Top Story Lending Related

The Federal Housing Finance Agency on Friday announced a set of required tenant protections for multifamily properties financed by Fannie Mae and Freddie Mac (the Enterprises). This announcement results from FHFA’s extensive and ongoing engagement with market participants and key stakeholders on tenant issues and represents the first time that tenant protections will be a standard component of Enterprise multifamily financing.

Covered housing providers will be required to provide tenants with:

• a 30-day written notice of a rent increase
• a 30-day written notice of a lease expiration
• a 5-day grace period for rent payments

The Enterprises will monitor and enforce the tenant protections announced on Friday, and failure to comply could result in penalties under the loan agreement. These protections will be required for new loans signed on or after the policy effective date, February 28, 2025. A detailed description of the tenant protection policies is expected to be published by the Enterprises in August 2024.

The Small Business Administration has published [89 FR 57353] in this morning's Federal Register a notification that it is introducing a new pilot loan program within the 7(a) Loan Program called “7(a) Working Capital Pilot” (WCP) to provide SBA 7(a) guaranteed lines of credit up to $5 million that may be used to support domestic and international transactions with SBA fees due from the Lender that operate as a function of time, charging a proportional amount for each year the facility is in use.

The purpose of the WCP Program is to allow participating 7(a) Lenders to make working capital lines of credit through asset-based and transaction-based lines of credit. Lenders making WCP loans $150,000 or less will have an 85 percent SBA guaranty, and WCP loans greater than $150,000 will have a 75 percent SBA guaranty. WCP Program requirements will be built around established industry norms. SBA intends to make program enhancements based on Lender feedback during the duration of the pilot program.

The WCP Program will become effective on August 1, 2024, and will remain in effect for three years, ending on July 31, 2027. Comments on the program will be accepted through August 14, 2024

On Friday, the federal bank regulatory agencies announced their release of the 2024 list of distressed or underserved nonmetropolitan middle-income geographies where certain bank activities are eligible for Community Reinvestment Act (CRA) credit.

Under the CRA, the agencies assess a bank’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operations. The list released by the agencies includes distressed or underserved nonmetropolitan middle-income geographies where revitalization or stabilization activities are eligible to receive CRA consideration. The designations reflect local economic conditions, including unemployment, poverty, and population changes. Previous years’ lists and criteria for designating these areas are available on the FFIEC's Distressed and Underserved Tracts webpage.

The Federal Financial Institutions Examination Council yesterday announced it has published data on 2023 mortgage lending transactions reported under the Home Mortgage Disclosure Act (HMDA) by 5,113 U.S. financial institutions, including banks, savings associations, credit unions, and mortgage companies.

The Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac (the Enterprises) are making historical VantageScore 4.0 credit scores available to approved users to support the transition to updated credit score and credit report requirements.

The historical credit scores for each Enterprise are associated with single-family loans purchased by that Enterprise from April 2013 through March 2023. This comprehensive release reflects the period for which trended consumer credit data is reliably available across the three nationwide consumer reporting agencies. These scores will provide market participants the ability to better analyze and understand the new credit score models that have been validated and approved for use by the Enterprises. The historical credit scores are available for download at the Enterprises’ respective websites.

In October 2022, FHFA announced the validation and approval of modernized credit score models for use by the Enterprises. At the same time, FHFA announced that the Enterprises would permit lenders to deliver loans with either tri-merge credit reporting, in which credit reports from each of the three nationwide consumer reporting agencies are used, or bi-merge credit reporting, in which credit reports from two of the nationwide consumer reporting agencies are used.

• Fannie Mae Credit Score Models and Reports Initiative
• Freddie Mac Credit Score Models and Reports Initiative

The FDIC has updated section 3.2 (Loans) of its Risk Manual of Examination Policies. The discussion related to the issuance of “Express Determination” letters has been updated to reflect current accounting guidance regarding the allowance for credit losses on loans and leases and procedures related to examinations conducted under the FDIC’s continuous examination program. Additional updates include the concurrent deletion of the “Troubled Commercial Real Estate Loan Classification Guidelines” and update to the “Commercial Real Estate Loans” sections.

The CFPB yesterday announced proposed new rules to make it easier for homeowners to get help when they are struggling to pay their mortgage. The proposed amendments to Regulation X, if finalized, would require mortgage servicers to focus on helping borrowers, not foreclosing, when a homeowner asks for help. The proposed changes would also make it simpler for servicers to offer assistance by reducing paperwork requirements, improve communication with borrowers, and ensure critical information is provided in languages borrowers understand. The CFPB is requesting comment about several other topics, including possible approaches it could take to ensure servicers are furnishing accurate and consistent credit reporting information for borrowers undergoing review for assistance.

• Proposed rule
• Unofficial redline of the proposed Regulation X amendments
• Fast Facts about the proposal

The current regulations governing mortgage servicing took effect in 2014. The rules have rigid timing and other requirements that servicers must follow in all cases. The rules also rely on borrowers submitting all their documents before the servicer begins its review or pauses foreclosure proceedings. In 2022, the CFPB asked the public for input on improving protections for borrowers facing financial hardships. The CFPB heard from both the mortgage industry and borrower advocates that a simpler, more flexible approach to mortgage assistance would be helpful.

Yesterday's proposal, if finalized, would—

• Stop dual tracking and limit fees: The proposed rule would require servicers to try to help borrowers first, before foreclosing, when they request assistance. Servicers would generally only be allowed to move ahead with foreclosure after all possibilities for assistance are exhausted or the borrower has stopped communicating with the servicer. The proposal would also limit the fees a servicer can charge a borrower while the servicer is reviewing possible options to help the borrower.
• Reduce delays by streamlining paperwork requirements: Currently, a servicer cannot evaluate whether a borrower is eligible for assistance without a “complete application” that includes all information needed to assess eligibility for all available options. This can delay assistance offers, hurting both homeowners and servicers. Under the proposal, servicers would have more flexibility to review borrowers for each option individually, potentially enabling quicker assistance.
• Improve borrower-servicer communications: The proposed rule would require servicers to provide more tailored notices to borrowers, so they know what actions they can take if they want to. This includes changing the notices that borrowers get shortly after missing a payment to include information about who the loan investor is and how to get information about available assistance.
• Ensure borrowers receive critical information in languages they understand: Under the proposal, borrowers who received marketing materials in another language could request mortgage assistance communications in that same language. The proposed rule would also require servicers to provide the improved notices in both English and Spanish to all borrowers, as well as make available oral interpretation services in telephone calls with borrowers.

The new provisions would not apply to small servicers. All existing requirements remain in effect until the effective date of a final rule. Comments must be received by September 9, 2024.

A notice was posted to the Department of Defense's MLA site that, due to scheduled maintenance, the MLA website will not be available on Saturday, June 13, 2024, from 6:00 PM PDT until 10:00 PM PDT (9:00 PM EDT on Saturday until 1:00 AM EDT on Sunday). The notice clearly should refer to July 13, which falls on Saturday, not June 13.

The CFPB yesterday announced it has taken action against repeat offender Fifth Third Bank for a range of illegal activities that would result in the bank paying $20 million in penalties in addition to paying redress to approximately 35,000 harmed consumers, including about 1,000 who had their cars repossessed. Specifically, the CFPB is ordering Fifth Third Bank to pay a $5 million penalty for forcing vehicle insurance onto borrowers who had coverage. The CFPB also filed a proposed court order that would require Fifth Third Bank to pay a $15 million penalty for opening fake accounts in the names of its customers. The proposed court order bans Fifth Third Bank from setting employee sales goals that incentivize fraudulently opening accounts.

For further information on yesterday's CFPB actions against Fifth Third, see BankersOnline's Penalty page.

In 2015, the CFPB took two actions against the bank – one for discriminatory auto loan pricing, which was a joint CFPB and U.S. Department of Justice action, and the other for illegal credit card practices. For the discriminatory auto loan pricing action, Fifth Third Bank was ordered to pay $18 million to harmed Black and Hispanic borrowers. For the illegal credit card practices, the bank was ordered to pay $3 million to harmed consumers and a $500,000 penalty.

The Federal Reserve Board's archive of evaluations of member banks' Community Reinvestment Act compliance includes 15 evaluations made public by the Reserve Banks in June 2024, all of which carried Satisfactory ratings.