On March 10, the FDIC issued FIL-18-2016 announcing updates to technical assistance videos on flood insurance. The FDIC’s videos “reflect changes in federal flood insurance laws, including changes regarding escrowing of flood insurance premiums and fees, insuring detached structures, and force-placed insurance.” The updated flood insurance series includes five separate videos: (i) Overview and Key Requirements; (ii) Building an Effective Compliance Management System; (iii) Common Violations and Consequences for Noncompliance; (iv) Frequently Asked Questions; and (v) Review and Resources. As highlighted in the letter, “the FDIC continues to emphasize to institutions the importance of managing compliance risk associated with making loans in areas having special flood hazards.”
On December 23, the CFPB announced that it is amending the official commentary interpreting Regulation Z (Truth in Lending) to reflect a change in the asset size exemption thresholds required to establish an escrow account for higher-priced mortgages under Reg. Z. Under the amended commentary, the exemption threshold is adjusted to increase to $2.069 billion from $2.052 billion.
Bank Settles with DOJ for $81.6 Million for Failing to Timely File Payment Change Notices for Homeowners in Bankruptcy
On November 5, the DOJ announced a proposed settlement with a bank for allegedly violating bankruptcy rules by not providing homeowners with required notices that would have allowed them to challenge the accuracy of increased mortgage rates. According to the DOJ, the bank acknowledged that, from December 1, 2011 to March 31, 2015, it failed to (i) file payment change notices (PCNs) 21 days before adjusting a debtor’s monthly mortgage payment, as required by federal regulations; and (ii) perform timely escrow analyses. Under the settlement, the bank will be required to pay over $80 million in restitution to homeowners in bankruptcy that were affected by its actions and will be required to update its internal procedures to prevent further violations, including improving its employee training and its quality control processes to ensure that PCNs are filed within the appropriate timeframe. The settlement was filed in the U.S. Bankruptcy Court for the District of Maryland and is subject to court approval.
On March 3, the DOJ’s U.S. Trustee Program announced a $50 million settlement with a national bank to resolve allegations that the bank engaged in improper actions during bankruptcy proceedings. Under the terms of the settlement, the bank will provide relief in the form of cash payments, mortgage loan credits, and loan forgiveness to over 25,000 homeowners who are, or were, in bankruptcy. Additionally, the bank will acknowledge that (i) the bank’s former employees and the employees of an outside vendor improperly signed more than 50,000 payment change notices filed in bankruptcy courts around the country; (ii) the bank failed to file timely, accurate payment change notices; and (iii) the bank failed to provide timely, accurate escrow statements. The bank further will agree to enhance its technology, policies, procedures, internal controls and other oversight systems. Finally, the parties will agree to engage an independent reviewer to confirm the bank’s adherence to the terms of the settlement. The settlement is pending court approval.
On April 29, FinCEN issued five rulings in response to companies who sought clarification regarding whether their company is a money service business under the BSA. In FIN-2014-R006, FinCEN determined that a company that operates an online real-time deposit, settlement, and payment services platform for banks, businesses, and consumers is considered a money transmitter, not a provider of prepaid access, and should be registered as a money services business under BSA regulations. In two other rulings—FIN-2014-R004 and FIN-2014-R005— FinCEN clarified the exemption from the money transmitter definition for persons that accept and transmit funds “only integral to the sale of goods or the provision of services, other than money transmission services.” FinCEN determined that the escrow services at issue in FIN-2014-R004 and the transaction management services at issue in FIN-2014-R005 fit within that exemption because the acceptance and transmission of funds in these cases is not a separate and discrete service in addition to the underlying service, but instead is a necessary and integral part of the service itself. Therefore, these companies are not considered to be money transmitters subject to registration. FinCEN determined in FIN-2014-R007 that a company that rents computer systems used to mine virtual currencies is not a money transmitter. Finally, in FIN-2014-R008, FinCEN determined that although the company, which uses armored cars to facilitate the exchange of coins and cash, does not qualify for the “armored car” exemption in the money transmitter definition, it is still not considered a money transmitter. FinCEN stated that the transportation of currency and/or coin of certain denominations from the company’s vault to the customer’s location and the return transportation of currency and/or coin in the exact amount of the change provided to the company’s own vault does not constitute the acceptance of value from one person and the transportation of such value to another person or location.