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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.


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.


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.


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.


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 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.


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.


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.


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.


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.


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