News from Washington: Regulatory Updates
The Consumer Financial Protection Bureau (CFPB) issues a report on electronic mortgage closings. 
On August 5, 2015, the CFPB published a report titled “Leveraging Technology to Empower Mortgage Consumers at Closing: Learnings from the eClosing Pilot.” The CFPB conducted a pilot research program with lenders and technology vendors to evaluate whether consumers benefit from eClosings, defined as mortgage closings that rely on technology for borrowers to view and sign closing documents electronically. Key findings in the report include the following: eClosings were associated with higher perceived consumer empowerment, efficiency, and understanding than paper closings; consumers who received and reviewed documents before closing felt more empowered in the closing process and had higher scores when quizzed about their actual understanding, relative to those who did not review documents before the closing meeting; and eClosing meetings were shorter than paper closings.
The CFPB issues a bulletin on the compliance requirements for private mortgage insurance.
On August 4, 2015, the CFPB published a compliance bulletin to assist mortgage servicers in complying with the Homeowners Protection Act of 1998 (HPA), which governs when PMI must be canceled or terminated. The CFPB, which has observed industry confusion with the HPA’s requirements, published the bulletin to facilitate compliance.
The U.S. Department of Housing and Urban Development (HUD) seeks comment on proposed revisions to addendum to uniform residential loan application.
On May 15, 2015, HUD published a notice seeking public comment on proposed revisions to the HUD Addendum to the Uniform Residential Loan Application. The changes would:
- differentiate between the initial and final Uniform Residential Loan Application;
- revise mortgagee certification on debarment and suspension to be loan specific;
- remove references to handbooks no longer in use by single-family housing;
- update language regarding acceptable sources of funds;
- provide current nondiscrimination language; and
- update terminology reflected in the new Federal Housing Administration’s Single Family Housing Policy Handbook (HUD Handbook 4000.1).
The public comment period closed on July 14, 2015.
The U.S. Department of Education (DOE) proposes consumer protections for student financial accounts.
On May 18, 2015, the DOE issued a rulemaking proposal to provide new consumer protections for student financial accounts. Many colleges and universities have partnered with financial account providers to disburse financial aid, usually through debit or prepaid cards. The DOE issued the proposal to address consumer protection issues that
have arisen with some account providers, such as charging recipients unavoidable fees to access their student aid funds and prioritizing disbursements to account providers’ own affiliated accounts over aid recipients’ preexisting bank accounts. The proposed regulations would, among other things, do the following:
- prohibit educational institutions from requiring students or parents to open specific accounts into which their credit balances are deposited;
- mitigate fees incurred by student aid recipients by requiring reasonable access to surcharge-free ATMs;
- prohibit point-of-sale fees and overdraft fees for T1 accounts (financial accounts used for disbursing Title IV funds) and allow students and parents to access Title IV funds without paying fees for up to 30 days after the funds are disbursed;
- require an institution to provide a list of account options from which a student may choose to receive credit balance funds, with each option presented in a neutral manner and the student’s preexisting bank account listed as the first, most prominent, and default option; and
- require institutions to ensure electronic payments made to a student’s preexisting account are treated the same as payments made to accounts marketed through the institution.
The DOE estimates the proposal would affect 9 million students receiving $25 billion in Pell Grants and Direct Loan program funds through debit or prepaid cards. Update: On October 30, 2015, the DOE issued a final rule 
that largely adopted the proposed changes.
Agencies issue final rule on minimum requirements for appraisal management companies.
On April 30, 2015, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the CFPB, the Federal Housing Finance Agency (FHFA), and the National Credit Union Administration (NCUA) (all inclusive: the agencies) issued a final rule to implement a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that mandated the agencies to establish minimum requirements for state registration and supervision of an appraisal management company (AMC). AMCs provide services to creditors or principals in the secondary mortgage market, including the hiring of licensed and certified appraisers to perform appraisals. The rule does not compel states to establish an AMC registration system. However, there is a consequence if a state does not establish an AMC registration system that applies the rule’s minimum requirements for AMCs within 36 months of the effective date of the rule: Nonfederally regulated AMCs in that state will be prohibited from providing appraisal management services for federally related transactions until the state adopts a regulatory structure for AMCs that incorporates the rule’s minimum requirements. Regarding the minimum requirements, AMCs must verify that 1) only state-certified or state-licensed appraisers are used for federally related transactions and 2) appraisals comply with the Uniform Standards of Professional Appraisal Practice and valuation independence standards in the Truth in Lending Act and implementing regulations. The final rule became effective on August 10, 2015. AMCs that are subsidiaries of insured depository institutions do not have to register with a state but must comply with the minimum requirements by August 10, 2016.
Regulators release guidance on private student loans with graduated repayment terms at origination.
On January 29, 2015, the Board, the OCC, the FDIC, the NCUA, and the CFPB, in partnership with the State Liaison Committee of the Federal Financial Institutions Examination Council, issued guidance for financial institutions on private student loans that have graduated repayment terms at origination. This guidance provides principles that financial institutions should consider in their policies and procedures for originating private student loans with graduated repayment terms — that is, those that are structured to provide for lower initial monthly payments that gradually increase. The guidance also states that financial institutions that originate private student loans with graduated repayment terms should underwrite the loans in a manner consistent with safe and sound lending practices and provide disclosures that clearly communicate the timing and the amounts of payments to facilitate a borrower’s understanding of the loans’ terms and features.