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08/06/2020

Flood Insurance Program suspensions published

The Federal Emergency Management Agency has published a final rule at 85 FR 47673 in today's Federal Register identifying 21 communities in Lackawanna County, Pennsylvania, and one in Randolph County, Illinois, that were scheduled for suspension from the National Flood Insurance Program on August 5, 2020, for noncompliance with the floodplain management requirements of the program.

  • PA: Benton, Blakely, Covington, Dalton, Dunmore, Elmhurst, Fell, Glenburn, Greenfield, Jefferson, Jessup, Mayfield, Newton, North Abington, Old Forge, Scott, Scranton, South Abington, Taylor, Throop, and Waverly
  • IL: Prairie du Rocher

If any of the communities met the floodplain management requirements prior to August 5, they were not suspended.

08/05/2020

NMLS posts update to Policy Guidebook

An updated version of the NMLS Policy Guidebook has been posted to the NMLS Resource Center and the Regulator Resource Center. A summary of the update indicates that there was a single change adding language stating that NMLS requires each entity under a series LLC to have its own unique EIN for licensing purposes.

08/05/2020

SBA FAQs on PPP loan forgiveness

The Small Business Administration has issued a collection of "Frequently Asked Questions (FAQs) on PPP Loan Forgiveness." The FAQs were issued in consultation with the Department of the Treasury to address borrower and lender questions concerning forgiveness of PPP loans.

The FAQs are grouped in these categories:

  • General Loan Forgiveness
  • Loan Forgiveness Payroll Costs
  • Loan Forgiveness Nonpayroll Costs
  • Loan Forgiveness Reductions

08/05/2020

FDIC releases CRA evaluation ratings

The FDIC has released a list of 64 banks recently evaluated for compliance with the Community Reinvestment Act whose evaluation ratings were made public in August. Sixty of the banks received a Satisfactory rating. One was rated Needs to Improve, and the following three were rated Outstanding:

08/05/2020

July 2020 SLOOS on bank lending practices

The Federal Reserve Board has posted the results of the July 2020 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 previous three months, roughly corresponding to the second calendar quarter.

Respondents indicated that, on balance, they tightened their standards and terms on commercial and industrial (C&I) loans to firms of all sizes. Banks reported weaker demand for C&I loans from firms of all sizes. Meanwhile, banks tightened standards and reported weaker demand across all three major commercial real estate (CRE) loan categories—construction and land development loans, nonfarm nonresidential loans, and multifamily loans—over the second quarter of 2020.

Banks tightened standards across all categories of residential real estate (RRE) loans and across all three consumer loan categories—credit card loans, auto loans, and other consumer loans—over the second quarter of 2020 on net. Banks reported stronger demand for all categories of RRE loans and weaker demand for all categories of consumer loans.

Banks also responded to a set of special questions inquiring about the current level of lending standards relative to the midpoint of the range over which banks’ standards have varied since 2005. Banks, on balance, reported that their lending standards across all loan categories are currently at the tighter end of the range of standards between 2005 and the present.

Paycheck Protection Program loans were not mentioned in the survey.

08/04/2020

FFIEC statement on COVID-19-related loan accommodations

The Federal Financial Institutions Examination Council (FFIEC) has issued a statement providing prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as initial coronavirus-related loan accommodation periods come to an end and they consider additional accommodations.

As initial loan accommodation periods come to an end, some borrowers may be able to resume contractual payments, and others may be unable to meet their obligations due to continuing financial challenges. The agencies encourage financial institutions to consider, when appropriate, prudent options for additional accommodations that can ease cash flow pressures on affected borrowers, improve their capacity to service debt, and facilitate the financial institution’s prudent management of its loans, consistent with applicable laws and regulations.

The statement also addresses issues relative to accounting and regulatory reporting and internal control systems.

08/04/2020

FTC sues merchant cash advance lender for UDAP

The Federal Trade Commission has filed a complaint in the U.S. District Court for the Southern District of New York against Yellowstone Capital LLC and Fundry LLC, both New York limited liability companies; and Yitzhak D. Stern, also known as Isaac Stern, and Jeffrey Reece, individually and as officers of the two LLCs; seeking permanent injunctive and other equitable relief. Yellowstone and Fundry are providers of merchant cash advances, and used deception to lure small business customers, then regularly withdrew money from their accounts without consent even after the customers had repaid the money they owed, according to the Commission's complaint.

Merchant cash advances are a form of financing in which the defendants provide money to a small business up front in exchange for a larger amount repaid through daily automatic payments. The Commission alleges that the defendants unlawfully withdrew millions of dollars in excess payments from their customers' accounts, and took weeks or months to provide refunds when challenged by those customers.

In addition, the complaint alleges that for years Yellowstone deceived potential customers about the amount of money they would receive, with the amount shown on the contract not reflecting additional fees that would be deducted. According to the complaint, these fees totaled hundreds and even thousands of dollars, and were not revealed to business owners until, in some cases, after their contracts were signed, The FTC also alleges that the defendants relied on deceptive marketing to promote their services. Specifically, the complaint states that Yellowstone promised that business owners would not be required to provide collateral or be subject to a personal guaranty. These promises appeared in online ads and other forms of marketing, but in many instances Yellowstone’s contracts actually required business owners to be personally liable if their business failed to make repayments, as well as put the business and all of its property up as collateral.

08/03/2020

Funding of March 2020 C&I drawdowns discussed

An article, "How Did Banks Fund C&I Drawdowns at the Onset of the COVID-19 Crisis?" has been posted to the Federal Reserve Board's FEDS Notes pages discussing how banks funded C&I drawdowns at the onset of the COVID-19 crisis. Banks experienced significant balance sheet expansions in March 2020 due to unprecedented increases in commercial and industrial (C&I) loans and deposit funding. According to the Federal Reserve's H.8 data, "Assets and Liabilities of Commercial Banks in the U.S.", C&I loans increased by nearly $480 billion in March—the largest monthly increase in the history of this series, surpassing the nearly $90 billion increase in C&I loans in the six weeks following Lehman Brothers' collapse in 2008.

Commentary in banks' and firms' earnings calls, as well as write-in comments provided in weekly data submissions, indicate that this growth was primarily attributable to firms drawing down revolving lines of credit to make up for revenue and funding disruptions related to the coronavirus pandemic.

07/31/2020

CFPB adds two HMDA FAQs

The CFPB has updated its Home Mortgage Disclosure Act FAQs, adding two questions in a new "Multiple data points" section:

  1. Are financial institutions required to report the credit score, DTI and CLTV relied on in making a credit decision when such data is not the dispositive factor?
  2. When income and property value are factors in the credit decision, though not the dispositive factor, should such data points be reported?

The answer to each question is "Yes" and is followed by an explanation.

07/31/2020

NCUA Board approves membership rule changes and proposals

The NCUA Board has announced it approved a final rule and two proposed rules yesterday:

  • A final rule amending the chartering and field-of-membership rules for credit unions applying for a community charter approval, expansion, or conversion.
  • A proposed rule that would phase-in the day-one adverse effects on regulatory capital that may result from the adoption of the current expected credit losses accounting methodology over a three year period.
  • A proposed rule that amends the NCUA’s regulation governing the assessment of an annual operating fee on federal credit unions.

The rule amending the chartering and field-of-membership regulations re-adopts a provision to allow an applicant to designate a combined statistical area, or an individual, contiguous portion thereof, as a well-defined local community if the chosen area has a population of 2.5 million or fewer. Credit unions that had their combined statistical areas removed from their fields of membership because of litigation will be contacted by the agency to determine if they would like those reinstated. If they would, then NCUA will do so as soon as the rule is effective (30 days after Federal Register publication).

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