Capitol Comments
February 2016
The OCC, the Board, and the FDIC amended their CRA regulations to adjust the asset-size thresholds used to define "small bank" or "small savings association" and "intermediate small bank" or "intermediate small savings association." As required by the CRA regulations, the adjustment to the threshold amount is based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The agencies also propose to make technical edits to remove obsolete references to the OTS and update cross-references to regulations implementing certain Federal consumer financial laws in their CRA regulations.

Comment: Beginning January 1, 2016, banks and savings associations that, as of December 31 of either of the prior two calendar years, had assets of less than $1.216 billion are small banks or small savings associations.
Small banks and small savings associations with assets of at least $304 million as of December 31 of both of the prior two calendar years and less than $1.216 billion as of December 31 of either of the prior two calendar years are intermediate small banks or intermediate small savings associations.
Small banks and small savings associations with assets of at least $305 million as of December 31 of both of the prior two calendar years and less than $1.221 billion as of December 31 of either of the prior two calendar years are intermediate small banks or intermediate small savings associations.
 
Joint agencies' issue statement on CRE risk management

The Federal Reserve, the FDIC, and the OCC jointly issued a statement ( FRB SR 15-17 , FDIC FIL-62-2015 ,   OCC Bulletin 2015-51 ) to remind financial institutions of existing regulatory guidance on prudent risk management practices for commercial real estate (CRE) lending activity through economic cycles. Statement on Prudent Risk Management for Commercial Real Estate Lending
Comment: Forward this the statement to your bank's president, compliance officer, and staff that supervises commercial real estate lending. The bottom line is banks need to review policies and practices in light of the developments in the statement and maintain risk management practices and capital levels commensurate with the level and nature of their CRE concentration risk. Banks must maintain underwriting discipline and exercise prudent risk management practices that identify, measure, monitor, and manage the risks arising from their CRE lending activity.

CFPB actions
CFPB seeks input on resubmission of data under HMDA

CFPB announced it is seeking public feedback on the resubmission of mortgage lending data reported under HMDA. In October 2015 the CFPB finalized a rule updating the reporting requirements of the HMDA regulation. Given these changes, the current resubmission guidelines may need to be updated, and the CFPB is seeking feedback on what modifications may be appropriate.
The published notice asks for public comment on the CFPB's use of resubmission error thresholds and how they should be calculated. The notice also invites comments on whether the thresholds should vary with the size of the submission or kind of data, as well as the consequences for exceeding a threshold. Other topics addressed in the notice include how the CFPB conducts its mortgage lending data integrity reviews and any technological or other changes that might be made to the data editing and collection process to help reduce errors.

Comment: Comments will be accepted for 60 days after the request is published in the Federal Register, which had not taken place at time of the issuance of this issue of Capital Comments.


CFPB announces annual HMDA and HPML escrow threshold adjustments

The CFPB issued two final rules regarding annual threshold adjustments under the implementing regulations for the HMDA and the TILA.

HMDA: The CFPB issued a final rule regarding the asset-size exemption threshold for banks, savings associations, and credit unions under Reg. C, which implements HMDA. The asset-size exemption for banks, savings associations, and credit unions will remain at $44 million. As a result, these institutions with assets of $44 million or less as of December 31, 2015, are exempt from collecting HMDA data in 2016. An institution's exemption from collecting data in 2016 does not affect its responsibility to report the data it was required to collect in 2015.
TILA: The CFPB issued a final rule adjusting the asset-size threshold for certain creditors to qualify for an exemption from the requirement to establish an escrow account for a higher-priced mortgage loan under Reg. Z. The asset-size threshold exemption for certain creditors will decrease from $2.060 billion to $2.052 billion for 2016. As a result, these creditors with assets of less than $2.052 billion (including assets of certain affiliates) as of December 31, 2015, that also meet other requirements of Regulation Z will be exempt from the requirement to establish escrow accounts for HPMLs in 2016.

CFPB fact sheet on construction loan disclosures
The CFPB created a fact sheet that reviews the basics of construction loan disclosures under the Know Before You Owe mortgage disclosure rule.

Comment: From the fact sheet:
Section 1026.17(c)(6)(ii) of Regulation Z has long provided that, when a multiple-advance loan to finance the construction of a dwelling may be permanently financed by the same creditor, the construction phase and the permanent phase may be treated as either one transaction or more than one transaction for purposes of required disclosures. The creditor can use either one combined disclosure for both the construction financing and the permanent financing, or a separate set of disclosures for the two phases.
If the creditor chooses to disclose the construction-to-permanent financing as one transaction, a single set of disclosures (Loan Estimate and Closing Disclosure) covers both phases of the transaction. If the creditor chooses to disclose the construction-to-permanent financing as separate transactions, the construction phase has its own Loan Estimate and Closing Disclosure, and the permanent phase has its own, separate Loan Estimate and Closing Disclosure.
The creditor can make this election whether the construction phase and the permanent phase are both closed at the same time or there are separate closings for the construction and permanent financing phases.

CFPB creates tool to determine rural or underserved areas
The CFPB created an online tool
to help creditors determine which properties are located in a "rural" or "underserved" area as defined in 12 CFR 1026.35(b)(2)(iv)(A) and (B). A creditor may rely on this tool to provide a safe harbor determination that a property is located in a rural or underserved area. However, the tool is not applicable to the exemption from the § 1026.35(c)(4) requirement for an additional appraisal, which is based on "rural county" and not "rural area." The CFPB publishes a list of counties that are entirely rural to facilitate compliance with the exemption in § 1026.35(c)(4)(vii)(H).

Creditors can select a year and enter addresses into the tool, either one at a time or more than one at a time, and the tool provides a determination of whether each address is in a rural or underserved area for the year selected. You should keep a copy of your results that show the determination for each address run through the tool. If the address is too new, the tool might not return a result.

Comment: The CFPB's webpage containing the tool also contains FAQs on the tool. If you enter an address and the tool can't find it, the address might be too new or you might need to enter the form of the address produced by the United States Postal Service site: https://tools.usps.com/go/ZipLookupAction_input.

CFPB issuances on college sponsored credit cards

The CFPB sent warning letters to 17 colleges directing them to improve disclosure of school-sponsored credit card agreements. A CFPB investigation found that these schools failed to make marketing agreements available to the public, as required by law. The CFPB is also releasing its annual report on college credit card agreements, which highlights trends in the marketing partnerships between colleges and financial institutions and concerns about transparency with college-sponsored financial accounts. To promote increased protections for students in the expanding school-sponsored debit and prepaid market, the CFPB is releasing a Safe Student Account Toolkit
to help colleges and universities avoid promoting financial accounts with surprise fees.

Comment: The CFPB reviewed a sample of 25 of the largest colleges with credit card partnership agreements. Eighty percent of the colleges did not disclose their credit card marketing contracts on their websites. More than two-thirds of the schools did not provide access to agreements upon request. The number of college credit card agreements has declined by 70 percent. College debit and prepaid card agreements are more common than credit card agreements.

CFPB annual appropriations report

The CFPB presented a report entitled Report of the Consumer Financial Protection Bureau Pursuant to Section 1017(e)(4) of the Dodd Frank Act to the Committees on Appropriations of the United States Senate and House of Representatives under Section 1017(e)(4), in fulfillment of its statutory responsibility and commitment to accountability and transparency. This report covers October 1, 2014 - September 30, 2015, the Bureau's 2015 fiscal year.

Comment: Much of the discussion we have seen about this report has focused on CFPB staff salaries. Approximately $265.9 million was spent on employee compensation and benefits for the 1,529 CFPB employees who were on-board by the end of the fiscal year. That's an average of $174,000 per year for every employee. The 2014 report stated that approximately $237 million was spent on employee compensation and benefits for the 1,443 CFPB employees who were on-board by the end of the fiscal year. Because the CFPB added 89 employees in 2015, the average CFPB employee must have been paid more than $174,000 in salary and benefits in 2015. It was probably closer to $177,000.

CFPB blog
Save the date, Louisville (hearing on access to checking accounts)

FDIC to conduct live deposit insurance seminars
The FDIC will conduct six identical live seminars [i] on FDIC deposit insurance coverage for bank employees and bank officers between February 23, 2016, and December 5, 2016. In addition, the FDIC has developed three separate Deposit Insurance Coverage Seminars for bank officers and employees, which are now available on the FDIC's YouTube channel . [ii]
Both the live and the YouTube deposit insurance coverage seminars will provide bank employees with an understanding of how to calculate deposit insurance coverage. The live seminars each provide a comprehensive overview of FDIC deposit insurance. The three YouTube seminars cover:
Comment: Good training material. Forward this to your Cashier.
 
FDIC proposes rule on deposit insurance assessment for small institutions
On January 21, 2016, the FDIC Board of Directors (Board) approved a Notice of Proposed Rulemaking (NPR). The NPR revises an NPR adopted by the Board on June 16, 2015, (2015 NPR) in response to comments received. Like the 2015 NPR, this revised NPR would refine the deposit insurance assessment system for small insured depository institutions (generally, those institutions with less than $10 billion in total assets). Under the revised NPR, refinements would become operative the quarter after the reserve ratio of the Deposit Insurance Fund (DIF) reaches 1.15 percent (or the first quarter after a final rule is adopted that the rule can take effect, whichever is later). Comments on the revised NPR are due 30 days following publication of the revised NPR in the Federal Register.
The revised NPR would be similar to the 2015 NPR, but, in contrast to the 2015 NPR, would:
  • Revise the previously proposed one-year asset growth measure.
  • Use a brokered deposit ratio (that treats reciprocal deposits and Federal Home Loan Bank advances the same as under current regulations) --rather than the previously proposed core deposit ratio -- as a measure in the financial ratios method for calculating assessment rates for all established small banks.
  • Remove the existing brokered deposit adjustment for established small banks, which currently applies to banks outside Risk Category I.
  • Revise the weights assigned to the proposed measures in the financial ratios method based upon a re-estimation of the underlying statistical model.
To help established IDIs evaluate the effect of the proposed rule, the FDIC will update the assessment calculator [vi] on the FDIC's website that will allow IDIs to estimate their assessment rates under the revised proposal.
 
FDIC issues winter 2015 Supervisory Insights
The winter 2015 issue of  Supervisory Insights [vii]   features three articles of interest to examiners, bankers, and supervisors. These articles address the development of an effective cybersecurity framework, marketplace lending, and recent results from the "FDIC's Credit and Consumer Products/Services Survey."
 

Highlights:

  • "A Framework for Cybersecurity" discusses the cyber threat landscape and how financial institutions' information security programs can be enhanced to address evolving cybersecurity risks. The article also provides an overview of actions taken by the Federal Deposit Insurance Corporation individually and with other regulators in response to the increase in cyber threats.
  • "Marketplace Lending" provides an overview of the marketplace lending model. The article offers resources for bank boards of directors and management to consider when engaging in marketplace lending activity.
  • "Lending Viewpoint: Results from the FDIC's Credit and Consumer Products/Services Survey" describes recent lending conditions and risks as reported through the survey at the conclusion of risk- management examinations.
  • "Regulatory and Supervisory Roundup" provides an overview of recently released regulations and supervisory guidance.

Comment: Cyber risk is a substantial business risk. A bank's board and senior management must understand the seriousness of the threat environment and create a cybersecurity culture throughout the organization. The effective identification and mitigation of cyber risk must be grounded in a strong governance structure with the full support of the board and senior management.
   
FDIC releases interest rate risk videos
As part of the FDIC's Community Banking Initiative, the FDIC is announcing the release of updated videos on interest rate risk. The new videos provide financial institution directors, management and staff with resources for better understanding interest rate risk and how it can be prudently managed.
Director video (33 minutes) [viii]
Management and staff videos (Eight videos varying between 6:38 and 11:31 minutes) [ix]
Highlights:
  • Balance sheets continue to reflect a heightened mismatch between asset and funding maturities that, coupled with tighter net interest margins, have left financial institutions more vulnerable to rising interest rates.
  • The FDIC continues to emphasize the expectation that institutions manage interest rate risk in a prudent manner.
  • The FDIC previously issued a video on interest rate risk tailored to directors as well as a series of more technical videos designed for management and staff involved in interest rate risk management.
  • To reflect recent industry data and to expand on relevant topics, the FDIC has released updated videos.
  • The videos address industry trends, board and management responsibilities, types of interest rate risk, different risk measurement systems, key modeling assumptions, internal controls, and independent review.
Comment: You might find a good place to stop the director's video and show it in two parts. FDIC-insured institutions may download the videos through FDICconnect by contacting their FDICconnect coordinator.
OCC issues country risk management exam booklet
The OCC issued the " Country Risk Management " [i] booklet of the Comptroller's Handbook. This revised booklet replaces the booklet of the same title issued in March 2008.
This booklet is prepared for use by OCC examiners in assessing a bank's exposure to country risk and includes procedures to evaluate the adequacy of the bank's country risk management framework. Country risk management topics include board and management oversight; policies and procedures; country exposure reporting system; country risk analysis process; country risk ratings; country exposure limits; monitoring country conditions; stress testing and integrated scenario planning; and independent risk management, internal controls, and audit.

This booklet provides updated and expanded guidance and examination procedures to examiners concerning country risk management.
*           reflects lessons learned from the financial crisis of 2008 and the European banking and debt crises.
*           updates the risks associated with international activities by providing more in-depth discussion of the effects of country risk, cross-border risk, and sovereign risk on the OCC's eight risk categories (credit, interest rate, liquidity, price, operational, compliance, strategic, and reputation).
*           adds an internal control questionnaire and a glossary.
*           expands the sample request letter.
*           addresses the risk management of third-party providers.
Comment: The OCC Comptroller's Handbook booklet, including the "Country Risk Management" booklet, is prepared for use by OCC examiners in connection with their examination and supervision of national banks and federal savings associations, which makes it an excellent resource when writing policies and procedures.
 
OCC revises installment lending booklet
The OCC issued the " Installment Lending " [ii] booklet of the Comptroller's Handbook. This revised booklet updates and replaces the "Installment Loans" booklet issued in March 1990 (and examination procedures issued in March 1998). The revised booklet also replaces section 217, "Consumer Lending," issued in January 2000 as part of the former Office of Thrift Supervision Examination Handbook for examining federal savings associations.
The revised booklet incorporates national bank and federal savings association statutes and regulations, guidance, and examination procedures. The booklet also provides updated guidance to examiners on assessing and managing the risks associated with installment lending activities
The "Installment Lending" booklet
*           rescinds OCC Bulletin 2004-59, "Retail Lending: Interim Examination Procedures."
*           provides updated guidance to examiners for assessing the quantity of risk associated with installment lending activities and provides guidance for assessing the quality of installment lending risk management.
*           provides updated guidance to examiners on the administration of installment lending practices and the controls and processes necessary to effectively manage the associated risks. These processes include underwriting or account eligibility criteria, charge-off, risk management and control systems, and third-party management.
Comment: The OCC Comptroller's Handbook booklet, including the "Installment Lending" booklet, is prepared for use by OCC examiners in connection with their examination and supervision of national banks and federal savings associations, which makes it an excellent resource when writing policies and procedures.
 
OCC releases 2016 directors' workshop schedule
The OCC announced its 2016 schedule of workshops for directors [iii] of national community banks and federal savings associations.
The OCC examiner-led workshops provide practical training and guidance to directors of national community banks and federal savings associations to support the safe and sound operation of community-based financial institutions.
The OCC offers the workshops nationwide to outside directors of national community banks and federal savings associations. Management directors may also find the workshops beneficial. The cost is $99.
Federal Reserve actions
Same day ACH effective September 2016: FAQs
Answers to many of the most frequently asked questions can be found using the links on this webpage [i] on the Fed's website. If your question is not answered by the information provided on the site, My FedDirectory® [ii] provides a comprehensive list of service and support contacts who can assist you.
 
Fed creates resource center for same day ACH
To help ACH network participants prepare for the September 23, 2016 implementation of the ACH Rules change regarding Same Day ACH, Federal Reserve Financial Services has created a resource center [iii] devoted to hosting related information.
 
Fed reports progress on enhancing the payment system
The Federal Reserve released a report [iv] detailing the progress made and outlined anticipated steps for moving forward with its initiative to enhance payment system speed, efficiency, and security.
Comment: The report comes one year after the publication of the Fed's Strategies for Improving the U.S. Payment System . [v] Videos of George and Powell discussing the effort to improve the payments system are available online at:  www.FedPaymentsImprovement.org.
 
Fed ends support for Internet Explorer 9 and 10
The Fed announced [vi] that it discontinued support for Microsoft® Internet Explorer® 9 and Internet Explorer 10® for use with FedLine Web® and FedLine Advantage® access solutions. The Fed now only provides support for Explorer 11®.
Comment: These changes are necessary because Microsoft ended support of older versions of Internet Explorer. For more security on the Internet, all bank personnel should keep their browsers up-to-date. Internet Explorer 11 is not compatible with Windows XP or Vista. If you are using Windows XP, your operating system is inherently unsafe because Microsoft ended support for them in 2014. Support for Vista SP2 ends April 11, 2017. Here is Microsoft's lifecycle fact sheet . [vii]
 
Fed's Outlook Live sends resource list in lieu of annual "year-in-review"
Because the Fed's Outlook Live covered most of the hot topics throughout the year through the Interagency Fair Lending Hot Topics and Common Violations and Hot Topics sessions, they did not host their annual "Year-in-Review" webinar. Instead, they provided a year-end recap highlighting recent regulatory developments and directing subscribers to additional resources:
  • TRID -All five Outlook Live webinars on TRID are available for playback through the archivespage. Additionally, there is an index of questionscovered during the webinars.
  • Flood Insurance Rule - On October 22, 2015, there was an Outlook Live session titled Interagency Flood Insurance Regulation Update,where the Agencies discussed the recent updates to the flood insurance regulations. The topics included:
    1. Escrow of flood insurance premiums and fees
    2. Force placed flood insurance
    3. Detached structures exemption
The Fed archived the session and posted an. event transcript . Because they received a large volume of questions, they will publish a Consumer Compliance Outlook article to address the more common questions.
  • HMDA Final Rule - The CFPB has released numerous resources, including: HMDA Executive Summary, HMDA Key Dates Timeline, HMDA Compliance Guide, Summary of Reportable Data, and Institutional Coverage Charts for 2017 and 2018; all of which are posted to the CFPB's Regulatory Implementationpage.
  • CFPB's Future Rulemaking -The CFPB posted its semiannual rulemaking agendaproviding an overview of the CFPB's major rulemaking initiatives in pre-rule, proposed rule, final rule, long-term, and completed stages. Among its shorter-term initiatives, the CFPB expects to issue a final rule related to prepaid accounts in spring 2016 and a proposal related to payday, auto title, and similar products in first quarter 2016.
Comment: These are excellent resources that you may want to bookmark and share.
FTC gives CFPB annual ECOA report
The staff of the FTC provided an annual summary [i] to the CFPB on the FTC's activities related to the enforcement of the ECOA.
The FTC is responsible for ECOA enforcement and education related to most non-bank financial service providers. In the letter to the CFPB, staff details the Commission's work on a number of policy issues related to ECOA, including issues addressed in FTC workshops as well as a proposed  consumer survey to learn about experiences with automobile dealership financing. In addition, the letter outlines the Commission's business and consumer education efforts related to fair lending issues.
 
FTC creates one-stop identity theft website
The FTC has created a new one-stop website [ii] that is integrated with its consumer complaint system, allowing consumers who are victims of identity theft to rapidly file a complaint with the FTC and then get a personalized guide to recovery that helps streamline many of the steps involved. The upgraded site, which is mobile and tablet accessible, offers an array of easy-to-use tools that enable identity theft victims to create the documents they need to alert police, the main credit bureaus and the IRS among others.
 
Agencies ask banks to encourage tax refund direct deposit
The Treasury and the IRS want to increase direct deposit [iii] for the upcoming 2016 tax filing season and have developed social media messages that asking financial institutions [iv] to use in order to encourage customers to have their tax refunds deposited into accounts. Here are the key messages:
* Eight out of 10 taxpayers get their refunds by direct deposit.
* Direct deposit is simple, safe and secure.
* 98 percent of all federal benefits are made by direct deposit.
* Direct deposit also saves you money. It costs the nation's taxpayers $1 for every paper refund check issued, but only about a dime for each direct deposit made.
 
FHFA, Fannie Mae, and Freddie Mac announce dispute resolution program
FHFA announced that Fannie Mae and Freddie Mac (the Enterprises) have implemented an independent dispute resolution (IDR) process for resolving repurchase disputes. The program enables lenders to submit unresolved loan level disputes to a neutral third party arbitrator after the appeal and escalation processes have been exhausted. It was developed cooperatively by the Enterprises and FHFA with input and support from the mortgage lending industry.
The IDR process provides the Enterprises and lenders a mechanism for resolving a repurchase dispute and avoiding the possibility that a dispute might languish unresolved for an extended period of time as has often occurred in the past," said FHFA Director Melvin L. Watt.  "IDR is the final part of the Representation and Warranty Framework which, taken as a whole, will increase clarity for lenders and will ultimately increase access to mortgages for creditworthy borrowers."
The  Representation and Warranty Framework [v] has been a priority outlined in the conservatorship Scorecards since 2012.   Direction to complete IDR as part of that framework was given in the  2016 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions. [vi]
 
Comment: According to the news release, the IDR process is available on loans delivered to Fannie Mae and Freddie Mac on or after Jan. 1, 2016. Specific details will be published in the Enterprises' selling guides in the coming months.
 
President creates commission on cybersecurity
The President issued an executive order establishing, within the Department of Commerce, the Commission on Enhancing National Cybersecurity (Commission). Press release . [vii]
The mission of the Commission is to "make detailed recommendations to strengthen cybersecurity in both the public and private sectors while protecting privacy, ensuring public safety and economic and national security, fostering discovery and development of new technical solutions, and bolstering partnerships between Federal, State, and local government and the private sector in the development, promotion, and use of cybersecurity technologies, policies, and best practices."
 
HSBC reaches $470 million agreement
The Department of Justice, HUD, and the CFPB, along with 49 state attorneys general and the District of Columbia's attorney general, have reached a $470 million agreement with HSBC Bank USA NA and its affiliates (collectively, HSBC) to address mortgage origination, servicing and foreclosure abuses.
The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork.
The settlement's consumer protections and standards include:
  • Making foreclosure a last resort by first requiring HSBC to evaluate homeowners for other loss mitigation options;
  • Restricting foreclosure while the homeowner is being considered for a loan modification;
  • Procedures and timelines for reviewing loan modification applications;
  • Giving homeowners the right to appeal denials; and
  • Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls.
OCC's Curry speaks on revitalizing communities
Comptroller of the Currency Thomas J. Curry discussed efforts to help revitalize communities and highlighted how community members can voice their concerns. Remarks came during a speech [1] before the 2016 National Interagency Community Reinvestment Conference.
Comment: Curry encouraged bankers and community stakeholders to engage in dialogue to help pinpoint new business opportunities, identify potential partnerships, and help formulate business strategy for bank CRA obligations. He highlighted the OCC's CRA training sessions for community development organizations and asked for public input to help inform the decisions the OCC makes when evaluating banks' activities. Lastly, he sought public comment on branch closure and said that branch closing and opening can affect a bank's CRA performance.
 
Fed releases consumer credit data for December 2015
According to the Fed, the data [2] reflects that consumer credit increased at a seasonally adjusted annual rate of 5-3/4 percent during the fourth quarter. Revolving credit increased at an annual rate of 5-1/4 percent, while nonrevolving credit increased at a seasonally adjusted rate of 6 percent. In December, consumer credit increased at an annual rate of 7-1/4 percent.
 
HUD and Census Bureau release new residential sales statistics
Sales of new single-family houses in December 2015 were at a seasonally adjusted annual rate of 544,000, according to estimates [3] released jointly today by HUD and the U.S. Census Bureau. This is 10.8 percent (±17.1%)* above the revised November rate of 491,000 and is 9.9 percent (±25.0%)* above the December 2014 estimate of 495,000.
The median sales price of new houses sold in December 2015 was $288,900; the average sales price was $346,400. The seasonally adjusted estimate of new houses for sale at the end of December was 237,000. This represents a supply of 5.2 months at the current sales rate.
An estimated 501,000 new homes were sold in 2015. This is 14.5 percent (±4.5%) above the 2014 figure of 437,000.
 
Fed issues December industrial production and capacity utilization numbers
Industrial production declined 0.4 percent in December, primarily as a result of cutbacks for utilities and mining. The decrease for total industrial production in November was larger than previously reported, but upward revisions to earlier months left the level of the index in November only slightly below its initial estimate. For the fourth quarter as a whole, industrial production fell at an annual rate of 3.4 percent.
Manufacturing output edged down in December. The index for utilities dropped 2.0 percent, as continued warmer-than-usual temperatures reduced demand for heating. Mining production decreased 0.8 percent in December for its fourth consecutive monthly decline. At 106.0 percent of its 2012 average, total industrial production in December was 1.8 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in December to 76.5 percent, a rate that is 3.6 percentage points below its long-run (1972-2014) average.
 
FedFocus
FedFocus [4] is the source for the latest Federal Reserve Financial Services news. Each edition keeps you informed about hot topics in the industry, as well as provides insight into the value of Federal Reserve Financial Services. The headlines from this month's edition are:  
  • FedLine Advantage® helps Roxboro Savings Bank streamline its wire processing
  • Celebrating the anniversary of Strategies for Improving the U.S. Payment System
  • Fed Facts: There are only 12 of them serving the entire U.S.
  • Kick off spring conference season with the Fed
FedFlash
FedFlash [5] is your source for the latest Federal Reserve Financial Services operational news. Each bulletin keeps you informed of issues critical to your day-to-day operations, providing you with National and District updates regarding the Fed's products and services, processes, technical protocols and contact information. In this month's edition:
 
Account Services
Account Services prepares for SCI integration into the AMI application
Check/Check 21 Services
Tips on the Canadian cash letter process
Federal Reserve Banks to publish new FedReceipt® RTNs
FedACH® Services
FedACH Feature: Automate the notice of ACH Return items and NOCs to your originators
Same Day ACH Resource Center now available
FedACH Services Customer Support number changed on January 4
FedLine® Access Solutions
New EUAC Onboarding Kit available in FedLine® Home
Federal Reserve Banks end support for Internet Explorer® 9 and 10
General
Introducing the Risk Management Toolbox
Treasury Services
U.S. Treasury asks financial institutions to encourage account holders to use direct deposit for tax refunds
Proposed rules are included only when community banks may want to comment.
COMMENTS
CLOSE                SUMMARY OF PROPOSED RULE
03.22.2016              EGRPRA [i] . The OCC, Board, and FDIC are conducting a review of the regulations we have issued in order to identify outdated or otherwise unnecessary regulatory requirements imposed on insured depository institutions, as required by the Economic Growth and Regulatory Paperwork Reduction Act of 1996. EGRPRA requires the Agencies to organize the regulations into categories and publish groups of categories for comment. In this notice, the Agencies are seeking public comment on regulations in the following categories: Rules of Procedure; Safety and Soundness; and Securities. We have listed these rules on a chart included with this notice. In addition, as we previously announced, the Agencies have expanded the scope of the EGRPRA review to include the Agencies' recently issued final rules. Accordingly, in this notice, the Agencies invite the public to comment on any Agency final rule not included in a previous EGRPRA Federal Register notice. To facilitate identification of these recently issued rules, we have included with this notice a separate chart that lists these rules. Finally, in order to be as inclusive as possible, the Agencies also invite comment during the comment period for this notice on any Agency rule that is issued in final form on or before December 31, 2015. The Agencies listed these rules on the EGRPRA Web site . [ii] The public may also comment on any other Agency rule, including rules covered by the three prior notices during the open comment period for this notice

04.04.2016              FinCEN published the revised Bank Secrecy Act Currency Transaction Report [iii] ("BCTR") in March 2011. The BCTR was designed to facilitate financial institutions reporting the most frequently encountered transaction scenarios. Since that time, FinCEN has become aware that the current report is not configured to allow for alternative reporting models that have developed in the last few years, such as reports filed by a parent company on behalf of its subsidiary. To remedy some of the limitations of the current BCTR, FinCEN now proposes an amended report. This notice does not propose any new regulatory requirements or changes to the requirements related to currency transaction reporting, but rather seeks input on technical matters designed to improve the layout and reporting of the BCTR. This request for comments covers 31 CFR 1010.310.
Not all final rules are included. Only rules affecting community banks are reported, but we make no guarantees that these are all the final rules your bank needs to know about.
 
EFFECTIVE
DATE:                SUMMARY OF FINAL RULE:
 
12.31.2015            Cyber-related sanctions regulations . [i] OFAC issued regulations to implement Executive Order 13694 [ii] of April 1, 2015 ("Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities"). OFAC intends to supplement this part 578 with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance and additional general licenses and statements of licensing policy.

12.24.2015            CFPB corrections to TRID rules. [iii] The CFPB made technical corrections to Reg. Z and the Official Interpretations of Reg. Z. These corrections republish certain provisions of Reg. Z and the Official Interpretations that were inadvertently removed from or not incorporated into the CFRs by the TRID TILA-RESPA Final Rule. Specifically, this final rule makes the following corrections to reinsert existing regulatory text that was inadvertently deleted from Reg. Z and its commentary:
  • o   Amends §1026.22(a)(5) to restore subparagraphs (i) and (ii).
  • o   Amends the commentary to §1026.17 at paragraph 17(c)(1)-2 to restore subparagraphs i, ii, and iii.
  • o   Amends commentary paragraph 17(c)(1)-4 to restore subparagraphs i.A, and i.B.
  • o   Amends commentary paragraph 17(c)(1)-10 to restore introductory text and subparagraphs iii, iv, and vi.
  • o   Amends commentary paragraph 17(c)(1)-11 to restore subparagraphs i, ii, iii, and iv.
  • o   Amends commentary paragraph 17(c)(1)-12 to restore subparagraphs i, ii, and iii.
  • o   Amends commentary paragraph 17(c)(4)-1 to restore subparagraphs i and ii.
  • o   Amends commentary paragraph 17(g)-1 to restore subparagraphs i and ii.
  • o   Amends the commentary to §1026.18 at paragraph 18(g)-4 to restore text to subparagraph i.
This rule also amends the commentary to appendix D to Reg. Z to add paragraph 7 that had been included in the TILA-RESPA Final Rule published in the Federal Register but that was inadvertently omitted from the commentary to appendix D in the CFR.

12.22.2015            The Federal Reserve Amended Reg. D [iv] (Reserve Requirements of Depository Institutions) to revise the rate of interest paid on balances maintained to satisfy reserve balance requirements ("IORR") and the rate of interest paid on excess balances ("IOER") maintained at Federal Reserve Banks by or on behalf of eligible institutions. The final amendments specify that IORR is 0.50 percent and IOER is 0.50 percent, a 0.25 percentage point increase from their prior levels. The amendments are intended to enhance the role of such rates of interest in moving the Federal funds rate into the target range established by the Federal Open Market Committee.
Not all final rules are included. Only rules affecting community banks are reported, but we make no guarantees that these are all the final rules your bank needs to know about .
EFFECTIVE
DATE:                SUMMARY OF FINAL RULE:
06.30.2016              Joint Agencies: Loans in Areas Having Special Flood Hazards [i] A lender who doesn't qualify for the small lender exemption shall mail or deliver to the borrower no later than June 30 a notice in writing, or if the borrower agrees, electronically, informing the borrower of the option to escrow all premiums and fees for any required flood insurance and the method(s) by which the borrower may request escrow, using language similar to the model clause in appendix B . A lender with ≥ $1 billion in assets does not qualify for the exemption. This applies to any loan secured by residential improved real estate or a mobile home that is outstanding on January 1, 2016. Also, see January 1, 2016 above. For lenders that lose the exemption, see September 30, 2017 below.

07.01.2016              The Secretary of Education amended the cash management regulations and other sections of the Student Assistance General Provisions regulations issued under the Higher Education Act of 1965, as amended. These final regulations are intended to ensure that students have convenient access to their title IV, HEA program funds, do not incur unreasonable and uncommon financial account fees on their title IV funds, and are not led to believe they must open a particular financial account to receive their Federal student aid. In addition, the final regulations update other provisions in the cash management regulations and otherwise amend the Student Assistance General Provisions. The final regulations also clarify how previously passed coursework is treated for title IV eligibility purposes and streamline the requirements for converting clock hours to credit hours.
                                Comment: This rule amendment is meant to stop educational institutions from prioritizing the deposits of financial aid into institutional-sponsored accounts. Marketing material must be presented in a neutral way that enables the student to choose either his or her existing account or a campus account.

10.03.2016              Limitations on Terms of Consumer Credit Extended to Service Members and Dependents . [ii] The Department of Defense issued a final rule amending the implementing regulations of the Military Lending Act of 2006. The final rule expands specific protections provided to service members and their families under the MLA and addresses a wider range of credit products than the DOD's previous regulation. FDIC-supervised institutions and other creditors must comply with the rule for new covered transactions beginning October 3, 2016 . For credit extended in a new credit card account under an open-end consumer credit plan, compliance is required beginning October 3, 2017. FIL-37-2015 [iii]

12.24.2016              Credit Risk Retention . The OCC, Board, FDIC, Commission, FHFA, and HUD (the agencies) are adopting a joint final rule (the rule, or the final rule) to implement the credit risk retention requirements of section 15G of the Securities Exchange Act of 1934, as added by section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act or Dodd-Frank Act). Section 15G generally requires the securitizer of asset-backed securities to retain not less than 5 percent of the credit risk of the assets collateralizing the asset-backed securities. Section 15G includes a variety of exemptions from these requirements, including an exemption for asset-backed securities that are collateralized exclusively by residential mortgages that qualify as ''qualified residential mortgages,'' as such term is defined by the agencies by rule. The final rule was effective February 23, 2015. Compliance with the rule with respect to asset-backed securities collateralized by residential mortgages is required beginning December 24, 2015. Compliance with the rule with regard to all other classes of asset-backed securities is required beginning December 24, 2016 .

09.30.2017              Joint Agencies: Loans in Areas Having Special Flood Hazards [iv] A lender that loses the small lender exemption shall mail or deliver to the borrower no later than September 30 of the first calendar year in which the lender loses its small lenders exemption a notice in writing, or if the borrower agrees, electronically, informing the borrower of the option to escrow all premiums and fees for any required flood insurance and the method(s) by which the borrower may request escrow, using language similar to the model clause in appendix B. A lender loses the exemption when its assets are ≥ $1 billion. This applies to any loan secured by residential improved real estate or a mobile home that is outstanding on July 1 of the first calendar year in which the lender no longer qualifies for the small lender exemption (exception is for lenders with <$1 billion in assets). Also, see January 1, 2016 above and September 30, 2017 below

10.03.2017              Limitations on Terms of Consumer Credit Extended to Service Members and Dependents . [v] The Department of Defense issued a final rule amending the implementing regulations of the Military Lending Act of 2006. The final rule expands specific protections provided to service members and their families under the MLA and addresses a wider range of credit products than the DOD's previous regulation. FDIC-supervised institutions and other creditors must comply with the rule for new covered transactions beginning October 3, 2016. For credit extended in a new credit card account under an open-end consumer credit plan, compliance is required beginning October 3, 2017 . FIL-37-2015 [vi]

01.01.2018              Home Mortgage Disclosure (Regulation C) . [vii] The CFPB amended Regulation C to implement amendments to HMDA made by section 1094 of the Dodd-Frank Act. Consistent with section 1094 of the Dodd-Frank Act, the CFPB is adding several new reporting requirements and clarifying several existing requirements. The CFPB is also modifying the institutional and transactional coverage of Regulation C. The final rule also provides extensive guidance regarding compliance with both the existing and new requirements.

Our list of effective dates of past final federal rules is limited to approximately 12 months.
 
EFFECTIVE
DATE:                SUMMARY OF FINAL RULE:
01.01.2016              Joint Agencies: Loans in Areas Having Special Flood Hazards [i] Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) relating to the escrowing of flood insurance payments and the exemption of certain detached structures from the mandatory flood insurance purchase requirement. The final rule also implements provisions in the Biggert-Waters Flood Insurance Reform Act of 2012 (the Biggert-Waters Act) relating to the force placement of flood insurance. In accordance with HFIAA, the final rule requires regulated lending institutions to escrow flood insurance premiums and fees for loans secured by residential improved real estate or mobile homes that are made, increased, extended or renewed on or after January 1, 2016, unless the loan qualifies for a statutory exception. In addition, certain regulated lending institutions are exempt from this escrow requirement if they have total assets of less than $1 billion. Further, the final rule requires institutions to provide borrowers of residential loans outstanding as of January 1, 2016, the option to escrow flood insurance premiums and fees. The final rule includes new and revised sample notice forms and clauses concerning the escrow requirement and the option to escrow. The final rule includes a statutory exemption from the requirement to purchase flood insurance for a structure that is a part of a residential property if that structure is detached from the primary residence and does not also serve as a residence. However, under HFIAA, lenders may nevertheless require flood insurance on the detached structures to protect the collateral securing the mortgage. (Lenders with assets < $1 billion, see June 30, 2016 and September 30, 2017.)

01.01.2016            CFPB: Reg. Z Annual Threshold Adjustments (CARD ACT, HOEPA and ATR/QM) : [ii] The CFPB issued this final rule amending the regulatory text and official interpretations for Regulation Z. The CFPB is required to calculate annually the dollar amounts for several provisions in Reg. Z; this final rule reviews the dollar amounts for provisions implementing amendments to TILA under the CARD Act, HOEPA, and the Dodd-Frank Act. These amounts are adjusted, where appropriate, based on the annual percentage change reflected in the Consumer Price Index in effect on June 1, 2015. The minimum interest charge disclosure thresholds will remain unchanged in 2016

01.01.2016              Amendments Relating to Small Creditors and Rural or Underserved Areas Under the Truth in Lending Act (Regulation Z) . [iii] The CFPB amended certain mortgage rules issued by the CFPB in 2013. The final rule [iv] revises the CFPB's regulatory definitions of small creditor, and rural and underserved areas, for purposes of certain special provisions and exemptions from various requirements provided to certain small creditors under the CFPB's mortgage rules.

01.01.2016              The OCC, the Board, and the FDIC amended their CRA regulations [v] to adjust the asset-size thresholds used to define "small bank" or "small savings association" and "intermediate small bank" or "intermediate small savings association." As required by the CRA regulations, the adjustment to the threshold amount is based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The agencies also propose to make technical edits to remove obsolete references to the OTS and update cross-references to regulations implementing certain Federal consumer financial laws in their CRA regulations.

01.01.2016              Federal Reserve Bank Services . [vi] The Board of Governors of the Federal Reserve System (Board) has approved the private sector adjustment factor (PSAF) for 2016 of $13.1 million and the 2016 fee schedules for Federal Reserve priced services and electronic access. These actions were taken in accordance with the Monetary Control Act of 1980, which requires that, over the long run, fees for Federal Reserve priced services be established on the basis of all direct and indirect costs, including the PSAF.

01.01.2018              Home Mortgage Disclosure (Regulation C) . [vii] The CFPB amended Regulation C to implement amendments to HMDA made by section 1094 of the Dodd-Frank Act. Consistent with section 1094 of the Dodd-Frank Act, the CFPB is adding several new reporting requirements and clarifying several existing requirements. The CFPB is also modifying the institutional and transactional coverage of Regulation C. The final rule also provides extensive guidance regarding compliance with both the existing and new requirements.

12.24.2015              Credit Risk Retention . The OCC, Board, FDIC, Commission, FHFA, and HUD (the agencies) are adopting a joint final rule (the rule, or the final rule) to implement the credit risk retention requirements of section 15G of the Securities Exchange Act of 1934, as added by section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act or Dodd-Frank Act). Section 15G generally requires the securitizer of asset-backed securities to retain not less than 5 percent of the credit risk of the assets collateralizing the asset-backed securities. Section 15G includes a variety of exemptions from these requirements, including an exemption for asset-backed securities that are collateralized exclusively by residential mortgages that qualify as ''qualified residential mortgages,'' as such term is defined by the agencies by rule. The final rule was effective February 23, 2015. Compliance with the rule with respect to asset-backed securities collateralized by residential mortgages is required beginning December 24, 2015. Compliance with the rule with regard to all other classes of asset-backed securities is required beginning December 24, 2016.

10.03.2015              CFPB: Final integrated Mortgage Disclosures under the RESPA (Reg. X) and the Truth In Lending Act (Reg. Z) [viii] Notice of final rule and official interpretations. The CFPB amended Reg. X and Reg. Z to establish new disclosure requirements and forms in Regulation Z for most closed-end consumer credit transactions secured by real property. In addition to combining the existing disclosure requirements and implementing new requirements imposed by the Dodd-Frank Act, the final rule provides extensive guidance regarding compliance with those requirements. CFPB blog on the disclosure .

10.03.2015              CFPB: Amendments to the 2013 Integrated Mortgage Disclosures Rule under Reg. X and Reg. Z and the Loan Originator Rule under Reg. Z [ix] ( 80 FR 8767 [x] ) Notice of final rule and official interpretations. This rule amending the integrated mortgage rule extends the timing requirement for revised disclosures when consumers lock a rate or extend a rate lock after the Loan Estimate is provided and permits certain language related to construction loans for transactions involving new construction on the Loan Estimate. This rule also amends the 2013 Loan Originator Final Rule to provide for placement of the NMLSR ID on the integrated disclosures. Additionally, the CFPB made non-substantive corrections, including citation and cross-reference updates and wording changes for clarification purposes, to various provisions of Regulations X and Z as amended or adopted by the 2013 TILA-RESPA Final Rule. CFPB blog on the disclosure .

10.01.2015              Department of Defense: Limitations on Terms of Consumer Credit Extended to Service Members and Dependents . [xi] The Department of Defense amended its regulation that implements the Military Lending Act, herein referred to as the "MLA." Among other protections for Service members and their families, the MLA limits the amount of interest that a creditor may charge on "consumer credit" to a maximum annual percentage rate of 36 percent. The Department amends its regulation primarily for the purpose of extending the protections of the MLA to a broader range of closed-end and open-end credit products. Among other amendments, the Department modifies the provisions relating to the optional mechanism a creditor could use when assessing whether a consumer is a "covered borrower," modifies the disclosures that a creditor must provide to a covered borrower, and implements the enforcement provisions of the MLA.

10.01.2015              Joint Agencies: Loans in Areas Having Special Flood Hazards [xii] The statutory force-placed insurance provision took effect upon the enactment of the Biggert-Waters Act on July 6, 2012. The statutory detached structure exemption took effect upon enactment of the HFIAA on March 21, 2014. The regulatory changes made by this final rule to incorporate these provisions are effective on October 1, 2015. See the final flood rule on 01.01.2016, below, for the statutory and escrow-related provisions.

08.01.2015              Joint Agencies: Loans in Areas Having Special Flood Hazards . [xiii] The OCC, the Fed, the FDIC, the FCA, and the NCUA amended their regulations regarding loans in areas having special flood hazards to implement certain provisions of the Homeowner Flood Insurance Affordability Act of 2014, which amends some of the changes to the Flood Disaster Protection Act of 1973 mandated by the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters). The Agencies plan to address the private flood insurance provisions in Biggert-Waters in a separate rulemaking.

Specifically, the final rule:
  • Requires the escrow of flood insurance payments on residential improved real estate securing a loan, consistent with the changes set forth in HFIAA. The final rule also incorporates an exemption in HFIAA for certain detached structures from the mandatory flood insurance purchase requirement.
  • Implements the provisions of Biggert-Waters related to the force placement of flood insurance.
  • Integrates the OCC's flood insurance regulations for national banks and Federal savings associations.
05.01.2015                The Fed adopted final amendments [xiv] to the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) (Policy Statement) that: (i) raise from $500 million to $1 billion the asset threshold to qualify for the Policy Statement; and (ii) expand the scope of companies eligible under the Policy Statement to include savings and loan holding companies. The Board is also adopting final conforming revisions to Regulation Y and Regulation LL, the Board's regulations governing the operations and activities of bank holding companies and savings and loan holding companies, respectively, and Regulation Q, the Board's regulatory capital rules. Specifically, the Proposed Rule would allow bank holding companies and savings and loan holding companies with less than $1 billion in total consolidated assets to qualify under the Policy Statement, provided the holding companies also comply with three qualitative requirements (Qualitative Requirements). Previously, only bank holding companies with less than $500 million in total consolidated assets that complied with the Qualitative Requirements could qualify under the Policy Statement. The Board issued the Policy Statement in 1980 to facilitate the transfer of ownership of small community-based banks in a manner consistent with bank safety and soundness. The Board adopted the Policy Statement to permit the formation and expansion of small bank holding companies with debt levels that are higher than typically permitted for larger bank holding companies.

02.23.2015              Joint Agencies: Credit risk retention. [xv] The OCC, Board, FDIC, Commission, FHFA, and HUD adopted a joint final rule to implement the credit risk retention requirements of Section 15 of the Securities and Exchange Act of 1934, as added by section 941 of the Dodd-Frank Act. Section 15G generally requires the securitizer of asset-backed securities to retain not less than 5 percent of the credit risk of the assets collateralizing the asset-backed securities. Section 15G includes a variety of exemptions from these requirements, including an exemption for asset-backed securities that are collateralized exclusively by residential mortgages that qualify as "qualified residential mortgages," as such term is defined by the agencies by rule.


In This Issue
Join our Compliance
 Network 
find out more at