Compliance Update, Second Quarter 2021

By March 31, 2021Industry Updates

Financial Crimes Enforcement Network (FinCEN) Extends Comment Period for Rule Aimed at Closing Anti-Money Laundering Regulatory Gaps for Certain Convertible Virtual Currency and Digital Asset Transactions

On January 14, 2021, FinCEN announced reopening the comment period for its recent proposed rulemaking regarding certain transactions involving convertible virtual currency or digital assets with legal tender status. Under the Notice of Proposed Rulemaking, banks and money services businesses would be required to submit reports, keep records, and verify the identity of customers in relation to transactions above certain thresholds involving convertible virtual currency or digital assets with legal tender status wallets not hosted by a financial institution or those hosted by a financial institution located in certain FinCEN identified jurisdictions.

https://www.fincen.gov/news/news-releases/fincen-extends-comment-period-rule-aimed-closing-anti-money-laundering

Supervisory Highlights COVID-19 Prioritized Assessments Special Edition

In January 2021, the Consumer Financial Protection Bureau (CFPB) issued the Supervisory Highlights COVID-19 Prioritized Assessments Special Edition. These highlights are to inform the public of observations in its prioritized assessment (PA) supervisory work, which were conducted last year following the onset of the COVID-19 pandemic. The PAs are focused on assessing identified risks to customers resulting from the pandemic.

https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-23_2021-01.pdf

CFPB: Semi-Annual Report Fall 2020

In January 2021, the CFPB presented its Semi-Annual Report to Congress for the period April 1, 2020, through September 30, 2020. The Semi-Annual Report discusses various challenges consumers face when shopping for or obtaining consumer financial products or services. There are two reports on the early effects of the COVID-19 pandemic on consumer credit and a report containing insights from a survey of U.S. consumers regarding difficulties in making ends meet.

https://files.consumerfinance.gov/f/documents/cfpb_semi-annual-report-to-congress_fall-2020.pdf

FinCEN Republishes Paycheck Protection Program (PPP) Frequently Asked Questions (FAQs)

On February 1, 2021, FinCEN released PPP FAQs regarding implementation of the program, established by section 1102 of the Coronavirus Aid, Relief, and Economic Security Act. Specifically, there are FAQs to address requirements under the Bank Secrecy Act (BSA) and how lenders can meet those requirements for PPP loans. FinCEN will continue to update this document with any additional BSA-related FAQs involving PPP.

https://www.fincen.gov/sites/default/files/2021-02/Paycheck_Protection_program_%20FAQs_Jan2021.pdf

HUD to Enforce Fair Housing Act to Prohibit Discrimination on the Basis of Sexual Orientation and Gender Identity

On February 11, 2021, the U.S. Department of Housing and Urban Development (HUD) announced it will administer and enforce the Fair Housing Act to prohibit discrimination based on sexual orientation and gender identity. HUD will begin implementation of the policy set forth in President Biden’s Executive Order that directed executive branch agencies to examine further steps that could be taken to combat such discrimination.

https://www.hud.gov/press/press_releases_media_advisories/hud_no_21_021

CFPB Issues Rule on Higher-Priced Mortgage Loan (HPML) Escrow Exemption

The CFPB issued a final rule to implement a requirement of Economic Growth, Regulatory Relief, and Consumer Protection Act to include exemptions for certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for certain HPMLs.

The final rule takes effect upon publication in the Federal Register. Regulation Z section 1026.35(b)(2)(vi) exempts the HPML escrow requirement for any loan made by an insured depository institution or insured credit union secured by a first lien on the principal dwelling of a consumer if: (1) the institution has assets of $10 billion or less; (2) the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; and (3) certain criteria of the existing HPML escrow exemption are met as described further in the final rule.

https://files.consumerfinance.gov/f/documents/cfpb_higher-priced-mortgage-loan-escrow-exemption_final-rule_2021-01.pdf

Federal Housing Finance Agency (FHFA) Extends COVID-19 Forbearance Period and Foreclosure and Real Estate Owned (REO) Eviction Moratoriums

The FHFA announced extensions to align COVID-19 mortgage relief policies across the federal government. Fannie Mae and Freddie Mac are extending the moratoriums on single-family foreclosures and real estate owned evictions from March 31, 2021, to now expire June 30, 2021. The real estate owned moratorium applies to properties that have been acquired by Fannie Mae or Freddie Mac through foreclosure or deed-in-lieu of foreclosure transactions.

The FHFA also announced that borrowers with Fannie Mae or Freddie Mac may be eligible for an additional 3-month extension of COVID-19 forbearance, which would extend borrowers to be in forbearance for up to 18 months. To be eligible for the extension, borrowers must be in a COVID-19 forbearance plan as of February 28, 2021. Other limits may also apply for eligibility. COVID-19 Payment Deferral for borrowers with a Fannie-Mae or Freddie-Mac-backed mortgage can now cover up to 18 months of missed payments and allows borrowers to repay their missed payments when the home is sold, refinanced, or at maturity.

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-COVID-19-Forbearance-Period-and-Foreclosure-and-REO-Eviction-Moratoriums.aspx

CFPB Proposes Delay of Mandatory Compliance Date for General Qualified Mortgage (QM) Final Rule

On December 29, 2020, the CFPB issued a final rule for General QMs. Previously, the consumer’s total monthly debt to total monthly income (DTI) ratio must not exceed 43 percent. This final rule amends the General QM loan definition under Regulation Z, including a change to remove the 43 percent DTI threshold and replace it with price-based thresholds. This final rule was effective on March 1, 2021, with mandatory compliance on July 1, 2021.

On March 3, 2021, the CFPB released a notice of proposed rulemaking to delay the mandatory compliance date from July 1, 2021 to October 1, 2022. The proposed extension is to ensure homeowners struggling with financial impacts of the COVID-19 pandemic have options they need available.

https://www.federalregister.gov/documents/2020/12/29/2020-27567/qualified-mortgage-definition-under-the-truth-in-lending-act-regulation-z-general-qm-loan-definition

https://www.consumerfinance.gov/about-us/newsroom/cfpb-proposes-delay-of-mandatory-compliance-date-for-general-qualified-mortgage-finalrule/

QM Definition under Regulation Z: Seasoned QM Definition

On December 29, 2020, the CFPB issued a final rule effective March 1, 2021, to create a new category of QMs, Seasoned QMs, for first-lien, fixed-rate covered transactions that have met certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements. The objective is to ensure access to responsible, affordable mortgage credit by adding a Seasoned QM definition.

https://www.federalregister.gov/documents/2020/12/29/2020-27571/qualified-mortgage-definition-under-the-truth-in-lending-act-regulation-z-seasoned-qm-loan

Federal Reserve Board (FRB) Announces Extension of PPP Liquidity Facility (PPPLF) to June 30, 2021

The FRB announced the extension of the PPPLF by three months from March 31, 2021, to June 30, 2021. The intention is to provide continued support for the flow of credit to small businesses through PPP. The PPPLF extends term credit to financial institutions making PPP loans, in which they accept PPP loans as collateral. The liquidity provided by the PPPLF is to aid financial institutions in funding additional PPP loans.

https://www.federalreserve.gov/newsevents/pressreleases/monetary20210308a.htm

If you have questions about this update, please contact Tim Schofer at tschofer@srsnodgrass.com, Frank Antiga at fantiga@srsnodgrass.com, or Michael Caparoula at mcaparoula@srsnodgrass.com or 724-934-0344.