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  • OCC seeks comments on notice of proposed rulemaking to raise recovery planning standards threshold to $250 billion

    Agency Rule-Making & Guidance

    On September 19, the OCC issued a notice of proposed rulemaking to revise its 2016 guidelines on recovery planning standards for insured national banks, insured federal savings associations, and insured federal branches. The OCC seeks to raise the average total consolidated assets threshold from $50 billion to $250 billion, and give banks above the threshold 12 months instead of 18 months to comply with the guidelines. The proposed rule would also make technical amendments to remove outdated compliance dates. According to the OCC, a threshold increase would tailor the focus on “institutions that present greater systemic risk to the banking system.” The proposal is also consistent with the scope of the FDIC and Federal Reserve Board’s resolution planning threshold, which was raised from $50 billion to $250 billion as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

    Comments on the proposal are due by November 5.

    Agency Rule-Making & Guidance OCC EGRRCPA S. 2155

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  • Fannie Mae, Freddie Mac update servicing guides

    Federal Issues

    On September 18, Fannie Mae issued SVC-2018-06, which updates the Servicing Guide to include, among other things, changes to reduce servicer costs and risks and simplify certain loan modification options. Updates include: (i) relieving servicers of the responsibility for paying property taxes and ground rents on acquired properties, effective October 1, and co-op fees on properties acquired on or after October 1; (ii) effective immediately, removing the requirement for servicers to receive Fannie Mae approval when modifying a Texas Constitution Section 50(a)(6) loan under the Cap and Extend Modification for Disaster Relief policy (does not apply to reverse mortgages); (iii) clarifying servicing and subservicing transfer requirements, effectively immediately (iv) revising evaluation notices and solicitation letters, in alignment with Freddie Mac (described below), that take effect immediately but must be implemented by January 1, 2019; (v) adjusting maximum allowable foreclosure attorney fees for certain loans secured by properties in New Mexico and Hawaii for matters active as of September 18; and (vi) consolidating and aligning policies related to project liability and fidelity insurance to be implemented no later than January 1, 2019.

    On the same day, Freddie Mac released Guide Bulletin 2018-14 announcing, among other things, servicing updates concerning (i) revised borrower evaluation notices and solicitation letters that take effect immediately but must be implemented by January 1, 2019; (ii) a new temporary servicer reimbursement process effective for property inspections related to insurance loss settlements conducted on or after September 1; (iii) changes to the Servicer Success Scorecard, effective July 1, 2019; and (iv) reporting requirements for third-party foreclosure sale redemptions, effective December 1.

    Federal Issues Fannie Mae Freddie Mac Mortgage Servicing Mortgages

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  • Fannie Mae updates Reverse Mortgage Loan Servicing Manual

    Federal Issues

    On September 18, Fannie Mae updated the Reverse Mortgage Loan Servicing Manual with changes related to a servicer’s responsibilities for paying escrow-related expenses for certain properties in Fannie Mae’s REO inventory. According to RVS-2018-03, Fannie Mae will now pay property taxes for all acquired proprieties in REO inventory and servicers are no longer required, except when directed by Fannie Mae, to pay co-op fees and assessments or ground rents for certain properties in REO inventory. The update applies to all property taxes and ground rents for all acquired properties effective on October 1, and applies to co-op fees and assessments for all acquired properties with a foreclosure sale or mortgage release date occurring on or after October 1.

    Federal Issues Fannie Mae Reverse Mortgages Mortgage Servicing Mortgages

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  • District Court partially dismisses student loan co-signer claims alleging violations of federal and D.C. debt-collection laws


    On September 10, the U.S. District Court for the District of Columbia partially granted a student loan administrator’s and a law firm’s joint motion to dismiss, and granted a lender’s motion for judgment on the pleadings, in a case involving a student loan co-signer’s claims brought under the Fair Debt Collection Practices Act (FDCPA), D.C. debt collection statute, and state law. The court rejected the plaintiff’s argument that her claims were tolled and dismissed the FDCPA claims against the loan administrator and firm because they were time-barred. The court also dismissed the plaintiff’s claim that the firm and the lender violated several provisions of the D.C. debt collection statute, concluding that the plaintiff failed to allege sufficient facts to support an allegation that the defendants willfully violated the statute. However, the court found that the plaintiff included sufficient facts to support a claim under the D.C. statute against the loan administrator based on allegations that the administrator, among other things, (i) concealed its “lack of authorization to sue”; (ii) concealed the fact that it was acting as a collector without the authority to enforce the terms of the loan; and (iii) has a “long, well-documented history of filing debt collection lawsuits falsely claiming to be the lender and/or real party in interest.” Finally, the court held that plaintiff’s abuse of process and malicious prosecution actions failed to state a claim against any of the defendants.

    Courts Student Lending Debt Collection FDCPA State Issues

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  • FDIC issues NPRM regarding treatment of reciprocal deposits

    Agency Rule-Making & Guidance

    On September 12, the FDIC issued a notice of proposed rulemaking (NPRM) and request for comments on the treatment of certain institutions’ reciprocal deposits to implement Section 202 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). According to the accompanying Financial Institution Letter, FIL-47-2018, Section 202 of EGRRCPA amends Section 29 of the Federal Deposit Insurance Act to except a capped amount of reciprocal brokered deposits from treatment as brokered deposits for certain insured depository institutions. Under the proposal, well-capitalized and well-rated institutions are not required to treat reciprocal deposits as brokered deposits up to the lesser of 20 percent of their respective total liabilities or $5 billion. Additionally, institutions that are not well capitalized or well rated also may exclude reciprocal deposits from their brokered deposits by maintaining reciprocal deposits at or below a special cap equal to the average amount of their reciprocal deposits held at quarter-end during the last four quarters preceding the quarter that the institution fell below well capitalized or well rated. Comments are due within 30 days of publication in the Federal Register.

    Agency Rule-Making & Guidance FDIC S. 2155 EGRRCPA Federal Deposit Insurance Act Deposit Products

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  • California updates foreign language disclosure requirements for mortgage modifications

    State Issues

    On September 11, the California governor approved SB 1201, which amends the state civil code to, among other things, require any supervised financial institution that negotiates a mortgage loan modification with a borrower primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean and offers the borrower a final loan modification in writing, to deliver to the borrower at the same time, a specified form summarizing the modified terms in the same language as the negotiation. The amendments require the California Department of Business Oversight (CDBO) to make available—using CFPB and Fannie Mae forms as guidance—certain disclosures and forms in those specified languages.

    The amendments are generally effective on January 1, 2019, with the amendments relating to the new written disclosures to become operative 90 days following the issuance of forms by the CDBO, but not before January 1, 2019.

    State Issues State Legislation Mortgage Lenders Mortgages Loss Mitigation Mortgage Modification Language Access CFPB Fannie Mae

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  • New Mexico Attorney General sues technology companies over COPPA violations regarding the collection of children’s personal data

    Privacy, Cyber Risk & Data Security

    On September 12, the New Mexico Attorney General announced the filing of a lawsuit against a group of technology companies for allegedly designing and marketing mobile gaming applications (apps) targeted towards children that contain illegal tracking software. The complaint asserts that the defendants’ practices violate both the Children’s Online Privacy Protection Act (COPPA) and New Mexico’s Unfair Practices Act, and pose the risk of data breaches and third-party access. Among other things, the complaint alleges the defendants’ data collection and sharing practices did not comply with COPPA’s specific notice and consent requirements, while the apps’ embedded software development kits allow the apps to communicate directly with the advertising companies that analyze, store, use, share, and sell the data to other third-parties to build “increasingly-detailed profiles of child users” in order to send highly-targeted advertising. The complaint seeks injunctive relief and nominal and punitive damages.

    Privacy/Cyber Risk & Data Security State Issues State Attorney General COPPA

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  • OFAC publishes new Ukraine-/Russia-related FAQs providing guidance on “maintenance” related to wind-down activities

    Financial Crimes

    On September 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the publication of two new FAQs to provide additional guidance on “maintenance” as that term is used in General Licenses (GLs) 1415, and 16. As previously covered in InfoBytes (see posts here, here, and here), the GLs authorize specified wind-down activities otherwise prohibited by Ukraine-related sanctions regulations. According to OFAC, maintenance “generally includes all transactions and activities ordinarily incident to performing under a contract or agreement in effect prior to April 6, 2018, provided that the level of performance is consistent with the terms of the general license and consistent with past practices that existed between the party and the blocked entity prior to April 6, 2018.”

    Visit here for additional InfoBytes coverage on Ukraine/Russia-related sanctions.

    Financial Crimes OFAC Department of Treasury Ukraine Russia

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  • SEC awards whistleblower $1.5 million after reducing amount for reporting delay


    On September 14, the Securities and Exchange Commission (Commission) announced a whistleblower award likely to yield the whistleblower more than $1.5 million for volunteering information that led to a successful enforcement action. In its order, the Commission notes that it “severely reduced the award here after considering the award criteria identified in Rule 21F-6 of the Exchange Act.” Specifically, the Commission alleges the whistleblower was culpable and “unreasonably delayed” reporting the information for over a year after the occurrence of the underlying facts, only doing so after learning a Commission investigation was ongoing and receiving a “significant and direct financial benefit.”

    The SEC’s whistleblower program has awarded approximately $322 million to 58 individuals since issuing its first award in 2012.

    Securities SEC Whistleblower Enforcement

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  • Pennsylvania appeals court upholds broad standard for “deception” under state consumer protection law


    On September 12, the Superior Court of Pennsylvania held that Pennsylvania’s Uniform Trade Practices and Consumer Protection Law (UTPCPL) imposes strict liability on businesses who deceive consumers and does not require proof of fraud or negligent misrepresentation to state a claim. The plaintiffs brought common law claims of fraudulent and negligent misrepresentation and a statutory claim under the UTPCPL against insurance companies related to the sale of various insurance products. The common law claims of fraudulent and negligent misrepresentation went to a jury, which returned verdicts on both counts in favor of the insurance companies. The trial judge, however, found that the insurance companies violated the “deceptive” provision of the UTPCPL and awarded damages to the consumers. The insurance companies appealed, arguing that (i) the jury verdict on the common law claims required the court to dismiss the UTPCPL claim, and (ii) challenging the judge’s damages award calculation.

    The appellate court affirmed the trial court’s determination that the defendants acted deceptively under the UTPCPL. The insurance companies argued that the UTPCPL claim was barred by the doctrines of collateral estoppel and res judicata based on the jury’s determination that the defendants had not committed a negligent misrepresentation. The appellate court, however, explained that these doctrines do not apply because the UTPCPL raises distinct issues. The court rejected the argument that the consumer must prove common law negligent misrepresentation to bring a claim under the deceptive prong of the UTPCPL. The court concluded that “any deceptive conduct, ‘which creates a likelihood of confusion or of misunderstanding,’” is actionable under the UTPCPL “whether committed intentionally (as in a fraudulent misrepresentation), carelessly (as in a negligent misrepresentation), or with the upmost care (as in strict liability).” The court also upheld the trial court’s damages determination under the UTPCPL, finding that the judge’s calculation was appropriate and consistent with the statute.

    Courts State Issues Deceptive Insurance Consumer Protection

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