January 6, 2022

MBA Highlights Concerns With ‘Overkill’ CFPB Proposal

“This proposal is the essence of overkill.”

That’s how MBA described the proposed implementation of the Dodd-Frank Act’s Section 1071 that would require lenders to collect and report data on small business credit applications. In its 21-page comment letter to the CFPB, MBA said “Regulatory excesses and their burden and cost are a primary source of the decline of diversity in banking and the concentration of power in financial services.” 

MBA highlighted three primary points.

  1. Increase the threshold for a covered financial institution from 25 originated loans to no less than 500 originated loans.
  2. Only the data points stated in the law should be reported, and not the discretionary data points proposed by the bureau.
  3. The implementation period should be much longer than 18 months after the final rule is published — MBA recommends at least a three-year period to allow for proper preparation.

MBA urged the CFPB to “craft a final rule that is workable, fair, efficient and presents the least burden and costs possible for our members and their customers and that does not result in reduced availability of credit for our small businesses and their communities.”

The comment period closes today. MBA thanks its members for taking time to share their views on the proposal with CFPB.

Supreme Court Sets Jan. 7 Argument In Vaccine Mandate Dispute

The U.S. Supreme Court will hold oral arguments tomorrow, Friday, Jan. 7, in the challenge to the employer vaccine mandate issued by the Occupational Safety and Health Administration. The mandate requires employers with 100 or more employees to ensure staff is vaccinated or tested weekly for COVID-19, among other requirements.

In December, a three-judge panel of the 6th U.S. Circuit Court of Appeals lifted a judicial stay of the vaccine mandate. In response, OSHA stated it will not issue citations for noncompliance with any aspect of the vaccine mandate before Jan. 10 and will not issue any citations for noncompliance with the mandate’s weekly testing requirements before Feb. 9 “so long as the employer is exercising reasonable, good faith efforts to come into compliance with the standard.”

In mid-December, business groups challenging the vaccine mandate filed an application with the Supreme Court for an emergency stay of the mandate. The Jan. 7 court date indicates that the court is not likely to act on the stay requests until after that date.

ABA Cautions FASB On Enhanced Disclosures As Replacement For TDRs

The American Bankers Association recently expressed support for a Financial Accounting Standards Board proposal that would eliminate the current accounting guidance for troubled debt restructurings, or TDRs, but cautioned that proposed expanded disclosure requirements for loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty could “unintentionally introduce additional cost and complexity that outweighs the benefits of eliminating TDRs.”

“Under current GAAP, banks provide specific disclosures for modified loans to customers in financial difficulty in which a concession was granted. In contrast, the [proposal] removes consideration of concessions,” ABA explained. “The proposed requirements would, thus, include modifications that do not affect cash flows, common financing to troubled borrowers that may otherwise reflect business as usual, as well as loss mitigation that may not necessarily involve a concession. As a result, many more loans will be subject to the proposed disclosures. ABA believes that the proposed broad requirements will require significant new processes and the resulting information will often obscure an investor’s analysis of credit risk.”

ABA urged FASB to reconsider the scope of the disclosures and the purpose of the modifications that would trigger disclosure requirements. The association also cautioned against the use of prescriptive disclosure guidance, asked FASB to rethink its transition method and expressed support for the board’s conclusion that vintage disclosure should not be expanded to include cumulative write-off data.

FDIC Releases New FAQs, Designated Exception on Brokered Deposits

The Federal Deposit Insurance Corporation released three new frequently asked questions on its brokered deposits rule, which took effect in April 2021. The new FAQs cover under what circumstances third parties can qualify for the exception for third-party administrators of health savings accounts, filing deadlines and penalties for filers who rely on the “primary purpose” exception for instances where an agent has less than 25% of the total “assets under administration” for its customers and filing deadlines and penalties for the annual certification under the “enabling transaction” test.

The agency also identified an additional business relationship that meets its primary purpose exception to the deposit broker definition. “It is the FDIC’s view that the agent or nominee’s primary purpose in placing deposits at [insured depository institutions] is to provide non-discretionary custodial services on behalf of the depositor or depositor’s agent,” the agency said in a notice it has submitted for publication in the Federal Register. “Therefore, such entities will be deemed to meet the primary purpose exception. ... Entities that meet the criteria described in this Notice will be permitted to rely upon the exception without the submission of an application or notice.”

The exception does not apply to custodial agents that “play any role” in determining at which banks to place customer funds, including as an example agents that create or use algorithms to make fund placement determinations, the agency said.

IRS Releases Final Regs On Tax Implications Of Post-Libor Modifications

Shortly before the cessation of two U.S. dollar Libor tenors Dec. 31, the IRS issued final regulations on the tax consequences of the transition away from Libor. The final regulations address circumstances when modifying a contract to update its reference rate could result in realization of income or losses for federal tax purposes — which, under existing rules, modifications may in certain circumstances be deemed to create a new contract and trigger a taxable event.
The final rules addressed most concerns raised by commenters, including the Alternative Reference Rates Committee, among them concerns about how to determine fair market values at the time a contract is modified. The final rules adopt an alternative approach providing additional definitions regarding covered and nonmodifications for determining qualification for avoidance of a tax event.

The final regulations are effective March 5.

FHFA Announces Higher Fees For High Balance Loans, Second Home Loans

The Federal Housing Finance Agency will increase fees for certain Fannie Mae and Freddie Mac high-balance loans and second home loans starting April 1. Fees for high-balance loans will increase between 0.25% and 0.75%, and second home loan fees will rise between 1.125% and 3.875%, with both types tiered by loan-to-value ratio, FHFA said.

The new fees will not be applicable to first time homebuyers in high-cost areas with incomes at or below 100% of area median income, FHFA said. The increased fees will also not be applied to affordable housing programs such as HomeReady, Home Possible, HFA Preferred and HFA Advantage.‌

The new fees are part of FHFA's previously announced updated 2022 performance goals for Fannie and Freddie and are expected to improve their regulatory capital positions over time, FHFA said.

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  • The Hamilton Bank, an independent community bank in northwest Missouri, has a great opportunity for an ag loan officer.
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