Consumer Compliance Outlook: Third Quarter 2009

News From Washington: Regulatory Updates

The Department of Housing and Urban Development (HUD) releases frequently asked questions on new Real Estate Settlement Procedures Act (RESPA) rules.

On October 7, 2009, HUD released frequently asked questions (FAQs) regarding the implementation of the new RESPA rules. The FAQs were compiled from questions received from industry since the publication of the rules on November 17, 2008. The rules are scheduled to take effect on January 1, 2010.

The Board of Governors of the Federal Reserve System (Board) proposes significant changes to Regulation Z (Truth in Lending) intended to improve the disclosures consumers receive in connection with closed-end mortgages and home-equity lines of credit.

On July 23, 2009, the Board proposed significant changes to Regulation Z intended to improve the disclosures consumers receive in connection with closed-end mortgages and home-equity lines of credit (HELOCs). These changes, offered for public comment, reflect the result of consumer testing conducted as part of the Board's comprehensive review of the rules for home-secured credit. Closed-end mortgage disclosures would be revised to highlight potentially risky features such as adjustable rates, prepayment penalties, and negative amortization. The rules for HELOCs would be revised to change the timing, content, and format of the disclosures creditors provide to consumers at application and throughout the life of such accounts. The deadline for submitting comments is December 24, 2009.

The Federal Deposit Insurance Corporation, Board, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision (the Agencies), and the Farm Credit Administration (Administration) release revisions to Interagency Questions and Answers Regarding Flood Insurance.

On July 21, 2009, the Agencies and the Administration released the revised Interagency Questions and Answers Regarding Flood Insurance (2009), which supersedes the 1997 interagency questions and answers and supplements other guidance or interpretations issued by the Agencies and the Federal Emergency Management Agency. The Agencies and the Administration are also proposing for public comment five new questions and answers on determining insurable value in calculating the maximum limit of coverage available for the particular type of property and the timing of force placement of required flood insurance by lenders. The comment period ended September 21, 2009.

The Agencies and the Federal Trade Commission (FTC) publish final rules and guidelines to promote accurate reports about consumers.

On July 2, 2009, the Agencies and the FTC published final rules and guidelines to promote the accuracy and integrity of information furnished to credit bureaus and other consumer reporting agencies. The final rules and guidelines are scheduled to take effect July 1, 2010. The federal agencies and the FTC also published an Advance Notice of Proposed Rulemaking to identify possible additions to the information that furnishers must provide to consumer reporting agencies, such as the account opening date.

The Agencies announce proposed revisions to regulations implementing the Community Reinvestment Act (CRA).

On June 24, 2009 the Agencies proposed revisions to regulations implementing the CRA to require the Agencies to consider low-cost education loans provided to low-income borrowers when assessing a financial institution's record of meeting community credit needs. This proposal incorporates provisions of the recently enacted Higher Education Opportunity Act, which revised the CRA. The comment period ended on July 30, 2009.

The Agencies issue FAQs on identity theft rules.

On June 11, 2009, the Agencies issued FAQs to help financial institutions, creditors, users of consumer reports, and issuers of credit and debit cards comply with the "Red Flags and Address Discrepancy Rules," which implement sections of the Fair and Accurate Credit Transactions Act that were issued jointly on November 9, 2007. The Agencies' staffs have jointly developed answers to these FAQs to provide guidance on numerous aspects of the rules.

The Agencies release list of distressed or underserved nonmetropolitan middle-income geographies.

On June 8, 2009, the Agencies released the 2009 list of distressed or underserved nonmetropolitan middle-income geographies in which revitalization or stabilization activities will receive CRA consideration as "community development." As with past releases, the 2009 list will incorporate a one-year lag period for geographies designated as distressed or underserved in 2008 but not designated as such in 2009. Geographies subject to this one-year lag period are eligible to receive consideration for community development activities for 12 months after publication of the 2009 list.

The Agencies and Administration propose rules for the Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act).

On June 1, 2009, the Agencies and the Administration issued for public comment proposed rules requiring mortgage loan originators who are employees of agency-regulated institutions to meet the registration requirements of the S.A.F.E. Act. The S.A.F.E. Act requires the Agencies and the Administration to jointly develop and maintain a system for registering residential mortgage loan originators who are employees of agency-regulated institutions, Farm Credit System institutions, and certain of their subsidiaries. These mortgage loan originators must be registered with the Nationwide Mortgage Licensing System and Registry (Registry), a database established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the states. The comment period ended on July 9, 2009.

New Truth in Lending Act disclosure requirements on buyers and assignees of home loans under the Helping Families Save Their Homes Act of 2009.

On May 20, 2009, President Obama signed into law the Helping Families Save Their Homes Act of 2009. The law strengthens the Federal Housing Administration's Hope for Homeowners program by providing a safe harbor for servicers who modify home loans and also to give the Federal Deposit Insurance Corporation and the National Credit Union Administration an expanded credit line with the U.S. Treasury. The new law also requires a creditor that purchases or is assigned a mortgage loan secured by the consumer's principal dwelling to provide a written disclosure to the consumer 30 days after the sale or assignment notifying the consumer of relevant information regarding the new creditor. This provision is effective immediately and does not require an implementing regulation.