February 2012 – Consumer Financial Services Watch

FinCEN Extends Anti-Money Laundering Program and Suspicious Activity Reporting Requirements to Non-Bank Residential Mortgage Lenders and Originators

Feb 29 2012

By: András P. Teleki, Kathryn S. Williams

Residential mortgage lenders and originators (RMLOs — known as “mortgage companies” and “mortgage brokers” but not individual loan originators) now are subject to the Bank Secrecy Act’s (BSA) anti-money laundering regime pursuant to a long expected new regulation published in the Federal Register on February 14, 2012 by FinCEN, a part of Treasury that implements the U.S.’s anti-money laundering regime. Under the new rules, RMLOs are required to develop and implement an anti-money laundering program (AML Program) and begin suspicious activity reporting (SAR Filings) by August 13, 2012. Read More

Treasury Offers Triple Investor Incentives for Principal Reductions

Feb 24 2012

By: Eric J. Edwardson, Kerri M. Smith

In January, Treasury announced significantly enhanced payments to encourage investors to consider or expand principal reduction modifications under HAMP. To effectuate this change, Treasury issued Supplemental Directive 12-01 on February 16, 2012, tripling the investor incentives that can be earned for permanent modifications under HAMP’s Principal Reduction Alternative Program, known as PRA, for loans with trial period plan effective dates on or after March 1, 2012. Few of the existing HAMP incentives have enjoyed the market success desired, and only time will tell whether this initiative is more fully embraced. Read More

Freeman v. Quicken Loans to Decide Whether Undivided Unearned Fees Violate RESPA

Feb 24 2012

By: Phillip L. Schulman

To split an unearned fee or not to split an unearned fee in order to violate the Real Estate Settlement Procedures Act (RESPA) – that is the question. Rather, that was the question on February 21, 2012 when the Supreme Court heard oral argument in the case of Freeman v. Quicken Loans, Inc. The case is intended to settle a dispute among the federal circuit courts regarding the statutory interpretation of Section 8(b) of RESPA which prohibits giving or accepting “any portion, split, or percentage” of any charge for settlement services “other than for services actually performed.” Read More

Refinancing Rural Housing Loans: Rural Housing Service Announces Pilot Program

Feb 23 2012

By: Kathryn M. Baugher

On the heels of President Obama’s State of the Union address, the U.S. Department of Agriculture this month announced a two-year pilot program to help borrowers with USDA-guaranteed loans refinance their mortgages at lower rates without obtaining a new credit report, appraisal, or property inspection. The program will be offered only in Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee, states selected because they are among those hardest hit by the downturn in the housing market. The Department estimates that 235,000 homeowners will be eligible to refinance their loans through this program. Read More

RESPA Webinar Series: Be Ready Should the New CFPB Knock on Your Door

Feb 23 2012

By: Phillip L. Schulman, Holly Spencer Bunting

It has been seven months since the Consumer Financial Protection Bureau (“Bureau”) took over the regulatory and oversight responsibility for the Real Estate Settlement Procedures Act (“RESPA”). While the Bureau has made it an immediate priority to create combined RESPA and Truth in Lending disclosure forms, the Bureau also is gearing up its RESPA enforcement efforts. Given the Bureau’s primary mission of protecting consumers in carrying out federal consumer financial laws, it is incumbent on all settlement service providers – mortgage lenders and brokers, real estate brokers, title insurance and escrow providers, appraisers, and builders – to ensure their business practices comply with RESPA. Before the Bureau comes knocking on your door, it is time to brush up on RESPA.

The K&L Gates Consumer Financial Services Group will be hosting two complimentary webinars examining Section 8 of RESPA and the current RESPA issues being addressed by the Bureau.

To view details and register for the part 1, March 14 webinar, click here.

To view details and register for the part 2, March 28 webinar, click here.

If you would like to attend one or both of our webinars please register for each one separately.

Recently Introduced Bills to Protect Privileged Documents: Are They Sufficient to Protect Credit Unions and Nonbanks?

Feb 20 2012

By: Stephanie C. Robinson

Several bills floating around Congress this month aim to address the privilege waiver issue that is causing anxiety for CFPB-regulated entities. Banks and credit unions routinely have shared privileged documents with their prudential regulators (banking agencies and the National Credit Union Administration) without concern about a claim of waiver because of two statutory provisions that say submitting privileged information to these regulators in the course of supervision does not result in a waiver as to any other person or entity. Read More

CFPB Launches Online Portal for Regulation Streamlining Comments

Feb 20 2012

By: Eric Mitzenmacher

On Friday, the CFPB launched a new online portal through which the public can submit comments on ongoing efforts to streamline inherited regulations. The move continues the Bureau’s trend of using its website to promote a more interactive and responsive regulatory feel. Over the past few months, the site has hosted dialogs between the Bureau, industry representatives, and consumers as part of Know Before You Owe Campaigns that have targeted disclosures related to mortgages, credit cards, and student loans. CFPB has also positioned its site as its preferred method for receiving and resolving complaints about consumers’ mortgages or credit cards. Indeed, the complaint portals remain the most prominent feature of the CFPB homepage. Read More

Supreme Court Case on Disparate Impact Voluntarily Dismissed – Parties in Magner v. Gallagher Say Never Mind

Feb 17 2012

By: Melissa S. Malpass

In a rare and unexpected move, the City of St. Paul last Friday agreed to dismiss its appeal to the U.S. Supreme Court challenging whether a violation under the Fair Housing Act may be proved under a disparate impact legal theory, or whether proof of intentional discrimination is required. As we posted previously, the Supreme Court on November 7, 2011 granted certiorari in Magner v. Gallagher to determine that issue. All briefs in the matter had been submitted, and oral argument was set for later this month. Read More

K&L Gates Launches Financial Fraud Enforcement Task Force

Feb 17 2012

By: Laurence E. Platt

Washington, D.C. – Following the recent introduction of the Residential Mortgage-Backed Securities (RMBS) Working Group as the latest strike in the Obama Administration’s enforcement response to the financial crisis, global law firm K&L Gates LLP has created a new cross-practice task force to assist clients in addressing questions and allegations relating to this joint federal and state initiative.

To view the complete release online, click here.

Administration’s Proposed Refinancing Plan for Non-GSE Loans Is Illusory

Feb 02 2012

By: Laurence E. Platt

The Administration’s newly announced plan to provide low cost refinancings to underwater, current borrowers whose residential mortgage loans are not owned or securitized by the GSEs is high on hope and low on likelihood of success. The plan creates a form of a “streamlined” refinancing on a stated income basis and without an appraisal. Eligibility criteria include that the loan to be refinanced has been current for the past six months, the borrower must meet a minimum credit score of 580 and be an owner-occupant and the new loan must fall within FHA loan limits and a to-be-determined high loan to value ratio. Holders may need to write down principal of the existing loan if the LTV exceeds a certain percentage in excess of 100%, much like the wildly unsuccessful 2010 FHA Short Refinance program. Read More

Archive:February 2012