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09/30/2020

Agencies finalize CECL phase-in rule

The Federal Reserve, OCC, and FDIC have published [85 FR 61577] a final rule that delays the estimated impact on regulatory capital stemming from the implementation of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses, Topic 326, Measurement of Credit Losses on Financial Instruments (CECL). This final rule is consistent with the interim final rule published in the Federal Register on March 31, 2020, with certain clarifications and minor adjustments in response to public comments related to the mechanics of the transition and the eligibility criteria for applying the transition.

09/30/2020

Regulators issue two final temporary rules

The Federal Reserve, OCC, and FDIC have announced they have finalized two rules, which are either identical or substantially similar to interim final rules currently in effect and issued earlier this year.

The final rule temporarily deferring appraisal and evaluation requirements is substantially similar to the interim final rule issued in April. It will allow individuals and businesses to more quickly access real estate equity to help address needs for liquidity as a result of the coronavirus. In response to comments, the final rule clarifies which loans are subject to the deferral. The final rule is effective upon publication in the Federal Register and will expire on December 31, 2020. PUBLICATION UPDATE: Published October 16, 2020, at 85 FR 65666.

The final rule pertaining to Federal Reserve liquidity facilities adopts without change three interim final rules issued in March, April, and May, 2020. Earlier this year, the Federal Reserve launched several lending facilities to support the economy in light of the coronavirus response. The final rule neutralizes the regulatory capital and liquidity coverage ratio effects of participating in the Money Market Mutual Fund Liquidity Facility and Paycheck Protection Program Liquidity Facility because there is no credit or market risk in association with exposures pledged to these facilities. It will be effective 60 days after publication in the Federal Register.

09/29/2020

Phony SBA lender settles FTC charges

The Federal Trade Commission has announced that a Rhode Island company and its owner will be permanently prohibited from misrepresenting they are affiliated with the SBA as part of a settlement resolving Commission charges they misled consumers in the early days of the coronavirus pandemic.

Ponte Investments, LLC, and its owner John C. Ponte were charged by the FTC in April with misleading small businesses to think they had an affiliation with the SBA and could offer companies access to the coronavirus relief programs administered by the agency.

The settlement prohibits defendants from misrepresenting that they are authorized to accept or process applications for SBA loans and misrepresenting that they are the SBA or are otherwise affiliated or associated with the SBA or the U.S. Government. The defendants will also no longer be able to use the trade name or domain name "SBA Loan Program."

09/29/2020

HUD Section 3 Rule finalized after 26 years

HUD has announced a final rule [85 FR 61524] implementing the “Section 3” statute. Section 3 of the Housing and Urban Development Act of 1968 (as amended) requires that recipients of certain HUD funds make economic opportunities available for low- and very low-income individuals, especially recipients of government assistance for housing, living in the areas where HUD funds are spent. An “interim rule” has been in effect since 1994. The final rule is designed to improve a focus on economic opportunity outcomes while simultaneously reducing the regulatory burden on those entities that receive those funds.

The rule will become effective November 30, 2020. Public housing financial assistance recipients must implement their Section 3 activities pursuant to these regulations and comply with the reporting requirements starting with the recipient's first full fiscal year after July 1, 2021. These regulations are applicable to Section 3 projects for which assistance or funds are committed on or after July 1, 2021. Published with the rule were Section 3 benchmarks [85 FR 60907].

09/28/2020

FSOC statement on secondary mortgage market review

The Treasury Department announced on Friday that the Financial Stability Oversight Council had voted unanimously to approve a statement summarizing its review of the secondary mortgage market. The Council’s review focused in particular on the activities of Fannie Mae and Freddie Mac. In conducting the review, the Council applied the framework for an activities-based approach described in the interpretive guidance on nonbank financial company determinations issued by the Council in December 2019.

The Council’s review noted the central role the Enterprises continue to play in the national housing finance markets, and found any distress at the Enterprises that affected their secondary mortgage market activities, including their ability to perform their guarantee and other obligations on their mortgage-backed securities (MBS) and other liabilities, could pose a risk to financial stability, if risks are not properly mitigated. The Council’s review also considered whether the regulatory framework of the Federal Housing Finance Agency (FHFA) would adequately mitigate this potential risk posed by the Enterprises.

The council encouraged—

  • the FHFA and other regulatory agencies to coordinate and take other appropriate action to avoid market distortions that could increase risks to financial stability
  • the FHFA to consider he relative merits of alternative approaches for more dynamically calibrating the capital buffers
  • the FHFA to ensure high-quality capital by implementing regulatory capital definitions that are similar to those in the U.S. banking framework and to require the Enterprises to be sufficiently capitalized to remain viable as going concerns during and after a severe economic downturn

09/28/2020

FDIC August enforcement actions

The FDIC has released a list of 13 orders of administrative enforcement actions taken against banks and individuals in August 2020. The administrative enforcement actions in those orders consisted of one cease and desist order, four consent orders of prohibition, and eight Section 19 orders.

CBW Bank, Weir, Kansas, was issued a consent cease and desist order related to findings that the bank's BSA/AML program was deficient. In the order, the bank was directed to cease all activity pertaining to foreign financial institution customers, including funds transfers, remote deposit capture, U.S. dollar repatriation, MSB remittances, ACH transfers, etc., until the FDIC determines the bank has taken sufficient corrective action and can be permitted to resume some or all of those activities.

The prohibition orders were issued to—

  • a former loan teller at Arrowhead Bank, Llano, Texas, for using fraudulent general ledger tickets to conceal unauthorized withdrawals from bank customers' accounts, using the funds for her personal benefit
  • the former president of PrimeSouth Bank (now CB&S Bank, Inc.), Tallassee, Alabama, for obtaining unauthorized advances from a loan to a bank customer and applying the proceeds to unrelated loans of other persons
  • the former CEO of Border State Bank (now Border Bank), Roseau, Minnesota, for arranging for bank customers to obtain loans from the bank and transfer the loan proceeds to himself in violation of Regulation O, and for issuing unauthorized letters of credit in furtherance of a personal investment
  • a former teller at BancorpSouth Bank, Tupelo, Mississippi, for embezzling funds from her teller drawer and the bank's vault for her personal use

09/28/2020

$165M to clean-up lead-based paint

HUD has announced the award of nearly $165 million to 44 state and local government agencies in 23 states to protect children and families from lead-based paint and home health hazards. The grants are available through HUD’s Lead Based Paint Hazard Reduction Grant Program (LBPHR) to identify and clean up dangerous lead in low-income families’ homes.

09/25/2020

September SCOOS posted

The Federal Reserve Board has posted its September 2020 Senior Credit Officer Opinion Survey (SCOOS), which collected qualitative information on changes in credit terms and conditions in securities financing and over-the-counter (OTC) derivatives markets. In addition to the core questions, the survey included two sets of special questions. The first set asked about market functioning, funding terms, and demand for funding for commercial mortgage-backed securities (CMBS), and the second set asked about dealer funding terms for commercial mortgage real estate investment trusts (commercial mREITs). The 23 institutions participating in the survey account for almost all dealer financing of dollar-denominated securities to non-dealers and are the most active intermediaries in OTC derivatives markets.

09/25/2020

Enterprises: 2nd quarter foreclosure prevention report

The FHFA has released its Second Quarter 2020 Foreclosure Prevention and Refinance Report. The report shows that Fannie Mae and Freddie Mac (the Enterprises) completed 252,014 foreclosure prevention actions in the second quarter of 2020, bringing to 4.68 million the number of troubled homeowners who have been helped during conservatorships. Of these actions, 3.98 million of the foreclosure prevention actions have helped troubled homeowners stay in their homes.

  • Forbearance: newly initiated forbearance increased significantly to 1.5 million in the second quarter from 170,533 in the first quarter of 2020. The total number of loans in forbearance plans at the end of the quarter was 1.39 million, representing approximately 4.95 percent of the total loans serviced. A majority of the forbearance actions occurred as a result of the Enterprises' response to COVID-19 impacts.
  • Loan Modifications: of the 13,991 loan modifications completed, 41 percent reduced borrowers' monthly payments by more than 20 percent; 66 percent were extend-term only; and 19 percent were modifications with principal forbearance.
  • Foreclose starts and sales: 1,028 third-party and foreclosure sales were completed, down 87 percent compared with the first quarter. Foreclosure starts decreased 74 percent from 28,978 in the first quarter to 7,551 in the second quarter of 2020.
  • Refinances: increased to 1.5 million in the second quarter, from 747,463 in the first quarter of 2020.

09/25/2020

FHFA again extends loan processing flexibilities

The Federal Housing Finance Agency has announced a further extension of Fannie Mae's and Freddie Mac's purchase of qualified loans in forbearance and several loan origination flexibilities through October 31, 2020. As before, the changes are to ensure continued support for borrowers during the COVID-19 national emergency.

The extended flexibilities include:

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