Rules and Regulations: Financial Market Utilities, Mortgage Servicing among Latest Dodd-Frank Act Proposed and Final Rules

Fed Requests Comments on the Following Proposed Rules

Comment by April 30 on enhanced prudential standards, early remediation requirements for foreign banking organizations and foreign nonbank financial companies

The proposed Fed rule requests comment on specified enhanced prudential standards for companies that the Financial Stability Oversight Council (FSOC) has determined pose a grave threat to financial stability. Additionally, certain foreign banking organizations would be required to form a U.S. intermediate holding company, which would generally serve as a U.S. top-tier holding company for the U.S. subsidiaries of the company. The proposed rule would affect foreign banking organizations with total consolidated assets of $50 billion or more and foreign nonbank financial companies supervised by the Federal Reserve Board. The Board extended the comment period to allow interested persons more time to analyze the issues and prepare their comments. Originally, comments were due by March 31.

Comment by May 3 on notice of proposed rulemaking regarding financial market utilities

The Federal Reserve Board seeks comment by May 3 on proposed rules regarding accounts for financial market utilities (FMU) as permitted by Regulation HH. The proposed rules set out conditions and requirements for a Reserve bank to establish and maintain an account for an FMU as well as the minimum safety and soundness conditions a designated FMU must meet for an account to be opened and maintained. The proposed rules also address a Reserve bank’s authority to pay interest on any balance maintained by a FMU.

Consumer Financial Protection Agency (CFPB) Releases Final Rules Related to Mortgage Servicing and other Standards

CFPB implements loan originator compensation requirements under the Truth in Lending Act

The CFPB rule implements amendments to the Truth in Lending Act as it relates to loan originators. The amendments include:

  • requirements and restrictions concerning loan originator compensation;
  • the qualifications, registration and licensing of loan originators;
  • compliance procedures for depository institutions;
  • mandatory arbitration; and
  • the financing of single-premium credit insurance.

Amendments to Sections 1026.36(h) and (i)—Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling—take effect on June 1, 2013. All other provisions of the rule become effective on Jan. 10, 2014.

CFPB establishes guidelines for requesting confidential information

This CFBP final rule establishes guidelines for the protection and disclosure of confidential information as well as procedures for serving the CFPB with legal documents and prohibiting employees from disclosing confidential information. The final rule also implements provisions of the Freedom of Information Act and Privacy Act. The rule is effective as of March 18, 2013.

CFPB implements, modifies several mortgage servicing rules under the Truth in Lending Act

This CFPB final rule implements and modifies several mortgage servicing rules under the Truth in Lending Act. The rule requires servicers to provide certain notices for adjustable-rate mortgages, periodic statements for residential mortgage loans and prompt crediting of mortgage payments and responses to requests for payoff amounts. The rule also amends current Truth in Lending provisions related to the scope, timing, content and format of disclosures to consumers regarding interest rate adjustments to variable-rate transactions. Amendments to Sections 1026.36(h) and (i)—Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling—take effect on June 1, 2013. All other provisions of the rule become effective on Jan. 10, 2014.

CFPB sets mortgage servicing rules under the Real Estate Settlement Procedures Act

This CFPB final rule implements and modifies several mortgage servicing rules under the Real Estate Settlement Procedures Act (RESPA). Mortgage servicers are obligated to correct errors asserted by borrowers, provide certain information to borrowers and provide protections to borrowers in connection with forced-placed insurance. Servicers are also required to establish certain policies and procedures and evaluate borrowers’ applications for loss mitigation options. The final rule also modifies and streamlines existing servicing related provisions of RESPA. This rule takes effect on Jan. 10, 2014.

Rule requires disclosure and delivery of appraisals and other written valuations under the Equal Credit Opportunity Act

The CFPB revised Regulation B to implement the Equal Credit Opportunity Act (ECOA). The revisions require creditors to provide all applicants with free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling. Creditors are also required to notify applicants in writing that copies of appraisals will be promptly provided. The rule takes effect on Jan. 18, 2014.

CFPB rule expands HOEPA coverage, sets home ownership counseling requirements

The CFPB amended the Truth in Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act (Regulation X) to:

  • expand the universe of loans covered by the Home Ownership & Equity Protections Act (HOEPA),
  • revise HOEPA’s tests for coverage and
  • offer guidance on how to determine HOEPA coverage.

The final rule also implements restrictions and requirements concerning loan terms and origination practices for mortgages that fall within HOEPA's coverage. In connection with certain loans, lenders are required to provide a list of homeownership counseling organizations to consumers and obtain confirmation that a first-time borrower received such counseling. The rule takes effect on Jan. 10, 2014.

Final rule amends ability-to-repay and qualified mortgage standards under the Truth in Lending Act

This CFPB final rule requires creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling and also establishes certain protections from liability under this requirement for qualified mortgages. The final rule contains special rules to encourage creditors to refinance nonstandard mortgages into standard mortgages with a fixed rate for at least five years to reduce consumers’ monthly payments. The rule also limits prepayment penalties for certain fixed-rate, qualified mortgages and requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated. This rule takes effect Jan. 10, 2014.

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