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Top Story Lending Related

11/10/2020

Fed posts October SLOOS results

The Federal Reserve Board has released the October 2020 Senior Loan Officer Opinion Survey (SLOOS) on Bank Lending Practices, which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally correspond to the third quarter of 2020.

Loans to businesses: Respondents indicated that, on balance, they tightened their standards and terms on commercial and industrial 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 loan categories—construction and land development loans, nonfarm nonresidential loans, and multifamily loans—over the third quarter of 2020.

Loans to households: Banks tightened standards across all categories of residential real estate loans and across all three consumer loan categories—credit card loans, auto loans, and other consumer loans—over the third quarter of 2020 on net. Banks reported stronger demand for credit card loans, auto loans, and most categories of RRE loans.

Banks also responded to a set of special questions inquiring about their forbearance policies. For all loan categories, a majority of banks reported that less than 5 percent of loans were in forbearance in the third quarter. Payment deferral was the most widely cited form of forbearance for CRE, RRE, and consumer loans, while covenant relief was the most cited form of forbearance for C&I loans. For most categories, a borrower’s degree of financial hardship was the factor most widely cited as important in determining banks’ willingness to approve forbearance requests or the terms of forbearance.

11/10/2020

G.19 Consumer Credit data

The Federal Reserve has posted its September 2020 G.19 Consumer Credit data. Consumer credit increased at a seasonally adjusted annual rate of 2-1/4 percent during the third quarter. Revolving credit decreased at an annual rate of 2-1/2 percent, while nonrevolving credit increased at an annual rate of 4 percent. In September, revolving credit increased at an annual rate of 4-3/4 percent, while nonrevolving credit increased at an annual rate of 4-3/4 percent.

11/09/2020

Agencies on LIBOR transition

The OCC, Federal Reserve Board, and FDIC have announced they have issued an interagency Statement on Reference Rates for Loans reiterating that the agencies do not endorse a specific replacement rate for the London InterBank Offered Rate (LIBOR), which is expected to cease after 2021. Banks may use any reference rate for loans that the banks determine to be appropriate for their funding models and customer needs. Banks should include language in lending contracts that provides for using a robust fallback rate if the initial reference rate is discontinued. The statement emphasizes that—

  • all banks should have risk management processes in place, commensurate with the size and complexity of their exposures, to identify and mitigate their LIBOR transition risks. For more information, refer to the FFIEC "joint Statement on Managing the LIBOR Transition."
  • examiners will not criticize banks solely for using a reference rate, including a credit-sensitive rate, other than the secured overnight financing rate (SOFR), for loans.

The agencies encourage banks to determine appropriate reference rates for lending activities and begin transitioning loans away from LIBOR without delay. They also encourage banks to accelerate outreach to lending customers to ensure that they are aware of, and prepared for, the transition from LIBOR. Finally, the agencies encourage banks to consider any technical changes that might be required for internal systems to accommodate new reference rates or fallback rates.

11/06/2020

Driver Loan, LLC and CEO subjects of Bureau suit

The CFPB has announced it has filed a lawsuit against Driver Loan, LLC, and its Chief Executive Officer, Angelo Jose Sarjeant, for allegedly engaging in deceptive acts or practices in taking deposits from and offering credit to consumers.

Driver Loan, based in Doral, Florida, offers short-term, high-interest loans to consumers funded by deposits made by other consumers. The Bureau alleges that Driver Loan and Sarjeant violated the Consumer Financial Protection Act of 2010 (CFPA) by misrepresenting the risks associated with the deposit product it offered to consumers and by misrepresenting the annual percentage rate (APR) for extensions of credit it offered to other consumers. The Bureau’s complaint alleges that since 2017, Driver Loan purports to have offered short-term, high-interest personal loans totaling over $30 million, typically to drivers who work with ride-share companies. The loans range from $100 to $500 each and are repayable in 15 daily installments. The Bureau alleges that Driver Loan deceptively markets its loans as having an APR of 440% when the actual APRs are about 975%.

11/06/2020

Bureau files complaint against student loan debt relief companies

The CFPB yesterday filed a complaint against Performance SLC, LLC (PSLC), a California debt-relief business focused on federal student loan debt; Performance Settlement, LLC (PSettlement), a California debt-settlement company; and Daniel Crenshaw, the owner and CEO of the two companies.

The Bureau alleges that PSLC and Crenshaw charged illegal advance fees in violation of the Telemarketing Sales Rule (TSR) to student loan borrowers seeking to obtain loan consolidation, loan forgiveness, or income-driven repayment plans for their federal student loans, and that PSLC failed to make required disclosures to certain consumers in violation of the TSR. The Bureau also alleges that PSettlement and Crenshaw used deceptive tactics in violation of the Consumer Financial Protection Act (CFPA) in order to induce consumers to sign up for PSettlement’s services. The complaint seeks redress to consumers, injunctive relief, and the imposition of civil money penalties against the defendants.

11/06/2020

CFPB issues no-action letter to BofA

The CFPB announced yesterday it has granted a no-action letter (NAL) to Bank of America, N.A. regarding certain small-dollar credit products. The NAL provides increased regulatory certainty that the Bureau will not bring a supervisory or enforcement action against a company for providing a product or service under certain facts and circumstances. Bank of America’s NAL application is based on the NAL Template issued by the Bureau on May 22, 2020 in response to an application from the Bank Policy Institute. The Bureau approved the NAL Template to further competition in the small-dollar lending space, which fosters access to credit while including important protections for consumers who seek small-dollar loan products.

11/06/2020

OCC Director’s Toolkit updated

The OCC has announced the update of its Director’s Toolkit to help bank directors for national banks and federal savings associations fulfill their corporate governance responsibilities. The Toolkit is a helpful guide for bank directors on strategic issues, risk management, and compliance responsibilities. The updated toolkit includes a revised Director's Book: Role of Directors for National Banks and Federal Savings Associations and adds a new publication, the Director’s Reference Guide to Board Reports and Information.

11/06/2020

FOMC statement issued

The Federal Reserve Board has voted unanimously to maintain the interest rate paid on required and excess reserve balances at 0.10 percent, effective November 6, 2020. As part of its policy decision, the Federal Open Market Committee (FOMC) voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive:

  • Undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent.
  • Increase the System Open Market Account holdings of Treasury securities and agency mortgage-backed securities (MBS) at the current pace. Increase holdings of Treasury securities and agency MBS by additional amounts and purchase agency commercial mortgage-backed securities (CMBS) as needed to sustain smooth functioning of markets for these securities
  • Conduct term and overnight repurchase agreement operations to support effective policy implementation and the smooth functioning of short-term U.S. dollar funding markets.
  • Conduct overnight reverse repurchase agreement operations at an offering rate of 0.00 percent and with a per-counterparty limit of $30 billion per day; the per-counterparty limit can be temporarily increased at the discretion of the Chair.
  • Roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and reinvest all principal payments from the Federal Reserve's holdings of agency debt and agency MBS in agency MBS.
  • Allow modest deviations from stated amounts for purchases and reinvestments, if needed for operational reasons.
  • Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions.

The Board also voted unanimously to approve the maintain the primary credit rate at the existing level of 0.25 percent.

11/05/2020

FDIC CRA ratings released

The FDIC has posted a list of 72 banks recently evaluated for compliance with the Community Reinvestment Act. The list covers evaluation ratings that the FDIC assigned to institutions in August 2020. Sixty-six banks received a Satisfactory rating, and we congratulate the following six banks, which were rated Outstanding:

11/05/2020

Treasury Department quarterly refunding statement

The Treasury Department has announced it is offering $122 billion of Treasury securities to refund approximately $60.9 billion of privately-held Treasury notes maturing on November 15, 2020. This issuance will raise new cash of approximately $61.1 billion. The securities are:

  • A 3-year note in the amount of $54 billion, maturing November 15, 2023;
  • A 10-year note in the amount of $41 billion, maturing November 15, 2030; and
  • A 30-year bond in the amount of $27 billion, maturing November 15, 2050.

The 3-year note will be auctioned on a yield basis at 1:00 p.m. ET on Monday, November 9, 2020. The 10-year note will be auctioned on a yield basis at 1:00 p.m. ET on Tuesday, November 10, 2020. The 30-year bond will be auctioned on a yield basis at 1:00 p.m. ET on Thursday, November 12, 2020. All of these auctions will settle on Monday, November 16, 2020.

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