March 11, 2021

Congressman Luetkemeyer Discusses New Roles As Ranking Member Of House Committees

In the latest Our Two Cents with MBA podcast episode, MBA President and CEO Max Cook interviews Congressman Blaine Luetkemeyer, who represents Missouri's 3rd Congressional District. Luetkemeyer is the ranking member on the House Small Business Committee and the ranking member on the Subcommittee on Financial Institutions and Consumer Credit. Luetkemeyer shares his priorities serving in both roles, as well as his perspective on what to expect in the years ahead for the financial services industry.

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House Small Business Committee Leaders Agree To PPP Extension

With the Paycheck Protection Program scheduled to end March 31, leaders with the House Small Business Committee late Wednesday reached a bipartisan agreement to extend the PPP through June 30. New applications will be accepted by SBA for an additional 60 days until May 31, 2021, after which the remaining 30 days will be used to process any outstanding loans that have been submitted to SBA.  

This is welcomed news as the American Bankers Association has been stressing to members of Congress and SBA that borrowers should be afforded the opportunity to receive a loan if they have submitted a loan request in a timely manner.   
 
The House is tentatively scheduled to consider this extension under the noncontroversial suspension calendar next week. Although this bipartisan deal was reached among House committee leaders, the Senate Small Business Committee leaders have not officially agreed to the proposal and would need to request to have this measure move through the Senate on unanimous consent, which requires agreement from all 100 senators to proceed quickly. Time is of the essence as the House is scheduled to adjourn until mid-April following the conclusion of legislative business next week and the Senate is set to adjourn the week following. ABA continues to work with key congressional stakeholders to advance a PPP extension.

ABA, Groups Urge Congress, Yellen To Shield EIPs From Garnishment

With passage of the $1.9 trillion COVID-19 relief bill, which includes another round of $1,400 economic impact payments, the American Bankers Association joined a coalition of financial and consumer groups urging lawmakers to shield these EIPs from assignment and garnishment. In a letter to House and Senate leaders, the groups emphasized that absent immediate legislation, banks and other financial institutions are legally required to comply with court orders. 

“We believe it is imperative that Congress ensure that these next stimulus payments are treated as ‘benefits’ subject to the federal exemption from garnishment,” the groups wrote. “Otherwise, the families that most need this money — those struggling with debt and whose entire bank accounts may be frozen by garnishment orders — will be not be able to access their funds.”

The groups urged lawmakers to “quickly pass standalone legislation addressing garnishment to ensure that American families will receive these benefits as intended to fulfill our common goal of protecting these payments from garnishment within the practical realities of existing financial institution systems.” 

The groups also urged Treasury Secretary Janet Yellen to support standalone legislation, noting that “It is simple to code the payments as exempt.” 

This is the third round of EIPs that have been distributed since the coronavirus began. Banks facilitated the processing of roughly 161.9 million payments in the first round and more than 147 million in the second round.

ABA, Groups Call For PPP Flexibility To Resolve Hold Codes, Process Applications

As the Small Business Administration prepares to wind down the Paycheck Protection Program at the end of the month, the American Bankers Association and nine other financial services trade groups called on SBA to clear thousands of loans that are currently on hold before shutting the program down. In a letter to House and Senate Small Business Committee leaders, the groups flagged that lenders have received a high number of hold codes or error messages that have held up the processing and funding of PPP loans to struggling small businesses for “several weeks or longer.”

The groups also called on lawmakers to urge SBA to hold the program open long enough for all loan applications that have been submitted to SBA by the March 31 deadline to be processed and funded.  “Since its inception, the PPP has served a vital role in helping millions of small businesses survive,” the groups wrote. “As this program reaches its current congressionally authorized sunset date, thousands of our nation’s small businesses have filed or intend to file applications for this critical economic lifeline. They should be given the opportunity to receive these funds through the full program authorization period.”

Fed To Extend PPP Liquidity Facility

The Federal Reserve will extend its Paycheck Protection Program Liquidity Facility until June 30. Through the facility, which is one of many COVID-19 relief programs established by the Fed under its Section 13(3) authority, the Fed may extend nonrecourse loans to institutions eligible to make PPP loans. PPP loans guaranteed by the SBA that are originated by eligible banks may be pledged as collateral to the Federal Reserve Banks. The PPPLF was originally set to expire March 31.

Agencies Update FAQs On Coronavirus, CRA Activities

The banking agencies have updated a list of frequently asked questions related to the Community Reinvestment Act and the coronavirus pandemic. The five new frequently asked questions clarify the following.

  • CRA regulatory criteria for the service test do not include loan processing and servicing activities for retail loans originated by the bank and that the agencies will not extend CRA service test consideration for Paycheck Protection Program-related activities. However, the agencies acknowledged that PPP activities may be considered under the CRA lending test when evaluating flexible or innovative lending programs offered by the bank.
  • Banks should not report on their CRA loan register PPP loans that have been rescinded or returned under the SBA’s safe harbor, nor will examiners consider the loans in their CRA evaluations of banks during the applicable time period.
  • A PPP loan greater than $1 million in low- or moderate-income geographies or in distressed or underserved nonmetropolitan middle-income geographies will be considered an eligible community development activity.
  • The waiving of ATM fees, overdraft fees and early withdrawal penalties on CDs and withdrawal fees on savings accounts are examples of retail services considered responsive to the needs of low- and moderate-income individuals. Allowing a LMI individual to make draws from a home equity line of credit during the repayment period could constitute a flexible lending practice. Allowing an LMI individual to make a withdrawal from an IRA or to draw on a HELOC during the draw period are routine banking services and, as such, are not eligible for CRA consideration.
  • As an alternative to in-person services, the agencies will consider services provided virtually by bank representatives that have a primary purpose of community development and that are related to the provision of financial services.

CFPB: Gender Identity, Sexual Orientation Discrimination Illegal Under ECOA

The Consumer Financial Protection Bureau issued an interpretive rule clarifying that the prohibition against sex discrimination as part of the Equal Credit Opportunity Act and Regulation B includes sexual orientation and gender identity discrimination. The CFPB added that the “prohibition also covers discrimination based on actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other associations.”

As part of the interpretive rule, the bureau said it will update its publications and examination guidance documents and will take enforcement actions against lenders for SOGI-related ECOA violations.

The CFPB said the interpretive rule is consistent with a 2020 Supreme Court ruling that the prohibition against sex discrimination in the Civil Rights Act of 1964 encompasses sexual discrimination based on sexual orientation or gender identity. The CFPB’s interpretive rule is effective upon publication in the Federal Register

Treasury Announces $9 Billion Investment In CDFIs, MDIs

The Treasury Department announced that it will invest $9 billion in community development financial institutions and minority depository institutions through the newly established Emergency Capital Investment Program. The program is designed to support these institutions’ efforts to provide financial products and services for small and minority-owned businesses and consumers that have been affected by COVID-19.

Under the program, which was established as part of the December COVID-19 relief bill, Treasury investments may take the form of senior preferred stock or subordinated debt, depending on the type of applicant and other factors. The program includes set-asides of $2 billion for institutions with less than $500 million in assets and $2 billion for institutions with less than $2 billion in assets. Applications for funding must be submitted by Friday, May 7. 

Treasury also has announced additional support for CDFIs and MDIs through the CDFI Rapid Response Program and the Emergency Support and Minority Lending Program.

Treasury’s Emergency Capital Investments To Count As Bank Capital

The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency announced an interim final rule allowing Treasury investments made to community development financial institutions and minority depository institutions under the newly established Emergency Capital Investment program qualify as regulatory capital. Comments are due 60 days after publication in the Federal Register.

Under the program, which was established as part of the December COVID-19 relief bill and which is currently accepting funding applications, Treasury investments may take the form of senior preferred stock or subordinated debt, depending on the type of applicant and other factors. Under the IFR, preferred stock issued under the EICP will qualify as additional tier 1 capital, and subordinated debt will qualify as tier 2 capital, the agencies noted.

“Treasury's Emergency Capital Investment Program helps make capital more available for Community Development Financial Institutions and minority banks. That's a step in the right direction,” Acting Comptroller of the Currency Blake Paulson said in a statement. “Making clear that these funds qualify as regulatory capital helps make the most of the program so institutions can maximize its benefits.”

The OCC also issued a pledge to strengthen minority depository institutions through its participation in “Project REACh,” which brings together leaders from the banking industry, national civil rights organizations, business and technology to reduce specific barriers that prevent full, equal, and fair participation in the nation’s economy. 
“The pledge helps minority banks remain vibrant parts of the economic landscape through larger banks' commitments to additional investment, technical assistance, executive development, and business partnerships,” Paulson added. “Twenty-one banks have already taken the pledge, and we are eager to see others join.”

ABA Weighs In On Proposed GSE Liquidity, Resolution Planning Requirements

In two comment letters to the Federal Housing Finance Agency, the American Bankers Association weighed in on proposed changes to liquidity requirements for Fannie Mae and Freddie Mac, as well as proposed changes to resolution planning requirements for the two GSEs.

FHFA in December proposed four new liquidity and funding requirements for the GSEs collectively intended to increase the enterprises’ ability to withstand a liquidity stress over the short, intermediate and longer terms. The proposal is based on the liquidity coverage ratio and net stable funding ratio, quantitative liquidity ratios that apply to the largest banks. While offering support for a robust capital and liquidity regime for Fannie and Freddie, ABA noted that greater detail is needed to allow for a full evaluation of the proposed standards and urged FHFA to issue an updated proposal for comment.

With regard to the proposed resolution planning requirements, which would require Fannie and Freddie to develop so-called “living wills” detailing how they would facilitate resolution in the event that the FHFA is appointed receiver, ABA urged FHFA to follow three key principles when implementing these rules. Specifically, the GSEs should take into account reliance on their operations by other market participants, ensure transparency and continue to move ahead with GSE reform.

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 June 30 for multifamily property owners, provided they notify tenants in writing about protections available during the forbearance period and 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 Calls For Extension Of NCUA CUSO Comment Period

The American Bankers Association wrote to the National Credit Union Administration seeking a 60-day extension to the 30-day comment period on a controversial proposal to amend NCUA’s credit union service organization regulation.

ABA said that because the proposal involves a significant expansion of CUSO lending activities, adequate time is needed to evaluate the proposal and the extent of its impact and risks imposed upon consumers, communities and the financial services industry, stating that the additional time would allow for “a more thorough and informed analysis of the proposal’s impact and the opportunity to consider additional legal, regulatory, and other issues that may not have been factored into the proposal.”

The association added that the NCUA Chairman Todd Harper has publicly opposed the proposal, noting that it “creates real reputational risk for the entire credit union system,” and that the “legal and public policy issues are too important” to support a 30-day comment period. ABA argued that a 90-day period is consistent with the regulatory objective of providing “a measured, inclusive, and deliberative rulemaking process.”

TCH's CHIPS Network Extends Hours To 6 P.M.

The Clearing House announced that CHIPS, its private-sector alternative to Fedwire, is extending its closing time for receipt of new payment messages by an hour to 6 p.m. EST. TCH said the extension is a step toward a larger goal of operating CHIPS 24 hours a day. The network clears and settles an average of $1.8 trillion in domestic and international payments a day, with 95% of payments having a cross-border leg.

Libor’s Scheduled Cessation Triggers ARRC Fallbacks On Rates

After the Intercontinental Exchange, which administers the London Interbank Offered Rate, finalized plans to cease publishing U.S. dollar Libor after the end of 2021, the Alternative Reference Rates Committee determined that the announcement constitutes a “benchmark transition event” that triggers ARRC-recommended rate fallback language on floating-rate notes, securitizations, syndicated business loans and bilateral business loans. The move follows action by the International Swaps and Derivatives Association recognizing the Libor news as an “index cessation event” under its protocol for rate fallbacks on derivatives.

OCC Updates Comptroller's Handbook Booklet

The Office of the Comptroller of the Currency issued an update to its Servicemembers Civil Relief Act booklet in the Comptroller's Handbook. The booklet provides information and procedures for examiners about the consumer protections that servicemembers are eligible for under the Servicemembers Civil Relief Act.

FDIC To Host Webinar On Brokered Deposits, Interest Rate Restriction Changes

The Federal Deposit Insurance Corporation will hold a free webinar at noon Wednesday, March 17, for bankers on recent revisions to regulations on brokered deposits and interest rate restrictions. The revisions were approved Dec. 15, 2020, and the final rule is effective April 1, with an extended compliance date of Jan. 1, 2022, for some provisions in the rule.

ABA To Host Webinar In Celebration Of National Agriculture Month

As part of the American Bankers Association’s celebration of National Agriculture Month in March, the association will host a free webinar at 11:30 a.m. Wednesday, March 24, on the state of ag banking in 2021. The webinar includes updates from ABA experts, the status of agricultural leadership in Congress and at USDA, as well as an overview of ABA ag banking resources like the 2020 Ag Lending Survey. ABA also has tips sheets for ag marketing and financial planning, as well as short training videos that offer quick lessons on hot topics in ag banking.

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