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FDIC updates Affordable Mortgage Lending Guide
On December 6, the FDIC issued FIL-84-2018 announcing updates to the Affordable Mortgage Lending Guide, Part I: Federal Agencies and Government Sponsored Enterprises (Guide), which reflect current information available about mortgage products offered through Fannie Mae and Freddie Mac. The Guide covers federal programs targeted to a variety of communities and individuals including rural, Native American, low- and moderate-income, and veterans, and is designed to provide community banks resources “to gain an overview of a variety of products, compare different products, and identify next steps to expand or initiate a mortgage lending program.” Updates to the Guide include, among other things, (i) revisions to the Program Matrix; (ii) changes to student loan debt in FHA, Fannie Mae, and Freddie Mac programs; and (iii) updates to certain FHA loan insurance products, USDA single family housing programs, and various Fannie Mae and Freddie Mac products.
FDIC encourages more de novo bank applicants, launches initiatives to streamline and promote transparency in deposit insurance applications
On December 6, the FDIC announced several initiatives designed to streamline and promote transparency in the federal deposit insurance application process, while encouraging more applications from de novo banks. According to FDIC Chairman Jelena McWilliams, the “application process should not be overly burdensome and should not deter prospective banks from applying.” As part of its initiative, the FDIC issued a request for information (RFI) soliciting feedback on all aspects of the deposit insurance application process—the RFI applies to all institutions, including those with less than $1 billion in total assets, as well as traditional community banks. The RFI seeks comments on: (i) suggestions for modifying the application process as it relates to traditional community banks; (ii) potential ways to “support the continuing evolution of emerging technology and fintech companies . . . [and whether there are] particular risks associated with any such proposals”; (iii) aspects of the application process such as legal, regulatory, economic, or technological factors that may discourage potential applications; and (iv) other suggestions for addressing stakeholder concerns regarding the application process, as well as methods for improving effectiveness, efficiency, and transparency. Comments on the RFI will be accepted for 60 days following publication in the Federal Register.
The FDIC also discussed a new, voluntary process for new deposit insurance applicants to request feedback on draft applications before filing formal submissions. “The new process is intended to provide an early opportunity for both the FDIC and organizers to identify potential challenges with respect to the statutory criteria, areas that may require further detail or support, and potential issues or concerns,” the announcement stated.
In addition to updating publications related to the application process (available through FIL-83-2018), the FDIC also released FIL-81-2018 and FIL-82-2018, which respectively provide application processing timeframe guidelines and an overview of the review process for draft deposit insurance proposals.
FTC seeks comments on identity theft detection rules
On December 4, the FTC released a request for public comment on whether the agency should make changes to its identity theft detection rules—the Red Flags Rule and the Card Issuers Rule—which require financial institutions and creditors to take certain actions to detect signs of identity theft affecting their customers. The FTC is seeking comment as part of its systematic review of all of its regulations and guides. According to the FTC, consumer complaints relating to identity theft represented the third largest category of consumer complaints made to the FTC through the first three quarters of 2018 and the second largest category in 2017. The FTC is seeking comment on all aspects of the two rules, but also poses specific questions for commenters to address, such as (i) whether there is a continuing need for the specific provisions of the rules; (ii) what significant costs have the rules imposed on consumers and businesses; and (iii) whether there are any types of creditors that are not currently covered by the Red Flags Rule but should be covered. The request for comment is due to be published in the Federal Register shortly, and comments must be received by February 11, 2019.
OCC reduces assessments by 10 percent for 2019
On November 30, the OCC announced a 10 percent reduction in the marginal rates for assessments on national banks, federal savings associations, and federal branches and agencies of foreign banks for 2019. The OCC projects the change will reduce total assessments collected by more than $90 million in 2019. The change will take effect with the March 31, 2019 assessment period.
Additionally, the OCC announced a change to the refund policy for institutions that leave the federal system during an assessment period. If an institution leaves the federal system during the first half of a semiannual assessment period, the OCC will issue a refund for the second half of the assessment period. If an institution leaves during the second half of an assessment period, the OCC will not issue a refund. As a result of this revised policy, institutions will no longer be required to prepay for three months of supervision after they leave the federal system.
Agencies increase threshold for appraisal exemption under TILA for HPMLs
On November 23, the CFPB, OCC, and the Federal Reserve Board published a final rule in the Federal Register, which increases the smaller loan exemption threshold for the special appraisal requirements for higher-priced mortgage loans (HPMLs) under TILA. TILA requires creditors to obtain a written appraisal based on a physical visit to the home’s interior before making a HPML, unless the loan meets or is less than the threshold exemption. Each year the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The exemption threshold for 2019 is $26,700, up from $26,000. This final rule is effective January 1, 2019.
Agencies finalize new 2019 thresholds for TILA and CLA
On November 21, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) to credit transactions, as required by the Dodd-Frank Act. Each year the thresholds must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2019, based on the annual percentage increase in the CPI-W, is now $57,200 or less, except for private student loans and loans secured by real property, which are subject to TILA regardless of the amount.
Agencies issue joint proposal on community bank leverage ratio for qualifying organizations
On November 21, the Federal Reserve Board, FDIC, and OCC jointly announced a proposed rule to simplify capital requirements for qualifying community banking organizations that opt into the community bank leverage ratio framework. Among other criteria, qualifying organizations must have “less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a community bank leverage ratio greater than 9 percent.” FDIC FIL-77-2018 provides an overview of the proposed regulation amendments—required under Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act—which would allow qualifying organizations to satisfy (i) generally applicable leverage and risk-based capital requirements; (ii) the prompt corrective action framework’s well-capitalized ratio requirements; and (iii) any other generally applicable capital and leverage requirements. Comments will be due 60 days after publication in the Federal Register.
Agencies propose $400,000 threshold for residential appraisal requirement
On November 20, the OCC announced a joint notice of proposed rulemaking with the Federal Reserve Board and the FDIC, which raises the threshold for residential real estate transactions requiring an appraisal to $400,000 from its current level of $250,000. According to the OCC, the proposal is in response to feedback that the current exemption threshold has not increased to keep pace with the price appreciation in the residential real estate market. The proposal includes the rural residential appraisal exemption included in the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously covered by InfoBytes here). Additionally, among other things, the proposal implements the Dodd-Frank Act mandate that institutions appropriately review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice. Comments will be due 60 days after publication in the Federal Register.
FinCEN revises GTOs to expand coverage to 12 metropolitan areas, lower reporting threshold, and include virtual currencies
On November 15, the Financial Crimes Enforcement Network (FinCEN) reissued a revised Geographic Targeting Order (GTO), which requires U.S. title insurance companies to identify the natural persons behind shell companies that pay “all cash” (i.e., the transaction does not involve external financing) for high-end residential real estate in 12 major metropolitan areas. Notably, the purchase amount threshold for the beneficial ownership reporting requirement—which previously varied by city—is now set at $300,000 for residential real estate purchased in the 12 covered areas. In addition, FinCEN requires title insurance companies to report covered purchases made using virtual currencies. FinCEN states that the reissued GTO “will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.”
The revised GTO takes effect November 17, and covers certain counties within the following areas: Boston, Chicago, Dallas-Fort Worth, Honolulu, Las Vegas, Los Angeles, Miami, New York City, San Antonio, San Diego, San Francisco and Seattle.
Visit here for additional InfoBytes coverage on FinCEN GTOs.
OCC policy and procedure update addresses institution-affiliated party enforcement actions
On November 13, the OCC issued OCC Bulletin 2018-41, announcing the release of Policies and Procedures Manual 5310-13 (PPM 5310-13), which outlines the OCC’s policy and framework for taking enforcement actions against institution-affiliated parties (IAP) of national banks, federal savings associations, and foreign banks’ federal branches and agencies. Among other things, PPM 5310-13 explains the definition of an individual who qualifies as an IAP and describes common enforcement actions taken against current or former IAPs, which include “violations of law, regulation, final agency orders, conditions imposed in writing, or written agreements; unsafe or unsound practices; or breaches of fiduciary duty.” PPM 5310-13 also outlines procedures and processes related to most informal and formal IAP enforcement actions.
Additionally, the OCC issued updated policies and procedures (see PPMs 5310-3 and 5000-7) concerning bank enforcement actions and related matters, as well as civil money penalties, to ensure consistency with PPM 5310-13. All three PPMs are effective immediately.