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Fintech in quick: CFPB problems No-Action Letter Templates for Affordable Dollar that is small Lending Mortgage Loss Mitigation

The other day, the Consumer Financial Protection Bureau (the “CFPB”) released two “no action” letter templates that address the affordable dollar that is small and homeloan payment relief for customers whenever numerous might need it many. Both templates had been given within the CFPB’s Policy on No-Action Letters (the “Policy”), that was revised in 2019. Depository organizations CFPB that is seeking approval tiny buck installment loans and home loan servicers searching for CFPB approval to be used of certain loss mitigation solutions can use these templates once the foundation because of their no-action letter applications. The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency issued the “Interagency Lending Principles for Offering Responsible Small-Dollar Loans” that outline important risk management considerations for regulated financial institutions to consider when making small dollar loans to individuals and small businesses in a related May action.

Small Dollar Lending

The small-dollar template had been released in reaction to a credit card applicatoin through the Bank Policy Institute (“BPI”) and provides a path for BPI bank users along with other deposit using institutions trying to provide small-dollar credit services and products. A job candidate can make use of this template to request a CFPB no-action page assurance that is providing its small-dollar credit services and products will likely not trigger a CFPB supervisory or enforcement action.

The template requires a job candidate to give you different types of information, like the following: (1) those items placed in area an for the Policy, including a description associated with the applicant’s proposed credit item and a conclusion of this product’s consumer that is potential and risks; (2) particular certifications, including that the applicant is, or perhaps is associated with, an insured depository institution or insured credit union with total assets of greater than ten dollars billion, that the small-dollar credit item is structured as either a hard and fast term, amortizing installment loan or an open-end credit line, and that the mortgage quantity doesn’t go beyond $2,500; and (3) information on item features and financing methods, such as the anticipated APR range, additional charges, a description associated with the payment framework and a description of the lender’s underwriting requirements. A whole range of the things needed within the template is present right here. The BPI no-action page demand failed to specify a maximum interest rate but expected that such loans will be less than the 400% to 500per cent interest levels charged by nonbank pay day loan companies.

As referenced above, installment loans or personal lines of credit cannot exceed $2,500 to get this relief that is NAL. The repayment term for installment loans and every draw on a credit line should be significantly more than 45 times but less than twelve months, and re re payments needs to be amortized for a straight-line basis across one or more payment. One exception is for credit lines with payment regards to 45 days or less that allow a payment that is single where a draw isn’t any significantly more than ten percent regarding the maximum dollar quantity founded for the merchandise.

Digitizing Mortgage Loss Mitigation Solutions

The loss mitigation template had been released as a result to a software by Brace computer Software, Inc. (“Brace”), and offers home loan servicers and borrowers each having an online user interface for electronic loss mitigation solutions. The working platform, that will be aimed toward borrowers, permits borrowers to more effortlessly connect to their home loan servicers remotely and offers a digitized form of the Fannie Mae/Freddie Mac Form 710 Borrower Solicitation Package. The working platform permits borrowers to, among other activities, upload loss mitigation papers straight to the working platform for receipt and review by their mortgage servicers. The template also includes a platform for mortgage servicers, that is inaccessible to borrowers. The mortgage servicers’ template permits servicers to process and handle the loss mitigation papers uploaded by borrowers. This platform permits home loan servicers to personalize the interface in purchase to best suit their processing requirements.

A of the Policy referenced above, the loss mitigation template requires the applicant to provide the following information: (1) statements that the letter is specific to the applicant and the specific platform being described by the applicant in the letter, is based on the factual representations made in the applicant’s application, does not purport to provide any legal conclusions regarding various statutory sections, and does not constitute an endorsement by the CFPB of any described uses of the platform; (2) commitments by the applicant to apprise the CFPB of any material changes to the information submitted in the application, or material changes to the performance quality of the platform described in the application; (3) statements pertaining to the CFPB’s commitment not to take certain regulatory action, and conditions surrounding potential termination of the letter; and (4) other statements and assurances regarding transparency of information in addition to the items required in section. A list that is full of necessary for this template can be obtained here.

The loss mitigation template also requires a job candidate to give you the next certifications: (1) the applicant intends to utilize the platform for processing loss mitigation applications; (2) the applicant will start thinking about loss mitigation applications from borrowers to be received pursuant to Regulation X, 12 C.F.R. § 1024.41(b)(2) each time a borrow clicks that is“Submit the borrower’s online application form presented through the working platform; (3) the applicant will process and effectuate needs to stop interaction with all the debtor in much the same as those needs which were submitted and received written down.


These two templates offer assurances that when the CFPB issues letters that are no-action a reaction to applicants making use of these templates that it’ll maybe perhaps not make supervisory findings or bring a supervisory or enforcement action under its authority to avoid unjust, misleading, or abusive functions or techniques against applicants for services and products described inside their application. Significantly, once we have emphasized before, this NAL relief is restricted to CFPB action just, and depository organizations and Fintechs must think about the risks that other agencies with jurisdiction during these services and products, including although not restricted to financial regulators and state police force agencies, may still take action whenever appropriate.

This up-date is for information purposes just and really should never be construed as legal counsel on any facts that are specific circumstances. Underneath the guidelines associated with Supreme Judicial Court of Massachusetts, this product can be regarded as advertising.