Fed Proposes Tighter Mortgage-Lending Rules (Due April 8, 2008)
The Federal Reserve Board issued proposed rules to Regulation Z (Truth in Lending) that would restrict certain practices and would also require certain mortgage disclosures to be provided earlier in the transaction. The proposal includes four key protections for "higher-priced mortgage loans" secured by a consumer's principal dwelling:  creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers' ability to repay the loan; creditors would be required to verify the income and assets they rely upon in making a loan; prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase; and creditors would have to establish escrow accounts for taxes and insurance.  The proposal to use the 300 basis point spread above comparable Treasury bonds as the threshold between regular and “regular-priced” mortgages is particularly problematic.  AmBA urges members to take a close look at this standard—and at other elements of the proposal highlighted in the Fed’s summary.

FDIC Publication Addresses Loan Modification (1/10/08)
The Federal Deposit Insurance Corporation's (FDIC) current issue of the FDIC Quarterly addresses a streamlined loan modification process that will help avert foreclosure for borrowers who are current on their loans, but who cannot refinance or afford the higher payments when interest rates reset. "The ability of mortgage servicers to get ahead of the curve by embracing restructuring on a wider basis could, in the end, be one of the most important factors in limiting the depth and duration of the present mortgage credit crisis" wrote FDIC Chair Sheila Bair.  Bair's article, The Case for Loan Modification also addresses common misconceptions about mortgage restructuring. Click here for a copy of the article.

Tips to Protect your Checking Account
The Federal Reserve Board released tips on protecting consumer accounts from unauthorized transfers.  Tips include: don't give your account number and bank routing information to anyone you don't know; review your monthly statement; notify your bank about any problems as soon as possible; if you don't have enough money in your account, don't write the check or authorize the debit and; know your rights under consumer protection laws.  A printable PDF version can also be downloaded so that financial institutions can distribute copies to consumers.

Download the Updated Flood Insurance Guidelines
The Federal Emergency Management Agency has updated its Mandatory Purchase of Flood Insurance Guidelines to clarify issues and incorporate industry best practices. The revised guidelines, for which the AmBA offered suggestions, include a flowchart illustrating the mandatory purchase process at loan origination; an explanation of options for purchasing coverage for buildings during construction; a review of penalties and loss assessments; and recommendations on residential condominium building association policies

AmBA Says Restricting SSN Use Must Not Interfere With Normal Business Operations
The Federal Trade Commission on July 30th, posted on its website request for comments regarding the uses of Social Security numbers in the private sector to reduce the overall incidence of ID theft. AmBA believes that the FTC's approach to SSN restrictions, and any recommendations made to the President for additional legislative or regulatory steps, should be guided by the desire to maintain this balance between reducing unnecessary SSN transfers or uses and inadvertently burdening necessary and appropriate ones. "As with antibiotics, unnecessary use can compromise the value of the instrument" AmBA said in a comment letter. The association added "any effort to restrict SSN use must not interfere with identity verification, anti-fraud, anti-money laundering and anti-terrorist financing efforts, as well as normal business operations that allow financial institutions to meet the needs of customers and the financial markets."

Judge Rules Patriot Act NSL Provisions Unconstitutional
A federal district judge on September 6th, struck down parts of the USA Patriot Act that authorize the FBI to use national security letters to compel organizations such as Internet service providers and -- occasionally -- banks to provide customer records without court authorization. U.S. District Judge Victor Marrero in New York , who ordered the FBI to stop issuing the letters, ruled that the NSL-related parts of the Patriot Act violate the First Amendment and the Constitution's separation of powers provisions because they prohibit recipients of the letters from revealing their existence and do not provide adequate judicial oversight. ABA experts pointed out that the district court's decision is not effective for 90 days, pending further government appeal, and such Patriot Act decisions often are overturned.