On August 2, the Consumer Financial Protection Bureau (CFPB) outlined consumer protection principles to guide mortgage servicers, investors, government housing agencies and policymakers to develop new foreclosure relief solutions. Motivated by the expiration of the Department of Treasury’s Home Affordable Modification Program, the CFPB intends the proposed principles to inform the discussion of potential options to help prevent avoidable foreclosures. The proposed principles call for assistance to consumers facing foreclosure that is accessible, affordable, sustainable and transparent. These principles span the spectrum of home-retention options such as forbearance, repayment plans and modifications, and home-disposition options such as short sales and deeds-in-lieu.
On August 4, the CFPB finalized the updated mortgage servicing rule intended to offer greater protection to “homeowners and struggling borrowers.” The updated rule requires servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan and helps ensure that surviving family members and others who inherit or receive property have the same protections as the original borrower. In addition, the updated rule provides the following new consumer protections: (1) providing more information to borrowers in bankruptcy; (2) requiring servicers to notify borrowers when loss mitigation applications are complete; (3) protecting struggling borrowers during servicing transfers; (4) clarifying servicers’ obligations to avoid dual-tracking and prevent wrongful foreclosures; and (5) clarifying when a borrower becomes delinquent.
On August 5, the Federal Financial Institutions Examination Council (FFIEC) announced a joint proposal from the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System and Federal Deposit Insurance Corporation (together, the Agencies) that would allow eligible small institutions (those with less than $1 billion in assets and domestic offices only) to file streamlined quarterly consolidated reports of condition and income (a.k.a., call reports), effective March 31, 2017. The proposal responds to industry concerns about the costs and burdens of the current reporting regime and supports an FFIEC initiative to reduce regulatory burdens imposed upon small institutions. The proposal would benefit such institutions by reducing reports from 85 to 61 pages through the removal of approximately 950 (about 40%) of the nearly 2,400 data items currently required pursuant to FFIEC 041. Recognizing that small institutions operate under widely varying business models, a supplemental schedule, to the extent applicable, would be used to collect data on complex and specialized activities. The comments on the proposal will be accepted for 60 days following the proposal’s publication in the Federal Register.
On August 1, the Board of Governors of the Federal Reserve System (the Board) solicited public comments on an interim final rule adjusting the Board’s maximum civil money penalties to effect a “catch-up” adjustment for inflation, as required by the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The Board’s notice contains a schedule of the maximum civil money penalties to be imposed under the interim final rule, which is effective as of August 1, 2016. The Board is accepting comments until August 30, 2016.
On August 2, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation issued Frequently Asked Questions (FAQs) providing information on how financial institutions may begin to submit self-assessments of their diversity policies and practices as required by Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Final Policy Statement Regarding Standards for Assessing Diversity Policies and Practices (the Final Policy Statement), which became effective on June 10, 2015. Details regarding the Final Policy Statement were discussed in the June 10, 2015, edition of the Roundup.
Enforcement & Litigation
On August 9, the U.S. Court of Appeals for the District of Columbia Circuit denied a petition for review filed by an investment adviser that had been sanctioned by the Securities and Exchange Commission (SEC) for violations of the Investment Advisers Act of 1940 and the rule against misleading advertising. The investment adviser had challenged the constitutionality of the findings of the administrative law judge (ALJ) who had presided over the enforcement action on the grounds that ALJ was a constitutional officer who must be appointed by the President pursuant to the Appointments Clause set forth in Article II, Section 2, clause 2 of the U.S. Constitution. In doing so, the D.C. Circuit Court became the first appellate court to affirmatively rule that the SEC’s administrative courts are constitutionally sound.
On July 28, the CFPB released a summary of proposals it is considering to reform debt collection practices. At the same time, it released a Study of Third Party Debt Collection Operations that the CFPB undertook to better understand how debt collection firms operate. The CFPB has published the proposals in preparation for convening a Small Business Review Panel, which is a preliminary step in the rulemaking process before the agency releases a proposed rule for public comment. For more information, click here to view the client alert issued by Goodwin’s Financial Industry practice.