Banking Agencies Address Disaster Relief for Hurricane Harvey Victims

Several federal agencies have issued reminders and requirements related to banking and credit services for borrowers affected by Hurricane Harvey. We previously reported on mortgage-related guidance issued by Fannie Mae, Freddie Mac, HUD, and VA regarding mortgage loans.

On August 26, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), and Conference of State Bank Supervisors issued a joint press release urging financial institutions in disaster areas to "work constructively with borrowers in communities affected by Hurricane Harvey." The joint press release reminds financial institutions that they may receive Community Reinvestment Act (CRA) consideration for community development loans, investments, or services that revitalize or stabilize federally designated disaster areas. It also reminds banks to monitor municipal securities and loans affected by the hurricane, as government projects may be negatively affected. The joint press release also assures banks that regulators will grant flexibility in regulatory reporting and publishing requirements, and that regulators will expedite any request to operate temporary banking facilities.

Additionally, the agencies have adopted the following disaster relief policies:

FRB

The FRB published letter SR 13-6 on March 29, 2013 to highlight the supervisory practices it employs during a disaster. In general, the letter seeks to encourage covered banking organizations to adopt measures that help borrowers and other customers in communities under stress and that contribute to the health and recovery of these communities. Per the letter, the FRB will aim to assist in disaster relief efforts by easing the regulatory burden on banks. For example, the FRB may exercise its authority to waive real estate-related appraisal regulations, and may extend CRA consideration to activities that revitalize or stabilize a disaster area, even if the loans, investments, or services provided are to middle- or upper-income individuals. The FRB also published a webpage of resources following Hurricanes Katrina and Rita that may be applicable here.

FDIC

On August 29, the FDIC published Financial Institution Letter FIL-38-2017 (the Letter), which applies to all FDIC-supervised institutions, including community banks. The Letter encourages banks to "consider all reasonable and prudent steps to assist customers in communities affected by recent storms." Specifically, the FDIC suggests waiving fees, increasing ATM cash limits, easing credit card limits, allowing loan customers to defer or skip payments, and delaying the submission of delinquency notices to credit bureaus. The Letter also suggests that banks use the non-documentary verification methods permitted by the Customer Identification Program requirement of the Bank Secrecy Act for affected customers who cannot provide standard identification documents.

The FDIC has also set up a webpage dedicated to Hurricane Harvey information for consumers and bankers. That webpage links to a document created for institutions supervised by Federal Financial Institution Examination Councilmember agencies and the Conference of State Bank Supervisors that discusses the lessons they learned from the effects of Hurricane Katrina.

The webpage includes resources for consumers including Hurricane Harvey FAQs, disaster planning assistance, and a disaster recovery to-do list.

OCC

On August 24, the OCC issued a Proclamation that permits national banking associations, federal savings associations, and federal branches and agencies of foreign banks to close offices in the areas affected by the emergency conditions for as long as deemed necessary for bank operation or public safety. The Proclamation also referred to OCC Bulletin 2012-28 (the Bulletin), which sets forth previous bank guidance applicable to natural disasters. For the purposes of disaster relief, the Bulletin persuades banks to consider assisting affected borrowers by, among other things, waiving or reducing ATM fees, and restructuring borrowers' debt obligations.

Banks should also consider previously issued OCC guidance that may be applicable in the event of a disaster. For example, OCC Bulletin 2014-37 provides that a bank must halt all debt sales on accounts of customers in disaster areas. According to FEMA declarations, this debt sales moratorium should have started on August 23 for affected counties in Texas, and on August 27 for Louisiana.

Farm Credit Administration (FCA)

On August 29, the FCA issued a press release encouraging Farm Credit System institutions to extend the terms of loan repayments, restructure borrowers' debt obligations, ease some loan documentation or credit-extension terms for new loans to certain borrowers, and seek FCA relief from specific regulatory requirements.

National Credit Union Administration (NCUA)

On August 25, in a press release, the NCUA reminded credit unions that its Office of Small Credit Union Initiatives can provide urgent needs grants of up to $7,500 to low-income credit unions that experience sudden costs to restore operations interrupted by the storm.

On August 28, the NCUA announced that there were 150 federally insured credit unions in the areas of Texas affected by Hurricane Harvey and approximately 28 credit unions in the areas of Louisiana affected by the storm. To help these credit unions, the NCUA stated that its disaster assistance policy was to:

  • Encourage credit unions to make loans with special terms and reduced documentation to affected members;
  • Guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund;
  • Make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility; and
  • Reschedule routine examinations of affected credit unions.

Under certain conditions, the NCUA permits federal credit unions to assist other credit unions and non-members by using their correspondent services authority to provide emergency financial services, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals in the areas affected by the floods. The NCUA notes that if a credit union provides such emergency services, it may not impose charges for such services that exceed its direct costs.

In addition to following the guidance above, in the absence of applicable exemptions or waivers granted by regulators, financial institutions wherever located must continue to comply with consumer protection and other banking laws. In particular, financial institutions serving communities impacted by Hurricane Harvey should remain mindful of anti-money laundering, suspicious activity reporting, data security, and privacy requirements.

- Pavitra Bacon


CFPB Publishes Annual CARD Act, HOEPA, QM Adjustments

The CFPB has published a final rule regarding various annual adjustments it is required to make under provisions of Regulation Z (TILA) that implement the CARD Act, HOEPA, and the ability to repay/qualified mortgage provisions of Dodd-Frank. The adjustments reflect changes in the Consumer Price Index in effect on June 1, 2017 and will take effect January 1, 2018.

CARD Act. The CARD Act requires the CFPB to calculate annual adjustments of (1) the minimum interest charge threshold that triggers disclosure of the minimum interest charge in credit card applications, solicitations, and account opening disclosures, and (2) the fee thresholds for the penalty fees safe harbor. The calculation did not result in a change for 2018 to the current minimum interest charge threshold (which requires disclosure of any minimum interest charge above $1.00). The calculation also did not result in a change for 2018 to the first and subsequent violation safe harbor penalty fees. Such fees remain at $27 and $38, respectively.

HOEPA. HOEPA requires the CFPB to annually adjust the total loan amount and fee thresholds that determine whether a transaction is a high-cost mortgage. In the final rule, for 2018, the CFPB increased the current total loan amount threshold from $20,579 to $21,032, and the current points and fees threshold from $1,029 to $1,052. As a result, in 2018, a transaction will be a high-cost mortgage (1) if the total loan amount is $21,032 or more, and the points and fees exceed 5 percent of the total loan amount, or (2) if the total loan amount is less than $21,032, and the points and fees exceed the lesser of $1,052 or 8 percent of the total loan amount.

Ability to repay/QM rule. Pursuant to its ability to repay/QM rule, the CFPB must annually adjust the points and fees limits that a loan cannot exceed to satisfy the requirements for a QM. The CFPB must also annually adjust the related loan amount limits. In the final rule, the CFPB increased these limits for 2018 to the following:

  • For a loan amount greater than or equal to $105,158 (currently $102,894), points and fees may not exceed 3 percent of the total loan amount
  • For a loan amount greater than or equal to $63,095 (currently $61,737) but less than $105,158, points and fees may not exceed $3,155
  • For a loan amount greater than or equal to $21,032 (currently $20,579) but less than $63,095, points and fees may not exceed 5 percent of the total loan amount
  • For a loan amount greater than or equal to $13,145 (currently $12,862) but less than $21,032, points and fees may not exceed $1,052
  • For a loan amount less than $13,145 (currently $12,862), points and fees may not exceed 8 percent of the total loan amount

- Barbara S. Mishkin


HUD/VA/Fannie/Freddie Address Mortgage-Related Disaster Relief for Hurricane Harvey Victims

U.S. Department of Housing and Urban Development (HUD)

On Monday, August 28, HUD announced that it was committed to "speed federal disaster assistance to the State of Texas and provide support to homeowners and low-income renters forced from their homes due to Hurricane Harvey."

The following forms of relief are available to people in impacted counties (currently, Aransas, Atascosa, Austin, Bee, Bexar, Brazoria, Brazos, Caidwell, Calhoun, Cameron, Chambers, Colorado, Comal, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Jackson, Jasper, Jefferson, Jim Wells, Karnes, Kerr, Kleberg, Lavaca, Lee, Leon, Liberty, Live Oak, Madison, Matagorda, Montgomery, Newton, Nueces, Refugio, San Patricio, Tyler, Victoria, Walker, Waller, Washington, Wharton, Willacy and Wilson counties):

Expedited Funds. State and local governments may request that the awarding of annual Community Development Block Grant (CDBG) and HOME Investment Partnerships (HOME) funds be expedited or that program year start dates be moved up. HUD is currently contacting state and local officials to explore streamlining its CDBG and HOME programs in order to expedite the repair and replacement of damaged housing.

Foreclosure Relief. HUD is granting a 90-day moratorium on foreclosures and foreclosure forbearance on Federal Housing Administration (FHA)-insured home mortgages located within the geographic boundaries of the disaster area. A borrower can also qualify for foreclosure relief if he or she is a household member of someone who is deceased, missing or injured directly due to the disaster, or if his or her financial ability to pay mortgage debt was directly or substantially affected by the disaster.

Mortgage Insurance. HUD's Section 203(h) program provides FHA insurance to disaster victims who have lost their homes, enabling them to finance the purchase or rehabilitation of a home. Borrowers working with participating FHA-approved lenders may be eligible for 100% financing. Additionally, HUD's Section 203(k) loan program enables the purchase, refinance, and rehabilitation of a home that has been lost or damaged.

Section 108 Loan Guarantee Program. HUD will offer state and local governments federally- guaranteed loans for housing rehabilitation, economic development, and repair of public infrastructure. Loans typically range from $500,000 to $140 million, depending on the scale of the project or program. Under this program, project costs can be spread over time with flexible repayment terms and low interest rates.

Freddie Mac

On August 25, Freddie Mac confirmed that under its Single-Family Seller/Servicer Guide, it requires servicers to suspend foreclosure proceedings for up to 12 months for disaster-affected borrowers and waive penalties or late fees for borrowers with disaster-damaged homes, and bars servicers from reporting forbearance or delinquencies caused by the disaster to credit bureaus. Freddie Mac also reminded servicers to obtain quality contact information for borrowers as soon as possible, help borrowers with disaster assistance, and monitor and coordinate the insurance claim process.

Moreover, recognizing that property inspections may be required to assess property damage and the costs of such inspections are typically not reimbursable, Freddie Mac will create a process for servicers to seek reimbursement.

In addition to confirming its existing policies, on August 29, Freddie Mac issued Bulletin 2017-14 (the Bulletin), which provides temporary servicing requirements related to Hurricane Harvey that are effective immediately. The Bulletin applies to borrowers with mortgaged properties or places of employment within the disaster area. Under the Bulletin, servicers and foreclosure firms must suspend all foreclosure sales and eviction activities for 90 days from when the area was declared to be a disaster area.

Fannie Mae

On August 25, Fannie Mae reminded servicers and homeowners to take advantage of its disaster-relief policies, which allow servicers to suspend or reduce a homeowner's mortgage payment for up to 90 days if the servicer believes a natural disaster reduced the value or habitability of the property or temporarily impacted the homeowner's ability to make mortgage payments. Under Fannie Mae's Servicing Guide, servicers do not need to contact homeowners in order to suspend payments for 90 days, but after contacting the homeowner, they can offer forbearance for up to six months, which can be extended up to an additional six months as needed for homeowners that were current or less than 90-days delinquent at the time of the storm.

Under its Selling Guide, Fannie Mae allows borrowers to use lump-sum disaster-relief grants or loans to satisfy Fannie Mae's minimum borrower-contribution requirement. The Selling Guide also provides that a lender must warrant, for each mortgage loan it delivers to Fannie Mae, that the property is not damaged by fire, wind, or other cause of loss; there are no proceedings pending for the partial or total condemnation of the property; the mortgage is an acceptable investment; and the mortgage's value or marketability has not been adversely affected.

On August 29, Fannie Mae announced that it is implementing a 90-day foreclosure sale suspension and a 90-day eviction suspension for borrowers with properties located within the disaster area. Fannie Mae also reiterated that homeowners impacted by Hurricane Harvey may qualify for forbearance.

Department of Veterans Affairs

On August 29, the Department of Veterans Affairs (VA) published Circular 26-17-23 (the Circular), which describes the various disaster-relief options available to its mortgagees and points to various regulations that facilitate the implementation of these options. Specifically, the Circular encourages holders of guaranteed loans secured by properties in the disaster area to grant forbearance requests, institute a 90-day moratorium on initiating new foreclosures, waive late charges, and refrain from credit bureau reporting on affected loans. The VA promises not to penalize servicers who suspend credit reporting for any late default reporting. The Circular, which is valid until July 1, 2018, asks servicers to extend special forbearance to members of the National Guard who are called to active duty to assist in recovery efforts.

Many mortgage lenders and servicers are also providing disaster relief for customers in the affected areas. We are monitoring the situation and will provide further updates as needed.

- Pavitra Bacon


CFPB Releases Summary of TRID Rule Amendments

In July, the CFPB finalized amendments to the TILA/RESPA Integrated Disclosure (TRID) rule. Published in the Federal Register earlier this month, the amendments will become effective on October 10, 2017, with a mandatory compliance date of October 1, 2018.

The CFPB has just released a 24-page summary of the amendments with citations to the sections of the rule that were amended.

- Richard J. Andreano, Jr.


CFPB Finalizes Temporary Increase of HMDA HELOC Reporting Threshold and Other Minor HMDA Amendments

As we previously reported, the CFPB adopted significant revisions to Regulation C, the Home Mortgage Disclosure Act (HMDA) rule, most of which become effective January 1, 2018. As a result of the revisions, the reporting of home-equity lines of credit (HELOCs) under HMDA, which is currently voluntary, will become mandatory for both depository institutions and non-depository institutions that originated at least 100 HELOCs in each of the two preceding calendar years.

On July 14, 2017, the CFPB proposed to temporarily increase the reporting threshold to the origination of 500 HELOCs in each of the two preceding calendar years. On August 24, 2017, the CFPB finalized a rule to increase the threshold for collecting and reporting data about HELOCs (the Rule). Under the Rule, financial institutions originating 100 or more HELOCs but fewer than 500 in 2018 or 2019 would not be required to begin collecting and reporting HELOC data until January 1, 2020. This temporary increase was adopted amid concerns from community banks and credit unions about the challenges and costs of reporting open-end lending. The CFPB will assess whether another rulemaking is required to address the appropriate permanent threshold for smaller-volume lenders. Accordingly, the reporting threshold commencing in 2020 may still be revised.

The Rule also finalizes certain substantive changes and technical corrections to the 2015 HMDA Final Rule that were proposed in April 2017. First, the Rule establishes transition rules that permit financial institutions, under certain conditions, to report "not applicable" for two data points—loan purpose and the unique identifier for the loan originator (the NMLSR ID). Second, the Rule amends the 2015 HMDA Final Rule to clarify certain key terms, such as multifamily dwelling, temporary financing, and automated underwriting system, and to create a new reporting exception for certain transactions associated with New York State consolidation, extension, and modification agreements. These changes, which we discussed in detail when they were initially proposed in April, were largely adopted as proposed because according to the CFPB, the "comments [received] did not raise points relevant to the Bureau’s decisions raised in its proposals." Third, the Rule provides that a census tract reporting error will be considered a bona fide error and not a violation of HMDA or Regulation C if a financial institution obtains an incorrect census tract number from the CFPB's soon-to-be-online geocoding tool, as long as the financial institution entered an accurate property address into the tool and the tool returned a census tract for the address entered.

Concurrent with the issuance of the Rule, the CFPB released an executive summary of the final rule, updates to technical filing instructions, and other implementation materials. Note that the changes include revisions to the Filing Instructions Guide for data collected in 2017 that must be reported in 2018.

With few exceptions, most of the amendments included in the 2015 HMDA Final Rule will take effect on January 1, 2018. Interested parties should assess if programming and operational changes made necessary by the Rule can be appropriately completed by January 1, 2018.

- Pavitra Bacon


FFIEC Issues New HMDA Resubmission Guidelines

As expected, the Federal Financial Institution Examination Council (FFIEC) member agencies issued new data resubmission guidelines under the Home Mortgage Disclosure Act (HMDA) effective for the 2018 data collection year. The change coincides with the substantial expansion of the HMDA data reporting fields that is effective January 1, 2018.

When examining an institution’s HMDA Loan Application Register (LAR), regulators will assess if the correction and resubmission of any data is required based on a review of a sample of reported loans. Currently for institutions that have fewer than 100,000 loans or applications on their annual LAR—which is the vast majority of HMDA reporting institutions—an institution must correct and resubmit its entire LAR if 10 percent or more or of the entries in the sample contain errors, and an institution must correct and resubmit an individual data field in the LAR if there are errors in that field with 5 percent or more of the entries in the sample. An institution can be required to correct and resubmit data even if the 10 percent or 5 percent thresholds are not reached, if the errors would make analysis of the institution’s data unreliable. Regulators will first assess a smaller set of entries in a LAR, and if one or no errors are found, they typically cease the verification process at that point.

Under the new guidelines, there are revised thresholds for requiring resubmission and for assessing if a full review of the sample will be performed based on errors in the initial smaller set of loans. Assessment of the data will be conducted on an individual data field basis. The new testing sample sizes and thresholds are as follows:

 

For institutions with fewer than 30 LAR entries, the resubmission threshold is still three, so the effective resubmission threshold percentage is higher than 10 percent. As is the case currently, even if the thresholds are not met an institution can be required to correct one or more data fields and resubmit one or more data fields in its HMDA LAR if examiners have a reasonable basis to believe that errors in the field or fields will likely make analysis of the HMDA data unreliable.

Under the revised guidelines, if an institution has a total of 1,000 entries on its LAR, the regulator would first review an initial sample of 35 loans. If the regulator finds two or more errors in a data field, the regulator would then review the full 79 loan sample. If four or more errors are found in any data field, the institution would be required to resubmit its LAR with the applicable data field corrected.

Unlike the current approach, under the new guidelines there are tolerances for certain data fields, and an error within the applicable tolerance will not be considered an error for either threshold. The tolerances are as follows:

  • Date of Application: Three calendar days or less with regard to the date the application was received or date shown on application form and the date reported in the LAR.
  • Loan Amount: One thousand dollars or less in the amount of the covered loan or loan applied for and the amount reported in the LAR.
  • Date Action Taken: Three calendar days or less with regard to the date the action was taken and the date reported in the LAR, provided that the difference does not result in reporting data for the wrong calendar year.
  • Income: Errors in rounding the gross annual income relied upon to the nearest thousand.

Subject to an exception, for purposes of the guidelines a "data field" generally refers to an individual HMDA Filing Instructions Guide (FIG) field, and such fields are identified by a distinct Data Field Number and Data Field Name. The July 2017 version of the FIG for data collected in 2018 is available here. The exception is for information on the ethnicity or race of an applicant or borrower, for which a data field consists of a group of FIG fields as follows:

  • The Ethnicity of Applicant or Borrower data field group—comprised of six FIG fields with information on an applicant’s or borrower’s ethnicity (FIG Data Field Numbers 19-24);
  • The Ethnicity of Co-Applicant or Co-borrower data field group—comprised of six FIG fields with information on a co-applicant’s or co-borrower’s ethnicity (FIG Data Field Numbers 25-30);
  • The Race of Applicant or Borrower data field group—comprised of eight FIG fields with information on an applicant's or borrower’s race (FIG Data Field Numbers 33-40); and
  • The Race of Co-Applicant or Co-borrower data field group—comprised of eight FIG fields with information on a co-applicant's or co-borrower’s race (FIG Data Field Numbers 41-48)

If one or more of the six data fields for such a data field group has errors, this would count as one error.
- Richard J. Andreano, Jr.


DID YOU KNOW?

Louisiana Adds Check Casher License to NMLS

On September 1, 2017, the Louisiana Office of Financial Institutions will start accepting new applications and transition fillings on NMLS for the Check Casher License and Check Casher Branch License. More information can be found here.


Michigan Using NMLS MSB Call Report

Starting in Q3 2017 (July 1, 2017 to September 20, 2017), the Michigan Department of Insurance and Financial Services is requiring Money Transmitter licensees to use the NMLS MSB Call Report in place of the Money Transmitter quarterly report. More information on the NMLS MSB Call Report can be found here.


Minnesota Adds Non-Depositor Licenses to NMLS

On October 1, 2017, the Minnesota Department of Commerce will start accepting new applications and transition fillings on NMLS for the following licenses:

  • Consumer Small-Loan Lender License
  • Debt-Management Services Provider Company License
  • Debt-Settlement Services Provider Company License
  • Industrial Loan and Thrift Company License - Depository
  • Industrial Loan and Thrift Company License – Non Depository
  • Regulated Loan Company License

Current licensees must submit a transition request via NMLS by December 1, 2017. More information can be found here.

In addition, on October 1, 2017, the Minnesota Department of Commerce will start receiving new and converted Electronic Surety Bonds (ESB) through NMLS for the Debt Management Services Provider Company License and Debt Settlement Services Provider Company License. More information on the ESB can be found here.

- Wendy T. Novotne


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