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06/05/2020

CFPB starts transition from LIBOR

The CFPB has announced it has taken steps to facilitate the transition away from LIBOR for consumers and regulated entities. The Bureau released an updated Consumer Handbook on Adjustable Rate Mortgages (CHARM) to help consumers better understand adjustable rate mortgage loan products. The Bureau also released a Notice of Proposed Rulemaking (NPRM) [comments due by August 4, 2020] concerning the anticipated discontinuation of LIBOR, including proposing examples of replacement indices that meet Regulation Z standards. Additionally, the Bureau is issuing guidance (FAQs) on other important LIBOR transition topics that do not require amendments to Regulation Z. The CHARM booklet is intended to provide information to consumers about the features and risks of adjustable rate mortgage loans. Creditors must provide the disclosure or a suitable substitute generally no later than three days following certain ARM applications.

06/05/2020

FDIC CRA ratings released

The FDIC yesterday issued a list of 78 state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in March 2020. Sixty-seven were rated Satisfactory, one Needs to Improve, and the following ten were rated Outstanding:

06/05/2020

OCC proposing regs updates

On Thursday, the Office of the Comptroller of the Currency announced it has published a Notice of Proposed Rulemaking (NPR) for public comment to update its rules for national bank and federal savings association activities and operations. The agency also released an Advance Notice of Proposed Rulemaking (ANPR) seeking comment on rules on those institutions' digital activities.

The NPR would make various changes to 12 CFR 7 to update or eliminate outdated regulatory requirements that no longer reflect the modern financial system and clarify and codify recent OCC interpretations. Among the significant proposed changes are:

  • incorporating and streamlining OCC interpretations addressing permissible derivatives activities for national banks;
  • codifying OCC interpretations to permit national banks and federal savings associations to engage in certain tax equity finance transactions;
  • codifying OCC interpretations regarding national bank membership in payment systems and clarifying that federal savings associations are subject to the same requirements as national banks;
  • expanding the ability of national banks to choose corporate governance provisions under state law;
  • clarifying the extent to which a national bank may adopt anti-takeover provisions permissible under state corporate governance law;
  • clarifying when national bank participation in a financial literacy program on the premises of, or a facility used by, a school or other organization would not be a branch; and
  • codifying OCC interpretations of the National Bank Act relating to capital stock issuances and repurchases.

The ANPR invites comment on OCC regulations at 12 CFR part 7, subpart E and part 155, and any other banking issues related to digital technology and innovation, including:

  • whether the legal standards in 12 CFR 7, subpart E, and 12 CFR 155 are sufficiently flexible and clear in light of the technological advances that have transformed the financial industry over the past two decades;
  • whether these legal standards create unnecessary hurdles or burdens to innovation by banks;
  • whether there are digital banking activities or issues that are not covered by these rules that the OCC should address (e.g., digital finders’ activities, certain software, and correspondent services);
  • what activities related to cryptocurrencies or cryptoassets are financial services companies or bank customers engaged in and what are the barriers or obstacles to further adoption of crypto-related activities in the banking industry;
  • how is distributed ledger technology used or potentially used in activities related to banking;
  • how are artificial intelligence and machine learning techniques used or potentially used in activities related to banking;
  • what new payments technologies and processes should the OCC be aware of and what are the potential implications of these technologies and processes for the banking industry;
  • what new or innovative tools do financial services companies use to comply with regulations and supervisory expectations (i.e., “regtech”);
  • what issues are unique to smaller institutions regarding the use and implementation of innovative products, services, or processes that the OCC should consider;
  • what other changes to the development and delivery of banking products and services should the OCC be aware of and consider; and
  • whether there are issues the OCC should consider in light of changes in the banking system that have occurred in response to the COVID-19 pandemic.

Comments on both the NPR and the ANPR are due by August 3, 2020.

06/05/2020

Temporary policy on FHA insurance endorsements

The Federal Housing Administration has announced a new temporary policy that provides guidance for lenders to obtain FHA insurance endorsements on mortgages where the borrower has requested or obtained a COVID-19 forbearance. The Mortgagee Letter (#2020-16) temporarily reverses the current FHA policy, which states mortgages that are in forbearance are not eligible for FHA insurance.

06/04/2020

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.

06/04/2020

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.

06/04/2020

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.

06/04/2020

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.

06/03/2020

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):

06/03/2020

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.

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