Meet the Author

Joseph C. Ott |

Senior Policy Analyst

Joseph C. Ott

Joseph Ott is a senior policy analyst in the Community Development Department of the Federal Reserve Bank of Cleveland. Working out of the Bank’s Pittsburgh Branch, Mr. Ott provides technical assistance and regulatory guidance to financial institutions, government entities and community-based organizations on issues related to consumer finance and protection, the Community Reinvestment Act (CRA), and community and economic development.

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Regulatory Roundup

Joseph Ott

Welcome to the fourth installment of Regulatory Roundup, the Federal Reserve Bank of Cleveland's compilation of legislative and regulatory updates on matters related to community development and consumer finance in the Fourth Federal Reserve District. We welcome your feedback. Please direct comments and suggestions to Joseph Ott,, or Mary Helen Petrus,

Hearing Announcements

Home Mortgage Disclosure Act (HMDA)1

On April 23, 2010, the Federal Reserve Board of Governors announced that it will hold four public hearings on potential revisions to Regulation C, which implements the Home Mortgage Disclosure Act. The act requires mortgage lenders to provide detailed annual reports of their mortgage lending activity to regulators and the public. The hearings will help the Board gather information about whether its current regulations are working as intended and what changes might be needed.

Specific discussion topics will include:

Panelists will be asked to discuss the advantages and disadvantages of suggested changes to Regulation C, addressing the importance or utility of particular information in light of the purposes of HMDA and the burdens and possible privacy risks associated with collecting and reporting that information.

The hearing dates and locations are as follows:

Consumers, community and consumer organizations, mortgage lenders, and other interested parties will be invited to participate in the hearings. Other interested parties may deliver oral statements of five minutes or less during an open-mike period. Written statements of any length may be submitted for the record. More information about each hearing, including how to register for the open-mike period, will be posted on the Board's website ( as it becomes available.

Community Reinvestment Act (CRA)2

The federal bank and thrift regulatory agencies3 announced a series of upcoming public hearings on modernizing the regulations that implement the Community Reinvestment Act (CRA). The purpose of the hearings is to seek a wide range of views on whether and how the agencies should revise their regulations to better serve the goals of the CRA.

The agencies will consider how to update the regulations to reflect changes in the financial services industry, changes in how banking services are delivered to consumers today, and current housing and community development needs. The agencies also want to ensure that the CRA remains effective for encouraging institutions to meet the credit needs of communities.

The planned hearing dates and locations are as follows:

To view the entire joint notice of public hearings, please go to:&##160;

Anyone wishing to submit testimony or attend the hearings must register five business days in advance on the website of the Federal Financial Institutions Examination Council (FFIEC) at Hearing details are also available on that site.

In addition to offering an opportunity for testimony at the hearings, the agencies are encouraging any individual to provide written comments on the CRA regulations to any of the agencies through August 31, 2010. While the agencies encourage public comments on any CRA topic, they are particularly interested in receiving comments on the topics and questions listed in the following document:

Federal Regulation

Community Reinvestment Act4

On June 17, 2010, the federal bank and thrift regulatory agencies5 announced a proposed change to the CRA regulations to support stabilization of communities affected by high foreclosure levels. The proposed change specifically would encourage depository institutions to support the Neighborhood Stabilization Program (NSP) administered by the U.S. Department of Housing and Urban Development (HUD).

Under the NSP, HUD has provided funds to state and local governments and nonprofit organizations for the purchase and redevelopment of abandoned and foreclosed properties. The agencies' proposal would encourage depository institutions to make loans and investments and provide services to support NSP activities in areas with HUD-approved plans.

The proposal would supplement existing CRA consideration for community development activities, including neighborhood stabilization activities. For example, for NSP areas identified in HUD-approved plans, the agencies would provide CRA consideration for activities that benefit individuals with incomes of up to 120 percent of the area median and geographies with median incomes of up to 120 percent of the area median. NSP-eligible activities would receive favorable consideration under the new rule only if conducted within two years after the date when NSP program funds are required to be spent.

Allowing banking institutions to receive CRA consideration for NSP-eligible activities in additional NSP-targeted areas creates an opportunity to leverage government funding targeted to areas with high foreclosure and vacancy rates and also serves the purposes of the CRA.

The entire proposed rule can be found by accessing the following link:

Comments on the proposed rule must be submitted no later than 30 days from the date of its publication in the Federal Register, which is expected in early July.

Interested in learning about a proposal to use CRA to fight vacancy and abandonment? See the latest issue of Forefront, the policy journal of the Cleveland Fed:

Gift Cards6

The Federal Reserve Board announced final rules to restrict the fees and expiration dates that may apply to gift cards. The rules protect consumers from certain unexpected costs and require that gift card terms and conditions be clearly stated.

The final rules prohibit dormancy, inactivity, and service fees on gift cards unless: (1) the consumer has not used the certificate or card for at least one year; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees. Expiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.

The Board's rules generally cover retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and network-branded gift cards, which are redeemable at any merchant that accepts the card brand.

The final rules are issued under Regulation E to implement the gift card provisions in the Credit Card Accountability Responsibility and Disclosure Act of 2009.

ATM & Debit Card Overdraft Fees7

The Federal Reserve Board announced final clarification to aspects of the rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.

Before opting in, the consumer must be provided a notice that explains the financial institution's overdraft services, including the fees associated with the service, and the consumer's choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.

For additional analysis on gift cards and ATM & debit card overdraft fees, see our recent article in Forefront, the policy journal of the Cleveland Fed:

Credit Cards8

The Federal Reserve Board approved a final rule to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider interest rate increases imposed since the beginning of last year.

Among other things, the final rule, which amends Regulation Z (Truth in Lending):

The provisions of the Act addressed in this rule will generally go into effect on August 22, 2010.

More about these new rules and other recent changes can be found on the Board's website at

Federal Legislation

Representative Maxine Waters (CA) introduced H.R. 5072,9 The FHA Reform Act of 2010, to improve the financial safety and soundness of the FHA insurance program. This bill, in part, gives the Secretary of HUD greater discretion over: insurance premium charges, including setting of maximum rates; indemnification of losses associated with mortgage origination outside of HUD guidelines; and utilization of outside sources to analyze and evaluate credit risk models and practices. In addition, this bill abolishes the position of FHA Chief Credit Officer and establishes an FHA Deputy Assistant Secretary for Risk Management and Regulatory Affairs responsible for all matters relating to managing and mitigating the risk to HUD mortgage insurance funds and for ensuring the performance of HUD-insured mortgages. The legislation was passed by the House and referred to the Senate Banking, Housing, and Urban Affairs Committee.

The Community Development team at the Cleveland Fed recently looked at FHA lending in Ohio. You can access the report, published as vol. 2, issue 5 of A Look Behind the Numbers, at:

Representatives Brad Miller (NC) introduced HR 4953,10 the Mortgage Servicing Conflict of Interest Elimination Act.&##160; This bill amends the Truth in Lending Act to prohibit the servicer of a residential mortgage loan (or an affiliate) from owning or holding any interest in any other residential mortgage loan secured by the same dwelling or residential real property. This bill is currently in the House Financial Services Committee.

Want to learn more about foreclosure issues in the 4th District? Check out our recent CR Forum publication, Containing a Firestorm: Adaptive Policies Needed to Address Changing Foreclosure Landscape, at:

Senator Jeanne Shaheen (NH) introduced SB 3161,11 the Mortgage Modification Reform Act of 2010. This bill would prevent mortgage servicers from initiating or continuing a foreclosure on any homeowner who has recently applied (within 30 days of receiving a foreclosure notice) for a loan modification. In addition to other provisions outlined in the legislation, this bill prohibits servicers from charging delinquency fees during pending loan modification applications, directs the Treasury Secretary to establish a homeowner review process for servicer denials of trial and permanent modifications, and directs the Treasury Secretary to reduce servicer incentive payments if servicers fail to review loan modifications in a timely fashion. This bill is currently in the Senate Banking, Housing and Urban Affairs Committee.

4th District State Legislation


Kentucky Representative Horlander introduced H.B. 46512 on February 19, 2010. This legislation would require lenders to register a vacant property with the local government for the area in which the property is located prior to filing a deed in lieu of foreclosure or foreclosure complaint. Failure to register the vacant property with the local government would result in a fine of $100 per day payable to the local government. This bill is currently in committee.


Ohio H.B. 31313 was signed into law permitting 41 Ohio counties (those with urban and suburban populations above 60,000) to establish land banks as a mechanism to restore vacant and abandoned properties. This law was modeled on the Cuyahoga County pilot program that was implemented in February 2009.

To learn more about Ohio&##8217;s efforts to deal with vacant and abandoned property, go to our recent Forefront publication and see Land Bank Notches First-Year Win:


The Pennsylvania State House passed H.B. 6014 introduced by Representative Peter Daley. This legislation would use federal stimulus money to create an affordable housing trust fund, which would enable the Pennsylvania Housing Finance Agency to build or rehabilitate and preserve housing for low to moderate income households, the elderly, and people with disabilities. In addition, the trust fund can be used for projects to prevent or reduce homelessness, to develop or rehabilitate projects in distressed neighborhoods, and to provide repair and improvement loans or grants to owner-occupied properties.

West Virginia

West Virginia H.B. 4034,15 which became effective on June 10, 2010, permits municipalities to enact vacant property registration programs. Under these vacant property registration programs, municipalities can assess and collect vacant property registration fees, as well as impose liens on vacant properties and assess civil penalties against vacant property owners. In addition, municipalities are able to exempt certain vacant properties, to specify the uses for fees and penalties collected and create ordinances to notify out of state owners and procedures for administration, enforcement and appeal.

West Virginia H.B. 4285,16 which became effective on June 10, 2010, amends licensing requirements for residential mortgage brokers, lenders and loan originators. In part, this law: allows for certain reductions and / or waivers of requirements relating to licensing for nonprofits such as community housing development organizations; increases pre-licensing education requirements for loan originators from twenty to twenty-two hours; provides that pre-licensing education courses and requirements and continuing education courses for mortgage loan originators may be approved by the division of banking; and provides a procedure for the commissioner to follow when taking an enforcement action.




[3]The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and the Office of Thrift Supervision


[5]The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and the Office of Thrift Supervision