February 19, 2021  

ABA Cautions Against Unilateral Efforts To Reform CRA In Letter To Fed

As the Federal Reserve contemplates updates to its Community Reinvestment Act regulations, the American Bankers Association emphasized the importance of working closely with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to “craft a modern regulatory framework that can be adopted by all three agencies.” ABA warned that “failure to act in coordination would yield undesirable results — including perpetuating confusion and inconsistency — which would be contrary to the objectives of the modernization effort.” 

ABA also outlined several objectives and principles that should guide any CRA modernization effort, noting that, among other things, a modernized framework should be durable, tailored and aimed at improving consistency, transparency and effectiveness. In addition, ABA also highlighted the need to make changes to assessment areas to account for digital banking trends, include both quantitative and qualitative assessments, reduce overall complexity and be mindful of excessive data burdens or new reporting requirements.

The Fed’s concept, which it outlined in an advance notice of proposed rulemaking last year, involves a retail test, which would consist of a retail lending subtest and a retail services subtest, as well as a community development test, which would consist of a community development financing subtest and a community development services subtest. Small retail banks could elect to be evaluated under the current CRA framework or choose to be evaluated under the retail lending subtest alone. Small banks could also elect to have their retail services and community development activities evaluated. 

ABA, Trade Groups Urge OCC To Withdraw CRA Information Collection Survey

The American Bankers Association and eight other financial trade groups echoed the call for interagency coordination on Community Reinvestment Act reform in a letter to the Office of the Comptroller of the Currency. In the letter, the groups raised concerns about the OCC’s CRA information collection survey, which will gather bank-specific information from institutions subject to the general performance standards established in the agency’s 2020 CRA rule. 

The groups urged the OCC to publicly announce that it will coordinate with the Federal Reserve and the Federal Deposit Insurance Corporation on a joint CRA rulemaking. In support of this joint rulemaking, they said the OCC should delay the compliance date of the 2020 CRA rule for at least two years, formally withdraw the information collection in the spirit of President Biden administration’s Jan. 20 regulatory freeze memo and discontinue work to establish performance benchmarks for the 2020 rule. The groups made similar recommendations in a letter to the OCC earlier this month. 

“We strongly support modernizing the regulations that implement the Community Reinvestment Act and reiterate our commitment to engaging in a constructive dialogue with the banking agencies and other CRA stakeholders in order to develop an updated regulatory framework that serves communities, banks, and regulators well,” the groups said. “However, proceeding with the proposed information collection would be counterproductive and would not advance an interagency effort.”

ABA Joins Coalition Supporting Neighborhood Homes Investment Act

The American Bankers Association has joined a broad coalition of finance, fair housing and community development advocates to support the Neighborhood Homes Investment Act, a bipartisan Senate bill.

Modeled after the Low Income Housing Tax Credit for affordable rental housing and New Markets Tax Credit for economic development, S. 98 would create a federal tax credit that will produce new equity investment dollars for the development and renovation of one-to-four-family housing in distressed urban, suburban and rural neighborhoods.

If enacted, the bill is expected to support the construction or rehabilitation of 500,000 homes in distressed communities, $100 billion in total development activity and more than 785,000 jobs throughout the next 10 years, along with $42.9 billion in wages and salaries and nearly $30 billion in federal, state and local tax revenues and fees.

Financial Trade Groups Offer Recommendations To Improve EIPs

As lawmakers consider a new round of direct payments as part of a new COVID-19 relief package, the American Bankers Association and six other financial trade associations offered recommendations to the Treasury Department for improving the economic impact payments process.

The groups urged the Treasury to implement steps to improve the accuracy of information used to create payments files, increase the use of electronic payments, improve communication with both EIP recipients and industry partners and address issues related to EIPs being used to reduce debts. The groups also urged the Treasury to meet with industry stakeholders to discuss the recommendations before future rounds of EIPs.

ABA earlier this week hosted a meeting with Treasury officials and other trade groups to review the contents of the letter and to reaffirm that the banking industry shares the goal of moving relief funds into recipient accounts as quickly as possible.

Biden Administration Extends Foreclosure Moratorium, Mortgage Forbearance

President Biden announced an extension of certain foreclosure moratoriums and mortgage forbearance programs that were set to expire in March. The announcement applies to loans guaranteed by the Department of Veterans Affairs or Department of Agriculture and those insured by the Department of Housing and Urban Development.

The foreclosure moratorium for those homeowners will now be extended through June 30, 2021. Those agencies also extended the date by which borrowers must request COVID-19 forbearance to June 30, 2021. Finally, borrowers who entered forbearance before June 30, 2020, can now request two additional forbearance extensions in three-month increments.
The announcement by Biden was done in conjunction with formal announcements by the Department of Housing and Urban Development, Department of Veterans Affairs, and Department of Agriculture in a coordinated effort to extend and expand upon existing forbearance and foreclosure relief programs. The extensions follow an announcement made recently by the Federal Housing Finance Agency that Fannie Mae and Freddie Mac would extend forbearance by three months for borrowers coming to the end of their forbearance period and extend the moratorium on foreclosures for Fannie Mae and Freddie Mac loans to March 31, 2021.

FDIC Finalizes Deposit Insurance Rule Change To Accommodate CECL Transition

The Federal Deposit Insurance Corporation finalized changes to the risk-based deposit insurance system that applies to banks with more than $10 billion in assets to address the temporary deposit insurance assessment effects resulting from CECL implementation. The final rule takes effect April 1.

The final rule amends the assessment regulations to remove the double counting of a specified portion of the CECL transitional amount or the modified CECL transition amount, as applicable, in certain financial measures that are calculated using the sum of Tier 1 capital and reserves and that are used to determine assessment rates for large and highly complex IDIs.

The final rule also adjusts the calculation of the loss severity measure to remove the double counting of a specified portion of the CECL transitional amounts for a large or highly complex IDI. It does not affect regulatory capital or the regulatory capital relief provided in the form of transition provisions that allow banking organizations to phase in the effects of CECL on their regulatory capital ratios.

Acting HUD Secretary Moves To Dismiss Disparate Impact Rule Appeal 

Acting Department of Housing and Urban Development Secretary Matt Ammon withdrew an appeal filed by the previous administration to overturn a federal court order staying HUD’s September 2020 rule under the Fair Housing Act. The appeal was filed by former HUD Secretary Ben Carson, challenging the Massachusetts District Court’s decision to stay the 2020 disparate impact rule’s effective date. 

The rule in question was issued under former President Trump to reflect the U.S. Supreme Court's 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities, which recognized disparate impact analysis to demonstrate discrimination claims under the FHA but added key limitations to ensure the burden of proof in disparate impact cases is with the plaintiffs. 
The rule remains stayed, and HUD is expected to begin proceedings to amend or rescind the rule, consistent with President Biden's directive to HUD to examine the rule's effects on compliance with the Fair Housing Act.

Federal Reserve Issues 2021 CCAR Scenarios

The Federal Reserve released two hypothetical economic and financial market scenarios that it will use in the next round of the Comprehensive Capital Analysis and Review process for the nation’s largest financial institutions. This year’s stress tests will evaluate 19 large banks. Smaller banks are on a two-year stress test cycle but may opt into this year’s test by April 5.

The two scenarios, baseline and severely adverse, include 28 variables, such as GDP, unemployment rate, stock market prices and interest rates. The baseline scenario is in line with average projections from surveys of economic forecasters. Under the severely adverse scenario, the world would plunge into a severe global recession in which the U.S. unemployment rate rises by 4 percentage points to 10.75%, along with substantial stress in commercial real estate and corporate debt markets.

Firms with large trading operations will participate in an additional test of reactions to a global market shock. Firms with substantial trading or processing operations will be required to incorporate a counterparty default scenario.

The Office of the Comptroller of the Currency also released its scenarios for banks and savings associations currently subject to the Dodd-Frank Act stress tests.

ABA, Groups Recommend Improvements For Service Members’ Financial Readiness

The American Bankers Association joined other members of the Military Family Financial Readiness Coalition in offering recommendations to President Biden’s administration to improve the financial readiness of military families. In a letter to the administration, the groups:

  • emphasized the importance of public-private partnerships to establish financial readiness for military and veteran families
  • flagged the barriers that exist between service members and the Department of Defense about financial readiness
  • noted the effects of the pandemic on military spouse employment
  • highlighted a need for additional focus on military retirement plans
  • urged greater trust and transparency between the Defense Department and organizations that serve service members and veterans
“Financial readiness is the key to the health and wellbeing of military and veteran families and the future of our all-volunteer force,” the groups wrote. “Our families need strong public-private partnerships, expert resources, access to secondary sources of income via military spouse employment, information and choice when it comes to military retirement, and clarity. These are the vehicles that will enable our families to be financially fit and mission ready.”

ABA To Host Webinar On COVID-19 Vaccines

The American Bankers Association will host a webinar at noon Tuesday, Feb. 23, on the COVID-19 vaccines. ABA staff will discuss key details about the vaccines likely to be deployed in the next six months, including the differences between vaccines in both disease progression and reduction in transmission, as well as the latest on new more virulent variants.

Discussion also will address discuss when the nation will reach “herd immunity,” plans for a “return to normal” and human resources issued surrounding requiring the vaccine, providing incentives for employees to be vaccinated and managing vaccinated and unvaccinated staff once employees return to work.

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