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Financial Services Law Insights and Observations

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  • CFPB releases HMDA 2021 reference chart

    Agency Rule-Making & Guidance

    On October 16, the CFPB published a new reference chart titled “Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart for Data Collected in 2021.” The chart is designed to be used as a reference tool for required data points to be collected, recorded, and reported under Regulation C, as amended by HMDA rules issued October 15, 2015, August 24, 2017, October 10, 2019, and April 16, 2020 (most recently covered by InfoBytes here). The Bureau noted that this chart does not provide HMDA loan/application register data fields or enumerations.

    Agency Rule-Making & Guidance CFPB HMDA FFIEC

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  • FFIEC adopts revised interagency examination procedures for TILA

    Agency Rule-Making & Guidance

    On September 30, On September 30, the OCC issued Bulletin 2020-84 announcing the Task Force on Consumer Compliance of the Federal Financial Institutions Examination Council’s adoption of revised interagency examination procedures for TILA, as implemented by Regulation Z. The updated interagency procedures reflect changes made to Regulation Z that relate to the TILA-RESPA Integrated Mortgage Disclosure Rule. Updates also reflect amendments to TILA that relate to the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), such as (i) special provisions relating to high-cost loans, appraisals, and student lending; (ii) “an additional type of qualified mortgage for insured depository institutions with less than $10 billion in assets”; and (iii) “an additional type of escrow exemption for insured depository institutions with less than $10 billion in assets.” The bulletin rescinds the “Truth in Lending Act” booklet of the Comptroller’s Handbook, as well as OCC Bulletin 2018-31, “Truth in Lending Act: Revised Comptroller's Handbook Booklet and Rescissions.” Going forward, examiners should only rely on the revised interagency examination procedures.

    The CFPB also updated its TILA examination procedures to reflect 2017 and 2018 amendments to Regulation Z and EGRRCPA on September 29.

    Agency Rule-Making & Guidance TILA CFPB OCC FFIEC Mortgages Disclosures

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  • CFPB releases more 2019 HMDA data

    Federal Issues

    On August 27, the CFPB issued a new analysis of the 2019 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions, which follows an initial release from the CFPB and the Federal Financial Institutions Examinations Council (FFIEC) earlier in June (covered by InfoBytes here). The newly released report groups the new and revised HMDA data points into seven major categories: (i) open-end and reverse mortgage flags; (ii) expanded or revised demographic information; (iii) property type; (iv) loan purpose and characteristics; (v) applicant/borrower characteristics and property characteristics; (vi) pricing outcomes and components; and (vii) miscellaneous data points. The report breaks down the data points in each category by providing a definition and basic reporting requirements, as well as a statistical overview of the reported information.

    Federal Issues CFPB HMDA FFIEC Mortgages

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  • FFIEC discusses additional Covid-19 loan accommodations

    Federal Issues

    On August 3, the member agencies of the Federal Financial Institutions Examinations Council (FFIEC) issued a joint statement on managing loan accommodations granted to borrowers pursuant to federal, state, and local law to address Covid-19 related hardships. Specifically, the statement provides risk management and consumer protection principles to financial institutions working with borrowers that are near the end of their initial loan accommodation period. Among other things, the statement outlines:

    • Risk Management Practices. The statement encourages financial institutions to institute sound credit risk management practices following an accommodation period, such as “reassess[ing] risk ratings for each loan based on a borrower’s current debt level, current financial condition, repayment ability, and collateral.” Additionally, the statement encourages institutions to provide “clear, accurate, and timely information to borrowers and guarantors regarding the accommodation” being granted.
    • Sustainable Accommodations. The statement notes that the Covid-19 pandemic may have “long-term adverse impact[s] on borrower’s future earnings” and financial institutions should consider additional accommodation options to mitigate losses for the borrower and institutions by assessing “each loan based upon the fundamental risk characteristics affecting the collectability of that particular credit.”
    • Consumer Protection. The statement encourages financial institutions to provide consumers with options to support repayment at the end of accommodations to avoid delinquencies and to consider offering credit product term changes to “support sustainable and affordable payments for the long term.”
    • Accounting and Regulatory Reporting. The statement emphasizes that financial institutions should consider the effects of the Covid-19 pandemic in its allowance for loan and lease losses, or credit losses, estimation processes, consistent with generally accepted accounting principles.
    • Internal Control Systems. The statement notes that internal control functions for the end of initial accommodation periods and for additional accommodations typically “include appropriate targeted testing of the process for managing each stage of the accommodation.” Additionally, the statement reminds financial institutions of their responsibility for ensuring service providers in charge of these functions act consistently with the institution’s policies and all applicable laws and regulations.

    Federal Issues Covid-19 Federal Reserve OCC FDIC NCUA Consumer Finance Risk Management Consumer Protection FFIEC

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  • FFIEC addresses LIBOR transition

    Federal Issues

    On July 1, the member agencies of the Federal Financial Institutions Examinations Council (FFIEC) issued a joint statement highlighting several risks that will result from the anticipated cessation of LIBOR at the end of 2021. Institutions with LIBOR exposures should put in place appropriate risk management processes “commensurate with the size and complexity of their exposures” to identify and mitigate financial, legal, operational, and consumer protection risks related to the transition, the FFIEC warned. Among other things, the FFIEC noted that as part of the agencies’ examination activities, “supervisory staff will ask institutions about their planning for the LIBOR transition including the identification of exposures, efforts to include fallback language or use alternative reference rates in new contracts, operational preparedness, and consumer protection considerations.” Additionally, agencies will increase their supervisory focus on evaluating institutions’ preparedness for LIBOR’s discontinuation during 2020 and 2021, “particularly for institutions with significant LIBOR exposure or less-developed transition processes.” Key recommendations include (i) identifying and quantifying LIBOR exposure across all products; (ii) discontinuing the origination or purchase of LIBOR-indexed instruments to limit exposure; (iii) creating transition plans for consumer financial products in order to develop clear, timely consumer disclosures regarding any changes in terms; and (iv) developing strategic transition plans with milestones and key completion dates addressing areas such as third-party risk management.

    The OCC also issued a bulletin expanding on the joint statement and providing guidance for regulated banks.

    Federal Issues FFIEC LIBOR OCC Risk Management

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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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  • FFIEC discusses cloud computing risk management practices

    Agency Rule-Making & Guidance

    On April 30, the FFIEC released a statement on risk management principles for cloud computing security in the financial services sector. The FFIEC emphasizes that the statement does not contain new regulatory expectations, but rather highlights examples of risk management practices for the safe and sound use of cloud computing services, along with safeguards for protecting customers’ sensitive information from risks that may cause potential consumer harm. Among other things, the statement stresses that management should understand the division of responsibilities between a financial institution and a cloud service provider in order to assess and implement appropriate controls over operations to prevent the increased risk of operational failures or security breaches. The FFIEC also addresses the importance of protecting customer-sensitive information from unsafe or unsound practices by implementing “an effective risk management process for cloud computing commensurate with the level of risk and complexity of the financial institution’s operations residing in a cloud computing environment.” The statement provides a list of government and industry resources and references to assist financial institutions when using cloud computing services.

    Agency Rule-Making & Guidance FFIEC Privacy/Cyber Risk & Data Security Risk Management Covid-19

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  • FFIEC releases APR, APY computational tools

    Agency Rule-Making & Guidance

    On April 16, the FFIEC, on behalf of its member agencies, announced the release of two computational tools for annual percentage rates (APR) and annual percentage yields (APY). These web-based tools are intended to assist financial institutions when complying with consumer protection laws and regulations.

    The APR Computational Tool is intended to help examiners and financial institutions verify finance charges and APRs included on consumer loan disclosures subject to TILA and Regulation Z, including calculations “related to unsecured and secured installment and construction loans, including real estate-secured loans.” The tool can also be used to verify military annual percentage rates for loans subject to the Military Lending Act. The APY Computational Tool is designed to support the verification of APYs on consumer deposit account disclosures, including advertisements and periodic statements, subject to the Truth in Savings Act and Regulation DD. See FDIC FIL-45-2020 and OCC Bulletin 2020-40 regarding the release of these tools.

    Agency Rule-Making & Guidance FFIEC APR APY Military Lending Act TILA Regulation Z Truth in Savings Act Regulation DD FDIC OCC

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  • FFIEC updates BSA/AML examination manual

    Agency Rule-Making & Guidance

    On April 15, the FFIEC published the updated Bank Secrecy Act/Anti-Money Laundering Examination Manual (Manual). According to an interagency statement, revisions were made throughout the updated sections to incorporate regulatory changes since the Manual was last updated in 2014 and “to ensure language clearly distinguishes between mandatory regulatory requirements and supervisory expectations.” The revisions can be identified by a 2020 date in the table of contents and include:

    • Examiners should tailor Bank Secrecy Act/anti-money laundering (BSA/AML) examinations to a bank’s risk profile.
    • Examiners should assess the adequacy of an institution’s BSA/AML compliance program and risk assessment processes. This includes identifying specific risk categories unique to a bank and analyzing the identified information to asses risks within these categories. The Manual notes, however, that there is no particular format or method for a bank to use for its risk assessment process, and reiterates that risk categories may vary based on a bank’s size, complexity, and organizational structure and that “updates may occur as necessary to align the risk assessment with a significant change in a bank’s risk profile.”
    • Examiners should be mindful that banks have flexibility when designing a BSA/AML compliance program and that “minor weaknesses, deficiencies, and technical violations alone are not indicative of an inadequate program.”

    The agencies acknowledge that they “are aware of the uncertainty faced by financial institutions during this unprecedented time” and emphasize that the updated Manual, “which supports tailored examination work, has been in process for an extended period and should not be interpreted as new instructions or as a new or increased focus.” Additional updates to the remaining Manual sections will be released in phases at a later date.

    Agency Rule-Making & Guidance Financial Crimes Bank Secrecy Act Anti-Money Laundering FFIEC Of Interest to Non-US Persons

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  • FFIEC releases updated instructions for call reports and FFIEC 101

    Federal Issues

    On April 9, the FFIEC released two depository institution reports—Capital-related Revisions to the Consolidated Reports of Condition and Income (Call Report) and the FFIEC 101 Report, and Consolidated Reports of Condition and Income for First Quarter 2020. The reports reiterate the agencies’ March 25 statement (covered by InfoBytes here) that March 31, 2020 Call Reports submitted after the filing deadline will not result in agency action, if “the report is submitted within 30 days of the official filing date.” Additionally, they explain that Call Report instructions were impacted by three interim final rules (IFRs) the agencies recently released due to issues caused by Covid-19. The regulatory capital IFRs cover: (i) the Money Market Mutual Fund Liquidity Facility (MMLF) IFR (covered here); (ii) the Standardized Approach for Calculating the Exposure Amount of Derivative Contracts (SA-CCR rule) IFR (covered here); and (iii) the transition of Current Expected Credit Losses (CECL) IFR (covered here). A notice regarding eligible retained income, along with the three IFRs, not only affected the instructions for March 31, 2020 Call Reports, but also impacted calculation instructions for regulatory capital on Schedule RC-R, and FFIEC 101 for regulatory capital reporting for institutions that use the advanced capital adequacy framework. The FFIEC’s updated instructions for the first quarter call report may be found here, and the updated instructions for the first quarter FFIEC 101 may be found here.

    CARES Act information was also added to the appendix of the Quarterly Call Report Supplemental Instructions to include section 2302, “Modifications for Net Operating Losses,” section 4013, “Temporary Relief from Troubled Debt Restructurings,” and section 4014, “Optional Temporary Relief from Current Expected Credit Losses.”

    Federal Issues Federal Reserve FDIC OCC CARES Act Call Report Agency Rule-Making & Guidance FFIEC Covid-19

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