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News By Edition
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Dodd Frank Update Monthly Edition
Dodd Frank Update February 2014
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Industry watchers discuss top pressure points as mortgage rules go live
Posted Date: Friday, January 10, 2014
The Consumer Financial Protection Bureau’s ability-to-repay and loan originator compensation rules took effect on Jan. 10, along with other sweeping new requirements. Although the rules have gone live, lenders are still working through numerous issues related to the agency’s new requirements. Read on for the details.
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Hearing defines baseline for measuring impact of QM rule
Posted Date: Sunday, January 19, 2014
U.S. House lawmakers weighed the potential impact of the ability-to-repay rule’s qualified mortgage provisions during a Jan. 14 hearing before the Financial Institutions and Consumer Credit Subcommittee. The Consumer Financial Protection Bureau’s ATR/QM rules took effect on Jan. 10, and it may be some time before policymakers have the data needed to determine how the mortgage market is responding to the rule. However, lawmakers said the hearing would provide a baseline against which they will gauge the rule’s effects. Read on for the details.
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CFPB fines nonbank lender for alleged RESPA violations
Posted Date: Sunday, January 19, 2014
The Consumer Financial Protection Bureau (CFPB) ordered a Missouri mortgage lender, Fidelity Mortgage Corp., and its former owner and current president, Mark Figert, to pay more than $81,000 for allegedly funneling illegal kickbacks to a bank in exchange for real estate referrals in violation of the Real Estate Settlement Procedures Act (RESPA).
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CFPB ends 2013 with flurry of enforcement actions
Posted Date: Saturday, January 4, 2014
The Consumer Financial Protection Bureau closed out 2013 with a pair of enforcement actions. American Express agreed to pay nearly $60 million in restitution and more than $16 million in civil penalties to settle claims that the firm’s billing and marketing practices violated federal law. The settlement between American Express, the CFPB and banking regulators came on the same day the bureau and Justice Department announced a settlement with PNC Bank regarding alleged mortgage loan discrimination at National City Bank, which PNC acquired in 2008. Read on for the details.
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Watt gets down to work at FHFA
Posted Date: Friday, January 10, 2014
Mel Watt has had a busy first few days in his new role as the director of the Federal Housing Finance Agency (FHFA). The former Democratic congressman from North Carolina was sworn in on Jan. 6 and has already delayed an agency policy change that was set to take effect this year. He also named four members to his team of advisers.
On Jan. 8, Watt made good on an earlier promise to delay a recently announced guarantee fee (g-fee) increase.
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Volcker Rule fix finalized by regulators
Posted Date: Wednesday, January 15, 2014
Banking regulators have altered provisions of the final Volcker Rule that industry participants said would have harmed community and mid-size banks by forcing them to immediately write down certain investments. An interim final rule, released by the agencies on Jan. 14, permits institutions to retain an interest in certain collateralized debt obligations (CDO) backed primarily by trust-preferred securities (TruPS) if certain qualifications are met.
Bankers were concerned that the final Volcker Rule, released by regulators on Dec. 10, 2013, would require institutions to divest themselves of certain “covered funds” by July 2015, including their investments in certain TruPS CDOs. Moreover, industry participants said accounting norms would essentially force banks to write down assets immediately.
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SEC delays muni adviser rule compliance date
Posted Date: Wednesday, January 15, 2014
The Securities and Exchange Commission delayed the compliance date for new municipal adviser registration rules that would have taken effect on Jan. 13. The delay came after industry participants asked for additional time to come into compliance with the September 2013 final rule and regulatory guidance the agency released on Jan. 10. Read on to learn about the new compliance date.
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Fed seeks feedback on risks associated with firms’ physical commodities activities
Posted Date: Tuesday, January 21, 2014
The Federal Reserve is seeking public comment as it weighs potential additional restrictions on financial holding companies’ physical commodity activities. The Fed signaled in an advance notice of proposed rulemaking (ANPR) that it would take steps to ensure that physical commodities activities authorized for financial holding companies are conducted in a safe and sound manner and do not pose a threat to financial stability.
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OCC to formalize heightened expectations for big banks
Posted Date: Tuesday, January 21, 2014
The Office of the Comptroller of the Currency (OCC) released a proposal that would formalize enhanced governance and risk management standards for large national banks and federal thrifts that were developed in the wake of the financial crisis.
The OCC developed a set of “heightened expectations” and began to communicate them informally to large supervised institutions in 2010. The agency said the proposal, released on Jan. 16, would build upon and formalize those expectations to provide additional clarity and specificity to the large financial institutions that the OCC oversees.
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CFTC starts final countdown on key Dodd-Frank swaps trading requirement
Posted Date: Tuesday, January 21, 2014
The Commodity Futures Trading Commission (CFTC) issued its first-ever certification for a list of interest rate swaps that will be traded on a multilateral platform as envisioned by the Dodd-Frank Act. The move starts a 30-day countdown to new requirements that will eventually see the majority of swaps traded on such platforms.
Section 723 of Dodd-Frank requires that swaps subject to the CFTC’s clearing requirement must occur on certain trading platforms, except where no platform makes the swap available to trade or certain exceptions apply. CFTC final rules released in May 2013 set forth the procedures for two types of platforms — swap execution facilities (SEF) and designated contract markets (DCM) — to send their “made available to trade” (MAT) submissions to the commission for certification.
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Florida firm’s precious metals trading business violated Dodd-Frank, CFTC says
Posted Date: Tuesday, January 21, 2014
The Commodity Futures Trading Commission accused a Florida-based telemarketing company of violating Dodd-Frank by soliciting retail customers to engage in financed precious metals transactions. On Jan. 13, the agency filed a civil injunctive enforcement against Vertical Integration Group LLC, and its owner, Richard Morello, seeking civil monetary penalties, restitution and other remedies.
The CFTC’s complaint, filed in U.S. District Court for the Southern District of Florida, alleges that from July 2011 to at least February 2013, the defendants solicited retail customers to buy physical precious metals in off-exchange leveraged transactions. Customers paid Vertical a portion of the purchase price for the metals, and Vertical financed the remainder of the purchase price, while charging the customers interest on the amount purportedly loaned to customers, the agency said.
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FHFA tallies nearly $8B in settlements for 2013
Posted Date: Saturday, January 4, 2014
The agency charged with overseeing Fannie Mae and Freddie Mac recovered nearly $8 billion in 2013 through settlements with firms that sold the private-label securities to the government sponsored enterprises between 2005 and 2007. The Federal Housing Finance Agency sued 18 financial institutions in 2011 and settled six of those cases in 2013. Read on for the details.
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Consumers, industry urged to comment on real estate closing process
Posted Date: Wednesday, January 8, 2014
The Consumer Financial Protection Bureau (CFPB) officially launched a public outreach effort as part of a plan to streamline the real estate closing process. The agency released a Federal Register notice, urging consumers and industry participants to identify key “pain points” associated with real estate closings.
The CFPB said in its Jan. 3 notice that it seeks to encourage the development of a more efficient and educational closing process as the mortgage industry increases its use of technology, electronic signatures and paperless processes. The bureau said the information it hopes to gather from market participants, consumers and other stakeholders who work closely with consumers will help the agency understand elements of the current closing process that consumers find most problematic. The comments will also “inform the CFPB’s vision for an improved closing experience.”
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Smaller servicers may struggle to balance compliance costs, profitability under new CFPB rules
Posted Date: Friday, January 10, 2014
Smaller servicers may struggle to balance compliance costs with the need to manage overall profitability under new mortgage rules that took effect on Jan. 10, according to Fitch Ratings. The ratings agency said many large servicers have made significant strides to comply with the Consumer Financial Protection Bureau’s mortgage servicing rules. “Where the potential problem lies, however, is with smaller independent/non-bank servicers,” Fitch said. Read on for the details.
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CFPB comports with U.S. Constitution’s separation of powers, court rules
Posted Date: Sunday, January 19, 2014
The Consumer Financial Protection Bureau complies with the U.S. Constitution’s separation of powers principles, a federal district court in California determined. The court weighed the issue after a company facing a CFPB enforcement action said the bureau’s case should be dismissed because the agency is unconstitutional. Read on for the details.
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Federal government should have role in insurance oversight, Dodd-Frank report says
Posted Date: Saturday, January 4, 2014
The current state-based system of insurance regulation is inefficient and burdensome, according to a long-awaited report mandated by the Dodd-Frank Act. The report, released last month by the Federal Insurance Office (FIO), concludes that policymakers should consider steps to involve the federal government in the state-based system. The FIO, which was created under Title V of Dodd-Frank, said states should take several steps to modernize insurance regulation. The report also said Congress should step in if the states fail to make needed improvements.
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Online loan servicer facing CFPB lawsuit settles separate New York case
Posted Date: Wednesday, January 29, 2014
An embattled tribal lender, as well as an online loan servicer currently facing a Consumer Financial Protection Bureau lawsuit, reached a settlement agreement with New York’s attorney general. Western Sky Financial LLC, CashCall Inc., WS Funding LLC, and their owners, Martin Webb and J. Paul Reddam, allegedly violated New York’s usury and licensed lender laws in connection with personal loans they made over the Internet. Read on to learn about the case and the terms of the settlement.
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Federal credit unions can use derivatives under new NCUA rule
Posted Date: Wednesday, January 29, 2014
Certain well-managed federal credit unions will be permitted to engage in limited derivatives activities for the purpose of mitigating interest rate risk under rules finalized by the National Credit Union Administration (NCUA). The rule was approve on Jan. 23 and will take effect 30 days after it is published in the Federal Register. Publication is expected shortly.
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Retailers, issuers at odds following payment card data breaches
Posted Date: Wednesday, January 29, 2014
Retailers and issuers are locked in a debate over payment card policy following the recent high-profile data breaches at Target and other retail chains. The National Retail Federation (NRF) told lawmakers that issuers should invest in card technologies designed to limit fraud. However, the Independent Community Bankers of America (ICBA) argued that retailers are responsible for the breaches and that the entity that suffers a data breach should pay for fraud losses.
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Tensions run high as U.S. House committee grills Cordray on QM impact
Posted Date: Wednesday, January 29, 2014
Tempers flared as Richard Cordray, director of the Consumer Financial Protection Bureau, squared off with Republicans during a Jan. 28 oversight hearing before the U.S. House Financial Services Committee. Much of the tension surrounded differences of opinion regarding the likely impact of the CFPB’s new qualified mortgage (QM) requirements, which took effect on Jan. 10.
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Know your regulator: OCC names deputy comptroller for market risk
Posted Date: Wednesday, January 29, 2014
The Office of the Comptroller of the Currency (OCC) named Kevin Walsh as the deputy comptroller for market risk. Walsh succeeds Martin Pfinsgraff, who was named senior deputy comptroller for large bank supervision last year. In his new role, Walsh will direct market risk activities including policy formulation and risk monitoring for trading activities, derivatives, structured products, liquidity, interest rate risk and asset management.
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CFPB plans to oversee larger nonbank international money transfer providers
Posted Date: Friday, January 24, 2014
Larger nonbank international money transfer providers would face federal regulatory scrutiny under rules proposed by the Consumer Financial Protection Bureau (CFPB). The proposal, released by the CFPB on Jan. 23, would designate certain nonbank remittance providers as “larger participants” subject to CFPB oversight and new rules that provide protections for consumers who send money abroad.
Comments on the proposal are due 60 days after publication in the Federal Register, which is expected shortly.
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CFTC to review swap recordkeeping, reporting requirements
Posted Date: Friday, January 24, 2014
The Commodity Futures Trading Commission (CFTC) said it would form an interdivisional staff working group to review certain swaps transaction data recordkeeping and reporting requirements enacted under Dodd-Frank. The move came at the request of Republican Commissioner Scott O’Malia, who said the review will help the agency develop a better understanding of specific changes that can be made to enhance regulatory compliance and reduce misreporting that has undermined the commission’s ability to use its regulatory data.
The working group, led by the director of the Division of Market Oversight, will seek public comment on questions pertaining to compliance with the commission’s Part 45 reporting rules and related provisions. Questions will also focus on consistency in regulatory reporting among market participants, the CFTC said.
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Stewart Lender Services names new director of regulatory compliance, capital markets
Posted Date: Friday, January 24, 2014
Stewart Lender Services, a provider of servicing and mortgage origination support services, announced a new director of regulatory compliance, capital markets. This person will oversee the compliance and regulatory aspects of operations within Stewart’s Capital Markets Group. Read on for the details.
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Budget package mandates increased scrutiny of Dodd-Frank’s Office of Financial Research
Posted Date: Friday, January 24, 2014
The $1.1 trillion budget package signed by President Barack Obama earlier this month includes funding increases for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) — two agencies responsible for implementing key elements of the Dodd-Frank Act. However, those agencies will receive far less money than the president requested. The budget also includes provisions to increase oversight of Dodd-Frank’s Office of Financial Research (OFR).
The bill to fund the government through Sept. 30 won final U.S. Senate approval on Jan. 16 and was signed by the president the next day.
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MSRB moving forward on muni adviser rules
Posted Date: Friday, January 24, 2014
The panel charged with building a new regulatory framework to police municipal advisers released a key proposal outlining the duties of advisers who provide advice on municipal securities transactions and related products. The proposal —released on Jan. 9 by the Municipal Securities Rulemaking Board (MSRB) — aims to reduce conflicts of interest and ensure that municipal advisers exercise due care and make only informed and suitable recommendations to their clients. However, an industry group was quick to raise concerns about the draft rule.
Comments on the proposed rule, known as Draft Rule G-42, are due by March 10.
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NCUA proposal would revise real estate loan risk-weights
Posted Date: Friday, January 24, 2014
The National Credit Union Administration (NCUA) is seeking comment on a plan to alter the agency’s prompt corrective action framework by replacing its current risk-based net worth requirements with new risk-based capital requirements. The proposal, which would apply to credit unions with $50 million or more in assets, would revise risk-weights for many of NCUA’s current asset classifications.
The NCUA board unveiled the risk-based capital proposal on Jan. 23. Comments on the proposal are due 90 days after publication in the Federal Register, which is expected shortly.
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Mortech adds new features to CFPB compliance management suite
Posted Date: Friday, January 24, 2014
Mortech, a Zillow business providing mortgage technology software solutions for mortgage bankers and secondary market teams, announced the release of new functionality to the suite of Consumer Financial Protection Bureau compliance tools built into Mortech’s Marksman product and pricing engine.
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CFPB review of auto dealer markups may raise lender compliance costs
Posted Date: Tuesday, January 21, 2014
Heightened scrutiny of potentially discriminatory auto lending practices by the Consumer Financial Protection Bureau (CFPB) will likely raise lender regulatory costs this year, according to Fitch Ratings.
The CFPB started investigating the auto finance industry last year concerning allegations that it may be discriminating against consumers based on race and violating the antidiscrimination provisions of the Equal Credit Opportunity Act (ECOA).
A March 2013 CFPB bulletin clarified that the agency has authority to pursue auto lenders whose policies harm consumers through unlawful discrimination. The bulletin explained how ECOA applies to indirect auto lending, an arrangement whereby a third-party lender provides an auto dealer with an interest rate that the lender will accept for a given consumer.
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Bureau extends comment deadline for debt collection proposal
Posted Date: Sunday, January 19, 2014
The Consumer Financial Protection Bureau is giving industry participants until Feb. 28 to comment on an advance notice of proposed rulemaking related to debt collection. Comments on the November 2013 proposal were originally due by Feb. 10. However, the bureau agreed to extend the comment period after some associations said more time would enable a higher quality response and yield greater insight to the bureau.
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CFPB seeking new advisory panel members
Posted Date: Sunday, January 19, 2014
The Consumer Financial Protection Bureau (CFPB) is looking to fill several seats on its advisory panels that will become vacant this fall. The agency is seeking seven new members for its Consumer Advisory Board (CAB) and eight new members for both the Community Bank Advisory Council (CBAC) and the Credit Union Advisory Council (CUAC).
Applications for all panels are due by Feb. 28.
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Fed to beef up standards for systemically important FMUs
Posted Date: Wednesday, January 15, 2014
The Federal Reserve asked for public feedback on a proposal to revise risk-management standards for systemically important financial market utilities — firms that operate systems to transfer, clear and settle transactions between institutions and entities. The Fed adopted a Dodd-Frank final rule implementing certain risk-management standards for systemically important FMUs in July 2012. As planned, the agency is now seeking to amend its requirements in light of benchmarks established by international standard setters shortly before that rule was finalized. Read on to learn about the Fed’s new proposals.
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a la mode’s Mercury Network offers compliance tools for new ECOA valuations rule
Posted Date: Wednesday, January 15, 2014
The Equal Credit Opportunity Act valuations rule, which mandates that all borrowers confirm statements prior to receiving an electronic copy of any appraisal report, takes effect on Jan. 18. Mercury Network, which is the flagship product of a la mode for the lending industry, has been updated with automated compliance tools for lenders and appraisal management companies to add to its Vendor Management Platform. The software creates a full audit trail to prove compliance with the new regulation.
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SoftPro builds on significant growth for 2014
Posted Date: Wednesday, January 15, 2014
SoftPro, a provider of title, closing and escrow software, announced its 155th hire over the last 12 months, bringing its employee base to over 300 nationwide. Read on for the details.
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Dodd-Frank appraisal-related rules will take effect this weekend
Posted Date: Wednesday, January 15, 2014
More new mortgage requirements are on the way. Several rules from the Consumer Financial Protection Bureau took effect on Jan. 10, including the new ability-to-repay and mortgage servicing rules. However, a second batch of rules related to appraisals will go live this coming weekend. Read on for a review of the rules’ key provisions.
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CFPB updates mortgage origination, servicing exam procedures
Posted Date: Wednesday, January 15, 2014
The Consumer Financial Protection Bureau (CFPB) updated the roadmaps its examiners use when they scrutinize mortgage originators and servicers. The exam manuals, released on Jan. 10, harmonize existing procedures for handling mortgage origination and mortgage servicing examinations with revised interagency procedures that address new mortgage regulations that took effect on Jan. 10.
“The exam procedures for both mortgage origination and mortgage servicing now cover final rules issued by CFPB through November 2013,” the bureau said in an email.
The updated procedures will be incorporated into the CFPB’s Supervision and Examination Manual at a later date, the CFPB said.
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Inspector general auditing CFPB’s supervision program
Posted Date: Friday, January 10, 2014
The inspector general for the Federal Reserve and the Consumer Financial Protection Bureau is expected to complete an audit of the CFPB’s supervision program in the coming weeks. The IG is also preparing to release a report on the bureau’s civil penalty fund and the agency’s efforts to comply with certain Dodd-Frank rulemaking requirements. Read on to learn about the topics the IG plans to report on soon.
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Lawmakers press for Volcker Rule fix
Posted Date: Friday, January 10, 2014
Lawmakers on both sides of the political spectrum are looking for ways to alter provisions of a Dodd-Frank final rule they fear will harm community and mid-sized banks. The rule, released on Dec. 10, 2013, implements Section 619 of Dodd-Frank, commonly known as the Volcker Rule.
At issue are final rule provisions that would require banks to divest themselves of certain covered funds — including certain investments in collateralized debt obligations that are backed by trust-preferred securities — by July 2015.
Republican-backed legislation introduced in the U.S. House would exempt from the divestiture requirements collateralized debt obligations that were issued prior to Dec. 10, 2013 and were backed predominantly by trust-preferred securities as of that date.
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SEC, Fed announce key staff departures
Posted Date: Wednesday, January 8, 2014
The Federal Reserve and Securities and Exchange Commission (SEC) announced the impending departure of key staff members. Sandra Braunstein, director of the Fed’s Division of Consumer and Community Affairs, will retire on April 1 after nearly 27 years at the agency. SEC Enforcement Co-Director George Canellos also plans to leave his post.
Braunstein joined the Fed in 1987 and was named senior associate director of the Division of Consumer and Community Affairs in 2003. She has served as division director since April 2004.
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Know your regulator: Leadership changes at the CFTC
Posted Date: Wednesday, January 8, 2014
Commodity Futures Trading Commission (CFTC) member Mark Wetjen was sworn in as the agency’s interim chairman. The change in leadership comes as the commission faces renewed criticism over efforts to implement its Dodd-Frank swaps regime and define the cross-border application of its rules.
Wetjen, a Democrat, replaces outgoing Chairman Gary Gensler, who concluded his five-year term with the agency on Jan. 3. Timothy Massad was nominated in November 2013 to be the agency’s permanent leader. His nomination has yet to be approved by the Senate.
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Dodd Frank Update provides training on Loan Estimate, Closing Disclosure
Posted Date: Wednesday, January 8, 2014
The Consumer Financial Protection Bureau has released its final rule on the integrated mortgage disclosures under the Real Estate Settlement Procedures Act and the Truth in Lending Act. RESPA News and Dodd Frank Update have teamed up to provide industry professionals with two training webinars that will deliver in-depth instruction on the impactful provisions of the new regulations. Read on for the details.
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Lenders brace for mortgage rule implementation day
Posted Date: Wednesday, January 8, 2014
Some lenders are facing uncertainty and a fair bit of fear ahead of this week’s all-important federal regulatory compliance deadline for several new mortgage rules issued last year by the Consumer Financial Protection Bureau. The CFPB’s new ability-to-repay requirements, along with rules pertaining to loan originator compensation, mortgage servicing and certain protections for high-cost mortgages, take effect on Friday. Some additional CFPB rules are scheduled to take effect on Jan. 18. Read on for the details.
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Bureau ramps up mortgage rule consumer education campaign
Posted Date: Wednesday, January 8, 2014
The Consumer Financial Protection Bureau (CFPB) is working to ensure that borrowers understand their rights under sweeping new mortgage rules that take effect on Friday. CFPB Director Richard Cordray told the National Association of Realtors the agency’s new ability-to-repay rule will usher in a “back-to-basics” approach to mortgage lending that will help consumers avoid costly debt traps. Other rules are intended to limit mortgage servicing surprises.
Cordray urged association members to spread the word about the CFPB’s consumer complaint function and education resources. He also said some myths have arisen regarding the bureau’s rules, and he took the opportunity to address them.
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Challenging conditions mean risk management must remain a priority, OCC says
Posted Date: Saturday, January 4, 2014
Slow economic growth and a prolonged low interest rate environment are creating unique challenges for banks seeking to improve their profits, according to a new report from the Office of the Comptroller of the Currency. The OCC said some national banks and federal thrifts are “layering risk back into the system in ways that are difficult to quantify” given the current environment. The agency said risk management “must remain a top priority” for banks. Read on to learn about the risks the OCC said bankers should watch for in the coming months.
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Dodd-Frank in 2014 (pt. 3): On the horizon
Posted Date: Saturday, January 4, 2014
The Dodd-Frank Act promises to force its way into the public consciousness as never before in 2014 as sweeping new mortgage requirements take effect. However, several additional issues promise to shape the landscape for financial services providers in 2014. Phil Schulman, a partner in the Washington, D.C., office of K&L Gates, predicted that reform of the government sponsored enterprises (GSE) will remain a hot topic. However, he doubted whether significant changes are in store in the immediate future.
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Regulators considering change to newly finalized Volcker Rule
Posted Date: Saturday, January 4, 2014
Four federal agencies are weighing whether to change a provision of a new Dodd-Frank final rule that industry participants said would harm community and mid-size banks. The Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Securities and Exchange Commission said on Dec. 27 that they are reviewing whether to exempt collateralized debt obligations backed by trust-preferred securities from the investment prohibitions of Section 619 of Dodd-Frank, otherwise known as the Volcker Rule.
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