On Friday, March 27, 2020, the President signed into law a stimulus bill designed to provide emergency assistance for those affected by the COVID-19 national emergency (the “CARES Act” or “Act”) that includes certain temporary relief for federal student loan borrowers. The Act largely codifies the Department of Education’s previous announcement regarding temporary relief to federal student loan borrowers impacted by the COVID-19 national emergency and extends the timeline for the temporary relief measures.

The Act provides three primary relief measures to federal student loan borrowers whose loans are held by the Department of Education:

Continue Reading School’s Out: Proposed Relief for Federal Student Loan Borrowers Impacted by COVID-19

On Monday, March 30, 2020, from 4:00 p.m. – 4:30 p.m. EDT, Mayer Brown partners Holly Spencer Bunting and Krista Cooley will discuss actions taken in response to the COVID-19 pandemic by the Federal Housing Administration, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac.  This call is a part of Mayer Brown’s Global Financial Markets Teleconference Series.

These actions were taken by the GSEs and agencies prior to the recent federal stimulus legislation, and will be affected by that new law.  Mayer Brown partner Larry Platt recently spoke in the Global Financial Markets Teleconference Series regarding the impact of the stimulus legislation on mortgage lending, and a recording of that call can be accessed here.

Register to attend the call here.

For more information on Mayer Brown’s extensive resources in relation to COVID-19, please visit covid19.mayerbrown.com.

The next test for mortgage finance companies licensed through the NMLS is the requirement of a number of states to provide financial statements through the NMLS within 90 days of the licensee’s fiscal year end.  We brought this issue to the attention of the Conference of State Bank Supervisors (“CSBS”) two weeks ago, and this was considered by the NMLS Policy Committee last week. No decision was made at that time, but the Policy Committee agreed to consider the matter further this week. As we understand, after the meeting of the Policy Committee on Tuesday, it was decided that while financial statements are still due, there will be a 60 day grace period to provide the financial statements, and certain other required filings of state licensed entities. Specifically, the NMLS Policy Committee issued the following yesterday:

“In response to the COVID-19 pandemic and its impact on state regulated entities, the NMLS Policy Committee has implemented a 60-Day deadline extension for the following types of reporting submitted in NMLS:

  • Money Services Business Call Report
  • Mortgage Call Report
  • Financial Statement

Continue Reading Coronavirus Still Plagues the Land, but State Regulators Step Up and Provide Some Temporary Relief from Certain State Filings

On Thursday, March 26, 2020, from 3:00 p.m. – 3:30 p.m. EDT, Larry Platt will discuss the provisions of recent federal legislation that impact residential mortgage loans.  This call is a part of Mayer Brown’s Global Financial Markets Teleconference Series.

Congress’s response to the COVID-19 pandemic is expansive legislation that provides support to federal agencies, businesses and consumers. That legislation includes mandatory home loan forbearance for consumers experiencing a COVID-19 hardship and other loss mitigation options.  By the time of this call tomorrow, Congress may have enacted the final bill.

Register to attend the call here.

For more information on Mayer Brown’s extensive resources in relation to COVID-19, please visit covid19.mayerbrown.com.

Federal housing finance authorities issued temporary relief measures for the benefit of mortgage loan borrowers affected by the COVID-19 outbreak and its economic consequences. The Federal Housing Administration and the Federal Housing Finance Agency (in its role overseeing Fannie Mae and Freddie Mac) have announced measures that require servicers to offer relief to borrowers who suffer hardship as a result of COVID-19.  The relief measures include a 60-day moratorium on foreclosures and evictions , and for Fannie Mae and Freddie Mac borrowers, expansion of forbearance and loan modification eligibility requirements and suspension of adverse credit reporting.

Read more in Mayer Brown’s Legal Update.

Last week, in a blog entitled “Coronavirus Hits Home,” we informed you that we had contacted the Conference of State Bank Supervisors (“CSBS”) and regulators in a number of states to see what CSBS or the state regulators were telling mortgage lender or broker licensees as to whether their licensed MLO employees who had been quarantined in their homes because of the coronavirus (“COVID-19”) could continue to originate mortgage loans from their homes without the home being licensed as a branch office. Since that blog, CSBS has posted certain state-by-state COVID-19 guidance on the NMLS Resource Center, which among other things covers relevant business continuity plans for licensed mortgage loan officers. We urge you to check the NMLS Resource Center and the State Agency websites for the guidance provided.

Since we sent our request to state regulators as to relief from branch licensing for licensed MLOs who are quarantined in their homes, but want to continue to originate mortgage loans, a number of state regulators have responded directly and positively to our email request. As some of the guidance posted on the NMLS website may not cover the branch licensing issue we posed to CSBS and certain other state regulators, we thought it would be helpful to post some of the specific guidance we have received from state regulators that addressed the branch licensing concern raised by our clients. Continue Reading Coronavirus Hits Hard – Branch Licensing May Be Waived

As concerns about the spread of the coronavirus escalate, some of our clients have raised branch office licensing questions about employees originating mortgage loans from their homes during a period of being quarantined in their home due to the coronavirus. All but a handful of states license branch offices, and most states require a licensed mortgage loan originator (“MLO”) to conduct his or her mortgage loan origination activities from a licensed location, whether it is the main office, or a licensed branch office. Some states may require the activity to be supervised by the branch manager. No state mortgage finance licensing statute addresses a situation where a licensed MLO is quarantined in his or her home and wants to continue originating mortgage loans. Given the absence of any guidance on this unique situation, we raised this matter with administrators of the Conference of State Bank Supervisors (“CSBS”), who indicated that they were as yet unaware whether the commissioners had considered this issue. We also raised this issue with the Ombudsman for the Nationwide Multistate Licensing System (“NMLS”), who advised that he will encourage state regualtors to communicate with their licensees as it relates tot his issue.

CSBS also encouraged us to contact state regulators. Therefore, we did. Regulators in some states had not yet considered the matter, but would be meeting to discuss our concerns. Regulators in other states had met and were considering issuing written guidance on their website. We understand that the Washington Department of Financial Institutions (“DFI”) has done so in response to our inquiry, and has pointed out that it grants licensed loan originators the temporary authority to work from home, even if their home addresses are not licensed locations, provided certain enumerated data security provisions are met. Please check the Washington DFI website for the full text of the posting and the referenced data security provisions. We have not yet contacted regulators in each state, but where we did, the regulators were very sensitive to the concerns. Many were looking to determine the extent of their discretionary authority under state law to allow the origination activity to be conducted from a licensed mortgage loan originator’s home, which was not licensed as a branch office, while the person was quarantined. Similar to the Washington DFI, some state regulators also were considering granting some sort of temporary license authority for a home office. If originating mortgage loans from the quarantined licensed MLO’s home was permitted, the origination of a mortgage loan by the licensed MLO would still need to be supervised by someone in the licensed office to which the licensed MLO was assigned. One state regulator suggested that the supervision should be done by the branch manager of that location. Additionally, one regulator also noted that precautions would need to be taken with respect to any loan application-related information that was not transmitted electronically, but submitted after being handled by the MLO. All good points to consider.

More to come as we learn of a substantive state action. We will seek to convey additional state regulator guidance next week. In the interim, check the state regulators’ websites. And, of course, if you have any related questions, please let us know.

In February, the Department of Defense (“DoD”) amended its interpretation of the Military Lending Act (“MLA”). The amendment should make it easier for many lenders to provide guaranteed asset protection (“GAP”) insurance or other credit insurance in connection with auto loans to covered servicemembers or their dependents.

MLA and “Q&A #2”

The MLA prohibits creditors from charging more than a 36 percent “military annual percentage rate” (“MAPR”) on credit transactions to covered persons. It also, among other requirements and restrictions, prohibits taking the title to a motor vehicle as security for a credit transaction, unless the creditor is a federal or state bank, savings association, or credit union. However, the MLA exempts several types of transactions from those restrictions, including a credit transaction to finance the purchase of a motor vehicle or other personal property when the credit is secured by that vehicle or property.

In addition to regulations, in 2016 the DoD issued interpretive guidance on the MLA in the form of questions and answers, and amended that guidance in 2017. One question-and-answer in the 2016 guidance (“Q&A #2”) advised that when a lender extends credit in excess of an item’s purchase price (such as a hybrid purchase-money and cash-advance loan), the loan is not exempt from the MLA. Initially, Q&A #2 was limited to secured personal property loans. However, in the 2017 amendments mentioned above, the DoD stated that the interpretation applied to secured motor vehicle loans, too. (See Mayer Brown’s Legal Update on the 2017 amendments and other updates.)

Accordingly, based on the 2017 Q&A #2, an auto purchase loan that included GAP insurance would not be exempt from the MLA or its regulations, unless the lender was a depository institution. Since those loans would be deemed subject to the MLA, they would not only be subject to the 36% MAPR limitation, but also to the prohibition against securing the transaction with the vehicle’s title. That interpretation effectively forced certain creditors to choose either not to finance (or not to offer) GAP products, or not to secure the loan with an interest in the vehicle’s title. Some also argued that the 2017 Q&A #2 was a change in interpretation that the agency should have applied only prospectively, and it should not apply to existing auto loans with GAP insurance.

DoD Updates to MLA Guidance

On February 28, 2020, the DoD withdrew the 2017 Q&A #2, reverting to its original version. It expressly applies only to credit for the purpose of purchasing personal property (and not a motor vehicle), where the creditor simultaneously extends credit in an amount greater than the purchase price. The 2020 Q&A #2 answers that a personal property loans is exempt if the transaction is expressly intended to finance only the acquisition of that property when the credit is secured by the property, and not if the loan also secures an additional cash advance. The Q&A no longer expressly applies to motor vehicle loans.

The new guidance will likely lead to increased servicemember access to GAP insurance and other credit-related products in connection with auto loans. The DoD stated that it found merit in creditors’ concern over their ability to technically comply with the MLA and its regulations as interpreted, although the agency stated that it plans to conduct additional analysis related to those concerns.

New Q&A #21

As a part of the February 2020 update, the DoD also added Q&A #21. The new Q&A clarifies that when an individual does not have a social security number, a creditor may use the individual’s taxpayer identification number to determine if the individual is a covered borrower for MLA purposes in the DoD’s database.

The Consumer Financial Protection Bureau (“CFPB”) has settled a lawsuit seeking to compel it to undertake the rulemaking required by Section 1071 of the Dodd-Frank Act (“Section 1071”). Section 1071, 15 U.S.C. § 1691c-2, requires financial institutions to collect and maintain information about loan applications by women-owned, minority-owned and small businesses, and requires the CFPB to collect and publish this data annually. It also requires the CFPB to issue implementing regulations. The settlement sets forth a specific date by which the CFPB must begin the rulemaking process and establishes a framework for determining, along with plaintiffs or subject to court order, a final timeline for promulgation of the required rule. The settlement should result in a final rule in 2022, a dozen years after Congress first required the CFPB to act. Continue Reading Long-Awaited Section 1071 Small Business Rulemaking Is Finally on the Horizon

The Taxpayer First Act (the “Act” or “TFA”) imposes new limits on the disclosure of US taxpayer tax information obtained on or after December 28, 2019. The Act is designed, among other things, to overhaul and modernize operations at the Internal Revenue Service (“IRS”). One provision of the TFA has a direct impact on a recipient of taxpayer return information obtained directly from the IRS. Although questions remain about the reach of the new rule, it is already finding its way into structured finance and secondary market transactions.

Section 6103 of the Internal Revenue Code (the “Code”) governs the confidentiality and disclosure of tax returns and the information contained in tax returns. The TFA, effective as of December 28, 2019, amends Code Section 6103(c) to require taxpayers to consent to: (i) the particular purposes for which the recipient will use the taxpayer’s tax return information (the recipient may not use the information for any other purpose); and (ii) the sharing of any information from the tax return with other persons. Prior to the TFA amendment, Code Section 6103(c) simply authorized the IRS to release a taxpayer’s tax return information to parties designated by the taxpayer to receive it. Continue Reading The Taxpayer First Act and the Impact on Secondary Market Participants