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Financial institution regulators provide Covid-19 mortgage servicer guidance
On April 3, the Federal Reserve (Fed), CSBS, CFPB, FDIC, NCUA, and the OCC (agencies) jointly announced an interagency statement (Joint Statement) to clarify the agencies’ supervisory and enforcement approach “regarding certain consumer communications required by the mortgage servicing rules” under Regulation X during the Covid-19 pandemic. Along with the Joint Statement, the CFPB released FAQs on the mortgage servicing rules during the pandemic. The agencies advised mortgage servicers to consider both the Joint Statement and the FAQs “when developing approaches to work with borrowers.”
The Joint Statement, among other things, gives mortgage servicers greater flexibility to provide CARES Act forbearance of up to 180 days and other short-term options upon the request of borrowers with federally backed mortgages without having to adhere to otherwise applicable compliance rules. In addition, the Joint Statement provides that no supervisory or enforcement action will be taken for delays in: (i) “sending the written early intervention notice to delinquent borrowers”; (ii) “establishing or making good faith efforts to establish live contact with delinquent borrowers”; or (iii) “sending the loss mitigation-related notices.”
NCUA issues off-site exam and supervision letter
In March, the NCUA issued a release expanding its March 16 off-site policy by extending off-site examinations through May 1. In the release, the NCUA outlined its top three priorities during the Covid-19 pandemic, which include: (i) “credit unions experiencing significant financial or operational problems”; (ii) outreach by examiners to all credit unions regarding “the institution’s operational and financial status” during the pandemic; and (iii) the continuation of off-site examinations. The NCUA added that “[i]f credit unions are occupied with addressing the impact of the COVID-19 pandemic on their operations, employees, and members, they should not be required to address an offsite examination request unless it is a serious or time-sensitive matter.”
FDIC, OCC, NCUA identify essential critical infrastructure workers during Covid-19
On March 26, the FDIC issued FIL-25-2020 stating that the financial services sector is a “critical infrastructure” during the Covid-19 pandemic pursuant to the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency’s (CISA) March 19 guidance. The guidance is intended to help state, local, and industry partners identify critical infrastructure sectors and essential workers in order to ensure continuity of critical functions. The FIL advises company leadership to provide workers with documentation identifying them as critical infrastructure workers who need “to travel inside restricted areas in order to support critical infrastructure.”
On March 25, the OCC issued similar guidance pursuant to CISA’s guidance. Bulletin 2020-23 encourages essential critical infrastructure workers to maintain normal work schedules during the Covid-19 pandemic, and offers guidance for banks concerning workers who may need to move within and between restricted areas. Essential critical infrastructure workers include those who are needed to: (i) “process and maintain systems for processing financial transactions and services (e.g., payment, clearing and settlement; wholesale funding; insurance services; and capital markets activities)”; (ii) “provide consumer access to banking and lending services,” such as ATMs and armored cash carriers; and (iii) support financial institutions (e.g., staffing data and security operations centers). The workers also include key third party providers who deliver core services. The OCC advises banks to, among other things, update business continuity plans and provide documentation to workers detailing work-related travel.
The NCUA also sent a letter to member boards of directors, chief executive officers, chief information officers, and chief information security officers identifying essential critical infrastructure workers pursuant to CISA’s guidance. Updates to Covid-19 NCUA resources are available here.
Banking regulators urge small-dollar lending during Covid-19 crisis
On March 26, the FDIC, Federal Reserve Board, CFPB, NCUA, and OCC issued a joint statement encouraging banks, savings associations, and credit unions to offer responsible, small-dollar loans to consumers and small businesses affected by Covid-19. The agencies recognize that small-dollar lending can play an important role in meeting credit needs during this time period, and recommend that financial institutions offer loans “through a variety of structures including open-end lines of credit, closed-end installment loans, or appropriately structured single payment loans.” For borrowers experiencing unexpected circumstances who cannot repay a loan as structured, financial institutions are “further encouraged to consider workout strategies designed to help borrowers to repay the principal of the loan while mitigating the need to re-borrow.” All loans, however, should be offered in a manner “consistent with safe and sound practices” that “provides fair treatment of consumers, and complies with applicable statutes and regulations, including consumer protection laws.”
Indiana amends certain financial institution and consumer credit provisions
On March 18, the Indiana governor signed House Enrolled Act No. 1353, which amends various provisions concerning financial institutions and consumer credit, including those related to first lien mortgage lenders, credit unions, and surety bond requirements for licensed mortgage loans originators, pawnbrokers, and money transmitters, among others. Among other things, the act also amends a provision in the state statute governing credit unions, which provides that loans made by a credit union to the credit union’s individual officers (and to the immediate family members of an officer, director, or supervisory committee member) must be made in accordance with Regulation O of the Federal Reserve Board. The act also stipulates that required appraisals connected to mortgage loans made to credit union members must be “consistent with the appraisal standards and transaction value limitations” outlined in the National Credit Union Administration’s appraisal regulations. The amendments take effect July 1.
NCUA issues FAQs regarding Covid-19 and credit union operations
On March 25, the National Credit Union Administration (NCUA) issued FAQs regarding the impact of Covid-19 on the NCUA and credit union operations. The FAQs answer questions regarding, among other things, flexibility for federal credit unions in planning annual meetings and monthly board of director meetings, restrictions on access to or closure of facilities, the impact of Covid-19 on the NCUA’s examination and supervision program, and deadlines for submission of certain filings (e.g., Call Reports, annual capital plan and/or stress testing, Bank Secrecy Act reports).
NCUA issues letter to federal credit unions regarding annual meeting flexibility
On March 20, the National Credit Union Administration (NCUA) issued a letter to federal credit unions permitting federal credit unions (by adoption by the board of directors of a bylaw) to hold annual meetings, and special member meetings for certain purposes, virtually and without an in-person quorum if certain conditions apply. The letter provides additional guidance to federal credit unions on the ability to revoke the bylaw amendment, the ability to postpone annual meetings, the ability to amend the date of its annual meeting, and the adjournment of a meeting for lack of a quorum.
NCUA provides urgent needs grants to credit unions during Covid-19 emergency
On March 23, the National Credit Union Administration (NCUA) announced that “[f]ederally insured, low-income designated credit unions” that have been adversely impacted by costs related to Covid-19 may apply for urgent needs grants. The NCUA can provide grants for such things as (i) “[h]ardware, software, or other equipment to help them provide financial products and services from remote locations”; (ii) “[c]onsulting services to develop programs…to assist those affected by COVID-19”; and (iii) “marketing materials to assure members their insured deposits are safe.” Applications for the grants may be found here.
Agencies issue joint statement on loan modifications and reporting for financial institutions
On March 22, the Federal Reserve Board (Fed), CFPB, FDIC, NCUA, OCC, and Conference of State Bank Supervisors (CSBS) issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” to address the “unique and evolving situation” created by Covid-19. Guidance covered in the statement includes, among other things (i) “encourage[ing] financial institutions to work prudently with borrowers” negatively impacted by disruptions in the economy caused by the virus, to include providing loan modifications to borrowers and mitigating credit risk; (ii) advising that in “accounting for loan modifications” the modifications “do not automatically result in [troubled debt restructurings] (TDRs).” The agencies assert that “short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not TDRs”; (iii) reporting loans as past due as a result of a payment deferral is “not expected”; (iv) reporting short-term loan arrangements, such as deferrals, as nonaccrual assets is temporarily not required; and (v) reminding financial institutions that restructured loans “continue to be eligible as collateral at the [Fed’s] discount window.” The statement adds that “the agencies view prudent loan modification programs offered to financial institution customers affected by COVID-19 as positive and proactive actions that can manage or mitigate adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk,” and “agency examiners will not criticize prudent efforts to modify terms on existing loans for affected customers.” (See Fed press release; OCC press release; FDIC press release and FIL-22-2020; NCUA press release; CFPB press release; and CSBS press release.)
Fed agencies encourage flexibility in light of Covid-19 crisis
On March 13, the OCC, FDIC, and NCUA issued guidance on March 13 that borrows heavily from the Federal Reserve’s 2013 Guidance SR 13-6 / CA 13-3: Supervisory Practices Regarding Banking Organizations and Their Borrowers and Other Customers Affected by a Major Disaster or Emergency to address how institutions can work prudently with affected customers and how the agencies can provide regulatory relief in a safe and sound manner to institutions.
Releases by the FDIC (FIL-17-2020, OCC (Bulletin 2020-15, and NCUA (Letter 20-CU-02, along with the Fed’s 2013 Guidance all encourage financial institutions to be flexible in working with all borrowers affected by the coronavirus outbreak, with the FDIC especially calling out customers in vulnerable industry sectors such as airlines, energy, travel, tourism, shipping, and small businesses.The guidance suggests the following efforts to aid customers: (i) waiving certain fees (e.g. ATM, overdraft, and late payments); (ii) increasing ATM daily withdrawal limits; (iii) easing restrictions on check-cashing; (iv) increasing credit card limits for creditworthy borrowers; (v) offering payment accommodations (e.g. extending due dates and allowing deferrals); and (vi) working with consumers temporarily unable to work due to business closures, slowdowns, or sickness. The regulators also encourage prudent efforts to modify terms of existing loans, and in the OCC’s guidance, to consider easing terms on new loans in a manner consistent with prudent banking practices.
The regulators stated their intent to work with institutions to reduce the burden of examinations, including making greater use of off-site reviews, and not to assess penalties or take other supervisory actions if institutions are unable to comply with reporting requirements despite reasonable and prudent efforts. The guidance also encourages institutions that need to temporarily close physical locations to offer alternative service options when practical and to notify their primary federal or state regulator and customers about temporary closures and alternative service options as soon as practical.