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Financial Services Law Insights and Observations

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  • House approves resolution to reverse OCC’s CRA rule

    Federal Issues

    On June 29, the U.S. House of Representatives approved resolution H.J. 90, along party lines, which would reverse the OCC’s final rule (covered by a Buckley Special Alert) to modernize the regulatory framework implementing the Community Reinvestment Act (CRA). As previously covered by InfoBytes, Chair of the House Financial Services Committee, Maxine Waters (D-CA) and Chair of the Subcommittee on Consumer Protection and Financial Institutions, Gregory Meeks (D-NY) introduced the resolution, with Waters criticizing the OCC’s decision to move forward with the rule “despite the Federal Reserve and the FDIC—the other regulatory agencies responsible for enforcing CRA—declining to join in the rulemaking.” While the resolution is unlikely to pass the Senate, the White House released a Statement of Administration Policy, which opposes the resolution and states that the President’s advisors will recommend he veto the action.

    Federal Issues House Financial Services Committee CRA Congressional Review Act OCC Agency Rule-Making & Guidance U.S. House White House

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  • CFPB announces e-disclosures and HMDA platform Tech Sprints

    Federal Issues

    On June 29, the CFPB announced two Tech Sprints that will “bring together regulators, technologists, software providers, consumer groups, and financial institutions to develop technological solutions to shared compliance challenges.” As previously covered by InfoBytes, the CFPB announced, in September 2019, its intention to use Tech Sprints—which had been used by the U.K.’s Financial Conduct Authority seven times since 2016 and resulted in a pilot project on digital regulatory reporting—to encourage regulatory innovation and requested comments from stakeholders on the plan.

    • E-Disclosures, October 5-9, 2020. This Tech Sprint will have participants “improve upon existing consumer disclosures” by “design[ing] innovative electronic methods for informing consumers about adverse credit actions, including from the use of algorithms.” The Bureau notes that many disclosure laws “were written in a paper-based age” and using digital technology for disclosures may “enable greater consumer engagement and understanding.”
    • HMDA platform and submission, March 22-26, 2021. This Tech Sprint will encourage participants to “develop new tools to address compliance challenges and improve the filing process” on the HMDA platform (operated by the Bureau on behalf of the Federal Financial Institutions Examination Council). Additionally, participants “may work to further develop the HMDA Platform’s Application Programming Interfaces to increase efficiency and lower cost.”

    Separately, the FDIC also announced the start of a prototyping competition intended “to help develop a new and innovative approach to financial reporting, particularly for community banks.” The competition will involve 20 technology firms from across the country that will propose solutions for the FDIC’s consideration to make financial reporting “seamless and less burdensome for banks.”

    Federal Issues CFPB Fintech HMDA Disclosures

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  • ARRC releases updated fallback language in the event of LIBOR transition

    Federal Issues

    On June 30, the Alternative Reference Rates Committee (ARRC) released updated recommended fallback language for U.S. dollar LIBOR denominated syndicated loans and new variable rate private student loans. ARRC noted that the private student loan language is intended to minimize risk and market disruption in the event of LIBOR’s anticipated cessation at the end of 2021. ARRC also released conventions for how market participants can voluntarily use the Secured Overnight Financing Rate (SOFR) in new student loan products. With respect to syndicated loans, ARRC noted that the updated fallback language recommends “the use of simple daily SOFR in arrears,” which, among other things, includes “a more permissive early opt-in trigger” to “allow parties involved in the loan to switch over to an alternative rate like SOFR before LIBOR is officially discontinued or determined to be unrepresentative.” Additionally, ARRC announced new details regarding its recommendation of spread adjustments for cash products that reference LIBOR. Market participants may voluntarily use ARRC’s recommended methodology to produce spread adjustments “where a spread-adjusted [SOFR] can be selected as a fallback.”

    Federal Issues ARRC LIBOR SOFR Student Lending Lending

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  • Fed issues enforcement action for flood insurance violations

    Federal Issues

    On June 30, the Federal Reserve Board announced an enforcement action against a Virginia-based bank for alleged violations of the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses an $8,500 penalty against the bank for an alleged pattern or practice of violations of Regulation H, but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.

    Federal Issues Federal Reserve Enforcement Flood Insurance National Flood Insurance Act

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  • Congress votes to extend PPP until August 8

    Federal Issues

    On July 1, the U.S. House of Representatives unanimously passed S.4116, following the Senate’s passage the day before. The legislation extends authorization for the Small Business Administration’s Paycheck Protection Program (PPP) through August 8. Additionally, the measure separates the amount authorized for the SBA’s standard 7(a) small business lending program from the PPP’s authorized commitment of $659 billion.

    Federal Issues Covid-19 SBA Small Business Lending Federal Legislation

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  • FHA issues mortgagee letter extending guidance on employment reverification and appraisals

    Federal Issues

    On June 29, the FHA issued Mortgagee Letter 2020-20, which re-extends the effective date of Mortgagee Letter 2020-05, previously covered here and here. The re-extension of appraisal guidance in Mortgagee letter 2020-05 and of re-verification of employment guidance in Mortgagee Letter 2020-05 are effective immediately for cases closed on or before August 31, 2020.

    Federal Issues Covid-19 FHA Appraisal Mortgages

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  • FINRA updates guidance on fingerprinting requirements

    Federal Issues

    FINRA has updated its frequently asked questions guidance regarding relief from certain fingerprinting requirements (previously covered here). The guidance notes that, on June 27, the SEC extended its order providing temporary relief from fingerprinting requirements of the Securities Exchange Act Rule 17f-2 for FINRA members until a date to be specified in a public notice from SEC staff. Because FINRA already provided notification to the SEC in March on behalf of its members, their employees, and associated persons, such individuals may continue to rely on the commissioner’s order and FINRA’s notification. However, for an individual seeking registration pursuant to the submission of a Form U4, a FINRA member firm seeking to rely on temporary exemptive relief for registered persons must comply with FINRA’s guidance with respect to FINRA Rule 1010.

    Federal Issues Covid-19 FINRA Fintech SEC

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  • OCC highlights key risks for federal banking system, says compliance risk elevated due to Covid-19

    Federal Issues

    On June 29, the OCC released its Semiannual Risk Perspective for Spring 2020, which reports on key risk areas that pose a threat to the safety and soundness of national banks and federal savings associations. In particular, the OCC focused this report on the financial impacts of the Covid-19 pandemic on the federal banking industry, emphasizing that weak economic conditions stemming from the shutdown will stress financial performances in 2020, and that banks should monitor elevated compliance risks that may occur as a result of their responses to the pandemic, including participating in the Paycheck Protection Program as well as forbearance and deferred payment programs. The report highlighted that the surge in consumer demands, government programs, and the modifications to operations due to remote work and the “short timelines for implementing changes placed additional strains on banks already operating in a stressed environment.” However, the report noted that, “[s]ome banks are leveraging innovative technologies and third parties, including fintech firms, to help manage these challenges,” and that “[b]ank risk management programs should maintain effective controls for third-party due diligence and monitoring and other oversight processes, operational errors, heightened cyber security risks, and potential fraud related to stimulus programs.” The report highlighted several areas of concern for banks, including (i) credit risk increases; (ii) interest rate risk, including risks related to the LIBOR cessation; (iii) operational risks related to banks’ Covid-19 response; (iv) heightened cyber risks; and (v) compliance risks related to Bank Secrecy Act/anti-money laundering laws, consumer compliance, and fair lending.

    Federal Issues OCC Covid-19 Risk Management Fintech Third-Party SBA Compliance

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  • Fannie Mae announces updated protections for renters and multifamily property owners impacted by Covid-19

    Federal Issues

    On June 29, Fannie Mae announced updated protections for renters in multifamily units and multifamily property owners impacted by Covid-19. Fannie Mae’s Delegated Underwriting and Servicing lenders have the authority to extend existing forbearances by three months for multifamily property owners, for a total period of up to six months. If extended, at the conclusion of the forbearance period, the borrower may qualify for up to 24 months to repay the missed payments. For Fannie Mae-financed multifamily properties with a new or extended forbearance, the borrower is required to provide certain tenant protections during the repayment period, including allowing the tenant flexibility to repay back rent over time and giving the tenant at least a 30-day notice to vacate.

    Federal Issues Covid-19 Fannie Mae Mortgages Forbearance

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  • FFIEC releases 2019 HMDA data

    Federal Issues

    On June 24, the Federal Financial Institutions Examinations Council (FFIEC) released the 2019 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions at 5,508 covered institutions. Available data products include: (i) the HMDA Dynamic National Loan-Level Dataset, which is updated on a weekly basis to reflect late submissions and resubmissions (2019 data is not available at the time of publication); (ii) the Aggregate and Disclosure Reports, which provides summaries on individual institutions and geographies; (iii) the HMDA Data Browser where users can customize tables and download datasets for further analysis; and (iv) modified Loan/Application Registers for filers of 2019 HMDA data.

    The data currently includes “a total of 48 data points providing information about the applicants, the property securing the loan or proposed to secure the loan in the case of non-originated applications, the transaction, and identifiers.” The 2019 data include information on 15.1 million home loan applications, 9.3 million of which resulted in loan originations, and 2.3 million purchased loans. Among the observations from the data relative to the prior year: (i) the number of reporting institutions declined by roughly 3 percent; (ii) closed-end loan applications increased by 21 percent, while open-end line of credit applications decreased by 9 percent; (iii) the total number of originated closed-end loans increased by roughly 26 percent; (iv) refinance originations for 1-4 family properties increased by 78 percent; (v) the share of home purchase loans for certain first lien properties to low- and moderate-income borrowers increased slightly from 28.1 percent to 28.6 percent, whereas refinance loans to these borrowers decreased from 30 percent to 23.8 percent; and (vi) nondepository, independent mortgage companies accounted for 56.4 percent of first-lien owner-occupied home purchase loans (down from 57.2 percent in 2018).

    Federal Issues FFIEC HMDA Mortgages

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