Mortgage Servicers Partner With Obama Administration To Enhance SCRA Protections

On August 26, the Obama Administration announced a new partnership with residential mortgage servicers designed to enhance protections under the Servicemember Civil Relief Act (SCRA). Speaking to the American Legion convention in Charlotte, North Carolina, President Obama observed that under the SCRA, service members and veterans are entitled to certain protections and benefits “but the burden is on them to ask for it and prove they’re eligible.” Under the new partnership, mortgage servicers will proactively identify eligible consumers and inform them of their rights and benefits under the law. Participating servicers will identify eligible participants by regularly checking their servicing portfolios against the Defense Manpower Data Center searchable database of military personnel. The initiative also aims to simplify the process for enrolling and satisfying the SCRA written notice requirements. The announcement was made as part of a White House effort to bolster services for service members, veterans, and their families.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: 0
TAGS:
POSTED IN: Consumer Finance, Federal Issues, Mortgages

Department Of Education Encourages FFEL Lenders To Adopt New Procedures For Determining SCRA Eligibility

On August 25, the U.S. Department of Education (ED) released a “dear colleague” letter authorizing and encouraging Federal Family Education Loan (FFEL) lenders and lender-servicers to use the new procedures adopted by ED for determining which borrowers are eligible for benefits under the Servicemembers Civil Relief Act. The new ED procedures require ED loan servicers to use the Department of Defense’s website to access the Defense Manpower Data Center (DMDC) database. From there, the ED loan servicers compare their list of borrowers against the DMDC database to identify borrowers who are eligible for the SCRA interest rate limitation. Once the borrower’s status and service dates have been confirmed using the DMDC, the FFEL lenders and lender-servicers using this process may use the DMDC-generated certification information in lieu of having a servicemember submit a copy of his military orders and a written request to receive the SCRA benefits. When the FFEL lender or lender-servicer applies the SCRA interest rate limitation to the borrower’s account, it must notify the borrower of the interest rate change.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: 0
TAGS:
POSTED IN: Consumer Finance, Federal Issues, Mortgages

FHFA Announces Settlement Of Litigation With Investment Bank

On August 22, the Federal Housing Finance Agency (FHFA) announced that it settled litigation with a major investment bank, other related companies, and several individuals over alleged violations of federal and state securities laws in connection with private-label mortgage-backed securities purchased by Fannie Mae and Freddie Mac between 2005 and 2007. In 2011, FHFA, as conservator for the two GSEs brought suit in the U.S. District Court of the Southern District of New York seeking relief for damages that allegedly resulted from a failure to adequately disclose risks related to the subject MBS offerings. Under the terms of the settlement, the bank is required to pay $3.15 billion to repurchase securities that were the subject of the claims in FHFA’s lawsuit. The difference between that amount and the securities’ current value is approximately $1.2 billion. According to FHFA, that difference is sufficient to effectively make the two GSEs whole on their investments. With this settlement, FHFA has resolved sixteen of the eighteen RMBS suits it filed in 2011. For details on those settlements, please see FHFA’s update on private-label securities suits. For specifics relating to how the August 22 settlement will impact each of the GSEs, please see the purchase and settlement agreements with Fannie Mae and Freddie Mac.

LinkedInFacebookTwitterGoogle+Share

HUD Issues Final Rule To Eliminate Post-Payment Interest On FHA Loans

On August 26, HUD issued its final rule prohibiting mortgagees from charging post-payment interest under FHA’s single family mortgage insurance program. The final rule is responsive to the CFPB’s ATR/QM rule, under which post-payment interest charges will be considered a prepayment penalty in connection with FHA loans closed on or after January 21, 2015. Because prepayment penalties are prohibited on higher-priced FHA loans, the new definition of “prepayment penalty” under the ATR/QM rule would have effectively prohibited the making of higher-priced FHA mortgage loans. Also effective January 21, 2015, HUD’s final rule ensures consistency among FHA single-family mortgage products and provides the same protections for all borrowers. Under the final rule, monthly interest on the debt must be calculated on the actual unpaid principal balance as of the date prepayment is received.

LinkedInFacebookTwitterGoogle+Share

HUD Issues Final Rule To FHA ARM Rate Adjustment Regulations

On August 26, HUD issued its final rule to amend FHA’s single family adjustable rate mortgage (ARM) program regulations to align with the interest rate adjustment and notification periods required for ARMs under the CFPB’s new TILA mortgage servicing rules. The final rule is effective January 10, 2015 and adopted the proposed rule issued on May 8 without change. Under the final rule, interest rate adjustments resulting in a corresponding change to the mortgagor’s monthly payment for an ARM must be based on the most recent index value available 45 days before the date of the rate adjustment. FHA’s previous regulations provided for a 30-day look-back period. Further, the final rule mandates that mortgagees of FHA-insured ARMs comply with the disclosure and notification requirements of the CFPB’s TILA servicing rules, which require at least 60-days, but no more than 120-days advance notice of an adjustment to a mortgagor’s monthly payment. Previously, the regulations provided for only 25 days advance notice.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: 0
TAGS: , ,
POSTED IN: Federal Issues, Mortgages

SEC Approves Final ABS And NRSRO Rules

On August 27, the SEC adopted revisions to rules governing the disclosure, reporting and offering process for asset-backed securities (ABS) and adopted new requirements for credit rating agencies registered with the SEC to increase governance controls, enhance transparency, and increase credit rating agency accountability. The adopted ABS reforms will make it easier for investors to review and analyze the credit risk of ABS.  The revised ABS rules will (i) require issuers to provide standardized asset-level disclosures for ABS backed by residential mortgages, commercial mortgages, auto loans, auto leases, and debt securities; (ii) provide investors with an additional three days to analyze a preliminary prospectus prior to the first sale of securities in the offering; (iii) revise the eligibility requirements for ABS shelf offerings and require additional changes to the procedures and forms related to shelf offerings; and (iv) revise reporting requirements to include expanded and additional information in the prospectus disclosure for ABS. The new rules adopted for credit rating agencies registered with the SEC require these agencies to (i) consider certain identified factors with respect to establishing, maintaining, and enforcing an internal control structure and file an annual report to the SEC regarding the agency’s internal control structure; (ii) implement conflict of interest controls to prevent inappropriate considerations from affecting a credit agency’s production of credit ratings; (iii) require public disclosure of credit rating performance statistics and histories; (iv) implement procedures to protect the credibility and transparency of rating methodologies, including disclosure requirements regarding the same; and (v) establish standards to ensure that credit analysts meet certain training, experience, and competence thresholds.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: 0
TAGS:
POSTED IN: Federal Issues, Mortgages, Securities

Fannie Mae Issues Lender Letter On Mortgage Loan Requirements

On August 25, Fannie Mae issued Lender Letter LL-2014-04, which reminds lenders that when a mortgage loan is selected by Fannie Mae for an anti-predatory and HOEPA compliance review, the lender must provide requested loan information to Fannie Mae. Further, the letter reminds sellers that mortgage loans with either an annual percentage rate or total points and fees payable by the borrower that exceed the applicable HOEPA thresholds are not eligible for delivery to Fannie Mae. Additionally, Fannie Mae released an optional worksheet, available on the Fannie Mae website, designed to assist lenders in responding to any information requests from Fannie Mae. This letter highlights the continued focus of Fannie Mae regarding its anti-predatory lending quality control process.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: 0
TAGS: ,
POSTED IN: Federal Issues, Mortgages

Federal Appeals Court Affirms Extender Statutes Trump Securities Act Statute Of Limitations

On August 19, the U.S. Court of Appeals for the Tenth Circuit reissued its original opinion affirming a district court’s holding that FIRREA’s NCUA extender statute circumvents the three-year repose period found in Section 13 of the Securities Act. Nat’l Credit Union Admin. Board v. Nomura Home Equity Loan Inc., Nos. 12-3295, 12-3298, 2014 WL 4069137 (10th Cir. Aug. 19, 2014). Extender statutes define the time period for government regulators to bring actions on behalf of failed financial organizations. The NCUA sued a number of RMBS issuers for violations of federal securities laws on behalf of two credit unions that the NCUA had placed into conservatorship. The defendant RMBS issuers countered that the suit was untimely under the applicable three-year statute of limitations in the Securities Act. The court originally held in 2013 that the NCUA’s claim was timely pursuant to the relevant extender statute, but its opinion had been vacated and remanded for further consideration in light of the Supreme Court’s recent decision in a similar case under a federal environmental statute. The court distinguished its case by first determining that the relevant statute was “fundamentally different” from the one in the Supreme Court’s case because the extender statute “plainly establishes a universal time frame for all actions brought by [the] NCUA.” The court rejected the argument that placed a distinction between statutes of limitations and statutes of repose by noting that extender statutes “displace[] all preexisting limits on the time to bring suit, whatever they are called.” The court then found that the extender statute’s surrounding language, statutory context, and statutory purpose supported its original decision that the NCUA’s suit was timely. Accordingly, the court reinstated its original opinion.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: 0
TAGS: ,
POSTED IN: Courts, Mortgages, Securities

CFPB Announces EClosing Pilot Participants

On August 21, the CFPB announced the companies that have been selected to participate in its residential mortgage eClosing pilot program. The program is intended to explore how the increased use of technology during the mortgage closing process may affect consumer understanding and engagement and save time and money for consumers, lenders, and other market participants. Specifically, the program seeks to aid the CFPB in better understanding the role that eClosings can play in addressing consumers’ “pain points” in the closing process, as identified by the CFPB in an April 2014 report. The three-month pilot program will begin later this year, and the participants include both technology vendors that provide eClosing solutions and creditors that have contracted to close loans using those solutions.

LinkedInFacebookTwitterGoogle+Share

Federal, State Mortgage-Related Investigations Yield Largest Ever Civil Settlement

On August 21, the DOJ announced that a large financial institution agreed to resolve federal and state mortgage-related claims through what the DOJ characterized as the largest ever civil settlement with a single entity. The agreement actually resolves numerous federal and state investigations related to various alleged practices conducted by the institution and certain former and current subsidiaries that it acquired during the financial crisis. Such allegations relate to the packaging, marketing, sale, arrangement, structuring, and issuance of RMBS and collateralized debt obligations (CDOs), as well as the underwriting and origination of mortgage loans. In total, the institution agreed to pay $9.65 billion in penalties and fines and provide $7 billion in relief to borrowers. Of the more than $9 billion in civil payments, $5 billion resolves several DOJ investigations related to RMBS and CDOs under FIRREA, as well as the allegedly fraudulent origination of loans sold to Fannie Mae and Freddie Mac or insured by the FHA. The origination investigations centered on alleged violations of the False Claims Act in the selling of, or seeking of government insurance for, loans alleged to be defective. Other penalty payments resolve RMBS-related claims by the SEC, the FDIC, and several states. In total, the state participants will receive nearly $1 billion, with California and New York obtaining the largest amounts at $300 million each. An independent monitor will be appointed to oversee the borrower relief provisions, which will require the institution to: (i) offer principal reduction loan modifications; (ii) make loans to “credit worthy borrowers struggling to obtain a loan”; (iii) make donations to certain communities harmed during the financial crisis; and (iv) provide financing for affordable rental housing. The institution also agreed to provide funding to defray any tax liability that will be incurred by borrowers who receive certain types of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act of 2007.

LinkedInFacebookTwitterGoogle+Share

Special Alert: CFPB Bulletin Re-Emphasizes Focus on Mortgage Servicing Transfers

On August 19, 2014, the CFPB issued Bulletin 2014-01 to address “potential risks to consumers that may arise in connection with transfers of residential mortgage servicing rights.”  The bulletin, which is the latest in a series of CFPB regulations, statements, and guidance on this subject, replaces the Bureau’s February 2013 bulletin on mortgage servicing transfers and states that “the Bureau’s concern in this area remains heightened due to the continuing high volume of servicing transfers.”  It further states that “the CFPB will be carefully reviewing servicers’ compliance with Federal consumer financial laws applicable to servicing transfers” and “may engage in further rulemaking in this area.”

The bulletin contains the following information, which is summarized in great detail below:

  • Examples of policies and procedures that CFPB examiners may consider in evaluating whether the servicers on both ends of a transfer have complied with the CFPB’s new regulations requiring, among other things, policies and procedures reasonably designed to facilitate the transfer of information during servicing transfers and to properly evaluate loss mitigation applications.
  • Guidance regarding the application of other aspects of the new servicing requirements to transfers.
  • Descriptions of other Federal consumer financial laws that apply to servicing transfers, such as the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the prohibition on unfair, deceptive, and abusive acts or practices (“UDAAPs”).
  • A statement that “[s]ervicers engaged in significant servicing transfers should expect that the CFPB will, in appropriate cases, require them to prepare and submit informational plans describing how they will be managing the related risks to consumers.”  This largely reiterates the Bureau’s statements in its February 2013 bulletin.

In a press release accompanying the bulletin, CFPB Director Richard Cordray stated that: “At every step of the process to transfer the servicing of mortgage loans, the two companies involved must put in appropriate efforts to ensure no harm to consumers. This means ahead of the transfer, during the transfer, and after the transfer.  We will not tolerate consumers getting the runaround when mortgage servicers transfer loans.

Click here to view the special alert.

LinkedInFacebookTwitterGoogle+Share

Unofficial Transcripts of the ABA Briefing/Webcast “Mortgage Q&A with the Consumer Financial Protection Bureau”

To address outstanding questions regarding the new mortgage rules that took effect in January 2014, CFPB staff provided non-binding, informal guidance in a webinar hosted by the American Bankers Association (ABA). Specifically, CFPB staff answered questions regarding the mortgage origination rules and the mortgage servicing rules on April 22, 2014.

With the ABA’s consent, BuckleySandler has prepared a transcript of the webinar that incorporates the ABA’s slides. The transcript is provided for informational purposes only and does not constitute legal opinions, interpretations, or advice by BuckleySandler. The transcript was prepared from the audio recording arranged by the ABA and may have minor inaccuracies due to sound quality. In addition, the transcripts have not been reviewed by the CFPB or the ABA for accuracy or completeness.

Questions regarding the matters discussed in the webinar or the rules themselves may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.

LinkedInFacebookTwitterGoogle+Share

CFPB Adjusts CARD Act, HOEPA, And Ability To Repay Thresholds

On August 14, the CFPB issued a final rule to re-calculate certain threshold amounts under Regulation Z. With respect to certain amounts under the CARD Act, effective January 1, 2015, the minimum interest charge disclosure thresholds will remain unchanged, while the permissible penalty fees safe harbor will increase to $27 for a first late payment and $38 for each subsequent violation in the following six months. With respect to HOEPA loans, effective January 1, 2015, the adjusted total loan amount threshold will be $20,391, and the adjusted statutory fee trigger will be $1,020. Also effective January 1, 2015, for the purpose of a creditor’s determination of a consumer’s ability to repay a transaction secured by a dwelling, a covered transaction will not be a qualified mortgage unless the transaction’s total points and fees do not exceed: (i) 3% of the total loan amount for a loan greater than or equal to $101,953; (ii) $3,059 for a loan amount greater than or equal to $61,172 but less than $101,953; (iii) 5% of the total loan amount for a loan greater than or equal to $20,391 but less than $61,172; (iv) $1,020 for a loan amount greater than or equal to $12,744 but less than $20,391; and (v) 8% of the total loan amount for a loan amount less than $12,744.

LinkedInFacebookTwitterGoogle+Share

FHFA Seeks Comments On Proposed Single GSE Security

On August 12, the FHFA requested comments on the structure of a proposed single security that would be issued and guaranteed by Fannie Mae or Freddie Mac (the GSEs). The implementation of the single security would be part of a “multi-year initiative” to build a common securitization platform. The request explains that the proposed single security would generally encompass many of the pooling features of the current Fannie Mae Mortgage Backed Security (MBS) and most of the disclosure framework of the current Freddie Mac Participation Certificate (PC). The single security would have key features that exist in the current market, such as: (i) a payment delay of 55 days; (ii) pooling prefixes; (iii) mortgage coupon pooling requirements; (iv) minimum pool submission amounts; (v) general loan requirements, such as first lien position, good title, and non-delinquent status; (vi) seasoning requirements; and (vii) loan repurchase, substitution, and removal guidelines. The GSEs would continue to maintain their separate Servicing and Selling Guides for the single security. The FHFA is especially interested in comments on how to preserve “to-be-announced” (TBA) eligibility and ensure that legacy MBS and PCs are “fully fungible” with the single security. The FHFA also seeks specific input on: (i) what key factors regarding TBA eligibility status should be considered in the design of and transition to a single security; (ii) what issues should be considered to ensure broad market liquidity for the legacy securities; (iii) what operational, system, policy, or other effects on the industry should be considered; and (iv) what can be done to ensure smooth implementation of a single security with minimal risk of market disruption. Comments are due by October 13, 2014.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: 0
TAGS: , ,
POSTED IN: Federal Issues, Mortgages

Freddie Mac Implements FinCEN AML Rules, Updates Other Selling And Servicing Policies

On August 14, Freddie Mac issued Bulletin 2014-15, which reminds seller/servicers subject to the AML requirements of the BSA that they are expected to maintain an AML compliance program and are required to report to Freddie Mac any instances of AML program noncompliance. Effective October 1, 2014, Freddie Mac is also requiring seller/servicers not subject to the AML provisions of the BSA to develop internal controls and policies and procedures to detect and report Suspicious Activity to Freddie Mac (but without the requirement to file SARs). Additionally, the Bulletin notifies seller/servicers that, effective October 15, 2014, Freddie Mac will require wholly-owned subsidiaries of seller/servicers that are federally-regulated depository institutions to obtain separate Freddie Mac seller/servicer approvals. The Bulletin also: (i) provides that seller/servicers can waive the requirement for flood insurance for non-residential detached structures located on the Mortgaged Premises; (ii) clarifies ULDD data points; (iii) updates Freddie Mac’s certificate of incumbency for sellers and warehouse lenders (effective October 1, 2014); and (iv) updates miscellaneous manufactured home requirements.

LinkedInFacebookTwitterGoogle+Share