Top Story Lending Related

The Small Business Administration has published [89 FR 68090] an interim final rule lengthening the required records retention for lenders that made loans under the Paycheck Protection Program (PPP) to ten years. This interim final rule harmonizes the PPP lender records retention requirements with subsequent legislation extending the statute of limitations for criminal charges and civil enforcement actions for alleged PPP borrower fraud to ten years after the offense. The rule became effective yesterday. August 22, 2024.

The rule applies to all PPP lender loan records. This includes PPP loan applications that were withdrawn, approved, denied or cancelled, and all other PPP lender loan records for PPP loans with an outstanding balance, PPP loans that have been forgiven, and PPP loans that are in repayment or have been paid in full by the borrower as of August 22, 2024. However, to the extent that a federally regulated PPP lender destroyed any PPP loan records before the effective date of this rule in accordance with a general internal records retention policy that was acceptable to the PPP lender's federal regulator, SBA will not enforce compliance by that federally regulated PPP lender with respect to the PPP loan records that were destroyed before August 22, 2024.

The Federal Housing Finance Agency yesterday announced a proposed rule that would establish the housing goals for 2025-2027 that Fannie Mae and Freddie Mac (the Enterprises) would be required to meet on an annual basis. FHFA is requesting comments on all aspects of the proposed rule during the 60-day public comment period.

The housing goals ensure that the Enterprises, through their mortgage purchases, responsibly promote equitable access to affordable housing that reaches low- and moderate-income families, minority communities, and other underserved populations. For the single-family housing goals categories, the Enterprises must meet the benchmark level established in the final rule or meet the actual market level determined retrospectively for the year based on Home Mortgage Disclosure Act (HMDA) data.

The proposed rule would establish a new process for evaluating compliance with the housing goals. Under the current regulation, if an Enterprise fails to meet a feasible housing goal, FHFA may require the Enterprise to submit a housing plan describing the steps that it will take to improve its performance. The proposed rule would provide that FHFA will not require a housing plan if the Enterprise’s performance met the level required by newly-defined Enforcement Factors. These Enforcement Factors address, in part, the uncertainty in forecasting the market several years in advance as well as the time lag in determining the actual market level retrospectively.

The Federal Housing Finance Agency yesterday announced that Fannie Mae and Freddie Mac (the Enterprises) are issuing updates to the Private Mortgage Insurer Eligibility Requirements (PMIERs) – the financial and operational standards that private mortgage insurance companies must meet to provide insurance on mortgage loans acquired by the Enterprises.

The updated standards will be implemented through a 24-month phased-in approach, with a fully effective date of September 30, 2026.

• Fannie Mae PMIERs Update
• Freddie Mac PMIERs Update

The CFPB reports it has ordered Fay Servicing LLC to pay a $2 million penalty for violations of mortgage servicing laws, as well as for violations of a 2017 agency order that addressed its illegal foreclosure practices. The company failed to implement the order’s requirements and continued to break the law. Fay Servicing took prohibited foreclosure actions against borrowers requesting mortgage assistance, failed to offer borrowers mortgage assistance options available to them, and overcharged for private mortgage insurance. In addition to the civil money penalty, the CFPB’s order requires Fay Servicing to pay consumer redress of $3 million and to invest $2 million to update its servicing technology and compliance management systems. The order also puts compensation limits on Edward Fay, the company’s Chairman of the Board and Chief Executive Officer (CEO), if Mr. Fay does not take actions necessary to ensure compliance with the order.

In 2017, the CFPB took action against Fay Servicing for failing to provide mortgage borrowers with the protections against foreclosure that are required by consumer financial protection law. The CFPB found that the company kept borrowers in the dark about critical information about the process of applying for foreclosure relief. The CFPB also found instances where the servicer illegally launched or moved forward with the foreclosure process when borrowers were actively seeking help to save their homes. The CFPB ordered Fay Servicing to stop its illegal practices and to pay $1.15 million to harmed borrowers.

The FDIC has issued FIL-58-2024 with guidance to assist financial institutions and facilitate recovery in areas of South Dakota affected by severe storms, straight-line winds, and flooding from June 16 to July 8, 2024. As of August 21, the affected areas included Davison, Lincoln, Turner, and Union counties.

The Federal Trade Commission has announced it is taking action against a large automotive dealer group, Asbury Automotive, for systematically charging consumers for costly add-on items they did not agree to or were falsely told were required as part of their purchase. The FTC also alleges that Asbury discriminates against Black and Latino consumers, targeting them with unwanted and higher-priced add-ons.

In an administrative complaint, the FTC alleges that three Texas dealerships owned by Asbury that operate as David McDavid Ford Ft. Worth, David McDavid Honda Frisco, and David McDavid Honda Irving, along with Ali Benli, who acted as general manager of those dealerships, engaged in a variety of practices to sneak hidden fees for unwanted add-ons past consumers. These tactics included a practice called “payment packing,” where the dealerships convinced consumers to agree to monthly payments that were larger than needed to pay for the agreed-upon price of the car, and then “packed” add-on items to the sales contract to make up that difference.

While some consumers reported that salespeople never discussed these products during the sales process, others said that they specifically declined these products only to find they were added on without consent. The FTC says that Asbury’s sales and financing process made it difficult, if not impossible, for consumers to know they were being charged for these add-ons, with consumers being asked to sign documents on electronic devices that showed only the places where they should sign and not the full documents. In other cases, consumers who noticed the add-on charges were falsely told they were mandatory.

In addition, according to the complaint, company documents show that the dealerships treated Black and Latino consumers differently from non-Latino White consumers, charging them hundreds of dollars extra on average for add-ons – including those add-ons for which they were charged without consent. The complaint alleges that there was no non-discriminatory reason for these higher costs.

The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.

FDIC FIL-57-2024 was issued Friday with information to provide regulatory relief to FDIC-supervised financial institutions and facilitate recovery in areas of Florida affected by Hurricane Debby. The affected areas are Columbia, Dixie, Gilchrist, Hamilton, Lafayette, Levy, Manatee, Sarasota, Suwannee, and Taylor Counties.

The CFPB has issued the 2025 Small Business Lending Filing Instructions Guide, which updates dates used in the filing instructions to correspond with the new compliance dates for the rule. Additionally, the Action Taken Date and Application Date data point examples have been updated to reflect the new compliance dates and use year 2025.

The Bureau also updated other Small Business Lending reporting resources to reflect the extended compliance dates.

Yesterday, the CFPB announced it had released an advisory opinion and research report on a form of home seller financing that is often referred to as contract for deed.

Under contract-for-deed deals, the seller agrees to turn over a home’s deed only after the buyer completes a series of payments. During the contract term, the borrower often carries the responsibilities of homeownership, including repairs, property taxes, and improvements. The deals often have little oversight, and investment groups and other sellers can set a series of traps that leave buyers in unlivable homes, on the hook for tax liens and expensive repairs, and at risk of losing their down payments and homes. The advisory opinion affirms that federal home lending rules and laws cover contracts for deed and provide key consumer protections. In yesterday’s report, the CFPB traces the history of contract-for-deed lending. The CFPB has found that these products often target Black, Hispanic, immigrant, and religious communities.

The CFPB's opinion holds that these contracts are in fact covered by the federal Truth in Lending Act. This law imposes certain requirements on larger sellers – often investment groups – such that they must assess borrowers' ability to repay loans, provide informative and accurate disclosures, and limit or avoid balloon payments.

PUBLICATION UPDATE: Published at 89 FR 68086 on 8/23/2024.

The CFPB also issued a Consumer Advisory on Contracts for Deed.

The CFPB yesterday announced it had filed a proposed order to resolve its lawsuit against Daniel A. Rosen, Inc., d/b/a Credit Repair Cloud and Daniel A. Rosen, its CEO, for providing substantial assistance or support to credit repair businesses that charge illegal advance fees to consumers. The proposed order, if entered by the court, would impose a $2 million civil penalty against Rosen and a $1 million civil penalty against Credit Repair Cloud. The order would also require the company and Rosen to take steps to ensure credit repair companies using Credit Repair Cloud stop charging consumers illegal advance fees.

On September 20, 2021, the Bureau filed a lawsuit against Credit Repair Cloud — a Los Angeles, California, company that since at least 2013 has provided an “all-in-one solution” for people to start their own credit repair businesses — and its owner and CEO, Daniel Rosen. On January 7, 2022, the Bureau filed an amended complaint. The Bureau alleged that Credit Repair Cloud and Daniel Rosen violated the Telemarketing Sales Rule by providing substantial assistance to credit repair businesses that violated the Telemarketing Sales Rule’s advance-fee prohibition. Specifically, the Bureau alleged that Rosen and Credit Repair Cloud encouraged the credit repair businesses that use their services — including Credit Repair Cloud’s trainings, materials, and software — to telemarket and charge unlawful advance fees. The Bureau further alleges that Rosen and Credit Repair Cloud knew or consciously avoided knowing that these credit repair businesses were telemarketing their services and charging consumers unlawful advance fees. The Bureau also alleges that by violating the Telemarketing Sales Rule, Credit Repair Cloud and Daniel Rosen violated the Consumer Financial Protection Act of 2010.