News By Edition

While some may be tempted to assume the latest guidance from the Consumer Financial Protection Bureau about using artificial intelligence (AI) in credit decisions is intended to put the industry on notice, Garris Horn Senior Partner John Levonick told Dodd Frank Update that does not appear to be the case. In fact, he contends the bureau is “effectively setting the stage for successful use of emerging technology.”

Find out what he believes the impact will be as lenders gain a better understanding of how to use AI and machine learning successfully. 

Citing willful violations of the Bank Secrecy Act, the Financial Crimes Enforcement Network recently issued a $15 million civil money penalty against Bancrédito International Bank and Trust Corp. – the agency’s first enforcement action against a Puerto Rican International Banking Entity.

The Mortgage Bankers Association reported the largest increase in applications since June in its Weekly Mortgage Applications Survey for the week ending Sept. 15. Mortgage applications jumped 5.4 percent from the previous week’s results, which included an adjustment for the Labor Day holiday.

If President Joe Biden’s nomination to the National Credit Union Administration (NCUA) Board of Directors is confirmed, she will become the first Asian-American to serve on the NCUA Board since the agency’s founding in March 1970.

She would take up the seat vacated by Rodney Hood, whose term expired in August.

A recent hearing on the Federal Reserve’s proposed rulemaking to implement the remaining provisions of the international Basel III agreement offered industry leaders a chance to testify in front of lawmakers regarding the measure, which the Fed voted to advance at its July 27 meeting.

Most industry groups expressed opposition to the measure.

An internal review of the Federal Deposit Insurance Corp.’s supervision of First Republic Bank highlights vulnerabilities in the company’s business model and management strategies related to interest rate changes from 2018 until its failure in May.

The report indicates a link between First Republic’s failure and that of two other banks in March.

The Mortgage Bankers Association released a whitepaper for financial professions navigating the ever-changing mortgage lending landscape through peaks and valleys in revenues and costs, as well as the ever-winding regulatory river through the mortgage marketplace.

The whitepaper explores proposed regulatory evolutions affecting mortgage lenders and offers analysis exploring the extent of their impact.

Black Knight, now a part of Intercontinental Exchange, recently announced an agreement with Mission Federal Credit Union for the use of Black Knight’s MSP loan servicing system – a comprehensive, end-to-end loan servicing system supporting all aspects of servicing, from loan boarding to default.

The Consumer Financial Protection Bureau’s (CFPB) small-business lending rule, finalized in March, is the subject of a back-and-forth legal battle between the bureau and seven Kentucky state-chartered banks, one national bank operating in Kentucky and the Kentucky Bankers Association arguing the rule contains too many new data collection requirements and the bureau overstepped what Congress envisioned for such a rule when it approved the Dodd-Frank Act.

The Federal Housing Finance Agency (FHFA) announced it will hold additional stakeholder forums and listening sessions to gather public feedback on the agency’s plan to transition to a new credit scoring model for the government-sponsored enterprises (GSEs) – Fannie Mae and Freddie.

The plan calls for the GSEs to adopt new credit scoring models and move from a tri-merge model for reporting requirements to a bi-merge reporting model. FHFA initially announced the pending changes in October 2022 as an effort to better ensure the quality of loans serviced by the enterprises. 

Weeks after announcing its first action against a company for violating the agency’s new marketing rule, the Securities and Exchange Commission (SEC) released details about nine more organizations that elicited similar charges. 

The nine registered investment advisers subject to the marketing rule stand accused of advertising hypothetical performance metrics on their websites without adopting and/or implementing required policies and procedures.

Mortgage lenders saw an uptick in credit availability in August, according to the Mortgage Credit Availability Index (MCAI), a report in which the Mortgage Bankers Association provides analysis of data compiled using ICE Mortgage Technology.

Per the MCAI, mortgage credit availability inched up by 0.3 percent in August, indicating a slight loosening of lending standards, whereas a decline in MCAI would indicate that lending standards are tightening.

Freddie Mac CEO Michael DeVito recently told board leaders at the government-sponsored enterprise he has helmed since June 2021 that he intends to retire during the first quarter of 2024.

The Freddie Mac Board of Directors and Federal Housing Finance Agency Director Sandra Thompson issued statements regarding DeVito’s pending departure.

National Mortgage Insurance Corporation (National MI), a subsidiary of NMI Holdings, Inc., announced it has integrated with Calyx Software’s Point loan origination system (LOS) to enable lenders and brokers to order National MI’s real-time, risk-based mortgage insurance through its Rate GPS tool without having to leave the Point platform, according to a press release.

The District Court for the Eastern District of Texas ruled in favor of the banking industry in a lawsuit challenging the legality of the Consumer Financial Protection Bureau’s updates to its unfair, deceptive, or abusive acts or practices examination manual.

In March 2022, the bureau announced changes to its supervisory operations to better guard against discriminatory practices, particularly with respect to fair lending laws. One of these changes involved expanding the bureau’s interpretation of “unfair” to include discrimination, raising concerns of statutory overreach by the bureau.

Five years after being named the defendant in a class-action discrimination lawsuit, the Consumer Financial Protection Bureau recently agreed to a proposed $6 million settlement with 85 employees who claim the bureau showed preferential treatment toward white and male employees to the detriment of their coworkers who are minorities and/or women.

When these employees complained about unfair treatment, they faced retaliation from management, according to official case filings.

The Securities and Exchange Commission (SEC) recently issued an enforcement action against Stanley Black & Decker involving inaccurate proxy disclosures in which the company underreported certain compensation paid to high-level executives.

Proxy statements filed by the company from 2018-2021 indicate that Stanley paid $1 million on average to four executive officers and one director. These payments were disclosed as “All Other Compensation” in financial reports, according to an SEC release. 

The 2024 Filing Instructions Guide for Home Mortgage Disclosure Act (HMDA) can be found via the websites for the Consumer Financial Protection Bureau and the Federal Financial Institutions Examination Council.

Additionally, the bureau released its Supplemental Guide for Quarterly Filers for 2024. This guide includes 2024 calendar year quarterly filing deadlines for financial institutions tasked with filing HMDA data on a quarterly basis.

Bitcoin ATMs, also referred to as “BTMs,” are standalone kiosks that convert cash to crypto.

The Federal Deposit Insurance Corp. (FDIC) will launch a new Banker Engagement Site (BES) through FDICconnect to provide a secure portal through which financial institutions may exchange documents, information and communications for consumer compliance and Community Reinvestment Act examinations.

BES is being introduced as the primary tool for exchanging materials used by the Division of Depositor and Consumer Protection for examination planning, according to a release by the FDIC.

Freedom Mortgage, one of the nation’s largest full-service non-bank mortgage companies and a leader in VA and government-insured lending, recently announced plans to add 3,000 mortgage professionals and support staff over the next six months. The company explained in a press release that the additional staff is needed to help meet increasing demand for mortgage refinancing and loan servicing.

The Consumer Financial Protection Bureau recently sued a nonbank, high-cost installment lender and several of its subsidiaries for unlawful loan-churning practices that often targeted older Americans and single-parent wage earners with low or fixed annual incomes.

Although high-cost loan borrowers make up just under 10 percent of the company’s total borrower population, their refinances generate 40 percent of the company’s net revenue.

Additionally, the SEC found other compliance issues present in the company’s business practices, which led to misleading disclosures about the custody of clients’ cryptocurrency assets.

The Federal Reserve Board issued a cease-and-desist order against a Kansas-based bank and its subsidiary, citing numerous operational deficiencies discovered during an examination in October 2022.

The order directs the bank to submit plans to improve in areas related books and records, capital, compliance with anti-money laundering regulations, credit risk management, earnings, information technology and information security, interest risk management, internal controls, lending and credit administration, liquidity and funds management, staffing and third-party risk management.

The Federal Deposit Insurance Corp. and Federal Reserve are seeking public input on proposed guidance to further develop resolution plans, also known as “living wills,” for certain financial institutions with more than $250 billion in total assets.

The proposed guidance seeks to address key areas of potential vulnerability for bank holding companies and foreign banking organizations, classified as Category II and III banking organizations under Title I of the Dodd-Frank Act.

In a letter to Federal Reserve Board Chair Jerome Powell, Sen. Elizabeth Warren (D-Mass.) urged the Fed to resist bowing to industry pressure to curtail proposed rules aimed at strengthening capital standards for the nation’s largest financial institutions.

Warren’s concern stems, in part, from comments in Powell’s opening statement prior to the Fed’s vote to advance the proposed rules, during which he expressed his intent to consider “potential modifications to the proposals.”