Recently the FDIC published the Affordable Mortgage Lending Guide (Guide). The Guide:

• Provides community banks with a practical reference tool to compare federal programs so they can make an informed decision about which programs might be the right fit for their business plans and strategies to improve lending options available for their communities.
• Describes programs from the U.S. Department of Housing and Urban Development (HUD) and its Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), the U.S. Department of Veterans Affairs (VA), the U.S. Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund), and Fannie Mae and Freddie Mac, known as Government Sponsored Enterprises (GSEs).
• Focuses on guarantee, loan purchase, and subsidy programs that can facilitate mortgage lending by insured depository institutions.
• Includes federal programs that support home purchase, refinance, manufactured housing, and some home improvement lending by banks.
• Covers programs that are targeted to a variety of communities and individuals including rural, Native American, LMI, and veterans.
• Discusses the requirements of each program, as well as how to access the program.

The Affordable Mortgage Lending Guide is available at: https://www.fdic.gov/consumers/community/mortgagelending/guide/part-1-docs/affordable-mortgage-lending-guide-part-1.pdf

Earlier today the President signed House Joint Resolution 143 that extends the National Flood Insurance Program through December 21, 2018. We will continue to watch Congress. We expect Congress to continue to “kick the can down the road.” rather than take meaning action to fix the problems in the Program.

The following was originally drafted on December 4, 2018.

As we reported last summer, Flood Insurance – Congress Continues to Play Games, the National Flood Insurance Program Extension Act extended the National Flood Insurance Program (NFIP) until November 30, 2018. This was the sixth short-term extension of the NFIP.

The NFIP was originally set to expire on September 30, 2017.

• On September 8, 2017, Congress passed a short-term extension set to expire on December 8, 2017.
• On December 8, 2017, the NFIP received a second short-term extension through December 22, 2017 and a third short-term extension through January 19, 2018.
• The NFIP lapsed between January 20, 2018 and January 22, 2018, but received a fourth short-term reauthorization through February 8, 2018.
• The NFIP lapsed for approximately eight hours during a brief government shut-down in the early morning of February 9, 2018. However, the NFIP received an extension in the omnibus spending bill through July 31, 2018.

With the July deadline approaching, on June 28, 2018, the U.S. Senate approved its version of the farm bill, which includes an amendment that would extend the authorization of the NFIP for six months. The House opposed a six-month extension because it would leave the fate of the program up to the 116th Congress. The House Amendment to S. 1182 only extends the program until November 30, 2018, maximizing pressure on Congress to enact a permanent solution that makes necessary reforms and provides certainty for insurance providers and housing markets.

Once again congress was not up to the task for making real changes. On December 1, 2018, the President signed legislation passed by Congress that extends, for the seventh time, the National Flood Insurance Program’s authorization to December 7, 2018. Congress must now reauthorize the NFIP by no later than 11:59 pm on December 7, 2018.

So what’s your guess – will Congress fix the many problems with the NFIP or kick the problems down the road for the next Congress? Watch for details later this week or at the beginning of next week.

On December 6, 2018 the Senate voted 50-49 to confirm Kathy Kraninger as the new Director of the Consumer Financial Protection Bureau (CFPB). She has no experience leading a government agency, no experience in financial institution regulatory matters, and no experience in consumer protection. So, there is no track record upon which to speculate about the direction of the agency with her holding the reins.

Let’s enjoy the Holiday season, watch Director Kraninger’s first steps and hope for the best.

Last week the Bureau of Consumer financial Protection (BCFP) issued revised versions of the small entity compliance guides for the Loan Originator Rule and the Home Ownership and Equity Protection Act (HOEPA) Rule. Both Guides are updated for changes resulting from the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).

The Loan Originator Rule, among other requirements,  addresses loan originator compensation, defines the concept of a loan originator and addresses qualification and other requirements related to loan originators. The updated guide includes:

• An expansion of an exemption from the concept of a loan originator with regard to retailers of manufactured and modular homes and their employees, which resulted from the EGRRCPA;
• Revisions to the process for contacting the CFPB with informal inquiries about the rule; and
• A declaration that the TILA/RESPA Integrated Disclosure (TRID) rule is now in effect (the prior version of the guide was issued in March 2015 and the TRID rule became effective in October 2015).

The revised HOEPA Guide addresses:

• An expansion of the exemption from the concept of a loan originator made by the EGRRCPA (see Loan originator rule above), as this can affect the requirement to include loan originator compensation in points and fees for purposes of the points and fees threshold under the HOEPA rule; and
• Revisions to the process for contacting the CFPB with informal inquiries about the rule.

It is expected that the BCFP will also soon revise the Small Entity Compliance Guide for the Ability to Repay (ATR) Rule since that Rule is impacted by the HOEPA changes described above. For purposes of the points and fees cap to determine qualified mortgage loan status under the ATR Rule, the definition of “points and fees” set forth in the HOEPA rule is used.

The Home Ownership and Equity Protection Act Rule Guide is available at: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_hoepa_small-entity_compliance-guide.pdf

The Loan Originator Guide is available at: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_loan-originator_small-entity_compliance-guide.pdf

On November 14, 2018 the FDIC  issued a nine-page request for information on small dollar lending, including steps that can be taken to encourage FDIC-supervised financial institutions to offer small-dollar credit products that are responsive to customers’ needs and that are underwritten and structured prudently and responsibly. The request was issued as FIL-71-2018. Comments will be accepted for 60 days following publication in the Federal Register, which is expected soon.

The FDIC recognizes the important role small-dollar credit products can play, as part of the spectrum of credit and savings products offered by banks, in helping consumers meet the need for credit for purposes such as addressing cash-flow imbalances, unexpected expenses, or income volatility. Recent research from the FDIC indicates that 20 percent of U.S. households reported that their income varied “somewhat” or “a lot” from month-to-month. Moreover, according to research from the Federal Reserve, if faced with a hypothetical $400 expense, 4 in 10 U.S. adults in 2017 would borrow, sell something, or not be able to pay.

Comments are requested on the following topics:

Consumer Demand

1. To what extent is there an unmet consumer demand for small-dollar credit products offered by banks?
2. To what extent do banks currently offer small-dollar credit products to meet consumer demand?
3. To what extent and in what ways do entities outside the banking sector currently satisfy the consumer demand for small-dollar credit products?
4. What data, information, or other factors should the FDIC consider in assessing the consumer demand for small-dollar credit products?

Benefits and Risks

5. What are the potential benefits and risks to banks associated with offering responsible, prudently underwritten small-dollar credit products?
6. What are the potential benefits and risks to consumers associated with bank-offered small-dollar credit products?
7. What are the key ways that banks offering small-dollar loan products should manage or mitigate risks for banks and risks for consumers?
8. What are the potential benefits and risks related to banks partnering with third parties to offer small-dollar credit?
9. What steps could the FDIC take, consistent with its statutory authority, to encourage banks to develop and offer responsible, prudently underwritten small-dollar credit products?

Challenges

10. Are there any legal, regulatory, or supervisory factors that prevent, restrict, discourage, or disincentivize banks from offering small-dollar credit products? If so, please explain.
11. Are there any operational, economic, marketplace, or other factors that prevent, restrict, discourage, or disincentivize banks from offering small-dollar credit products? If so, please explain.
12. What factors may discourage consumers from seeking responsible, prudently underwritten small-dollar credit products offered by banks?

Product Features

13. Are there specific product features or characteristics of small-dollar loan products that are key to meeting the credit needs of consumers while maintaining prudent underwriting?
14. Are there specific product features or characteristics that are key to ensuring the economic viability to a bank of responsible, prudently underwritten small-dollar credit products?

Innovation

15. How can technology improve the ability of banks to offer responsible, prudently underwritten small-dollar loan products in a sustainable and cost-effective manner? Please specify the technology or technologies and the use case(s).
16. Are there innovations that might enable banks to better assess the creditworthiness of potential small-dollar loan borrowers with limited or no credit records with a nationwide credit reporting agency?
17. What role should the FDIC play, if any, in supporting innovations that enhance banks’ abilities to offer responsible, prudently underwritten small-dollar loans? Are there specific barriers that prevent banks from implementing such technologies or innovations?
18. How can technology be leveraged to improve consumers’ experiences and reduce potential risks to consumers associated with small-dollar credit products?

Alternatives

19. What other products and services that supplement or complement small-dollar credit offerings should banks consider? Are there other ways that banks can help consumers address cash-flow imbalances, unexpected expenses, or income volatility besides small-dollar credit products?

Other

20. Are there any distinguishing characteristics of particular institutions, such as a bank’s size, complexity, or business model, that the FDIC should consider, and if so how?
21. Please provide any other comments or information that would be useful for the FDIC to consider.

Other recent news on small dollar loans is available at: https://www.jackscomplianceresource.com/bcfp-puts-brakes-on-payday-loans/

A copy of the FIL is available at https://www.fdic.gov/news/news/financial/2018/fil18071.html?source=govdelivery&utm_medium=email&utm_source=govdelivery.

A copy of the request for information is available at:  https://www.fdic.gov/news/news/press/2018/pr18084a.pdf

On October 26, 2018 the Bureau of Consumer Financial Protection announced that it expects to issue proposed rules in January 2019 that will reconsider its rule regarding Payday, Vehicle Title, and Certain High-Cost Installment Loans and address the rule’s compliance date. The Bureau will make final decisions regarding the scope of the proposal closer to the issuance of the proposed rules. However, the Bureau is currently planning to propose revisiting only the ability-to-repay provisions and not the payments provisions, in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions. The proposals will be published as quickly as practicable consistent with the Administrative Procedure Act and other applicable law.

Stay tuned for further details in January.

On October 25, 2018 the federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC) with Community Reinvestment Act (CRA) responsibilities today announced the availability of data on small business, small farm, and community development lending reported by certain commercial banks and savings associations, pursuant to the CRA. The agencies releasing the data are the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

An FFIEC disclosure statement on the reported 2017 CRA data, in electronic form, is available for each reporting commercial bank and savings association. The FFIEC also prepared aggregate disclosure statements of small business and small farm lending for all of the metropolitan statistical areas and non-metropolitan counties in the United States and its territories. These statements are available for public inspection on the FFIEC website (www.ffiec.gov/cra).

A copy of the FFIEC’s press release is available at :  https://www.ffiec.gov/press/pr102518.htm

A copy of the Fact Sheet on the 2017 Data is available at:  https://www.ffiec.gov/hmcrpr/cra_fs18.htm

Details on the upcoming Compliance Resource webinar entitled CRA Data Collection and Reporting are available at:  https://www.jackscomplianceresource.com/event-registration/?ee=193

Recently the U.S. Department of Housing and Urban Development (HUD) approved a Conciliation Agreement resolving claims brought by three homeowners, a couple and an individual, against loanDepot.com, LLC, and Appraisal Management Services of America, Inc. The three alleged that the lender refused to refinance their homes because they are on Native American lands. The individual also claimed that loanDepot.com would not refinance his house because he is Native American.

The Fair Housing Act prohibits housing discrimination in mortgage lending and real estate-related transactions based on race, color, national origin, religion, sex, familial status and disability.

“A homeowner’s creditworthiness and ability to pay should be the only thing that matters when they apply for a mortgage, not their race or the fact that their home is located on Native American lands,” said Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity. “Today’s agreement sends a loud and clear message that HUD is committed to ensuring that lenders and other companies involved in the home mortgage process meet their obligations under the Fair Housing Act.”

The cases came to HUD’s attention when the couple from Belcourt, North Dakota, and the homeowner from Hoopa, California, filed complaints alleging that loanDepot,com refused to refinance their homes, which they owned in fee simple but within American Indian reservations. In one case, Appraisal Management Services of America informed loanDepot.com that it could not provide an appraisal on the home because it was on “Indian land.” LoanDepot.com and Appraisal Management Services of America deny discriminating against the three homeowners.

Under the terms of the agreement, loanDepot.com will pay the couple and the other homeowner $30,000 each and fund a loan subsidy program in the amount of $40,000 that will benefit prospective borrowers on American Indian Reservations.  LoanDepot.com also will provide $240,000 to support outreach programs that improve housing conditions, teach financial literacy, and provide home ownership education to American Indians on and around reservations. In addition, loanDepot.com will revise its policies regarding the underwriting of home mortgage loans on land located within the boundaries of American Indian reservations to ensure that its policies are consistent with the requirements of the Fair Housing Act.

Appraisal Management Services of America, Inc., will revise its policies regarding appraisals for mortgages on homes located on American Indian reservations and no longer contract with appraisers who refuse to conduct appraisals on reservations.

A copy of the agreement is available at https://www.hud.gov/sites/dfiles/FHEO/documents/18CA.pdf

Section 301 of the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA):

• Requires free placement and removal of security freezes by establishing a public webpage with links to credit reporting agency security freeze web pages.
• Requires Equifax, Experian and TransUnion to each set up a webpage for requesting fraud alerts and credit freezes.
• Provides additional ID theft protections to minors.
• Requires the big three credit bureaus to offer free electronic credit monitoring services to all active duty military personnel.
• Changes the rules for “fraud alerts,” which currently are free but only last for 90 days. Under the new law, fraud alerts last for one year, but consumers can renew them each year.

Section 301 is effective September 21, 2018, without implementing regulations.

The big three credit bureaus currently operate fee-paid freeze sites. The current sites generate a lot of consumer complaints. It is not clear yet whether the free sites will operate with fewer complaints.

Some banks offer credit monitoring or other products or services associated with the consumer credit report. If the package of services includes credit freezes and the consumer pays a fee for the package concerns regarding unfair and deceptive acts may arise. At a minimum product disclosures should explain that credit freezes may be placed or released through the credit bureaus for no charge.

For information on a webinar regarding deposit add-on products refer to:  https://www.jackscomplianceresource.com/event-registration/?ee=188

For more information about EGRRCPA refer to the following articles:

• https://www.jackscomplianceresource.com/hmda-final-rule-for-egrrcpa-exemption/
• https://www.jackscomplianceresource.com/extended-examination-cycle/
• https://www.jackscomplianceresource.com/interagency-statement-on-egrrcpa/
• https://www.jackscomplianceresource.com/restoration-of-ptafa/