Dodd-Frank News Center

CFPB reports that loopholes in Military Lending Act rules increase servicemember costs

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau has issued a report highlighting how "loopholes in the current Military Lending Act rules are racking up costs for servicemembers." According to the report, these gaps have allowed companies to offer high-cost loans to military families by skirting the 36 percent rate cap and other military-specific credit protections. The bureau included these findings in a comment filed in support of the Department of Defense's proposal to broaden the scope of the Military Lending Act rules to cover deposit advance products and more types of payday, auto title, and installment loans.

"The current rules under the Military Lending Act are akin to sending a soldier into battle with a flak jacket but no helmet. To give our troops full-cover protection, the rules need to be expanded," said CFPB Director Richard Cordray. "The Department of Defense's proposed revisions will go a long way toward better shielding our military from high-cost credit products."

Fed announces appraisals for higher-priced mortgage loans exemption threshold adjustment

This story appeared in Bank Digest.

The Federal Reserve Board has announced the annual adjustment of the dollar amount used to determine whether a small loan is exempt from the special appraisal requirements that apply to higher-priced mortgage loans. The Dodd-Frank Act amended the Truth in Lending Act to require creditors to obtain a written appraisal based on a physical visit of the home's interior before making a higher-priced mortgage loan. The rules implementing this requirement contain an exemption for loans of $25,000 or less and also provide that the exemption threshold will be adjusted annually based on the annual percentage change reflected in the Consumer Price Index. The exemption threshold is being adjusted to $25,500, effective Jan. 1, 2015, based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1, 2014.

Fed releases FAQs to Section 619 of the Dodd-Frank Act

This story appeared in Bank Digest.

The Federal Reserve Board has published a set of frequently asked questions regarding Section 619 of the Dodd-Frank Act, which added a new section 13 to the Bank Holding Company Act of 1956 (BHC Act), commonly referred to as the Volcker rule. The Volcker rule generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund. These prohibitions are subject to a number of statutory exemptions, restrictions, and definitions.

The Fed is working closely with the other agencies charged with implementing the requirements of section 13, including the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Securities and Exchange Commission, and Commodity Futures Trading Commission. While these frequently asked questions apply to banking entities for which the Fed has jurisdiction under section 13 of the BHC Act, they have been developed by staffs of the agencies and substantively identical versions will appear on the public websites of each agency.

FHFA issues latest Property Managers report

This story appeared in Bank Digest.

The Federal Housing Finance Agency has issued its latest Federal Property Manager's Report to Congress. The report showed that Fannie Mae and Freddie Mac completed approximately 72,700 foreclosure prevention actions in the third quarter, bringing the total to more than 3.3 million since the start of the conservatorships in September 2008. These measures have helped nearly 2.8 million borrowers stay in their homes, including 1.7 million who received permanent loan modifications. The report is 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.

FHFA warns of states creating super-priority liens

This story appeared in Bank Digest.

The Federal Housing Finance Agency is alerting homeowners, financial institutions, and state authorities of the agency’s concerns with state-level actions that threaten the first-lien status of single-family loans owned or guaranteed by Fannie Mae and Freddie Mac. In particular, the FHFA is concerned about state actions to create superpriority liens in two instances: (1) through certain energy retrofit financing programs structured as tax assessments; and (2) through granting priority rights in foreclosure proceedings for homeowner associations. In issuing this statement, the FHFA is acting in furtherance of its statutory obligations as regulator and conservator of Fannie Mae and Freddie Mac.

The FHFA said the existence of these super-priority liens increases the risk of losses to taxpayers. Fannie Mae and Freddie Mac, while operating in conservatorship, currently support the housing finance market by purchasing, guaranteeing, and securitizing single-family mortgages.

OCC reports mortgage performance improvement continues

This story appeared in Bank Digest.

The performance of first-lien mortgages serviced by seven national banks and one federal savings association improved in the third quarter of 2014, according to a report released by the Office of the Comptroller of the Currency. The OCC Mortgage Metrics Report, Third Quarter 2014, showed 93.0 percent of mortgages were current and performing at the end of the quarter, compared with 92.9 percent at the end of the previous quarter and 91.4 percent a year earlier. The percentage of mortgages that were 30 to 59 days past due was 2.4 percent of the portfolio--an increase of 1.9 percent from the previous quarter, but an 8-percent decrease from a year earlier. Seriously delinquent mortgages—60 or more days past due or held by bankrupt borrowers whose payments are 30 days or more past due--made up 3.1 percent of the portfolio—a decrease of 0.9 percent from the previous quarter and 14.5 percent from a year earlier.

Treasury sells entire Ally financial stake

This story appeared in Bank Digest.

The Treasury Department has announced that it agreed to sell all of its remaining 54.9 million shares of Ally Financial Inc. (Ally) common stock, exiting the last major Troubled Asset Relief Program (TARP) investment and winding down the Auto Industry Financing Program. The shares were sold at $23.25 per share, recovering $1.3 billion to taxpayers.

FDIC issues guidance for the resolution plans of large banks

This story appeared in Bank Digest.

The Federal Deposit Insurance Corporation has issued guidance for resolution plans that insured depository institutions with assets greater than $50 billion must periodically submit. These plans are required by an FDIC rule approved in January 2012 and complement those required from certain entities, such as covered bank holding companies under the Dodd-Frank Act.

The FDIC's rule requires each covered institution to provide a resolution plan that should enable the FDIC as receiver under the Federal Deposit Insurance Act to resolve the institution in an orderly manner that enables prompt access of insured deposits, maximizes the return from the failed institution's assets, and minimizes losses realized by creditors and the Deposit Insurance Fund.

NCUA sues trustees of mortgage-backed securities

This story appeared in Bank Digest.

The National Credit Union Administration has filed suit in federal court against U.S. Bank National Association and Bank of America National Association, alleging the banks violated state and federal laws by failing to fulfill their duties as trustees for 99 residential mortgage-backed securities trusts. The agency's suit seeks damages to be determined at trial.

Five corporate credit unions—U.S. Central, WesCorp, Members United, Southwest, and Constitution--purchased approximately $5.8 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007. Those securities lost value, contributing to the failure of all five corporates.

Secretary Lew on the passage of H.R. 83, Consolidated and Further Continuing Appropriations Act, 2015

This story appeared in Bank Digest.

In a statement on the passage of Consolidated and Further Continuing Appropriations Act, Secretary Lew commented that while the law isn't perfect, it will prevent another government shutdown from happening while at the same time providing certainty that most of the government will continue to operate next year.

Looking at the negatives of the Act, Lew said it "imposes irresponsible funding cuts to the Internal Revenue Service," which marks the fifth year in a row that its budget has been reduced, making it harder for the agency to provide quality service that American taxpayers deserve. And it "fails to provide a viable solution to address the challenges facing multi-employer pension plans and puts a heavy burden on retirees." In addition, Lew believes that Congress's failure to "approve International Monetary Fund reform puts our leadership position in this critical international institution at risk and undermines the ability of the IMF to play its critical role in promoting global financial stability." Going forward, we will work to address these shortcomings, Lew said.