The U.S. regulatory agency for national banks is cracking down on unlawful and unfair lending practices.
Earlier this month, the Office of the Comptroller of the Currency, which charters, regulates and supervises national banks, issued “OCC Guidelines Establishing Standards for National Banks’ Residential Mortgage Lending Practices.”
The guidelines, which the OCC introduced “as a further step to protect against national bank involvement in predatory, abusive, unfair or deceptive residential mortgage practices,” will become effective in April.
These guidelines will become part of the OCC’s regulations. “These standards further the OCC’s goal of ensuring that national banks and their operating subsidiaries are not involved directly or indirectly through loans that they purchase or make through intermediaries, in predatory or abusive residential mortgage lending practices.”
A part of the guidelines offers strong language relating to bank and bank subsidiary conduct with appraisers. “Engaging in a practice of influencing the independent judgment of an appraiser with respect to a valuation of real estate that is to be security for a residential mortgage loan would violate applicable standards,” the guidelines state. (See Inman News articles on appraisal industry problems.)
If banks violate these OCC guidelines, the OCC can issue a notice requiring a “compliance plan” that details “the steps the bank will take to correct the deficiencies and the time within which those steps will be taken.” Banks must submit this plan within 30 days of the Notice of Deficiency sent by the OCC, according to an enforcement process relating to the guidelines.
If the bank does not submit an acceptable compliance plan or does not comply with this plan, the OCC can issue another notice. The bank would have 14 days to respond to this notice, and if the bank does not respond or submits a deficient plan, the OCC can choose to issue a Safety and Soundness Order, which is “legally equivalent to a cease and desist order.”
An appeal process would follow this order, and a bank that does not comply with the order “is subject to an enforcement proceeding in federal district court and/or assessment of civil money penalties,” according to the enforcement process.
Questions relating to the guidelines can be directed to Michael Bylsma, director, OCC Community and Consumer Law Division, at (202) 874-5750; Michele Meyer, special counsel, Legislative & Regulatory Activities Division, at (202) 874-5090; or Rick Freer, national bank examiner, Compliance, at (202) 874-4428. Questions can also be mailed to: 250 E Street, SW, Washington, D.C. 20219.
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