Dodd-Frank News Center

Institutions Alerted to Joint Guidance on Leveraged Lending

This story appeared in Bank Digest.

The Federal Deposit Insurance Corp. has alerted supervised institutions to final guidance on leveraged lending issued jointly with the Office of the Comptroller of the Currency and  Federal Reserve Board. The guidance outlines high-level principles related to safe and sound leveraged lending activities, including underwriting considerations, assessing and documenting enterprise value, risk management expectations for credits awaiting distribution, stress-testing expectations, pipeline portfolio management, and risk management expectations for exposures held by the institution. According to the FDIC, institutions engaged in leveraged lending should define this activity in their credit policies and establish prudent risk management processes consistent with the final guidance.

CFPB Consumer Complaint Database Expanded

By Richard Roth, J.D., Editor, the Federal Banking Law Reporter, Bank Compliance Guide, Bank Digest; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The Consumer Financial Protection Bureau has expanded the information contained in its Consumer Complaint Database by increasing the number of complaints described from 19,000 to more than 90,000. The database now provides information on complaints about mortgages, bank accounts and services, student loans, and general consumer loans in addition to the credit card account complaints that originally were covered. The bureau also has adopted a new policy statement that describes how it will make future disclosures of consumer complaint data. To provide guidance, the bureau has issued a fact sheet explaining some aspects of the database and a “snapshot” summarizing complaints received and how they were addressed.

Report on the Transfer of OTS Functions Issued

By Serena Lynn, Editor, the Federal Banking Law Reporter and Bank Digest.

The Offices of Inspector General for the Federal Reserve Board, Federal Deposit Insurance  Corp., and Office of the Comptroller of the Currency have reported the results of the fifth joint review of the transfer of the functions, employees, funds, and property of the former Office of  Thrift Supervision. In accordance with Title III of the Dodd-Frank Act, the transfer occurred in July 2011. A joint implementation plan for the transfer was issued in January 2011.

Stress Test Information Collection Finalized

This story appeared in Bank Digest.

The Federal Reserve Board has announced final approval of the "Capital Assessments and Stress Testing" information collection (FR Y-14). The FR Y-14 series is authorized by Section 165 of the Dodd-Frank Act, which requires the Fed to ensure that certain supervised bank holding companies and nonbank financial companies are subject to enhanced risk-based and leverage standards in order to mitigate risks to the U.S. financial stability. The data collected is intended to provide the Fed with the information and perspectives necessary to help ensure that large BHCs have strong, firm‐wide risk measurement and management processes supporting their internal assessments of capital adequacy and that their capital resources are sufficient given their business focus, activities, and resulting risk exposures.

Latest Property Managers Report Issued

This story appeared in Bank Digest.

The Federal Housing Finance Agency has issued its latest Federal Property Manager's Report to Congress as required by Section 110 of the Emergency Economic Stabilization Act of 2008. The FHFA is a designated Federal Property Manager in its role as conservator for Fannie Mae and Freddie Mac. Based on the report, Fannie and Freddie completed 130,000 foreclosure prevention actions in the fourth quarter of 2012 making the total for the year more than 540,000. According to the agency, nearly 2.7 million foreclosure prevention actions have been taken since the start of conservatorship in 2008.

 

Streamlined Modification Initiative Announced

By Serena Lynn, Editor, the Federal Banking Law Reporter and Bank Digest.

The Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac will offer a new, simplified loan modification initiative to minimize losses and to help troubled borrowers avoid foreclosure and stay in their homes. The new Streamlined Modification Initiative is intended to eliminate the administrative barriers associated with document collection and evaluation. Beginning July 1, 2013, servicers will be required to offer eligible borrowers who are at least 90 days delinquent on their mortgage an easy way to lower their monthly payments and modify their mortgage without requiring financial or hardship documentation. Eligible borrowers must demonstrate a willingness and ability to pay by making three on-time trial payments, after which the mortgage will be permanently modified. According to FHFA Acting Director Edward J. DeMarco this "new option gives delinquent borrowers another path to avoid foreclosure."

FHFA Revises Policy Regarding Force-Placed Insurance

By Serena Lynn, Editor, the Federal Banking Law Reporter and Bank Digest.

A Federal Housing Finance Agency policy change would prevent government-sponsored enterprises Fannie Mae and Freddie Mac from buying mortgages unless the loan sellers and servicers are banned from receiving direct or indirect compensation for force-placed insurance. According to the FHFA, in the wake of the financial crisis, demands for lender-placed insurance have risen and, as a result, so have GSE expenses related to such coverage. The agency notes that concerns about lender-placed insurance costs, compensation, and practices have been raised by the National Association of Insurance Commissioners, state regulators, the Consumer Financial Protection Bureau, state attorneys general, and consumer organizations. Generally, these concerns have centered on excessive rates and costs passed on to borrowers, as well as commissions and other compensation paid to servicers by carriers.

OIG Reports on GSE Oversight

By Serena Lynn, Editor, the Federal Banking Law Reporter and Bank Digest.

The Federal Housing Finance Agency’s Office of Inspector General has reported on its assessment of the FHFA's oversight of government-sponsored enterprises Fannie Mae and Freddie Mac. The OIG analyzed monitoring of counterparties, including entities that sell mortgage loans to or service them for the GSEs, with an emphasis on federal consumer protection laws and found that the FHFA does not thoroughly oversee how the GSEs monitor contractual compliance. The OIG further determined that the GSEs do not ensure that their counterparties' business practices follow all federal and state laws and regulations designed to protect consumers from unlawful activities such as discrimination. According to the report, the GSEs do not review the loans they buy at the time of purchase to assess whether consumers are being treated properly according to applicable law.

CFPB Finalizes Fee Cap Revisions

By Katalina M. Bianco, J.D., Writer Analyst, Federal Banking Law Reporter and Mortgage Compliance Guide; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The Consumer Financial Protection Bureau has finalized a rule amending provisions of Reg. Z—Truth in Lending (12 CFR 1026) and the official interpretation that relate to the Credit Card Accountability Responsibility and Disclosure Act of 2009. Reg. Z generally limits the total amount of fees that a credit card issuer may require a consumer to pay with respect to an account, limiting fees to 25 percent of the credit limit in effect when the account is opened. Reg. Z previously provided that the limitation applies prior to account opening and during the first year after account opening. The rule is revised to provide that the limitation applies only during the first year after account opening. According to the bureau, the final rule is in response to a federal court ruling that granted a preliminary injunction to block a part of a 2011 Reg. Z amendment by the Federal Reserve Board from taking effect (First Premier Bank v. U.S. Consumer Fin. Prot. Bureau, D.S.D., Sept. 23, 2011). The CFPB was named in the lawsuit because, pursuant to the Dodd-Frank Act, the Fed’s rulemaking authority was transferred to the bureau on July 21, 2011.

Cordray and Gruenberg Committed to Consumer Success

By Serena Lynn, Editor, the Federal Banking Law Reporter and Bank Digest.

“All of us want to put consumers in a position where they can make good choices for themselves, choices that enhance their lives and empower them to succeed,” stated CFPB Director Richard Cordray in remarks before the National Community Reinvestment Coalition Annual Conference on March 22, 2013. Cordray called the CFPB a fierce advocate for a consumer financial marketplace that “allows people to pursue a path to opportunity.” He asserted that the bureau is “working to ensure that path is not disrupted by deceptive marketing or products that land consumers in debt traps. We have a new role to play to help consumers avoid dead ends or discrimination. We want to do what we can to enable Americans to live out that fundamental principle of working hard and getting ahead.”