryptocurrency can’t be used for mortgage qualification
On December 1, Freddie Mac released Bulletin 2021-36 to Freddie Mac sellers to provide guidance on selling updates. The bulletin provides guidance on, among other things: (i) 2022 conforming loan limits; (ii) extension of the guarantee fee obligation; (iii) affordable lending; (iv) credit underwriting; and (v) document custody. In order to address uncertainty regarding the treatment of cryptocurrency in mortgage underwriting, the bulletin specifically addresses requirements related to cryptocurrency’s use in the mortgage qualification process. These requirements include, among other things, that income paid to the borrower in cryptocurrency cannot be utilized to qualify for a mortgage and that “[c]ryptocurrency may not be included in the calculation of assets as a basis for repayment of [the] obligation.” Unless otherwise noted, the changes issues in the bulletin are effective immediately.
Fed provides guidance on LIBOR transition
On November 19, the Federal Reserve Board announced answers to “Supervision FAQs on the Transition away from LIBOR.” The Fed’s announcement follows an October 2021 joint statement by the CFPB, Fed, FDIC, NCUA, and OCC, in conjunction with the state bank and state credit union regulators, regarding the transition away from LIBOR. (Covered by InfoBytes here.) Among other things, the FAQs included statements regarding what qualifies as a “new contract” under the previously issued guidance, specifically regarding: (i) modifications to adjustable-rate mortgages; (ii) loans that “automatically renew” after December 31, 2021; and (iii) physical settlement of a contract that existed before December 31, 2021. The FAQs also discussed: (i) Board-supervised institutions engaging in secondary trading of LIBOR-linked cash instruments that were issued before December 31, 2021; (ii) the need for fallback language in contracts entered into prior to 2022; and (iii) the approach by examiners in assessing firms’ LIBOR transition plans.
Agencies finalize 2022 HPML exemption threshold
On November 30, the CFPB, OCC, and Federal Reserve Board published finalized amendments to the official interpretations for regulations implementing Section 129H of TILA, which establishes special appraisal requirements for “higher-priced mortgage loans” (HPMLs). The final rule increases the TILA smaller loan exemption threshold for the special appraisal requirements for HPMLs. Each year the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The exemption threshold for 2022 will increase from $27,200 to $28,500 effective January 1.
7th Circuit denies CFPB’s request to reconsider attorney exemption in foreclosures
On November 29, the U.S. Court of Appeals for the Seventh Circuit denied the CFPB’s petition for panel or en banc rehearing of its earlier decision in an action taken against several foreclosure relief companies and associated individuals accused of violating Regulation O. As previously covered by InfoBytes, the Bureau asked the appellate court to reconsider its determination “that practicing attorneys are categorically exempt from Regulation O,” claiming that the court’s holding strips the Bureau “of the authority given it by Congress to hold attorneys to account for violations not just of Regulation O, but of a host of other federal laws as well.” In July, the 7th Circuit vacated a 2019 district court ruling that ordered $59 million in restitution and disgorgement, civil penalties, and permanent injunctive relief against defendants accused of collecting fees before obtaining loan modifications, and inflating success rates and the likelihood of obtaining a modification, among other allegations (covered by InfoBytes here). The appellate court based its decision on the application of the U.S. Supreme Court’s ruling in Liu v. SEC, which held that a disgorgement award cannot exceed a firm’s net profits—a ruling that is “applicable to all categories of equitable relief, including restitution.” The appellate court also concluded that attorneys who are subject to liability for violating consumer laws “cannot escape liability simply by virtue of being an attorney.” However, the appellate court vacated the recklessness finding in the civil penalty calculation pertaining to certain defendants, writing that “[a]lthough we have found that they were not engaged in the practice of law, the question was a legitimate one. We consider it a step too far to say that they were reckless—that is, that they should have been aware of an unjustifiably high or obvious risk of violating Regulation O.” (Covered by InfoBytes here.) In its appeal, the Bureau did not challenge the vacated restitution award, but rather argued that a rehearing was necessary to ensure that the agency can bring enforcement actions against attorneys who violate federal consumer laws, including Regulation O.
2nd Circuit reverses itself, finding no standing to sue for recording delays
On November 17, the U.S. Court of Appeals for the Second Circuit reversed its earlier determination that class members had standing to sue a national bank for allegedly violating New York’s mortgage-satisfaction-recording statutes, which require lenders to record borrowers’ repayments within 30 days. As previously covered by InfoBytes, the plaintiffs filed a class action suit alleging the bank’s recordation delay harmed their financial reputations, impaired their credit, and limited their borrowing capacity. While the bank did not dispute that the discharge was untimely filed, it argued that class members lacked Article III standing because they did not suffer actual damages and failed to plead a concrete harm under the U.S. Supreme Court’s decision in Spokeo Inc. v. Robins. At the time, the majority determined, among other things, that “state legislatures may create legally protected interests whose violation supports Article III standing, subject to certain federal limitations.” The alleged state law violations in this matter, the majority wrote, constituted “a concrete and particularized harm to the plaintiffs in the form of both reputational injury and limitations in borrowing capacity” during the recordation delay period. The majority further concluded that the bank’s alleged failure to report the plaintiffs’ mortgage discharge “posed a real risk of material harm” because the public record reflected an outstanding debt of over $50,000, which could “reasonably be inferred to have substantially restricted” the plaintiffs’ borrowing capacity.
In withdrawing its earlier opinion, the 2nd Circuit found that the Supreme Court’s June decision in TransUnion v. Ramirez (which clarified what constitutes a concrete injury for the purposes of Article III standing in order to recover statutory damages, and was covered by InfoBytes here) “bears directly on our analysis.” The parties filed supplemental briefs addressing the potential impacts of the TransUnion ruling on the 2nd Circuit’s previous decision. The bank argued that while “New York State Legislature may have implicitly recognized that delayed recording can create [certain] harms,” the plaintiffs cannot allege that they suffered these harms. Class members challenged that “the harms that the Legislature aimed to preclude need not have come to fruition for a plaintiff to have suffered a material risk of real harm sufficient to seek the statutory remedy afforded by the Legislature.” Citing the Supreme Court’s conclusion of “no concrete harm; no standing,” the appellate court concluded, among other things, that class members failed to allege that delayed recording caused a cloud on the property’s title, forced them to pay duplicate filing fees, or resulted in reputational harm. Moreover, while publishing false information can be actionable, the appellate court pointed out that the class “may have suffered a nebulous risk of future harm during the period of delayed recordation—i.e., a risk that someone (a creditor, in all likelihood) might access the record and act upon it—but that risk, which was not alleged to have materialized, cannot not form the basis of Article III standing.” The appellate court further stated that in any event class members may recover a statutory penalty in state court for reporting the bank’s delay in recording the mortgage satisfaction.
HUD updates appraisal fair housing compliance
On November 17, HUD issued Mortgagee Letter 2021-27, which provides updates on appraisal fair housing compliance and general appraiser requirements. According to HUD, the letter clarifies FHA’s existing requirements for appraisers and mortgagees on compliance with fair housing laws related to appraisal of properties that will serve as security for FHA-insured mortgages, and applies to all FHA Single Family Title II Forward and Reverse Mortgage Programs. Among other things, the changes include: (i) revising the Appraisers Post-Approval Requirements section to emphasize compliance with applicable laws, including the Fair Housing Act and all other federal, state, and local antidiscrimination laws; (ii) clarifying language in the Quality of Appraisal section to emphasize the requirement that mortgagees ensure the appraisal complies with applicable laws, including the Fair Housing Act and other federal, state, and local antidiscrimination laws; and (iii) restructuring a section of the General Appraiser Requirements into subsections, which clarifies guidance to the nondiscrimination policy and compliance with FHA guidelines and appraiser conduct. The mortgagee letter is effective immediately.
CFPB seeks input on HMDA
On November 16, the CFPB issued a notice and request for comments regarding the rules for implementing the Home Mortgage Disclosure Act (HMDA). The Request for Information (RFI) solicits public comments on its plans to assess the effectiveness of the HMDA Rule, focusing on, among other things: (i) institutional and transactional coverage; (ii) data points; (iii) benefits of the new data and disclosure requirements; and (iv) operational and compliance costs. According to the CFPB, the RFI follows a 2021 HMDA report, which found that mortgage lenders deny credit and charge higher interest rates to Black and Hispanic applicants more often than white applicants, and a July 2021 report that analyzed 2020 HMDA loan data and examined the differences in mortgage characteristics across Asian American and Pacific Islander subgroups. (Covered previously by InfoBytes here and here.) Additionally, the RFI notes that the Bureau expects to issue a report on the findings of its assessment of the HMDA Rule by January 1, 2023. The Bureau also notes that it “plans to review recent changes to the rule and evaluate their effectiveness,” and that the assessment “will strengthen the CFPB’s ability to maintain a fair, competitive, and non-discriminatory mortgage market.” The deadline for submitting comments on the RFI is 60 days after the notice is published in the Federal Register.
CFPB releases FAQs on HMDA requirements
On November 10, the CFPB updated its FAQs on the Home Mortgage Disclosure Act (HMDA) reporting requirements to clarify institutional and transactional coverage. The updated FAQs, among other things, highlighted that the final rule, issued in April 2020, established the closed-end mortgage loan threshold to be 100 in each of the two preceding calendar years, effective July 2020, and the open-end line of credit threshold at 200 in each of the two preceding calendar years, effective January 1, 2022, upon the expiration of the temporary threshold of 500 open-end lines of credit. (Covered by InfoBytes here). Additionally, the FAQs presented circumstance-based questions and answers applying the threshold rules to scenarios with varying originations of closed-end mortgage loans and open-end lines of credit and addressed voluntary reporting.
On November 12, the CFPB sent a reminder to institutions that the threshold for reporting HMDA data for open-end lines of credit will adjust to 200 open-end lines of credit in each of the two preceding calendar years effective January 1, 2022. According to the reminder, starting January 1, 2022, an institution that meets the new threshold and all other Regulation C institutional coverage criteria, must collect, record, and report data about its open-end lines of credit.