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  • FDIC announces disaster relief in connection with Hurricane Sally

    Federal Issues

    On September 23, the FDIC issued FIL-92-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Alabama affected by Hurricane Sally starting on September 14. In the guidance, the FDIC notes that, in supervising institutions affected by the hurricane, the FDIC will consider the unusual circumstances those institutions face. The guidance suggests that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain reporting and publishing requirements.

    Federal Issues FDIC Mortgages Disaster Relief

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  • FDIC, HUD announce Oregon wildfires regulatory and disaster relief

    Federal Issues

    On September 18, the FDIC issued FIL-91-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Oregon affected by wildfires that began on September 7. In the guidance, the FDIC writes that, in supervising institutions affected by the wildfires, it will consider the unusual circumstances those institutions face. The guidance suggests that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC will also consider relief from certain reporting and publishing requirements.

    Separately, on September 17, HUD announced disaster assistance available to certain counties impacted by the Oregon wildfires, providing foreclosure relief and other assistance to affected homeowners. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to those victims whose homes were destroyed or severely damaged. Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house and the costs of repair, through a single mortgage. The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes.

    Federal Issues HUD Mortgages Disaster Relief FHA FDIC

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  • Fed: Lenders must consider pre-pandemic condition when underwriting Main Street Lending Program loans

    Federal Issues

    On September 18, the Federal Reserve Board, in conjunction with the FDIC and the OCC, revised the Main Street Lending Program (MSLP) FAQs (for-profit here, nonprofit here) to clarify underwriting expectations, supervisory expectations, and details regarding co-borrower loans. Specifically, the FAQs note that a lender is expected to “conduct an assessment of each potential borrower’s pre-pandemic financial condition and post-pandemic prospects” when reviewing an application to determine approval. Additionally, the FAQs state that Fed supervisors will “not criticize” lenders for originating loans in accordance with MSLP requirements, even when “such loans are considered non-pass at the time of origination,” provided the weaknesses are due to the Covid-19 pandemic and expected to be temporary. Finally, the FAQs include new details covering co-borrower loans, as the Federal Reserve Bank of Boston anticipates the MSLP will accept loans made to multiple co-borrowers starting next week.

    Federal Issues Covid-19 Federal Reserve Main Street Lending Program FDIC OCC Compliance

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  • OCC, FDIC announce disaster relief guidance

    Federal Issues

    On September 14, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by Hurricane Sally “for as long as deemed necessary for bank operation or public safety.” The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions. According to the 2012 Bulletin, only bank offices directly affected by potentially unsafe conditions should close, and institutions should make every effort to reopen as quickly as possible to address customers’ banking needs. Earlier in the week, the OCC also issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by wildfires in Oregon and Washington.

    Separately, on September 14, the FDIC issued FIL-89-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Puerto Rico affected by Tropical Storm Isaias. In the guidance, the FDIC notes that, in supervising institutions affected by the severe weather, the FDIC will consider the unusual circumstances those institutions face. The guidance suggests that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices,” so the institutions can “contribute to the health of the local community and serve the long-term interests of the lending institution.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services that revitalize or stabilize designated disaster areas. The FDIC states, among other things, that it will also consider relief from certain filing and publishing requirements, and recommends institutions experiencing disaster-related compliance difficulties contact the New York Regional Office.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues OCC FDIC Consumer Finance Disaster Relief

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  • Agencies give guidance on working with borrowers affected by hurricane, wildfires

    Federal Issues

    On September 1, the Federal Reserve Board, OCC, FDIC, NCUA, and the Conference of State Bank Supervisors (CSBS) issued a joint statement covering supervisory practices for financial institutions affected by Hurricane Laura and the California wildfires. Among other things, the agencies called on financial institutions to “work constructively” with affected borrowers, noting that “prudent efforts” to adjust loan terms in affected areas “should not be subject to examiner criticism.” Institutions facing difficulties in complying with any publishing and reporting requirements should contact their primary federal and/or state regulator. Additionally, the agencies noted that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services that revitalize or stabilize federally designated disaster areas.

    Additionally, HUD announced it will make disaster assistance available to Louisiana, which will provide foreclosure relief and other assistance to homeowners living in parishes affected by Hurricane Laura. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to those victims whose homes were destroyed or severely damaged. Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house along with the costs of repair, through a single mortgage.  The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes.

    Federal Issues Disaster Relief HUD FDIC OCC Federal Reserve NCUA CSBS

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  • FDIC encourages regulatory relief for California borrowers affected by wildfires

    Federal Issues

    On August 28, the FDIC issued FIL-85-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of California affected by wildfires that began on August 14. In the guidance, the FDIC notes that, in supervising institutions affected by the wildfires, the FDIC will consider the unusual circumstances those institutions face. The guidance suggests that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain reporting and publishing requirements.

    Find continuing InfoBytes coverage on disaster relief guidance here.

    Federal Issues FDIC Disaster Relief Consumer Finance

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  • FDIC releases July enforcement actions

    Federal Issues

    On August 28, the FDIC released a list of administrative enforcement actions taken against banks and individuals in July. During the month, the FDIC issued nine orders, consisting of “one consent order under 8(b) [of the Federal Deposit Insurance Act], one order of prohibition under 8(e) [of the Federal Deposit Insurance Act], six Section 19 orders, and one order terminating deposit insurance.”  The consent order, issued against a New Jersey state bank, relates to alleged weaknesses in its Bank Secrecy Act and anti-money laundering (BSA/AML) compliance program. Among other things, the bank was ordered to (i) increase its supervision and direction of its BSA/AML policies, procedures, and processes to ensure compliance with the applicable laws and regulations; (ii) implement a revised BSA compliance program to address BSA/AML deficiencies, including improvements in suspicious activity monitoring and reporting and in customer due diligence; (iii) implement an effective BSA training program for appropriate personnel regarding specific compliance responsibilities; (iv) review and analyze Office of Foreign Assets Control-issued regulations to ensure timely and complete compliance; (v) conduct a look back review to ensure certain reportable transactions and suspicious activities were appropriately identified and reported; and (vi) establish a directors’ BSA/AML compliance committee.

    Federal Issues FDIC Enforcement Bank Secrecy Act Anti-Money Laundering

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  • FDIC proposes revisions to its supervisory appeals process

    Agency Rule-Making & Guidance

    On August 21, the FDIC announced a proposal to amend the agency’s Guidelines for Appeals of Material Supervisory Determinations (Guidelines) and establish a new, independent Office of Supervisory Appeals (Office) that would replace the current Supervision Appeals Review Committee. The new Office, which will have final authority to resolve appeals, would be independent from other divisions within the FDIC that have authority to issue material supervisory determinations. According to the release, to promote the Office’s independence, the FDIC intends to recruit externally and employ reviewing officials on a part-time or intermittent, time-limited basis. The proposal also includes modifications to the procedures and timeframes regarding when determinations underlying formal enforcement-related actions may be appealed.

    Among other things, the proposal would update the Guidelines to clarify that for purposes of the supervisory appeals process, a formal enforcement-related action begins, and appeal rights are temporarily unavailable, when the FDIC: (i) initiates a formal investigation; (ii) issues a notice of charges or notice of assessment, as applicable; (iii) provides an institution with a draft consent order; or (iv) provides written notice stating “that the FDIC is reviewing the relevant facts and circumstances to determine whether a formal enforcement action is merited.” Under the proposal, should the FDIC provide written notice that it is determining whether a formal enforcement action is merited, the agency would be required to provide the institution with a draft consent order within 120 days, as well as an opportunity to engage in settlement negotiations. If the FDIC fails to provide the institution with a draft consent order within the initial 120-day period, supervisory appeal rights would become available to the institution. If a settlement is not reached, the FDIC would have 90 days to issue a notice of charges or assessment or open an order of investigation, or the institution’s supervisory appeal rights would be made available. In either case, once supervisory appeal rights are made available, the institution would have 60 days to file an appeal, which is consistent with the standard timeline for appealing a material supervisory determination. If the institution agrees to the consent order, “then the matter would be resolved and the need for an appeal would be obviated.”

    If the proposal is adopted, institutions “would continue to be encouraged to make good-faith efforts to resolve disagreements with examiners or the appropriate regional office or division director.” However, if an institution is unable to resolve a disagreement regarding a material supervisory determination through such efforts, it would be able to appeal that determination to the Office.

    Chairman Jelena McWilliams commented that the while the proposal retains several aspects of the existing appeals process—for example, the burden of proof on appeal will continue to rest with the institution—the “proposal seeks to establish a fair, independent process for a bank to appeal material supervisory decisions,” which is “key to promoting consistency among examiners across the country, ensuring accountability at the agency, and, ultimately, maintaining stability and public confidence in the nation’s financial system.” McWilliams added that she does not expect the proposed changes to result “in an avalanche of appeals.”

    Comments on the proposal will be accepted until October 20.

    Agency Rule-Making & Guidance FDIC Supervision Enforcement

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  • FDIC, HUD announce disaster relief guidance for Iowa, California borrowers

    Federal Issues

    On August 26, the FDIC issued FIL-81-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Iowa affected by severe storms. In the guidance, the FDIC notes that, in supervising institutions affected by the severe weather, the FDIC will consider the unusual circumstances those institutions face. The guidance suggests that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices, can contribute to the health of the local community and serve the long-term interests of the lending institution.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain filing and publishing requirements.

    Separately, on August 25, HUD announced it will expedite disaster assistance to certain counties impacted by the California wildfires, which will provide foreclosure relief and other assistance to homeowners living in the counties. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is further making FHA insurance available to those victims whose homes were destroyed or severely damaged. Additionally, HUD’s Section 203(k) loan program will allow victims to finance the purchase or refinance of a house along with the costs of repair through a single mortgage, and will also allow homeowners with damaged property to finance the rehabilitation of their existing single-family homes.

    Find continuing InfoBytes coverage on disaster relief guidance here.

    Federal Issues FDIC HUD Disaster Relief Consumer Finance Mortgages

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  • Agencies finalize three pandemic-related rules

    Federal Issues

    On August 26, the Federal Reserve Board, FDIC, and OCC finalized three rules that were temporarily issued in March and April to assist financial institutions during the Covid-19 pandemic. Highlights of the three rules include:

    • Community Bank Leverage Ratio (CBLR). The agencies adopted, without change, two interim final rules issued in April (covered by InfoBytes here) that temporarily lower the CBLR threshold and provide a gradual transition back to the prior level in order to enable qualifying community banking organizations to support lending during the Covid-19 pandemic. Effective October 1, the final rule, among other things, lowers the leverage ratio to eight percent through 2020 and increases the ratio to 8.5 percent in 2021 and nine percent in 2022.
    • Current Expected Credit Losses (CECL). The agencies adopted, without substantial change, an interim final rule issued in March (covered by InfoBytes here), which provides an additional two years to the three-year transition period that is already available to “mitigate the estimated cumulative regulatory capital effects” of CECL. The final rule expands the pool of eligible institutions to include any institution adopting CECL in 2020 and is effective upon publication in the Federal Register.
    • Capital distributions. The agencies adopted, without change, an interim final rule issued in March revising the definition of “eligible retained income” to allow for a more gradual application of any automatic limitations on capital distributions if an institution’s capital levels decline below certain levels. Additionally, the final rule includes the adoption of a Federal Reserve-only interim final rule (covered by InfoBytes here), similarly revising the definition of “eligible retained income” for purposes of the total loss-absorbing capacity rule. The final rule is effective January 1, 2021.

    Federal Issues Agency Rule-Making & Guidance FDIC OCC CECL Federal Reserve Capital Covid-19

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