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56 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Lender Flood Insurance Regs Shift A ruling by banking regulators alters guidelines for the sort of flood insurance policies lenders must accept. A joint ruling by banking regulators including the Federal Reserve, the Office of the Comptroller of the Cur- rency (OCC), National Credit Union Administration, Federal Deposit Insurance Corporation, and Farm Credit Administration will implement the provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 to require mortgage lenders and credit unions to accept certain private flood insurance policies in addition to policies under the National Flood Insurance Program (NFIP). With the addition of accep- tance of private insurance flood policies through this rule, the regulators have widened the scope for lenders to accept private flood insurance policies by al- lowing them to conclude that the policy meets the definition of private flood insurance, "without a further review of the policy, if the policy or an endorsement to the policy, states: This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the cor- responding regulation." According to the OCC, the rule which takes effect on July 1 would also allow financial institutions to rely on an insurer's written assurances in a private flood insurance policy stating that the policy meets the criteria for flood insurance. It also clarifies that lenders, under certain condi- tions, can accept policies that don't meet the Biggert-Waters Act criteria. It also allows lenders to accept some flood coverage plans provided by mutual aid societies subject to agency approval. The regulation specifies that the amendment would "permit regulated lending institutions to exercise their discretion to accept flood insurance policies issued by private insurers and plans providing flood coverage issued by mutual aid societies that do not meet the statutory definition of private flood insurance, subject to certain restrictions." The OCC said that The proposed rule included condi- tions for accepting these policies. However, in response to com- menters, the agencies removed some of these conditions from the final rule. "The key conditions in the final rule are a requirement that the policy provides sufficient protection for a designated loan, consistent with general safety and soundness principles, and a requirement that the regulated lending institution document its conclusion regarding the sufficien- cy of protection in writing." CFPB Tackles PACE Financing Rules How could changes to rulemaking for residential Property Assessed Clean Energy financing could affect lenders? T he Consumer Financial Protection Bureau (CFPB) issued an Advance Notice of Proposed Rulemak- ing (ANPR) on residential Property Assessed Clean Energy (PACE) Financing. The rule will address the direction given to the bureau on PACE financing under the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) that was signed into law in May 2018, CFPB said in a statement. "Today's action is the next step in the Bureau's efforts to implement the Economic Growth, Regulatory Relief and Consumer Protection Act as expeditiously as possible," said Kathleen L. Kraninger, Director, CFPB. "I look forward to reviewing the comments in response to the questions we are asking to facilitate the required rulemaking." Through the ANPR, the consumer watchdog is seeking information on written materials associated with PACE financing transactions, current standards and practices in PACE financing originations, civil liability under Truth in Lending Act (TILA) for violations of the Ability to Repay (ATR) requirements related to PACE financing as well as rescission and borrower delinquency and default, unique features of PACE, and potential implications of regulating PACE financing under TILA. According to the ANPR, PACE financing has been de- fined in the EGRRCPA as "financing to cover the costs of home improvements that result in a tax assessment on the real property of the consumer." The law also directs CFPB to prescribe regulations that achieve two purposes on PACE financing, the CFPB said. The first objective is to carry out the purpose of TILA's existing ATR requirements even for PACE financing. The existing ATR requirements prohibit creditors from making a residential mortgage loan unless they make a "reasonable and good faith determination" based on verified and documented information on the consumer's ability to repay that mort- gage. The ATR requirement is "to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive, or abusive." The second objective, according to the CFPB relates to the regulations implementing EGRRCPA's section 307 must apply TILA's general civil liability provision for violations of the ATR rules that will apply to PACE financing. "That provision sets forth damages for TILA violations generally, as well as specific penalties for violations of the current ATR requirements."