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OCC Issues Updated List of Permissible Activities for Banks and Federal Savings Associations
On October 13, the OCC issued an update to its list of permissible activities for national banks, federal savings associations, and operating subsidiaries that are engaged in “the business of banking.” Activities Permissible for National Banks and Federal Savings Associations, Cumulative updates the list of permissible activities for banks, reflects precedent not previously included or issued since the last edition, streamlines certain entries for readability, and includes certain OCC interpretive letters and corporate decisions issued after the Dodd-Frank Act transferred responsibility from the Office of Thrift Supervision to the OCC. While the update consolidates existing guidance, the OCC stated that “OCC precedent remains applicable until rescinded, superseded, or revised,” and banks should not rely solely on the update for guidance but “should review the authorities cited and other relevant precedent before engaging in an activity.” Furthermore, according to an OCC-issued press release, “[i]ndividual OCC-regulated institutions may be precluded from engaging in otherwise permissible activities based on safety and soundness or other supervisory reasons.”
OCC Policy Outlines CRA Evaluation Process and Impact of Discriminatory Practices
On October 12, the OCC issued OCC Bulletin 2017-40 announcing the release of its Policies and Procedures Manual 5000-43 (PPM 5000-43), which outlines the OCC’s policy and framework for how the agency determines Community Reinvestment Act (CRA) ratings when there’s evidence of discriminatory or other illegal credit practices directly related to a supervised financial institution’s CRA lending activities. First, PPM 5000-43 requires a “logical nexus” between the assigned ratings and the evidence of discriminatory or other illegal practices to ensure that the CRA evaluation “does not penalize a bank for compliance deficiencies or illegal credit practices unrelated to its CRA lending activities.” Second, the OCC examiners will give “full consideration” to any remedial actions the institution has already taken to address such discriminatory or other illegal credit practices to ensure that the CRA rating “does not penalize a bank for compliance deficiencies or illegal credit practices that have been, or are substantially being, addressed by the bank.”
OCC Acting Comptroller Shares Thoughts on Opportunities to Reduce Regulatory Burdens
On October 5, OCC Acting Comptroller of the Currency Keith Noreika spoke before the 2017 Midsize Bank Coalition of America Chief Risk Officer Meeting to discuss opportunities for regulatory reform.
According to Noreika, one area of concern relates to the adverse effect arbitrary asset thresholds pose to the annual stress test requirements required under the Dodd-Frank Act because the burden “is not commensurate with the systemic risks presented by an institution.” Given the amount of diversity in the business models of banks who have around $10 billion in assets, “regulators need the ability and authority to tailor their supervision to the unique risks presented by individual banks.” Noreika suggested an approach that would give federal banking agencies the authority to tailor statutory stress testing requirements without an asset threshold, thus reducing the risk of banks growing beyond the threshold to offset increased costs or staying below the threshold to avoid unwelcome scrutiny.
Noreika also urged for interagency harmonization of guidance and policies to avoid conflicting regulatory guidance when addressing cybersecurity issues.
Additionally, Noreika addressed the CFPB’s arbitration rule as an example of the need to work “to ensure regulation is balanced and appropriate by speaking up when we see proposed rules that may adversely affect the business of banking, have systemic effects, or result in perverse unintended consequences.” Noreika stated that prior to the publication of the final arbitration rule, the OCC requested access to the data the CFPB used to develop and support the rule in order to conduct an independent review. However, it was not until after the rule was published that the CFPB made the data available. According to OCC findings, the rule will adversely impact consumers by increasing costs. Community banks, Noreika noted, will also bear the burden of increased legal costs from defending lawsuits.
Finally, Noreika commented that banks continue to face challenges when trying to implement Bank Secrecy Act compliance programs and adapt to new requirements under TRID, HMDA, and the Military Lending Act.
Fannie Mae and Freddie Mac Update Servicing Guides
On October 11, Fannie Mae and Freddie Mac announced updates to their respective Servicing Guides.
Fannie Mae. Servicing Guide Announcement SVC-2017-09 highlights recent updates to the Servicing Guide, including topics related to the management of electronic transactions such as: (i) confirmation that sellers and servicers may originate, service, and modify loans using electronic records (electronic promissory notes require special approval); (ii) streamlined language clarifying requirements for the accuracy of information in electronic records; (iii) specification that paper records are not required for recorded mortgages and deeds of trust; (iv) clarification that all electronic signatures must comply with ESIGN, UETA, and other applicable laws; and (v) the removal of requirements for document custodians from the Servicing Guide that were duplicative of requirements set forth in Fannie Mae’s Requirements for Document Custodians. Additional updates address changes made to the reimbursement of foreclosure sale publication costs for costs incurred on or after January 1, 2018, and specific guidance for servicers pertaining to mortgage liens (to be implemented by December 1, 2017).
Freddie Mac. Freddie Mac issued Bulletin 2017-22 announcing servicing updates concerning (i) modifications to imminent default evaluation and process requirements (jointly developed with Fannie Mae) that will take effect July 1, 2018; and (ii) provisions under the Servicemembers Civil Relief Act (SCRA) related to compliance time frames for servicers when responding to, or submitting requests for, interest rate reductions, along with updates that take effect February 1, 2018, concerning Guide Exhibit 71 used by servicers to report eligible SCRA interest rate subsidized loans. The updates also eliminate the manual property condition certificate process and modify time frame requirements for cancelling property insurance policies on real estate owned properties.
CFPB Publishes Updated TRID Small Entity Compliance Guide; ABA Submits Comments on CFPB’s Proposal to Fix TRID’s “Black Hole” Issue
On October 6, the CFPB released an updated version of its TILA-RESPA Integrated Disclosure Rule (Final Rule) small entity compliance guide. The updated guide reflects amendments issued July 7, previously discussed in a Buckley Sandler Special Alert, that the CFPB made to the Final Rule. The guide also provides a version log to outline incorporated changes.
Separately, on October 10, the American Bankers Association (ABA) issued a comment letter regarding the CFPB’s proposal to address an aspect of the Final Rule concerning a “black hole” issue that prevents creditors from resetting tolerances using the Closing Disclosure except in very limited circumstances. (See previous InfoBytes coverage here.) The proposal was issued August 11, the same day the CFPB published the Final Rule. In its letter, the ABA requested additional clarification on certain areas of the proposal, but stated that it supports the removal of the “four-business-day limit for providing Closing Disclosures for purposes of resetting tolerances” because it “is an effective and very efficient approach to addressing the ‘black hole’ problem while preserving adequate consumer protections that will avoid bait-and-switch tactics or unjustified fee increases.” Furthermore, the ABA believes, “the use of [Closing Disclosures], whether initial or corrected, as a vehicle for correcting and ‘re-baselining’ fee disclosures, is a straightforward approach to returning regulatory order and compliance clarity on this provision.”
Federal Banking Agencies Issue Request for Comment on Proposed Combined Dodd-Frank Stress Test Report
On October 6, the Federal Reserve Board (Fed), the FDIC, and the OCC (agencies)—all members of the Federal Financial Institutions Examination Council (FFIEC)—issued a joint notice and request for comment on a proposal to combine the agencies’ three separate, identical stress test report forms into a single new FFIEC report (FFIEC 016) under the Dodd-Frank Act. In addition to replacing the Fed’s FR Y–16, the FDIC’s DFAST 10–50, and the OCC’s DFAST 10–50B, a limited number of revisions would be made to align FFIEC 016 with “recent burden-reducing changes to the FFIEC 031 and FFIEC 041 Consolidated Reports of Condition and Income and the Fed’s FR Y–9C Consolidated Financial Statements for Holding Companies.” Under the proposal, institutions who have a Legal Entity Identifier will also be asked to include it on the report form.
FFIEC 016 respondents are depository institutions and holding companies with at least $10 billion but less than $50 billion in total consolidated assets. The proposed FFIEC 016 will impact stress test reports with an as-of date of December 31, 2017, and have a submission deadline of July 31, 2018. Comments on the joint notice and request for comment must be received by December 5, 2017.
NCUA Issues Proposed Rule to Revise Advertising Requirements for Federally Insured Credit Unions
On October 4, the National Credit Union Administration (NCUA) issued proposed changes to the advertising rule requiring federally insured credit unions (FICUs) to use NCUA’s “official advertisement statement” when advertising products and services. The changes will include: (i) adding a fourth advertising option for FICUs, “Insured by NCUA”; (ii) expanding the current advertising statement requirement exemption concerning certain radio and television advertisements; and (iii) eliminating a requirement that NCUA’s official advertising statement must be included on statements of condition required to be published by law. Comments must be received by December 4, 2017.
OCC Rescinds Guidance on Deposit Advance Products, Cites Overlap With CFPB Payday Rule
On October 5, the OCC rescinded its 2013 Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products and accompanying Bulletin 2013-40, effective immediately. The rescission, announced so as to avoid “potentially inconsistent regulatory direction,” comes as a reaction to the CFPB’s final rule announced October 5 concerning payday loans, vehicle title loans, deposit advance products, and longer-term balloon loans. (See previous InfoBytes coverage here.) Acting Comptroller of the Currency, Keith A. Noreika, acknowledged that the changing regulatory and marketplace landscape has made it difficult for banks to serve the demand for short-term, small-dollar credit, and while the OCC may issue new guidance at a later date, it will continue to ensure that banks that choose to offer these types of products are compliant with the “basic principles of prudent underwriting and risk management as well as fair and inclusive treatment of customers.”
Buckley Sandler Special Alert: CFPB Issues Rule Regarding Payday, Title, Deposit Advance, and Certain Other Installment Loans
On October 5, 2017, the CFPB published its final rule (the “Rule”) addressing payday loans, vehicle title loans, and certain other extensions of credit (collectively, “covered loans”). Among the Rule’s key provisions, it requires lenders to determine a borrower’s ability to repay for “covered short-term loans” and “covered longer-term balloon-payment loans,” but not other covered loans. Thus, unlike the CFPB’s proposed rule, the Rule does not require an ability to repay determination for longer-term loans that are not balloon loans. For certain covered short-term loans, lenders may provide a principal payoff option in lieu of conducting a full ability-to-repay analysis. Like the CFPB’s proposed rule, the Rule caps at three the number of covered loans that may be made in quick succession. The Rule also limits certain payment collection practices for all covered loans, including non-balloon loans.
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Click here to read full special alert.If you have questions about the rule or other related issues, please visit our Consumer Financial Protection Bureau practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.
Fannie Mae Updates Servicing Guidelines for Multifamily Residences
On September 29, Fannie Mae released updates to its servicing guidelines for multifamily residences, effective October 2. Fannie Mae is updating provisions concerning Asset Management and Watchlist Management. Changes include:
- removing color descriptions that previously corresponded to defined Mortgage Loan rating classifications;
- updating the rating classification descriptions and/or characteristics to conform to regulatory definitions for Pass/Watch and Special Mention Assets; and
- requiring Servicers provide an explanation and status of the issues causing an Asset to be reported on the Servicer Watchlist.