Posts filed under ‘Financial Institutions’

Written by: Lindsay Harden

Yesterday the OCC issued Frequently Asked Questions (“FAQs”) to supplement OCC Bulletin 2013-29, “Third-Party Relationships: Risk Management Guidance.” The FAQs provide helpful guidance to banks on subjects including working with fintech companies, reducing oversight costs for lower-risk third-party relationships, and engaging in marketplace lending arrangements with non-bank entities. Portions of this guidance may be particularly useful for community banks who wish to leverage resources by distributing costs among multiple banks. For example, the OCC clarified in the FAQs that banks using a common third-party service provider may collaborate with each other to meet certain OCC expectations with respect to performing due diligence, contract negotiation, and ongoing monitoring responsibilities. The FAQs also make clear that a bank may outsource certain compliance management functions or collaborate with a group of banks to manage cybersecurity issues, as additional cost saving alternatives.

June 8, 2017 at 2:11 pm

Federal Banking Agencies Remind Banks of Appraisal Waiver Process

Written by: Jennifer Salisbury

On Wednesday, federal banking agencies issued a reminder of two approaches financial institutions can use to ease the shortage of qualified appraisers that is slowing down closing times. First, temporary practice permits allow state-certified or licensed appraisers to provide services in other states.  Second, a financial institution may qualify for a temporary waiver of the requirement to use a state-certified or licensed appraiser if the institution faces documented scarcity of appraisers that has led to “significant delays” in appraisers on federally related transactions in a specific geographic area.  For more information, click here to view the ABA Banking Journal article discussing this topic.

June 2, 2017 at 3:33 pm

CFPB Issues Consent Order for RESPA Violations

Written by:  Robert Harry

On January 31, 2017, the Consumer Financial Protection Bureau (“CFPB”) published a Consent Order with Prospect Mortgage, LLC (“Prospect”) for alleged violations of the Real Estate Settlement Procedures Act (“RESPA”) prohibitions against kickbacks and unearned fees, commonly referred to as “RESPA Section 8”. RESPA Section 8 states that “no person shall give and no person shall accept any fee, kickback or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person”. RESPA Section 8 applies to, among others, mortgage lenders, title companies, lawyers, servicers, and real estate agents.

The CFPB alleges that Prospect entered into a series of agreements with two real estate brokerage agencies and a loan servicer for mortgage origination referrals. The CFPB noted that Prospect violated RESPA Section 8 by:

1. Using lead agreements to pay brokers for referrals;
2. Using Marketing Services Agreements, commonly referred to as “MSAs” to pay brokers for referrals;
3. Using desk licensing agreements to pay brokers for referrals;
4. Encouraging brokers and agents to require consumers to loan obtain pre-approvals with Prospect’s loan officers
5. Paying the servicer for referrals;
6. Using a third-party’s website advertising to pay real estate brokers for referrals; and
7. Encouraging brokers to use fees and credits to pressure consumers into using Prospect.

The CFPB ordered Prospect to pay a $3.5 million dollar civil money penalty to the bureau. Further, Prospect may still have liability for any private civil action available under RESPA Section 8 to any consumer harmed by these actions, is prohibited from engaging in the activities described in the Consent Order, and must undergo compliance training, and conduct extensive reporting and recordkeeping.

Additionally, and in a departure from the CFPB’s prior RESPA Section 8 enforcement actions, the CFPB also entered into Consent Orders with the two real estate brokerages for accepting the payments in violation of the law. This is the first time the CFPB has enforced RESPA Section 8’s prohibition against kickbacks against real estate brokers under the common use of MSAs, desk licensing, and co-marketing agreements. The two brokerages agreed to pay a combined $230,000.00 in fines and disgorgement due to the alleged violations and may still be held liable under related consumer private causes of action.

The actions by the CFPB reinforce Richard Cordray’s position that the bureau will analyze marketing arrangements between settlement service providers with great scrutiny. The orders rely on internal communications and statements to demonstrate that the facially lawful arrangements under RESPA Section 8 were likely only a means of circumventing the anti-kickback provisions while still paying for referrals. It’s imperative that all settlement service providers carefully evaluate any marketing or business activities with other settlement service providers to ensure compliance with RESPA.

The attorneys at Stinson Leonard Street are uniquely able to counsel and assist clients in the residential real estate finance and sales industry to navigate the complex regulation that is RESPA Section 8.

February 16, 2017 at 10:35 am

Stinson Leonard Street’s Quarterly Banking Seminar – How to Prosper Through Market Change

With the beginning of a new year comes new opportunities in the banking and financial fields. These opportunities, however, are not without potential challenges, obstacles and pitfalls. Focused attention on strategy and problem avoidance is more critical than ever.

Join us Tuesday, January 24 for a panel discussion on some of the hot topics in the banking industry. Learn how new regulations will pose significant compliance and operational challenges for your organization and how you can prepare to implement the right steps to avoid complications and scrutiny.

Our presenters will cover critical changes in the market including :

  • Strategy and Competition
  • Financial Technology
  • Regulatory Landscape
  • Talent Acquisition and Retention
  • Customer Demands
  • The Impact of Global Decisions

This program will be presented from various Stinson Leonard Street locations.

Join us in person in the Denver, Kansas City, Minneapolis, St. Louis and Washington, DC offices for this informative event.

Register online to attend this event.

WHEN:

Tuesday, January 24

Registration: 8:30 – 9 a.m. (MT) 9:30 – 10 a.m. (CT) 10:30 -11 a.m. (ET)

Program: 9 – 11 a.m. (MT) 10 a.m. – 12 p.m. (CT) 11 a.m. – 1 p.m. (ET)

Lunch reception immediately following in Denver, Kansas City, Minneapolis, St. Louis and Washington, DC.

WHERE:

Stinson Leonard Street

Denver [map]

Kansas City [map]

Minneapolis [map]

St. Louis [map]

Washington, DC [map]

December 7, 2016 at 8:00 am

National Bank Charters for FinTech Companies

Written by: P. Michael Campbell

On Friday December 2nd, the Office of the Comptroller of Currency (“OCC”) announced that it would start considering applications for special purpose national bank charters from fintech (financial technology) companies.  The OCC believes that providing fintech companies charters will establish a regulatory framework for the fintech industry.  As noted by the OCC, a company receiving the special purpose national bank charter will be “held to the same rigorous standards of safety and soundness, fair access, and fair treatment of customers that apply to national banks and federal savings associations.”

In addition to regulation by the OCC, a fintech company receiving a charter could be subject to regulation from other governmental bodies, including the Federal Reserve, Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau.

Any company seeking a special purpose national bank charter is expected to have a well-developed business plan setting forth in “significant detail” the bank’s activities. The plan must also cover the governance structure, capital, liquidity, compliance risk management, financial inclusion and recovery and exit strategies.

SLS is well positioned to advise any company seeking a special purpose national bank charter. SLS has experts in every aspect of the application process and years of experience working with regulatory agencies.

The OCC’s proposal is open for comment until January 15th and is expected to receive many comments as the move has been both applauded and criticized in the financial and banking industry.  SLS will continue to monitor any developments with the OCC’s announcement.

December 6, 2016 at 8:00 am

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