Regulatory Corner

FEDERAL COMPLIANCE CFPB SETTLES WITH SEVERAL MORTGAGE BROKERS OVER FALSE LOAN ADS

The CFPB recently issued several consent orders against mortgage brokers that were found to be in violation of the Consumer Financial Protection Act’s prohibition against deceptive acts and practices, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Its sweep of investigations has led to a total of eight cases of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages. The CFPB commenced this sweep in response to concerns about potentially unlawful advertising in the market that the VA identified. Here are some: • A consent order was issued against Go Direct Lenders, Inc., a California corporation licensed as a mortgage broker or lender in about 11 states. The

CFPB found that Go Direct sent consumers numerous mailers for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or that lacked required disclosures, in violation • Another consent order issued that requires Service 1st to pay a civil money penalty of $230,000 and imposes requirements to prevent future violations. Service 1st Mortgage, Inc. is a mortgage broker based in Glen Burnie, Maryland, licensed in about 12 states. Service 1st also offers and provides VA-guaranteed mortgage loans. Service 1st's principal means of advertising VA loans is via directmail advertisements sent primarily to U.S. military servicemembers and veterans.

The CFPB found that in advertising VA-guaranteed mortgages Service 1st sent consumers numerous mailers that contained false, misleading, and inaccurate statements or that lacked required disclosures. • Hypotec, Inc. is a mortgage broker based in Miami, Florida, licensed in eight states. Hypotec offers and provides mortgage loans guaranteed by the U.S.

Department of Veterans Affairs. Hypotec advertises its VA-guaranteed loans to

U.S. military servicemembers and veterans through using direct mail. The Bureau found that Hypotec sent consumers numerous mailers that contained false, misleading, and inaccurate statements or that lacked required disclosures. The consent order requires Hypotec to pay a civil money penalty of $50,000 and imposes requirements to prevent future violations. • The consent order against Accelerate Mortgage, LLC, a Newark, Delaware-based company licensed as a mortgage broker and lender in about 31 states, requires

Accelerate to pay a civil money penalty of $225,000 and imposes requirements to prevent future violations. The CFPB found that Accelerate sent consumers mailers for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or that lacked required disclosures.

FEDERAL AGENCIES EXTEND COMMENT PERIOD ON FLOOD INSURANCE Q&AS

The Fed, FDIC, NCUA, OCC, and the Farm Credit Administration recently announced they will extend the comment period on a proposal to revise the Interagency Questions and Answers Regarding Flood Insurance to end on November 3, 2020, rather than the original September 4, 2020. The agencies are extending the comment period because of the extent of the revisions proposed by the agencies and in light of the challenges associated with the COVID-19 pandemic. The extension will allow interested parties additional time to analyze the issues and to prepare comments. The proposed Interagency Questions and Answers, which were issued in July 2020, provide information addressing technical flood insurance-related compliance issues.

NMLS POLICY GUIDEBOOK UPDATED

The NMLS Policy Guidebook has been recently updated and posted to the NMLS Resource Center and the Regulator Resource Center. The changes were made to the Criminal Background Checks Section on pages 61-62 and 96 to: • Explain that fingerprints in NMLS must be no older than three years, otherwise an individual will need to be reprinted. • Explain that new fingerprints must be submitted within the 180-day background check window. • Add an explanation that international applicants will receive fingerprint packages in a traceable manner to their current physical or mailing international address or their employer’s address and that the applicant is responsible for providing a mailing label to facilitate the transmission of the packet.

FRB AND CRA MODERNIZATION

The Federal Reserve Board recently announced Monday an Advance Notice of Proposed Rulemaking on an approach to modernize the regulations that implement the Community Reinvestment Act by strengthening, clarifying, and tailoring them to reflect the current banking landscape and better meet the core purpose of the CRA. The ANPR seeks feedback on ways to evaluate how banks meet the needs of low- and moderateincome (LMI) communities and address inequities in credit access.

Board Chair Jerome H. Powell said, "By releasing a thoughtful and balanced ANPR and providing a long period for comment, the Federal Reserve is hoping to build a foundation for the banking agencies to come together on a consistent approach to CRA that has the broad support of the intended beneficiaries as well as banks of different sizes and business models." The Federal Reserve said its proposal will have a 120-day comment period starting when it is published in the Federal Register. Click here for the Fact Sheet on the Community Reinvestment Act issued by the Federal Reserve.

In June 2020, the OCC published a final rule to modernize its CRA regulations, with an October 1, 2020, effective date and a compliance date of January 1, 2023. The FDIC did not join the OCC in issuing a final rule at that time, although the OCC and FDIC had jointly issued a proposal. MBM