Financial Services Bulletin: Action At Federal Agencies


CFTC Proposed Clearing Requirement Determination Rules

On Tuesday, August 7, 2012, the Commodity Futures Trading Commission (the "CFTC") proposed regulations to establish a clearing requirement under new Section 2(h)(1)(A) of the Commodity Exchange Act (the "CEA"), enacted under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The regulations would require that certain classes of credit default swaps and interest rate swaps be cleared by a derivatives clearing organization registered with the CFTC. The CFTC also proposed regulations to prevent evasion of the clearing requirement and related provisions.

Read the CFTC rule

CFTC and SEC Adopt Product Definition Final Rules

On Monday, August 13, 2012, the CFTC and the Securities and Exchange Commission (the "SEC"), in consultation with the Board of Governors of the Federal Reserve System (the "Fed"), jointly adopted new rules and interpretations under the CEA and the Securities Exchange Act of 1934 to further define the terms "swap," "security-based swap," and "security-based swap agreement." The rules and interpretations also relate to the regulation of "mixed swaps" and security-based swap agreements record keeping. The CFTC and SEC adopted these rules and interpretations in accordance with Sections 712(a)(8), 712(d)(1), 712(d)(2)(B) and (C), 721(b) and (c), and 761(b) of the Dodd-Frank Act.

Read the CFTC rule

CFTC Grants Temporary Relief to Those Eligible for the Trade Option Exemption

On Wednesday, August 15, 2012, the CFTC's Division of Market Oversight issued a no-action letter providing that, for a limited time, market participants can rely on the trade option exemption in CFTC regulation 32.3 without complying with specified provisions thereof. The no-action letter is effective until the earlier of December 31, 2012, or the effective date of any final action taken by the CFTC in response to comments on the Trade Option Exemption Interim Final Rules.

To rely on the no-action relief, market participants must comply with: (1) the conditions for qualifying as a “trade option” (§ 32.3(a)); (2) speculative position limits (§ 32.3(c)(2)); and (3) prohibitions on fraud, manipulation and other abusive trade practices (§ 32.3(d)).

Read the CFTC press release

Federal Agencies Propose Rule on Appraisals for High-Risk Mortgages

On Wednesday, August 15, 2012, the Fed, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency issued a proposed rule to establish new appraisal requirements for "higher-risk mortgage loans." The proposed rule would implement new Section 129H of the Truth in Lending Act enacted under Section 1471 of the Dodd-Frank Act. Under Section 129H, mortgage loans are higher-risk if they are secured by a consumer's home and have interest rates above a certain threshold.

For higher-risk mortgage loans, the proposed rule would require creditors to use a licensed or certified appraiser who prepares a written report based on a physical inspection of the interior of the property. The proposed rule also would require creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report.

Creditors would have to obtain an additional appraisal at no cost to the consumer for a home-purchase higher-risk mortgage loan if the seller acquired the property for a lower price during the past six months. This requirement would address fraudulent property flipping by seeking to ensure that the value of the property being used as collateral for the loan legitimately increased.

Read the Fed press release

Read the rule

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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