Top Story Lending Related

The Federal Reserve Board has issued the Federal Open Market Committee Statement following the Committee's Meeting on December 12–13, 2023. An excerpt follows:

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of any additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.”

The Board and the Committee also released the economic projections made by participants at the Committee meeting.

In the Implementation Note that accompanied the Statement, it is noted that the Board of Governors voted unanimously to maintain the interest rate paid on reserve balances at 5.4 percent, effective December 14, 2023, and voted unanimously to approve the establishment of the primary credit rate at the existing level of 5.5 percent.

The Federal Trade Commission has announced it has finalized a new rule, the Combating Auto Retail Scams Trade Regulation Rule (CARS Rule) to fight two common types of illegal tactics consumers face when buying a car: bait-and-switch tactics and hidden junk fees. The FTC expects the new rule to save consumers nationwide more than $3.4 billion and an estimated 72 million hours each year shopping for vehicles.

The CARS Rule also includes clear protections for members of the military and their families, who are targeted not only with bait-and-switch tactics and junk fees, but also deceptive information about whether dealers are affiliated with the military and other specific issues that affect servicemembers.

The CARS Rule:

• Prohibits misrepresentations about key information, like price and cost.
• Requires dealers to provide the offering price—the actual price any consumer can pay for the vehicle; tell consumers that optional add-ons (like extended warranties) are not required; and give information about the total payment when discussing monthly payments.
• Prohibits dealers from charging for any add-on that does not provide a benefit to consumers. Examples of such add-ons include: warranty programs that duplicate a manufacturer’s warranty, service contracts for oil changes on an electric vehicle, GAP agreements that do not actually cover the car or neighborhood in which it is housed, or other parts of the deal, and software or audio subscription services on a vehicle that cannot support the software or subscription.
• Requires dealers to get consumers’ express, informed consent for any charges that they pay as part of a vehicle purchase.
• Prohibits dealers from lying to servicemembers and other consumers about important cost and financing information, and about whether the dealers are affiliated with the military or any other governmental organization. They also are prohibited from lying about whether a vehicle can be moved out of state (which affects servicemembers and their families, who must frequently move to new duty stations) and whether a vehicle can be repossessed (there are laws that protect many servicemembers from having their vehicle repossessed).

The rule, which will add part 463 to subchapter D of Title 16 of the C.F.R., will become effective July 30, 2024.

UPDATE: Published at 89 FR 590 on 1/4/2024.

The OCC has reported on the performance of first-lien mortgages in the federal banking system during the third quarter of 2023.

The OCC Mortgage Metrics Report, Third Quarter 2023 showed that 97.3 percent of mortgages included in the report were current and performing at the end of the quarter, the same as the previous quarter. Performance improved compared to third quarter 2022 when 97.2 percent of mortgages were current and performing.

The percentage of seriously delinquent mortgages—mortgages that are 60 or more days past due and all mortgages held by bankrupt borrowers whose payments are 30 or more days past due—was 1.1 percent in the third quarter of 2023, the same as the previous quarter, and a decrease from 1.3 percent a year ago. The percent of seriously delinquent loans has trended down since the third quarter of 2021.

Servicers initiated 8,965 new foreclosures in the third quarter of 2023, an increase from the prior quarter but a decrease from a year earlier. The new foreclosure volume in the third quarter of 2023 is lower than pre-COVID-19 pandemic foreclosure volumes.

Servicers completed 7,436 modifications during the third quarter of 2023, a 13.8 percent decrease from the previous quarter’s 8,623 modifications. Of these 7,436 modifications, 6,367 or 85.6 percent, were “combination modifications”—modifications that included multiple actions affecting the affordability and sustainability of the loan, such as an interest rate reduction and a term extension.

FinCEN has updated its Beneficial Ownership Information (BOI) Reporting Rule FAQs to include 19 new or updated questions on general inquiries, the reporting process, reporting companies, reporting requirements, initial reports, updated reports, compliance and enforcement, FinCEN identifiers, and third-party service providers.

The Office of the Comptroller of the Currency yesterday reported the key issues facing the federal banking system in its Semiannual Risk Perspective for Fall 2023.

The OCC highlighted credit, market, operational, and compliance risks as the key risk themes in the report. The report also highlights artificial intelligence (AI) in banking as an emerging risk.

The Office of the Comptroller of the Currency has issued guidance to OCC-supervised institutions to address the risks associated with "buy now, pay later" (BNPL) lending.

The guidance, included in OCC Bulletin 2023-37 (12/6/2023), focuses on the risk management of BNPL loans, which are payable in four or fewer installments and carry no finance charges. The guidance notes that banks should maintain underwriting, repayment terms, pricing, and safeguards that minimize adverse customer outcomes and should ensure that marketing materials and disclosures are clear and conspicuous.

The OCC expects banks that offer BNPL loans to do so in a manner that is safe and sound, provides fair access to financial services, supports fair treatment of consumers, and complies with applicable laws and regulations.

Our monthly research in the Federal Reserve System's archive of Community Reinvestment Act evaluations found that the Reserve Banks made public 16 evaluations during November. Fourteen of the evaluations listed were assigned ratings of "Satisfactory." We offer congratulations to two banks whose evaluations were rated "Outstanding":

• Washington Savings Bank, Lowell, MA
• Community First Bank of the Heartland, Mount Vernon, IL

The Office of the Comptroller of the Currency has announced its 2024 schedule of free, virtual workshops for directors, senior management, and other key executives of national community banks and federal savings associations. The OCC examiner-led workshops provide practical training and guidance to directors and senior management of national community banks and federal savings associations in a virtual learning environment to support the safe and sound operation of community-based financial institutions.

The workshops will be held from 1 – 4 p.m. EST on the dates indicated:

• January 9: Credit Risk: Recognizing and Responding to Risk
• January 18: Operational Risk: Navigating Rapid Changes
• February 15: Building Blocks: Developing Strong Management
• February 22: Risk Governance: Improving Effectiveness
• March 5: Compliance Risk: Understanding the Rules

Registration is required.

The FDIC has released its December 2023 list of 45 banks recently evaluated for compliance with the Community Reinvestment Act. The list includes two banks — one in Waterloo, Alabama, and one in Philadelphia, Pennsylvania — whose evaluations were rated "Needs to Improve," and 40 banks whose evaluations were rated "Satisfactory."

The following three banks are to be congratulated on receiving "Outstanding" ratings on their evaluations:

• United Citizens Bank of Southern Kentucky, Columbia, Kentucky
• Exchange Bank, Kearney, Nebraska
• First Bank, Ketchikan, Alaska

The OCC has released a list of 42 CRA performance evaluations that became public In November. Of the evaluations listed, 29 are rated satisfactory, and the following 13 are rated outstanding:

• Community West Bank, N.A., Goleta, GA
• San Luis Valley Federal Bank. Alamosa, CO
• Citizens Bank & Trust, Inc., Trenton, GA
• The Citizens National Bank of Quitman,, Quitman, GA
• Central FS & LA, Cicero, IL
• The First National Bank of Ava, Ava, IL
• Home FS&LA of Grand Island, Grand Island, NE
• Valley National Bank, Passaic, NJ
• Pioneer Bank, Roswell, NM
• BNY Mellon, N.A., Pittsburg, PA
• The First National Bank in Sioux Falls, Sioux Falls, SD
• Home Federal Bank of Tennessee, Knoxville, TN
• Skyline National Bank, Independence, VA