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Top Story Lending Related

04/01/2020

Fannie and Freddie expand loan accommodations

The Federal Housing Finance Agency has announced several loan processing flexibilities from Fannie Mae and Freddie Mac designed to help lenders process loans, including:

  • Allowing desktop appraisals on new construction loans;
  • Allowing flexibility on demonstrating construction has been completed (alternative to the Completion Report);
  • Allowing flexibility for borrowers to provide documentation (rather than requiring an inspection) to allow renovation disbursements (draws); and
  • Expanding the use of power of attorney and remote online notarizations.

These accommodations only apply to loans being originated for sale to Fannie or Freddie.

03/31/2020

Regulators adjust calculation for credit concentration

The FDIC has issued FIL-31-2020 announcing that the FDIC, Federal Reserve, and OCC are jointly adjusting their calculation for credit concentration ratios used in the supervisory process. The adjustment is in response to changes in the capital information available after the implementation of the Community Bank Leverage Ratio (CBLR) rule.

Effective March 31, 2020, for supervisory purposes, examiners will calculate credit concentration ratios using tier 1 capital plus the appropriate allowance for loan and lease losses or the allowance for credit losses attributed to loans and leases (as applicable) for the denominator.

03/30/2020

Regulators' actions to support lending

On Friday, the federal bank regulatory agencies announced two actions to support the U.S. economy and allow bankign organizations to continue lending to households and businesses:

  • Allowing early adoption of a new methodology on how certain banking organizations are required to measure counterparty credit risk derivatives contracts; and
  • Providing an optional extension of the regulatory capital transition for the new credit loss accounting standard.

The "standardized approach for measuring counterparty credit risk" rule, also known as SA-CCR, was finalized by the agencies in November 2019, with an effective date of April 1. It reflects improvements made to the derivatives market since the 2007-2008 financial crisis, such as central clearing and margin requirements. To help improve current market liquidity and smooth disruptions, the agencies will permit banking organizations to early adopt SA-CCR for the reporting period ending March 31. UPDATE: Published at 85 FR 17721 on 3/31/2020 as an interim final rule, with a comment period ending 5/15/2020..

Additionally, the agencies issued an interim final rule that allows banking organizations to mitigate the effects of the "current expected credit loss," or CECL, accounting standard in their regulatory capital. Banking organizations that are required under U.S. accounting standards to adopt CECL this year can mitigate the estimated cumulative regulatory capital effects for up to two years. This is in addition to the three-year transition period already in place. Alternatively, banking organizations can follow the capital transition rule issued by the banking agencies in February 2019. UPDATE: Published at 85 FR 17723 on 3/31/2020

The changes will be effective immediately and the agencies will accept comments on the CECL interim final rule for 45 days following publication.

03/30/2020

FDIC releases February enforcement orders

The FDIC has released a list of enforcement orders issued in February:

  • An institution affiliated party of Sunrise Bank Dakota, Onida, South Dakota, was assesses a civil money penalty of $15,000 after the FDIC determined (and the party neither admits nor denies), that, in 2017, he allowed bank customers to continuously overdraw their accounts, resulting in unsecured loans in excess of the bank's legal lending limit and financial loss to the bank.
  • An institution affiliated party of United Commercial Bank, San Francisco, California (now in receivership), was issued an order of prohibition and an order to pay a civil money penalty of $150,000, for having engaged or participated in violations, reckless unsafe or unsound banking practices, and breaches of fiduciary duty resulting in financial loss or other damage to the bank and prejudicing the interests of the bank's depositors.
  • Additional orders of prohibition from further participation were issued to:
    • a former employee of Louisa Community Bank, Louisa, Kentucky, for violations of law or regulation and unsafe or unsound banking practices, including embezzlement of $45,450 from the bank;
    • a former customer service manager of OneUnited Bank, Boston, Massachusetts, for having misappropriates funds from certificate of deposit accounts of various elderly customers of the bank, resulting in a loss to the bank of $71,425.36;
    • a former branch manager at PeoplesBank, A Codorus Valley Company, York, Pennsylvania, for having embezzled approximately $139,000 from the bank and its customers; and
    • a former institution affiliated party of The Fahey Banking Company, Marion, Ohio, who, while also treasurer of a public library in Mt. Giliad, Ohio, deprived the library of funds totaling $19,720, using the funds for his personal benefit.

03/27/2020

Student Loans and the coronavirus pandemic

The CFPB has posted an article reporting that the U.S. Department of Education announced that all borrowers with federally-held student loans will automatically have their interest rates set to 0% for at least 60 days. All borrowers with federally-held loans may also request to suspend their payments for at least two months, and delinquent borrowers will have their payments automatically suspended. The Department of Education also announced that they have stopped the collection of defaulted federal student loans for at least 60 days. A list of other things of interest to borrowers regarding a federal-held loans was also provided.

03/27/2020

Victims of student loan debt scheme to receive $3.1M

The Federal Trade Commission is mailing checks totaling more than $3.1 million to consumers who were victims of a student loan debt relief and credit repair scheme. Strategic Student Solutions (also doing business under other names) and its owner, Dave Green, settled FTC allegations that they charged consumers illegal upfront fees and falsely promised to reduce their student loan debt or monthly payments by enrolling them in student loan forgiveness or other programs. The FTC also alleged that the defendants falsely promised to apply monthly payments to consumers’ student loans and to improve their credit scores and histories. The FTC is mailing 20,988 checks—averaging $148 each—to victims of the scheme.

03/27/2020

FDIC issues COVID-19-related FILs

The FDIC issued four COVID-19-related Financial Institution Letters yesterday.

  • FIL-25-2020: Identification of Essential Critical Infrastructure Workers During the COVID-19 Response Efforts
  • FIL-26-2020: Statement encouraging responsible small dollar lending to consumers and small businesses in response to COVID-19
  • FIL-27-2020: Temporary alternative procedures for sending supervision-related mail and email to FDIC
  • FIL-28-2020: 30 day grace period for First Quarter Call Report

03/27/2020

First quarter SCOOS posted

The March 2020 Senior Credit Officer Opinion Survey (SCOOS) on Dealer Financing Terms has been posted by the Federal Reserve Board. It collected qualitative information on changes over the previous three months in credit terms and conditions in securities financing and over-the-counter (OTC) derivatives markets. In addition to the core questions, the survey included a set of special questions related to bifurcation of spreads in corporate bond and collateralized loan obligations markets during the second half of 2019. The 22 institutions participating in the survey account for almost all dealer financing of dollar-denominated securities to nondealers and are the most active intermediaries in OTC derivatives markets. The survey was conducted during the period between February 11, 2020, and February 25, 2020, and closed before the recent period of high market volatility related to COVID-19. The core questions asked about changes between December 2019 and February 2020.

03/27/2020

Regulators encourage making small-dollar loans in response to COVID-19

Yesterday, the Federal Reserve, CFPB, FDIC, NCUA, and the OCC issued a joint statement encouraging banks, savings associations and credit unions to offer responsible small-dollar loans to consumers and small businesses in response to COVID-19. The statement of the agencies recognizes that responsible small-dollar loans can play an important role in meeting customers' credit needs because of temporary cash-flow imbalances, unexpected expenses, or income disruptions during periods of economic stress or disaster recoveries. Such loans can be offered through a variety of structures including open-end lines of credit, closed-end installment loans, or appropriately structured single payment loans.

In addition to yesterday's statement, the agencies are working on future guidance and lending principles for responsible small-dollar loans to facilitate the ability of banks, credit unions, and saving associations to more effectively meet the ongoing credit needs of their customers, members, and communities.

03/27/2020

Bureau extends comment period on FDCPA proposal

On March 3, 2020, the CFPB published a Supplemental Notice of Proposed Rulemaking requesting comment on a proposal to amend Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA) to require debt collector to make certain disclosures when collecting time-barred debts (see our earlier Top Story). The comment period was set to close on May 4, 2020. The Bureau has published a notice in the March 27, 2020, Federal Register extending the comment period through June 5, 2020.

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