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Pennsylvania amends certain mortgage licensing requirements
On February 3, the Pennsylvania governor signed HB 1588, which makes various amendments to the Pennsylvania Consolidated Statutes related to mortgage loan industry licensing requirements. Among other things, the amendments make several updates to the definition of remote location, installment sales contract, mortgage loan correspondent, mortgage originator, qualifying individual, and wholesale table funder. The bill also provides new licensed activity exceptions. Specifically, a mortgage lender may act as a mortgage broker or mortgage loan correspondent without obtaining separate mortgage broker/mortgage loan correspondent licenses. Additional amendments relate specifically to mortgage loan correspondents, including prelicensing and continuing education requirements; mortgage loan business prohibitions; licensing suspension, revocation, and refusal provisions; and licensing application guidelines related to, among other things, surety bonds, minimum net worth, and the designation of qualifying individuals for a mortgage loan correspondent’s principal place of business and branch locations. Certain provisions take effect immediately, while the remainder of the changes take effect in 60 days.
OCC to host risk management workshops
On February 7, the OCC released its lineup of free, virtual workshops for boards of directors of community national banks and federal savings associations. Included as part of the workshops to be held this spring is a risk management series focusing on credit risk, operational risk, compliance risk, and risk governance. Another workshop will present guidance for directors and senior managers on building blocks for success. A schedule of the upcoming workshops and registration information is available here.
McWilliams discusses her tenure at FDIC
On February 3, outgoing-FDIC Chairman Jelena McWilliams spoke at the Bipartisan Policy Center on both her tenure and technology’s role in facilitating a more inclusive financial system. In reflecting upon her time as Chairman, McWilliams opined that the “story of how financial regulators, central banks, and the global financial system responded to the pandemic is one of great success. Only three banks failed since the start of the pandemic, and none due to the pandemic itself.” She also pointed out that during the Covid-19 pandemic, the FDIC prioritized “improving supervision and resolution planning” and “the importance of strong capital levels,” particularly for large banks. McWilliams listed some of her accomplishments as Chairman, including “implement[ing] a recordkeeping rule,” “simplify[ng] the deposit insurance rules for trust accounts,” and “enhancing the FDIC’s readiness if it is ever called upon to resolve non-bank firms, such as central counterparties.” Central counterparties, McWilliams explained, play a critical role in the financial system as their clearing services are central to U.S. financial markets. McWilliams discussed the ways in which the FDIC enhanced competition, fostered innovation, and “supported third-party partnerships,” extolling these virtues as “the guiding principles of my chairmanship that helped forge the most vibrant financial market in the world.”
McWilliams also stated that a “key aspect of our pro-competition agenda” was to “moderniz[e] a broad range of our rules while maintaining our core safety and soundness focus.” In connection with “crypto assets,” McWilliams opined that her personal “view is that generally bank-issued stablecoins closely resemble digital representations of deposits.” She urged the FDIC to “to build off the work we have done and provide clarity to the public as soon as practicable, which could include promulgating amendments to the deposit insurance rules.” McWilliams said that she hopes regulators will be more welcoming of the “endless possibilities” that digital assets and blockchain technology have in enhancing the efficiency of payments.
Treasury stresses importance of regulating stablecoins
On February 8, Under Secretary for Domestic Finance Nellie Liang testified before the House Financial Services Committee that more must be done to clearly and consistently regulate stablecoins. Stablecoins’ “exponential growth” heightens “the urgency of ensuring that an appropriate regulatory framework is in place,” Liang stressed, adding that the value of stablecoins has grown over the last two years from roughly $5 billion in 2020 to approximately $175 billion today.
Liang encouraged lawmakers to consider two additional issues as they create policy: (i) regulations for “intermediaries” in the digital asset markets, including traditional financial actors such as banks and investment companies, as well as stablecoin issuers, custodial wallet providers, and digital asset exchanges; and (ii) potential systemic risk that may result from the build-up of leverage against digital assets, which “can play a key role in catalyzing and accelerating financial instability.” Liang compared the second issue to the 2007-2008 financial crisis. To address this risk, Liang stated that the Biden Administration is examining the role that leverage plays in the digital asset market, as well as the implications that leverage may have on the rest of the financial system. She also reiterated concerns raised in the President’s Working Group (PWG) on Financial Markets’ report on stablecoins (covered by InfoBytes here), which emphasized that stablecoins may be more widely used in the future as a means of payment and could increase “risks to users and the broader system.” Liang stressed that “[w]hile Treasury and the PWG fully support efforts by state and federal agencies to use existing authorities in support of their statutory mandates, we do not believe existing authorities provide a sufficient basis for comprehensive and consistent oversight of stablecoins.”
CFPB publishes 2022 reportable HMDA data reference chart
On January 27, the CFPB published the Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart for HMDA Data Collected in 2022. The chart serves as a reference tool for data points that are required to be collected, recorded, and reported under Regulation C, as amended by HMDA rules, which were most recently issued in April 2020 (covered by InfoBytes here). The chart also provides relevant regulation and commentary sections and guidance for when to report “not applicable or exempt.” The Bureau notes that the “chart does not provide data fields or enumerations used in preparing the HMDA loan/application register (LAR).” For additional information on preparing the HMDA LAR, financial institutions should consult FFIEC guidance here.
Five agencies launch effort to address romance scams
On February 7, the CFTC, FinCEN, CFPB, ICE, and U.S. Postal Inspection Service launched the nationwide awareness effort “Dating or Defrauding?” to remind the public about the ongoing dangers of romance scams that target individuals through dating apps or social media. The agencies draw attention to new types of scams that have costs victims millions of dollars, and highlight recent FTC studies showing that 2020 was a record year for romance scams with the number of these types of complaints continuing to increase in 2021. According to a January FTC blog post (covered by InfoBytes here), more than 95,000 people reported about $770 million in losses to fraud initiated on social media platforms in 2021, with investment scams and romance scams having the most reported dollars lost. A recent FTC data spotlight showed that consumers reported losing $547 million to romance scams in 2021 alone. The agencies’ initiative provides guidance on how to recognize scams before individuals give away any money or assets, as well as measures to take if they have been victimized.
House passes America COMPETES Act
On February 4, the U.S. House passed, by a vote of 222-210, the “America Creating Opportunities for Manufacturing Pre-Eminence in Technology and Economic Strength (COMPETES) Act” H.R. 4521, which aims to strengthen the competitiveness of the U.S. economy and U.S. businesses, and counters anti-competitive actions taken by the People’s Republic of China. The COMPETES Act includes provisions affecting financial services, such as:
- U.S. Policy on World Bank Group and Asian Development Bank Loans to China. This provision would, among other things, direct Treasury to vote against any loans to China from the World Bank or Asian Development Bank under certain circumstances, and allow borrowing countries to seek restructuring of China loans in official multilateral debt relief forums.
- Prohibitions or Conditions on Certain Transmittal of Funds. This provision would streamline the process by which special measures may be introduced and modernizes the authorities granted to the FinCEN by permitting the agency to pursue bad actors.
- Study on Chinese Support for Afghan Illicit Finance. This provision would direct Treasury’s Office of Terrorism and Financial Intelligence to brief Congress on the identification and analysis of Chinese economic, commercial, and financial connections to Afghanistan, to include illicit financial networks involved in narcotics trafficking, illicit financial transactions, official corruption, natural resources exploitation, and terrorist networks.
- Support for Debt Relief for Developing Countries. This provision would direct the Treasury secretary and U.S. representatives at the International Monetary Fund and the World Bank to engage with international financial institutions, official creditors, and relevant commercial creditor groups to advocate for the effective implementation of the G-20’s Common Framework.
Judgments reached in SEC’s first crowdfunding regulation enforcement action
On January 28, the U.S. District Court for the Eastern District of Michigan issued judgments (see here and here) against a real estate company and its CEO in the SEC’s first crowdfunding regulation enforcement action. As previously covered by InfoBytes, the SEC filed a complaint last September alleging that several entities and related individuals participated in a fraudulent scheme to sell nearly $2 million of unregistered securities through two crowdfunding offerings. The complaint alleged that two of the entities issued securities without registering with the SEC, while their principals diverted investor funds for personal use rather than using the funds for the disclosed purposes. Without admitting or denying the SEC’s allegations, the real estate company and the CEO consented to be permanently enjoined from violating certain securities laws. The CEO also agreed to a prohibition on “acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)].” The judgments decreed that, upon motion of the SEC, the court will decide whether disgorgement and/or civil money penalties are appropriate.
Treasury says banks need to collaborate to combat corruption
On February 3, U.S. Treasury Department Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg spoke before the Union of Arab Banks Conference to discuss the importance of working with member institutions in the Middle East and Africa to fight corruption. While noting that countering terrorist financing remains a crucial priority, Rosenberg pointed out that terrorist financing is not the only threat affecting the financial system. “In countries across the region, we have seen trends in which some politically exposed persons have sought to hide their ill-gotten gains through transfers to secondary jurisdictions under both themselves as well as family members’ and associates’ names,” Rosenberg said. “This is something that banks have a responsibility, indeed an obligation, to identify and halt,” she added, emphasizing that “[w]e will all be stronger, more secure, if every bank represented here builds and maintains strong compliance programs” designed to “identify and disrupt the onboarding of customers and the processing of transactions involv[ing] bribes or expropriated government funds.” Rosenberg encouraged the banks to share information on corruption with each other and to ensure enhanced due diligence, especially when dealing with politically exposed persons. “Nearly every act of corruption flows through the formal financial system, the system we are all a part of, which means all of us have the ability—and the responsibility—to stop it,” Rosenberg noted, highlighting the “global corruption boom” in recent decades resulting from individuals seeking to conceal assets and ownerships though shell companies or transactions involving art, real estate, and cryptocurrencies. Rosenberg also informed the banks that as part of the Biden Administration anti-corruption strategy, Treasury “will soon require many U.S. and foreign companies to report their true beneficial owners and to update that information when those beneficial owners change.”
OCC hosts virtual Innovation Hours
On February 3, the OCC announced it will host virtual Innovation Office Hours on March 16 through 17, to promote responsible innovation in the federal banking system. As previously covered by InfoBytes, the OCC established the Office of Innovation in 2016 to implement certain aspects of the OCC’s responsible innovation framework, including, among other things: (i) creating an outreach and technical assistance program; (ii) conducting awareness and training activities for OCC staff, such as implementing an internal web page that provides OCC staff a ‘one-stop-shop’ to access information on industry trends and innovative products, services, and processes; and (iii) encouraging coordination and facilitation among the regulatory community and industry stakeholders. According to the OCC’s recent announcement, office hours are one-on-one meetings with representatives from the OCC Office of Innovation to discuss fintech, new products or services, partnering with a bank or fintech company, or other matters. Each meeting will last no longer than one hour. Interested parties should request a virtual office hours session by February 18.