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July 28, 2010
Justice Issues Final Rule Governing ATM Accessibility Standards
The Justice Department this week issued a final rule revising its ADA Standards for Accessible Design under the Americans with Disabilities Act that apply to all public accommodations and commercial facilities, including banks. The final rule, which ends a rulemaking process that started in 2004, imposes new accessibility standards for ATMs, including a requirement for speech output and tactilely discernable input controls to assist blind customers. AmBA had urged Justice in a comment letter to exempt, or provide a safe harbor, for existing ATMs that are in compliance with current ADA accessibility standards, but the agency declined to do so in the final rule.
As a result, some existing ATMs may have to be retrofitted to comply with the new standards. The ADA requires upgrading unless doing so would result in an “undue burden.” Therefore, whether a bank will have to upgrade existing ATMs will be determined by its resources -- or those of its holding company, if applicable -- along with the modification costs. The new standards will be legally enforceable six months after their publication in the Federal Register.
Read more.
Read the final rule.
Read the requirements for ATMs in Chapter 7, Section 707.
Read ABA’s comment letter.
For more information, contact AmBA's Virginia O’Neill.
Agencies Adopt Rule Implementing Mortgage-Originators Registration System
The federal banking agencies adopted a final rule implementing a nationwide licensing and registration system -- mandated by the Secure and Fair Enforcement for Mortgage Licensing Act -- for mortgage loan originators. The rule requires employees of banks, savings association and certain other financial institutions who act as residential mortgage-loan originators to register with the Nationwide Mortgage Licensing System and Registry, maintain that registration, and obtain a unique identifier.
Agency-regulated institutions also must adopt and follow written policies and procedures designed to assure compliance with those requirements. Although the draft rule that the agencies released lists an Oct. 1, 2010, effective date, banks should confirm that date in the final version published in the Federal Register. AmBA will circulate a summary of the rule upon publication. Read the final rule. For more information, contact AmBA's Rod Alba.
July 26, 2010
AmBA FAQs Address How Dodd-Frank Will Affect FDIC’s TAG Program
In response to bankers’ queries,
AmBA
has developed frequently asked questions that address how the Dodd-Frank Act will affect the FDIC’s Transaction Account Guarantee Program.
The Dodd-Frank Act provides unlimited FDIC insurance for noninterest-bearing transaction accounts at all banks, effective Dec. 31, 2010, and continuing through Dec. 31, 2012. The act does not change the current FDIC TAG Program, which continues through the end of this year.
While the FDIC gave itself the option -- if conditions warrant -- of extending the TAG Program again into 2011, the new law would make such a decision moot. Thus, while the new two-year coverage picks up where the current TAG Program leaves off, there are important changes to the coverage that
AmBA
’s FAQs explain. Read the frequently asked questions. For more information, contact
AmBA
's Rob Strand.
Walsh to Become Acting Comptroller of the Currency
John Walsh, chief of staff at the Office of the Comptroller of the Currency, will become the acting head of the agency when current Comptroller John Dugan leaves on Aug. 14, the Treasury Department announced Friday. Since October 2005, Walsh has served as the OCC’s chief of staff and head of public affairs. He joined the agency after serving as executive director of the Group of 30, a consulting group that focuses on international economic and monetary affairs. Walsh also worked on the Senate Banking Committee staff from 1986 to 1992, and served as an international economist for the Treasury from 1984 to 1986. Read more.
AmBA: Proposal to Use CRA to Support HUD Program Too Restrictive
AmBA opposes the banking agencies’ proposed change in the Community Reinvestment Act regulations that would expand the definition of “community development” to encourage depository institutions to support the Department of Housing and Urban Development’s Neighborhood Stabilization Program, the association said Friday in a comment letter Friday. The proposal’s intent is to use CRA on a short-term basis to supplement existing federal grants in neighborhoods affected by foreclosures.
AmBA
emphasized that it supports stabilizing and revitalizing neighborhoods affected by foreclosures and agrees that such activity merits favorable CRA consideration. “However, we object to using the CRA as a mechanism for endorsing particular federal programs to the exclusion of alternative private-sector initiatives that serve similar goals,”
AmBA
said. “Instead, we recommend a more flexible standard that recognizes stabilization and revitalization activities can receive CRA credit independent of HUD NSP eligibility criteria.”
If the agencies provide guidance that grants favorable CRA consideration for such activities “that are not restricted to a single federal grant program or to a single type of geography, [they] will take a step forward toward flexibility consistent with the goals of CRA,” the association said. Read the letter. Read the proposal. For more information, contact
AmBA
's Rob Rowe.
July 23, 2010
FDIC Updates Official Deposit Insurance Sign
The FDIC has updated its official sign for advertising deposit insurance coverage because the Dodd-Frank Act permanently raised the standard maximum deposit insurance amount to $250,000, the agency said yesterday. Banks may order the new sign from the FDIC for free, and the agency is encouraging them to quickly acquire and post it to increase depositor awareness of the permanent increase in deposit insurance coverage. Read more.
July 22, 2010
FDIC: Dodd-Frank Permanently Raises Insurance Coverage to $250,000
The FDIC reminded bankers yesterday that the Dodd-Frank Act permanently raises the current standard maximum deposit insurance amount to $250,000. That coverage limit applies per depositor, per insured depository institution for each account ownership category, the agency said. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until Dec. 31, 2013.
In related news, the FDIC also said that the new law made the increase to $250,000 retroactive to Jan. 1, 2008, and the amount therefore applies to six banks that failed between Jan. 1 and Oct. 3, 2008. That means the number of uninsured depositors at the failed institutions has been reduced from more than 10,000 to about 500, and the FDIC will mail checks to those depositors today.
Read about the permanent insurance maximum.
Read about the reduction in uninsured depositors.
AmBA Submits Principles to Guide GSE Reform
In a comment letter yesterday to the Treasury Department and the Department of Housing and Urban Development,
AmBA
presented 11 principles to guide the establishment of a sustainable and limited government-supported enterprise mission that would support housing-market stability and liquidity.
AmBA
submitted the letter in response to Treasury and HUD’s request for comments on seven questions addressing how to establish a more stable and sound housing finance system.
“Any reform of the secondary mortgage market must recognize the vital role played by the Federal Home Loan Banks and must in no way harm the traditional advance businesses of the [FHLBs] …,”
AmBA
emphasized in listing its key principles.
Some of the association’s other key principles stressed that any mortgage GSE’s primary goal is to provide market stability and liquidity to aid primary market lenders; strong regulation, examination and authority for prompt corrective action is a key GSE reform element; any successors to Fannie Mae and Freddie Mac must be limited to a well-defined and regulated secondary market role; affordable housing goals or efforts to broaden housing affordability are more suited to programs and entities other than the GSEs; and the GSEs must provide fair and equitable access to all primary market lenders that sell into the secondary market through them.
AmBA
said that it supports a well-regulated and noninvasive government role through some type of GSE apparatus that would promote secondary-market stability and liquidity. The association also is strongly committed to developing a means to responsibly unwind Fannie and Freddie’s complicated and unsustainable conservatorship status,
AmBA
said. Read the letter. For more information, contact
AmBA
's Bob Davis.
July 21, 2010
HUD Issues Revised Version of Settlement-Cost Booklet
The Department of Housing and Urban Development has issued a revised version of its settlement-cost booklet, Shopping for Your Home Loan. The Real Estate Settlement Procedures Act requires lenders and mortgage brokers to provide the booklet to residential real estate loan applicants within three days of receiving an application.
ABA
has asked HUD whether lenders/originators must start using the new version immediately; if lenders -- as in the past -- can deplete their supply of current booklets before using the new ones; and whether the booklet can be ordered through HUD, or through the Government Printing Office.
In related news, HUD yesterday launched a “RESPA Roundup” page on the agency’s website. The page will provide periodic updates on RESPA rules and interpretations, and also disseminate information on the most pressing Regulation X issues. Read the revised Shopping for Your Home Loan booklet. Read the “RESPA Roundup” page. For more information, contact
ABA
's Rod Alba.
FDIC: Work With Customers Affected by Nebraska Storms
The FDIC yesterday encouraged banks to work constructively with borrowers in Nebraska counties affected by severe storms, flooding and tornadoes. Extending repayment terms, restructuring existing loans or easing terms for new loans, if done in a manner consistent with sound banking practices, can contribute to the fiscal health of local communities and serve the long-term interests of lending institutions, the FDIC said. Read more.
Fed Agrees to Reduce TALF Credit Protection
The Federal Reserve yesterday said that it had reached an agreement with the Treasury Department to reduce from $20 billion to $4.3 billion the credit protection the Treasury’s Troubled Asset Relief Program provides for the Fed’s Term Asset-Backed Securities Loan Facility. The Fed had authorized up to $200 billion in TALF loans -- intended to added liquidity to the financial system -- that the New York Federal Reserve Bank extended to investors in highly rated asset-backed securities and commercial mortgage-backed securities.
When the TALF closed June 30, there were $43 billion in loans outstanding. Under the agreement, any TALF losses first would be absorbed by the accumulated excess of the program’s loan interest payments over the Fed’s cost of funds, and then by the TARP funds. To date, the TALF program has experienced no losses and all outstanding TALF loans are well collateralized, Fed officials said. Read more.
REGULATORS SHOULD EXPAND SCOPE ACTIVITIES INCLUDED UNDER CRA,
ABA
SAYS
While the current Community Reinvestment Act (CRA) exam process is transparent and reflects banks’ successful service to their communities, there is room for regulatory improvement, including expansion of the scope of activities that qualify as community development, ABA witness Marie Bibbs told regulators yesterday at the first of four joint agency hearings designed to determine whether and how regulators should revise rules to better serve CRA goals.
Bibbs, who is Executive Vice President for Community Development and CRA Officer at City First Bank of DC in
Washington
,
D.C.
, also urged regulators to proceed cautiously with any changes to the CRA regulatory regime.“Maintaining CRA simplicity is important for any modernization effort,” she said. “Adding burdensome data reporting requirements will not materially improve an examiner’s ability to evaluate a bank’s record of CRA performance but will create expenses that could be better applied to actually supporting the community.”
Additional hearings are scheduled for August 6 in
Atlanta
, August 12 in
Chicago
, and August 17 in
Los Angeles
.
ABA
plans to submit a comprehensive comment on CRA modernization at the end of August. Bankers can share their suggestions with Rob Rowe (202-663-5029; rrowe@aba.com) or Joe Pigg (202-663-5480; jpigg@aba.com).
July 20, 2010
SEN. DODD RAISES DOUBTS ON
WARREN
CFPB NOMINATION
Senate Banking Committee Chairman Chris Dodd (D-CT) suggested on a Washington-based public radio show yesterday that Elizabeth Warren may not be confirmable as the first Director of the new Consumer Financial Protection Bureau (CFPB). Warren, who currently heads the Congressional Oversight Panel for the Troubled Asset Relief Program, has been widely discussed as the frontrunner for the position.“No idea is terribly creative if it can’t sell,” Chairman Dodd said on the program, asking rhetorically, “Is she confirmable?”Other potential nominees under discussion include Treasury Assistant Secretary for Financial Institutions Michael Barr and Deputy Assistant Attorney General Eugene Kimmelman.
SENATE TO DEBATE PROCEDURAL MOTION ON TAX EXTENDERS BILL
The Senate is scheduled today to resume consideration of a procedural motion on legislation (H.R. 4213) that would extend for one year about 50 popular tax cuts that expired at the end of 2009. The bill also would extend unemployment benefits through November. The Senate over the past several months has been unable to garner the 60 votes necessary to pass the procedural motion and bring the legislation to a final vote on the Senate floor.Prior to bringing up the tax bill, the Senate is scheduled to swear-in Garte Goodwin (D-WV), who was named last week to fill the seat of the late Sen. Robert Byrd.
The Senate resumed consideration of an ABA-supported small business lending bill (H.R. 5297) yesterday, but did not hold any votes.
ABA
continues to work against a possible amendment by Sen. Mark Udall (D-CO) that would increase some credit unions’ member business lending cap.
ABA
Testifies at Joint Agency Hearing on CRA Modernization
While the current Community Reinvestment Act exam process is transparent and reflects banks’ successful service to their communities, there is room for regulatory improvement, ABA witness Marie Bibbs said yesterday at the first of four joint agency hearings on CRA. The regulators are holding the hearings to discern whether and how they should revise their rules to better serve CRA goals.
Bibbs, who is EVP for community development and CRA officer at City First Bank of DC in
Washington
,
D.C.
, suggested that the agencies expand the scope of activities that qualify as community development. She also pointed out that the CRA is not an anti-discrimination law and should not be used as one. Other laws -- such as the Fair Housing Act and the Equal Credit Opportunity Act -- are better designed to address discrimination and, unlike CRA, apply to more than just federally insured depository institutions.
Bibbs also urged regulators to proceed cautiously with any changes to the CRA regulatory regime. “Maintaining CRA simplicity is important for any modernization effort,” she said. “Adding burdensome data reporting requirements will not materially improve an examiner’s ability to evaluate a bank’s record of CRA performance but will create expenses that could be better applied to actually supporting the community.”
Additional hearings are scheduled for August 6 in
Atlanta
, August 12 in
Chicago
and August 17 in
Los Angeles
.
ABA
plans to submit a comprehensive comment on CRA modernization at the end of August and is encouraging bankers to share their suggestions with
ABA
staffers Rob Rowe or Joe Pigg.
Read more about the hearings. Read Bibbs’ testimony.
ABA
: FCA Proposal Out of Bounds
ABA yesterday gave a thumbs-down to a Farm Credit Administration proposal authorizing Farm Credit System institutions to purchase loans from the FDIC that are part of a failed non-System bank’s agricultural lending portfolio. The proposed rule is beyond the FCA’s authority, since it could result in System institutions extending financing to borrowers that do not meet FCA eligibility requirements,
ABA
said in a comment letter.
The proposal also would divert the System from its congressionally prescribed mission, and would add stress to the System’s portfolio at a time when the agricultural economy is weakening,
ABA
added. Read the letter. For more information, contact
ABA
's Vincent Barnes.
Fed Designates Reserve Bank Chairs
The Federal Reserve Board on Monday announced the designation of the chairs and deputy chairs of the twelve Federal Reserve Banks for 2011. Each Reserve Bank has a nine-member board of directors. The Board of Governors in
Washington
appoints three of these directors and each year designates one as chair and a second as deputy chair. Read the announcement.
July 14, 2010
Credit Terms Loosened for Hedge Funds, Private Equity Firms
The 20 largest dealers eased credit terms in the second quarter for hedge funds and private-equity companies that borrow against securities and trade over-the-counter derivatives, according to a new Federal Reserve survey released yesterday. The initial Senior Credit Officer Opinion Survey on Dealer Financing Terms -- conducted May 24-June 4 -- showed more aggressive competition and an improvement in market liquidity and functioning as the key causes for loosening terms.
Dealers also cited “efforts by clients to negotiate more-favorable terms had increased in intensity” during the previous three months. Two-thirds of responding dealers said hedge funds, in particular, pushed harder for better rates and looser nonprice terms, and some funds received better deals as a result. Read the survey.
July 13, 2010
FDIC Board Revises MOU to Strengthen Backup Supervisory Authority
The FDIC Board yesterday approved a revised memorandum of understanding with the primary banking regulators to enhance the agency’s ability to gather information from such regulators and conduct special examinations of banks it doesn’t supervise directly -- especially those that are large and complex. The agreement is designed to address concerns that the FDIC and the Treasury Department inspectors general raised in an April report on Washington Mutual’s failure.
The report criticized the existing memorandum because it limited the FDIC's ability to make its own assessment of the institution’s risk to the Deposit Insurance Fund and required the FDIC to place unreasonable reliance on the Office of Thrift Supervision’s work. “While significant effort has gone into developing this revised agreement, the real work lies ahead in implementing its terms,” FDIC Chairman Sheila Bair said. Read more. Read the memorandum of understanding.
Report Shows CTR Changes Help Law Enforcement
Financial institutions are filing fewer Currency Transactions Reports on transactions with no -- or limited -- use to law enforcement, while higher-value CTRs are becoming easier to identify thanks to a rule the Financial Crimes Enforcement Network issued in December 2008, according to a report FinCEN released yesterday.
The study was done to evaluate the rule, which was intended to simplify and clarify the process by which financial institutions exempted certain people from reporting currency transactions of more than $10,000. As a result of the new regulation, CTR filings fell from 15.5 million in 2008 to 13.7 million in 2009, but certain classes of filings valuable to law enforcement increased, the report found. Read more. Read the report.
Bernanke: Banks, Regulators Must Find Ways to Boost Small-Biz Lending
Banks and regulators must find ways to ensure that small businesses receive the credit they need to create jobs, Federal Reserve Chairman Ben Bernanke said yesterday at a Fed forum on small-business lending. “The challenge ahead for lenders will be to determine how to assess the credit quality of businesses in an uncertain and difficult economic environment,” Bernanke said. “It is in lenders' interest, after all, to lend to creditworthy borrowers; ultimately, that’s how they earn their profits. Regulators, for their part, need to continue to work with lenders to help them do all that they prudently can to meet the needs of creditworthy small businesses.”
He noted that some lenders, who participated in the 40-plus small-business meetings the Fed has held since February, said that current lending conditions don't represent credit tightening as much as a return to more traditional underwriting standards following a period of too-lax standards.
“But, though some lenders said they were emphasizing cash flow and relying less on collateral values in evaluating creditworthiness, it seems clear that some creditworthy businesses -- including some whose collateral has lost value but whose cash flows remain strong -- have had difficulty obtaining the credit that they need to expand, and … even to continue operating,” Bernanke said. Read Bernanke’s speech.
Fed to Release New Dealer Credit Survey
The Federal Reserve today will release its first quarterly Senior Credit Officer Opinion Survey on Dealer Financing Terms, the Fed said yesterday. The survey -- modeled on the Senior Loan Officer Opinion Survey on Bank Lending Practices -- will provide information about the availability and terms of credit in securities financing and over-the counter derivatives markets. The initial survey was conducted in late May and early June, and includes information from about 20 dealers. Read more.
July 9, 2010
Comptroller Dugan to Leave OCC on Aug. 14
Comptroller of the Currency John Dugan notified President Obama yesterday that he will leave office on Aug. 14, near the end of his five-year term. Dugan helped steer major policy decisions during the financial crisis, and was involved in crafting and implementing rescue efforts, including the $700 billion Troubled Asset Relief Program.
“While the financial system continues to face significant challenges, national banks have stabilized, confidence has improved markedly, and institutions are now in a much stronger position to help fund economic recovery,” he said in his resignation letter to Obama.
AmBA President and CEO Ed Yingling said Dugan has been an outstanding comptroller during a difficult time, and has always recognized the vital role that national banks play in the country’s dual banking system.
“John was fair in applying regulations, but tough when it was needed,” Yingling said. “He left a successful practice as one of the country’s leading banking lawyers to serve for five years in this important capacity, and he deserves our thanks for a job well done.” Read more. Read Dugan’s letter of resignation.
July 8, 2010
FHA Revises Standards for Mortgage Insurance Under Multifamily Programs
The Federal Housing Administration is revising underwriting standards, policies and procedures for mortgage insurance under its multifamily rental programs, the agency said yesterday. The FHA, among other things, is raising debt-service coverage ratios and lowering loan-to-value and loan-to-cost ratios. For example, the maximum loan-to-value ratios on affordable rental properties is being cut from 90 percent to 87 percent. The agency also is requiring enhanced verification of a property’s financial performance to decrease misrepresentation and fraud; an expanded review of borrower credit; and a prescreening of applications to eliminate loans that aren’t feasible or might not make it to closing. Read more. Read the policy changes. For more information, contact
AmBA
's Rod Alba.
FDIC Board to Meet Next Monday
The FDIC Board will meet at 10:30 a.m. next Monday. The only item on the discussion agenda is an information-sharing memorandum of understanding for addressing crisis management and the resolution of cross-border banks. Read more.
July 7, 2010
AmBA Details Shortcomings of FDIC’s Proposed Scorecard System
A risk-based premium pricing system should fairly differentiate risk among banks, but AmBA does not believe that the FDIC’s proposal to dramatically change the assessment formula for the nation’s largest banks meets that standard, the association said in a letter last Friday.
The FDIC proposal would create a scorecard system that would provide banks with more than $10 billion in assets -- and also large, highly complex institutions -- with a unique score that would determine their insurance rate. The scorecard would consist of a performance score and a loss-severity score.
AmBA
believes that more work needs to be done on the proposed scorecard system. “We believe that such a finely gradated system cannot possibly reasonably reflect the risk of failure -- which is unlikely to be so finely calibrated -- and, therefore, [it] puts an additional cost on some institutions that are no more likely to fail than others,”
AmBA
said.
The methodology relies too heavily on the very recent past, which may not indicate future problems that will lead to failure,
AmBA
said, and before any change is adopted there should be an independent validation of the proposal and its ability to differentiate over a wider variety of possibilities the FDIC’s risk of loss.
“In brief, affected institutions are seriously concerned that the proposed methodology is opaque, based on outdated data, and overly subjective,”
AmBA
said. “Further, there is a need to better understand the implications of the pending regulatory reform legislation, since without this insight it will be virtually impossible to develop credible premium pricing. Read the letter. For more information, contact
AmBA
's Rob Strand.
FHFA Urges PACE Energy-Efficiency Loan Program Put on Hold
The Federal Housing Finance Agency yesterday urged state and local governments to put on hold and reconsider Property Assessed Clean Energy program retrofit loans because they present significant safety and soundness concerns. The White House-backed PACE program fosters lending for energy-efficient retrofits of residential or commercial properties through a county or city’s tax assessment regime, and most such loans acquire a priority lien over existing mortgages, the FHFA explained.
“First liens for such loans represent a key alteration of traditional mortgage lending practice,” the agency said. “They present significant risk to lenders and secondary market entities, may alter valuations for mortgage-backed securities and are not essential for successful programs to spur energy conservation.” The FHFA directed Fannie Mae, Freddie Mac and the Federal Home Loan Banks to take specific actions to protect their operations from such loans.
In related news, the FDIC said yesterday that it shares the FHFA's concerns about PACE loans’ lack of appropriate underwriting and consumer protection standards. Read the FHFA’s press release. Read the FDIC’s financial institution letter.
FDIC Encourages Banks to Work With Customers Affected by Minnesota Storms
The FDIC yesterday encouraged banks to work constructively with borrowers in
Minnesota
counties affected by severe storms, tornadoes and flooding. Extending repayment terms, restructuring existing loans or easing terms for new loans, if done in a manner consistent with sound banking practices, can contribute to the fiscal health of local communities and serve the long-term interests of lending institutions, the FDIC said. Read more.
July 6, 2010
AmBA
Recommends OTS Delay Supplemental Overdraft Guidance
The Office of Thrift Supervision's proposed supplemental guidance on overdraft protection is premature given the debit-card overdraft rules that went into effect on July 1,
AmBA
said last week in a comment letter.
AmBA
recommended that the OTS delay adopting the proposed supplemental guidance until the effects of new debit-card rules are understood.
The OTS also should "work with the other agencies -- or the new consumer protection bureau currently under congressional consideration -- to update and replace, rather than merely supplement, the original overdraft protection guidance so that it addresses any new issues, provides consistency among regulators, and facilitates compliance," the association said.
AmBA
also rejected the proposal's classification of failure to comply with many of the supplemental guidance's best practices as “unfair or deceptive” -- in effect making them mandatory. Read the letter. For more information, contact
AmBA
's Nessa Feddis. July 2, 2010
Agencies Remind Bankers About Call Report Deadline, Updates
The federal banking agencies yesterday reminded banks that the deadline for submitting their second-quarter Call Reports is July 30. An updated instruction book is expected to be available on the FDIC and Federal Financial Institutions Examination Council websites by July 7. The instruction book revisions primarily involve glossary entries related to recent changes in accounting standards, the agencies said.
Banks also should refer to the second-quarter Call Report supplemental instructions for guidance on such reporting issues as term deposits, purchased subordinated securities, prepaid deposit insurance assessments, and Financial Standards Accounting Board Standards 166 and 167, they said.
Banks that continue in the FDIC Transaction Account Guarantee Program should note a Call Report change requiring them -- starting yesterday -- to record on a daily basis the closing balances for accounts covered under the TAG Program in excess of the $250,000 standard coverage limit.
The TAG assessment base, to be reported at the end of the third quarter under the new Call Report item, is the average of daily closing balances covered only by the TAG Program. Banks also must retain the documentation, the agencies said. Read more. Read the supplemental instructions. For more information, contact
AmBA
's Cathy McTighe.
AmBA: FDIC Should Halt Proposed Changes to Safe Harbor for Securitizations
The FDIC should not move forward with its proposed changes to the safe harbor protection for failed banks’ assets transferred for securitizations or participations that would be affected by recent accounting changes, AmBA and its AmBA Securities Association affiliate said yesterday in a comment letter.
The associations pointed out that the same kinds of changes are included in the financial regulatory reform bill (H.R. 4173) currently before Congress, and they also are part of a proposal that the Security and Exchange Commission has issued for comment.
“We believe that most of the goals expressed in [the agency’s notice of proposed rulemaking] will be addressed directly, rather than indirectly as proposed, through … interagency rulemaking in which the FDIC will play a significant role,” they said. Read the letter. For more information, contact
AmBA
's Cris Naser.
July 1, 2010
SEC Curbs Investment Adviser ‘Play-for-Pay’ Practices
The Securities and Exchange Commission yesterday adopted a final rule intended to prevent registered investment advisers from making campaign contributions and related payments to elected officials to win contracts for managing pension funds and investments -- a practice known as “pay to play.”
The rule prohibits such advisers from working with public pensions for two years if they make a political contribution to a government official who is in a position to influence a pension’s investment decisions. That time period would be six months for individuals newly promoted or hired to positions covered by the rule.
The rule also bans registered investment advisers and certain of their executives and employees from soliciting or coordinating political contributions from others for elected officials positioned to influence adviser selection. Registered advisers also would be banned from paying third-party solicitors who are not “regulated persons” prohibited from making contributions. Read more. For more information, contact
AmBA
's Phoebe Papageorgiou.
June 29, 2010
Fed to Implement Daylight Overdrafts Changes in Early 2011
The Federal Reserve will implement revisions to its Payment System Risk Policy in early 2011that it adopted in December 2008, the agency said Monday. The revised policy -- which encourages institutions to pledge collateral to cover daylight overdrafts -- provides collateralized daylight overdrafts at no fee and raises the fee for uncollateralized daylight overdrafts to an annual rate of 50 basis points. Read more.
June 28, 2010
OCC: Banks’ First-Quarter Trading Revenues Rise to $8.3 Billion
Commercial banks’ revenues from trading derivatives and cash securities rose to $8.3 billion in the first quarter, 328 percent higher than $1.9 billion tallied in the “seasonally weak” fourth quarter, the Office of the Comptroller of the Currency said in a report Friday. First-quarter credit trading generated $2.7 billion, the highest amount since banks began reporting the credit separately in 2007, the OCC said.
The report showed that the notional amount of derivatives banks held in the first quarter increased $3.6 trillion -- or 1.7 percent -- to $216.5 trillion. Interest rate contracts increased $2.4 trillion to $182 trillion, while foreign exchange contracts increased 6 percent to $17.6 trillion. Read more. Read the report.
June 25, 2010
FDIC Releases Report on Results of Small-Dollar Loan Pilot Program
The FDIC yesterday released a report on the results of the agency’s two-year Small-Dollar Loan Pilot Program. The program was designed to show how banks can profitably offer affordable, small-dollar loans as an alternative to high-cost credit products, such as payday loans and fee-based overdraft programs.
According to the report, the pilot’s finding resulted in a template that contains the elements for safe, affordable and feasible small-dollar loans. Those elements include loan amounts up to $2,500; annual percentage rates of 36 percent or less; low or no fees; streamlined underwriting; and loan terms of 90 days or more.
Among the elements of success that emerged during the pilot, the report said, were: The realization that small-dollar loans are best used as a strategy to develop or retain long-term consumer relationships; long-term program support from a bank's board of directors and senior management is essential; and loan terms should be longer than a few pay cycles to give consumers time to repay. Read more. Read the report.
June 18, 2010
FDIC Board Expected to Approve TAG Program Extension on Tuesday
The FDIC Board during its meeting Tuesday is expected to approve a final rule that will extend the Transaction Account Guarantee Program -- which offers unlimited deposit insurance on noninterest-bearing accounts -- from July 1, 2010 to Dec. 31, 2010. Meanwhile, the House and Senate conferees on the regulatory reform bill are considering proposals to either make the program permanent for all banks, or extend it for two years beyond its current Dec. 31, 2010, expiration date.
The board also will report on Deposit Insurance Fund projections, including income, losses and a reserve-ratio projection update for the fund restoration plan. Read more.
Regulators Propose CRA Change to Support HUD Program
The federal bank and thrift agencies yesterday proposed a change in the Community Reinvestment Act regulations intended to encourage depository institutions to support the Department of Housing and Urban Development’s Neighborhood Stabilization Program. HUD uses the program to provide funds to state and local governments, and to nonprofit organizations, that enable them to buy and redevelop abandoned and foreclosed properties.
The agencies’ CRA proposal would encourage institutions to make loans and investments, and provide services to support NSP activities in areas with HUD-approved plans. The proposal would supplement existing CRA consideration for community development activities, including those involving neighborhood stabilization. Read more. Read the proposal.
Agencies to Hold Public Hearings on CRA Modernization
In related news, the federal bank and thrift agencies announced yesterday that they will hold a series of upcoming public hearings on modernizing Community Reinvestment Act regulations. Interested parties are invited to provide testimony and written comments as the agencies consider how to update the CRA regulations to reflect changes in the financial services industry, changes in how banking services are delivered, and current housing and community development needs. The hearing schedule is July 19, Arlington, Va.; Aug. 6, Atlanta; Aug. 12, Chicago; and Aug. 17, Los Angeles. Read more. Read possible topics for testimony and written comments.
Fed to Hold Hearings on Potential HMDA Revisions
The Federal Reserve yesterday announced the discussion topics for its upcoming public hearings on potential revisions to Regulation C, which implements the Home Mortgage Disclosure Act. Those topics include reportable HMDA data elements; rule changes on the types of institutions required to report HMDA data; and emerging mortgage-market issues likely to affect the HMDA data’s usefulness and accuracy. Members of the Fed’s Consumer Advisory Council will join agency officials in presiding over the hearings.
The Fed will invite consumers, community and consumer organizations, mortgage lenders and other interested parties to participate. The hearing schedule is July 15, Atlanta Federal Reserve Bank; Aug. 5, San Francisco Federal Reserve Bank; Sept. 16, Chicago Federal Reserve Bank; and Sept. 24, Fed headquarters in
Washington
,
D.C.
Read more.
FDIC Advisory Committee to Review Results of Small-Dollar Loan Pilot Program
The FDIC’s Advisory Committee on Economic Inclusion will meet next Thursday to review how lessons learned from the agency’s two-year Small-Dollar Loan Pilot Program can be used to encourage more banks to offer safe, affordable small-dollar loans. The program was designed to illustrate the feasibility of banks offering affordable small-dollar loans as an alternative to high-cost credit products, such as payday loans and fee-based overdraft programs, FDIC officials said.
At its conclusion, the program had 28 volunteer banks with assets ranging from $28 million to nearly $10 billion and offices in 27 states. They provided loans of up to $2,500 at annual percentage rates of less than 36 percent, with low or no fees and loan terms of at least 90 days to give consumers time to repay.
The advisory committee also will continue discussions on the FDIC’s proposed templates for safe, low-cost transactional and basic savings accounts, and will review the public comments received on the templates. Read more.
June 16, 2010
DOL Rule Requires Banks to Post Notice on Employees’ Rights to Organize
The Labor Department finalized a regulation on May 20 requiring federal contractors -- including banks -- to post a notice advising employees of their rights under the National Labor Relations Act to join and form labor unions.
While neither the final rule nor the executive order it implements references deposit insurance,
AmBA
has learned that department officials said in a recent webinar that insured institutions must post the notice by the rule’s June 21, 2010, effective date. (An audio recording of the webinar is available -- until July 2 -- by dialing 800-333-1825.)
According to the webinar, the regulatory definition of "government contract" would include banks based on two criteria: (1) FDIC deposit insurance is a covered government contract, and (2) the issuing and paying of bonds and federal fund depository also establishes coverage.
The physical notice should be posted where the bank displays its other federal posters, such as for the Fair Labor Standards Act and Title VII. Banks that post notices to employees electronically must also post the required notice electronically via a link to Labor’s Office of Labor-Management Standards’ website.
The link to the notice must be placed where the bank customarily places other electronic notices to employees about their jobs, and it must be at least as prominent as other employee notices. Electronic posting, however, cannot be used as a substitute for physical posting.
Read more.
Read a fact sheet on the rule.
Download a notice.
For more information, contact
AmBA
's Cris Naser.
Fed Approves Final Rule on Credit Card Penalty Fees
The Federal Reserve yesterday approved a final rule that, among other things, prohibits credit card issuers from charging a penalty fee of more than $25 for late payments or for otherwise violating the account’s terms -- except if the consumer has repeatedly violated those terms, or the issuer can show that a higher fee is a reasonable proportion of the costs incurred as a result of violations.
The rule, which takes effect Aug. 22, also prohibits issuers from charging penalty fees that exceed the dollar amount associated with the consumer's violation. For example, card issuers cannot charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20.
The regulation also bans "inactivity" fees, such as those based on a consumer’s failure to use the account to make new purchases; prevents issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms; and mandates that issuers that have increased rates since Jan. 1, 2009, must evaluate whether the increase’s reasons have changed and, if appropriate, to reduce the rate.
Yesterday’s final rule represent the final phase of the broad-based changes mandated by the Credit Card Act, said Ken Clayton, AmBA SVP and general counsel for card policy. “With the new disclosure provisions [mandated by the Fed but not covered by the act] set to take effect next month, this brings to a close the most sweeping overhaul of the industry since the invention of credit cards,” Clayton said. “Taken together, the new rules will provide consumers with numerous tools for better management of their credit costs.” Read more.
Read Clayton statement.
Read the final rule.
June 14, 2010
TARP Repayments Exceed Amount Outstanding for First Time
The Troubled Asset Relief Program’s repayments have reached $194 billion, which exceeds its outstanding debt -- $190 billion -- for the first time, the Treasury Department said in its May report to Congress, released Friday. The report also shows that the cumulative proceeds from TARP investments have gone over the $23 billion mark. They include about $16 billion in dividends, interest, distributions and other income, and some $7 billion in warrant sales from Capital Purchase Plan and Targeted Investment Program investments. “TARP repayments have continued to exceed expectations, substantially reducing the projected cost of this program to taxpayers,” said Herb Allison, Treasury assistant secretary for financial stability. Read the report.
June 8, 2010
Federal Reserve Board Posts Credit Card Agreements.
On May 24, the Federal Reserve Board (Board) announced that consumer credit card agreements from a vast majority (over 300) of credit card issuers have been made available online at http://www.federalreserve.gov/creditcardagreements. The Board's database is the result of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, which also requires card issuers to post account agreements on their websites, as well as to provide consumers with credit card agreement(s) upon a consumer's request. The next submission deadline for the Board's database is August 2, 2010. For a copy of the announcement, click here.
AmBA Opposes Product Templates for Low- and Moderate-Income Consumers
The FDIC should not move ahead with its proposed templates for low-cost transactional and basic savings account products for low- and moderate-income consumers,
AmBA
said yesterday in a comment letter. “
AmBA
concludes that the templates fail to address the realities needed to articulate a flexible, viable and sustainable model that will address the needs of the [low- and moderate-income] segment … ,” the association said.
AmBA
added that the proposed templates’ account features would not enable the accounts to pay for themselves and, as a result, institutions or other accountholders would have to underwrite or subsidize them. Among the template approach’s shortcomings, the association said, are that it assumes a plain-vanilla solution for a diverse market of needs and demands; data from bank Community Reinvestment Act exams show that many low- and moderate-income consumers are responsibly using existing transactional accounts; and the government should not be in the product-design and endorsement business.
AmBA
suggested several alternatives to the template concept. They include highlighting successful low- and moderate-income bank programs that other institutions can emulate; revamping the Bank Enterprise Award Program to enable a broader range of participants to develop viable business plans that other institutions could adopt; and avoiding inflexible regulations or chilling pronouncements that stifle new technologies enabling banks to develop delivery channels to better reach target markets. Read the letter. For more information, contact
AmBA
's Cathy McTighe.
FDIC Issues Guidance on Deposit Placement and Collection Activities
The FDIC yesterday issued guidance that outlines the steps banks should take to avoid customer misunderstandings about deposit insurance coverage when the institutions enter into third-party arrangements to collect and place deposits.
“Institutions should ensure that marketing materials, customer statements and disclosures given to customers are accurate with respect to deposit insurance coverage and reflect the terms and conditions of the arrangement between the customer and the bank, as well as with the banks that receive customer funds,” FDIC said.
The agency also emphasized that institutions acting as agents in deposit collection and placement arrangements should ensure that customers receive the deposit amount and the name of the bank where their deposits are ultimately placed. Read more. Read the guidance.
Agencies Issue Guidance on Bargain Purchases and Assisted Acquisitions
The federal banking agencies yesterday issued guidance to address supervisory considerations related to bargain purchase gains and the effect such gains have on the acquisition approval process. “Approval of an acquisition may be conditioned on the acquiring institution's commitment to maintain specified levels of capital to address the risk of significant retrospective adjustments to the bargain purchase gain or other risks,” the FDIC said in a financial institution letter.
The guidance also highlights the accounting and reporting requirements unique to business combinations resulting in bargain purchase gains and FDIC- and National Credit Union Administration-assisted acquisitions of failed institutions. It does not, however, add to or modify the agencies’ existing regulatory reporting requirements, or current accounting requirements under generally accepted accounting principles. Read more. Read the interagency guidance.
Bair Questions Homeowner Tax Breaks
Taxpayer subsidies for homeowners are three times the size of all rental subsidies, and over time they have helped push housing prices out of the reach of groups the government is trying to assist, Sheila Bair said yesterday at the Housing Association of Non-Profit Developers annual meeting in Tysons Corner, Va. “Even as we emerge from this crisis, it is worth asking whether federal policy is devoting sufficient emphasis to the expansion of quality, affordable rental housing,” Bair said. She added that the country needs to “take a hard look” at housing policies that drove the homeownership rate as high as 69 percent. That level proved to be unsustainable, and may never be reached again, Bair said. Read Bair’s speech.
June 4, 2010
FDIC: Summary of Deposits Survey Deadline Is July 30
The FDIC reminded banks Friday that the deadline is July 30 for submitting its annual Summary of Deposits Survey for branch offices at all agency-insured commercial banks, agency-supervised savings banks and insured branches of foreign banks. Institutions with only a main office are exempt. No filing extensions will be granted, FDIC officials said. Read more.
Bernanke: Fed Encouraging Lenders to Increase Small Biz Credit
The Federal Reserve is encouraging lenders to increase the credit flow to small business to reduce unemployment and support the economic recovery, Fed Chairman Ben Bernanke said yesterday at a small-business lending forum in
Detroit
. “While maintaining appropriate prudence, lenders should do all they can to meet the needs of legitimate, creditworthy borrowers. Doing so is good for the borrower, good for the lender, and good for our economy, ” Bernanke said.
He added that the Fed is educating its examiners to ensure that they do not prevent good loans. “We have also conducted extensive training programs for our bank examiners, with the message that encouraging lending to small businesses that are well positioned to repay is positive, not negative, for the safety and soundness of our banking system,” Bernanke said.
Bernanke’s remarks show that the Fed has received
AmBA
’s message -- emphasized in congressional testimony, and in talks with administration officials and regulators -- that examiners have been discouraging banks from making solid loans.
In March,
AmBA
sent regulators a letter listing lending-related areas in which overzealous examiners were acting contrary to the banking agencies’ Feb. 5 joint statement saying that banks would not be subject to supervisory criticism for making prudent small-business loans. Read Bernanke’s speech.
June 2, 2010
HUD Issues Advance Rulemaking Notice Regarding “Required Use”
On June 3rd, HUD issued an Advance Notice of Proposed Rulemaking (ANPR) to initiate rulemaking aimed at strengthening and clarifying the prohibition against the ‘‘required use’’ of affiliated settlement service providers in residential mortgage transactions under section 8 of RESPA. In the notice, HUD states that it has received complaints that about homebuyers committing to use a builder’s affiliated mortgage lender in exchange for construction discounts or discounted upgrades, without sufficient time to research their contracts or to comparison shop. The purpose of the ANPR is to solicit information that can be used to construct the proper regulatory outlines for the ‘‘required use’’ of affiliated settlement service providers in residential mortgage transactions.
Through the ANPR, HUD seeks comment from all sources, and welcomes comment on actions in addition or as an alternative to rulemaking that would better address concerns with affiliated business arrangements in residential mortgage transactions.
To access the HUD notice, click here For more information, contract
AmBA
’s Rod J. Alba.
Fed: Applying Card Act Restrictions to Small-Biz Cards Could Increase Costs, Cut Credit
A Federal Reserve report released yesterday affirms the banking industry’s long-held belief that applying certain Credit Card Act provisions designed to protect consumers to small-business credit cards will increase costs and reduce credit availability to small businesses, AmBA said.
Small-business credit cards and consumer credit cards are similar in function and features, but they differ markedly in the manner in which they are used. In short, small-business cards present higher underwriting risk and greater cost in both maintaining accounts and in overseeing their performance, Ken Clayton, AmBA SVP and general counsel for card policy, explained.
The report makes clear that “small businesses will lose access to small-business credit cards if lenders are restricted in their flexibility to manage risk,” Clayton said. “That would be a terrible blow to small businesses nationwide as they seek to stabilize their operations, grow their business and hire new employees. The potential must be of paramount consideration to any effort to regulate small-business cards.” Read the report. Read Clayton’s statement. For more information, contact
AmBA
's Clayton.
Agencies Release List of Areas Eligible for CRA Credit
The federal banking agencies yesterday released the 2010 list of distressed or underserved nonmetropolitan middle-income areas in which banks participating in revitalization or stabilization activities will be considered for Community Reinvestment Act credit. Read more. Read the list.
June 1, 2010
Fed Issues Reg E and DD Clarifications Affecting Overdraft Services
The Federal Reserve on Friday issued final clarifications to Regulations E (Electronic Fund Transfers Act) and DD (Truth in Savings Act) that affect overdraft services. The clarifications explain, among other things, that the Reg E prohibition on assessing overdraft fees without a consumer's consent applies to all institutions -- including those that decline ATM and one-time debit card transactions when an account has insufficient funds.
Read more.
Read the Reg DD clarification.
Read the Reg E clarification.
May 27, 2010
AmBA Briefs Reporters on New Overdraft Rules
AmBA
retail banking expert Nessa Feddis yesterday held a conference call to brief reporters on the new overdraft protection rules that take effect July 1. Thirty reporters from a variety of media outlets -- including the Wall Street Journal, USA Today, Associated Press, Dallas Morning News and Buffalo News -- dialed into the call to learn how debit card operations will change, why a jump in declined transactions could occur, and what consumers should know to decide whether or not to "opt in." An audio file of the call and background materials that were shared with reporters have been posted on a special journalist telebriefing page on aba.com. Visit the journalist telebriefing page. For more information, contact
AmBA
's Carol Kaplan.
May 24, 2010
Exam Guidance Issued for Internet Gambling Rule
The Federal Reserved last week issued interagency examination guidance for reviewing banks' compliance with the final rule implementing the 2006 Unlawful Internet Gambling Enforcement Act. The exam guidance is urgently needed because the rule will go into effect June 1 after a six-month implementation delay. The guidance includes an overview of the final rule, applicable exemptions and nonexclusive safe harbors for compliance. Read more. Read the guidance. For more information, contact
AmBA
's Steve Kenneally.
AmBA Develops New Regulatory Burden Catalog
AmBA
on Friday unveiled its new Regulatory Burden Catalog that bankers can use to debunk media myths that the banking industry has somehow undergone deregulation. The catalog, which will be updated periodically, lists 50 new regulatory mandates that have been finalized and imposed on banks during the past two years. It does not include any proposed regulations that are under consideration.
"The banking industry already is in the midst of one of the most radically transformational periods in its history -- even if Congress never passes any regulatory reform legislation," the catalog's introduction says. The rules described in the catalog, and the many more that are on the drawing board, are imposing daunting new burdens on almost every facet of bank operations.
"As Congress and the regulators consider new initiatives, they would do well to keep in mind the reform already well underway and the enormous new burdens that are being piled on banks almost literally every day," the introduction says. Read the catalog. For more information, contact
AmBA
's Cathy McTighe.
May 21, 2010
Industry Earned $18 Billion in First Quarter
Banks and savings institutions earned $18 billion in the first quarter, $12.5 billion more than the industry’s $5.6 billion profit in 2009’s first quarter, but well below historical norms. A reduction in loan-loss provisions was the primary factor contributing to the improvement, FDIC officials said. While first-quarter provisions were still high, at $51.3 billion, they were $10.2 billion -- or 16.6 percent -- lower than a year earlier. Lower expenses for goodwill impairment and other intangible asset charges added $5 billion to pretax earnings, they said.
Asset-quality trends also improved as troubled-loan growth slowed for the fourth straight quarter. Charge-offs were $52.4 billion, up from $37.9 billion a year earlier, but less than the $53.6 billion charged off in the fourth quarter of 2009. The percentage of noncurrent loans and leases rose from 5.38 percent in 2009’s final quarter to 5.45 percent in the first quarter, the highest level in the 27 years those data have been reported. But the $17.4 billion increase in noncurrent loans was the smallest quarterly increase in two and a half years.
The extent that both noncurrent loans and charge-offs improved was understated because new accounting standards -- FAS 166 and 167 -- were implemented, the FDIC said. The rules require banks to report on their balance sheets many existing securitized credit card and other consumer loans that had not been included in banks’ loan portfolios. They also require reporting the noncurrent loans and charge-offs associated with those securitized loans.
The problem bank list grew by 73 to 775 -- the largest number since 1993 -- and the Deposit Insurance Fund increased by $145 million to a negative $20.7 billion, the first rise in the fund’s balance since the first quarter of 2008. The fund balance reflects a $40.7 billion contingent loss reserve that has been set aside to cover estimated losses. Combining the fund balance with this contingent loss reserve shows total DIF reserves of $20 billion, FDIC said. Read more. Read the FDIC Quarterly Banking Profile.
May 20, 2010
AmBA Urges Agencies to Support Removing Collins Amendment
AmBA
yesterday urged the federal banking regulators to support removing from the financial regulatory reform bill (S. 3217) Sen. Susan Collins’ (R-Maine) amendment that the Senate adopted last week. “
AmBA
urgently requests your assistance to help inform the Senate about the many possible serious unintended consequences of this amendment,” association President and CEO Ed Yingling said in a letter.
The amendment -- intended to improve capital quality -- would require the banking agencies to establish minimum leverage and risk-based capital requirements for all banks, bank holding companies and nonfinancial firms under the Federal Reserve’s jurisdiction. But
AmBA
believes the amendment could go much further than intended and could be read to limit Tier 1 capital components for holding companies to those permitted as Tier 1 for banks under the prompt correction action rules, Yingling said.
“We believe that this would exclude capital instruments such as trust preferred securities from the consolidated Tier 1 capital of bank and thrift holding companies,” Yingling explained. “The amendment also would eliminate the small-bank holding company [less than $500 million in assets] exemption from consolidated capital requirements.”
He added that excluding trust preferred securities as a capital source would negatively impact 644 bank holding companies -- most which are mid-size -- and eliminate $129 billion in capital, supporting $1.3 trillion in assets, from the banking system. It also would affect a significant number of savings and loan holding companies, Yingling said.
“In addition, we estimate there are hundreds of … community banks that issued trust preferred securities in pooled programs,” he said. “If trust preferred is excluded, then holding companies would need to replace the capital, most likely through a common stock offering, or significantly shrink their balance sheets to offset the capital impact, further reducing lending.”
Yingling outlined several other adverse effects of the Collins amendment, and said that if it can’t be removed from the bill, the agencies should, at the very least, grandfather existing capital instruments. Read the letter. For more information, contact
AmBA
's Mark Tenhundfeld.
AmBA
Supports TAG Program Extension; Recommends Changes
AmBA supports extending the FDIC's Transaction Account Guarantee Program another six months through the end of the year -- and the flexibility to extend the program for up to another year -- but it also recommends some changes to improve the TAGP, the association said yesterday in a comment letter.
The latest extension and the flexibility for another are "appropriate given the still uncertain path of the economic recovery and the need to prepare to carefully unwind the program in a way that limits any adjustment problems," said
AmBA
, which requested the second extension in a March 12 letter to FDIC Chairman Sheila Bair.
The association also recommended changes in the interim rule extending the TAGP that, among other things, would allow healthy banks which had previously opted out of the program to opt back in; maintain the cap on interest rates for NOW accounts at 50 basis points or index it; and keep the base used for program assessments consistent with the reporting done by banks of different sizes. Read the letter. For more information, contact
AmBA
's Rob Strand.
AmBA, Affiliates Urge Senators to Vote Against Restricting Securities, Insurance
AmBA and its securities and insurance affiliates -- the AmBA Securities Association and the American Bankers Insurance Association -- yesterday urged all senators to vote against an amendment (No. 3884) to the financial regulatory reform bill -- offered by Sens. Maria Cantwell (D-Wash.) and John McCain (R-Ariz.) -- that would restrict banks’ ability to engage in securities and insurance activities.
“Modernizing the current financial regulatory structure does not require the Senate to repeal the powers granted financial firms under the Gramm-Leach-Bliley Act, nor is it the case that the financial crisis was caused by GLBA,” the associations said in a memo. In fact, absent GLBA, several troubled securities and brokerage firms would have failed rather than been acquired, exacerbating an already fragile financial system.
They emphasized that millions of customers rely on their banking organizations’ ability to offer a full range of banking, brokerage and insurance services. “We do not see how repealing the ability of these firms to offer insurance or securities products and diversify their income stream would assist in the economic recovery or contribute to a safer financial environment,” the associations said. Read the memo.
May 12, 2010
FDIC Board Issues New Proposal on Safe Harbor Protection for Securitizations
The FDIC Board yesterday issued a proposal intended to clarify the safe harbor protection of failed banks’ assets transferred for securitizations or participations that would be affected by recent changes to generally accepted accounting principles. The conditions the proposal would put on an investor safe harbor for such bank-sponsored securitizations include significant disclosures and also structural requirements to the securitization process.
The FDIC had issued an advance notice of proposed rulemaking on the issue in December, and yesterday’s proposal makes several key changes to the ANPR. Those changes, among other things would require a 5 percent reserve fund for residential mortgage-backed securities to cover potential put-backs during the first year of the securitization, rather than the prior 12-month seasoning requirement; disclosure of any competing ownership interests held by the servicer, or its affiliates, in other loans secured by the same property; and deferred compensation for rating agencies only -- rather than all service providers.
AmBA
and its AmBA Securities Association affiliate opposed the FDIC’s December ANPR, arguing that the agency should wait until Congress passes a regulatory reform bill that addresses securitization-process reform. They also said the ANPR’s risk retention requirement was, at best, an indirect means to address the poor underwriting standards, and the securitization safe harbor is not the appropriate vehicle to undertake key changes to the securitization market. Comptroller of the Currency John Dugan -- who along with Office of Thrift Supervision Acting Director John Bowman voted against issuing yesterday’s proposal -- raised similar concerns. There will be a 45-day comment period on the proposal after its publication in the Federal Register. Read more.
Read the proposed rule.
Read Dugan’s statement.
Read the AmBA/AmBASA comment letter.
For more information, contact
AmBA
's Cris Naser.
FDIC Proposes Contingent Resolution Plans for Large Banks
The FDIC yesterday proposed a rule that would require the industry's 40 largest banks -- those with more than $10 billion in assets owned by holding companies with more than $100 billion in assets -- to submit contingent resolution plans that demonstrate how they could be resolved separately from their parent structures if there was another financial crisis. As part of the plan, banks would have to provide a "gap analysis" showing the FDIC potential obstacles to a resolution and how they could be addressed. Proposed reporting requirements would include information about a bank's operations and management, affiliate relationships and other relevant data. There will be a 60-day comment period on the proposal after its publication in the Federal Register. Read more. Read the proposed rule.
May 11, 2010
AmBA
Posts Update to ABAWorks on RESPA
The AmBAWorks on RESPA has been updated to reflect certain additions from the April FAQs issued by HUD, and to incorporate various elements of clarification. This RESPA Guide is free for members and can be downloaded at http://www.aba.com/Members+Only/ABAWorks_RESPA.htm.
AmBA
will continue to issue updates to this Guide as HUD issues new guidance and interpretations.
ABmA
welcomes your views and critiques on the Guide's contents.For more information, contact
AmBA
’s
Rod Alba.
FDIC to Vote on Safe Harbor for Securitizations
The FDIC Board at its meeting today will consider a proposed rule on the safe harbor protection of failed banks’ assets transferred for securitizations or participations that would be affected by recent changes to generally accepted accounting principles. An advance notice of proposed rulemaking on large-bank reporting and planning also is on the meeting agenda. Read the meeting agenda.
May 10, 2010
FDIC Issues Guidance on Lending During Flood Insurance Lapses
During periods when the National Flood Insurance Program is not available, FDIC-supervised financial institutions may make loans subject to the Flood Act without flood insurance coverage, the FDIC said in guidance Friday. Those institutions must, however, continue to make flood determinations, provide timely, complete and accurate notices to borrowers, and comply with other parts of the flood insurance regulations, the agency said. The FDIC issued the guidance because the Federal Emergency Management Agency’s authority to issue flood insurance policies under the National Flood Insurance Program lapsed between March 28 and April 16. Read more.
May 7, 2010
AmBA
Offers Summary of Proposed Garnishment Rule
AmBA
has prepared a detailed summary of a proposed rule establishing procedures that banks must follow when a garnishment order is received for an account into which federal benefit payments have been directly deposited.
The proposal, issued jointly last month by five agencies that issue federal benefit payments, would require banks to look at account activity in the garnished account for the 60 days prior to the date the order is received. If such federal benefits were deposited, the bank must ensure that the account holder has access to either the sum of such payments or the account balance on the date of the account review.
The agencies said the proposal was issued in response to recent developments in technology and debt collection practices that have led to an increase in the freezing of accounts containing federal benefit payments. Comments are due June 18. Read the AmBA summary. For more information, contact
AmBA
's Mark Tenhundfeld.
May 6, 2010
FDIC Board to Vote on Safe Harbor for Securitizations
The FDIC Board at its meeting next Tuesday will consider a proposed rule on the safe harbor protection of failed banks’ assets transferred for securitizations or participations that would be affected by recent changes to generally accepted accounting principles.
AmBA
and its AmBA Securities Association affiliate in a Feb. 22 comment letter opposed the changes contemplated in the FDIC’s advance notice of proposed rulemaking on the issue. They said the ANPR would impose credit-risk retention and other structural restrictions on securitization transactions that could fundamentally change their underlying economics.
The FDIC Board on March 11 extended for six months -- through Sept. 30, 2010 -- the safe harbor protection of failed institutions' assets transferred for securitizations or participations. The extension permanently grandfathered all securitizations or participations that are in process through that date.
AmBA
and ABASA had requested an extension.
An advance notice of proposed rulemaking on large-bank reporting and planning also is on the FDIC Board’s meeting agenda. Read the meeting agenda.
May 5, 2010
Amendment Striking New Deposit Account Disclosures Also Receives Backing
Senate Banking Committee Chairman Chris Dodd (D-Conn.) also expressed support for an amendment by Sen. Olympia Snowe (R-Maine) that would eliminate an ABA-opposed provision in the financial regulatory reform bill (S. 3217) requiring new disclosures on deposit accounts. It is one of the 27 new or expanded types of regulation in the legislation that
ABA
identified in an April 19 letter to senators and has targeted for removal.
The provision, among other things, would require every bank to maintain records on the number and dollar amount of its customers’ deposit accounts for all branches, ATMs and other deposit-gathering facilities. Customer addresses would have to be geo-coded and identified as residential or commercial. Banks also would be required to make annual disclosures, for each branch, ATM or other facility on the type of deposit account, and also provide data on the number and dollar amount of all accounts by customer census tract.
AmBA
: Proposed Large-Bank Tax Also Would Affect Community Banks, Customers
AmBA
yesterday reiterated to Congress its opposition to the Obama administration’s proposal to levy a tax on large financial firms with more than $50 billion in assets that received government assistance. “Large banks will clearly bear the brunt should any bank tax be applied, but the consequences go well beyond the largest banks and will likely affect community banks’ funding costs and the ultimate borrowing costs for their customers,” AmBA Chief Economist Jim Chessen told the Senate Finance Committee.
Chessen explained that the impetus for the proposed bank tax is a provision in the Emergency Economic Stabilization Act that requires any TARP losses to be recovered from the financial industry. He noted, however, that nonbanks account for all projected TARP losses. “Had the TARP been limited to the banking industry, there would be no losses on the program,” Chessen said. “The bank tax is an arbitrary tax on institutions of a certain size without regard to where the losses actually occurred or the payments made by banks which have provided a significant return to taxpayers.”
He emphasized that government sources project that taxpayers will make a profit on every bank-TARP program. As of April 16, the government has received $19 billion in dividends and warrants from the $245 billion in bank investments, an estimated 8.5 percent profit for taxpayers that is “a very good return by any measure,” Chessen said.
The bank tax would not only be unfair, he added, it also would have the serious unintended consequences of reducing credit availability and driving capital out of the banking industry. The proposal could mean as much as $1 trillion of loans would not be made over the next decade, Chessen said.
Iowa Bankers Association President and CEO John Sorensen also testified against the proposed large-bank tax. He said, among other things, that it would hurt consumers and small businesses, and it would not help community bank competitiveness.
Read AmBA’s testimony.
Read Sorensen’s testimony.
Read other witnesses testimony.
Watch a video of the hearing.
AmBA Updates Guide on HUD’s New RESPA Rules
AmBA
has updated its free, members-only AmBAWorks on RESPA, a guide to help bankers comply with the Department of Housing and Urban Development’s recently issued new Real Estate Settlement Procedures Act disclosure rules that went into effect Jan. 1. The updated version reflects recent guidance and frequently asked questions from HUD, and also contains industry interpretations of HUD’s guidance so far. Download the updated AmBAWorks on RESPA.
Subscribe to AmBAWorks on RESPA updates.
For more information, contact
AmBA
's Rod Alba.
May 3, 2010
Fed Issues Proposed Rule on Card Fees, Interest Rates
The Federal Reserve proposed a rule that would implement 2009 Credit Card Act provisions slated to go into effect August 22. The rule is the third stage in the Fed's implementation of the act. The proposal would, among other things, prohibit card issuers from charging penalty fees that exceed the dollar amount associated with the violation. The proposal also would ban inactivity fees, such as those charged for not using the account to make new purchases; bar charging multiple penalty fees based on a single late payment or other violations of account terms; require that consumers are informed about the reasons for rate increases; and mandate that issuers who have increased rates since January 1, 2009, evaluate whether the reasons for the increase have changed and reduce the rate if appropriate. For more information, contact
AmBA
's Nessa Feddis. For details on the rule, click here.
Banking Agencies Issue Final Guidance on Correspondent Concentration Risks
The federal banking agencies on Friday issued final guidance that outlines their expectation for identifying, monitoring and managing correspondent concentration risks between financial institutions for both credit and funding exposures. The guidance does not establish strict concentration thresholds, but it requires banks to develop strategic plans and internal limits to manage correspondent risks on a stand-alone and consolidated basis.
It also emphasizes that banks that maintain or contemplate entering into any credit or funding transactions with another financial institution should ensure that the terms for such transactions are on an arm's-length basis; conform to sound investment, lending and funding practices; and avoid potential conflicts of interest. The final guidance will become effective upon publication in the Federal Register. Read the FDIC financial institution letter on the guidance. Download an FDIC worksheet for calculating credit and funding exposures. Read the final guidance. For more information, contact
AmBA
's Denyette DePierro.
Federal Reserve to Offer Term Deposits
The Federal Reserve on Friday approved a final rule that authorizes the Federal Reserve Banks to offer term deposits to assist in the management of reserve balances. The term deposits will be offered through a term deposit facility to institutions that are eligible to receive earnings on their balances at the Federal Reserve Banks. The term deposits, like a certificate of deposit, will have maturities of up to one year and earn interest rates that will not exceed the general level of short-term interest rates.
The Federal Reserve, responding to a Feb. 1 AmBA comment letter, expects to implement the program in a way that promotes equitable access to term deposits for institutions of all sizes -- with low minimum bid amounts and no required reserve balance or master account.
The Federal Reserve also adopted
AmBA
's suggestion to have a noncompetitive bid process, similar to auctions for Treasury securities, that will allow small institutions to submit a tender for the quantity of term deposits they wish to hold at a rate established by the competitive auction. The final rule will become effective 30 days after its publication in the Federal Register. Read more. Read the final rule. For more information, contact
AmBA
's Denyette DePierro.
AmBA Comments to IRS on Allowing ID Number Truncation
AmBA on Friday said the Internal Revenue Service should issue guidance that would permit -- rather than require -- financial institutions and others to truncate various types of tax identification numbers on paper payee statements for IRS Forms 1098, 1099 and 5498. The IRS "should make TIN truncation optional, rather than required, as there may be other ways for filers to address the issue of identity theft or privacy other than truncating the TIN on documents mailed to customers,"
AmBA
said in a comment letter.
AmBA
sent the comment letter in response to several question the IRS asked in a Nov. 19 notice that created a pilot program to allow banks and others to truncate TINs on certain statements and forms filed for calendar years 2009 and 2010. The association also urged the IRS in the letter to extend the pilot program so that more filers could participate for multiple years to give the agency the experience needed to implement an effective permanent program. Read AmBA's letter. Read the IRS notice. For more information, contact
AmBA
's Fran Mordi.
April 27, 2010
Reminder: Opt-Out Deadline for TAG Program Is Friday
AmBA is reminding banks that are participating in the FDIC’s Transaction Account Guarantee Program that they have until Friday, April 30, to opt out of the second six-month program extension -- from July 1, 2010 to Dec. 31, 2010 -- that the agency approved in an interim rule on April 13. There will be no other opt-outs offered even if the FDIC Board decides to extend the TAG an additional year, which is permitted under the interim rule.
Banks that opt out of the extension must post notices in their lobbies and on their Web sites by May 20, indicating that noninterest-bearing deposit accounts will no longer be covered above $250,000 after June 30. To opt out, send an e-mail to optout@fdic.gov with the subject line “TLGP Election Form Opt Out Requested -- Cert No. XXXXX.”
The e-mail must include: the bank name, city, state and zip code; FDIC certificate number; name, telephone number, and e-mail address of a contact at the bank; a statement that the bank would like to opt out of the TAG program, effective July 1; and confirmation that appropriate depositor notification will be posted by May 20. For more information, contact
AmBA
’s Rob Strand.
April 26, 2010
OTS Proposes Guidance on Abusive Overdraft Practices
The Office of Thrift Supervision on Friday proposed overdraft protection program guidance that addresses practices the Federal Trade Commission Act prohibits as unfair or deceptive, as well as practices that violate other federal laws or regulations.
The proposal, which would supplement guidance the OTS issued in 2005, emphasizes that thrift institutions must clearly represent the features of such programs, provide consumers with the opportunity to choose whether to participate, explain the institution's policies on clearing transactions, and place reasonable aggregate limits on overdraft fees.
AmBA
is rigorously reviewing the proposed guidance, and initially has identified concerns about imposing ambiguous “fairness” obligations on thrifts when they're pricing services.
AmBA
will continue to work closely with bankers and regulators to help ensure that beneficial overdraft services can be effectively offered to consumers without excessive and costly regulatory burdens. There will be a 60-day comment period on the proposed guidance after its publication in the Federal Register. Read the proposed guidance.
Fed to Hold Four Public HMDA Hearings
The Federal Reserve Board starting in July will hold four public hearings on potential revisions to Regulation C, which implements the Home Mortgage Disclosure Act, the agency said Friday. The hearings are intended to help the Fed to evaluate whether the 2002 Reg C revisions, which required lenders to report mortgage pricing data, helped provide useful, accurate information about the mortgage market. The hearings also will help the Fed assess the need for additional data and identify emerging issues in the mortgage market.
The hearings will be held July 15 at the Atlanta Federal Reserve Bank; Aug. 5 at the San Francisco Federal Reserve Bank; Sept. 16 at the Chicago Federal Reserve Bank; and Sept. 24 at Fed headquarters in
Washington
,
D.C.
All hearings will include panel discussions by invited speakers. Other interested parties may deliver oral statements of five minutes or less during an open-mike period and/or submit written statements for the record. Read more.
April 23, 2010
FDIC Issues New Version of Deposit Insurance Estimator
The FDIC has issued a new version of its electronic deposit insurance estimator that provides increased functionality and enables banks to customize the estimator and integrate it into their Web sites, the agency said yesterday. The new enhancements allow users to calculate coverage for irrevocable trusts and government accounts, in addition to personal and business accounts. They also give users the ability to calculate coverage for deposit accounts that mature in or after 2014. Updated frequently asked questions about deposit insurance, a glossary of terms and FDIC contact information are also included. Read more. Read an overview of the new version’s features. Read the new version’s technical specifications for bank Web masters.
April 22, 2010
FDIC Community Bank Panel Discusses Liquidity, Other Topics
The FDIC Community Banking Advisory Committee -- a 14-person group that includes 12
AmBA
bankers -- discussed a range of topics affecting community banks and their customers yesterday at its third meeting. During the committee’s discussion of funding and liquidity issues facing community banks, FDIC officials raised the possibility of setting minimum liquidity ratios. But the bankers said that their institutions need flexibility, and strict ratios could disrupt community banks’ ability to work with their customers. Other topics covered included the status of pending regulatory reform legislation, the lending environment, real estate values and proposed changes to FDIC assessments. Read a list of committee members. Watch for an FDIC video of the meeting. For more information, contact
AmBA
’s Denyette DePierro.
April 14, 2010
FDIC Approves AmBA-Requested TAG Extension, Proposes New Large-Bank Premium Formula
As reported in yesterday’s Newsbytes special edition, the FDIC Board extended the Transaction Account Guarantee Program another six months -- from July 1, 2010 to Dec. 31, 2010.
AmBA
and many association bankers had sent letters to the FDIC strongly supporting the extension. Under the interim rule extending the program, there could be another one-year extension without more rulemaking but the FDIC Board would have to make that determination by Oct. 29.
Banks that want to opt out of the program must do so by April 30, and there will be no other opt-outs offered even if the board decides to extend the TAG an additional year. The maximum interest rate for qualifying as a NOW account under the interim rule -- effective July 1 -- is 0.25 percent, down from 0.50 percent, the FDIC said.
In related news, the FDIC Board also proposed a rule that would dramatically change the assessment formula that the nation’s largest banks use. Instead of the current risk-based grid, the board proposed creating a scorecard system that would provide banks with more than $10 billion in assets -- and also large, highly complex institutions -- with a unique score that would determine their insurance rate. The scorecard would consist of a performance score and a loss-severity score.
FDIC’s proposal also would adjust the overall rate schedule for all banks in order to ensure that the new system does not generate more revenue than the existing system. The new base rate would range from a low of 10 basis points to a high of 50 basis points, in contrast to the current base-rate range of 12 basis points to 45 basis points (not including any adjustments for higher levels of capital or higher concentrations of secured liabilities).
Read the Newsbytes special edition. Read about the TAG Program extension. Read about the proposed large-bank premium formula. For more information, contact
AmBA
’s Rob Strand.
April 13, 2010
ABASA: Eliminate or Clarify Inter-Affiliate Derivatives Provisions
Provisions in the Senate regulatory reform bill that would add derivative transactions to the list of inter-affiliate transactions subject to the quantitative limits of the Federal Reserve Act’s Section 23A should be either eliminated or -- at least -- clarified, the AmBA Securities Association told Senate leaders yesterday.
Under the legislation, “these derivative transactions, designed to hedge risk within the holding company on an enterprise-wide basis, would effectively be pushed out of the holding company and would have to be conducted instead with third parties” -- ironically increasing the global interconnectedness of institutions that legislators and regulators are seeking to curtail through the reform bill, ABASA, an AmBA affiliate, said in a letter.
ABASA said that it is particularly concerned that the bill’s provisions would restrict transactions that cause “a member bank or subsidiary to have a credit exposure to the affiliate” without defining the term “credit exposure.” Although ABASA prefers eliminating these provisions, the proposal, at a minimum, should clarify how “credit exposure” is to be quantified, the trade group said. Read the letter. For more information, contact
AmBA
’s Sally Miller.
FDIC Approves AmBA-Requested Extension of TAG
The FDIC Board this morning approved an interim rule that extends the Transaction Account Guarantee Program -- which offers unlimited deposit insurance on non-interest bearing accounts -- from July 1, 2010 to Dec. 31, 2010.
AmBA
and many association bankers had supported the extension in recent letters to the FDIC. They argued that it was needed because of regional economic weaknesses, the necessity for banks to maintain liquidity and the importance of retaining depositor confidence.
The industry’s concerns were reflected in an FDIC staff memo to the board explaining the need for the interim rule.
“Staff is concerned that allowing the TAG program to expire in the current environment could cause a number of community banks to experience deposit withdrawals from their large transaction accounts and risk needless liquidity failures,” the memo said. It noted that nearly 6,400 banks continue to participate in TAG, which is insuring $266 billion that would otherwise not be covered under regular deposit insurance rules.
Under the interim rule:
- The board may extend the program an additional year without additional rulemaking, but it would have to make such a determination by Oct. 29.
- Banks that wish to opt out must do so by April 30. No additional opt-out would be offered later even if the program is extended an additional year.
- The maximum interest rate for qualifying as a NOW account under the rule is 0.25 percent, down from 0.50 percent.
Read the interim TAG rule. For more information, contact
AmBA
’s Rob Strand.
April 12, 2010
FDIC Expected to Approve Extension of TAG Program on Tuesday
The FDIC at its board meeting Tuesday is expected to approve an interim rule to again extend the Transaction Account Guarantee Program. The program is scheduled to end on June 30, 2010, after an initial six-month extension.
AmBA President and CEO Ed Yingling sent a letter last month to FDIC Chairman Sheila Bair strongly supporting another extension.
AmBA
's letter and those of its bankers have been influential in raising the awareness of how important the TAG Program is in certain parts of the country.
The FDIC Board also is expected to consider proposed changes to the large-bank model for setting premiums and also to large-bank reporting. Read the meeting agenda. For more information, contact
AmBA
's Rob Strand.
April 6, 2010
SAFE ACT:
ABA
MEETS WITH OFFICE OF MANAGEMENT AND SAFE ACT:
ABA
MEETS WITH OFFICE OF MANAGEMENT AND BUDGET
On April 2, AmBA and other financial trade associations met with representatives from the Office of Management and Budget (OMB) to discuss the FFIEC’s pending rulemaking under the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act). SAFE mandates the creation of a Nationwide Mortgage Licensing System and Registry (NMLSR), and encourages all states to provide for a licensing and regulatory regime for all residential mortgage loan originators. Under SAFE, loan originators employed by depository institutions must register under the NMLSR pursuant to regulations that have not yet been made final by the federal regulatory agencies. The objective of the April 2 meeting with OMB was to allow
AmBA
and other financial trade associations to offer their views regarding these pending regulations. In the meeting,
ABA
offered three principal positions. First, the rules applicable to depository institutions should exclude the registration of servicing staff or modification specialists employed by banks. Second, the fingerprinting requirements of SAFE should be open to all FBI-approved vendors, to ensure competition and broad availability. Finally,
AmBA
stressed the need for adequate implementation timetables, of at least 180 days from the time that the NMLSR is able to accept registrations. The
AmBA
’s meeting with OMB reflects the high probability that final rules on SAFE registration will be published in the coming few weeks. In the meantime, ABA members should keep in mind that final SAFE Act regulations affecting depository institutions are not yet published, and depositories are therefore not subject to any present registration requirements. For more information, contact
AmBA
’s Rod Alba.
HUD ISSUES ADDITIONAL FAQS
On April 2, the Department of Housing and Urban Development added more RESPA guidance, through an expanding list of FAQs, to the HUD website. The new FAQs offer important clarifications to the RESPA reform regulations that became effective on January 1, 2010. The new FAQs offer new compliance details concerning right to cure and tolerance violations, the methodology regarding preapprovals and pre-applications, as well as new clarifications regarding GFE disclosures.
AmBA
will, in the very near future, publish a comprehensive AmBA Works providing compliance guidance for the new RESPA regulations. The ABA Works will provide members a detailed set of instructions to comply with the new rules, and will provide consistent and immediate updates in response to all formal and informal HUD changes to the rules. Publication of the guide will be announced in this Bulletin and others sources as soon as it becomes available.To access the new FAQs, go here. For more information, contact
AmBA
’s Rod Alba.
DOL INTERPRETATION: MORTGAGE LOAN OFFICERS NOT ‘EXEMPT’ EMPLOYEES
A Labor Department interpretation issued March 24 has effectively overturned agency guidance that had exempted mortgage loan officers (and others performing the same function) from the overtime requirements of the Fair Labor Standards Act (FLSA). This decision has potentially far-reaching ramifications on all banks with mortgage operations, and institutions should review operations in light of this decision. The industry was previously successful in obtaining guidance that indicated mortgage loan officers were exempt as long as their primary duty was not selling the employer’s products. But the new interpretation finds that generally mortgage loan officers are, in fact, selling their employers’ financial products.
AmBA
is working with others in the industry to determine the appropriate next steps to deal with the issues raised by this Interpretation. Read the interpretation. For more information, contact
AmBA
’s or Rod Alba or Cris Naser.
FHA ANNOUNCES FINAL REGULATIONS
On Monday, April 5, the Federal Housing Administration (FHA) announced new regulations to reduce and better manage counterparty risks. These regulations were proposed on September 18, 2008, where HUD set forth a number of credit policy changes that enhance the program’s risk management function. The final rule, which is not yet published but expected to appear in the Federal Register in the coming days, will increase the net worth requirements of FHA-approved lenders, strengthen lender approval criteria, and make lenders liable for the oversight of mortgage brokers. Under the regulations, lenders bear the overall risk of FHA-endorsed loans, forcing them to approve their counterparties and ensuring they have sufficient capital to operate. While mortgage brokers will continue to be able to originate FHA-insured loans through their relationships with approved lenders, they will no longer receive independent FHA eligibility approval.The final rule will also increase the capital requirements for FHA lenders to a minimum net worth of $1 million (from a previous net worth of $250,000). Effective three years following the enactment of the provision, approved lenders and applicants to FHA single-family programs must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million, and approved lenders and applicants to FHA multifamily programs must have a minimum net worth of $1 million. (Multifamily lenders that also engage in mortgage servicing must have an additional 1% of total volume in excess of $25 million, and multifamily lenders that do not perform mortgage servicing must have an additional 0.5% of total loan volume in excess of $25 million.)
OTS, FEMA OFFER GUIDANCE ON FLOOD INSURANCE PROGRAM LAPSE
The Office of Thrift Supervision earlier this month issued guidance for lenders in anticipation of the National Flood Insurance Program expiring, as it did on March 28. The guidance, which other bank regulators are expected to mirror, indicates that thrifts may make loans without the required flood insurance, but they must continue to "make flood determinations, provide timely, complete, and accurate notices to borrowers, and comply with other parts of the flood insurance regulations." OTS also said institutions should have a system in place to ensure that policies are obtained as soon as possible for properties requiring coverage as soon as the NFIP is reauthorized. The Federal Emergency Management Agency, which administers the flood program, also issued a frequently-asked-questions this week on the program's lapse.
AmBA
encourages non-OTS-regulated banks to refer to this FAQ and to any subsequent communication from their regulators for additional guidance on lending during NFIP's inactive period. The Senate is expected to take up legislation that includes an extension of the NFIP after Congress reconvenes April 12. Read more. Read the OTS guidance. Read FEMA's FAQ. For more information, e-mail
AmBA
's Compliance Hotline or call it at 1-800-551-2572.
GSES ISSUE UPDATES TO HVCC FAQS
On March 17, Fannie Mae and Freddie Mac updated their frequently asked questions to the Home Valuation Code of Conduct to provide additional clarification to affected industry. The clarifications involve a number of issues that do not radically alter the operation or reach of the Code. The new FAQs clarify the following points: (1) non-commissioned employees may not provide an AMC a list of appraisers to be used for loans; (2) liability for Code violations could remain on both transferors and transferees of an appraisal in covered transactions; and (3) borrowers may close a loan without delay even without receiving appraisal within three days prior to closing, if lenders acted in good faith and if the borrower waives the three-day requirement and is provided a copy of the appraisal on the day of closing. Fannie Mae’s updated HVCC FAQs are found at www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf .Freddie Mac’s updated HVCC FAQs are found at www.freddiemac.com/singlefamily/hvcc_faq.html#20. For more information contact
AmBA
’s Rod Alba.
AmBA
Meets With OMB on Pending SAFE Act Rules
AmBA
and several other financial trade groups last Friday offered Office of Management and Budget officials their views on the Federal Financial Institutions Examination Council’s pending rulemaking under the 2008 Secure and Fair Enforcement Mortgage Licensing Act. The SAFE Act creates a Nationwide Mortgage Licensing System and Registry and encourages the states to provide a licensing and regulatory regime for all residential mortgage loan originators. The act -- and the FFIEC’s pending rules -- also requires bank loan originators to register with the NMLSR.
AmBA
told OMB officials that the rules should exclude the registration of bank servicing staff or modification specialists, and said that the SAFE Act fingerprinting requirements should be open to all FBI-approved vendors to ensure competition and broad availability. The association also emphasized the need for adequate implementation timetables -- at least 180 days from the time that the NMLSR is able to accept registrations.
AmBA
expects the FFIEC to issue final SAFE Act regulations in several weeks. For more information, contact
AmBA
’s Rod Alba.
FDIC Reminds Banks About Funding and Liquidity Risk Management Policy
The FDIC yesterday reminded banks that the federal banking agencies and the National Credit Union Administration on March 17 issued a final policy statement on their expectations for sound funding and liquidity risk-management practices. “The agencies expect each financial institution to manage funding and liquidity risk using processes and systems that are commensurate with the institution's complexity, risk profile and scope of operations,” the FDIC said in a financial institution letter.
The guidance expands the examples of high-quality liquid assets; recognizes that testing certain elements of a contingency funding plan -- including asset sales -- may be impractical; and, most important, provides more flexibility on the degree of centralization for liquidity risk management. The final policy statement also deletes the requirement that separately regulated entities maintain liquidity on a stand-alone basis. Read more. Read the policy statement. For more information, contact
AmBA
’s Mark Tenhundfeld.
April 5, 2010
FDIC Committee to Seek Comments on Model Banking Accounts
The FDIC Advisory Committee on Economic Inclusion, which met last Thursday, said it will seek public comment later this spring on criteria used for model banking accounts aimed at low- and moderate-income consumers. The model accounts, or templates, address product features of both transactional and savings accounts, including account eligibility, opening deposit requirements, minimum balances, maintenance fees and service charges, no overdrafts and electronic options.
FDIC Chairman Sheila Bair said the model accounts should be “safe and affordable for consumers, but also economically sustainable for mainstream financial institutions.” Bair created the advisory committee in 2006 to advise FDIC on expanding access to banking services to the “underserved” – which FDIC defines as those who currently either lack a bank account or use non-bank providers for some financial services. Read more.
AmBA Comments on Overdraft Proposals
AmBA last week filed a comment letter expressing general support for the Federal Reserve’s proposed Regulation E clarifications that will assist banks in implementing new overdraft protection rules that take effect July 1. AmBA also offered additional clarifications in areas such as the written confirmation requirement, the “reasonable opportunity” to opt-in requirement, and the mandate that a bank allocate deposits to account debits in the same order in which it posts debits.
In a separate letter AmBA suggested changes to proposed Regulation DD changes, which address disclosure rules related to overdraft services. While the rule requires banks to exclude from automatically-obtained balance information the additional funds available through overdraft services and lines of credit, it makes an exception for retail sweep arrangements. AmBA suggested the exception be extended to include investment sweep arrangements, since customers view their investment sweep accounts and related demand deposit accounts as a single account and expect the available balance to reflect the total funds. Read the Reg E letter. Read the Reg DD letter. For more information, contact AmBA’s Virginia O’Neill.
April 1, 2010
AmBA White Paper Supports Fed Oversight of Community Banks
AmBA has prepared a white paper explaining why the Federal Reserve’s continued direct oversight of community banks is important. The piece is targeted to lawmakers as they consider regulatory reform legislation. The reform bill that cleared the Senate Banking Committee last week would restrict the Fed’s oversight to large holding companies and systemically important nonbanks, while eliminating the Fed’s supervision of smaller and state-chartered banks. AmBA strongly such opposes. Read the white paper. For more information, contact AmBA’s Jim Chessen.
FDIC Announces Changes to Loss Share Formula
The FDIC recently announced changes -- effective March 31 -- to the loss-sharing formula governing bank acquisitions, including the elimination of the 95 percent/5 percent loss-share coverage. Since FDIC continues to evaluate its loss-share arrangements and could make further changes, bankers are encouraged to carefully study the governing Purchase and Assumption Agreement when considering a bid on a failing bank. Read more about the loss-share formula changes. For more information, contact AmBA’s Denyette DePierro.
FDIC Advisory Group on Economic Inclusion Meets Today
The FDIC's Advisory Committee on Economic Inclusion will meet today to discuss designing and promoting safe bank accounts for underserved consumers. The committee, among other things, will talk about the key product features that most closely target the needs of underserved consumers, the FDIC said. The panel also will look at methods financial institutions and other organizations have used to successfully offer and market such products. Read more.
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