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CFPB updates HMDA webinars
On August 29, the CFPB updated two HMDA webinars to reflect amendments made by the Economic Growth, Regulatory Relief, and Consumer Protection Act, and the interpretive and procedural rule issued by the CFPB in August 2018. (Previous InfoBytes coverage on the amendments and the interpretive and procedural rule available here.) The Bureau also released a new HMDA webinar to provide an overview “on reporting certain application or covered loan features, pricing information, features of the property, and transaction indicators.”
CFPB updates auto finance section of the Supervision and Examinations Manual
On August 28, the CFPB updated its examination procedures for automobile finance in its Supervision and Examinations Manual. The procedures are comprised of seven modules and each examination will cover one or more modules. Prior to using the procedures, examiners will complete a risk assessment and examination scope memorandum, which will assist in determining which of the seven modules the exam will cover: (i) company business model; (ii) advertising and marketing; (iii) application and origination; (iv) payment processing and account maintenance; (v) collections, debt restructuring, repossession, and accounts in bankruptcy; (vi) credit reporting, information sharing, and privacy; and (vii) examiner conclusions and wrap-up.
FFIEC urges standardized cybersecurity approach
On August 28, the FFIEC issued a press release emphasizing the benefits of implementing a standardized cybersecurity preparedness approach. The FFIEC noted that firms who adopt a standardized approach are “better able to track their progress over time, and share information and best practices with other financial institutions and with regulators.” Highlighted are several standardized tools for financial institutions to use when assessing and improving their level of cybersecurity preparedness, including the FFIEC Cybersecurity Assessment Tool, the Financial Services Sector Coordinating Council Cybersecurity Profile, the National Institute of Standards and Technology Cybersecurity Framework, and the Center for Internet Security Critical Security Controls.
FDIC adds to risk management exam policies
On August 27, the FDIC issued Financial Institution Letter FIL-47-2019 announcing an update to its Risk Management Manual of Examination Policies to incorporate a new section titled “Risk-Focused, Forward-Looking Safety and Soundness Supervision.” According to the letter, the new section covers the FDIC’s “long-standing examination philosophy” that the focus of supervision should be on areas that present the greatest risk. The letter notes that the risk-focused approach is “forward-looking,” with the intent to look beyond the condition of an institution at a specific point in time to just how well the institution will be able to respond to a changing market and assist examiners in identifying and correcting “weaknesses in conditions or practices before they impact an institution’s financial condition.”
Fed updates private flood insurance interagency examination procedures
On August 22, the Federal Reserve Board (Fed) issued CA 19-10, which provides updates to the interagency examination procedures for the Flood Disaster Protection Act (FDPA). The updated guidance is applicable to all Fed-supervised institutions with total consolidated assets of $10 billion or less, and supersedes CA 16-1’s FDPA examination procedures. Specifically, the updated procedures address new sections from a final interagency rule issued in February concerning the acceptability of private flood insurance (previously covered by InfoBytes here). Additionally, the updated procedures provide guidelines for lending institutions when considering a mutual aid society flood protection plan. The Fed notes that “state member banks may not typically analyze mutual aid society plans in the course of their lending activities,” and reminds lenders that acceptance standards for mutual aid society plans will vary depending on the state.
FDIC to ease deposit-rate restrictions on less than well capitalized institutions
On August 20, the FDIC announced a notice of proposed rulemaking (NPR) concerning interest rate restrictions applicable to less than well capitalized insured depository institutions. The NPR provides additional flexibility for these institutions to compete for funds and amends the methodology for calculating the national rate, national rate cap, and local rate cap for specific deposit products. According to the FDIC, the NPR is intended to “provide a more balanced, reflective, and dynamic national rate cap.” Specifically, under the NPR, the “national rate would be the weighted average of rates paid by all insured depository institutions on a given deposit product, for which data are available, where the weights are each institution's market share of domestic deposits,” while the national rate cap for particular products will be set at the higher of either (i) the 95th percentile of rates paid by insured depository institutions weighted by each institution’s share of total domestic deposits; or (ii) the proposed national rate plus 75 basis points. The NPR also will “simplify the current local rate cap calculation and process by allowing less than well capitalized institutions to offer up to 90 percent of the highest rate paid on a particular deposit product in the institution’s local market area.”
Additionally, the FDIC seeks comments on alternative approaches to setting the national rate caps. According to the FDIC, “[s]etting the national rate cap too low could prohibit less than well capitalized banks from fairly competing for deposits and create an unintentional liquidity strain on those banks competing in national markets. . . . Preventing such institutions from being competitive for deposits, when they are most in need of predictable liquidity, can create severe funding problems.”
Comments on the NPR are due 60 days after publication in the Federal Register.
OCC finalizes assessment fee refunds
On August 21, the OCC published in the Federal Register a final rule providing partial assessment refunds to banks under OCC jurisdiction that exit the OCC’s jurisdiction within the prescribed timeframe. As previously covered by InfoBytes, in March, the OCC proposed to maintain semiannual assessment fee payments, but allow for partial refunds equal to the prospective half of the assessment for banks that leave the OCC’s jurisdiction between the date of the applicable Call Report and the date of collection. The final rule was adopted without substantive changes to the proposed rule and is effective as of September 20.
NCUA allows credit unions to serve hemp businesses
On August 19, the NCUA released interim guidance allowing federally insured credit unions to service hemp businesses. The guidance notes that, as of December 20, hemp is no longer a controlled substance at the federal level—the Agriculture Improvement Act of 2018 (2018 Farm Bill) removed hemp from Schedule I of the Controlled Substances Act. However, hemp may not be produced lawfully under federal law, beyond a 2014 pilot program, until the USDA promulgates regulations and guidelines to implement the hemp production provisions of the 2018 Farm Bill. The guidance instructs credit unions to be aware of federal, state, and tribal laws and regulations that apply to any hemp-related businesses they may service and to have Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance programs equal to the level of complexity and risks involved. The guidance emphasizes that lending to lawfully operating hemp-related businesses is permissible, but that the lending must be done in accordance with NCUA’s regulations for lending, and appropriate underwriting standards must be considered. NCUA notes that the guidance will be updated once the USDA regulations are finalized.
California DBO releases draft regulations for commercial financing disclosures
In July, the California Department of Business Oversight (DBO) issued a request for comment on draft of regulations implementing the state’s new law on commercial financing disclosures. As previously covered by InfoBytes, in September 2018, the California governor signed SB 1235, which requires non-bank lenders and other finance companies to provide written consumer-style disclosures for certain commercial transactions, including small business loans and merchant cash advances. Most notably, the act requires financing entities subject to the law to disclose in each commercial financing transaction—defined as an “accounts receivable purchase transaction, including factoring, asset-based lending transaction, commercial loan, commercial open-end credit plan, or lease financing transaction intended by the recipient for use primarily for other than personal, family, or household purposes”—the “total cost of the financing expressed as an annualized rate” in a form to be prescribed by the DBO.
The draft regulation provides general format and content requirements for each disclosure, as well as specific requirements for each type of covered transaction. In addition to the detailed information in the draft regulation, the DBO has released model disclosure forms for the six financing types, (i) closed-end transactions; (ii) open-ended credit plans; (iii) general factoring; (iv) sales-based financing; (v) lease financing; and (vi) asset-based lending. Additionally, the draft regulation uses an annual percentage rate (APR) as the annualized rate disclosure (as opposed to the annualized cost of capital, which was considered in the December 2018 request for comments, covered by InfoBytes here). Moreover, the draft regulation provides additional information for calculating the APR for factoring transactions as well as calculating the estimated APR for sales-based financing transactions.
Comments on the draft regulations are due by September 9.
HUD revises proposed FHA mortgage lender certification
On August 14, HUD published revisions in the Federal Register to the Federal Housing Administration’s (FHA) lender certification requirements originally issued in May. (Previously covered by InfoBytes here.) In response to comments received on its initial proposal, HUD released a proposed streamlined FHA Annual Lender Certification, which removes a broad statement regarding lenders certifying compliance with all HUD requirements in order to maintain FHA approval. Commenters generally recommended HUD: “(1) Rescind the annual certification statements since the National Housing Act does not require certification of compliance with FHA eligibility requirements or completion of an annual certification; or (2) revise the annual certification statements to a general acknowledgement of the existence of policies and procedures that are reasonably designed to ensure material compliance.” Comments are due September 13.