On September 27th, Mayer Brown’s Jon Jaffe, a partner in the firm’s Financial Services Regulatory Enforcement Group, will participate in a webinar sponsored by the California Mortgage Bankers Association. The webinar, an effort of the CMBA’s Mortgage Quality and Compliance Committee, will address the various compliance concerns for mortgage lenders and loan officers reaching out to potential borrowers through advertising, including through social media.

As the Mortgage Bankers Association gathers for its Regulatory Compliance conference next week in Washington, DC, Mayer Brown’s Consumer Financial Services group will be addressing all the hot topics.

Melanie Brody will be talking about the Equal Credit Opportunity Act (ECOA) on a panel called “Fair Lending and Equal Opportunity Laws” on Sunday, September 16.

On Monday, September 17th, Phillip Schulman will discuss trends in RESPA Section 8 compliance. He will also join in the round-table discussion of RESPA later that afternoon.

Ori Lev will speak on panel entitled “UDAAP Compliance.”

Krista Cooley will be discussing the latest developments in FHA servicing compliance. She will also field questions on the topic during the afternoon servicing round-table.

On Tuesday, September 18th, Keisha Whitehall Wolfe will discuss state compliance issues.

Also in attendance from Mayer Brown will be new partner Michael McElroy, partner David Tallman, and associates Christa Bieker, Joy Tsai, and James Williams.

We look forward to seeing you there!

 

The ABA Business Law Section is holding its 2018 Annual Meeting in Austin, Texas on September 13-15, 2018. The Meeting will offer over 80 CLE programs and many more committee meetings and events, and will feature several Mayer Brown panelists.

Financial Services Regulatory & Enforcement (FSRE) partner Laurence Platt will participate in a panel discussion on the future of housing finance.

FSRE partner Marc Cohen will participate in a panel discussion on what the Anti-Terrorism Act and Alien Tort Statute mean for banks.

FSRE associate Eric Mitzenmacher will participate in a panel on current developments in consumer financial services.

Stuart Litwin, co-head of Structured Finance and Capital Markets, will moderate a panel on the transition away from LIBOR and similar rates.

FSRE partner David Beam will moderate a panel on the differences between P2P and interbank payment systems.

FSRE associate Matthew Bisanz will moderate a panel discussion on current trends in banking enforcement actions against individuals.

The Bureau of Consumer Financial Protection (“BCFP” or the “Bureau”) wants your input on its proposed changes to the Trial Disclosure Programs Policy (“TDP Policy”). Under Dodd-Frank, the BCFP can permit covered persons to conduct trial disclosure programs and to provide a safe harbor (or waiver) from the corresponding applicable regulatory requirements. 12 U.S.C. § 5532(e). These trials can include modifications or replacements to existing disclosures or forms, changed delivery mechanisms, or the elimination of certain disclosure requirements. The BCFP previously published the TDP Policy in October 2013. However, as the Bureau noted, the prior version of the policy “failed to effectively encourage trial disclosure programs: The Bureau did not permit a single such program in the nearly five years since the Policy was issued.”

The proposed TDP Policy looks quite similar to the 2013 version, with a few differences that reflect the BCFP’s renewed focus on innovation and a desire to lessen the burden of approving trial programs. Continue Reading BCFP’s Focus on Innovation Continues with Revival of the Disclosure Sandbox; Comments are Due October 10, 2018

Senators Mark Warner (D-VA) and Mike Rounds (R-SD) recently introduced Senate Bill 3401 to facilitate access to residential mortgage loans for consumers who are self-employed or otherwise receive income from nontraditional sources. The lawmakers indicated that lenders have shied away from loans to those consumers due to overly strict or ambiguous federal requirements for documenting the consumers’ income. The bill would, if enacted, provide mortgage lenders greater flexibility in documenting income during the underwriting process. They call the bill the Self-Employed Mortgage Access Act.

Federal regulations require that for most closed-end, dwelling-secured loans, a lender must make a reasonable and good faith determination that the consumer will have a reasonable ability to repay the loan, based on (among other factors) the consumer’s verified income. To take advantage of a presumption of compliance with that requirement, most lenders follow the regulations’ Qualified Mortgage (QM) guardrails, described in part in Appendix Q of the regulations. Appendix Q generally dictates the type of income documentation a lender must obtain.

For example, for a self-employed individual (any consumer with a 25 percent or greater ownership interest in a business), Appendix Q requires that a lender seeking to make a QM must get the consumer’s signed, dated individual tax returns, with all applicable tax schedules, for the most recent two years. For a corporation, “S” corporation, or partnership, the lender must get signed copies of the federal business income tax returns, with all applicable tax schedules, for the last two years. Finally, the lender must get a year-to-date profit-and-loss statement and a balance sheet. Appendix Q does not expressly provide for any flexibility in those documentation requirements. Continue Reading Qualified Mortgages for Self-Employed Borrowers; Bill on the Hill

The Summer 2018 edition of Supervisory Highlights –the first one the BCFP has issued under Mick Mulvaney’s leadership – is much the same as previous editions. In it, the Bureau describes recent supervisory observations in various industries, and summarizes recent public enforcement actions as well as supervision program developments.

One aspect of the report that is notably different, however, is the introductory language. In prior regular editions of Supervisory Highlights, the report’s introduction would emphasize the corrective action that the Bureau had required of supervised institutions. It would highlight the amount of total restitution to consumers and the number of consumers affected by supervisory activities, and would note the millions of dollars imposed in civil money penalties.

This new version eliminates all of that discussion from the introduction. Instead, the Bureau has added language emphasizing that “institutions are subject only to the requirements of relevant laws and regulations” and that the purpose of disseminating these Supervisory Highlights is to “help institutions better understand how the Bureau examines institutions” to help industry limit risks to consumers.

The first sentence of the report, which in previous iterations used to say that the Bureau is “committed to a consumer financial marketplace that is fair, transparent, and competitive, and that works for all consumers” now says the Bureau is committed to a marketplace that is “free, innovative, competitive, and transparent, where the rights of all parties are protected by the rule of law, and where consumers are free to choose the products and services that best fit their individual needs.”

Ultimately, time will tell whether this is simply rhetoric or if the Bureau’s supervisory and enforcement posture will be dramatically different from that under Mulvaney’s predecessor. Continue Reading BCFP’s Latest Supervisory Highlights

The Bureau of Consumer Financial Protection (the “Bureau”) has struck out again in trying to enforce a Civil Investigative Demand (“CID”) that contains broad and generic language about the nature of the agency’s investigation. For the second time, a US Court of Appeals has ruled that a CID issued by the Bureau was invalid because the agency failed to meet the statutory requirement that the CID identify the conduct constituting the alleged violation under investigation and the provision of law applicable to such violation, as required by 12 U.S.C. § 5562(c)(2). As we previously discussed, last year the DC Circuit ruled that a CID that the Bureau issued to a college accrediting agency failed to meet the statutory threshold when it merely identified “unlawful acts and practices in connection with accrediting for profit colleges” as the conduct under investigation. CFPB v. ACICS, 854 F.3d 683 (D.C. Cir. 2017).

Now, a unanimous panel of the Fifth Circuit has followed suit and held that a CID issued to the Source for Public Data, “a company that provides public records to the public through an Internet-based search engine,” is invalid because it uses similarly broad language that does not comply with the statute. Continue Reading Another One Bites the Dust: BCFP Loses CID Appeal

On September 5, 2018, a coalition of 14 state attorneys general, led by North Carolina’s attorney general, Josh Stein, wrote to Acting BCFP Director Mick Mulvaney to express “grave concerns” that the BCFP may seek to abandon the federal government’s longstanding position that ECOA provides for disparate impact liability. A copy of the letter can be found here.

The letter appears to have been inspired by at least two relatively recent developments – the revocation of the then-CFPB’s March 2013 Indirect Auto Lending Bulletin and Acting Director Mulvaney’s public comments stating that the Bureau will be “reexamining” the requirements of ECOA.  The letter emphasized that the disparate impact theory has been critical to the effective enforcement of federal and state antidiscrimination laws and warned that the Attorneys General “will not hesitate to uphold the law” if the BCFP concludes that disparate impact is not available under ECOA.

At this point, it remains to be seen whether and how the BCFP will “reexamine” ECOA. The most likely approach would be for the Bureau to propose amendments to Regulation B that would remove the rule’s current language allowing for disparate impact liability.  This would likely prompt strong condemnation from the 14 Attorneys General who signed the letter (among others), and possibly litigation over whether the BCFP has the authority to gut disparate impact under ECOA given that the Supreme Court held in 2015 that the theory was viable under similar language in the Fair Housing Act.

The Bureau of Consumer Financial Protection (the Bureau) issued an interpretive rule on August 31, 2018, explaining how depository institutions that originate fewer than 500 open- or closed-end home mortgage loans annually may take advantage of data collection and reporting relief.

The Home Mortgage Disclosure Act (HMDA) has for decades required mortgage lenders to collect and report significant data on their applications for, and originations or purchases of, residential mortgage loans. In 2015, in response to the Dodd-Frank Act, the Bureau significantly amended the regulations under HMDA, revising which institutions must collect and report the data, what data those institutions must report and in connection with which transactions, and how the institutions must submit the data to the government. Those expansive changes, requiring significant systems updates and hours of training, have already largely become effective. For applicable institutions, the bulk of the changes kicked in on January 1, 2018

However, in May 2018, Congress enacted the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), amending HMDA to allow certain depository institutions to avoid the collection and reporting of so-called “new” data elements. While those institutions may have wished this relief had come before they were forced to implement all the changes needed to collect the new data, the actual reporting deadline for that data is still months away. In the meantime, those institutions (and their regulators) had many questions about what exactly they could or should do now. The Bureau’s interpretive rule attempts to provide them some guidance. Continue Reading HMDA Clarification: Relief for Lower-Volume Banks, Credit Unions

Foreign statutory trusts that acquire delinquent residential mortgage loans are NOT required to be licensed under the Maryland Collection Agency Licensing Act (the “Act”), based on an opinion released today by the Maryland Court of Appeals. The opinion reverses lower court rulings that called for such licensing. According to the opinion, the Act’s plain language is ambiguous as to whether the Maryland General Assembly intended foreign statutory trusts, acting as a special purpose vehicle in the mortgage industry, to obtain a license as a collection agency. The court conducted a fulsome review of the original legislative history, subsequent legislation, and related statutes to discern legislative intent.

Finding that the original impetus for licensing was to address abuses in the debt collection industry, the court held that the General Assembly did not intend for foreign statutory trusts to obtain a collection agency license under the Act before their substitute trustees filed foreclosure actions in various circuit courts. As a result, the court held that the lower courts improperly dismissed foreclosure actions (which the courts had done simply because the two foreign statutory trusts that had acquired the delinquent mortgage loans were not licensed under the Act before the substitute trustees instituted the foreclosure proceedings).

Of particular interest in the opinion is the conclusion that a foreign statutory trust is not “doing business” as a collection agency. The court wrote:

 Applying that definition of “business” as used in [the Act] to the consolidated cases before us presents further ambiguity. Specifically, the foreign statutory trusts that own the mortgage loans in the cases sub judice do not have any employees or offices, do not have any registered agent, and do not have any specifically identified pursuit in the State of Maryland. Instead, [the trusts] both act solely through trustees and substitute trustees. Therefore, it would be hard for this Court in the first instance to conclude that the foreign statutory trusts engage, either directly or indirectly, in the business of a collection agency when it is hard to deduce if these entities are even conducting “business” under Funk and Wagnall’s definition.

The earlier, now overturned, opinions had set off a frenzy within the Maryland foreclosure bar and the delinquent loan holders they represent. Many foreclosure law firms simply were unwilling to pursue foreclosures unless the owner of a loan that had been acquired in a delinquent status was licensed as a collection agency, and Maryland had to create an entirely new process to license trusts. Underlying the confusion was the view that a trust simply is not “doing business” as a matter of law, and thus a state did not have jurisdiction to require the licensing of the trust. The earlier Maryland opinions followed a twisted logic that a trust may not be “doing business” in the state as a matter of Maryland law on foreign qualifications, but is “doing business” as a collection agency. The plain speaking Maryland Court of Appeals concluded that doing business means doing business, and not doing business means not doing business — a logical conclusion that is elegant in its simplicity.