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The Federal Deposit Insurance Corporation has issued guidance that the agency says provides comprehensive information to give servicers and financial institutions “all of the tools necessary to implement a systematic and streamlined approach to modifying loans.”  The guidance is said to be based on the agency’s loan modification program initiated at IndyMac Federal Bank.

The press release states in part:

The Program is designed to achieve affordable and sustainable mortgage payments for borrowers and increase the value of distressed mortgages by rehabilitating them into performing loans. Under the terms of the Program, borrowers receive a loan modification with a maximum 38% down to 31% housing-to-income ratio through the use of interest rate reduction, amortization term extension, and in some cases, principal deferment. This loan modification process improves the value of the troubled mortgages for investors while helping many borrowers experiencing financial difficulties remain in their homes.

The FDIC implemented this approach to loan modifications on August 20th after IndyMac Bank, FSB failed on July 11, 2008. As of November 20th, 2008 IndyMac has sent out more than 23,000 modification letters to eligible borrowers and has completed more than 5,300 modifications after verifying the borrowers’ income. Thousands more are in the pipeline.

Although foreclosures are costly to lenders, borrowers and communities, the number of foreclosures continues to rise while the pace of modifications remains too slow. Currently, 1.6 million total loans are over 60 days delinquent. Through the end of 2009, the FDIC estimates that there will an additional 3.8 million new loans over 60 days past due. Today’s release of the FDIC’s “Mod in a Box” guide will provide the industry with the necessary tools to facilitate streamlined and systematic loan modifications to help stem foreclosures, halt the decline in home prices and provide needed stability to the broader economy.

The guidance includes a Summary of the Loan Modification program, a substantial appendix containing various additional information, and certain related materials.

For a full copy of the press release, click here.

Tags: Bailouts, Consumer Protection, Distressed Assets, FDIC, Federal Bank Regulators, Foreclosure, Loan Servicing, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
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The Federal Deposit Insurance Corporation has extended the deadline for participation in the Temporary Liquidity Guarantee Program. 

The program permits the FDIC to provide a 100 percent guarantee for newly-issued senior unsecured debt and non-interest bearing transaction deposit accounts at FDIC insured institutions subject to certain terms.

The FDIC issued an interim rule on the program October 29, 2008, providing a 15-day period for comment.  The FDIC indicated the extension of time would give institutions an opportunity to fully consider the interim rules prior to deciding whether to participate.

Any institution that opts out will avoid any assessment under the program.  Other institutions will pay program fees. 

For a copy of the full press release, please click here.

For a copy of the amendment extending the deadline, click here.

For a copy of the October 29 Interim Final Rule, click here.

For a Fact Sheet regarding the program, click here.

The new deadline is December 5, 2008.

Tags: Bailouts, Economic Stimulus, FDIC, Federal Bank Regulators, Regulations by the Editor
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Today, the Federal Housing Finance Agency published formal announcement of its establishment in the Federal Register.

The FHFA is an independent Federal agency established July 30, 2008, which will integrate certain functions of the Office of Federal Housing Enterprise Oversight and Federal Housing Finance Board.

Meanwhile, the firestorm of discussions surrounding the Department of Treasury’s conservatorship of Fannie Mae and Freddie Mac continue.  The popular press continues to issue in-depth articles on a variety of details of that conservatorship, and the events leading up to and after the conservatorship.

Mortgage Law Blog notes for readers that various agencies also have issued statements regarding the conservatorship.  Links to a number of these releases appears below.

For a copy of the FHFA announcement, click here.

For FHFA press releases on the conservatorship, click here.

For an FHFA Fact Sheet on the conservatorship, click here.

For a press release from the Department of Treasury, click here.

The following releases are also of interest, in some ways due to their reserved nature:

• Board of Governors of the Federal Reserve System.
• Department of Housing and Urban Development.
• House Committee on Financial Services; also here.
• Senate Committee on Banking, Housing and Urban Affairs; also, here.

Tags: Bailouts, Bankruptcy, FDIC, Fannie Mae/Freddie Mac, Federal Bank Regulators, Federal Reserve, HUD & FHA, Mortgage Banking - General, NCUA, OCC, OTS, U.S. Treasury by the Editor
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The Federal Deposit Insurance Corporation will hold a forum on mortgage lending for low- and moderate-income households on July 8, 2008.

The announcement indicates the purpose of the LMI Mortgage Forum is to explore a framework for LMI mortgage lending in the future, including identifying market and regulatory incentives for encouraging responsible LMI mortgage lending.

Speakers and participants will come from the banking, investing, government, academic and nonprofit communities.  Speakers will include (among others):

• Ben S. Bernanke, Chairman of the Board of Governors of the Federal Reserve
• James Dimon, Chairman of the Board and Chief Executive Officer of JPMorgan Chase & Co., and
• Henry M. Paulson, Jr., Secretary of the Treasury

The Forum will cover such topics as:

• Back to Basics, Reintroducing Standard Underwriting Criteria and Pricing to the LMI Mortgage Market
• Reasonable, Profitable and Innovative Approaches to LMI Mortgage Lending
• Building Relationships, Building Communities: Partnerships that Foster Home Ownership

For a full copy of the announcement, please click here.

Tags: Conferences & Events, Consumer Protection, Economic Stimulus, FDIC, Federal Bank Regulators, Federal Reserve, Financial Literacy, Industry Involvement, Mortgage Banking - General, Regulations, U.S. Treasury by the Editor
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The Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve, Office of Thrift Supervision, and National Credit Union Administration have jointly published Illustrations of Consumer Information for Hybrid Adjustable Rate Mortgage Products.

The agencies’ joint summary states:

The Agencies are publishing four documents that set forth Illustrations of Consumer Information for Hybrid Adjustable Rate Mortgage Products. The illustrations are intended to assist institutions in implementing the consumer protection portion of the Interagency Statement on Subprime Mortgage Lending adopted on July 10, 2007, and in providing information to consumers on hybrid adjustable rate mortgage (ARM) products as recommended by that interagency statement. The illustrations are not model forms and institutions may choose not to use them.

The Illustrations are effective May 29, 2008.

For a full copy of the Federal Register notice, please click here.

Tags: Consumer Protection, FDIC, Federal Bank Regulators, Federal Reserve, Financial Literacy, Mortgage Banking - General, NCUA, OCC, OTS, Regulations, Unfair or Deceptive Acts by the Editor
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The Federal Financial Institutions Examination Council yesterday issued updated guidance for examiners, financial institutions, and technology service providers to identify business continuity risks and evaluate controls and risk management practices for effective business continuity planning.  The guidance is an update to the “Business Continuity Planning Booklet.”

Many in the industry view this agency’s guidance as useful for mortgage companies generally. 

This is true even though FFIEC is actually structured to assist institutions regulated by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

The FFIEC’s press release states in part: 

The revised booklet includes enhancements to the business impact analysis and testing discussions and addresses emerging threats and lessons learned in recent years. The booklet also stresses the responsibilities of each institution’s board and management to address business continuity planning with an enterprise-wide perspective by considering technology, business operations, communications, and testing strategies for the entire institution.

Key elements of the FFIEC’s December 2007 Interagency Statement on Pandemic Planning have been added to the booklet. A pandemic outbreak would present unique business continuity challenges. The methodologies detailed in the booklet provide a framework for financial institutions to develop or update their pandemic preparedness plans. All financial institutions should have plans that address how the institution will function during a pandemic event.

Other changes in the booklet highlight the importance of business continuity planning for all financial institutions, regardless of whether their systems are provided in-house or through third-party service providers, as well as the lessons learned from financial institutions that suffered damage from hurricanes Katrina and Rita. Electronic versions of the Business Continuity Planning Booklet and other IT Examination Handbook booklets are available at http://www.ffiec.gov/ffiecinfobase/html_pages/it_01.html.

The FFIEC IT Examination Handbook is a collaborative effort of the FFIEC’s Information Technology Subcommittee of the Task Force on Supervision. The Information Technology Subcommittee promotes uniform and effective information technology policies and supervisory programs for financial institutions and their service providers.

A copy of the full press release can be found here.

Tags: Business Continuity Planning, FDIC, Federal Bank Regulators, Federal Reserve, Mortgage Banking - General, NCUA, OCC, OTS, Regulations by the Editor
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The Office of the Comptroller of the Currency yesterday issued guidance (OCC Bulletin 2008-4) regarding Flood Hazard Determination Practices.  (As discussed below, this guidance is useful to non-OCC regulated entities also.)

The OCC notes two concerns regarding flood hazard determinations that expose regulated entities to compliance and operational risks.  The Bulletin states in pertinent part:

The OCC discovered that some companies that provide flood determinations to national banks are not using the Community Status Book (CSB) when obtaining community status information for their flood determinations.  Instead, these entities rely solely on the information available through Flood Map Status Information Service (FMSIS), the Federal Emergency Management Agency’s (FEMA) electronic flood data that is provided to subscribers on a monthly basis.  This also may be a problem for national banks that are performing determinations for their own portfolio.  FEMA has indicated that the CSB is the final authority for community status information and that the community status information in FMSIS may not always be current.  If an entity making a flood determination fails to rely on the CSB when obtaining community status information for flood determinations, the entity could make incorrect flood determinations, which in turn, could expose national banks and their customers to a risk of financial loss.  Therefore, the OCC strongly encourages national banks to review their third-party vendor relationships and their own practices and procedures to ensure that appropriate information is used when performing flood determinations.

The OCC also discovered that some flood determination companies do not note on the Standard Flood Hazard Determination Form that they have revised or updated its determination.  This also may be a problem for a national bank that is performing determinations for its own portfolio.  If the entity revising or updating the form does not record the revised or updated date, the bank may not be able to determine or track compliance with the regulation.  The OCC recommends that flood determination companies and national banks indicate any dates of revision in the “comments” section of the Standard Flood Hazard Determination Form, when a determination has been revised or updated. 

The Bulletin notes that this information also is being reported to the National Flood Determination Association (NFDA) and Federal Emergency Management Association (FEMA) for incorporation into guidance issued by those entities.

While the OCC regulation is generally limited to banks and their subsidiaries, the flaw in relying on outdated information certainly poses similar operational risks to mortgage companies more generally.  Mortgage Law Blog encourages mortgage-related companies to take a look at the Bulletin. 

Tags: FDIC, Federal Bank Regulators, Mortgage Banking - General, OCC, Regulations by the Editor
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