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January 2016 Capitol Comments
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Every banker's inbox is crowded. Capitol Comments points out those compliance and legal items that are the most important.
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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
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.
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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
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FDIC board to discuss small bank deposit insurance
The FDIC's Board of Directors will meet in open session at 9:00 a.m. (CST) on Thursday, January 21, 2016, to consider the following matters:
Memorandum and resolution re: Notice of Proposed Rulemaking on Deposit Insurance Assessments for Small Banks.
FDIC webinar on encouraging savings
Comment: The webinar precedes America Saves Week 2016, which is February 22 through 27, 2016. The theme is "Set a Goal, Make a Plan, Save Automatically." The webinar is free, but you must register.
FDIC releases FIL on Call Report for December 31, 2016F
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| Comment: Other than those items listed above in the "Joint federal agency issuances section," the OCC had no alerts, bulletins, news releases since December 18, 2015, that the editors deemed necessary for inclusion. If you wish to review the OCC's issuances, go to www.occ.gov. |
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President Obama signs the FAST Act
FASB new guidance is big win for community banks
President signs Data Security Act of 2015
FHFA axes community bank opposed proposal from final membership rule
The Federal Housing Finance Agency (FHFA) issued a final
rule
that does not include its previous proposal that banks maintain at least 1% of their assets in long term home mortgage loans and at least 10% of assets in residential mortgage loans as a condition of membership in the Federal Home Loan Bank (FHLB).
Comment: A number of community banks have taken advantage of the products and services of the FHLB to provide funding alternatives and manage interest rate risk. Further, additional hurdles in the residential mortgage lending arena subsequent to well-intentioned yet misguided federal responses to the crisis have taken a number of banks out of this line of business. The FHFA did the right thing in dropping this ill-advised proposal.
OFAC designates Mexican newspaper executive as SDNT
LifeLock settles with FTC
Comment: It seems counterintuitive that LifeLock would fail to establish and maintain a comprehensive information security program.
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GAO reports on Dodd-Frank impact on financial institutions
Comment: The article highlights the importance of community banks in general, especially in regard to small business and agriculture loans
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OCC releases Fall 2015 Semiannual Risk Perspective
Comment: Highlights of the report: Many national banks and federal savings associations continue to face strategic challenges to growing revenues to meet target rates of return in a slow-growth, low interest rate environment. Banks and thrifts are easing credit underwriting standards and practices, including structure, terms, pricing, collateral, guarantors, and loan controls in response to competitive pressures and growth objectives. This easing is particularly evident in high-growth loan segments, such as indirect auto, commercial and industrial, and multifamily. The ongoing low interest rate environment poses additional concerns as banks reach for yield by loosening underwriting and extending asset duration trends. Cyber threats, reliance on service providers, and resiliency planning remain industry concerns, particularly in light of increasing global threats. Bank Secrecy Act risk continues to increase as criminal behaviors and technology use evolve
FDIC Consumer News
FHFA October house price index
The Federal Housing Finance Agency released the U.S. monthly
House Price Index for October
. In October, housing prices rose 0.5 percent on a seasonally adjusted basis from the previous month. The previously reported 0.8 percent increase in September was revised downward to reflect a 0.7 percent increase.
HUD and Census Bureau release November new residential construction activity
The median sales price of new houses sold in November 2015 was $305,000; the average sales price was $374,900. The seasonally adjusted estimate of new houses for sale at the end of November was 232,000. This represents a supply of 5.7 months at the current sales rate.
CFPB monthly complaint report
Law360 article on TRID liability
Two attorneys from the law firm of BuckleySandler LLP, Benjamin K. Olson and Brandy A. Hood, published an article on Law360.com regarding TRID liability. If your bank makes mortgage loans, it is worth reading. Olson was formerly the Deputy Assistant Director for the Office of Regulations at CFPB, is a partner in the Washington, DC office of BuckleySandler LLP. According to his bio, he led the CFPB's TRID Rule.
Oct. 3, 2015, was a watershed moment for the mortgage origination industry and the Consumer Financial Protection Bureau. On that date, the CFPB's long-awaited Know Before You Owe: TILA-RESPA Integrated Disclosure (TRID) rule finally became effective, marking the end - for most mortgages - of 30 years of separate, overlapping disclosures under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), and the beginning of TRID's loan estimate and closing disclosure.
Measured against their predecessors, the new TRID forms are a marked improvement in terms of prioritizing and explaining the cost information that consumers care most about when selecting a mortgage.[1] But the first round of loans closed under TRID is troubled. The quality control vendors that assess compliance are reporting extraordinary levels of errors, and private investors are rejecting loans at seemingly unprecedented rates, citing violations of the rule's requirements.
Read more...
Fed's Beige Book - January 13, 2016
FedFocus
Reminder - Ensure your institution has a current Board Resolution (BR) and Official Authorization List (OAL) on file
Check Adjustments Tip: Understanding a CA1100 message for a PAID adjustment
Federal Reserve Banks to publish new FedReceipt® RTNs
FedACH Services Customer Support number changed to (877) 372.2457.
Reminder - FedGlobal® ACH Payments A2R Option Discontinued
2016 marks the seventh year of the America the Beautiful Quarters® Program
Federal Reserve Banks publish PFMI disclosures for Fedwire® Services
Federal Reserve Banks announce readiness to expand National Settlement Service operating hours
Comment: Most significantly, the Treasury has updated its savings bond cashing guide. We have hyperlinked it so that you can save it to your desktop or print it out. Send the link to your head cashier. The Fedflash entry regarding the guide states:
The new version replaces all previous versions of this document, including The Quick Start Supplement to The Guide to Cashing Savings Bonds (FS P 0022-1), which has been decommissioned. The information contained in FS P 0022-1 has been incorporated into the updated version of The Guide to Cashing Savings Bonds.
Please take a few moments to:
- o Update any links as necessary
- o Delete any earlier versions you may have downloaded to your system
- o Recycle any paper versions of the FS P 0022 and the FS P 0022-1 you may have referenced in the past
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2016 Series - 6 for the price of 5
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