July 1, 2021

Parson Signs Legislation Reforming Residential PACE Program

A major victory to reform the state’s residential PACE program is official after Gov. Mike Parson signed House Bill 697 into law Tuesday. The bill was a priority for MBA and is effective Jan. 1, 2022.

House Bill 697 contains important changes to current PACE law and will help protect consumers, as well as financial institutions, from the risks of this complicated lending program. R-PACE, or residential Property Assessed Clean Energy, allows loans for energy efficiency upgrades to homes. The loan is paid back through the county collector as a property assessment and receives the same priority lien as property taxes.

Notable provisions in House Bill 697 include the following.

  • oversight by the Missouri Division of Finance
  • limitations or prohibitions on projects if costs exceed a certain threshold based on the home’s assessed value
  • a required insurance policy to protect financial institutions in the event of a PACE loan default
  • numerous consumer protections and financial disclosures

Currently, PACE operates with little to no oversight. A ProPublica investigation found PACE lenders had overextended some homeowners for financing that they could not afford and, in some cases, did not need.

MBA thanks bill sponsors Rep. Bruce DeGroot, R-Chesterfield, and Sen. Sandy Crawford, R-Buffalo, along with Reps. Terry Thompson, R-Lexington; Bill Owen, R-Springfield; Michael O’Donnell, R-St. Louis; Rick Francis, R-Perryville; and Sen. Paul Wieland, R-Imperial, for their efforts ushering through this important piece of legislation. House Bill 697 passed the House by a 137-12 vote and the Senate by a 31-1 vote.

For a full list of bills the governor has taken action on, please click here.

Governor Signs Bill Modernizing State Banking Laws

Legislation to modernize state banking laws also was signed by Gov. Mike Parson on Tuesday. Senate Bill 106, another priority measure for MBA, contains four separate measures all supported by the MBA.  Changes to the consumer loan act will help banks streamline compliance, facilitate electronic and remote filing and execution of documents, and will promote small business and small farm loans.  The bill also updates the state’s banking statute and aligns the Uniform Commercial Code Section 3-309 to the current uniform standard. The bill takes effect Aug. 28.

MBA thanks bill sponsors Sen. Sandy Crawford, R-Buffalo, and Rep. Dan Shaul, R-Imperial. Other sponsors of language in Senate Bill 106 include Sens. Justin Brown, R-Rolla; Paul Wieland, R-Imperial; and Reps. Bill Owen, R-Springfield; and Terry Thompson, R-Lexington.

For a full list of bills the governor has taken action on, please click here.

Parson Signs Measure Allowing State To Collect Online Sales Tax

Gov. Mike Parson signed Senate Bill 153 that allows the state to collect sales taxes from online retailers. Missouri is the last state in the nation to pass the so-called “Wayfair” bill, and it is intended to provide parity between brick-and-mortar businesses located in the state and out-of-state online retailers. The legislation was sponsored by Sen. Andrew Koenig, R-Manchester, and was carried in the House by Rep. J. Eggleston, R-Maysville.

For a full list of bills the governor has taken action on, please click here.

Senate Lawmakers Introduce Bill To Level Playing Field Between Banks, FCS

Sens. Jerry Moran, R-Kan., John Boozman, R-Ark., Mike Rounds, R-S.D., Kevin Cramer, R-N.D., and Roger Marshall, R-Kan., introduced S. 2202, the Enhancing Credit Opportunities in Rural America Act of 2021. This legislation would end the taxation of interest earned from agricultural real estate loans.

This would not only reduce servicing costs for community banks providing these types of loans, it also would level the playing field between banks and the tax-advantaged Farm Credit System — making it easier for banks to support the farm sector through real estate loans. A bipartisan companion bill was introduced in the House earlier this year by Reps. Ron Kind, D-Wis., and Randy Feenstra, R-Iowa.

“This critically important legislation … will help lower the cost of credit for farmers and ranchers in rural America,” said American Bankers Association President and CEO Rob Nichols. “ECORA offers a straightforward solution to help farmers and ranchers during this time of lower farm incomes without creating new government payments or programs. We urge Congress to help our country’s farmers and ranchers by moving quickly to pass this timely bill.”

MBA Document Details Advance Child Tax Credit Payment

On July 15, the Internal Revenue Service will start monthly payments to eligible taxpayers who are entitled to claim a Child Tax Credit on their 2021 federal income tax return, based on information the IRS has on file from 2020 (or 2019) tax returns. MBA has created an informational document on the Child Tax Credit and Advance Child Tax Credit Payments. Additional information about the Advance Child Tax Credit Payments is available on the IRS website.

The IRS announced families eligible to receive the expanded child tax credit payments now can update their bank account information so they can easily receive their payments. The IRS made updates to its online Child Tax Credit Update Portal at IRS.gov and said that any changes to routing information made by Aug. 2 will apply to the Aug. 13 payment and all subsequent monthly payments for the remainder of the year.

Families will receive their July 15 payment by direct deposit in the bank account currently on file with the IRS. Those who are not currently enrolled for direct deposit will receive a check, the IRS said. The agency also warned of potential scams related to the child tax credit, and urged taxpayers only to submit their information to IRS.gov and not click on links received via phone, text or email prompting them to update their bank account information in order to receive the payment. 

House Votes To Repeal OCC ‘True Lender’ Rule

The House voted 218-208 on June 24 to repeal the Office of the Comptroller of the Currency’s “true lender” rule. The rule, finalized in 2020, established a test to determine when a bank is considered the true lender on a loan made in a partnership with a nonbank entity. On May 11, the Senate voted to repeal the rule using a Congressional Review Act resolution.

The measure now goes to the White House, where President Biden is expected to sign it. Following the vote, the OCC reaffirmed its long-standing position that "predatory lending has no place in the federal banking system."

“Moving forward, the OCC will consider policy options, consistent with the Congressional Review Act, that protect consumers while expanding financial inclusion,” the agency said. “Both of these priorities are part of the agency’s mission of ensuring that national banks and federal savings associations provide fair access to financial services for all Americans and that customers are treated fairly.”

The American Bankers Association and other trade groups have previously written in opposition to the Congressional Review Act resolution, stating that the next comptroller of the currency should analyze the rule and consider whether to initiate a new rulemaking to create a more robust true lender framework for providing safe and affordable credit to consumers.

ABA Statement Highlights Banks' Commitment To DEI, Financial Inclusion

In a statement for the record shared ahead of a House Financial Services subcommittee hearing on economic and racial justice, the American Bankers Association emphasized the banking industry’s commitment to diversity, equity and inclusion and highlighted some of the DEI and financial inclusion initiatives banks are implementing across the country. The statement also detailed specific steps ABA has taken to support banks as they work to strengthen their DEI initiatives.

“The banking industry firmly believes in the value of diversity, equity, and inclusion, and that a diverse workforce is critical to individual banks’ success in meeting the needs of diverse communities and customers across the nation,” ABA said. “ABA’s mission is to meet every bank where they are and assist them with implementing DEI programs and policies that advance them in their journey toward more equitable, inclusive and diverse workplaces and greater service to their communities.”

The statement highlights some of the significant financial commitments made by large banks during the past year to address the racial wealth gap in the U.S. and promote financial inclusion. Those include major investments in Black-owned businesses, support for historically Black colleges and universities and financing for MDIs and CDFIs. ABA also cited a range of DEI initiatives underway at banks of all sizes, citing several specific examples. These include employee resource groups, leadership and formal mentoring programs to advance women, people of color, and other underrepresented groups, and supplier diversity programs.  

Fed’s Quarles Skeptical On Benefits Of U.S. CBDC

Cautioning against “American susceptibility to boosterism and fear of missing out” leading to “occasionally impetuous, deluded crazes or fads,” Federal Reserve Vice Chairman for Supervision Randal Quarles  raised several concerns about the purported benefits and “considerable risks” of developing a U.S. central bank digital currency. The speech comes as the Fed undertakes a wide-ranging research project on the costs and benefits of a U.S. CBDC.

Speaking at the Utah Bankers Association’s convention this week, Quarles said the potential benefits of a U.S. CBDC are “unclear,” given that the ones most often touted by CBDC backers — relevance of the dollar and financial inclusion — are already being advanced by market participants. “I believe we can promote financial inclusion more efficiently by taking steps to make cheap, basic commercial bank accounts more available to people for whom the current cost is burdensome, such as the Bank On accounts developed in collaboration between the Cities for Financial Empowerment Fund and many local coalitions,” he said. Even if realized, he added, such benefits would be questionable given the “very good” condition of the U.S. payments system and ongoing private sector and Fed efforts to improve it.

Quarles also highlighted risks from a U.S. CBDC, including cyberattacks, money laundering risks, undermining private-sector competition and operational risk as a Fed “CBDC could, in essence, set up the Federal Reserve as a retail bank to the general public. … We will need to consider whether the potential use cases for a CBDC justify such costs and expansion of the Federal Reserve’s responsibilities into unfamiliar activities, together with the risk of politicization of the Fed's mandate that would come with such an expansion.”

CFPB Comments On Juneteenth Questions During ABA Regulatory Conference

A panel of representatives from the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Federal Reserve and the Consumer Financial Protection Bureau discussed a range of issues during the American Bankers Association’s Regulatory Compliance Conference. Among the topics was the newly enacted Juneteenth holiday that was observed Friday, June 18.

A lack of regulatory guidance after the historic holiday’s rapid enactment raised questions about the definitions of “holidays” and “business day,” which affect the timing of disclosures and rescission periods required by the Truth in Lending Act and TILA-RESPA Integrated Disclosure timing requirements in connection with residential mortgage transactions. During the panel discussion, Bryan Schneider, associate director of Supervision, Enforcement and Fair Lending at CFPB, acknowledged that there were “concerns around the implementation” of the holiday, particularly related to TRID. “Yes, it certainly happened very quickly,” Schneider said. “We know that some lenders didn’t have sufficient time after the federal holiday was declared to consider whether and how to adjust their closing timelines.”

When asked if CFPB would issue an interim final rule that would retroactively define June 18 as a business day under TILA to help ensure that institutions that went ahead with scheduled closings and fund disbursements won’t face unnecessary litigation risk, Schneider repeated the statement issued by CFPB Acting Director Uejio on June 18, stating that “TILA and TRID generally protect creditors from liability for bona fide errors and permit redisclosure after closing to correct errors.” He added that any guidance issued by the bureau would take into account the limited implementation period before the holiday and would be in consultation with FFIEC regulators as well as the Conference of State Bank Supervisors to “ensure consistency of interpretation for all regulated entities.”

Schneider confirmed the bureau is working on another statement, is “very attuned to and aware of the impact” and will proceed in a “thoughtful manner” with all regulatory stakeholders. “We’ve heard you and we’re working on it,” he said.

CFPB Finalizes Rule To Assist Borrowers Affected By COVID-19

The Consumer Financial Protection Bureau finalized a rule to facilitate streamlined loan modification efforts and establish a temporary COVID-19 emergency pre-foreclosure period under Regulation X that would prohibit servicers from making the first notice or filing required to initiate foreclosure until Dec. 31. This “pre-foreclosure” period would apply to mortgage loans secured by the borrower’s principal residence.

The final rule, effective Aug. 31, builds on existing rules that prohibit a servicer from making the first notice or filing required by law until a borrower’s mortgage loan obligation is more than 120 days delinquent. The CFPB issued the rule, along with an executive summary, in response to concerns that a large number of borrowers may exit forbearance at the same time this fall when they reach the maximum term of forbearance and could strain servicer capacity.

In addition, final rule:

  • temporarily allows mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19-related hardship based on the evaluation of an incomplete application
  • requires servicers to discuss specific additional COVID-19-related information as part of their early intervention obligations
  • clarifies servicers’ reasonable diligences when the borrower is in a short-term payment forbearance program made available to a borrower experiencing a COVID-19-related hardship based on the evaluation of an incomplete application
  • offers a definition of “COVID-19-related hardship”

FHFA: GSEs To Hold off On Certain GSE Foreclosures In Light Of New CFPB Rule

Following a final rule issued by the Consumer Financial Protection establishing a temporary COVID-19 emergency pre-foreclosure period under Regulation X that prohibits servicers from making the first notice or filing required to initiate foreclosure until Dec. 31, the Federal Housing Finance Agency said Fannie Mae and Freddie Mac servicers may not make a first notice or filing for foreclosure that would be prohibited by the CFPB rule before it takes effect. FHFA took this action to bridge the gap between the expiration of its existing moratoriums on single-family foreclosures and real estate owned evictions that will expire July 31 — a month before the CFPB rule is set to take effect.  

Fed Extends PPP Liquidity Facility For Final Time

The Federal Reserve will extend for a final time its Paycheck Protection Program Liquidity Facility until July 30. The Fed said that the extension is being made as an operational accommodation to allow additional processing time for banks, community development financial institutions and other financial institutions to pledge to the facility any PPP loans approved by the Small Business Administration through the June 30 expiration of the PPP program.

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.

FHFA Extends Foreclosure, Eviction Moratoriums Through July 31

The Federal Housing Finance Agency announced it would extend through July 31 a moratorium on foreclosures and real estate owned evictions for single-family mortgages backed by Fannie Mae or Freddie Mac. The current moratorium was set to expire June 30.

HUD To Propose Reinstating 2013 ‘Disparate Impact’ Rule

The U.S. Department of Housing and Urban Development proposed to recodify its 2013 discriminatory effects rule. If finalized, it would overturn HUD’s September 2020 final rule that conformed HUD’s 2013 disparate impact rule with the Supreme Court’s 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, 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 2020 final rule never took effect because a Massachusetts federal district court judge stayed the rule pending consideration of consumer advocates’ challenge to the rule as arbitrary and capricious.

Under the 2013 rule that HUD proposes to recodify, the burden shifts to the defendant to prove that its policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest, if the plaintiff first proves that the policy or practice caused or predictably will cause a disparate impact on a protected group.

In contrast, the 2020 final rule added five elements that must be included in disparate impact claims under the FHA. The American Bankers Association and other trade groups had supported the 2020 final rule, which they noted struck the “appropriate balance” envisioned by Inclusive Communities. The association is closely following these developments and will provide feedback to HUD on this latest proposal. Comments are due Aug. 26.

CFPB Report Flags Consumer Reporting, Debt Collection, Payday Lending Issues

The Consumer Financial Protection Bureau issued a “Supervisory Highlights” report focusing on recent examiner observations of several financial products. Among other things, examiners flagged issues related to consumer reporting, debt collection and payday lending.

Examiners noted several issues related to consumer reporting, including the following.

  • failure by consumer reporting companies to comply with accuracy procedures
  • failing to place security freezes on consumer’s reports
  • failing to update and correct consumer information

The bureau also flagged issues related to debt collection, such as companies making prohibited calls to a consumer’s workplace, failure to cease communication on written request and deceptive means of collection.

In addition, the bureau flagged one instance of redlining, citing HMDA data from the lender, as well as direct mail marketing campaigns, “that featured models, all of whom appeared to be non-Hispanic white,” and the inclusion of “headshots of its mortgage professionals in its open house marketing materials” that “showed only professionals who appeared to be non-Hispanic white.” The bureau also found that the lender’s office locations were nearly all concentrated in majority non-Hispanic neighborhoods and said that examiners “determined that the lender employed mostly non-Hispanic white mortgage loan officers and identified emails among mortgage loan officers containing racist and derogatory content.”

FinCEN Issues National AML Priorities

The Financial Crimes Enforcement Network issued government-wide policy priorities for anti-money laundering and countering the financing of terrorism. According to the priorities, the most significant AML/CFT threats currently facing the country are corruption, cybercrime, domestic and international terrorist financing, fraud, transnational criminal organization activity, drug trafficking organization activity, human trafficking and human smuggling, and proliferation financing.

In a separate interagency statement issued by FinCEN and the federal banking agencies, the agencies stated that publication of the priorities “does not create an immediate change to Bank Secrecy Act requirements or supervisory expectations for banks.” The agencies said they will revise their BSA regulations within the next six months to address how the priorities will be incorporated into banks’ BSA requirements.

The agencies added that they will not examine banks for the incorporation of the priorities into their risk-based BSA programs until the effective date of the revised regulations. The priorities list will be updated every four years, as required by the Anti-Money Laundering Act of 2020.

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