rc11kully.workshop1.alphabetsoupecoafha2011

8/3/2019 RC11Kully.Workshop1.AlphabetSoupECOAFHA2011

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MBAs Regulatory Compliance

Conference 2011

Kris D. KullyK&L Gates LLP

[email protected]

Workshop 1: Quick Guide to the Alphabet Soup Federal Laws

Equal Credit Opportunity Act / Regulation B

Fair Housing Act


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15 U.S.C. 1691 et seq.

12 C.F.R. Part 202

Equal Credit Opportunity Actand Regulation B


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Equal Credit Opportunity Act (ECOA)and Regulation B

Purpose of ECOA and Regulation B:

To promote the availability of credit to all creditworthyapplicants with fairness & impartiality, and without

discrimination based on: race color religion national origin sex

marital status age (provided the applicant has the ability to

contract) receipt of public assistance exercise of rights under the Consumer Credit

Protection Act


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Equal Credit Opportunity Act (ECOA)and Regulation B (contd)

Key Provisions:

Prohibits a creditor from discriminating against an applicant on aprohibited basis regarding any aspect of a credit transaction

Requires creditors to notify applicants of action taken onapplications

Requires creditors to report credit history in the name of bothspouses on an account

Requires creditors to collect race/ethnicity and other informationfor certain dwelling-related loans

Requires creditors to provide applicants with copies of appraisalreports

Restricts when a creditor may require signature of a spouse on acredit instrument

Record retention requirements


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Prohibits discrimination on a prohibited basis:

A creditor may not discriminate against an applicanton a prohibited basis regarding any aspect of acredit transaction

Includes underwriting, terms of credit, and servicing

A creditor may not discourage applicants orprospective applicants from making or pursuing an

application Includes advertising, marketing, any oral/written

statement

Creditors must follow rules regarding requestsfor information and evaluation of applications


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Notice Requirement ( 202.9):

A creditor must notify an applicant of the actiontaken within:

30 days after receiving a completed application, anotice of action taken on the application (approval,counteroffer, or adverse action)

30 days of taking adverse action on an incompleteapplication (unless it provides a notice of

incompleteness)

90 days after notifying the applicant of a counterofferand the applicant does not accept


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Reporting credit history:

ECOA does not require reporting credit informationto consumer reporting agencies (CRAs)

If creditor does report, ECOA requires reportinginfo on both spouses:

it must designate any new account to reflect theparticipation of both spouses, if the applicantsspouse is permitted to use or is contractually liableon the account

it must furnish information to consumer reportingagencies in a way that will allow the CRA to accessthe information in the name of each spouse

it must respond to inquiries about an account inwhich both spouses participate in the name of thespouse about whom the information is requested


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Collection of Race/Ethnicity Information(202.13):

Creditors receiving an application for a purchasemoney loan or refinance involving an owneroccupied dwelling must request information aboutthe applicants ethnicity, race, sex, marital statusand age.

If applicant chooses not to provide, must note on

application; creditor must then note based onvisual observation/surname.

Model application forms (URLA)

HMDA

HAMP


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Providing Appraisal Reports:

A creditor must provide applicant copy (at noadditional cost) of written appraisals and valuations(AVMs, BPOs) developed in connection withapplication for a loan be secured by a first lien on adwelling, promptly but at least within 3 days prior toclosing.

Regardless of whether credit granted or denied,

application incomplete or withdrawn.

Must notify at application in writing of right toreceive copy

(Current regs based on prior statute: Must provide

appraisal report, either routinely or upon theapplicants request, regardless of lien position.)


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Spousal Signature ( 202.7(d)):

A creditor may not require signature of anapplicants spouse or other person (other than a

joint applicant) on a credit instrument

Certain exceptions sometimes apply, but carefullegal and factual review is important

Unsecured credit applicant relying on joint

property Unsecured credit community property states

Secured credit

Co-signors to support creditworthiness


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Women- or Minority-Owned, and SmallBusinesses

Must inquire whether business is women-owned,minority-owned, or small business

Must maintain records and submit to CFPB

Must if feasible shield information fromunderwriters

Prohibition against discrimination based on thisinformation

CFPB to issue regulations


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Record Retention ( 202.12):

Must retain applications and information requiredto be obtained or used in evaluating the application

Notice of action taken, adverseaction/statement of specific reasons

Any written allegations of violations

For 25 months after application (for consumer credit)


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42 U.S.C. 3601, et seq.

Fair Housing Act


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Fair Housing Act (contd)

Coverage

Any person or other entity whose businessincludes engaging in residential real estate-related

transactions includes making or purchasing loans or providing

other financial assistance for purchasing,constructing, improving, repairing or maintaining adwelling, or secured by residential real property

includes servicing activities, including modificationsand other default remedies

includes real estate brokering and appraisalactivities, advertising the availability of real estate,provision of reasonable accommodations to personswith disabilities


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Key Provisions

Prohibits discrimination in housing-related lendingactivities against any person on a prohibited basis.

Prohibits redlining (i.e., denying loans in certainneighborhoods even though the individualapplicant may be eligible for credit), expressing aracially exclusive image, discouraging applicationsfrom protected class members, and imposing more

onerous terms and conditions on protected classmembers.


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Enforcement

HUD

DOJ

Remedies

Actual damages

Injunctive or other equitable relief

Civil penalty (in administrative proceeding or civilaction by Attorney General)

Punitive damages (in civil action by privatepersons)

Attorneys fees and costs


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