InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
HUD issues mortgage relief for FHA single-family homeowners
On April 1, HUD issued guidance detailing mortgage relief options for single-family homeowners with FHA mortgages impacted by Covid-19. HUD explains that the CARES Act requires mortgage servicers to provide mortgage relief to borrowers with options for payment deferral or payment forbearance “for up to six months, and must provide an additional six months of forbearance if requested by the borrower.” In addition, Mortgagee Letter 2020-06 states that borrowers with forbearance plans will have all late charges, fees, and penalties waived as long as the plans are in effect. Although servicers are required to comply with the FCRA, the Mortgagee Letter instructs servicers not to report a borrower as delinquent if the borrower is in a Covid-19 forbearance plan and “performing as agreed,” and further suggests that servicers should “consider the impacts” of Covid-19 “on Borrowers’ financial situations and any flexibilities a Servicer may have under the FCRA.” The Mortgagee Letter also provides a mortgage relief option for “seniors with Home Equity Conversion Mortgages” who can request an extension of up to six months initially, which may be extended up to an additional six months. This mortgage relief option also requires that all late fees, charges, and penalties be waived during the extension period. Borrowers with owner-occupied properties who are granted forbearance plans must also be evaluated for a “C[ovid]-19 National Emergency Standalone Partial Claim” prior to the end of the plan. This option will allow borrowers to reinstate their loans after the plan ends.
DOJ reaches $2.47 million settlement to resolve alleged lending violations regarding FHA-insured reverse mortgages
On March 31, the DOJ announced a $2.47 million settlement with an Oklahoma-based mortgage lender in connection with alleged violations of the False Claims Act (FCA) related to an acquired predecessor entity’s origination and underwriting of home equity conversion mortgages (HECM). According to the DOJ, these HECM loans were insured by the Federal Housing Administration (FHA) but failed to meet HUD requirements. The DOJ alleged that, prior to May 2, 2010, the predecessor entity ordered appraisals for HECM loans on forms that provided loan amounts and “otherwise improperly communicated certain information to [appraisers] in an attempt to influence the appraised value, in violation of FHA requirements.” The mortgage lender agreed to pay the DOJ $1.97 million to resolve the FCA claims, as well as $500,000 to HUD to resolve administrative liability allegations. The DOJ’s press release noted that the claims “are allegations only, and [that] there has been no determination of liability.”
HUD issues FAQs re: Fair Housing Initiatives Program
HUD’s Office of Fair Housing and Equal Opportunity issued FAQs to address questions and concerns regarding the Fair Housing Initiatives Program (FHIP) operations during the Covid-19 epidemic. The FAQs address, among other things, the impact of Covid-19 on existing FHIP awards, as well as possible extensions due to the disruption of planned activities.
Senators urge HUD to withdraw new version of AFFH rule
On March 16, thirty-seven Senators led by Senator Sherrod Brown (D-OH) sent a letter to HUD in response to the agency’s proposed replacement for the 2015 version of the Affirmatively Furthering Fair Housing (AFFH) rule (proposed rule). As previously covered by InfoBytes, in January, HUD announced that the proposed rule would provide state and local government participants with more straightforward advice “to help them improve affordable housing choices in their community.” The Senators contend, however, that the proposed rule will reverse efforts to make access to housing fair and equitable and “relies on the faulty premise that simply increasing housing supply can address the problems of housing discrimination and segregation.” Among other things, the Senators argue that the proposed rule undermines the following “three core elements of any approach to fair housing”: (i) “detailed, comprehensive analysis of fair housing issues”; (ii) “judicious enforcement”; and (iii) “the public input necessary to ensure that our communities can provide inclusive pathways of opportunity for all Americans.” The Senators request that HUD withdraw the proposed rule and re-implement the 2015 AFFH final rule.
HUD implements foreclosure and eviction moratorium
On March 18, HUD announced that it would implement an immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages for the next 60 days and issued Mortgagee Letter 2020-04. The guidance applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) Mortgages, and directs mortgage servicers to: (i) halt all new foreclosure actions and suspend all foreclosure actions currently in process; and (ii) cease all evictions of persons from FHA-insured single-family properties.
CFPB issues NAL on housing counselors
On January 10, the CFPB issued its second no-action letter (NAL) under the agency’s revised NAL Policy that was issued last September. The new NAL Policy’s goal is to streamline the review process to “focus[ ] on the consumer benefits and risks of the product or service in question.” As previously covered by InfoBytes, the Bureau issued its first NAL under the revised policy in response to a request by HUD on behalf of more than 1,600 housing counseling agencies (HCAs) that participate in HUD’s housing counseling program.
A national bank is the recipient of the most recent NAL regarding the bank’s funding arrangements with HCAs certified by HUD. The NAL states that the Bureau will not take supervisory or enforcement actions against the bank under RESPA or UDAAP for entering into certain arrangements with HCAs for pre-purchase housing counseling services conditioned on the consumer applying for a loan from the bank, even if that activity could be construed as a referral, as long as the level of payment for the services is no more than a level that is commensurate with the services provided and is reasonable and customary for the area. The Bureau noted that the bank submitted its application to facilitate funding arrangements with HCAs through the HUD NAL application, which was made public last year.
HUD unveils new version of AFFH rule
On January 7, HUD published its proposed replacement for the 2015 version of the Affirmatively Furthering Fair Housing (AFFH) rule. According to HUD, the proposed AFFH rule will provide state and local government participants with more straightforward advice “to help them improve affordable housing choices in their community.”
In August of 2018, HUD suspended requirements under the 2015 rule for HUD grant recipient communities to submit assessments of fair housing. Additionally, as previously covered in InfoBytes, HUD solicited comments on amendments to the 2015 AFFH regulations, which, according to the agency, “proved ineffective, highly prescriptive, and effectively discouraged the production of affordable housing.” The proposed rule suggests a change to the definition of AFFH to “advancing fair housing choice within the program participant’s control or influence,” and seeks to move the focus away from anti-segregation planning and toward creation of affordable housing options.
According to the proposed rule, fair housing choice includes (i) “[p]rotected choice, meaning absence of discrimination”; (ii) “[a]ctual choice, meaning not only that affordable housing options exist,” but that state and local governments are encouraged to educate the public on their rights; and (iii) “[q]uality choice, meaning that the available and affordable housing is decent, safe, and sanitary, and, for persons with disabilities, accessible as required under civil rights laws.”HUD increases FHA loan limits for 2020
On December 3, HUD announced the maximum FHA loan limits for 2020, issuing Mortgagee Letter 19-19 for FHA-insured forward mortgage case numbers and Mortgagee Letter 19-20 for FHA-insured Home Equity Conversion Mortgage (HECM) case numbers. The general one-unit property limits “floor” increased to $331,760, and the “ceiling” increased to $765,600, while the HECM claim amount also increased to $765,600, effective January 1, 2020.
Democrats urge HUD to “immediately rescind” disparate impact proposal
On November 22, the Democratic members of the House Financial Services Committee sent a letter to Secretary of HUD Ben Carson, opposing the agency’s proposed rule amending its interpretation of the Fair Housing Act’s (FHA) disparate impact standard (also known as the “2013 Disparate Impact Regulation”). The letter argues that the proposed rule would “make it harder for everyday Americans who find themselves victims of housing discrimination to get justice.” As previously covered by InfoBytes, in August, HUD issued the proposed rule in order to bring the rule “into closer alignment with the analysis and guidance” provided in the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (covered by a Buckley Special Alert) and to codify HUD’s position that its rule is not intended to infringe on the states’ regulation of insurance. Specifically, the proposed rule codifies the burden-shifting framework outlined in Inclusive Communities, adding five elements that a plaintiff must plead to support allegations that a specific, identifiable policy or practice has a discriminatory effect. Moreover, the proposal provides methods for defendants to rebut a disparate impact claim.
The letter urges Secretary Carson to “immediately rescind” the proposed rule, calling the proposal a “huge departure from a standard and framework that has been expressly supported by HUD…[and] a deviation from decades of legal precedent, including a Supreme Court decision affirming the legitimacy of the disparate impact standard under the [FHA].” Moreover, the letter argues that “[i]n 2018, Black homeownership rates reached the lowest they had since before the [FHA] was passed,” and that HUD’s mission to build inclusive and sustainable communities will be “seriously compromised” with this proposed rule.
Special Alert: HUD, DOJ sign MOU on mortgage False Claims Act violations
On October 28, HUD and DOJ announced a long-awaited Memorandum of Understanding (MOU), which provides prudential guidance concerning the application of the False Claims Act to matters involving alleged noncompliance with FHA guidelines. The announcement was made by HUD Secretary Dr. Benjamin S. Carson at the Mortgage Bankers Association’s Annual Conference, and both agencies issued releases shortly after Carson’s comments. The intention, HUD noted, is to bring greater clarity to regulatory expectations within the FHA program and ease banks’ worries about facing future penalties for mortgage-lending errors.
* * *
Click here to read the full special alert.
If you have any questions about the HUD/DOJ Memorandum of Understanding or other related issues, please visit our Mortgages or False Claims Act & FIRREA practice pages, or contact a Buckley attorney with whom you have worked in the past.