FYI: Feds Issue Final Guidance on Correspondent Concentration Risks

The federal financial regulatory agencies issued the attached final guidance regarding management of risks associated with funding and credit concentrations arising from correspondent relationships.

As you may recall, a correspondent relationship occurs when a financial organization provides another financial organization with services related to lending, or other activities.  A correspondent relationship also occurs between a bank and its holding company, subsidiary and affiliates.

The final guidance emphasizes the need for institutions to identify, monitor, and manage correspondent concentration risk on a standalone and organization-wide basis. The guidance also reinforces the supervisory view that financial institutions should perform appropriate due diligence on all credit exposures to, and funding transactions with, other financial institutions as part of their risk management policies and procedures. The guidance states that it does not supplant or amend applicable regulations such as Limitations on Interbank Liabilities (Regulation F).

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

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Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com

 

 

 

FYI: FinCen Issues Advisory on Reverse Mortgage/HECM Fraud

The Financial Crimes Enforcement Network released the attached advisory guidance to assist financial institutions in guarding against fraud schemes against senior citizens who obtain reverse mortgage loans, especially FHA Home Equity Conversion Mortgage loans.

 

The advisory highlights new trends and schemes that law enforcement and the Department of Housing and Urban Development officials have identified, including use of unsuspecting seniors in property flipping and other fraud schemes. FinCEN also is asking financial institutions to use certain key words within the Suspicious Activity Report narrative section to assist law enforcement in identifying and prosecuting these crimes.

 

Some of the schemes noted by FinCEN include:  (1) theft of a senior’s loan proceeds through illegal cross selling of financial products;  (2) theft of the reverse mortgage proceeds by people the seniors trusts, such as family members, care takers and loan officers; and  (3) use of a power of attorney to obtain a loan without the senior’s full knowledge.

 

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com

 

 

FYI: OTS Cracks Down on Overdraft Protection Programs, Issues Proposed Guidance

The Office Thrift Supervision announced that one of its regulated entities will pay a penalty of $400,000 and refund more than $12 million to consumers who were charged allegedly excessive fees for overdraft protection on bank accounts.  The OTS asserted that the institution engaged in unfair or deceptive acts or practices, conditioning credit on repayment by preauthorized electronic fund transfers, and false advertising in connection with its overdraft protection program.  Copies of the civil money penalty and cease and desist order are attached.

 

In addition, the OTS proposed the attached guidance to its examiners and OTS-regulated institutions about overdraft practices, including procedures OTS discovered in connection with the above-action. The OTS said the proposed guidance addresses practices prohibited by the Federal Trade Commission Act for being unfair or deceptive, as well as actions that violate other federal laws or regulations. The proposal emphasizes that thrift institutions must clearly represent the features of overdraft programs; provide consumers with the opportunity to choose whether to participate; explain the thrift’s policies on clearing transactions; and place reasonable aggregate limits on overdraft fees. The proposed guidance has a 60-day comment period.

 

 

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com

 

 

FYI: FTC Shuts Down More Credit Repair and Loan Mod Scammers

The Federal Trade Commission obtained a court order banning eight companies and their principals from selling credit repair and mortgage relief services, and requiring them to pay more than $7.5 million for deceiving consumers throughout the United States.  A copy of the Order is attached.

The FTC charged seven of the companies and three officers with making false promises that they would improve consumers’ credit scores by removing negative information such as late payments, charge-offs, collections, inquiries, delinquencies, judgments, and accounts discharged in bankruptcy.  According to the FTC, the defendants charged consumers up to $2,000, including illegally charging an advance payment of $300, and failed to provide written contracts and other materials required by law. 

The FTC also asserted that various of the defendants falsely claimed they would help consumers get mortgage loan modifications or stop foreclosure in all or virtually all instances. The court entered default judgments against all of the defendants except Gerald Serino, also known as Jerry Serino, after they failed to respond to the lawsuit.

The credit repair defendants are United Credit Adjusters, Inc., doing business as United Credit Adjustors and UCA; United Credit Adjustors, Inc., d/b/a United Credit Adjusters and UCA; United Counseling Association, Inc., d/b/a UCA; Bankruptcy Masters Corp., National Bankruptcy Services Corp., Federal Debt Solutions, Ltd., United Money Tree, Inc., Ahron E. Henoch, Ezra Rishty, and Gerald Serino. The loan modification defendants are The Loan Modification Shop, Ltd., Casey Lynn Cohen, a/k/a Casey Lynn Collins, and Rishty.

The court order prohibits the credit repair companies and their owners from selling credit repair services, and it bans the loan modification companies and their individual owners from selling mortgage loan modification and foreclosure relief services. The order also prohibits the defendants from misleading consumers about financial goods and services, such as loan terms or rates, how much a consumer will save by enrolling in a debt relief service, and credit terms other than those a lender actually offers. The order also bars the defendants from misleading consumers about any good or service, such as refund terms, government affiliation, and total cost.

In addition, the order bars the defendants from trying to collect payment from their customers, and from selling or otherwise disclosing their customers’ personal or financial information. The order imposes a $7,500,334 judgment against the credit repair defendants, and a $32,710 judgment against the loan modification defendants. Litigation will continue against Serino.

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com

 

 

FYI: NC Promulgates New Loss Mitigation/Foreclosure Prevention Rules

The North Carolina Office of the Commissioner of Banks announced new rules to reduce and delay foreclosures by licensed mortgage services that will go into effect on June 1, 2010.  Copies of the new rules and related press release are attached.

 

The new rules require a state licensed non-bank mortgage servicer to stop foreclosure efforts pending the consideration of a request by the homeowner for assistance, with some specific exceptions. The new rules also require mortgage servicers to acknowledge a borrower's loss mitigation request within 10 days, respond to a borrower's loss mitigation request within 30 days of a completed application, and specific information in denial letters.

 

The regulator states that the new rules do not apply to bank servicers, but the state regulator “hopes that bank servicers with large numbers of delinquent mortgage loans will consider adopting similar procedures to reduce the potential of unnecessary foreclosures.” 

 

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com

 

 

 

FYI: GSEs/Regulators Announce Anti Loan Mod Scam Campaign

Fannie Mae, Freddie Mac and various federal agencies recently announced a national campaign to prevent loan modification scams through the formation of a Loan Modification Scam Prevention Network, as well as a consolidation website.

 

As part of the campaign, the network has launched a website, www.PreventLoanScams.org, which is designed to support national, state and local law enforcement efforts. The website serves as a nationwide clearinghouse and destination for loan modification scam information on complaints filed, laws and regulations, and enforcement actions. The website includes: (1) an electronic complaint form for scam victims; (2) names of individuals and organizations identified by enforcement agencies to have allegedly committed a loan modification scam; (3) information on how to avoid a loan modification scam; (4) state-by-state information about rules, regulations and resources available to homeowners; and (5) news and information on enforcement efforts.

 

Prominent contributors to the campaign include: the Treasury Department, FDIC, the Department of Housing and Urban Development, the Federal Trade Commission, the Conference of State Bank Supervisors, the National Association of Attorneys General, the Justice Department and FBI.

 

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com

 

 

 

FYI: OCC Enters Into $5.2M Settlement re: Inadequate Monitoring of Remotely Created Check Activity

The Office of the Comptroller of the Currency recently entered into the attached settlement agreement and consent order for civil money penalty with a national bank, requiring the bank to make $5.1 million in restitution to over 60,000 consumers allegedly adversely affected by the bank's alleged inadequate monitoring and controls relating to Remotely Created Checks used by a third party payment processor and several telemarketers and internet merchants.  The bank is also required to pay a $100,000 civil money penalty to the U.S. Treasury.

The practices cited by the OCC in the settlement involved the use of remotely created checks, or RCCs, by telemarketers, internet merchants, and the payment processor that maintained account relationships with the Bank. An RCC is a check that is not created by the accountholder and does not bear the accountholder's signature. Instead, the signature block of the check includes text such as “authorized by your depositor, no signature required.”

A large percentage of these RCCs were returned to the bank by individuals, or their financial institutions, who said the checks were never authorized or that they had never received the products or services promised by the telemarketers or merchants. In some cases, the return rates exceeded 60% of the total deposited.

More specifically, the OCC asserted that the bank maintained:  (a) inadequate due diligence prior to opening the accounts with the various third party companies; (b) inadequate monitoring of the rates of return on the RCCs, demand drafts, and other similar instruments deposited into the accounts; and (c) inadequate policies, procedures, systems, and controls relating to the bank’s relationship with the third parties.

The OCC concluded that the bank engaged in unsafe or unsound practices during the course of its relationships with the payment processor and the telemarketers and internet merchants, and unfair practices within the meaning of the Federal Trade Commission Act.  The account relationships with the payment processor and merchants ended in August 2007.

In addition to the monetary components of the settlement, the bank agreed to develop new policies and procedures with respect to RCCs, before accepting any new customers that regularly deposit RCCs.

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com