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The Office of Comptroller of Currency is issuing additional Fair Credit Reporting Act examination procedures regarding affiliate marketing, identity-theft red flags, and address discrepancies.  The procedures are additions to existing FCRA procedures in OCC Bulletin 2006-49.  The procedures address three sections of the FCRA.

The OCC’s press release states in part:

Section 624 has been added to Module 2 of the existing examination procedures. This section pertains to affiliate marketing and opt-out notices to limit solicitations (12 CFR 41.20 – 41.28). The mandatory compliance date for these rules is October 1, 2008.

Section 605(h) has been added to Module 4 of the existing procedures, and section 615(e) has been added to Module 5. Section 605(h) pertains to duties of users of credit reports regarding address discrepancies (12 CFR 41.82), and section 615(e) pertains to duties regarding the detection, prevention, and mitigation of identity theft and duties of card issuers regarding changes of address (12 CFR 41.90 and 41.91 respectively). The mandatory compliance date for these rules is November 1, 2008.

The OCC will incorporate the new procedures in an updated Comptroller’s Handbook series when all FCRA exam procedures are completed.  Until the revised handbook is issued, examiners will use a supplemental attachment.  The new OCC issuance rescinds OCC Bulletin 2006-49. 

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

Tags: Consumer Reports/Credit Reports, FCRA, Mortgage Banking - General, OCC, 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 Office of the Comptroller of Currency has announced the 2008 Fair Lending Conference, Statistical Analysis and Modeling for Risk Assessment.  The Conference will be held in New Orleans September 9 and 10, 2008.

The announcement states the Conference provides an “extraordinary opportunity to learn more about the OCC’s comprehensive approach to fair lending supervision, including an in-depth look at the examination process.”

According to the announcement, attendees will:

Benefit from a discussion of the current issues in the consumer protection arena by the government agencies responsible for fair lending supervision and enforcement.

Learn more about what makes the OCC fair lending examination process unique, including the economic and statistical modeling tools used by OCC economists on fair lending exams.

Hear from industry and regulatory experts on key issues in fair lending, such as credit scoring and pricing.

Gain insights from bankers on their experiences with fair lending compliance, from internal controls to interactions with regulators. 

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

For a copy of the Agenda, click here.

Registration closes August 24, 2008.

Tags: Conferences & Events, Consumer Protection, Fair Lending, Federal Bank Regulators, Mortgage Banking - General, OCC, Regulations by the Editor
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The Office of the Comptroller of the Currency has issued 2007 Significant Legal, Licensing, and Community Development Precedents for National Banks.

The summary highlights certain developments in the areas of general banking and securities activities, enforcement actions, investments, preemption and regulations.

Readers will recall that 2007 included a monumental victory for the OCC in the area of preemption in the Supreme Court case of Watters v. Wachovia, ___ U.S. ___, 127 S.Ct. 1559 (2007).

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

Tags: Federal Bank Regulators, OCC, Regulations 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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In a letter to the Office of Federal Housing Enterprise Oversight, the Office of the Comptroller of the Currency has expressed ”substantial concerns” regarding certain appraisal related agreements and a code of conduct agreed to by OFHEO, the Attorney General of the State of New York, Fannie Mae and Freddie Mac.

The OCC’s concerns relate to unintended adverse consequences of the Agreements and Code for the safety, soundness and efficient operation of national banks’ residential mortgage lending activities and the cost of credit to consumers.

The OCC says that it “strongly endorses” the principle that appraisers must be free from coercion or influence.  This objective should be achieved, however, through direct regulation.  The goal should not be sought indirectly by dictating the corporate and internal organizational structures of lenders.

The OCC then goes on to say that the Agreements and Code conflict with the approach set forth by Congress and have “significant, unintended negative consequences for lenders and borrowers, and . . . major legal flaws.”

The OCC provides its rationale and objections at length in the 12-page letter.

For a full copy of the letter, click here.

Tags: Appraisals, Consumer Protection, Fannie Mae/Freddie Mac, Fraud, Mortgage Banking - General, OCC, Regulations by the Editor
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Comptroller of the Currency, John C. Dugan, recently addressed significant problems banks were encountering with home equity loans and lines of credit. 

Mr. Dugan indicated that the accelerating losses in this sector showed banks need to build reserves and return to stronger underwriting.

Mr. Dugan noted that home equity loans and lines of credit more than doubled sinc 2002, to $1.1 trillion.  The increase was, at least In part, because of rapid appreciation in home prices, tax deductibility, and low interest rates.  But the increase also came, he said, from weak underwriting.

The consequences, Mr. Dugan noted, were that house price declines beginning in 2007 have caused unprecedented losses.  Losses have traditionally run at about 20 basis points (2/10 of 1 percent).  In 4th quarter 2007, however, losses were at nearly 1 percent.  In 1st quarter 2008, losses were at 1.73 percent.

In perspective, losses were still far lower than other types of retail credit, such as credit cards.  But prompt and determined action are necessary, including building sufficient reserves and strengthening underwriting.

Among the practices that need particular scrutiny, Mr. Dugan highlighted:

• The use of home equity lines to finance down payments.
• The appropriate use of collateral valuation tools, such as asset valuation models, which the Comptroller said must be closely managed, periodically validated, and supported with sound business rules.
• Income documentation. Although the overt use of stated income has been largely abandoned, some lenders now ask for income information and authorization to verify it, but do not follow through. “This practice is only marginally better than expressly relying on stated income, since it is questionable whether the borrower’s belief that income will actually be verified will really induce a higher level of honesty in providing information,” Mr. Dugan said. “We need to think carefully about whether anything short of actual verification of income is acceptable from a safety and soundness perspective for most borrowers.”
• The extended interest-only structure that home equity credit lines have in the early years of the loan term. Payment patterns can only be a proxy for a borrower’s capacity to handle a given debt level if he or she is asked to make payments that are meaningful. “Interest-only payments reflect a borrower’s capacity to pay interest on a debt, but not the debt itself,” Mr. Dugan said. “Further, this lack of structured payment discipline encourages borrowers to assume greater levels of debt, often to the limit of their ability to make minimum monthly payments. In contrast, higher payments that reduce principal address both these concerns.”

For a copy of Mr. Dugan’s prepared remarks, click here.

For a copy of the OCC’s press release, click here.

Tags: Home Equity Lines of Credit/HELOCs, Home Equity Loans, Loss Reserves, OCC, Regulations by the Editor
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The Office of the Comptroller of the Currency has issued guidance on how consumers can avoid foreclosure rescue scams.

The OCC’s press release states:

Most foreclosure rescue scams fall within three categories.  In lease-back or repurchase scams, the con artist convinces a borrower to sign over their deed in return for a promise to lease back or eventually repurchase the property.  Refinance fraud involves a situation where the borrower believes the transaction is a refinance, but in fact the fraud involves transfer of property ownership to the con artist.  Bankruptcy schemes involve repeat bankruptcy filings to get a temporary stay order to delay foreclosure, but can result in damaging the consumers’ credit without saving their homes.

The OCC lists some ways to identify scams, ways to avoid them, and ways to seek actual assistance when facing difficulties in making payments.

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

For a copy of the Consumer Advisory, click here.

Tags: Consumer Protection, Foreclosure, Fraud, Mortgage Banking - General, OCC, Regulations 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 said Friday it is requiring comprehensive data from nine large national banks engaged in mortgage servicing.  The OCC stated that these nine comprise the “overwhelming majority” of national banks servicing mortgage loans. 

The OCC indicated the data would supplement HOPE NOW alliance efforts, a cooperative enterprise between investors, lenders and counselors intended to help distressed homeowners.  The data request covers all mortgages, rathen than being limited to subprime. 

Comptroller John C. Dugan stated the data was being collected “to assure that we have a detailed picture of the activities of national bank servicers and the performance of loans serviced by them.”

The press release states in part:

With record numbers of foreclosures, the data is expected to give the OCC and other regulators a more complete view of the market, which will aid in the agency’s supervisory work as well as help in preventing unnecessary foreclosures.  Metrics developed from the data on subprime lending will be available to state agencies through the HOPE NOW alliance, and should provide a robust and comprehensive overview of subprime mortgage lending.

While the HOPE NOW alliance is collecting data on subprime mortgages, the OCC is seeking a broader data set that includes information on all mortgages.  The OCC is also planning to collect data on home equity loans as well, later this year.

The OCC has had an effort underway for some time now to develop data that would provide key metrics on the mortgage lending industry, and share the agency’s proposed metrics, data definitions and reporting schedules with HOPE NOW.  HOPE NOW has revised and expanded its subprime mortgage metrics to be more consistent with the enhanced metrics to be used by the OCC, and the OCC has made some revisions to its metrics and definitions so they would be compatible with the HOPE NOW data set.

As a result, national banks can satisfy the OCC reporting requirements either by sending mortgage data directly to the OCC, or the OCC will accept mortgage data prepared on behalf of national banks from the HOPE NOW alliance data aggregator.

A copy of the letter the OCC sent to these nine national banks is available here.

As previously mentioned on this site, Mortgage Law Blog has concerns regarding multiple, duplicative regulations burdening lenders and servicers.  The currently sharp spike in foreclosures exacerbates this concern today, as servicers need to focus their time and limited resources assisting homeowners rather than responding to redundant requests for information about foreclosures. 

Mortgage Law Blog is glad to see the OCC is cognizant of the burden of data production on national banks.  Other regulators will hopefully take a similar approach.  A number of states have implemented or proposed foreclosure data production laws and regulations.  

A single uniform approach would greatly serve the public interest.  The OCC has indicated it would share the information with the states.  Assuming the states are willing, this approach is imminently sensible.

Tags: Consumer Protection, Distressed Assets, Federal Bank Regulators, Foreclosure, Loan Servicing, Mortgage Banking - General, OCC, Regulations, State Regulation by the Editor
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