On January 12, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) announced the release of its report on TARP’s “Hardest Hit Fund” (HHF). Created in 2010, the HHF provides a temporary safety net to help save the homes of unemployed and underemployed Americans in 19 states deemed to be the hardest-hit areas of the country. Among other things, the report noted that a majority of the more than 160,000 people denied funds through the program earned less than $30,000. The report notes that SIGTARP is unable to determine why denial rates for homeowners making less than $30,000 are so high, in part, because state agencies’ records are non-existent, missing, or incomplete. Indeed, according to the report, some state agencies were unable to provide “even basic aggregate information about why homeowners were denied, let alone a specific reason for each person turned away.” The report emphasized, among other things, the need for all such records-related deficiencies be “immediately remedied.” The report also recommended that state agencies “remove unnecessary restrictions for participation in the program.”
On January 11, the GAO announced the release of its report providing an update on the status and condition of Treasury’s TARP-funded housing programs as of October 31, 2016. According to the report, Treasury had disbursed nearly 60 percent or $22.6 billion of the $37.51 billion assigned to TARP for the purpose of helping struggling homeowners avoid foreclosure. The report also notes that the GAO’s latest review yielded no new recommendations and that only five of the 29 recommendations GAO has previously made related to the TARP-funded housing programs remain open or not fully implemented. The report states that the GAO will continue to monitor and assess the status of these recommendations.
On January 11, the OCC reported that it has ordered a large London-based bank to pay $32.5 million to settle claims that the bank failed to properly follow the regulator’s orders to improve mortgage foreclosure practices that led to borrowers being harmed after the 2008 credit crisis. Specifically, the OCC had accused the bank in 2015 of failing to meet the demands it had agreed to, and the agency imposed certain additional restrictions on the company’s mortgage-servicing abilities until it fixed the alleged shortcomings. The regulator also noted that the bank had failed to properly file documents in certain bankruptcy cases after the orders (for which it was ordered to pay $3.5 million in remediation to borrowers). The OCC confirmed, however, that the bank is now in compliance with all OCC orders related to the alleged foreclosure practices.
On January 3, the CFPB announced the release of its annual report to the Senate and House Committees on Appropriations for 2016. The report—which covers October 1, 2015 through September 30, 2016—identifies the specific responsibilities that the Dodd-Frank Act tasked to the CFPB and explains how the Bureau has attempted to meet those responsibilities. Among other things, the report describes Bureau regulations and guidance related to the Dodd-Frank Act including, but not limited to: (i) a proposed rule on arbitration; (ii) a proposed rule related to payday loans, vehicle title loans, and other similar credit products; (iii) a final rule to amend various provisions of the mortgage servicing rules implementing the Real Estate Settlement Procedures Act and the Truth in Lending Act; and (iv) a final rule amending Regulation C, implementing the Home Mortgage Disclosure Act. The report also includes descriptions of the Bureau’s supervisory activities and enforcement actions undertaken by in the 2016 fiscal year.
On December 22, the Kentucky Department of Financial Institutions (the “Department”) issued a memorandum stating that master servicers and sub servicers are required to be licensed as mortgage loan companies under the Kentucky Mortgage Licensing and Regulation Act, unless they can document to the Department in writing that an exemption applies to them. The memorandum defines “master servicer” as “any entity or individual that owns the right to perform servicing of a mortgage loan. A master servicer typically reserves the legal right to either perform the servicing itself or to do so through a sub servicer.” The memorandum specifies that “[a] sub servicer does not own the right to perform mortgage servicing, but performs servicing on behalf of a master servicer, generally premised upon duties enumerated in a contract between the sub servicer and master servicer.” The licensing requirement is effective March 1, 2017.