Alston & Bird Consumer Finance Blog

Consumer Finance

FHFA Director Directs Fannie and Freddie to Consider Crypto Assets to Qualify for Mortgages

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What Happened?

On June 26, Federal Housing Finance Agency (“FHFA”) Director William Pulte told Fannie Mae and Freddie Mac (the “government sponsored entities”) to draft policies that would consider a borrower’s cryptocurrency holdings as reserves or assets when qualifying for a mortgage, without requiring borrowers to convert those holdings into U.S. dollars, and cryptocurrencies under consideration would be those stored on a U.S.-regulated exchange.

Why It’s Important

Currently, cryptocurrency that has not been converted to U.S. currency cannot be considered when evaluating a borrower’s qualifications for a mortgage backed by the government sponsored entities. The Trump administration has expressed interest in bolstering and further legitimizing cryptocurrency in the U.S. financial system. Incorporating crypto assets into the housing industry would inextricably link crypto, a less established financial tool, to one of the most stable asset classes in America.

What To Do Next?

Fannie Mae and Freddie Mac are directed to develop proposals “as soon as reasonably practical.” Parties with an interest in housing finance should stay up to date with Fannie Mae and Freddie Mac announcements to see when proposals are published.

Georgia Legislation Expands Consumer Financial Protections

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What Happened?

On May 13 and 14, Georgia Governor Brian Kemp signed into law three measures that amend or expand existing consumer financial protections for Georgians, and impact mortgage lending and servicing as follows:

  • HB 240, effectively immediately upon approval on May 13, prohibits unfair and deceptive practices related to mortgage trigger leads.
  • HB 241, effective July 1, clarifies allowable convenience fees applicable to loans made under the Georgia Residential Mortgage Act (“GRMA”) (as well as laws applicable to installment loans, retail installment and home solicitation sales contracts, motor vehicle sales financing contracts, and insurance premium finance companies).
  • HB 15, effective July 1, in addition to certain licensing amendments, amends the GRMA to impose capital, net worth, liquidity and corporate governance obligation on mortgage lenders and servicers. Noteworthy, the measure requires mortgage lenders and brokers to prepare an annual risk assessment delivered to its board of directors and make it available to the regulators upon request.

Why Is It Important?

Taken together, these pieces of legislation signal Georgia’s intent to enhance consumer protections with respect to mortgage lending and servicing.

Trigger Lead Legislation: HB 240 amends the state’s unfair and deceptive trade law, called the Fair Business Practices Act (“FBPA”).  First, the measure specifies that use of a mortgage trigger lead to solicit a consumer who has applied for a loan with a different mortgage lender or broker (as those terms are defined in the GRMA) is considered unfair or deceptive when it (1) fails to clearly state in the solicitation that the solicitor is not affiliated with the mortgage lender or broker the consumer initially applied with; (2) fails to comply with state and federal requirements to make a firm offer of credit to the consumer; (3) uses the information of consumers who have opted out of being contacted; or (4) offers rates, terms, or costs with the knowledge that they will subsequently be changed to the detriment of the consumer.  For purposes of this provision, a “mortgage trigger lead,” in accordance with the federal Fair Credit Reporting Act, is defined as a “consumer report triggered by an inquiry made with a consumer reporting agency in response to an application for credit.” Second, the measure amends the GRMA to include a new paragraph prohibiting mortgage lenders and brokers form engaging in unfair or deceptive practices as outlined in Section 10-1-393.20 of the Georgia Code.

Banking and Finance Laws: HB 15 implements a variety of changes to Georgia’s banking and finance laws. The measure amends requirements for mortgage lenders related to licensing, reporting to the Nationwide Multistate Licensing System and registry, quarterly and annual reporting obligations, and calculating liquidity and net worth. The measure also requires mortgage brokers and lenders to have a board of directors and outlines their responsibilities including designing governance frameworks, monitoring licensee compliance, accurately reporting, conducting internal audits, and establishing risk management programs. The measure creates two new sections of the GRMA of particular  relevance to mortgage lenders and mortgage brokers:

  • Section 7-1-1022 outlines capital, liquidity, and net worth requirements, to be reported in accordance with generally accepted accounting principles. If a licensed mortgage lender is a covered servicer (meaning that it has a servicing portfolio of 2,000 or more residential mortgages serviced or subserviced as reported in its most recent mortgage call report), it must maintain the requisite the capital, liquidity, and net worth outlined in the Federal Housing Finance Agency Eligibility Requirements for Enterprise Single-family Seller/Servicers. All other lenders must maintain a minimum net worth of $100,000 and evidence of $1 million of liquidity (which may include a warehouse line of credit).
  • Section 7-1-1023 mirrors the corporate governance requirements in the Model Capital, Liquidity and Risk Management Framework for non-bank lenders created by the Conference of State Bank Supervisors. Every mortgage lender and broker must establish a board of directors responsible for establishing a written corporate governance framework, monitoring the licensee’s compliance with said framework, reporting regularly, developing internal audit requirements, creating risk management programs and assessments, and conducting formal reviews. The adoption of financial and corporate governance standards for servicers also follows similar legislation in other states (including Connecticut and Maryland, and Iowa) on which we have previously reported.

Convenience Fees: HB 241 revises the general provisions of Georgia contract law to amend requirements for merchants and lenders seeking to utilize convenience fees when processing electronic payments. The measure sets a floor for convenience fees, allowing merchants to charge whichever is greater — $5.00 or the average actual cost (defined as the amount paid by a lender to a third party or the amount incurred by a third party) of a specific type of payment made by electronic means. These provisions apply to banking and financial institutions, as well as lenders of retail installment loans, home solicitation sales contracts, vehicle financing contracts, and insurance premium finance agreements.

What To Do Now?

Licensed mortgage lenders and mortgage brokers should familiarize themselves with the requirements under the newly amended GRMA and FBPA, particularly the prohibitions on deceptive or unfair practices when using mortgage trigger leads or extending credit.

Mortgage lenders and mortgage brokers should also understand the newly updated licensing, reporting, governance, and liquidity requirements to ensure compliance with Georgia’s updated banking and finance regulations.

When utilizing convenience fees, lenders and merchants should verify that such fees do not exceed the maximum amount and should implement the requisite payment processing options. The $5.00 minimum may allow changes in pricing structures for some lenders and merchants.

*We would like to thank Summer Associate Elise Hall for her contribution to this blog post.

Update on New Maryland Law Clarifying Exemptions for Certain Mortgage Trusts

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What Happened?

As we previously advised you, in 2024, the Maryland Appellate Court in Estate of H. Gregory Brown v. Carrie M. Ward, et al., No. 1009, (App. Ct. Sept. Term 2023), ruled that a statutory trust that held a defaulted home equity line of credit (a “HELOC”) must be licensed as both an installment lender and a mortgage lender under Maryland law prior to proceeding to foreclosure on the HELOC.  The relevant parties did not appeal the decision.  Following this ruling, on January 10, 2025, the Maryland Office of Financial Regulation (the “OFR”) issued formal guidance on licensing requirements for mortgage trusts and a notice of emergency regulations to conform to the Brown decision. The guidance mandated that absent an exemption, all assignees of Maryland residential mortgage loans, including trusts, must be licensed as Maryland Installment Lenders or Maryland Mortgage Lenders.  While the formal guidance and emergency regulations took effect upon promulgation by the OFR on January 10, 2025, the OFR suspended enforcement of the emergency regulations until April 10, 2025 — later extended to July 6, 2025.

Why Does it Matter?

On April 22, 2025, Maryland Governor Wes Moore signed into law the Maryland Secondary Market Stability Act of 2025 (emergency measures HB 1516 and its companion SB 1026) with an immediate effective date. The legislation expressly excludes passive trusts from Maryland’s mortgage licensing requirements and defines a “passive trust” as a trust that: (1) acquires or is assigned mortgage loans in whole or in part; (2) does not make mortgage loans; (3) is not a mortgage broker or a mortgage servicer; and (4) is not engaged in the servicing of mortgage loans, which does not include the act of transmitting or directing payments received by a mortgage servicer.

On May 29, 2025, in response to the enactment of the Maryland Secondary Market Stability Act of 2025, OFR rescinded its prior guidance issued on January 10, 2025, and all related advisories (issued on January 31, 2025, and February 18, 2025) and enforcement deadlines concerning licensing requirements for trusts holding mortgage loans. The OFR also formally withdrew the previous emergency and proposed regulations relating to the licensing of mortgage trusts.

The OFR also clarified that commercial lenders making loans exclusively for business purposes under Maryland’s installment loan statutes, as defined by Md. Code Ann., Fin. Inst. § 11-301, are not subject to OFR’s licensing requirements under mortgage lending and installment licensing provisions.

What to Do Now

Please be advised that the Maryland Secondary Market Stability Act of 2025 and the OFR’s rescission of its prior guidance and previous emergency and proposed regulations applies only to residential mortgage loans, and does not address other loan categories such as consumer loans not secured by real estate.  

Secondary market purchasers of loans that do not use passive trusts to acquire or take assignment of residential mortgage loans in Maryland must become licensed as Maryland mortgage lenders by July 6, 2025. However, there can be no assurance that other states will not pass laws or issue regulations, or courts of law will require licensing, even retrospectively, which may adversely affect the Mortgage Loans.

The End of Disparate Impact Liability?

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On April 23, 2025, President Trump signed an Executive Order entitled “Restoring Equality of Opportunity and Meritocracy,” which seeks to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.”

This sweeping eradication of the disparate impact theory is not surprising. Indeed, the Consumer Financial Protection Bureau (CFPB) under the first Trump Administration (Trump I) strongly questioned the doctrine and ultimately brought no disparate impact enforcement actions. Further, the Trump I CFPB rescinded Bulletin 2013-02, in which the CFPB had previously asserted that indirect auto lenders may be held liable under the legal doctrines of both disparate treatment and disparate impact for disparities in their portfolio. What’s more, the Congressional resolution rescinding the Bulletin further prevented the CFPB “from ever reissuing a substantially similar rule unless specifically authorized to do so by law.” In addition, the CFPB under Trump I challenged the validity of the disparate impact theory under the Equal Credit Opportunity Act (ECOA) in light of the of the U.S. Supreme Court 2015 ruling in Texas Department of Housing v. Inclusive Communities Project Inc., which applied the disparate impact theory under different language found in the Fair Housing Act. And earlier this year, Attorney General Bondi ordered the U.S. Department of Justice (DOJ) to issue updated guidance that “narrow[s] the use of ‘disparate impact’ theories that effectively require use of race- or sex-based preference.”

Nonetheless, the language of the Executive Order is stark: “It is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution, Federal civil rights laws, and basic American ideals.” To that end, the Executive Order boldly demands that all agencies “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability.”

What is the Disparate Impact Theory?

Disparate impact is a theory of discrimination applied when a facially neutral practice has a statistically significant impact on a protected group. According to the Executive Order, “disparate-impact liability” creates “a near insurmountable presumption of unlawful discrimination … where there are any differences in outcomes in certain circumstances among different races, sexes, or similar groups, even if there is no facially discriminatory policy or practice or discriminatory intent involved, and even if everyone has an equal opportunity to succeed.”  The order criticizes disparate-impact liability as “all but requir[ing] individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability.”  Thus, according to President Trump, disparate-impact liability prevents employers from “act[ing] in the best interests of the job applicant, the employer, and the American public” and undermines “meritocracy,” “a colorblind society,” and “the American Dream.”

Civil rights advocates, on the other hand, argue that the Trump Administration misstates the disparate impact legal theory and effectively instructs the government to stop enforcing key civil rights protections in the workplace, at schools, and throughout society – the latter of which includes the offering of loans and other consumer financial products and services. Does this Executive Order then mean that lenders can once again impose facially neutral policies that traditionally have been viewed as discriminatory under the disparate impact theory, such as increased minimum loan amount requirements (beyond investor and agency thresholds) or practices that exclude self-employment income?

What Does the Executive Order Mean for Financial Services Enforcement?

As stated previously, the Executive Order directs all federal agencies to deprioritize enforcement of all statutes and regulations to the extent they include disparate impact liability. Consequently, the Executive Order also instructs all heads of federal agencies, including the CFPB and the U.S. Department of Housing and Urban Development (HUD), to evaluate all pending proceedings relying on disparate impact theories and “take appropriate action” within 45 days.  Agencies must conduct a similar review of “consent judgments and permanent injunctions” within 90 days.

The above indicates that federal agencies may not pursue fair lending actions rooted in disparate impact – at least for a while. The Executive Order even attempts to curtail state actions by requiring the Attorney General, “in coordination with other agencies,” to determine whether state laws imposing disparate impact liability are preempted. Of course, private litigation is still a real tool for consumer complainants. And federal agencies may still look to the disparate treatment theory to pursue and remediate potential fair lending violations under ECOA, the Fair Housing Act, and other federal statutes. Further, certain federal claims, more recently characterized (or mischaracterized) as disparate impact, such as pricing discrimination, may continue to be brought, but as newly and perhaps more appropriately packaged disparate treatment claims.

What Does the Executive Order Mean for Financial Services Compliance?

Given the potential for private litigation and increased interest by the states in light of federal deprioritization – not to mention the fact that the statute of limitations for most federal fair lending violations can be up to five (5) years, lenders should continue to conduct their routine fair lending monitoring and testing, which seeks to detect disparities among statutorily protected groups. Frankly, this testing alone cannot identify whether any disparities are due to discrimination, much less whether the discrimination was of the disparate treatment or disparate impact variety (though the results are more likely to detect disparate impact discrimination than isolated instances of discriminatory treatment). Nevertheless, the results of monitoring and testing provide lenders with a starting point for assessing their policies, procedures, and practices for fair lending compliance. One question that remains, however, is whether lenders should add White as a racial category in their monitoring efforts.

VA Announces Wind Down of VASP Program and VA Home Retention Waterfall

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What Happened?

On April 23, 2025, the U.S. Department of Veterans Affairs (VA) issued Circular 26-25-2 (the Circular), which announces that the VA’s Veterans Affairs Servicing Purchase (VASP) program is winding down. As of May 1, 2025, the VA will no longer accept VASP submissions and will rescind the VA Home Retention Waterfall.  New VASP submissions received in VALERI by the deadline will be evaluated against the VASP qualifying criteria “subject to VA’s determination that funds remain available for VASP.”

Why Does it Matter?

VA implemented the VASP program in May 2024 as the final option in the VA Home Retention Waterfall (i.e., Appendix F to VA Servicer Handbook M26-4), to assist borrowers in finding an affordable loss mitigation option given the high-interest rate environment.

The Circular states that, as of May 1, 2025, VA will rescind the VA Home Retention Waterfall and will stop accepting VASP submissions, including new VASP trial payment plans (TPPs). However, VA will allow active TPPs to continue through August 31, 2025, and will purchase successful loans, subject to VA’s determination that funds remain available for VASP.

VASP Wind Down Key Dates and Requirements

The Circular sets forth the following key dates and program parameters with which servicers are required to follow as the VASP program winds down:

  • VA Home Retention Waterfall: Servicers are required to discontinue use of the VA Home Retention Waterfall outlined in Appendix F to VA Servicer Handbook M26-4 (the Handbook), as soon as practicable, but no later than April 30, 2025, at 11:59 p.m. EDT (the Cutoff Date).

 

  • VASP Event Submissions: On May 1, 2025, VA will no longer accept submissions for new VASPs in VALERI. Submissions for new VASPs reported through the Cutoff Date will be evaluated against the VASP qualifying criteria, and if accepted, VA will review for a VASP payment, subject to VA’s determination that funds remain available for VASP.

 

  • TPPs: Veterans are permitted to continue making payments and complete VASP TPPs for any loans with an accepted VASP TPP event reported through the Cutoff Date. VA will not accept resubmissions of failed VASP TPPs after the Cutoff Date.

 

  • VASP TPP Complete Events: Servicers must report the VASP TPP Complete event in VALERI for all completed VASP TPPs. VASP TPP Complete events should be reported when a VASP TPP fails, or the final payment is received. Any active TPP for which the VASP TPP Complete event is not received by the Cutoff Date will be canceled.

 

  • VASP Required Documents: Servicers must upload required VASP documents into VALERI no later than 6 business days after the VASP Payment Process is launched. Beginning May 1, 2025, VA will deny VASP submissions when the servicer does not meet the 6-business day deadline, and VA will not provide servicers with an opportunity to resubmit. Servicers are responsible for monitoring pending submissions to ensure required documents are timely uploaded before the deadline.

 

  • VASP Payment Process: For VASPs that are timely submitted by the Cutoff Date, and have ongoing active TPPs, VA will review pending VASP Payment processes for all successful submissions received through the Cutoff Date, subject to VA’s determination that funds remain available for VASP. However, no VASP payments will be issued after September 30, 2025 at 11:59 p.m. EDT.

Discontinuation of VA Home Retention Waterfall

As noted above, effective May 1, 2025, servicers are required to discontinue use of the VA Home Retention Waterfall and review veterans for all options outlined in Chapter 5 of the Handbook (Chapter 5). Servicers must offer the best loss mitigation option available for the borrower’s individual circumstances. Servicers are not required to follow the review outline in the VA Home Retention Waterfall; however, servicers must keep VA’s preferred order of consideration in mind.

Additionally, the Circular modifies VA’s pre-authorized loan modification requirements in Chapter 5 by removing the minimum 10% principal and interest payment reduction target for the 30- and 40-year loan modifications, effective May 1, 2025.

What Do I Need to Do?

The industry has been preparing for this wind down but, now that it’s here, servicers should take extra caution to ensure that any submissions before the Cutoff Date are error free.  Servicers also should begin reviewing their loss mitigation policies, procedures, systems, and borrower-facing correspondence and make necessary updates in preparation for the discontinuance of VASP and the VA Home Retention Waterfall. Servicers should also consider ways to mitigate risk against a VA determination that funds are unavailable for VASP. Alston & Bird’s Consumer Financial Services Team is actively engaged and monitoring these developments and can assist with any compliance concerns regarding these changes to VA requirements.