Top Story Lending Related

On Thursday, the Federal Housing Administration (FHA) announced it has posted for industry feedback a proposed update to its Home Equity Conversion Mortgage (HECM) assignment claims eligibility policy. The proposal enables certain categories of due and payable HECMs that were previously ineligible for assignment to be assigned to HUD, enabling servicers to obtain earlier resolution of these loans through HUD’s assignment claims process. This change will support servicer liquidity and strengthen the HECM market for senior homeowners who use a HECM to age in place.

FHA is seeking industry feedback on its proposal through December 11, 2023.

The Small Business Administration has announced that small nonfarm businesses in Clallam, Grays Harbor, Island, Jefferson, Kitsap and Mason counties in the state of Washington are now eligible to apply for low‑interest federal disaster loans from the SBA. These loans offset economic losses because of reduced revenues caused by drought in Clallam and Jefferson counties that began September 12.

Small nonfarm businesses, small agricultural cooperatives, small businesses engaged in aquaculture and most private nonprofit organizations of any size may qualify for Economic Injury Disaster Loans of up to $2 million to help meet financial obligations and operating expenses which could have been met had the disaster not occurred. These loans have an interest rate of 4 percent for businesses and 2.375 percent for private nonprofit organizations, a maximum term of 30 years and are available to small businesses and most private nonprofits without the financial ability to offset the adverse impact without hardship. No interest accrues for the first year.

There is a notice on the Department of Defense's Military Lending Act (MLA) website indicating that the site is scheduled for system maintenance on Saturday, November 11, 2023, and will not be available from 6:00 p.m. until 9:00 p.m. PST (9:00 p.m. to midnight EST).

Our monthly review of the Federal Reserve's archive of CRA evaluations identified 10 evaluations of state-chartered member banks that were made public in October. Nine of the evaluations were rated Satisfactory. We congratulate Valley Bank of Ronan, Ronan, Montana, on its evaluation, which was rated Outstanding.

On Wednesday, the CFPB announced it has ordered Citibank, N.A. (Citi) to pay $25.9 million in fines and consumer redress for intentionally and illegally discriminating against credit card applicants the bank identified as Armenian American.

According to the CFPB's consent order, from 2015 through 2021, Citi singled out for discrimination applicants for certain credit card products, based on their surnames, whom it suspected of being of Armenian descent, in violation of the Equal Credit Opportunity Act, Regulation B, and the Consumer Financial Protection Act (CFPA). Citi supervisors conspired to hide the discrimination by instructing employees not to discuss the discriminatory practices in writing or on recorded phone lines. Citi employees also lied about the basis of denial, providing false reasons to denied applicants, also in violation of ECOA, Regulation B and the CFPA. Under Wednesday’s order, Citi will pay $1.4 million to harmed consumers along with a $24.5 million penalty.

The CFPB reported that Citi treated Armenian Americans as criminals who were likely to commit fraud. From at least 2015 through 2021, Citi targeted retail services credit card applicants with surnames that Citi employees associated with Armenian national origin as well as applicants in or around Glendale, California. The bank specifically targeted surnames ending in “-ian” and “-yan.” Nicknamed “Little Armenia,” Glendale is home to approximately 15% of the Armenian American population in the U.S.

The Bureau said that Citi managers trained and directed employees to take part in the bank’s plan to single out Armenian Americans applying for retail services credit cards because of stereotypes Citi projected onto an entire nationality.

The Federal Housing Finance Agency yesterday released its report on the FHLBank System at 100: Focusing on the Future initiative, the Agency’s comprehensive review of the Federal Home Loan Bank (FHLBank) System in anticipation of the System’s centennial in 2032.

The FHLBank System at 100: Focusing on the Future initiative featured robust public engagement over the course of the past year, including listening sessions and regional roundtables as well as multiple opportunities for written input from stakeholders. FHFA drew on the feedback received through this public engagement along with its own extensive analysis when preparing the report, which includes recommendations for how the FHLBank System could effectively fulfill its mission. FHFA expects the initiative to continue as a multi-year, collaborative effort with stakeholders to address the recommended actions in the report.

• The report
• Fact Sheet

The CFPB has released the beta version of the HMDA Platform for data that will be collected in 2024 (2024 Beta Platform). The 2024 Beta Platform provides financial institutions and vendors an opportunity to determine whether their sample loan/application register data comply with the reporting requirements outlined in the Filing Instructions Guide for HMDA data collected in 2024.

Visit the beta version of the HMDA Platform to login and select ‘2024’ from the dropdown to start testing. Financial institutions can use their log-in credentials from the previous filing periods or, if they have not previously filed data, establish log-in credentials and upload sample 2024 HMDA files to perform validation on their data. Use of this platform requires financial institutions to have a Legal Entity Identifier (LEI) which uniquely identifies the institution, and that LEI must be recognized by the HMDA Platform. If your institution has not registered for an LEI and intends to file HMDA data, visit the Global LEI Foundation for information on obtaining an LEI.

The 2024 Beta Platform is for testing purposes only and the Bureau will continue to add functionality. No data submitted on the Beta Platform will be considered for compliance with HMDA data reporting requirements. During the beta period, financial institutions may test and retest HMDA data files as often as desired.

The Federal Reserve Board has released the results of its October 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally correspond to the third quarter of 2023.

• Regarding loans to businesses, survey respondents, on balance, reported tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the third quarter.2 Furthermore, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
• For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages, for which standards remained basically unchanged. Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Moreover, for credit card, auto, and other consumer loans, standards reportedly tightened, and demand weakened on balance.
• The October SLOOS included a set of special questions that asked banks to assess the likelihood of approving credit card and auto loan applications by borrower FICO score (or equivalent) in comparison with the beginning of the year. Banks reported that they were less likely to approve such loans for borrowers with FICO scores of 620 and 680 in comparison with the beginning of the year, while they were more likely to approve credit card loan applications and about as likely to approve auto loan applications for borrowers with FICO scores of 720 over this same period.
• The October SLOOS also included a set of special questions that inquired about banks’ reasons for changing standards for all loan categories in the third quarter of 2023. Banks most frequently cited a less favorable or more uncertain economic outlook; reduced tolerance for risk; deterioration in the credit quality of loans and collateral values; and concerns about funding costs as important reasons for tightening lending standards over the third quarter.

On Friday, the FDIC issued a list of 72 state nonmember banks recently evaluated for compliance with the Community Reinvestment Act. The list covers evaluation ratings assigned to institutions in August 2023.

Of the 72 banks listed, 68 received evaluation ratings of Satisfactory. Two banks, one in West Mansfield, Ohio, and the other in Farragut, Tennessee, received ratings of Needs to Improve. We congratulate two banks that received Outstanding ratings:

• United Bank, Atmore, Alabama
• Middlesex Savings Bank, Natick, Massachusetts

The FDIC announced on Friday, that Citizens Bank, Sac City, Iowa, was closed by the Iowa Division of Banking, which appointed the FDIC as receiver. To protect depositors, the FDIC entered into a Purchase and Assumption Agreement with Iowa Trust & Savings Bank, Emmetsburg, Iowa, to assume all of the deposits of Citizens Bank.

The Division of Banking's press release reported that, during a joint and ongoing examination of the bank, examiners identified significant loan losses that had not previously been identified by the bank, and that the bank was declared insolvent. The bank had a concentration of out-of-territory and out-of-state loans to one industry and incurred heavy losses on some of those loans.

The two branches of Citizens Bank will reopen as branches of Iowa Trust & Savings Bank this morning during normal business hours. Checks drawn on Citizens Bank will continue to be processed. Loan customers should continue to make their payments as usual.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $14.8 million. Compared to other alternatives, Iowa Trust & Savings Bank’s acquisition was the least costly resolution for the DIF. Citizens Bank is the fifth bank to fail in the nation this year. The last failure in Iowa was Polk County Bank, Johnston, Iowa, on November 18, 2011.