CFPB Issues No-Action Letter to National Bank for Funding Arrangements with Housing Counseling Agencies

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The CFPB recently granted a national bank’s application for a No-Action Letter (NAL), agreeing not to bring a supervisory or enforcement action against the bank under section 8 of RESPA or its UDAAP authority regarding the bank’s funding arrangements with HUD-approved housing counseling agencies (HCAs), even if these arrangements may be construed as “referrals” under RESPA.  The application was based on the NAL template that the CFPB issued on September 10, 2019, in response to HUD’s application for a NAL regarding funding arrangements between HCAs and mortgage lenders, which WBK previously covered here.

According to the CFPB, in the bank’s application, the bank noted that it operates a program in which it enters into certain arrangements with HCAs that participate in HUD’s Housing Counseling Program for funding housing counseling services to consumers subject to specified conditions (Funding Arrangements).  Additionally, the bank stated that: (i) the terms of the bank’s existing Funding Arrangements are formalized in memorandum of understanding (MOUs) with participating HCAs, and that these existing MOUs comply with HUD’s requirements; and (ii) any future Funding Arrangements will be formalized in MOUs with participating HCAs, and that these future MOUs will also comply with HUD’s requirements.

The NAL provides that unless or until terminated, the CFPB will not make supervisory findings or bring supervisory or enforcement actions against the bank under section 8 of RESPA and Regulation X, or its UDAAP authority, for including and adhering to a provision of the bank’s existing or future MOUs that conditions the bank’s payment for housing counseling services on the consumer applying for a loan with the bank, even if such arrangements could be construed as “referrals” under RESPA.  However, the CFPB stated that the level of payment for such counseling services must not exceed a level that is commensurate with the services provided and must be reasonable and customary for the area.  Moreover, the CFPB noted that it may terminate the NAL if it determines that it is necessary or appropriate to do so to advance the CFPB’s policy on NALs.  

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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