The Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury, is sounding the alarm over challenges faced by elder financial exploitation (EFE).
In a newly released trends report, FinCEN highlighted more than $27 billion worth of “suspicious activity” across more than 155,000 filings of Bank Secrecy Act (BSA) data with FinCEN between June 15, 2022 and June 15, 2023.
The data is linked to elder financial exploitation, “or the illegal or improper use of an older adult’s funds, property, or assets.” Within the $27 billion-plus in reported suspicious activity, EFE could include both actual and attempted transactions that “may affect personal savings, checking accounts, retirement savings, and investments, and can severely impact victims’ well-being and financial security,” the report stated.
This is a follow-up to a prior notice issued by FinCEN in June 2022, which aimed to alert financial institutions of a rising trend of EFE. FinCEN noted that companies should be aware of these activities and attempt to counteract them through both internal mechanisms and reporting to authorities.
“FinCEN has long recognized the threat that [EFE] poses and the need to protect the older adult population from financial abuse,” FinCEN Director Andrea Gacki said in a statement. “FinCEN’s analysis highlights the critical role of financial institutions in helping to identify, prevent, and report suspected [EFE]. We are grateful for their vigilance and for the BSA information they have filed — and continue to file — in response to FinCEN’s 2022 advisory.”
Seventy-two percent of all EFE filings included in the data were filed by banks, with two banks alone accounting for 50,670 (33%) of all filings. The most commonly cited typology of the EFE incidents were “account takeovers,” and adult children of the elder victims were the most common perpetrators, according to the report.
“BSA filers reported adult children as the perpetrators of elder theft in nearly 40% of cases, based on a manual review of EFE-related filings,” the report explained.
Perpetrators also relied primarily on what FinCEN refers to as “unsophisticated means,” or those that “minimize direct contact with financial institution employees” and which include “using previously compromised identifying information and/or passwords, guessing passwords, or mass spam emails that elicit replies containing sensitive information.”
This is because direct involvement with financial institution personnel would increase the likelihood of being caught, since workers at these institutions “would likely identify EFE activity more frequently if victims or perpetrators conducted transactions in person, and presumably not permit the requested transactions.”
Financial institutions also filed significantly more reports related to scams targeting seniors, most frequently including “tech support” scams in which a perpetrator falsely claims to offer technical assistance, or “romance scams” in which a perpetrator attempts to present themselves as a potential romantic partner to the victim.
Real estate scams are also included in the typology of the report, although it does not mention reverse mortgages specifically. The U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) previously identified reverse mortgage scams as a potential vehicle for perpetrators to target elderly victims.
Late last year, the FBI warned the public about a problematic rise in instances of elder financial abuse. Seniors are common targets of financial scammers, and authorities consistently warn the public to safeguard the financial accounts and assets of their loved ones.
In a report last week on AI and cybersecurity, the U.S. Department of the Treasury said that, while banks tend to share plenty of information with each other for the purposes of cybersecurity and anti-money laundering, they have practiced “insufficient data sharing” in the area of fraud prevention.
The dearth of banks sharing their fraud data undercuts smaller banks’ efforts to train anti-fraud AI models— models that many banks hope will replace rule-based engines, deny lists and device fingerprinting in the fight to detect and prevent transaction-related crimes such as money laundering and fraud.
Treasury acknowledged a general gap in the data available to financial institutions for training AI models of all kinds, but the report said the gap is “significant in the area of fraud prevention,” which the report contrasted with robust cybersecurity data sharing efforts led by organizations including the Financial Services Information Sharing and Analysis Center.
“The accuracy of machine learning-based systems in identifying and modeling fraudulent behavioral patterns correlates directly with the scale, scope (variety of datasets) and quality of data available to firms,” the report reads.
The report said “most financial institutions” interviewed for the report, which was based on 42 interviews, expressed the need for better collaboration in the domain of fraud prevention, particularly as fraudsters themselves have been using AI and machine learning technologies.
“Sharing of fraud data would support the development of sophisticated fraud detection tools and better identification of emerging trends or risks,” the report said.
However, while such information sharing could improve fraud detection, it “also raises privacy concerns,” the report said, as it would involve collecting and storing sensitive financial information including transaction histories and personal behaviors. Data anonymization and algorithmic transparency — i.e., helping customers understand how their data is used — could mitigate these issues, the report said.
Treasury said in the report that the Financial Crimes Enforcement Network, which is a bureau of Treasury, might be well positioned to support fraud information-sharing efforts between banks, to ensure that smaller financial institutions “are benefitting from the advancements in AI technology development for countering fraud,” the report said. Core providers could also play this role, according to the report.
While many vendors offer smaller banks access to AI-based transaction monitoring systems, Treasury’s report said internal development at banks “offers advantages in oversight and control of the development, testing, transparency, and governance of models and access to sufficient data monitoring for model risk management evaluation purposes.”
For the moment, the report cited efforts by two institutions that are already working to close the fraud information-sharing gap: The Bank Policy Institute and the American Bankers Association.
The Bank Policy Institute, a public policy research and advocacy organization, told Congress in February that, as part of the effort to promote and enable data and intelligence sharing between institutions, the institute has established BITS, an “executive-level forum” for bankers to collaborate on policy advocacy, promote critical infrastructure resilience, strengthen cybersecurity and reduce fraud.
The American Bankers Association, a trade organization and bank industry lobbying group, is set to launch an information-sharing exchange in the first half of this year, which the association says will help member banks fight fraud.
As an example of how the exchange will work, in fraud cases known as business-email compromise, the platform will enable banks to alert their peers with key information about the account of the alleged fraudster, said Paul Benda, executive vice president of risk, cybersecurity and fraud at the American Bankers Association.
“The idea here is to allow banks to share this information amongst other banks in a near-real-time manner so they can integrate this data into their payment flows, into their risk-scoring systems, to stop that money from going out,” Benda said.
The association said its long-term goal is to make the exchange available to all financial institutions that are covered by Section 314(b) of the Patriot Act, which gives financial institutions the right to share information that could be used to identify transactions that might involve money laundering or terrorist funding.
As for the consequences of failing to promote adequate fraud information sharing, several institutions Treasury interviewed said “there may be a risk of future consolidation towards larger institutions” if “smaller financial institutions are not supported in closing this critical gap,” according to the report.
The Office of Federal Housing Enterprise Oversight announced yesterday that it is changing the way Fannie Mae and Freddie Mac must identify and report mortgage fraud in an effort to minimize the ongoing problem.
Specifically, the new policy guidance was altered to require that both companies “immediately” report “insider fraud”, which is defined as knowledge that “a board member, officer, employee, or contractor engaged by the enterprise has or may have engaged in mortgage fraud or possible mortgage fraud”.
The enhanced rules also require the two mortgage financiers to report any pattern of conduct or behavior that is “interpreted as mortgage fraud or possible mortgage fraud”.
In a statement released yesterday, OFHEO director James Lockhart noted that it was important to update the guidance of fraud reporting to help protect consumers and the government sponsored entities.
“Mortgage fraud can pose tremendous risks for consumers,” said Lockhart. “This guidance reflects the ongoing work of both OFHEO and the Enterprises in the development and improvement of mortgage fraud detection and reporting,” he added.
Per the OFHEO, the new policy guidance:
– Permits the Enterprises to designate scenarios that rise to a “pattern” of reportable cases of mortgage fraud or possible mortgage fraud further enhancing their reporting to OFHEO;
– Expands the immediate notification requirements to OFHEO to include situations involving insider fraud;
– Revises the time frame and format of reporting to follow the Department of the Treasury’s Financial Crimes Enforcement Network requirements; and,
– Adds clarifications to the definition of mortgage fraud, which continues to be defined as any material misstatement, misrepresentation, or omission such as, but not limited to, false information contained in identification and employment documents, false mortgagee or mortgagor identity, fraudulent appraisals, theft of custodial funds, non-remitted payoff funds, misrepresentations of borrower funds, and property flipping where designed to falsely inflate property value.
Jumbo Loans
According to an OFHEO report just released, assuming Congress decides to raise the conforming loan limit, Fannie and Freddie would likely only purchase low-risk jumbo loans.
These include fixed-rate mortgages and fully amortizing mortgages, which made up only 30% of jumbo loan originations in the first half of 2007, according to the report.
If a proposed bill were to be enacted, the new conforming loan limit for Los Angeles and Orange County could range from $568,000 to $588,400, and be as high as $625,500 in the Bay area.
But the OFHEO has found a number of drawbacks to raising the conforming limit, including greater credit risk which could have a negative impact on both the GSE’s and the common borrower.
Savings bonds are a cornerstone of conservative investing, offering a secure and reliable means to grow one’s wealth over time. Yet, many people remain unclear about the intricacies of this financial instrument.
In this article, we aim to demystify this valuable financial tool by delving into its core characteristics, advantages, and practical applications. Whether you’re an individual seeking to diversify your investment portfolio or a professional aiming to optimize your financial strategies, understanding the ins and outs of savings bonds can be a game-changer.
What is a savings bond?
Savings bonds are a low-risk, U.S. government-backed investment that you can buy to help raise funds over time. When you purchase one, you are loaning money to the government. In return, the government promises to repay the amount you invested with interest.
Electronic savings bonds are simple to buy, safe to invest in, and affordable. You receive interest payments, and the bonds purchased can go to many purposes later, such as qualified education expenses. The purchase amounts range from a minimum investment of $25 – $10,000. However, there are maximum purchase limits per calendar year depending on the type of bond you purchase.
How do savings bonds work?
Think of a savings bond as a loan to the government. While there are a few rules, the main idea is that the government promises to pay back your loan through interest payments.
The government sets the interest rate for the loan, which doesn’t change for the bond’s duration. You buy these bonds at face value.
Savings bonds offer fixed terms, meaning they mature at a specific date. Once they reach that state, you can redeem them for their total value – plus interest.
The type of bond you purchase determines the maturity date. Some can take up to 30 years, while others take much less time.
Different Types of Savings Bonds
There are two main types of savings bonds in the US today, both a fixed rate, while paper bonds are slowly being phased out.
The U.S. Government issues two main types at face value: Series I Bonds and Series EE Bonds. Below is an overview of what each entails.
Series I Bonds
A Series I U.S. Savings Bond is a type of bond that offers a fixed interest rate that adjusts for inflation. The bonds are sold at face value, meaning that the price you purchase savings bonds for is what it is worth once the bond reaches maturity. With I Bonds, you can protect your investment from the variable inflation rate.
The government sets the I Bond inflation rate twice annually, once for each upcoming six-month period.
The current interest rate is 5.27% for I Bonds issued between November 1, 2023 to April 30, 2024.
I Bonds can earn interest for up to 30 years, unless you decide to cash them out beforehand. You can buy them from the U.S. Treasury using a TreasuryDirect account, or purchase paper bonds using your IRS tax refund.
Series EE Bonds
Series EE Savings Bonds are savings bonds that earn interest regularly for up to 30 years. The government guarantees that the Series EE Bond doubles in value in 20 years, even if it needs to add money at 20 years to reach that number.
Series EE bonds differ from I bonds in multiple ways. Primarily, they are not inflation adjustable. The second is that new EE bonds are only available for electronic purchase.
The government applies the bond’s interest rate to a new principal every six months. A principal is the sum of the previous principal and the fixed rate of interest in the past six months.
As of 2005, new EE Bonds earn a fixed interest rate set on the day you buy a bond. After 20 years pass, the government may adjust the interest on it.
When should I consider a savings bond?
You can buy a savings bond anytime, depending on your finances and long-term investment goals. There are multiple reasons why buying bonds is a good idea for later, however, such as:
Their low-risk nature
They generate a stable and low-risk investment
The interest earned on them is exempt from state and local taxes
Any investor with $25 and above can buy them
Bonds pay back, helping you plan for the future
Enjoying the stability of a fixed rate of interest announced twice annually
Are savings bonds worth it?
Savings bonds are worth the investment if you are looking for a stable way to increase your money at a reliable, fixed rate. If you want faster and higher returns, saving bonds may not be your best option. Remember that you do have to pay federal taxes as the bonds accrue interest, but not state or local taxes.
Ultimately, the selling point for purchasing a savings bond is a stable and safe return on your investment. Not all investments you make come with a guarantee as solid as the one you can get from the government.
The TreasuryDirect website also lets you send an announcement to someone to let them know you purchased a savings bond for them as a gift.
How do I redeem my savings bonds?
Redeeming a savings bond is usually an uncomplicated and seamless process. If you purchased your bonds electronically, such as the Series EE or Series I bonds, you could cash them in through your online TreasuryDirect account. Once you do so, you will receive your money in a checking or savings account of your choice in a few business days.
If you purchased older paper savings bonds, you could redeem them at financial institutions where you have an account. The option to cash in a bond at a bank or credit union depends on how long you had an account with them.
For older series of savings bonds, like HH bonds, you can’t redeem them through banks or credit unions. The FAQ section will cover HH bonds, as the government no longer issues them.
For HH Bonds, you must complete a specific form called the FS Form 1522. Once completed, you must mail the bond with a certified signature and direct deposit information to the Treasury Retail Securities Services.
Early Withdrawal Penalty
Sometimes, a circumstance may force you to withdraw your savings bond early. Although not advisable as savings bonds are long-term investments, you still have options when something unexpected happens.
Series EE and Series I savings bonds have an early withdrawal penalty if you redeem them less than five years after their issue date.
So, if you cash in the bond before the five-year mark, you receive the principal amount plus the interest earned up to that point minus the interest accrued in the past three months.
After the five-year mark, there are no penalties for redeeming your savings bond. You can receive the total value of the principal and interest earned.
Savings Bonds vs. Savings Accounts vs. Certificates of Deposit (CDs)
A savings account and a CD are financial products that banks and credit unions offer. With a savings account, you can deposit money and earn interest on electronic bonds over time. A CD is when you keep a specific amount of money with the bank for a timeframe in exchange for fixed interest rates.
Although savings accounts and CDs are low-risk investment options, they are not backed by the government like savings bonds. And unlike savings bonds, you must pay federal, state, and local income taxes for CDs and savings accounts.
Benefits and Drawbacks of Investing in Savings Bonds
In terms of benefits, an electronic bond comes with low-risk, guaranteed returns backed by the government. You can use them as a future nest egg, for retirement, or to fund a child or grandchild’s education. Moreover, they come with tax benefits. The federal government allows exemptions on state and local taxes and are simple to buy and later redeem. Keep in mind that you do have to pay federal income tax on them in some cases.
One drawback to electronic bonds is the time it takes to make a solid amount of interest like a money market account. Additionally, they do not offer the potential for capital gains, only from the interest accrued over time. Finally, if you do not have a Series I bond, you do not have sufficient protection against inflation.
Bottom Line
Bottom line: Savings bonds are an excellent investment option if you are looking for guaranteed returns by the United States government. Although it takes time to get their full benefit, they are a reliable way to save money, helping you plan for the future or pay tuition for college. You don’t have to worry about a variable interest rate, and the interest payment is always stable.
Frequently Asked Questions
Where can I purchase savings bonds?
You can purchase savings bonds online from the U.S. Department of the Treasury through their online platform, www.treasurydirect.gov. Buying from the treasury guarantees safety and security. Paper bonds can only be purchased for Series I U.S. savings bonds. Additionally, you can only pay for a paper bond using a tax return.
What is an HH savings bond?
HH savings bonds offer semi-annual interest directly to the bondholder. They were only available as a paper bond by exchanging Series EE or Series E bonds. The government discontinued them in 2004, and they are no longer available for sale. However, some HH bonds are still redeemable depending on their year of purchase.
When can I redeem my savings bonds?
Savings bonds can be redeemed after a minimum holding period, which is typically one year. However, if you redeem the bond before it is five years old, you will lose the last three months of interest as a penalty. Bonds reach their full face value at maturity, which is usually 20 to 30 years from the issue date.
With mortgage rates above 7%, historically low levels of housing inventory, defaults in commercial real estate, and a series of potentially onerous regulations to come, Mortgage Bankers Association President and CEO Bob Broeksmit said the trade group is doing all its can to influence policymakers.
“MBA cannot control macroeconomic forces, but what we can do is make sure the actions of policymakers help our industry instead of hindering it at a crucial time,” Broeksmit said at the organization’s Compliance and Risk Management Conference this week in Washington, D.C.
Broeksmit highlighted the group’s work in helping a bill about remote online notarization get through the divided U.S. House of Representatives. The bill would create federal minimum standards to allow notaries to perform remote online notarization (RON) transactions. The MBA also supported Rep. John Rose (R-TN)’s effort to curb trigger leads, he said.
Broeksmit also touched on agency-focused policy work, citing the cancelation of a controversial Federal Housing Finance Agency (FHFA) policy that would have imposed a controversial upfront fee on Fannie Mae and Freddie Mac borrowers with higher debt-to-income (DTI) ratios.
The trade group has its eyes on other challenges ahead, including a proposal by the Financial Stability Oversight Council (FSOC) at the U.S. Department of the Treasury that would label non-bank financial entities as systemically important financial institutions, which MBA opposes.
“This will be a major regulatory power grab over a part of the housing finance market that is already well-regulated by the states and other federal agencies,” Broeksmit said. “If FSOC is concerned about the core banking activities taking place outside the purview of prudential bank regulation, then it should reconsider the regulatory environment that has caused the exit of so many traditional depository institutions from the marketplace in the first place. If you regulate everyone out of the business, who is left to originate and service these loans?”
MBA is also looking ahead to a U.S. Supreme Court decision expected early next year that will decide the constitutionality of the Consumer Financial Protection Bureau (CFPB), Broeksmit added.
“While the MBA has its disagreements with many of the Bureau’s regulatory actions, we have a strong position on the need for consistency and our opposition to chaos,” he said, noting the MBA has filed an amicus brief saying as much.
MBA is also keeping an eye on a developing case before the U.S. District Court for Maryland where the CFPB and the U.S. Department of Justice (DOJ) are aiming to make lenders liable for actions of third-party appraisers when those actions result in bias or discrimination during the valuation process, which MBA is also against.
“Lenders cannot be held vicariously liable on fair lending grounds for the actions or inputs of an independent third party such as an appraiser or [automated valuation model (AVM)] provider,” Broeksmit said. “AVMs hold great promise as an opportunity to alleviate appraiser shortages, minimize bias and reduce transaction costs. Clear rules of the road are necessary so we will stay engaged with federal policymakers on ways to reduce bias and improve accuracy for AVM users of all sizes and business models.”
Non-bank originator Change Lending lost its Community Development Fund Institution (CDFI) certification, according to a report from Barron’s.
Change Lending was removed from the CDFI Fund’s list of certified program lenders last week, the outlet reported. Its parent company, The Change Company CDFI, remains as one of the certified program originators.
The CDFI certification is a designation given by the U.S. Department of Treasury CDFI Fund to specialized organizations that provide financial services to low-income communities and people who lack financing. At least 60% of a lender’s financing must target low- and moderate-income borrowers or customers in underserved communities.
Since becoming a CDFI in 2018, The Change Company has funded over $25 billion in loans to more than 75,000 families, according to the firm.
Because CDFIs provide credit and financial services to underserved Black, Hispanic and low-income communities, they are exempt from certain mortgage regulations.
In particular, the CDFI designation exempts lenders from complying with the Consumer Financial Protection Bureau’s ability-to-repay rule, which requires mortgage lenders to document a borrower’s income, assets, employment and credit history.
The Change Company faces a lawsuit by a former high-ranking employee accusing the firm of retaliation after he notified executives of employees “mischaracterizing loans” to apparently skirt federal reporting requirements.
When Adam Levine – CEO Steven Sugarman’s former chief of staff – reported illegal activity by the company’s employees in 2023 to Sugarman and other executives and board members, leadership terminated his employment, according to a suit filed by Levine in Superior Court in Orange County, California in June.
Levine also accused The Change Company of false representations to investors about the underlying characteristics of the mortgages it securitizes.
The former chief-of-staff is seeking damages for alleged wrongful termination, whistleblower retaliation and breach of contract.
Bloomberg reported that the Securities and Exchange Commission (SEC) is probing The Change Company over its mortgage-backed securities and the regulator is also looking into some of the actions of Sugarman, citing people with direct knowledge of the matter.
Sugarman was the former chairman and CEO of Banc of California before resigning amid a SEC probe in 2017.
The SEC declined to comment on the existence or nonexistence of a possible investigation. The Change Company nor Change Lending responded to requests for comment.
The agencies intend to tackle two challenges evident during the Covid-years refi boom: higher costs due to appraiser shortages and concerns regarding bias in home valuations.
In their letter, MBA and CBA said that AVMs and technologies like them can alleviate appraiser shortages, reduce transaction costs, and safeguard against individual appraisal bias. Ultimately, a robust regulatory framework continues to be a critical imperative to achieve these outcomes.
However, any regulation should consider the practicalities of model risk management and its potential unintended consequences.
For example, the associations said the proposed rule includes Fannie Mae and Freddie Mac to the new standards, which creates a level playing field in the market. But the trade groups are worried about the impact of quality control standards on the GSEs’ alternative valuation methods, such as desktop appraisal, since these tools are essential in times of high demand.
“MBA and CBA suggest that the agencies consult with the GSEs to ensure that application of the quality control standards would not create adverse effects on the availability of alternative valuation methods,” the letter states.
In addition, regulators should be aware of any unbalanced market effects of AVMs regulations, conflicting interpretations of the legal framework, and the lack of established methodologies in examining systemic bias in the U.S., the trade groups state.
The agencies involved include the Federal Housing Finance Agency; the Consumer Financial Protection Bureau; the National Credit Union Administration; the Federal Deposit Insurance Corporation; the U.S. Department of the Treasury; and the Federal Reserve System.
Per the proposed rules, each institution using AVMs will adopt and maintain its practices, procedures, and control systems, reducing the burden on smaller institutions. But the trade groups request the agencies to include a small lender/servicer exemption from the standards, as these companies are likely to rely on larger outside service providers subject to a thorough review by regulators or larger clients.
Regarding third-party providers, the associations suggest that the CFPB expand its Compliance Bulletin 2016-02, Service Providers to outline expectations and potential recourse “for quality control and fair lending oversight” of third-parties providing AVMs services. In addition, MBA and CBA said that creditors should not be liable for violating nondiscrimination law when relying on third-party AVMs, disagreeing with the agencies’ interpretation of the Fair Housing Act.
The MBA and the CBA requested an adequate implementation timeline of at least 12 months.
The White House supports a new rule for AVMs, which follows goals set out by the president in addressing issues of racial bias that have exacerbated homeownership and wealth gaps. When announcing the proposed rule, Vice President Kamala Harris weighed in.
“Today, I’m proud to announce we are developing a rule that will require that financial institutions ensure that their appraisal algorithms are not biased, for example, that they do not produce lower valuations for homes owned by people of color,” Harris said. “We are also releasing the guidance to make it easier for consumers to appeal what they suspect to be unbiased valuation.”
Another trade group weighed in on the newly proposed rule.
The National Association of Mortgage Brokers (NAMB) said it supports new federal regulatory proposals governing the use of AVMs.
“The reality is the systems and structures are themselves, in some cases, problematic,” said NAMB President Ernest Jones in a statement. “Even when appraisers follow the intended approach, it may result in an outcome that disenfranchises people. They could be doing everything in a way they feel is consistent with the approaches they’ve learned and for which they’re certified, but there are some underlying issues that need to be addressed.”
After years of discussion, the U.S. Treasury Department is expected to propose a rule that would effectively end anonymous luxury home purchases in the coming weeks, according to the Financial Crimes Enforcement Network’s (FinCEN) regulatory agenda.
The rule, which department officials first said they planned to implement in 2021, would require real estate professionals, such as title insurers, to report the identities of beneficial owners buying real estate in cash to FinCEN. The department believes the proposed rule will close a loophole that allows corrupt oligarchs, terrorists and criminals to hide illegally obtained funds in U.S. real estate.
According to a state from Treasury Secretary Janet Yellen in March, as much as $2.3 billion was laundered through U.S. real estate between 2015 and 2020, a trend that she said has been going on for decades.
The new rule would replace FinCEN’s current reporting system known as the Geographic Targeting Orders (GTOs).
The GTOs require title companies to identify the people behind shell companies used in all-cash purchases of residential real estate.
As of mid-August 2023, 34 cities and counties throughout the U.S., including Litchfield and Fairfield Counties in Connecticut; Adams, Arapahoe, Clear Creek, Denver, Douglas, Eagle, Elbert, El Paso, Fremont, Jefferson, Mesa, Pitkin, Pueblo, and Summit counties in Colorado; Boston; Chicago; Dallas-Fort Worth; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; Seattle; Washington, D.C.; Northern Virginia and Maryland (DMV) area; the city and county of Baltimore; the Hawaiian Islands of Honolulu, Maui, Hawaii and Kauai; and Houston and Laredo, Texas.
In all of these GTOs, except for the city and county of Baltimore, which has a threshold of $50,000, all cash purchases of $300,000 or more must reported to FinCEN.
Officials have also been working on implanting a related rule that would force real estate professionals to report the identities of shell company owners who purchase real estate in cash through their shell company. While the American Land Title Association has expressed support of the new rule, it has also stated that its implementation should be delayed until the shell company rule is also complete.
The proposed rule will be open to public and industry feedback once it is announced
The Mortgage Bankers Association (MBA) this week submitted a letter to the Financial Stability Oversight Council (FSOC) in the U.S. Department of the Treasury urging several additional considerations in its plans to classify more non-bank entities as systemically important financial institutions (SIFIs).
One of the points made in the letter, submitted by MBA President Bob Broeksmit, is that a SIFI designation on a nonbank entity could cause material harm to that company attempting to compete in the marketplace.
“In proceeding with a non-bank SIFI designation, FSOC should conduct a deep and thorough analysis, including weighing the cost and benefit of such designation to the U.S. financial system as a whole and the likelihood the financial company in question will experience material financial distress as a result of the designation,” the letter said.
If FSOC is concerned about the core banking activities taking place outside the purview of prudential bank regulation, FSOC’s should “reconsider the regulatory environment” that has caused more traditional depository institutions from competing in the marketplace such nonbanks are attempting to do business in, Broeksmit said.
“As a general matter, FSOC should consider less costly alternatives to designation of a non-bank financial entity – especially where such an entity is already subject to regulation by an FSOC-constituent member and the perceived risk to financial stability associated with that entity can be, or perhaps already has been, adequately addressed through targeted programmatic changes by that regulator,” he said.
FSOC should also consider the potential costs and benefits of designating nonbanks as SIFIs, since the current proposal “eliminates any evaluation of the costs and benefits of non-bank designation and dispenses with assessing the likelihood that a firm would experience material financial distress,” Broeksmit said.
Additionally, since many “core traditional” banking activities are now operating outside of regulatory purview, MBA urges FSOC to “consider and address whether existing regulations are driving core banking activities outside the regulatory perimeter,” the letter said.
“With respect to residential mortgage lending, banks’ share of origination and servicing volume has consistently declined during the fifteen years following the global financial crisis,” Broeksmit said. “Some of the decline may reflect a re-assessment of the economic returns available in mortgage lending and a shifting of resources into business lines that have better prospects.”
But based on conversations with MBA’s bank members, it also reflects “regulations specific to banks which reduce the returns on capital from mortgage lending,” Broeksmit said.
This has led to non-bank servicers becoming more prevalent in the servicing market, leading to increased scrutiny from FHFA and Ginnie Mae.
“This example highlights what is the critical question: if bank regulations are so punitive that they discourage banks from effectively competing in markets for core banking services, shouldn’t FSOC first re-examine the regulatory regime that caused this change?,” the letter said.
Last November, Biden administration officials began a push that would target nonbanks with increased regulatory scrutiny. In an op-ed published by HousingWire, former FHA Commissioner David Stevens said that increased regulation of IMBs was not needed.
“The fact is that the invaluable role that IMBs play is deserving of a counterattack to push back against the ‘throwing the baby out with the bath water’ mentality that could be overtaking Washington,” Stevens wrote in November 2022. “The Mortgage Bankers Association authored a valuable piece on IMBs that should be required reading for all policymakers as they consider trying to fix something that is simply not broken.”
FSOC announced a proposal for tightening regulation of nonbanks in April.
The Homeowners Assistance Fund (HAF) — a program designed to offer financial help to homeowners impacted by the COVID-19 pandemic — has kept more than 300,000 homeowners in their homes by curing defaults and keeping them out of foreclosure, according to data released this week by the U.S. Department of the Treasury.
“As of March 31, HAF programs made roughly $3.7 billion in payments to more than 318,000 homeowners at risk of foreclosure,” the Treasury Department said in an announcement. “In the first quarter of 2023 alone, HAF programs distributed $1.2 billion in assistance to households – a 50% increase over the fourth quarter of 2022 – demonstrating the program is continuing to scale rapidly as designed.”
The data also shows that 14 states and two U.S. territories have expended over 50% of their HAF funds, excluding administrative expenses. In addition, the funding has reached a greater number of economically vulnerable people than it did prior to the federal mortgage relief efforts.
“As of March 2023, 49% of HAF assistance was delivered to very low-income homeowners, defined as homeowners earning less than 50% of the area median income,” the Treasury said. “Demographically, 35% of homeowners assisted self-identified as Black, 23% self-identified as Hispanic/Latino, and 59% self-identified as female.”
The Treasury Department is committed to ensuring that the remainder of the funds will be distributed, according to Wally Adeyemo, deputy secretary of the Treasury.
“The Homeowner Assistance Fund has helped keep hundreds of thousands of families in their homes,” Adeyemo said. “As state programs assess their remaining HAF funds, the Treasury Department will continue working with recipients to ensure these funds are swiftly delivered to homeowners most in need.”
Passed as part of the American Rescue Plan Act in early 2021, the HAF program is designed to help homeowners who have been financially impacted by COVID-19 pay their mortgage or other home expenses. A $10 billion allocation was made for the program, but mortgage servicers previously stated that spreading awareness about the program has been a challenge.
The program is also available for reverse mortgage borrowers. A requirement of a government-sponsored Home Equity Conversion Mortgage (HECM) is that the homeowner keep their home in good repair while paying any applicable property taxes, homeowners insurance and homeowners association (HOA) fees.
Reverse mortgage borrowers who may have fallen behind on such payments are eligible to receive HAF funds to help cover the expenses and keep them out of foreclosure.