Consumer Compliance Outlook
News from Washington: Regulatory Update
On January 15, 2009, HUD delayed the effective date of the "required use" section of its RESPA final rule until April 16, 2009. The rule establishes a new definition of "required use" that would effectively prohibit nonsettlement service providers from providing discounts to consumers for using affiliates of settlement service providers. The required use rule was scheduled to become effective on January 16, 2009.
On January 8, 2009, HUD issued new guidance on how it will interpret state compliance with the SAFE Mortgage Licensing Act (Safe Act). The Safe Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators. The Safe Act also requires the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish and maintain a nationwide mortgage licensing system and registry. The guidance provides that HUD has reviewed the state model bill prepared by the CSBS and AARMR and found that states adopting that bill will be in compliance with the Safe Act requirements.
On January 6, 2009, HUD issued Mortgagee Letter 2009-3 (ML 09-03), which describes procedures for originating and servicing Federal Housing Administration-insured mortgages authorized under the Hope for Homeowners (H4H) program. The letter incorporates changes to the H4H program made by the Emergency Economic Stabilization Act of 2008 (EESA) by supplementing and modifying Mortgagee Letters 2008-29 and 2008-30 in three ways.First, the letter gives lenders additional flexibility in calculating a borrower's debt-to-income ratio in adjustable-rate mortgage transactions. Second, the letter allows lenders to provide qualifying borrowers with mortgages that have terms between 30 and 40 years. However, in order for the loan to qualify for a securitization pool, the term must be either 30 or 40 years. Third, the letter expands the types of properties eligible under the program to include two-, three-, and four-unit properties, provided that the borrower occupies one of the units as a primary residence. The letter also clarifies previous program requirements.
On January 6, 2009, the federal financial institution regulatory agencies (the agencies) announced the publication of the final Interagency Questions and Answers (Q&As) Regarding Community Reinvestment that, among other things, encourages financial institutions to take steps to help prevent home mortgage foreclosures. The questions and answers interpret the agencies' Community Reinvestment Act (CRA) regulations and provide guidance to financial institutions and the public. The agencies proposed the Q&As on July 11, 2007. After considering the comments, the agencies adopted the majority of the Q&As as they were proposed or with revisions in response to the comments.
On December 29, 2008, in accordance with Section 611(e) of the Fair Credit Reporting Act (FCRA), the FTC submitted its Report on Complaint Referral Program. Section 611(e) of the FCRA directs the commission to transmit certain consumer complaints to the nationwide consumer reporting agencies (CRAs) that are the subject of complaints, obtain information from the CRAs related to resolving those complaints, and submit a report to Congress about the complaint referral program. The report covers the period from the start of the program in 2004 through the end of 2007.
On December 18, 2008, the Board approved final rules that will prohibit certain unfair acts or practices and improve the disclosures consumers receive in connection with credit card accounts and other revolving credit plans. The final rules prohibiting certain credit card practices were adopted under the Federal Trade Commission Act and are being issued concurrently with substantially similar final rules by the Office of Thrift Supervision and the National Credit Union Administration. In addition, the Board also adopted extensive changes to Regulation Z dealing with open-end (nonhome-secured) plans. For further information on these topics, please refer to the articles that begin on page 4 and page 6, respectively, of this issue.
On December 17, 2008, the federal bank regulatory agencies announced the annual adjustment to the asset-size thresholds used to define small bank, small savings association, intermediate small bank, and intermediate small savings association under the CRA regulations. The new asset-size thresholds are as follows: Small bank or small savings association means an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $277 million. Intermediate small bank or intermediate small savings association means a small institution with assets of at least $277 million as of December 31 of both of the prior two calendar years and less than $1.109 billion as of December 31 of either of the prior two calendar years.
On November 12, 2008, the Department of the Treasury and the Board announced the release of a joint final rule to implement the Unlawful Internet Gambling Enforcement Act of 2006. The act prohibits gambling businesses from knowingly accepting payments in connection with unlawful Internet gambling, including payments made through credit cards, electronic funds transfers, and checks. The act requires the Board and the Treasury to develop a joint rule in consultation with the Department of Justice. Compliance with the rule is required by December 1, 2009.
On November 12, 2008, the Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision issued a joint press release to emphasize the importance of banking organizations and their regulators working together to ensure that the needs of creditworthy borrowers are met. The news release noted that the Board, the Treasury Department, and the FDIC had recently put into place several programs designed to promote financial stability and to mitigate the effects of current market conditions. These programs make new capital widely available to U.S. financial institutions, broaden and increase the guarantees on bank deposit accounts and certain liabilities, and provide backup liquidity to U.S. banking organizations. These actions are designed to help support responsible lending activities of banking organizations, enhance their ability to fund such lending, and enable banking organizations to better meet the credit needs of households and businesses. All banking organizations are expected to adhere to the principles set forth in this statement.