InfoBytes, November 25, 2008
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Federal Issues
FDIC Approves Temporary Liquidity Guarantee Program Final Rule; Sets December 5, 2008 Opt-Out Deadline. On November 21, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved a Final Rule to implement its Temporary Liquidity Guarantee Program (TLGP). The TLGP, which is intended to mitigate adverse effects on economic conditions or financial stability, has two primary components: (i) the Debt Guarantee Program, through which the FDIC will guarantee the payment of certain newly-issued senior unsecured debt from banks, thrifts and holding companies; and (ii) the Transaction Account Guarantee Program, through which the FDIC will guarantee in full certain noninterest-bearing deposit transaction accounts. The Final Rule affects FDIC-insured depository institutions, any U.S. bank holding company or financial holding company, and certain U.S. savings and loan holding companies. Unless an institution opts-out of one or both of these programs by December 5, 2008, the institution will be included in the program(s) and assessed accordingly.
The TLGP election form is currently available via FDICconnect (for a sample of the election form, please see http://www.fdic.gov/news/news/financial/2008/fil08125b.pdf). All institutions must complete the election form on or before December 5, 2008 to either opt-out of one or both components of the TLGP, or, for those entities remaining in the TLGP, to provide data to determine an entity’s debt guarantee limit and to agree to the terms of the TLGP. Entities that remain in the Debt Guarantee Program must also execute and submit to the FDIC a Master Agreement. In the future, the FDIC will make available a list of eligible entities that have opted-out of both programs. All eligible entities that are affiliates of a U.S. bank holding company, or that are affiliates of an eligible entity that is a U.S. savings and loan holding company must make the same decision regarding continued participation in each guarantee program; failure to do so constitutes an opt-out by all members of the group.
Beginning December 19, 2008, each insured depository institution that offers noninterest-bearing transaction accounts must post a prominent notice in the lobby of its main office and each branch, and, if applicable, on its website, clearly indicating whether the institution is participating in the Transaction Account Guarantee Program. If the institution is participating in the Transaction Account Guarantee Program, the notice must also state that funds held in noninterest-bearing transaction accounts at the entity are insured for the entire amount through December 31, 2009. The Final Rule is available at http://www.fdic.gov/news/board/08BODtlgp.pdf, and Frequently Asked Questions regarding the TLGP are available at www.fdic.gov/regulations/resources/TLGP/faq.html.
Fed Will Support Consumer Lending Backed Securities. On November 25, the Federal Reserve Board announced the creation of the Term Asset-Backed Securities Loan Facility (TALF). The TALF is designed to increase credit availability and support economic activity by facilitating renewed issuance of consumer and small business asset-backed securities (ABS) at lower interest rate spreads. Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The FRBNY will lend an amount equal to the market value of the ABS less a haircut and that amount will be secured at all times by the ABS. The U.S. Department of the Treasury will provide $20billion of credit protection to the FRBNY in connection with the TALF under the Troubled Assets Relief Program. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/monetary/20081125a.htm. For a copy of the terms and conditions of TALF, please see http://www.federalreserve.gov/newsevents/press/monetary/monetary20081125a1.pdf.
Fed Plans to Purchase GSE Obligations and Securities. On November 25, the Federal Reserve Board (FRB) announced that it will initiate a program to purchase direct obligations and mortgage-backed securities (MBS) from certain government-sponsored enterprises (GSEs). The FRB will purchase the direct obligations of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks, and will purchase MBS backed by Fannie Mae, Freddie Mac, and the Government National Mortgage Association (Ginnie Mae).Purchases of up to $100 billion in GSE direct obligations under the program will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions that begin next week. Purchases of up to $500 billion in MBS will be conducted by asset managers selected via a competitive process with the goal of beginning these purchases before year-end. Purchases of both direct obligations and MBS are expected to take place over several quarters.For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/monetary/20081125b.htm.
HUD Pursues E-Mortgage Initiative for FHA Loans. On November 19, U.S. Department of Housing and Urban Development (HUD) Secretary Preston delivered a speech in Washington, D.C. that emphasized HUD’s focus on modernizing critical information technology systems that support the Federal Housing Authority’s (FHA) core business functions. Secretary Preston stated that “HUD must continue to drive forward in reengineering business processes designed to speed assistance to customers and provide employees with tools to do their jobs more effectively. We are already taking big steps forward. For example, in a major area of our business that is labor intensive, we are reducing the time it takes to process a loan from as much as 9 days down to one. We are developing an e-mortgage plan that permits the entire FHA loan process to be handled electronically. In addition, we are working hard to complete a detailed operations and technology roadmap to support the incoming administration. We must continue this important progress.” For a copy of the speech, please see http://www.hud.gov/news/speeches/2008-11-19.cfm.
Courts
California Federal Court Holds Federal Courts of Appeals Have Exclusive Jurisdiction to Review FCC Final Rulings. On November 21, the U.S. District Court for the Northern District of Californiadismissed a case for lack of jurisdiction involving claims arising under the Telecommunications Consumer Protection Act (TCPA) and involving the interpretation of a Federal Communications Commission (FCC) ruling. Leckler v. CashCall, Inc., No. C 07-04002 (N.D. Cal. Nov. 21, 2008). In this case, the plaintiffs alleged in a class action suit that the defendant violated the TCPA by calling consumers’ cell phones using an automatic dialing system and prerecorded messages. The defendant moved to vacate a previous district court order granting summary judgment for the plaintiffs, which rejected a January 2008 FCC final ruling. The FCC ruling stated that autodialed and prerecorded message calls to cell phones do not violate the TCPA when the called party provides the number to a creditor (e.g., through a loan application) in connection with an existing debt. The previous district court order rejected the FCC ruling, reasoning that creditors must have “prior express consent“ to call a consumer’s cell phone using an autodialer or prerecorded message, and that the mere inclusion of a cell phone number on an application, etc., was not such “prior express consent.” In support of its motion to vacate the previous district court order, the defendant argued that the federal Hobbs Act gives federal courts of appeals exclusive jurisdiction to review the validity of final FCC orders. Because this case involved such a ruling, the court held that the district court lacked jurisdiction to review the ruling, and vacated the previous order. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Leckler_v_Cashcall.pdf.
Firm News
Joe Kolar is scheduled to speak on the RESPA Rule LIVE Online Conference sponsored by the Mortgage Bankers Association on December 2.
Joe Kolar is also scheduled to make a presentation with HUD officials at an online webinar on the RESPA rule sponsored by the Consumer Bankers Association on December 9.
Grant Mitchell was a featured speaker at the annual RESPRO Fall Seminar in New Orleans, Louisiana from November 5 - 7. His presentation concentrated on various RESPA issues.
Sara Emley spoke at the Investment Advisers Association Compliance Workshop in Atlanta, Georgia on November 6. Her topics included business continuity and the Form ADV proposal.
Chris Witeck spoke at the Mortgage Bankers Association’s Residential Underwriting Conference 2008 in Tampa, Florida on November 7. He spoke on the Red Flag Alert panel and discussed, among other items, the recent FTC data security settlement with Premier Capital Lending.
Jerry Buckley and Margo Tank conducted a panel discussion on electronic-related legal and regulatory issues at the Electronic Signature and Records Association (ESRA) Second Annual Conference: E-Signatures ’08: Business, Legal and Technology Trends on November 12 and 13 in Washington, DC.
Joe Kolar participated in a webinar on November 17 sponsored by the Mortgage Bankers Association, with representatives from CSBS and AARMR, regarding the SAFE Mortgage Licensing Act.
Jeff Naimon spoke about the amended Regulation Z at the District of Columbia Bar Association’s Off-The-Record luncheon program in Washington, DC, on November 17.
Mortgages
Fed Will Support Consumer Lending Backed Securities. On November 25, the Federal Reserve Board announced the creation of the Term Asset-Backed Securities Loan Facility (TALF). The TALF is designed to increase credit availability and support economic activity by facilitating renewed issuance of consumer and small business asset-backed securities (ABS) at lower interest rate spreads. Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The FRBNY will lend an amount equal to the market value of the ABS less a haircut and that amount will be secured at all times by the ABS. The U.S. Department of the Treasury will provide $20billion of credit protection to the FRBNY in connection with the TALF under the Troubled Assets Relief Program. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/monetary/20081125a.htm. For a copy of the terms and conditions of the TALF, please see http://www.federalreserve.gov/newsevents/press/monetary/monetary20081125a1.pdf.
Fed Plans to Purchase GSE Obligations and Securities. On November 25, the Federal Reserve Board (FRB) announced that it will initiate a program to purchase direct obligations and mortgage-backed securities (MBS) from certain government-sponsored enterprises (GSEs). The FRB will purchase the direct obligations of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks, and will purchase MBS backed by Fannie Mae, Freddie Mac, and the Government National Mortgage Association (Ginnie Mae).Purchases of up to $100 billion in GSE direct obligations under the program will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions that begin next week. Purchases of up to $500 billion in MBS will be conducted by asset managers selected via a competitive process with the goal of beginning these purchases before year-end. Purchases of both direct obligations and MBS are expected to take place over several quarters.For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/monetary/20081125b.htm.
HUD Pursues E-Mortgage Initiative for FHA Loans. On November 19, U.S. Department of Housing and Urban Development (HUD) Secretary Preston delivered a speech in Washington, D.C. that emphasized HUD’s focus on modernizing critical information technology systems that support the Federal Housing Authority’s (FHA) core business functions. Secretary Preston stated that “HUD must continue to drive forward in reengineering business processes designed to speed assistance to customers and provide employees with tools to do their jobs more effectively. We are already taking big steps forward. For example, in a major area of our business that is labor intensive, we are reducing the time it takes to process a loan from as much as 9 days down to one. We are developing an e-mortgage plan that permits the entire FHA loan process to be handled electronically. In addition, we are working hard to complete a detailed operations and technology roadmap to support the incoming administration. We must continue this important progress.” For a copy of the speech, please see http://www.hud.gov/news/speeches/2008-11-19.cfm.
Banking
FDIC Approves Temporary Liquidity Guarantee Program Final Rule; Sets December 5, 2008 Opt-Out Deadline. On November 21, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved a Final Rule to implement its Temporary Liquidity Guarantee Program (TLGP). The TLGP, which is intended to mitigate adverse effects on economic conditions or financial stability, has two primary components: (i) the Debt Guarantee Program, through which the FDIC will guarantee the payment of certain newly-issued senior unsecured debt from banks, thrifts and holding companies; and (ii) the Transaction Account Guarantee Program, through which the FDIC will guarantee in full certain noninterest-bearing deposit transaction accounts. The Final Rule affects FDIC-insured depository institutions, any U.S. bank holding company or financial holding company, and certain U.S. savings and loan holding companies. Unless an institution opts-out of one or both of these programs by December 5, 2008, the institution will be included in the program(s) and assessed accordingly.
The TLGP election form is currently available via FDICconnect (for a sample of the election form, please see http://www.fdic.gov/news/news/financial/2008/fil08125b.pdf). All institutions must complete the election form on or before December 5, 2008 to either opt-out of one or both components of the TLGP, or, for those entities remaining in the TLGP, to provide data to determine an entity’s debt guarantee limit and to agree to the terms of the TLGP. Entities that remain in the Debt Guarantee Program must also execute and submit to the FDIC a Master Agreement. In the future, the FDIC will make available a list of eligible entities that have opted-out of both programs. All eligible entities that are affiliates of a U.S. bank holding company, or that are affiliates of an eligible entity that is a U.S. savings and loan holding company must make the same decision regarding continued participation in each guarantee program; failure to do so constitutes an opt-out by all members of the group.
Beginning December 19, 2008, each insured depository institution that offers noninterest-bearing transaction accounts must post a prominent notice in the lobby of its main office and each branch, and, if applicable, on its website, clearly indicating whether the institution is participating in the Transaction Account Guarantee Program. If the institution is participating in the Transaction Account Guarantee Program, the notice must also state that funds held in noninterest-bearing transaction accounts at the entity are insured for the entire amount through December 31, 2009. The Final Rule is available at http://www.fdic.gov/news/board/08BODtlgp.pdf, and Frequently Asked Questions regarding the TLGP are available at http://www.fdic.gov/regulations/resources/TLGP/faq.html.
Fed Will Support Consumer Lending Backed Securities. On November 25, the Federal Reserve Board announced the creation of the Term Asset-Backed Securities Loan Facility (TALF). The TALF is designed to increase credit availability and support economic activity by facilitating renewed issuance of consumer and small business asset-backed securities (ABS) at lower interest rate spreads. Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The FRBNY will lend an amount equal to the market value of the ABS less a haircut and that amount will be secured at all times by the ABS. The U.S. Department of the Treasury will provide $20billion of credit protection to the FRBNY in connection with the TALF under the Troubled Assets Relief Program. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/monetary/20081125a.htm. For a copy of the terms and conditions of the TALF, please see http://www.federalreserve.gov/newsevents/press/monetary/monetary20081125a1.pdf.
Fed Plans to Purchase GSE Obligations and Securities. On November 25, the Federal Reserve Board (FRB) announced that it will initiate a program to purchase direct obligations and mortgage-backed securities (MBS) from certain government-sponsored enterprises (GSEs). The FRB will purchase the direct obligations of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks, and will purchase MBS backed by Fannie Mae, Freddie Mac, and the Government National Mortgage Association (Ginnie Mae).Purchases of up to $100 billion in GSE direct obligations under the program will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions that begin next week. Purchases of up to $500 billion in MBS will be conducted by asset managers selected via a competitive process with the goal of beginning these purchases before year-end. Purchases of both direct obligations and MBS are expected to take place over several quarters.For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/monetary/20081125b.htm.
Consumer Finance
California Federal Court Holds Federal Courts of Appeals Have Exclusive Jurisdiction to Review FCC Final Rulings. On November 21, the U.S. District Court for the Northern District of Californiadismissed a case for lack of jurisdiction involving claims arising under the Telecommunications Consumer Protection Act (TCPA) and involving the interpretation of a Federal Communications Commission (FCC) ruling. Leckler v. CashCall, Inc., No. C 07-04002 (N.D. Cal. Nov. 21, 2008). In this case, the plaintiffs alleged in a class action suit that the defendant violated the TCPA by calling consumers’ cell phones using an automatic dialing system and prerecorded messages. The defendant moved to vacate a previous district court order granting summary judgment for the plaintiffs, which rejected a January 2008 FCC final ruling. The FCC ruling stated that autodialed and prerecorded message calls to cell phones do not violate the TCPA when the called party provides the number to a creditor (e.g., through a loan application) in connection with an existing debt. The previous district court order rejected the FCC ruling, reasoning that creditors must have “prior express consent“ to call a consumer’s cell phone using an autodialer or prerecorded message, and that the mere inclusion of a cell phone number on an application, etc., was not such “prior express consent.” In support of its motion to vacate the previous district court order, the defendant argued that the federal Hobbs Act gives federal courts of appeals exclusive jurisdiction to review the validity of final FCC orders. Because this case involved such a ruling, the court held that the district court lacked jurisdiction to review the ruling, and vacated the previous order. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Leckler_v_Cashcall.pdf.
Litigation
California Federal Court Holds Federal Courts of Appeals Have Exclusive Jurisdiction to Review FCC Final Rulings. On November 21, the U.S. District Court for the Northern District of Californiadismissed a case for lack of jurisdiction involving claims arising under the Telecommunications Consumer Protection Act (TCPA) and involving the interpretation of a Federal Communications Commission (FCC) ruling. Leckler v. CashCall, Inc., No. C 07-04002 (N.D. Cal. Nov. 21, 2008). In this case, the plaintiffs alleged in a class action suit that the defendant violated the TCPA by calling consumers’ cell phones using an automatic dialing system and prerecorded messages. The defendant moved to vacate a previous district court order granting summary judgment for the plaintiffs, which rejected a January 2008 FCC final ruling. The FCC ruling stated that autodialed and prerecorded message calls to cell phones do not violate the TCPA when the called party provides the number to a creditor (e.g., through a loan application) in connection with an existing debt. The previous district court order rejected the FCC ruling, reasoning that creditors must have “prior express consent“ to call a consumer’s cell phone using an autodialer or prerecorded message, and that the mere inclusion of a cell phone number on an application, etc., was not such “prior express consent.” In support of its motion to vacate the previous district court order, the defendant argued that the federal Hobbs Act gives federal courts of appeals exclusive jurisdiction to review the validity of final FCC orders. Because this case involved such a ruling, the court held that the district court lacked jurisdiction to review the ruling, and vacated the previous order. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Leckler_v_Cashcall.pdf.
E-Financial Services
HUD Pursues E-Mortgage Initiative for FHA Loans. On November 19, U.S. Department of Housing and Urban Development (HUD) Secretary Preston delivered a speech in Washington, D.C. that emphasized HUD’s focus on modernizing critical information technology systems that support the Federal Housing Authority’s (FHA) core business functions. Secretary Preston stated that “HUD must continue to drive forward in reengineering business processes designed to speed assistance to customers and provide employees with tools to do their jobs more effectively. We are already taking big steps forward. For example, in a major area of our business that is labor intensive, we are reducing the time it takes to process a loan from as much as 9 days down to one. We are developing an e-mortgage plan that permits the entire FHA loan process to be handled electronically. In addition, we are working hard to complete a detailed operations and technology roadmap to support the incoming administration. We must continue this important progress.” For a copy of the speech, please see http://www.hud.gov/news/speeches/2008-11-19.cfm.