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CFPB starts transition from LIBOR

The CFPB has announced it has taken steps to facilitate the transition away from LIBOR for consumers and regulated entities. The Bureau released an updated Consumer Handbook on Adjustable Rate Mortgages (CHARM) to help consumers better understand adjustable rate mortgage loan products. The Bureau also released a Notice of Proposed Rulemaking (NPRM) [comments due by August 4, 2020] concerning the anticipated discontinuation of LIBOR, including proposing examples of replacement indices that meet Regulation Z standards. Additionally, the Bureau is issuing guidance (FAQs) on other important LIBOR transition topics that do not require amendments to Regulation Z. The CHARM booklet is intended to provide information to consumers about the features and risks of adjustable rate mortgage loans. Creditors must provide the disclosure or a suitable substitute generally no later than three days following certain ARM applications.


Temporary policy on FHA insurance endorsements

The Federal Housing Administration has announced a new temporary policy that provides guidance for lenders to obtain FHA insurance endorsements on mortgages where the borrower has requested or obtained a COVID-19 forbearance. The Mortgagee Letter (#2020-16) temporarily reverses the current FHA policy, which states mortgages that are in forbearance are not eligible for FHA insurance.


Syria-related sanctions regulations

OFAC has announced it is issuing regulations to implement Executive Order 13894 of October 14, 2019 (“Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria”). These regulations will take effect upon publication in today’s Federal Register. OFAC intends to supplement the regulations with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance, general licenses, and statements of licensing policy.


OCC proposing regs updates

On Thursday, the Office of the Comptroller of the Currency announced it has published a Notice of Proposed Rulemaking (NPR) for public comment to update its rules for national bank and federal savings association activities and operations. The agency also released an Advance Notice of Proposed Rulemaking (ANPR) seeking comment on rules on those institutions' digital activities.

The NPR would make various changes to 12 CFR 7 to update or eliminate outdated regulatory requirements that no longer reflect the modern financial system and clarify and codify recent OCC interpretations. Among the significant proposed changes are:

  • incorporating and streamlining OCC interpretations addressing permissible derivatives activities for national banks;
  • codifying OCC interpretations to permit national banks and federal savings associations to engage in certain tax equity finance transactions;
  • codifying OCC interpretations regarding national bank membership in payment systems and clarifying that federal savings associations are subject to the same requirements as national banks;
  • expanding the ability of national banks to choose corporate governance provisions under state law;
  • clarifying the extent to which a national bank may adopt anti-takeover provisions permissible under state corporate governance law;
  • clarifying when national bank participation in a financial literacy program on the premises of, or a facility used by, a school or other organization would not be a branch; and
  • codifying OCC interpretations of the National Bank Act relating to capital stock issuances and repurchases.

The ANPR invites comment on OCC regulations at 12 CFR part 7, subpart E and part 155, and any other banking issues related to digital technology and innovation, including:

  • whether the legal standards in 12 CFR 7, subpart E, and 12 CFR 155 are sufficiently flexible and clear in light of the technological advances that have transformed the financial industry over the past two decades;
  • whether these legal standards create unnecessary hurdles or burdens to innovation by banks;
  • whether there are digital banking activities or issues that are not covered by these rules that the OCC should address (e.g., digital finders’ activities, certain software, and correspondent services);
  • what activities related to cryptocurrencies or cryptoassets are financial services companies or bank customers engaged in and what are the barriers or obstacles to further adoption of crypto-related activities in the banking industry;
  • how is distributed ledger technology used or potentially used in activities related to banking;
  • how are artificial intelligence and machine learning techniques used or potentially used in activities related to banking;
  • what new payments technologies and processes should the OCC be aware of and what are the potential implications of these technologies and processes for the banking industry;
  • what new or innovative tools do financial services companies use to comply with regulations and supervisory expectations (i.e., “regtech”);
  • what issues are unique to smaller institutions regarding the use and implementation of innovative products, services, or processes that the OCC should consider;
  • what other changes to the development and delivery of banking products and services should the OCC be aware of and consider; and
  • whether there are issues the OCC should consider in light of changes in the banking system that have occurred in response to the COVID-19 pandemic.

Comments on both the NPR and the ANPR are due by August 3, 2020.


FDIC CRA ratings released

The FDIC yesterday issued a list of 78 state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in March 2020. Sixty-seven were rated Satisfactory, one Needs to Improve, and the following ten were rated Outstanding:


IRS interest rates decrease

The Internal Revenue Service announced yesterday that its interest rates will decrease for the calendar quarter beginning July 1, 2020. The rates will be:

  • 3 percent for overpayments [2 percent in the case of a corporation];
  • 0.5 percent for the portion of a corporate overpayment exceeding $10,000;
  • 3 percent for underpayments; and
  • 5 percent for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.


COVID-19 tax relief for QOFs

The IRS has provided guidance for Qualified Opportunity Funds (QOFs) and their investors in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic with the issuance of Notice 2020-39, which answers questions regarding relief from certain requirements under section 1400Z-2 of the Internal Revenue Code (Code) and the implementing regulations. Additionally, the IRS has updated the Qualified Opportunity Zones FAQs.


FTC Annual Enforcement Report sent to CFPB

The staff of the FTC has provided its 2019 Annual Financial Acts Enforcement Report to the Bureau on its enforcement and related activities regarding the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA).

The report highlights, among other things, the FTC’s enforcement actions related to automobile purchases and financing, payday lending, credit repair and debt relief, consumer electronics financing, and electronic fund transfers. It also addresses the FTC’s research and policy efforts related to truth in lending, including assessment and review of information from a qualitative study of consumers’ experiences in buying and financing automobiles at dealerships, and a workshop examining small business financing.

The report highlights the agency’s Military Task Force, which comprises a cross-section of FTC representatives and focuses on various initiatives to assist military consumers. The report further outlines the FTC’s consumer and business education efforts on truth in lending, leasing, and electronic fund transfer issues. A copy of the report also has been provided to the Federal Reserve Board.


Whistleblower awarded nearly $50M

The SEC announced yesterday a nearly $50 million whistleblower award to an individual who provided detailed, firsthand observations of misconduct by a company, which resulted in a successful enforcement action that returned a significant amount of money to harmed investors. This is the largest amount ever awarded to one individual under the SEC’s whistleblower program.


FDIC updates exam-related manuals

The FDIC has posted its May 2020 updates to the agency's Consumer Compliance Examination Manual, with changes to the following sections:

  • II-14.1 - SOURCE Violation Codes were modernized and streamlined
  • III-2.1 - Bank of Anytown (ZIP file of Word Documents). Updated to conform to the new SOURCE Violation Codes and remove the CRA Performance Evaluation example
  • XII - All CRA Performance Evaluation templates were updated to conform to updated writing procedures

The FDIC also updated its Risk Management Manual of Examination Policies as of June 1, 2020, with changes to Section 21.1 (Emergency Planning), including additions to the Examination Profile Script to promote the availability of options for off-site loan review and examiner connectivity, and to address modifications related to the COVID-19 pandemic.


Electronic filing of CMIR now allowed

FinCEN has posted a link to an electronic filing version of the Currency and Monetary Instrument Report (CMIR). FinCEN and U.S. Customs and Border Protection developed the electronic filing version, which is available via FinCEN's Filing Information webpage (together with FinCEN's fillable PDF version) or directly on the Department of Homeland Security website.

The CMIR is used by persons entering or exiting the United States, and physically transporting $10,000 or more in currency or other monetary instruments at one time. It's also used by each person who receives currency or other monetary instruments in the United States which have been transported, mailed, or shipped from any place outside the United States and each person who transports, mails or ships currency or other monetary instruments from within the U.S. to locations outside the U.S.

The paper version remains available for use, especially by travelers transporting currency or monetary instruments.


Get ready for the 2020 Summary of Deposits survey

The FDIC has issued FIL-59-2020 announcing its annual survey of branch office deposits as of June 30, 2020. All FDIC-insured institutions, including insured U.S. branches of foreign banks, other than institutions with no branch offices, are required to complete and submit the survey by July 31, and no filing extensions will be granted.


Fed expands availability of Muni Liquidity Facility

The Federal Reserve Board has announced an expansion in the number and type of entities eligible to directly use its Municipal Liquidity Facility (MLF). Under the new terms, all U.S. states will be able to have at least two cities or counties eligible to directly issue notes to the MLF regardless of population. Governors of each state will also be able to designate two issuers in their jurisdictions whose revenues are generally derived from operating government activities (such as public transit, airports, toll facilities, and utilities) to be eligible to directly use the facility.

The MLF continues to be open to U.S. states, the District of Columbia, U.S. cities of at least 250,000 residents, U.S. counties of at least 500,000 residents and some multistate entities.


Rental housing finance survey results

HUD and the Census Bureau have released the results of their rental housing finance survey, which reports that, of the 48.2 million rental housing units, nearly 49 percent are located in rental properties of one to four units of which nearly 73 percent (14.1 million) are owned by individual investors and more than one-third (7.9 million) have a mortgage or similar debt.


159 million Economic Impact Payments delivered

Treasury and the IRS have announced that 159 million Economic Impact Payments, worth more than $267 billion, have been distributed to Americans in two months. Payments have been sent to all eligible Americans for whom the IRS has the necessary information to make a payment. These totals do not include the more than $2.5 billion that have been delivered to U.S. territories for payment to territory residents. For more Information on the Economic Impact Payment, including answers to frequently asked questions and other resources, visit


Final rule on FHLBanks' housing goals

Yesterday, the Federal Housing Finance Agency (FHFA) announced it had sent to the Federal Register for publication a final rule on the Federal Home Loan Banks’ (FHLBanks) Housing Goals. The new goals become effective in 2021, and enforcement of the rule will be phased in over three years. The final rule amends the FHLBanks’ housing goals to:

  • Eliminate the retrospective evaluation using HMDA data and set a single prospective mortgage purchase housing goal as a share of each FHLBank’s total Acquired Member Asset (AMA) purchases;
  • Set a new small member participation housing goal for participation by small institutions;
  • Eliminate the volume threshold and instead allow FHLBanks to propose different levels for the goals for mortgage purchases and small member participation, subject to FHFA approval; and
  • Simplify and clarify the eligibility criteria to make federally backed loans sold by small institutions eligible to count for goals purposes.

The FHFA also released an FHLBanks' Housing Goals Fact Sheet.


CFPB statement on Reg Z disclosures during pandemic

The CFPB has issued a statement to help consumers receive relief during the pandemic more quickly from their credit card issuer. Regulation Z requires that creditors provide written disclosures to consumers for account-opening and temporary rate or fee reduction. During the pandemic, consumers may seek to open a new account or request a temporary reduction in APR or fees for an existing account or a low-rate balance transfer. The Bureau is providing temporary and targeted flexibility for credit card issuers regarding electronic provision of certain disclosures normally required to be in writing during this pandemic.

Specifically, the Bureau's statement pertains to oral telephone interactions where a card issuer may seek to open a new credit card account for a consumer, to provide certain temporary reductions in APRs or fees applicable to an existing account, or to offer a low-rate balance transfer. In these instances, the Bureau does not intend to cite a violation in an examination or bring an enforcement action against an issuer that during a phone call does not obtain a consumer’s E-Sign demonstrative consent to electronic provision of the written disclosures required by Regulation Z, so long as the issuer during the phone call obtains both the consumer’s oral consent to electronic delivery of the written disclosures and oral affirmation of his or her ability to access and review the electronic written disclosures.

The Bureau has also issued FAQs focusing on existing regulatory flexibilities for open-end credit (that is not home-secured) that may be useful for assisting customers.


Hurricane season and COVID-19

The Federal Trade Commission has posted information on what people need to know if they have to go to a shelter for weather emergencies with the added concern of the COVID-19 pandemic.


NCUA Chairman statement on death of George Floyd

Yesterday, NCUA Chairman Rodney E. Hood, the first African-American to lead a federal banking agency, issued a statement on the death of George Floyd.


OFAC targets companies in Venezuela oil trade

On Tuesday, the Treasury Department reported that OFAC designated four companies and four crude oil tankers for operating in the oil sector of the Venezuelan economy.

As a result of Tuesday’s action, all property and interests in property of these entities that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by the designated entities are also blocked. For identity information on the designated entities and vessels, see BankersOnline's OFAC Update.


Bureau settles with short-term lenders in UDAP case

The Consumer Financial Protection Bureau has announced a settlement with Main Street Personal Finance, Inc. and its subsidiaries—ACAC, Inc., which conducts business under the name Approved Cash Advance, and Quik Lend, Inc.—(collectively, Approved Cash). The companies, which are based in Cleveland, Tennessee, offer payday and auto-title loans and own and operate about 156 stores in eight different states: Alabama, Louisiana, Michigan, Mississippi, Oklahoma, South Carolina, Tennessee, and Virginia.

The Bureau found that Approved Cash provided deceptive finance charge disclosures in violation of the Consumer Financial Protection Act (CFPA) and the Truth in Lending Act (TILA), violated the CFPA and TILA by failing to refund overpayments on its loans, and violated the CFPA by engaging in unfair debt collection practices. The consent order prohibits Approved Cash from engaging in this unlawful conduct in the future and requires it to pay consumer redress and a civil money penalty.

For additional information, see "Short-term lenders in UDAAP settlement with CFPB," in BankersOnline's Penalties pages.


CFPB issues remittance transfers FAQs

The CFPB has posted a Compliance Aid in the form of "Remittance Rule FAQs related to the COVID-19 Pandemic." The document comprises three questions (and their answers) related to a provider's failure to deliver remittance transfer funds by the disclosed date as a result of certain government-mandated closures in response to the COVID-19 pandemic.

A remittance transfer provider's failure to deliver funds on the disclosed availability date would not be an error under the Remittance Transfer Rule if it could not have reasonably anticipated the closure. For example, if a government-mandated stay-at-home order that deems remittance transfers non-essential in an intermediate or recipient country is announced after the transfer is sent, there is no error if the transfer is delayed. However, if the closure was announced before the transfer was sent, a failure to deliver by the disclosed availability date is an error.


Credit risk transfer tool

The Federal Housing Finance Agency has published a Credit Risk Transfer (CRT) spreadsheet tool based on the re-proposed capital rule for Fannie Mae and Freddie Mac. The tool shows how CRT formulas work and allows users to input assumptions and calculate the amount of capital the Enterprises are required to hold across retained risk exposures in different types of CRT transactions. The tool will better inform public comment on the proposed treatment of CRT.


Agencies update host state loan-to-deposit ratios

The Fed, FDIC, and OCC yesterday issued a joint press release on the updated host state loan-to-deposit ratios they will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios replace the prior year's ratios, which were released on May 28, 2019.

In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production. Section 109 also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production. Section 109 also provides a process to test compliance with the statutory requirements. The first step in the process involves a loan-to-deposit ratio test that compares a bank's statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a particular state. A second step is conducted if a bank's statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank's interstate branches. A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate agency.


OCC CRA evaluation ratings

Yesterday the OCC released a list of Community Reinvestment Act (CRA) performance evaluations that became public in May. Of the 17 evaluations listed, 14 were rated Satisfactory and the following three were rated Outstanding as Intermediate Small banks (links are to evaluation reports):


Agencies publish guidance on credit losses and risk review

The interagency guidance documents on credit losses and risk review announced on May 8 (see our May 11 Top Story) were published and became available on June 1, 2020.

  • Interagency Policy Statement on Allowances for Credit Losses -- 85 FR 32991
  • Interagency Guidance on Credit Risk Review Systems -- 85 FR 33278


Webinar on re-proposed Enterprises capital rule announced

The Federal Housing Finance Agency (FHFA) has announced it will host a webinar on the re-proposed capital rule for Fannie Mae and Freddie Mac (the Enterprises) on June 4 from 2 – 3 pm. EDT. The webinar is open to the public, media, stakeholders, and market participants. The rule, which was released on May 20, is designed to strengthen the Enterprises so they can serve the mortgage market and help low- and moderate- income households access credit during good times and bad. Online registration is required.


Non performing loan sales report released

The Federal Housing Finance Agency (FHFA) has released its latest report on the sale of non-performing loans (NPLs) by Fannie Mae and Freddie Mac (the Enterprises) ,which includes information about NPLs sold through December 31, 2019, and reflects borrower outcomes on sales of 126,757 NPLs sold with a total unpaid principal balance (UPB) of $23.8 billion.

  • NPL sales highlights:
    • NPLs sold had an average delinquency of 2.9 years and an average loan-to-value ratio of 91 percent.
    • The average delinquency for pools sold ranged from 1.4 years to 6.2 years.
    • NPLs in New Jersey, New York, and Florida represented nearly half (44 percent) of the NPLs sold. These three states accounted for 47 percent of the Enterprises' loans that were one year or more delinquent as of December 31, 2014, prior to the start of NPL program sales in 2015.
    • Fannie Mae sold 86,216 loans with an aggregate UPB of $15.8 billion, an average delinquency of 3.0 years, and an average LTV of 89 percent.
    • Freddie Mac sold 40,541 loans with an aggregate UPB of $8.1 billion, an average delinquency of 2.9 years, and an average LTV of 98 percent.
  • Borrower outcomes highlights:
    • The borrower outcomes in the report are based on 114,745 NPLs that were settled by June 30, 2019, and reported as of December 31, 2019.
    • Compared to a benchmark of similarly delinquent Enterprise NPLs that were not sold, foreclosures avoided for sold NPLs were higher than the benchmark.
    • NPLs on homes occupied by borrowers had the highest rate of foreclosure avoidance outcomes (38.3 percent foreclosure avoided versus 15.9 percent for vacant properties).
    • NPLs on vacant homes had a much higher rate of foreclosure, more than double the foreclosure rate of borrower-occupied properties (76.9 percent foreclosure versus 34.4 percent for borrower occupied properties). Foreclosures on vacant homes typically improve neighborhood stability and reduce blight as the homes are sold or rented to new occupants.


Brooks warning on impact of COVID-19 lockdowns on banking

In letters to the National League of Cities, the U.S. Conference of Mayors, and the National Association of Governors, the Acting Comptroller of the Currency Brian Brooks urged mayors and governors to consider the adverse impact of a long-term regional economic shutdown on the nation's banks when making their decisions. He stated, “Certain aspects of these local orders potentially threaten the stability and orderly functioning of the financial system the OCC is charged by law to protect."

The letter raises awareness among state and municipal officials of certain risks closely associated with "essentially indefinite" business closures in certain cities and states. Requiring businesses to remain closed decreases businesses' ability to service their debt, thus increasing default risk in the banking system. Lengthy business closures also reduce the value of collateral securing commercial real estate because of increases in burglaries and vandalism of vacant strip malls, storefronts, and the like; in those cities considering cutting off electric, water, and other utilities to businesses that choose to remain open notwithstanding lockdown orders, the degradation of the physical loan collateral exposes banks to more severe losses.


NCUA prohibition actions

The NCUA has announced its issuance of three prohibition enforcement actions in April and May.


Avoiding COVID-19 government imposter scams


FDIC issues July–December CRA exam schedule

The FDIC has issued its lists of institutions scheduled for a Community Reinvestment Act (CRA) examination during the third and fourth quarter 2020.

CRA examinations are scheduled based on an institution's asset size and CRA rating. Without reasonable cause, an institution with $250 million or less in assets and a CRA rating of Satisfactory can be subject to a CRA examination no more frequently than once every 48 months, and an institution with $250 million or less in assets and a CRA rating of Outstanding can be subject to a CRA examination no more frequently than once every 60 months.


Pennsylvania credit union liquidated

The NCUA announced on Friday it had liquidated IBEW Local Union 712 Federal Credit Union in Beaver, Pennsylvania. West Penn P&P Federal Credit Union of Beaver, Pennsylvania, immediately assumed the closed credit union's assets, member shares, and loans.

IBEW Local Union 712 Federal Credit Union is the first federally insured credit union liquidated in 2020. At the time of liquidation, it served 2,935 members and had assets of approximately $7.7 million, according to its most recent Call Report.


Aggregate consolidated liabilities report released

The Federal Reserve has released its annual determination of the aggregate consolidated liabilities of financial companies as required by the Dodd-Frank Act. The act prohibits a financial company from combining with another company if the resulting company's liabilities would exceed 10 percent of the aggregate consolidated liabilities of all financial companies. Effective July 1, 2020, aggregate consolidated liabilities equal $21,229,884,414,000. This number, which is the average of the year-end financial sector liabilities of the preceding two years, will be the measure of aggregate consolidated liabilities from July 1, 2020 through June 30, 2021.


Survey of senior financial officers on reserves management

The Federal Reserve Board has posted the results of its most recent survey of senior financial officers (SFOS) at banks about their strategies and practices for managing reserve balances, which was conducted between January 31 and February 14, 2020. The questions in the survey focused on gaining updated information on banks’ demand for reserves and additional information on banks’ engagement in money market activity under three different conditions. The survey:

  1. Asked respondents to identify the lowest level of reserve balances that they would be comfortable holding before they began taking active steps to maintain or increase their position
  2. Asked whether respondents preferred to hold a minimum end-of-day reserve level in January 2020 that was different from their lowest comfortable level of reserves
  3. Asked respondents to indicate the level of reserves above which the risk-adjusted returns of other high-quality liquid assets (HQLA) relative to the interest on excess reserves (IOER) rate would be the primary factor in their willingness to convert additional reserves into other HQLA

The next part of the survey explored respondents’ ability and willingness to lend in overnight wholesale markets (both secured and unsecured). It also asked respondents to elaborate on the factors behind these decisions, the kinds of instruments they used, and the expected risk- adjusted returns relative to the IOER rate at which they were willing to engage in such activity.


OCC finalizes 'valid when made' rule

Acting Comptroller of the Currency Brian P. Brooks issued a statement on Friday regarding the OCC's final rule, issued on Friday to clarify that when a national bank or savings association sells, assigns, or otherwise transfers a loan, interest permissible before the transfer continues to be permissible after the transfer. Approving the rule was one of Brooks's first official acts as Acting Comptroller.

The OCC's press release on the final rule explains that the rule was issued following recent developments, including a decision from the U.S. Court of Appeals for the Second Circuit (Madden v. Midland Funding, LLC), which had created legal uncertainty regarding the effect of a transfer on a loan’s permissible interest rate. The final rule addresses this legal uncertainty by clarifying and reaffirming the long-standing understanding that a bank may transfer a loan without affecting the permissible interest term.

The rule applies to loans made by national banks and federal savings associations and will become effective 60 days following publication in the Federal Register.

PUBLICATION UPDATE: Scheduled for Federal Register publication on June 2, 2020, with an effective date of August 3, 2020.

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