January 8, 2021

Congress Overturns Trump’s NDAA Veto, Enacting AML/BSA Reform

The House and Senate last week voted to overturn President Trump’s veto of the National Defense Authorization Act for fiscal year 2021. Passed in December, the now-enacted legislation includes several improvements to anti-money laundering rules.

Among other things, the law:
  • directs the Financial Crimes Enforcement Network to establish and maintain a national registry of beneficial ownership information that banks may in turn rely on when complying with customer due diligence requirements
  • requires the Justice Department to report on how law enforcement uses Bank Secrecy Act data
  • calls for the Treasury Department to review BSA reporting requirements with an eye toward streamlining them, including reviewing current thresholds
  • provides for financial institutions to share BSA compliance resources, among other measures

ABA Urges OCC To Withdraw 'Fair Access' Proposal

The American Bankers Association has called for the withdrawal of a controversial proposal from the Office of the Comptroller of the Currency stating that banks should provide access to services, capital and credit based on their risk assessment of individual customers and not make broad-based decisions that affect whole categories or classes of customers. The rule, which was proposed by the OCC in November, would prohibit covered national banks and federal savings associations (generally, those with $100 billion or more in assets) from denying services in an effort to disadvantage or otherwise hinder the customer from competing in a market or business segment, or to benefit another person or business activity.

In its comment, ABA emphasized that the OCC does not have the statutory authority to pursue such a rulemaking, nor did it meet procedural requirements for issuing the proposal. The association pointed out that in particular, the OCC seriously underestimated the cost burden the rule would impose upon covered banks.
ABA further opposed the proposal on the grounds that:
  • the OCC should not impede the normal course of banks’ business strategies or discretion
  • the proposal would undermine well-established safety and soundness practices
  • it would impede bank services to underserved marketsthe overall scope, requirements and language included in the proposal are unworkable

SBA Extends Comment Period On PPP Forms To Cover Loan Necessity Questionnaires

The Small Business Administration has provided an additional 60 days for public comments on its Paycheck Protection Program-related paperwork, in particular SBA Forms 3509 and 3510 — the loan necessity questionnaires that SBA is requesting for PPP loans amounting to $2 million or more, which had not been issued when SBA last solicited comments on its PPP forms.

Bankers have previously raising concerns about the questionnaires, noting that the forms ask for information unrelated to what borrowers were asked to consider when they applied for their PPP loan and warning that they may introduce confusion and excess burden for borrowers and lenders. Comments are now due by Friday, March 5. 

FDIC Issues Advisory On Audit Relief For Banks With COVID-Bulked Balance Sheets

In a financial institution letter, the Federal Deposit Insurance Corporation advised banks on its interim final rule providing relief from auditing because of participation in pandemic-related government stimulus programs and rapid, possibly short-term inflows of assets and deposits during the coronavirus pandemic.

The FDIC said auditing requirements in Part 363 would be required if it determines that asset growth was related to merger or acquisition transactions. Part 363 generally requires specific independent auditor reports to be issued for banks that exceed $500 million and $1 billion in assets and also requires specific audit committee member qualifications for banks with over $3 billion in assets. 

FinCEN Issues Notice On COVID-19 Vaccine Scams

The Financial Crimes Enforcement Network issued a notice on COVID-19 vaccine and distribution scams and included information about filing reports of COVID-19-related suspicious activities. FinCEN said fraudsters have offered to provide potential victims with the vaccine sooner than permitted and that vaccine fraud may include the sale of unapproved and illegally marketed vaccines, sale of counterfeit versions of approved vaccines and illegal diversion of legitimate vaccines.

The notice provided information about what banks should include in suspicious activity reports about suspected COVID-19 related scams and requested filers include detailed information. 

Article Examines Post-COVID Exam Expectations

Banks moved heaven and earth to help clients through COVID-19, making loans and handling modifications under a great deal of stress while also racing to make Paycheck Protection Program loans. What will examiners say as industry moves into a post-crisis environment in 2021?

An article from the forthcoming January/February 2021 issue of the ABA Banking Journal interviews experts on what examiners may find when reviewing fair lending compliance, troubled debt restructurings and credit risk changes. Documentation is critical to helping examiners understand decisions taken in response to the pandemic.

GSEs Extend Forbearance Options For Multifamily Property Owners

The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will extend mortgage forbearance through March 31 for multifamily property owners, provided they suspend all evictions for renters unable to pay rent due to the coronavirus pandemic. Evictions must be deferred for the entire time the property owner remains in forbearance. 

ABA Supports Rule To Clarify The Role Of Supervisory Guidance 

The American Bankers Association submitted a comment letter supporting a proposed rule by the federal banking regulators to codify and clarify their 2018 interagency statement on supervisory guidance. In proposing this rule, the regulators granted much of a November 2018 joint petition filed by ABA and the Bank Policy Institute. The ABA-BPI joint petition sought this formal rulemaking to ensure that banking organizations would not need to rely on the interagency statement to clarify the role of guidance.

ABA supported key clarifications included in the proposal, such as affirming that examiners will not base supervisory criticisms, including the issuance of MRAs, on a “violation” of or “non-compliance” with supervisory guidance. It also raised concerns about aspects of the joint petition that were denied. For example, in the proposal, the agencies decided not to base supervisory criticism solely on violations of statute, regulation, order or a demonstrably unsafe and unsound practice.

The letter also pressed the regulators to avoid circumstances that might lead banking organizations to perceive that guidance has a binding effect, such as providing guidance alongside supervisory criticism on the same topic. The association added that “we also argue that interpretive rules should be within the scope of this proposal since there is no practical way for banks to differentiate agency issuances that are supervisory guidance and those that are interpretive rules.”

ABA Urges CSBS To Align Standards For Nonbank Mortgage Firms With Fed Regs

The American Bankers Association submitted comments to the Conference of State Bank Supervisors urging that state regulators align prudential standards for nonbank mortgage servicers with those of the federal banking agencies. ABA wrote that CSBS’ effort to develop comprehensive safety and soundness standards for nonbank mortgage servicers and investors would promote stronger protections for mortgage borrowers and investors, while enhancing the stability of the nation's mortgage finance system.

The association added that “as a general matter, firms that provide financial services should receive equivalent regulation and oversight as do banks. This mitigates both regulatory arbitrage and systemic risk, helping to ensure that activities important to market functioning will continue through periods of stress.”

The COVID-19 pandemic confirmed the need for the expanded oversight and regulation proposed by the CSBS, ABA wrote, adding that “going forward, it is imperative to ensure that all mortgage servicing operations understand and manage their liquidity and other risks to ensure they are able to remain financially and operationally robust during periods of stress.”

Fed Proposes Reg D Changes

The Federal Reserve has proposed changes to Regulation D, which addresses reserve requirements of depository institutions. The proposal would eliminate references to an “interest on required reserves” rate and to an “interest on excess reserves rate.” The Fed would replace these with a reference to a single “interest on reserve balances” rate.

In addition, the Fed also proposed to simplify the formula used to calculate the amount of interest paid on balances maintained by or on behalf of eligible institutions in master accounts at Federal Reserve Banks, among other things. Comments on the proposal are due 60 days after publication in the Federal Register.

Finally, the Fed adopted as a final rule a previously issued interim final rule lowering reserve requirement ratios on transaction accounts maintained at depository institutions to zero percent. The rule takes effect upon publication in the Federal Register

FHFA Seeks Comment On Fannie, Freddie Appraisal Policies

The Federal Housing Finance Agency issued a request for input on appraisal-related policies and practices for Fannie Mae and Freddie Mac. The FHFA is seeking input on: 

  • appraisal modernization
  • the uniform appraisal dataset and the design of appraisal forms
  • automated valuation models and appraisal waivers
  • valuation differences by borrower and neighborhood ethnic makeup
Comments are due Feb. 26. 

GSEs Release ‘Duty To Serve’ Plans

The Federal Housing Finance Agency outlined how Fannie Mae and Freddie Mac will work to improve the distribution and availability of safe and sound residential mortgage financing in underserved markets in 2021.

Under a 2016 final rule implementing the new “duty to serve” requirements, Fannie Mae and Freddie Mac must submit three-year draft plans detailing their planned activities and objectives for serving three underserved markets: manufactured housing, affordable housing preservation and rural housing. However, because of COVID-19-related uncertainties, FHFA instructed the GSEs to submit plans for 2021 only as an extension of their 2018-2020 plans. The plans became effective Jan. 1.

FCC Restricts Banks’ Exempted Informational Calls To Customers

The Federal Communications Commission issued an order restricting the number of nontelemarketing prerecorded calls that a bank or other business places to a customer’s landline residential phone number. The order is part of an existing exemption to the Telephone Consumer Protection Act’s prior express consent requirement and requires businesses to allow recipients of exempted calls to opt out of receiving further calls. 

The restriction is effective six months after the Office of Management and Budget completes its Paperwork Reduction Act review but does not restrict the number of calls that a bank may place with the consent of the called party or the number of live-voice informational calls that may be placed to a customer’s landline. 

CFPB: HMDA Filing Period Now Open

The Consumer Financial Protection Bureau announced the filing period for Home Mortgage Disclosure Act data collected in 2020 opened Jan. 1. Submissions will be considered on time if they are received on or before March 1. Financial institutions subject to Regulation C other than insured depository institutions or insured credit unions must collect, record and report all HMDA data.

OCC Proposes Tweaks To Requirements For Permissible Bank Premises 

The Office of the Comptroller of the Currency proposed changes to its current rules on national bank or federal savings association ownership of real property. The proposal will provide a set of general standards, including an occupancy test and excess capacity standards, that the OCC will use for determining whether the acquisition and holding of real estate is necessary for the transaction of an institution’s business.

The proposal defines bank-occupied office premises as those “containing offices where professional or clerical duties are performed” and “as real estate acquired and held in good faith in which more than 50% of each building or severable piece of land is used by bank persons, including facilities that may be operated by third parties to provide amenities and services to bank persons or otherwise facilitate bank business operations.” Comments on the proposal are due 45 days after publication in the Federal Register

Next DEI Open Forum Scheduled For Jan. 19

The American Bankers Association will host another free open forum on diversity, equity and inclusion in the banking industry at 1:30 p.m. Tuesday, Jan. 19, for bankers to discuss current DEI challenges and topics, exchange leading practices and ideas and learn more about implementing DEI programs and initiatives at individual banks. The open forum will feature a speaker on the topic of neurodiversity. 

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