Dodd-Frank News Center

Enterprises to implement new refinance offering; HARP extended into 2017

This story appeared in Bank Digest.

Fannie Mae and Freddie Mac (the Enterprises), at the Federal Housing Finance Agency’s direction, will implement a new refinance offering, starting in October 2017, aimed at borrowers with high loan-to-value ratios. According to the FHFA, this offering will provide much-needed liquidity for borrowers who are current on their mortgages but are unable to refinance through traditional programs because their LTV ratio exceeds the Enterprises' maximum limits. Specific eligibility requirements are listed in the agency's news release. The FHFA has also released a "Fannie Fact Sheet" and a "Freddie Fact Sheet" with information on the new refinance option as it pertains to Fannie Mae and Freddie Mac mortgages.

To ensure that high LTV borrowers who are eligible for the Home Affordable Refinance Program will not be without a refinance option while the new refinance offering is being implemented, the FHFA is also directing the Enterprises to extend HARP through Sept. 30, 2017.

CFPB proposes amending procedures used by public to obtain information

This story appeared in Bank Digest.

The Consumer Financial protection Bureau is proposing amendments to the procedures used by the public to obtain information from the bureau under the Freedom of Information Act and the Privacy Act of 1974, as well as in legal proceedings. The proposed rule would also amend the bureau's rule regarding the confidential treatment of information obtained from persons in connection with the exercise of its authorities under federal consumer financial law. Comments on the proposed rule must be received by Oct. 24, 2016.

OCC proposes limits on default rights in qualified financial contracts

This story appeared in Bank Digest.

The OCC is proposing to add a new part to its rules to address concerns relating to the exercise of default rights in certain financial contracts that could interfere with the orderly resolution of certain systemically important financial firms. Specifically, a covered bank would be required to ensure that a covered qualified financial contract (1) contains a contractual stay-and-transfer provision analogous to the statutory stay-and-transfer provision imposed under Title II of the Dodd-Frank Act and in the Federal Deposit Insurance Act, and (2) limits the exercise of default rights based on the insolvency of an affiliate of the covered bank.

 In addition, the proposed rule would make conforming amendments to the OCC's Capital Adequacy Standards and the Liquidity Risk Measurement Standards in its regulations. According to the OCC, the requirements of its proposed rule are substantively identical to those contained in a proposed rule issued by the Federal Reserve Board on May 3, 2016. Comments on the OCC's proposed rule must be received by Oct. 18, 2016.

Hoenig op-ed discusses problems with risk-based capital system

This story appeared in Bank Digest.

An opinion editorial by Federal Deposit Insurance Corporation Vice Chairman Thomas M. Hoenig posted on the agency's website describes what Hoenig believes are problems with the risk-based capital system of assessing banks' resilience. Hoenig said that system, under which regulators or the banks themselves "assign weights to different classes of assets in a portfolio based on their calculated guess about future risks" to determine how much capital should be held for each asset, "has been highly unreliable and contributed to the 2008 financial crisis."

According to Hoenig, this system "too easily allows banks to conceal risk and amplify leverage." He also said the system "denigrates bank management's responsibility" and "inflates the role of regulators in allocating bank capital despite their poor record."

The main regulatory alternative to this system, Hoenig said, is "a simple leverage ratio, which measures capital to total assets without applying different weights" and which "has proven most reliable principally because it does not pretend to judge future trends in asset quality. It simply measures how much loss from total assets a bank can withstand before it fails." Hoenig warned that "the largest banks and some policy makers" are trying to undermine the role of the leverage ratio "and return to the system that failed."

FHFA extends response period for Credit Risk Transfer Request for Input

This story appeared in Bank Digest.

The Federal Housing Finance Agency has extended the response period for its "Single-Family Credit Risk Transfer Request for Input" until Oct. 13, 2016. Previously, input was due by Aug. 29, 2016. The agency said it was granting the extension in light of requests from stakeholders for more time to evaluate the information and questions raised in the RFI.

The RFI is intended to help the FHFA, as well as Fannie Mae and Freddie Mac (the Enterprises), in their ongoing analysis of front-end credit risk transfer transactions in which a portion of the credit risk is transferred prior to Enterprise acquisition of the underlying mortgage. The RFI lays out the FHFA's principles of credit risk transfer and seeks feedback on credit risk transfer policy issues and on proposals to adopt front-end credit risk transfer.

SIGTARP investigations result in criminal or civil charges against 102 bankers

This story appeared in Bank Digest.

The Office of the Special Inspector General for the Troubled Asset Relief Program has reported that its investigations have led to 102 bankers being charged by the Justice Department, state and local prosecutors, and the Securities and Exchange Commission for their conduct leading up to and during the financial crisis. Of these bankers, 80 have been criminally charged and 58 have been convicted, including 35 already sentenced to prison. An additional 22 bankers have been civilly charged with fraud.

Special Inspector General Christy Goldsmith Romero said, "SIGTARP's unrelenting pursuit of justice has already resulted in charges against more than 100 bankers, and we expect more bankers to be indicted."

Foreclosure Prevention Report issued

This story appeared in Bank Digest.

The Federal Housing Finance Agency has issued its Foreclosure Prevention Report for May 2016. According to the report, Fannie Mae and Freddie Mac (the Enterprises) completed 15,283 foreclosure prevention actions in May, bringing the total to 3,724,545 since the Enterprises were placed into conservatorship in September 2008. Over half of these actions have been permanent loan modifications.

The FHFA also said that there were 9,838 permanent loan modifications in May, bringing the total to 1,951,257 since the start of the conservatorships. Regarding the Enterprises' mortgage performance, the report said the serious delinquency rate decreased from 1.31 percent at the end of April to 1.28 percent at the end of May.

Corker issues statement on GSE stress test results

This story appeared in Bank Digest.

Senate Banking Committee member Bob Corker (R-Tenn) has issued a statement regarding recently released stress test results for government-sponsored enterprises Fannie Mae and Freddie Mac. According to Corker's press release, the results showed that the GSEs could require a taxpayer-funded bailout of more than $125 billion in the case of a severe economic crisis.

According to Corker, the "stress test is another reminder of our housing finance system's failed model: taxpayers are on the hook during bad times, but investors benefit greatly during good times." He added, "Reforming Fannie and Freddie remains the last major piece of unfinished business of the financial crisis, and this news highlights the need for comprehensive housing finance reform."

FHFA issues report on results of Enterprises' annual stress tests

This story appeared in Bank Digest.

The Federal Housing Finance Agency has released a report providing the results of annual stress tests Fannie Mae and Freddie Mac (the Enterprises) are required to conduct under the Dodd-Frank Act. The stress tests are required of certain financial institutions to determine whether they can absorb losses as a result of adverse economic conditions.

According to the FHFA, the report provides updated information on possible ranges of future financial results of Fannie Mae and Freddie Mac under severely adverse economic conditions.

CFPB substantially strengthens mortgage borrower consumer protections

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau has adopted a final rule that provides new measures intended to ensure that homeowners and struggling borrowers are treated fairly by mortgage servicers. The final rule is the result of a November 2014 proposed rulemaking that addressed nine major mortgage-related topics.

The new protections provided to consumers include requiring servicers to provide foreclosure protections for borrowers who have brought their loans current at any time since submitting the prior complete loss mitigation application. Other provisions include expanding consumer protections to surviving family members and other homeowners by establishing a broad definition of "successor in interest" and providing borrowers in bankruptcy periodic statements with specific information tailored for bankruptcy, as well as a modified written early intervention notice to let those borrowers know about loss mitigation options.