April 17, 2020

ABA Urges OCC, FDIC To Further Refine Proposed CRA Overhaul

The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have taken a “significant step” toward modernizing the Community Reinvestment Act regulations with their recent proposal to update the 30-year old framework, ABA and 51 state bankers associations said. The associations requested that the agencies refrain from finalizing the proposed CRA performance measures pending further study but suggested that the agencies finalize various aspects of the rule that have broad support, such as clarifications regarding qualifying activities, the creation of a qualified activities list and the creation of a prior approval process.
The associations emphasized the need for a durable CRA regulatory framework that is “clear and calibrated appropriately” and takes a data-centric approach to performance measures. While they supported the agencies’ efforts to establish quantifiable CRA performance metrics, they raised numerous concerns about the metrics outlined in the proposal, which include a CRA evaluation measure, a retail lending distribution test, and a 2% community development minimum that together would generate a presumptive CRA rating.
The associations also raised concerns about the agencies’ proposed data collection, recordkeeping and reporting requirements, noting that they would be considerably more complex than existing CRA reporting mechanisms and overly burdensome for banks to implement. In addition, given the significant amount of work that would be required for banks of all sizes to implement the changes if finalized, the associations recommended a two-year implementation period.

Finally, the associations emphasized that regulators should continue to pursue a CRA framework that can be adopted by all three agencies. (The Federal Reserve declined to join the FDIC and the OCC’s proposal, though Fed officials have expressed the agency’s commitment to CRA modernization.) “An interagency final rule with help to ensure that modernization stands the test of time,” they wrote. “In addition, failure to act in coordination would yield undesirable results—including perpetuating confusion and inconsistency—which would be contrary to the objective of the modernization effort.”

CFPB Permanently Raises HMDA Reporting Thresholds

The Consumer Financial Protection Bureau has raised the reporting thresholds for banks reporting data under the Home Mortgage Disclosure Act. The final rule increased the threshold for closed-end mortgages from 25 to 100 loans, effective July 1. The bureau also raised the permanent threshold for open-end lines of credit from 100 to 200, effective Jan. 1, 2022, when the current temporary threshold of 500 open-end lines of credit expires.

FATF Upgrades Assessment Of U.S. Regarding Beneficial Ownership Framework

The Financial Action Task Force recently upgraded its assessment of the United States’ anti-money laundering and counter-terrorism compliance framework. Among other things, the FATF found that the U.S. is “largely compliant” with beneficial ownership requirements, noting that FinCEN’s 2016 beneficial ownership rule, along with industry compliance, has provided increased transparency since taking effect.

FDIC To Extend Brokered Deposit Comment Period

The Federal Deposit Insurance Corporation announced it would extend until June 9 the comment deadline for its proposal to modernize the existing brokered deposit rules and foster greater innovation by financial institutions. 
The proposal would clarify the definition of “deposit broker” to reflect more accurately the industry today and take into account the vast number of technological advances that have changed how banks take deposits. It also would establish an application and reporting process for depository institutions wishing to utilize the rule’s “primary purpose exception.” 

ARRC Recommends Lookback For Cash Product Spread Adjustment Methodology

The Alternative Reference Rates Committee recommended a spread adjustment methodology for cash products referencing the London Interbank Offered Rate. The ARRC’s initial recommendation, aligned with a recommended methodology for derivatives, is a methodology based on a median over a five-year lookback period calculating the difference between U.S. dollar Libor and the Secured Overnight Financing Rate, the ARRC’s preferred Libor alternative.
Meanwhile, for consumer financial products, the ARRC also recommended a one-year transition period for the spread adjustment methodology. The ARRC said it would release more details on its methodology for cash products in the coming weeks.

The recommendation is part of the ARRC’s efforts to minimize any expected changes in the value of financial contracts that might result from a sudden reference rate shift. The ARRC continues to develop resources to assist financial institutions with the transition to SOFR from Libor, which is not guaranteed to be sustained beyond 2021.

GSEs Revise URLA Implementation Timeline

Fannie Mae and Freddie Mac have extended the implementation timeline for the redesigned Uniform Residential Loan Application and automated underwriting systems. Lenders will now be required to use the new URLA form beginning on March 1, 2021.
According to an updated timeline issued by the GSEs, a “limited production” period will begin Aug. 1, during which the GSEs will begin accepting loan application submission files in production on a limited basis. Open production will begin Jan. 1, 2021, and the GSEs will no longer support application submission files based on previous AUS specifications on March 1, 2022.

FFIEC Releases Computational Tools For APRs, APYs

To help financial institutions comply with consumer protection rules, the Federal Financial Institutions Examination Council released two computational tools for annual percentage rates and annual percentage yields.
The APR tool is designed to help banks verify APRs and reimbursement adjustments. The tool includes relevant finance charge and APR tolerances for verifying the accuracy of annual percentage rates and finance charges on loans secured by real estate or a dwelling. It also can be used to verify military annual percentage rates for loans subject to the Military Lending Act. Meanwhile, the APY tool can be used to verify APYs on consumer deposit account disclosures for the purposes of the Truth in Savings Act. 

FDIC To Postpone Effort To Modernize Agency's Signage, Advertising Requirements

The Federal Deposit Insurance Corporation will temporarily postpone its efforts to modify its signage and advertising requirements. The agency remains committed to modernizing these rules at a future date to better reflect how banks and savings associations are transforming their business models to take deposits via physical branches, digital, and mobile banking channels. In February, FDIC sought input regarding potential changes to its sign and advertising rules. In March, the agency extended the comment period to April 20.

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