Citing new information it has received, the CFPB has reopened the period for public comments on a proposed rule that would require lenders to assess consumers' ability to repay mortgage loans before extending them credit. According to the bureau, data received from the Federal Housing Finance Agency tracking the performance of loans purchased or guaranteed by Fannie Mae and Freddie Mac from 1997 to 2011, as well as data on other securitized loans, requires comment. Comments on the proposal now will be accepted until July 9, 2012. The rule initially was proposed by the Federal Reserve Board in 2011.

Wanda I. DeLeo has been appointed Deputy Director for a newly created Office of Strategic Initiatives. DeLeo will be responsible for coordinating and overseeing activities associated with the recently issued Strategic Plan for Fannie Mae and Freddie Mac Conservatorships. The plan, which FHFA sent to Congress in February, established the objectives and steps the FHFA is taking or intends to take to meet its obligations as conservator. DeLeo has served in a variety of leadership roles at the FHFA, most recently as Deputy Director for the Division of Examination Programs and Support.

“OCC examination procedures during the period 2008 through 2010 were not sufficient in scope or application to identify significant weaknesses in national banks' foreclosure documentation and processing functions, “according to an audit report by the Treasury Department's Inspector General. The OCC “did not consider foreclosure documentation and processing to be an area of significant risk and, as a result, did not focus examination resources on this function,” the report said. Among specific problems the IG noted was that the OCC's handbook covering examination procedures had not been updated since 1998, meaning that examiners could not rely on it for guidance on key risks. Examiners also relied on bank internal audits in believing that there were no significant problems, a reliance the report characterized as “misplaced.”

The CFPB is seeking comments on an information collection entitled “Applications for Advisory Boards, Groups, and Committees.” This information collection will allow the bureau to obtain information on the qualifications of individuals nominated to the Consumer Advisory Board and will aid the bureau in its selection of members for other advisory groups. The bureau seeks to collect selection-related information from nominees, such as background information, information related to financial disclosures and other supplemental information relevant to the application process.

The National Futures Association (NFA), the self-regulatory organization for the U.S. futures industry, has proposed several measures to tighten control over customer segregated funds held by commodity futures brokers, known as futures commission merchants (FCMs). Most significantly, the rule would require written approval by the CEO or CFO of withdrawals of more than 25% of the FCM's “residual interest” in customer segregated funds.

The proposed measure is popularly referred to as the “Corzine Rule” after the former CEO of MF Global, a major FCM that suddenly went bankrupt last fall.  In the days leading up to the firm’s failure, funds were transferred from customer segregated funds to cover the firm’s proprietary trades. Jon Corzine has stated that he was not aware of the fund transfers.

Under CFTC Rule §1.23, FCMs are permitted to retain a residual financial interest in customer funds in excess of the amount necessary to meet segregation requirements, as long as the residual interest is properly segregated and accounted for.  Also known as “excess funds”, these funds may be used to make up any deficiency in a customer’s account if the customer fails to have sufficient funds on deposit with the FCM to meet the customer’s obligations.

The proposed measure would require that if a transfer is made exceeding 25% of the FCM’s residual interest in a customer segregated fund account, the firm's CEO, CFO or other defined principal must pre-approve the transaction in writing. The FCM must also  immediately file a written notice with NFA providing details of the transaction, including the reason for the disbursement and the current estimate of the remaining total residual interest in the accounts, along with a representation that the FCM remains in compliance with the segregation requirements.

In addition to the approval and notification requirement, FCMs will be required to have written policies and procedures regarding the maintenance of the firm's residual interest in its customer segregated funds. The policies and procedures must target an amount, either by percentage or dollars, that the FCM seeks to maintain as its residual interest in those accounts, and ensure that the FCM remains in compliance with the applicable segregation requirements.

Futher, FCMs will be required to provide NFA with certain financial and operational information on a monthly or semi-monthly basis. NFA will subsequently make some of the information publicly available on its website in the future.

"These new requirements will help begin the process of restoring public confidence in the financial integrity of customer segregated funds," said Roth. "Making this information available to the public will give investors a better picture of the financial standing of the FCM with which they are conducting business."

The proposed new requirements were approved by NFA's Board of Directors on May 17. NFA has submitted the proposed financial requirements and accompanying interpretive notice to the CFTC for approval.

Democrats in the House of Representatives have introduced legislation that would stop officers, directors and employees of financial firms from purchasing insurance designed to shield them from having to pay a compensation clawback or civil penalty if their actions result in illegal, unsafe or unsound conduct.

“The creation of insurance policies to insulate financial executives from clawbacks is one more effort by some in the industry to perpetuate a lack of accountability,” said bill sponsor Rep. Barney Frank, D-Mass., ranking member of the House Financial Services Committee.

The Executive Compensation Clawback Full Enforcement Act of 2012 states that a company employee who is required to repay previously earned compensation or a civil penalty, must be held personally liable for the amount owed. Frank said the aim of the bill is to protect the intent of provisions in the Dodd-Frank Act, the Sarbanes Oxley Act, and other federal financial regulatory laws that give regulators the ability to require clawbacks or impose civil penalties.

“Executives who preside over billions of dollars in losses should not be protected from the results of their decisions, especially if those decisions run afoul of our securities laws or involve inappropriate risk-taking,” said bill co-sponsor Rep. Henry Waxman, D-Calif.

The Federal Reserve Board has announced the approval of a final rule outlining the procedures for securities holding companies (SHCs) to elect to be supervised by the Fed. An SHC is a nonbank company that owns at least one registered broker or dealer.

The final rule specifies the information that an SHC will need to provide to the Fed as part of registration for supervision, including information related to organizational structure, capital, and financial condition. Under the final rule, an SHC's registration becomes effective no later than 45 days from the date the Fed receives all required information. Once an SHC’s registration becomes effective, it will be regulated as if it were a bank holding company; however, consistent with the Dodd-Frank Act, the restrictions on nonbanking activities in the Bank Holding Company Act would not apply to a supervised SHC.

Rep. Maxine Waters, D-Calif., joined by 52 House Democrats, has sent a letter to Treasury Secretary Timothy Geithner and Federal Housing Finance Agency Acting Director Edward DeMarco regarding implementation of the Hardest Hit Fund (HHF) and the latest version of the Home Affordable Refinance Program (HARP 2.0). The letter was sent in response to a recent report by the Special Inspector General for the Troubled Asset Relief Program that found HHF, which received $7.6 billion in funding, has spent only 3 percent of its funding. The letter also expresses concerns about HARP 2.0, stating that the program appears to be failing to serve the distressed borrowers it was designed to assist. In the letter, Waters and the Democrats seek improvements to both housing programs.

The Fed's Office of Inspector General has presented the results of its audit of the Fed's progress in developing enhanced prudential standards. Section 165 of the Dodd-Frank Act requires the Fed to establish enhanced prudential standards for bank holding companies (BHCs) with total consolidated assets equal to or greater than $50 billion (referred to in the report as large BHCs) and nonbank financial companies that are determined by the Financial Stability Oversight Council to pose a risk to financial stability. The audit was conducted to analyze the Fed's approach and activities for its supervision of large BHCs in preparing to meet the related requirements of Dodd-Frank.

Overall, the audit report found that the division had taken a proactive approach to enhancing its supervision of large BHCs, including initiating actions prior to the passage of the Dodd-Frank Act. The IG noted that the division has reorganized its sections to accommodate a new framework for supervision of large BHCs and has taken actions to meet the related requirements of Dodd-Frank. The audit provides two suggestions for management's consideration that the IG believes would further strengthen the division's efforts to supervise large BHCs and meet related Dodd-Frank requirements. First, the audit suggests that the LISCC define and document roles and responsibilities for its subgroups and for coordination with other Fed offices to ensure a clear understanding of each office's purposes and functions. Second, the audit recommends that the division finalize the process for distributing and maintaining a complete list of large BHCs that are subject to enhanced prudential standards, including BHCs that may fluctuate above or below the $50 billion threshold in asset size, to effectively and timely supervise BHCs under Dodd-Frank requirements.

A Blog post celebrating Memorial Day noted that the CFPB’s Office of Servicemember Affairs seeks to educate and engage with the public about consumer finance as it impacts servicemembers and their families. At www.consumerfinance.gov, servicemembers and their families can find information on a host of initiatives, including ways in which the CFPB seeks to combat financial scams targeted at military consumers. Consumers can also find innovative tools, including the Financial Aid Comparison Shopper, complete with military benefits calculator, and student loan complaint system, equipped to field concerns from servicemembers, veterans, and their families.