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FDIC finalizes rule amending real estate lending
On October 22, the FDIC adopted a final rule amending the Interagency Guidelines for Real Estate Lending Policies to include consideration of the capital framework established in the community bank leverage ratio (CBLR) rule into the method of calculating the ratio of loans in excess of the supervisory loan-to-value limits (LTV limits), which applies to all FDIC-supervised financial institutions. As previously covered by InfoBytes, the FDIC issued the proposed rule to amend the Interagency Guidelines for Real Estate Lending Policies in June by proposing to establish supervisory LTV criteria for certain real estate lending transaction types and allowing exceptions to the supervisory LTV limits. Among other things, the final rule: (i) “revises the Appendix so that all FDIC-supervised institutions calculate the ratio of loans in excess of the supervisory LTV limits using tier 1 capital plus the appropriate allowance for credit losses in the denominator, regardless of an institution’s CBLR election status”; and (ii) “provides a consistent approach for calculating the ratio of loans in excess of the supervisory LTV limits at all FDIC-supervised institutions,” and “would approximate the historical methodology . . . for calculating the ratio of loans in excess of the supervisory LTV limits.” The final rule is effective 30 days after publication in the Federal Register.
Agencies seek to update uniform rules for administrative enforcement proceedings
Recently, the FDIC, OCC, Federal Reserve Board, and NCUA issued a notice of proposed rulemaking (NPRM) to modernize the agencies’ Uniform Rules of Practice and Procedure (Uniform Rules) applicable to formal administrative enforcement proceedings. The amendments would recognize the use of electronic communications and technology in all aspects of administrative hearings to increase the efficiency and fairness of administrative adjudications. Among other things, the NPRM would (i) allow electronic signatures and filings; (ii) permit depositions to be held by remote means; (iii) modernize language and definitions; and (iv) extend certain filing time limits. Amended provisions also address the authority of administrative law judges, adjudicatory proceedings, good faith certifications, ex parte communications, and expenses. The agencies also propose to modify their specific rules of administrative practice and procedure (known as the Local Rules) applicable to enforcement actions brought by each agency. FDIC staff released a memo recommending its board approve and authorize the NPRM, pointing out that the rules have not been substantively updated in 25 years and do not account for technological advances.
Fed announces new rules for staff securities trading
On October 21, the Federal Reserve Board announced new rules to prohibit the purchase of individual securities, restrict active trading, and increase the timeliness of reporting and public disclosure. According to the announcement, the new rules apply to the Reserve Bank and Board policymakers and senior staff. Among other things, the rules require that Fed policymakers and senior staff provide 45 days’ advance notice and obtain approval before purchasing or selling approved securities. In addition, they will be required to hold investments for a minimum of one year.
FHA proposes changes to defect taxonomy for loan servicing
On October 28, FHA requested stakeholder review and feedback on a draft update to Appendix 8.0 – FHA Defect Taxonomy for its Single Family Housing Policy Handbook 4000.1. The updated draft appendix includes, among other things, (i) six new defect areas to incorporate loan-level servicing reviews (servicer operations, account administration, delinquent and default servicing, loss mitigation processing, home retention, and home disposition); (ii) severity tier descriptions explaining the process used for determining whether defects require corrective servicing action or a different response “based on the impact of non-compliance on FHA, the property, or both”; and (iii) and expanded, servicing-specific remedies for violations. As previously covered by InfoBytes, FHA issued an update to Section III of the handbook, which streamlined many standard mortgage servicing operational requirements and incorporated FHA actions taken to support borrowers experiencing Covid-19-related financial hardships. The proposed defect taxonomy updates are intended to increase transparency into FHA’s servicing loan review process and provide clarity on how FHA will hold servicers accountable for loan-level compliance. Comments are due December 27.
NCUA approves expansion of CUSO lending rights
On October 21, the National Credit Union Administration Board approved a final rule by a 2-1 vote to expand the range of permissible activities and services that credit union service organizations (CUSOs) may engage in. Under the final rule, CUSOs will be allowed to originate, purchase, sell, and hold any type of loan a federal credit union is permitted to, including auto and payday loans. The final rule also provides the Board “additional flexibility to approve permissible CUSO activities and services outside of notice and comment rulemaking.” NCUA Vice Chairman Kyle Hauptman stated the rule “gives credit unions the tools to compete more effectively in the digital marketplace.” However, NCUA Chairman Todd Harper opposed the final rule, warning that because NCUA “lacks the third-party vendor authorities that the other federal banking agencies and several state regulators have, the NCUA has no power to supervise CUSOs for compliance with federal consumer financial protection laws and regulations and compliance with prudential standards like concentration limits, maximum loan-to-value ratios, and minimum capital levels.” The final rule takes effect 30 days after publication in the Federal Register.
OCC updates Payment Systems booklet
On October 21, the OCC issued Bulletin 2021-49 announcing the revision of the Payment Systems booklet of the Comptroller’s Handbook. The booklet rescinds the Payment Systems and Funds Transfer Activities booklet of the Comptroller’s Handbook (March 1990); the Office of Thrift Supervision Examination Handbook section 580, the Payments Systems Risk (January 1994); banking Circular 235, International Payments Systems Risks (May 10, 1989); and OCC Bulletin 1996-48, Stored Value Card Systems: Information for Bankers and Examiners (September 3, 1996). Among other things, the revised booklet: (i) provides information on payment systems, types of payments, risks associated with payment systems, and associated risk management practices; (ii) highlights the requirements of 12 CFR 7.1026 on payment systems memberships; and (iii) includes expanded examination procedures and “supplemental procedures for deeper review of certain payment activities.”
Agencies release statement on LIBOR transition
On October 20, the CFPB, Federal Reserve Board, FDIC, NCUA, and OCC, in conjunction with the state bank and state credit union regulators, (collectively, “agencies”) released a joint statement regarding the transition away from LIBOR. As previously covered by InfoBytes, the Fed, FDIC, and OCC issued a joint statement encouraging banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable, but by December 31, 2021 at the latest. The agencies' October 20 joint statement provides supervisory considerations for institutions when choosing an alternative reference rate, such as, among other things: (i) the meaning of new LIBOR contracts; (ii) understanding how the chosen reference rate is constructed and the fragilities associated with it; and (iii) expectations for fallback language. In addition, the agencies noted that supervised institutions should “develop and implement a transition plan for communicating with consumers, clients, and counterparties; and ensure systems and operational capabilities will be ready for transition to a replacement reference rate after LIBOR’s discontinuation.”
CFPB releases Spanish-language model validation notice for debt collectors
Recently, the CFPB issued a Spanish-language translation of its Model Validation Notice. Debt collectors are permitted to send a consumer a completely and accurately translated validation notice if the consumer was either provided an English-language version in the same communication or in a prior communication. Debt collectors that meet these requirements and use the translated notice qualify for the Debt Collection Rule’s safe harbor that any translation be complete and accurate. The Bureau noted that the translated validation notice omits the disclosure informing consumers of their right to request the validation notice in Spanish, “because no translation of those disclosures is necessary,” but debt collectors who choose to include the optional Spanish-language disclosures in a Spanish-language validation notice are still eligible for the safe harbor.
CFPB updates 2022 HMDA filing instructions
On October 20, the CFPB released three updates regarding the Filing Instructions Guide for HMDA data collected in 2022 that must be reported in 2023. As previously covered by InfoBytes, the CFPB released the Filing Instructions Guide for HMDA, which states that there are no significant changes to the submission process and that the required data fields to be collected and reported have not changed. Instructions for quarterly reporting can be found in the Supplemental Quarterly Reporting Guide.
On October 25, the CFPB reminded that, "[f]or data collected beginning January 1, 2022, financial institutions should use census tract information provided in the 2020 Census." In addition, the FFIEC’s Geocoder will utilize census tract information from the 2020 Census beginning January 1, 2022.
Agencies announce new measures to combat ransomware
On October 15, the U.S. Treasury Department announced additional steps to help the virtual currency industry combat ransomware and prevent exploitation by illicit actors. The guidance builds upon recent “whole-of-government” actions focused on confronting “criminal networks and virtual currency exchanges responsible for laundering ransoms, encouraging improved cyber security across the private sector, and increasing incident and ransomware payment reporting to U.S. government agencies, including both Treasury and law enforcement.” (Covered by InfoBytes here.) The newest industry-specific guidance—part of the Biden administration’s efforts to counter ransomware threats—outlines sanctions compliance best practices tailored to the unique risks associated with this space. According to Treasury, there is a “need for a collaborative approach to counter ransomware attacks, including public-private partnerships and close relationships with international partners.”
The same day, the Financial Crimes Enforcement Network (FinCEN) released new data analyzing ransomware trends in Bank Secrecy Act reporting filed between January 2021 and June 2021. The report follows FinCEN’s government-wide priorities for anti-money laundering and countering the financing of terrorism priorities released in July (covered by InfoBytes here). Issued pursuant to the Anti-Money Laundering Act of 2020, the report flags “ransomware as a particularly acute cybercrime concern,” and states that in the first half of 2021, FinCEN identified $590 million in ransomware-related suspicious activity reports (SARs)—an amount exceeding the entirety of the value report in 2020 ($416 million). If this trends continues, FinCEN warns that ransomware-related SARs submitted in 2021 will have a higher transaction value than similar SARs filed in the previous 10 years combined. FinCEN attributes this uptick in activity to several factors, including an increasing overall prevalence of ransomware-related incidents, improved detection and incident reporting, and an increased awareness of reporting obligations and willingness to report by financial institutions.
In conjunction with the “growing prevalence of virtual currency as a payment method,” Treasury’s Office of Foreign Assets Control (OFAC) issued sanctions compliance guidance for companies in the virtual currency industry, including technology companies, exchangers, administrators, miners, wallet providers, and financial institutions. OFAC warned that “sanctions compliance obligations apply equally to transactions involving virtual currencies and those involving traditional fiat currencies,” and that participants “are responsible for ensuring that they do not engage, directly or indirectly, in transactions prohibited by OFAC sanctions, such as dealings with blocked persons or property, or engaging in prohibited trade- or investment-related transactions.” Among other things, the guidance will assist participants on ways to evaluate risks and build a risk-based sanctions compliance program. OFAC also updated related FAQs 559 and 646.