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/

On Friday, September 7, 2018, the Financial Crimes Enforcement Network (FinCEN) issued a ruling which grants certain exceptions for financial institutions from the Beneficial Ownership Rule. Specifically the ruling provides financial institutions relief from the obligations under the Beneficial Ownership Requirements of identifying Legal Entity Customers in the case of:
•A rollover of a certificate of deposit (CD)
•A renewal, modification, or extension of a loan (e.g., setting a later payoff date) that does not require underwriting review and approval;
•A renewal, modification, or extension of a commercial line of credit or credit card account (e.g., a later payoff date is set) that does not require underwriting review and approval; and
•A renew al of a safe deposit box rental.

FinCEN deems each of these account relationships to presents low risks for money laundering and terrorist financing because they make such activity impractical.

Prior to this action, on May 16, 2018, FinCEN issued a 90-day temporary exceptive relief, retroactive to May 11, 2018, which was then extended an additional 30 days on August 8, 2018. Similar to the September 7 ruling, the May 11 temporary rule provided exceptive relief from the Beneficial Ownership Rule for products and services that automatically rolled over or renewed (i.e., CD or loan accounts) and were established before the Beneficial Ownership Rule’s Applicability Date of May 11, 2018. This exceptive relief replaces and supersedes the May 16, 2018, temporary rule, as well as the August 8, 2018, 30-day extension.

FinCEN’s ruling is available here.

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On September 10, 2018 the Bureau of Consumer Financial Protection (BCFP) proposed to create a Disclosure Sandbox through its revised Policy to Encourage Trial Disclosure Programs (Policy or TDP Policy), which is intended to carry out the BCFP’s authority under Section 1032(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). Comments will be received until October 10, 2018.

The BCFP believes that there may be significant opportunities to enhance consumer protection by facilitating innovation in financial products and services through enabling responsible companies to research informative, cost-effective disclosures in test programs. The BCFP also recognizes that in-market testing, involving companies and consumers in real world situations, may offer particularly valuable information with which to improve disclosure rules and model forms. The Policy implements the statutory requirement to issue standards and procedures for trial disclosure programs and is designed to encourage financial services companies to innovate by proposing and conducting such programs, consistent with the protections for consumers described in the Policy.

One hopes that the plan creates an environment where program participants developing new options for consumer disclosures can play creatively and safely, like kids in a sandbox, rather than an environment that program participants, under the auspices of the BCFP, use like a cat.

A copy of the proposed policy guidance is available at:  https://www.gpo.gov/fdsys/pkg/FR-2018-09-10/pdf/2018-19385.pdf

On August 31 the Bureau of Consumer Financial Protection issued a final rule to implement and clarify the requirements of section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which amended certain provisions of the Home Mortgage Disclosure Act (HMDA). The rule clarifies:

• That insured depository institutions and insured credit unions covered by a partial exemption under the EGRRCPA have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data;
• That only loans and lines of credit that are otherwise HMDA reportable count toward the thresholds for the partial exemptions;
• Which of the data points in Regulation C are covered by the partial exemptions;
• Designates a non-universal loan identifier for partially exempt transactions for institutions that choose not to report a universal loan identifier; and
• The EGRRCPA’s exception to the partial exemptions for negative Community Reinvestment Act examination history.

Section 104(a) of the Act amends HMDA section 304(i) by adding partial exemptions from HMDA’s requirements for certain insured depository institutions and insured credit unions.

• New HMDA section 304(i)(1) provides that the requirements of HMDA section 304(b)(5) and (6) shall not apply with respect to closed-end mortgage loans of an insured depository institution or insured credit union if it originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years.
• New HMDA section 304(i)(2) provides that the requirements of HMDA section 304(b)(5) and (6) shall not apply with respect to open-end lines of credit of an insured depository institution or insured credit union if it originated fewer than 500 open-end lines of credit in each of the two preceding calendar years.
• Notwithstanding the new partial exemptions, new HMDA section 304(i)(3) provides that an insured depository institution must comply with HMDA section 304(b)(5) and (6) if it has received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent examinations or a rating of “substantial noncompliance in meeting community credit needs” on its most recent examination under section 807(b)(2) of the Community Reinvestment Act of 1977.

Section 104 of EGRRCPA was effective upon enactment, May 24, 2018, but without regulations it was basically impossible to take advantage of the exception. The final rule is effective when published in the Federal Register, which is expected soon. While covered institutions may legally take advantage of the exception, systems most likely need updating to take advantage of the exception.

The CFPB also needs to update its HMDA platform to accept data from institutions covered by the exception. Accordingly, the HMDA platform will continue to accept submissions of a data field that is covered by a partial exemption under the Act for a specific loan or application as long as those insured depository institutions and insured credit unions that choose to voluntarily report the data include all other data fields that the data point comprises. For example, if a partially exempt institution reports a data field that is part of the property address data point (such as street address) for a partially exempt loan or application, it will report all other data fields that are part of the property address data point (including zip code, city, and State) for that transaction in accordance with the 2018 Filing Instructions Guide (FIG).

The final rule contains specific lists of the fields on the Loan Application Register that an exempt institution does not need to report.

A copy of the 31 page final rule is available at:  https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_hmda_interpretive-procedural-rule_2018-08.pdf

On August 28, 2018 the Office of the Comptroller of the Currency released an Advanced Notice of Proposed Rulemaking (ANPR) seeking comment on the best ways to modernize the regulatory framework implementing the Community Reinvestment Act (CRA). The ANPR solicits comment on a number of questions related to

• increasing lending and services to people and in areas that need it most, including in LMI areas;
• clarifying and expanding the types of activities eligible for CRA consideration;
• revisiting how assessment areas are defined and used;
• establishing metric-based thresholds for CRA ratings;
• making bank CRA performance more transparent;
• improving the timeliness of regulatory decisions related to CRA; and
• reducing the cost and burden related to evaluating performance under the CRA.

The OCC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, agencies) issue regulations that implement the requirements of the CRA.  Those regulations have not been significantly revised in over 20 years. While the OCC is taking the lead on the revision process, ultimately all of the agencies will be involved in issuing revised regulations.

Comments will be received by the OCC for 75 days following publication in the Federal Register, which is expected soon.

A copy of the OCC  Bulletin 2018-24 is available at:  https://www.occ.gov/news-issuances/bulletins/2018/bulletin-2018-24.html

A copy of the ANPR is available at:  https://www.occ.gov/news-issuances/news-releases/2018/nr-occ-2018-87a.pdf

On August 27, 2018 the Consumer financial Protection Bureau (CFPB published a final rule amending Regulation Z. The Bureau is required to calculate annually the dollar amounts for several provisions in Regulation Z; this final rule revises, as applicable, the dollar amounts for provisions implementing TILA and amendments to TILA, including under:

• The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act);
• The Home Ownership and Equity Protection Act of 1994 (HOEPA); and
• The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The Bureau is adjusting these amounts, where appropriate, based on the annual percentage change reflected in the Consumer Price Index (CPI) in effect on June 1, 2018.

Credit Card Annual Adjustments

• Minimum Interest Charge Disclosure Thresholds – The minimum interest charge amounts for §§ 1026.6(b)(2)(iii) and 1026.60(b)(3) will remain unchanged at $1.00 for the year 2019.
• Safe Harbor Penalty Fees – Effective January 1, 2019, the permissible fee threshold amounts increased by $1 and are $28 for § 1026.52(b)(1)(ii)(A) and $39 for § 1026.52(b)(1)(ii)(B).

 HOEPA Annual Threshold Adjustments

Effective January 1, 2019, for purposes of determining under § 1026.32(a)(1)(ii) the points-and-fees coverage test under HOEPA to which a transaction is subject, the total loan amount threshold is $21,549, and the adjusted points-and-fees dollar trigger under § 1026.32(a)(1)(ii)(B) is $1,077.

• When the total loan amount for a transaction is $21,549 or more, and the points-and-fees amount exceeds 5 percent of the total loan amount, the transaction is a high-cost mortgage.
• When the total loan amount for a transaction is less than $21,549, and the points-and-fees amount exceeds the lesser of the adjusted points-and-fees dollar trigger of $1,077 or 8 percent of the total loan amount, the transaction is a high-cost mortgage.

 Qualified Mortgages Annual Threshold Adjustments

Effective January 1, 2019, a covered transaction is not a qualified mortgage if, pursuant to § 1026.43(e)(3), the transaction’s total points and fees exceed:

• 3 percent of the total loan amount for a loan amount greater than or equal to $107,747;
• $3,232 for a loan amount greater than or equal to $64,648 but less than $107,747;
• 5 percent of the total loan amount for loans greater than or equal to $21,549 but less than $64,648;
• $1,077 for a loan amount greater than or equal to $13,468 but less than $21,549; or
• 8 percent of the total loan amount for loans less than $13,468.

This final rule is effective January 1, 2019.

The final rule is available at:  https://www.federalregister.gov/documents/2018/08/27/2018-18209/truth-in-lending-regulation-z-annual-threshold-adjustments-credit-cards-hoepa-and-qualified

On August 23, 2018 the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (the agencies) issued interim final rules to allow qualifying insured depository institutions (generally those that are well capitalized and well managed) with less than $3 billion in total assets to benefit from an extended 18-month on-site examination cycle (up from the previous 12-month cycle).

Prior to enactment of the EGRRCPA, only qualifying insured depository institutions with less than $1 billion in total assets were eligible for an 18-month examination cycle. The agencies estimate that the interim final rules will increase the number of banks and savings associations that may qualify for an extended 18-month examination cycle by approximately 420 (227 of which are supervised by the FDIC, 100 by the OCC, and 93 by the Board), bringing the total number to 4,798 banks and savings associations.

The overburdened agencies have reportedly “jumped the gun” by contacting some financial institutions, immediately after enactment of EGRRCPA, and pushing back planned examination dates.

The interim final rule is effective immediately upon publication in the Federal Register, which is expected soon.

A copy of the interim final rule is available at:  https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20180823a1.pdf

On August 15, 2018 the Office of the Comptroller of the Currency (OCC) published OCC Bulletin 2018-23 to make public the revised Policies and Procedures Manual (PPM) 5000-43, which clarifies the OCC’s policy for applying the regulatory framework to determine the effect of evidence of discriminatory or other illegal credit practices on the Community Reinvestment Act (CRA) rating of a national bank, federal savings association, or federal branch. The updated PPM replaces and rescinds OCC PPM 5000-43, “Impact of Evidence of Discriminatory or Other Illegal Credit Practices on Community Reinvestment Act Ratings” (October 12, 2017).

The revised PPM does not appear to be a change in policy, but rather a realignment of written policy with practices actually used by the OCC. While this action only impacts OCC regulated institutions other federal bank regulatory agencies tend to apply the same concepts to the institutions they regulate.

The revisions tweak the existing guidance on this subject.

• For example the revised procedures clarify that in assigning a CRA rating, the OCC first evaluates a bank’s performance for the applicable time period under the regulatory performance criteria and then makes any adjustments that are warranted based on evidence of discriminatory or other illegal credit practices.
• The PPM further clarifies that if, after completing an evaluation of a bank’s CRA performance, the OCC determines that a bank’s composite or component rating will be lowered based on evidence of discriminatory or other illegal credit practices directly related to the bank’s CRA lending activities, the OCC’s general policy is to downgrade the rating by only one rating level unless such illegal practices are found to be particularly egregious. Multi-level downgrades based on discriminatory or other illegal credit practices have occurred, but are rare.
• The CRA regulations provide that in determining the adverse effect of evidence of discriminatory or other illegal credit practices, “the OCC considers . . . any corrective action that the bank has taken or has committed to take, including voluntary corrective action resulting from self-assessment.” This principle is consistent with a purpose of the CRA regulations, which is to consider whether discriminatory or other illegal credit practices have been, or are substantially being, addressed by the bank. The OCC’s policy is generally not to penalize a bank by lowering its CRA rating when examiners have determined the bank has taken appropriate remedial actions because penalties in such cases can unnecessarily distract and divert the bank’s resources from lending, investing, or serving the relevant communities and thereby frustrate the CRA’s purposes.

The updated Policies and Procedures Manual is available at:  https://www.occ.gov/publications/publications-by-type/other-publications-reports/ppms/ppm-5000-43.pdf

For comparison purposes the old PPM is available at:  https://buckleysandler.com/sites/default/files/Buckley%20Sandler%20InfoBytes%20-%20OCC%20Manual%20PPM5000-43%202017.10.12.pdf. (Thanks to Buckley Sandler for retaining the previous guidance on their website.)

On August 10, 2018 the Bureau of Consumer Financial Protection (CFPB) completed the nearly three year process of issuing relatively minor amendments to implement legislation that allows financial institutions that meet certain requirements to be exempt from sending annual privacy notices to their customers. The Gramm-Leach-Bliley Act (GLBA) generally requires that financial institutions send annual privacy notices to customers.

In December 2015, Congress amended the GLBA as part of the Fixing America’s Surface Transportation Act (FAST Act). This amendment to the GLBA provides financial institutions that meet certain conditions an exemption to the requirement under the GLBA to deliver an annual privacy notice. A financial institution can use the annual notice exception if it limits its sharing of customer information so that the customer does not have the right to opt out, and has not changed its privacy notice from the one previously delivered to its customer.

The final rule implements this legislation and establishes deadlines for institutions resuming annual privacy notices if their practices change and they therefore cease to qualify for the exemption.

The rule is effective 30 days after publication in the Federal Register, which is expected soon. A copy of the 55-page final rule is available at:  https://files.consumerfinance.gov/f/documents/bcfp_glba-privacy-notices_final-rule_amendment_2018-08.pdf