Coping With Regulatory Compliance Challenges NCSHA Annual Conference Miami Florida September 26, 2016

Coping With Regulatory Compliance Challenges Service Provider Oversight NCSHA Annual Conference Miami, Florida September 26, 2016 Discussion Leader: Howard Zucker – Hawkins Delafield & Wood LLP Participants: Dru Jacobs – ADFITECH, Inc. Alexa Reimelt – Consumer Financial Protection Bureau Drew Page – Kutak Rock LLP

Roadmap for Today’s Discussion Discuss whether your HFA is a Supervised Entity and subject to the Consumer Financial Protection Bureau’s (CFPB) supervision and examination authority. Discuss the CFPB’s expectations with respect to a Supervised Entity’s Compliance Management System. Discuss how Service Provider oversight fits as a piece of a Compliance Management System.

CFPB Supervision & Examination Authority The CFPB examines Supervised Entities for their compliance with “Federal Consumer Financial Law.” Federal Financial Consumer Law includes 19 different federal statutes and related regulations, including Truth In Lending Act Real Estate Settlement Procedures Act Equal Credit Opportunity Act Fair Debt Collection Practices Act See 12 USC 5481(14) and (15).

CFPB Supervision & Examination Authority, cont’d Four Groups of Supervised Entities Supervised Banks Supervised Nonbanks Service providers to Supervised Banks and Supervised Nonbanks Service providers to a large number of small insured depository institutions or credit unions See 12 USC 5514, 5515 and 5516.

Is your HFA a Supervised Nonbank? A Supervised Nonbank is Any covered person who offers or provides origination, brokerage or servicing of loans secured by real estate for use by consumers primarily for family or household purposes, or loan modifications or foreclosure relief services in connection with such loans. See 12 USC 5514(a)(1)(A).

CFPB Supervision & Examination Authority Supervised Banks are examined “regularly” and those examinations occur simultaneously with prudential regulators examinations. Supervised Nonbanks are not examined regularly. They are identified for examination on the basis of the risk they pose to consumers.

Compliance Management System Four Elements of an Effective Compliance Management System Board and Management Oversight Compliance Program Response to Consumer Complaints Compliance Audits CFPB SUPERVISION AND EXAMINATION MANUAL – Compliance Management Review, at pg. CMR 2.

Compliance Management System – Compliance Program A Compliance Program should include policies and procedures for Service Provider oversight. A Service Provider is “any person that provides a material service to a covered person in connection with the offering or provision of such covered person of a consumer financial product or service.” Service Providers are not persons who provide A support service provided to businesses generally or a similar ministerial service; or Time or space for an advertisement for a consumer financial product or service. 12 USC 5481(26).

Compliance Management System – Compliance Program, cont’d CFPB’s Stated Expectations for Service Provider oversight Conducting Due Diligence Requesting and Reviewing Policies and Procedures Reviewing Agreements with Service Providers Establishing Internal Controls to Monitor Service Providers Taking Prompt Action to Address Problems. CFPB Bulletin 2012-03

Compliance Management System “While all of the firms under our jurisdiction must follow the law, we understand that the means that they employ to achieve that goal will – and likely should – differ. We recognize that large, complex entities necessarily have different compliance oversight and management systems than smaller entities or those offering a more limited number of products or services.” CFPB SUPERVISION AND EXAMINATION MANUAL – CFPB Supervision and Examination Process, at pg. Overview 4.

Coping With Regulatory Compliance Challenges Service Provider Oversight NCSHA Annual Conference Miami, Florida September 26, 2016 Discussion Leader: Howard Zucker – Hawkins Delafield & Wood LLP Participants: Dru Jacobs – ADFITECH, Inc. Alexa Reimelt – Consumer Financial Protection Bureau Drew Page – Kutak Rock LLP