December 5, 2013
AmBA SUPPORTS PATENT REFORM BILL PASSAGE. AmBA, the Credit Union National Association, and the Independent Community Bankers of America yesterday urged the House to pass legislation (H.R. 3309) to restrain patent trolls, while offering suggestions on ways to improve some of the bill’s provisions. The bill will be considered on the House floor today.Our joint letter praised a provision that would allow the Patent and Trademark Office to waive the costly fee for a review of the validity of an underlying patent, which would help smaller companies targeted with abusive letters demanding payment for the supposedly infringing patents. We also praised the bill’s clarification that a demand letter counts as an accusation of infringement, but we urged the House to adopt an amendment by Rep. Jared Polis (D-CO) that would require patent holders to disclose more information prior to lawsuits. In addition, we urged the adoption of stronger protections for end users of technology.
STATE EXEC TO DISCUSS SMALL-BUSINESS LENDING. South Carolina Bankers Association President and CEO Fred Green is testifying this morning before the House Small Business Economic Growth Subcommittee, where he will share the banking industry’s perspective on the small-business lending environment. “Loan demand has improved since the recession, however [it] remains at relatively weak levels, held back by tremendous uncertainty about the future,” he will say. “Concerns over changes to taxes, employment costs and regulation make small business owners less interested in expanding and incurring new debt.” Green will urge Congress to be “vigilant” in its oversight of the Dodd-Frank Act’s implementation “to ensure that rules are adopted only if they result in a benefit that clearly outweighs the burden. Some rules under Dodd-Frank, if done improperly, will literally drive banks out of lines of business.”
December 4, 2013
AmBA TESTIFIES ON REGULATORY RELIEF. AmBA supports draft legislation that would “require a review and reconciliation of existing regulations that may be in conflict with or duplicative of new rules being promulgated by the banking agencies,” AmBA member banker Thomas Richards will tell the House Financial Services Financial Institutions Subcommittee at a hearing this morning. Richards, who is Assistant Vice President and Director of Owingsville Banking Company in Owingsville, Kentucky, also will express AmBA’s support for a bill (H.R. 2672) that would create an appeals process to challenge Consumer Financial Protection Bureau (CFPB) designations of particular communities as “rural” or “underserved.” He will explain that “unnecessary restrictions will lead to some qualified borrowers not receiving the credit that they deserve… Balloon loans serve as a viable alternative credit product, and under the rules proposed by the CFPB many banks will no longer be able to offer this option, thus restricting the flow of credit.”
BANKING PANEL SCHEDULES HOUSING-FINANCE HEARING. The Senate Banking Committee will hold a hearing next week on “transferring credit risk in a future housing finance system.” The hearing, scheduled for Tuesday, December 10, will include testimony from representatives of the Federal Housing Finance Agency, Freddie Mac, Fannie Mae, and the Mortgage Guaranty Insurance Corporation. The hearing is the latest in a series this year to address a variety of housing-finance reform issues.
OMBUDSMAN RECOMMENDS CFPB IMPROVEMENTS. The ombudsman for the Consumer Financial Protection Bureau (CFPB) issued a report yesterday recommending several improvements to the Bureau’s exam procedures and communications efforts, many of which were based on concerns from supervised institutions. The ombudsman wrote that the CFPB should clearly identify the exam team members, including the examiner in charge, and their contact information. The Bureau also should refer to the citation manual during exam communications, clearly describe the exam process up-front, and provide regular updates on the status of exams.
VOLCKER RULE EXPECTED NEXT WEEK. Federal regulators plan to vote next week on a final version of the long-awaited Volcker Rule. The FDIC, Federal Reserve, and Commodity Futures Trading Commission announced yesterday that they will vote December 10. The OCC also is expected to approve a final rule that day, and the Securities and Exchange Commission plans to vote “on or about” December 10. The Volcker Rule is intended to rein-in high-risk trading by prohibiting certain derivatives activities and banning proprietary trading.
November 25, 2013
AmBA, TRADE GROUPS COMMENT ON INTERIM SERVICING RULE CHANGES. AmBA, the Consumer Bankers Association, and the Mortgage Bankers Association wrote to the Consumer Financial Protection Bureau (CFPB) on Friday regarding an interim final rule issued last month that amends certain mortgage servicing-related provisions under the Real Estate Settlement Procedures Act and the Truth in Lending Act. Our joint letter states that we “strongly support” the interim rule, but notes that it is the third set of amendments to the servicing rules this year and that the CFPB has had an “ongoing rulemaking process” in order to address the “large volume of interpretive questions and operational concerns” that have been identified during that time. “In sum, the implementation period has been too short for a brand-new regulatory structure of this size and complexity,” we wrote. “A limited extension of the implementation period would best assure an orderly transition to the new servicing requirements.” Our letter also addressed concern with the ability of servicers to provide periodic statements to borrowers whose loans have been charged off, asking the CFPB “not require servicers to provide periodic statements that meet all of the content and layout specifications for periodic statements.”
CFPB REPORT ANALYZES COMPLIANCE COSTS. The CFPB issued a report finding that complying with consumer deposit account regulations at smaller banks accounts for 4-6 percent of deposit operating expenses, while at larger banks it accounts for 1-2 percent of expenses. Smaller institutions incurred significantly higher compliance costs than larger banks in operations, information technology, and the compliance function itself. The study covered seven depository institutions’ compliance programs for consumer checking and savings accounts, debit cards, and overdraft protection. The CFPB said it hoped the report would clarify the costs and benefits of regulations, reduce unnecessary compliance costs in the future, and provide a basis for additional research and study.
November 22, 2103
BANKING PANEL APPROVES YELLEN NOMINATION. The Senate Banking Committee yesterday approved, by a 14-8 vote, the nomination of Janet Yellen to be Federal Reserve Board Chairman. In related news, the Senate voted yesterday to change the chamber’s rules so that procedural votes on most nominations will require only simple majorities to pass. The rules previously required 60 votes to limit debate and move to final votes on nominees. The change, which passed on a 52-48 vote, will not apply to Supreme Court nominees. The rule change could result in the confirmation of Rep. Mel Watt (D-NC) as Federal Housing Finance Agency Director. A procedural vote on his nomination failed last month by a vote of 56-42.
GUIDANCE ON DEPOSIT ADVANCES FINALIZED. The FDIC and OCC yesterday finalized guidance intended to ensure that banks are aware of the “significant” risks associated with deposit advance products. The regulators said that examiners will assess credit quality and underwriting – a including a customer’s ability to repay and bank relationship – adequacy of capital, banks’ reliance on fee income, allowance for losses, compliance with consumer protection laws, management oversight, and relationships with third parties. The guidance will limit advances to one per month and six per year, with customer eligibility to be reexamined every six months. AmBA had argued against the guidance’s adoption, citing conflicts with the Consumer Financial Protection Bureau’s mandate that would lead to a “patchwork of overlapping regulations and an un-level playing field.”
November 21, 2013
CFPB REFORM BILLS APPROVED. The House Financial Services Committee completed work this morning on six bills to make various reforms to the Consumer Financial Protection Bureau (CFPB). The panel approved, by a vote of 32-25, an AmBA-supported bill (H.R. 3193) to change the voting standard established for the Financial Stability Oversight Council (FSOC) from the two-thirds majority vote currently required to a simple majority vote. The Committee also approved, by a vote of 31-21, legislation (H.R. 2446) that would replace the Director with a five-person commission (H.R. 2446). The bill was amended to state that one of the five members would be the Fed Vice Chairman for Supervision. AmBA urged the Committee in a memo on Tuesday to consider perfecting H.R. 2446 by requiring the commission to include members with consumer finance business experience and direct safety and soundness regulatory expertise. In addition, the Committee approved bills to establish the CFPB as an independent agency by subjecting it to the annual appropriations process, and to address the collection of consumer information and the issuing of annual information disclosure reports.
HOUSE PANEL APPROVES PATENT TROLL BILL. The House Judiciary Committee yesterday approved, by a vote of 33-5, legislation (H.R. 3309) that would address frivolous litigation brought by patent trolls. The legislation includes several AmBA-supported provisions that would help banks fight patent trolls, including language that would allow the Patent and Trademark Office (PTO) to waive the costly filing fee required to initiate a proceeding that examines the underlying validity of a patent. The Committee also approved several amendments that AmBA is analyzing. We will continue to work with the Committee on improvements to the bill as the legislative process moves forward.
November 20, 2013
SENATE PANEL RELEASES INTERNATIONAL TAX REFORM ‘DISCUSSION DRAFT’. Senate Finance Committee Chairman Max Baucus (D-MT) yesterday released a “staff discussion draft” of international tax reform legislation. According to the Committee, the discussion draft would encourage U.S. investment by multinationals, reduce incentives for U.S. companies to invest overseas, allow for overseas profits of U.S. firms to be reinvested domestically, and combat the use of tax havens. ““We need to bring our tax system into the 21st century and make the U.S. more competitive,” Chairman Baucus said. “That’s what tax reform can do – it can help America overcome the competitiveness crisis that’s driving businesses and jobs overseas.” Yesterday’s release is the latest in a series of tax reform discussion drafts the Committee has released this year, and additional releases are expected later this week, the Committee said.
CFPB ISSUES FINAL MORTGAGE DISCLOSURE FORMS. The Consumer Financial Protection Bureau (CFPB) today issued a final rule requiring lenders to use two new mortgage disclosure forms that combine and streamline disclosure requirements under the Truth in Lending Act and Real Estate Settlement Procedures Act. The forms include a three-page “Loan Estimate” that must be given to borrowers within three business days of loan applications, and a five-page “Closing Disclosure” that provides details on all loan costs and which must be given at least three business days before loan closings.
REGULATORS RELEASE CAPITAL-REQUIREMENTS ESTIMATION TOOL. The federal bank regulatory regulators yesterday released an estimation tool (Excel file) to help community banks understand the potential effects of the recently revised regulatory capital framework on their capital ratios. The tool addresses changes under the Basel III regulatory capital rules and requirements of the Dodd-Frank Act.
November 19, 2013
THREE DEMOCRATS QUESTION FORECLOSURE REVIEW PROCESS. Sen. Elizabeth Warren (D-MA), House Financial Services Committee Ranking Member Maxine Waters (D-CA), and House Oversight and Investigations Committee Ranking Member Elijah Cummings (D-MD) on Friday asked the Federal Reserve and the OCC to release information from their Independent Foreclosure Review (IFR) process. “We have raised significant concerns about the decision to conclude the IFR process before all borrower requests for review had been satisfied and randomly selected samples of eligible loan files had been reviewed,” they wrote. “Based on the information provided to us at the time of the settlements, we could not assess whether the settlement amount and terms were adequate.” They specifically requested documentation of borrowers’ financial remediation, an accounting of disclosures to borrowers whose foreclosure files were examined, and the status of servicers’ compliance with the 2011 consent agreements.
AmBA SEEKS FATCA DEADLINE DELAY. AmBA and three other trade groups yesterday requested an additional delay of certain implementation deadlines under the Foreign Account Tax Compliance Act (FATCA). Noting that not all final guidance has been issued and that progress on intergovernmental agreements has been slow, we explained that firms remain unable to complete the final steps of implementation plans. Our joint letter sought six-month extensions of deadlines related to withholding and new account procedures and a one-year delay of the due date for reporting, provided final guidance is available by December 31, 2013.
TRADE GROUPS ASK FOR CLARITY ON MODEL MORTGAGE CONTRACTS. AmBA, the Housing Policy Council, and the Mortgage Bankers Association wrote to Fannie Mae and Freddie Mac yesterday regarding their Uniform Instrument Update Project, which seeks to update the model form mortgage contracts that lenders use. Our joint letter addressed the need to remove ambiguities and improve clarity to reduce future litigation risks and costs.
While the associations “believe many of the contemplated updates reflect significant improvements over the existing instruments…many of the contemplated changes will require changes to their systems and procedures,” we wrote. We therefore “urge the GSEs to allow users of the uniform instruments a reasonable amount of time to implement the use of the updated forms after the revision process is completed.”
November 18, 2013
REP. LUETKEMEYER QUESTIONS CFPB’S ‘DISPARATE IMPACT’ USE. Rep. Blaine Luetkemeyer (R-MO) wrote to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray to express concern about the basis for the Bureau’s actions on auto lending, particularly the CFPB’s reliance on “disparate impact” analysis. “Disparate impact is not an appropriate way to enforce consumer protection laws against indirect auto lenders who, in many cases, never see a customer or have knowledge of a customer’s race,” Rep. Luetkemeyer wrote. “To the best of my knowledge, the Equal Credit Opportunity Act does not contain a disparate impact theory of discrimination.” The House Financial Services Oversight and Investigations Subcommittee will hold a hearing on disparate impact theory on Tuesday morning.
REGULATORS FINALIZE CRA Q&A. The federal banking regulators issued final revisions to their question-and-answer guidance on Community Reinvestment Act (CRA) compliance. The final amendments clarify how regulators consider community development activities that benefit a zone broader than a bank’s assessment area; offer guidance on CRA consideration for investments in nationwide funds; clarify consideration for service on a community development organization board; address how to treat loans or investments in organizations that in turn reinvest those funds; and clarify the weighting of community development lending performance in ratings.
Committee Passes AmBA-Backed Reg Relief. The House Financial Services Committee yesterday approved an AmBA-supported community bank regulatory relief bill. H.R. 3329, introduced by Rep. Blaine Luetkemeyer (R-Mo.), would raise the Fed's definition of a small bank or thrift holding company from $500 million to $1 billion, exempting more banks from regulatory burdens that would not materially improve safety and soundness. AmBA said in a letter earlier this week that the bill would make it easier for “community banks and thrifts to issue debt and raise capital and thus increase their involvement in promoting the growth of their local economies.” AmBA also noted that it continues to support additional legislation (H.R. 1750, the CLEAR Act) raising the threshold to $5 billion and urged the committee to return to the issue in the future.
Plagge: Put 'Farm' Back in Farm Credit. The Farm Credit System needs a course correction, AmBA Chairman Jeff Plagge wrote in an op-ed published Sunday in the Des Moines Register. “It’s time to put the ‘Farm’ back in Farm Credit and to ask why the Farm Credit System doesn’t pay federal income taxes at the same level as the rest of us,” said Plagge, the president and CEO of Northwest Financial Corp., Arnolds Park, Iowa. He also spoke on the topic, which was front and center at this week's AmBA National Agricultural Bankers Conference in Minneapolis.
November 14, 2013
AmBA OUTLINES CYBERSECURITY EFFORTS, URGES SENATE ACTION. AmBA, the Financial Services Roundtable, and the Securities Industry and Financial Markets Association (SIFMA), wrote to the Senate Intelligence Committee, outlining the industry’s numerous and ongoing efforts to address cybersecurity issues and explaining that such efforts are “a top business priority.”
“The cyber threat facing the financial services industry presents a clear and present danger not only to our members and their customers but to other critical infrastructure providers relied on by our industry and our economy,” our joint letter said. “It is critical that Congress pass threat information sharing legislation to combat today’s and stay ahead of tomorrow’s threat…“Congress must support and enhance the work already accomplished…so our nation’s critical infrastructure can more effectively leverage our collective capabilities to defend against this growing threat.”
BANKING PANEL TO CONSIDER NEW FED NOMINEE. The Senate Banking Committee is holding its hearing to consider the nomination of Federal Reserve Vice Chairman Janet Yellen to be Fed Chairman. .
INDUSTRY GROUPS UNITE TO DELAY QM RULE. AmBA and two other trade groups yesterday urged Consumer Financial Protection Bureau (CFPB) Director Richard Cordray to delay for nine to twelve months the Ability-to-Repay/Qualified Mortgage (QM) rule scheduled to take effect in January. As key details of the rule changed in the past year, financial institution software vendors and compliance specialists have had a hard time delivering products and systems in time for the compliance deadline, our joint letter explained. As a result, “safety and soundness concerns will cause many lenders to reduce or stop lending until they are certain that they can do so in full compliance and without undue risk. This risk includes not just safety and soundness risks but also liability from private rights of action and state attorneys general.” The Financial Services Roundtable and the Securities Industry and Financial Markets Association also signed the letter.
MORTGAGE SERVICING, ESCROW RULE GUIDES AVAILABLE. In related news, AmBA released new members-only resources to help banks understand recent changes to the CFPB’s mortgage servicing and escrow rules that take effect in January. One resource outlines the mortgage servicing rules’ changes to Regulations Z and X. It is accompanied by an at-a-glance guide that includes small-servicer exemptions. The second resource examines changes to the escrow requirement for costlier mortgage loans, including the rule’s general provisions and special exemptions.
AmBA SUPPORTS INCREASE IN BANK HOLDING COMPANY THRESHOLD. AmBA wrote to the Financial Services Committee yesterday in support of legislation (H.R. 3339) to raise the Federal Reserve’s Small Bank Holding Company threshold from $500 million to $1 billion, explaining that the bill would facilitate the ability of smaller banks “to issue debt and raise capital and thus increase their involvement in promoting the growth of their local economies.”
MUNICIPAL ADVISOR RULE TO BE EFFECTIVE JAN. 13. The Securities and Exchange Commission published its final rule on municipal advisors in the Federal Register today, with an effective date of January 13, 2014. ABA encourages bankers to review the rule carefully in order to determine whether they must register. The final rule narrows the original proposal’s definition of “investment strategies” on which municipal advisors give advice, and provides exemptions for many traditional banking products and services. Individuals working for registered municipal advisory firms do not need to individually register, but may rely on their firms’ registrations. AmBA has released several staff summaries to help bankers, broker-dealers and trust professionals understand their obligations under the rule. The Municipal Securities Rulemaking Board also released a checklist to help newly registered municipal advisers determine how ready they are for regulatory oversight.
AmBA has released additional staff summaries for member banks on the rule. Covering key definitions and exemptions, the summary versions include a decision tree addressing whether bankers will need to register under the rule and to help trust departments and broker-dealers understand the rule.
November 4, 2013
FED RELEASES STRESS-TEST SCENARIOS. The Federal Reserve on Friday released the three economic and financial market scenarios – baseline, adverse, and severely adverse – that it will use in the next round of stress tests for the nation’s 30 largest financial institutions, 12 of which will be participating for the first time. The three scenarios include 28 variables such as unemployment, exchange rates, prices, and interest rates. The Fed explained that the baseline scenario represents the expectations of private sector forecasters, while the adverse and severely adverse scenarios are hypothetical. Banks with $50 billion or more in assets are subject to the stress tests as part of the Fed’s Comprehensive Capital Analysis and Review program. Six banks with large trading operations will participate in an additional test of reactions to a global market shock, and eight banks for the first time will be required to incorporate a counterparty default scenario.
November 1, 2013
PROCEDURAL VOTE FAILS ON WATT NOMINATION. The Senate yesterday rejected a procedural motion to move forward on the nomination of Rep. Mel Watt (D-NC) to be Federal Housing Finance Agency (FHFA) Director, by a vote of 56-42. Sixty votes were needed to move forward and bring the nomination to a final vote. Senate Majority Leader Harry Reid (D-NV) could still bring the nomination to the floor for consideration again if additional votes are found.
HOUSE PASSES SWAPS PUSH-OUT BILL. The House passed AmBA-supported legislation (H.R. 992) this week, by a bipartisan 292-122 vote, which would help banks continue to use swaps as part of their prudent risk management portfolio. The bill would reform the so-called swaps push-out rule in the Dodd-Frank Act requiring banks to form separate affiliates to conduct certain swaps, which many banks use as a routine part of their risk management policies. The White House, however, has said that the bill “could be disruptive” to the implementation of the remaining derivatives provisions in the Dodd-Frank Act. Its prospects in the Senate are uncertain.
AmBA URGES BROADER QM SAFE HARBOR. AmBA this week commented on Housing and Urban Development Department (HUD) proposed standards for Federal Housing Administration insured Qualified Mortgages (QMs), suggesting several changes and clarifications. HUD proposed two categories for federally insured QMs: a safe harbor QM and a rebuttable presumption QM, which it intended to align largely with the QM guidelines established by the Consumer Financial Protection Bureau (CFPB). HUD’s proposed standard has several key differences with the CFPB’s standard, including a different points-and-fees trigger and a different rebuttable presumption standard. The rule also is unclear on whether the FHA will insure non-QM loans. AmBA urged HUD to eliminate interest rate distinctions and provide safe harbor to all FHA loans that meet HUD’s QM standard. AmBA also recommended that HUD provide a means for curing loans for which points and fees were miscalculated and offer clarity about how to adjust the QM threshold based on mortgage insurance premium rates.
AmBA SUPPORTS RE-PROPOSED QRM STANDARD. AmBA also said this week that we support the mortgage risk retention rule that federal regulators re-proposed in August. The re-proposal aligns the qualified residential mortgage (QRM) standard with the CFPB’s QM rule. The revised rule reduces the risk of default and delinquency, provides clarity and consistency for mortgage professionals, and ensures creditworthy homebuyers have access to safe mortgage financing, AmBA said.
October 28, 2013
AmBA, TRADE GROUPS COMMENT ON PATENT TROLL BILL; AmBA and eight other trade groups wrote this morning to House Judiciary Committee Chairman Bob Goodlatte (R-VA) to thank him for introducing legislation – H.R. 3309, the Innovation Act of 2013 – that would address frivolous litigation brought by patent trolls.The legislation has many provisions that would help, including language that would allow the Patent and Trademark Office (PTO) to waive the costly filing fee required to initiate a proceeding that examines the underlying validity of a patent. “Financial institutions of every size have been targeted” by patent trolls, our joint letter explained, “who in most cases assert low-quality business method patents through vaguely worded demand letters or intentionally vague complaints… Components of the Innovation Act could help alter the business model of trolls by removing some of their financial incentive to assert low-quality patents in the hope of quick settlements.” Our letter added that the legislation should be improved in how it addresses end-users by “adding a ‘right of contribution’ or ‘mandatory joinder’ to the patent law would enable a more equitable distribution of liability between end-users and suppliers.” The Committee is holding a hearing on the bill this morning.
VOTE NEARS ON REP. WATT FOR FHFA. Senate Majority Leader Harry Reid (D-NV) yesterday filed a procedural motion to move forward on the nomination of Rep. Mel Watt (D-NC) to be Federal Housing Finance Administration (FHFA) Director. The “cloture” motion could bring the nomination to a final vote by the end of the week. “There is no legitimate reason Mel Watt should not be confirmed…” Senate Banking Committee Chairman Tim Johnson (D-SD) said in response. “It is important to fill this role as soon as we can, so the agency can fully assist in helping stabilize the housing market as our economy continues to recover from the financial crisis.”
REP. WATERS MOVES TO DELAY FLOOD INSURANCE RATE INCREASES. House Financial Services Committee Ranking Member Maxine Waters (D-CA) is expected this week to introduce legislation that would impose a delay on flood insurance rate increases for two years following a mandated “affordability study” by the Federal Emergency Management Agency (FEMA).
“FEMA has estimated it will take two years to complete the affordability study before regulations can be issued and reviewed by Congress meaning rate increases would be delayed for approximately four years in total,” Rep. Waters said in a press release on Friday. Rep. Waters also said the legislation is the result of “consensus” forged during a bipartisan meeting of “nearly 20 House Members, as well as Senate staff.” Sen. Mary Landrieu (D-LA) also is expected to introduce a bill this week to delay rate increases.
QM RULE WILL NOT INCREASE FAIR LENDING RISK, REGULATORS SAY. “The Agencies do not anticipate that a creditor's decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution's fair lending risk,” the FDIC, Federal Reserve, OCC, Consumer Financial Protection Bureau (CFPB), and National Credit Union Administration said in guidance issued yesterday. AmBA and others had expressed concerns that a potential tightening of mortgage credit under the Ability-to-Repay/QM rule could expose lenders to liability for violating fair lending laws according to disparate impact theory. The regulators’ guidance notes, however, that lenders have “legitimate business needs” to select product offerings or follow business models based on a variety of recognized factors, including credit risk, market opportunities, capital requirements, and liability risk. “The decisions creditors will make about their product offerings in response to the Ability-to-Repay Rule are similar to the decisions that creditors have made in the past with regard to other significant regulatory changes affecting particular types of loans,” the regulators said. “Creditors should continue to evaluate fair lending risk as they would for other types of product selections…”
October 22, 2013
SMALL BUSINESS HEARING POSTPONED. Thursday’s scheduled Small Business subcommittee hearing on the regulation of smaller financial institutions has been postponed. The funeral for late Rep. Bill Young (R-FL) will be held Thursday, so other House activities, such as the two subcommittee hearings in the Financial Services Committee, may be postponed as well.
AmBA JOINS AMICUS BRIEF IN INTERCHANGE CASE. AmBA and several trade groups yesterday filed a friend of the court brief in the case over the Federal Reserve’s interchange rule, noting that they oppose the Fed’s rule capping interchange fees but are even more strongly against a lower court ruling that the fee cap should be lower still. “The district court’s decision, if affirmed, would make things significantly worse,” our joint brief said. “It compounds the Board’s legal error through a construction that would require deep cuts – amounting to many billions of dollars each year – into issuers’ remaining interchange-fee revenues.” The brief argues that the lower court misinterpreted how much of the card issuer’s cost can be recovered under the statute, that it ignored the statute’s “reasonable and proportional” fee allowance, and that it went beyond the law’s requirements on exclusivity. A district court ruled in July that the Fed’s rule violated Congressional intent in the Dodd-Frank Act by setting the interchange fee cap too high and failing to allow merchants to choose multiple unaffiliated PIN and signature networks for each card transaction they process. The case is currently on expedited appeal to the D.C Circuit Court of Appeals.
October 18, 2013
Gov. Mike Beebe Names Frank Scott Jr. of Little Rock to the Arkansas Highway Commission, replacing John Burkhalter, who resigned from the commission to focus on his run for Arkansas lieutenant governor. Scott, 29, is an executive with First Security Bancorp. He grew up in Little Rock and holds an MBA in strategic management from the University of Arkansas at Little Rock. Scott is also on the boards of directors for the Little Rock Port Authority and Big Brothers/Big Sisters of Central Arkansas. Beginning in 2007, Scott spent five years on Beebe's policy staff, and was serving his director of intergovernmental affairs when he left for his current job.
HEARINGS SCHEDULED ON CAPITAL FORMATION, CFPB REFORM. The House Financial Services Committee has announced that it will hold two subcommittee hearings next week, both on Thursday, October 24. The Capital Markets Subcommittee will meet at 10:00 a.m. to discuss “legislation to further reduce impediments to capital formation,” followed by a Financial Institutions Subcommittee hearing at 2:00 p.m. on proposals “to bring more accountability, reform, and transparency to the Consumer Financial Protection Bureau.” A hearing planned for next week in the Senate Banking Committee on housing finance reform has been postponed and not yet rescheduled.
AmBA BRIEFS CFPB ON OVERDRAFT PROTECTION. AmBA staff met this week with Consumer Financial Protection Bureau (CFPB) officials to discuss the results of an AmBA-commissioned survey of consumers who regularly use overdraft protection. The survey, conducted by The Mellman Group, is the first to assess the demographics and views of regular overdraft protection users rather than the general population, which can be less informed about the product. The survey found that regular users are middle-income and educated, are aware of the consumer protections surrounding overdraft products, and use the service rationally. Users also reported that overdraft protection helps them manage their financial affairs, and that they would have few options if access to the service was limited. In a follow-up letter, AmBA urged the Bureau to keep the survey results in mind as it analyzes overdraft protection programs, explaining that “any new regulatory obligations that may impair access to overdraft services should take into consideration information from the regular user of overdraft protection…”
October 16, 2013
NEW DAY, NEW TACTIC TO END SHUT-DOWN. The House did not hold a vote on yesterday’s reported plan to end the federal shut-down and increase the statutory debt limit, after Republican leadership met with opposition from their conference. The latest reports indicate that House Speaker John Boehner (R-OH) plans instead to hold a floor vote on a plan reached between Senate leaders, relying on Democratic votes to pass it. Having the House consider the Senate plan first would expedite its consideration in the Senate, as it would remove several procedural hurdles.
CFPB ISSUES INTERIM RULE ON SERVICER OBLIGATIONS. The Consumer Financial Protection Bureau (CFPB) yesterday issued an interim final rule clarifying servicer obligations when a borrower is in bankruptcy or sends a cease-communication request under the Fair Debt Collection Practices Act. The interim final rule provides that if a borrower is in bankruptcy, a servicer is not required to provide periodic statements or comply with the servicing rule’s early intervention requirements. Similarly, a servicer is not required to comply with the early intervention requirements when a borrower has invoked the Act’s cease communication provisions. The updated rule was accompanied by guidance regarding communications with heirs to deceased borrowers, as well as examples of reasonable steps for establishing live contact with delinquent borrowers. Many AmBA members have expressed concern about complying with certain servicing requirements for borrowers under the protection of bankruptcy law. Comments on the interim final rule will be due 30 days after their publication in the Federal Register.
October 15, 2013
HOUSE PLANS VOTE TODAY ON FUNDING, DEBT LIMIT. House Republican leaders have presented to their conference a plan to address government funding and the debt ceiling, with the intention of holding a vote today and sending it to the Senate. The plan reportedly would increase the statutory debt limit until February 7 and fund federal government operations until January 15 at current sequester levels. It also includes healthcare provisions regarding income verification, a two-year suspension of the medical device tax, and to require Members of Congress, the President, Vice President, and cabinet secretaries to participate in the insurance exchanges.
BASEL III RULES PUBLISHED IN FED REGISTER. The OCC and the Federal Reserve published in the Federal Register on Friday the joint final rule implementing the Basel III regulatory capital framework. The final rule, adopted in July by both regulators and the FDIC, sets the minimum regulatory capital requirements for all organizations. It includes a new common equity Tier 1 ratio of 4.5 percent of risk-weighted assets, raises the minimum Tier 1 capital ratio from 4 percent to 6 percent of risk-weighted assets, and sets a new conservation buffer of 2.5 percent of risk-weighted assets.
October 14, 2013
HOUSE MOVES TO CONFERENCE WITH SENATE ON FARM BILL. The House passed on Friday, by a voice vote, a motion to go to conference with the Senate to resolve differences on the 2013 Farm Bill (S. 954/H.R. 2642). The legislation to re-authorize agriculture programs for five years includes continuing support for crop insurance without a means test and repealing term limits on farm operating loans. A major element in the conference debate will be the legislation’s Nutrition title, including the Supplemental Nutrition Assistance Program (SNAP), which the House passed as a separate bill (H.R. 3102).
Republican House conferees will be Rep. Steve Southerland (FL) for the leadership; Chairman Frank Lucas (OK) and Reps. Steve King (IA), Randy Neugebauer (TX), Mike Rogers (AL), Michael Conaway (TX), Glenn Thompson (PA), Austin Scott (GA), Rick Crawford (AR), Martha Roby (AL), Kristi Noem (SD), Jeff Denham (CA), and Rodney Davis (IL) for the Agriculture Committee; Chairman Ed Royce (CA) and Rep. Tom Marino (PA) for the Foreign Affairs Committee; and Chairman Dave Camp (MI) and Rep. Sam Johnson (TX) for the Ways and Means Committee.Democratic House conferees will be Rep. Marsha Fudge (OH) for the leadership; Ranking Member Collin Peterson (MN) and Reps. Mike McIntyre (NC), Jim Costa (CA), Tim Walz (MN), Kurt Schrader (OR), Jim McGovern (MA), Suzan DelBene (WA), Gloria Negrete McLeod (CA), and Filemon Vela (TX) for the Agriculture Committee; Rep. Eliot Engel (NY) for the Foreign Affairs Committee; and Ranking Member Sander Levin (MI) for the Ways and Means Committee. Democratic Senate conferees will be Agriculture Committee Chairman Debbie Stabenow (MI) and Sens. Patrick Leahy (VT), Tom Harkin (IA), Max Baucus (MT), Sherrod Brown (OH), Amy Klobuchar (MN), and Michael Bennet (CO). Republican Senate conferees will be Agriculture Committee Ranking Member Thad Cochran (MS) and Sens. Pat Roberts (KS), Saxby Chambliss (GA), John Boozman (AR), and John Hoeven (ND).
October 8, 2013
CFPB ISSUES POLICY ON CONSUMER DISCLOSURES. The Consumer Financial Protection Bureau (CFPB) last week released its final policy allowing companies to test new consumer disclosures on a case-by-case basis in exchange for sharing the results of the tests with the Bureau. The CFPB will approve limited-time exemptions from federal disclosure laws to enable companies to conduct the trials, and the Bureau will use the resulting information to improve its disclosure rules and model forms. The final policy includes several changes advocated by ABA and its American Bankers Insurance Association (ABIA) subsidiary, including encouraging companies and associations to collaborate in trials, allowing companies to discuss potential trials with the CFPB in advance, having the Bureau specify in its waivers that an approved trial disclosure is not deceptive, and allowing appeals for revoked waivers.
AmBA, ABIA PROVIDE FLOOD-RATE RESOURCES. As bank customers express concern about the flood insurance premium rate increases that began taking effect October 1, ABA and ABIA are advocating for legislative action and providing resources to help bankers educate customers. We have been working with FEMA and trade groups to bring attention to the affordability concerns, and a planned forum at the U.S. Capitol will be rescheduled as soon as possible once government operations return to normal. Communications materials explaining the key changes to the National Flood Insurance Program leading to the rate increases are available to AmBA members here.
HOUSE BILL SEEKS ‘NEGOTIATING COMMITTEE’ ON DEBT, SPENDING. It is our understanding that the House will consider a new bill today that would create a “negotiation committee” comprised of House Members and Senators, who would be tasked with negotiating on both the debt limit and spending. The bill also would permit salaries to be paid to “essential” federal employees who are working during the shutdown. The House will hold separate votes on the two portions of the legislation, but will send it to the Senate as a single package.
AmBA CALLS FOR FARM CREDIT SYSTEM HEARING. AmBA wrote to the House Agriculture Committee yesterday, urging the panel to hold an oversight hearing on the Farm Credit System (FCS). Our letter specifically asked the Committee to examine the FCS’s indirect lending, which allows non-members to borrow taxpayer-subsidized funds; its pre-1985 retained mineral rights; the System’s “never-ending” pilot programs; questionable federal crop insurance sales practices; and shadow banking activities such as deposit-taking and credit cards. “It is not the goal of this letter for the Committee to require ‘farmers to pay more for credit,’” AmBA wrote. “On the contrary, Congress has a responsibility to examine anachronisms in federal tax expenditure policy… [I]t is critical that all aspects of the FCS, especially their financial practices in areas outside of FCS’s core mission, be closely scrutinized and thoroughly examined.”
October 3, 2013
CARD ACT’S NEGATIVE EFFECTS LARGER THAN ACKNOWLEDGED, AmBA SAYS. The CARD Act report that the Consumer Financial Protection Bureau (CFPB) released yesterday does not acknowledge the Act’s full effects on credit availability, AmBA said.“While consumers are paying less interest on credit cards, that’s only to the degree they have access,” ABA Executive Vice President Ken Clayton explained. “Unfortunately, the CARD Act has contributed to a reduction in the availability of credit cards, particularly for those who have imperfect credit histories or no credit history at all.
“We’re concerned about the Bureau’s hesitation to recognize that policy decisions like the CARD Act have unintended consequences for consumers. We urge the CFPB to be sensitive to potential negative consequences that future regulatory initiatives…could have on hundreds of millions of Americans who enjoy the many benefits that come with their credit cards.”
AmBA URGES DELAY FOR FLOOD INSURANCE RATE INCREASES. AmBA and several other trade groups urged Congressional leaders to delay premium hikes for flood insurance that took effect on October 1, explaining that “unintended consequences” from the Biggert-Waters Act of 2012 “threaten to harm the very people the program was designed to protect.” Provisions in the Act “will make flood insurance unaffordable for citizens who built to code and followed the law every step of the way,” our joint letter said. “Congress should consider longer-term legislation to balance fiscal responsibility with premium affordability. In the meantime, we urge you to delay these provisions until FEMA submits its congressionally mandated affordability report.”
October 2, 2013
HUD ISSUES QM PROPOSAL FOR FHA MORTGAGES. The Department of Housing and Urban Development (HUD) yesterday proposed a definition for Qualified Mortgages (QM) that are insured by the Federal Housing Administration (FHA). HUD proposed two “subsets” of FHA-insured QMs: a safe harbor QM and a rebuttable presumption QM. The two categories “are similar, but not identical to those” of the Consumer Financial Protection Bureau (CFPB), HUD explained. “Even though the CFPB final rule is structured…to provide only a single definition of ‘qualified mortgage,’ the preamble to the CFPB final rule acknowledges that the result is that ‘the final rule distinguishes between two types of qualified mortgages based on the mortgage's [annual percentage rate] relative to the [average prime offer rate].’” HUD’s proposed standard has several key differences with the CFPB’s standard, including a different points-and-fees trigger and a different rebuttable presumption standard. The rule is also unclear on whether the FHA will insure non-QM loans.
CFPB RELEASES CARD ACT REPORT. The Consumer Financial Protection Bureau (CFPB) released a report this morning on the credit effects of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). The report finds that total costs of credit declined between 2008 and 2012, over-limit fees “have effectively been eliminated,” and the size of late fees have declined. The CFPB said the report also shows “outstanding areas of concern,” including with add-on products, “fee harvester” cards, deferred interest products, online disclosures, and disclosures about rewards programs and grace periods.
FLOOD INSURANCE, FHA LOANS REMAIN AVAILABLE. The National Flood Insurance Program (NFIP) announced yesterday that it is continuing to operate during the government shutdown, as it is funded by subscriber premiums, not Congressional appropriations. “[Write Your Own] Companies and insurance agents should continue all NFIP functions as they normally would. Letter of Credit (LOC) functions will also continue to be handled as usual,” NFIP said. Also, Federal Housing Administration (FHA) Commissioner Carol Galante clarified yesterday that the agency will continue to guarantee single-family loans during the shutdown, with “a very limited number of staff…available to endorse new loans.”
October 1, 2013
GOVERNMENT SHUTDOWN BEGINS; BANKING REGULATORS REMAIN OPEN. With the Senate having rejected the latest House continuing resolution, the federal government started the new fiscal year today under a partial shutdown. The Federal Reserve, OCC, Consumer Financial Protection Bureau, and FDIC remain open, as they are not subject to the annual appropriations process. This means bank examinations and bank-only rulemakings will continue. Interagency rulemakings that involve regulators affected by appropriations will not move forward during the shutdown. The Securities and Exchange Commission said it will use funds carried over from the previous fiscal year to remain open “for a few weeks.” The Treasury Department and its Congressionally funded agencies are expected to halt most operations. The Federal Housing Administration (FHA) is partially closed; home loans requiring FHA approval may not be processed during the shutdown and federal flood insurance policies may not be issued.
AmBA SUPPORTS SWAPS BILL. AmBA wrote House Members this morning in support of legislation (H.R. 992) that would reform the swaps push-out requirement of the Dodd-Frank Act to allow banks to continue engaging in commodity, equity, and some structured finance products. “The push-out requirement applies only to swaps dealers and some major swaps participants, but it has been the focus of broad debate because it will affect the ability of both banks and their customers to centralize risk management,” AmBA explained. “Banks would have to form separately capitalized and funded affiliates to conduct some swaps.” The House had been scheduled to consider the bill tomorrow, but has postponed its consideration during the government shutdown.
FLOOD INSURANCE FORUM POSTPONED. Due to the current closure of federal government facilities, the National Flood Insurance Program Affordability Forum planned for this afternoon in the Capitol Visitors’ Center has been postponed. The event will be rescheduled at a later date.
September 30, 2013
REP. WATERS URGES CONGRESS TO ADDRESS FLOOD INSURANCE RATES. House Financial Services Committee Ranking Member Maxine Waters (D-CA) released a statement this morning calling on Congress to address pending rate increases for the National Flood Insurance Program, expressing “outrage” over the “flood insurance premiums that have resulted from the Biggert-Waters Act.” “I certainly did not intend for these types of outrageous premiums to occur for any homeowner,” Rep. Waters said. “With these rate increases approaching, time is running out. Congress must act quickly to ensure flood insurance rates do not make homeownership unaffordable or harm our housing market.”
REP. BACHUS TO RETIRE. Rep. Spencer Bachus (R-AL) will not seek reelection next year, he told an Alabama news outlet this morning. Rep. Bachus served two years as Chairman of the Financial Services Committee and is currently the panel’s Chairman Emeritus. He is in his 11th term representing the Birmingham-based 6th district and also serves on the Judiciary Committee, where he is Chairman of the Regulatory Reform Subcommittee.
FHA TO TAKE CASH INFUSTION. The Federal Housing Administration (FHA) said in a letter to Congress on Friday that it would take a $1.7 billion cash infusion from the Treasury Department by today in order to cover losses to its mortgage insurance fund. The White House had previously projected the FHA would need $943 million by the end of the year. The letter maintained that the agency is not bankrupt and blamed the shortfall on accounting rules.
September 27, 2013
Customers Paying Less to Use Credit Cards, New Report Finds. Credit cardholders are paying less to use their cards due to changes in consumer behavior and a shift in the market toward the least risky borrowers, according to the inaugural issue of AmBA Credit Card Market Monitor released yesterday. The Monitor found that the cost of credit -- the effective finance charge yield -- has fallen from 12.65 percent in 2008 to 11.25 percent in 2013. This cost has fallen as credit has declined for all but the most creditworthy borrowers. Credit lines have fallen nearly 19 percent since 2009, with subprime and prime credit dropping from 2010 through 2012 and only super-prime lines holding steady. Overall, since 2008, the availability of credit card credit has declined more than any other major credit type, including mortgages. AmBA created the Monitor, which will be issued quarterly, to “provide a clear, concise, fact-driven assessment of credit card market conditions that places current trends in both a historical and broader-market context,” AmBA EVP Ken Clayton said. “This report will allow us to identify and discuss topics that affect consumers and how our industry can serve them.”
FDIC to Issue Guidance on Payment Processing Relationships. The FDIC will shortly issue guidance on how banks should handle payment processors whose clients have a higher risk of involvement in illegal or fraudulent transactions, FDIC Chairman Martin Gruenberg said in a recent letter to members of Congress. The agency will remind banks that “the FDIC’s focus is the proper management of the banks’ relationships with their customers, particularly those engaged in higher risk activities, and not underlying activities that are permissible under state and federal law,” he explained. The FDIC has found that some of its supervised banks “may not have fully developed systems or procedures to identify and manage the risks” of direct and indirect payment processing for “higher risk” businesses. These businesses might include online short-term lending, telemarketing, debt consolidation, online gaming, online tobacco and firearms sales and online pharmaceutical sales, Gruenberg said. Bank relationships with companies that process payments on behalf of these sorts of businesses “can pose significant risks for financial institutions in these areas because, ultimately, the bank can be held responsible for the transactions which it facilitates,” he added. \
Performing Mortgages Increase in Q2; Foreclosures at Five-Year Low. Some 90.6 percent of mortgages were current and performing at the end of the second quarter, up from 90.2 percent in the first quarter and the 88.7 percent recorded a year earlier, according to the Mortgage Metrics Report released yesterday by the OCC. About 3.8 percent of mortgages were seriously delinquent at the end of the second quarter, 0.2 points lower than the first quarter and 0.6 points lower than a year earlier. The report also found that the number of loans in the process of foreclosure at the end of the second quarter fell to just under 745,000, 39.8 percent less than a year ago and a low not seen since the first quarter of 2008. “Strengthening economic conditions, servicing transfers, home retention efforts, and home forfeiture actions contributed to improving performance of home mortgages in the second quarter of 2013,” the report said.
September 26, 2013
SPENDING RESOLUTION PING-PONG AS FISCAL YEAR ENDS. According to AmBA’s latest information, the Senate now is expected to send the continuing resolution back to the House either Friday or Saturday, after removing the healthcare law repeal language and a provision directing the Treasury Department to prioritize payments as federal spending nears the current debt ceiling. The Senate also will shorten the resolution’s funding period from December 15 to November 15. The House is not expected to agree to the Senate’s changes, though it is not yet known what changes the House leadership plans. The House also could take up legislation on Friday addressing the debt ceiling, which will be used as another vehicle to defund “Obamacare” for one year in return for a one-year suspension of the debt ceiling. Early drafts of the legislation contain “instructions” on tax reform and a number of repeal efforts, including of the Dodd-Frank Act’s Title II orderly liquidation fund under, the home affordable modification program, mandatory funding for the Consumer Financial Protection Bureau (CFPB), and the Office of Financial Research.
FHA to Require Infusion by End of Month. The Federal Housing Administration is likely to need a cash infusion of more than $1 billion from the Treasury Department by the end of the month, according to news reports yesterday. White House officials signaled this spring that the FHA would need approximately $943 million by the end of the year, but did not indicate when they expected to take the draw. The projected shortfall stems from losses in the FHA’s troubled reverse mortgage program. The FHA announced changes earlier this month to limit losses on reverse mortgages.
Farm Credit Administration ‘Hiding’ FCS Problems, Analyst Says. The Farm Credit Administration is trying to hide regulatory problems in the Farm Credit System that it oversees, industry analyst Bert Ely said in the latest issue of AmBA’s Farm Credit Watch e-bulletin. The FCA does not publish its enforcement orders, Ely said, even though nearly 10 percent of FCS associations were under “written agreements” with the FCA on June 30. “Finding out which associations have disclosed the existence of an enforcement order is a challenge, unless one reads the reports for all 82 associations,” Ely reported. Associations under an enforcement order tend to be smaller than average, he added, with average assets of $593 million, compared with a system wide average of $1.96 billion..
OCC Finds Improving Bank Conditions in South. The OCC reported yesterday that banking conditions are improving in the agency’s nine-state Southern District, which spans from Texas to Georgia. The report -- generated quarterly from Call Reports in the region -- cited increased residential and commercial real estate activity and values, as well as growth in oil and gas. The region’s economic strength has improved banking conditions. “Most banks with asset quality issues are having success reducing problem assets which has resulted in a significant decrease in the number of problem banks and a reduction in enforcement actions in 2012 and 2013,” said Southern District Deputy Comptroller Gil Barker. About 80 percent of banks were in satisfactory condition in mid-2013, with the number improving, and capital levels improved slightly for community national banks and thrifts. The OCC cautioned that pressure on bank earnings will rise due to low loan demand and falling investment yields, and it warned about problem assets in certain areas remaining above national averages. “In particular, OCC examiners are focused on the impact of increasing interest rates as many banks are extending loan and investment maturities in search of yield,” the agency said.
Cordray: Financial Education Is Fundamental. “Financial education should be as fundamental as the education we are all required to receive in U.S. history and government,” Consumer Financial Protection Bureau Director Richard Cordray said yesterday at a Financial Literacy and Education Commission field hearing in Wisconsin. “Within the framework of our republic, we have built the greatest system of economic liberty in the history of mankind. Yet it will only endure if we take the steps necessary to strengthen that system from the bottom up, starting with the individual,” he said. Cordray repeated CFPB’s call for financial education to be integrated into the curricula of schools, and for financial concepts to be incorporated into state-administered standardized tests. He also noted that school bank programs, entrepreneurship training and games “can help students deepen their financial knowledge and build financial capability.” AmBA offers several resources and programs to help bankers teach young people the value of saving, budgeting and wise credit use. AmBA currently is urging bankers to participate in its Get Smart About Credit campaign, which will be celebrated Oct. 17.
September 24, 2013
LEVERAGE RATIO FRAMEWORK HAS RISKS, AmBA SAYS. AmBA and several other trade groups wrote to the Basel Committee on Banking Supervision, warning of unintended consequences from the Committee’s framework for a supplemental leverage ratio. Our joint letter offered support for offering a leverage ratio “as a supplemental, backstop measure to the risk-based measure.” The proposed increase in the ratio’s denominator, however, could make the ratio the binding measure for “a substantial number” of banks, we explained. A binding ratio would encourage banks to hold riskier assets in order to generate higher returns and reduce holdings of government securities and other low-risk assets. It also could overstate banks’ economic exposure, increase systemic risk, and hinder monetary policy’s effectiveness, the joint letter said.
OCC TO INCREASE INTERNAL REVIEWS. Comptroller of the Currency Thomas Curry said in a speech yesterday that the OCC is raising standards for internal self-assessment and performance. The agency will “bring the same kind of controls and program reviews to our work that we would expect of the banks we supervise,” he said, and the review process will be “structured very much like a bank exam.” Curry also said that the OCC will bring in bank supervisors from Australia, Canada, and Singapore to conduct an independent peer review of the agency’s large-bank supervision.
September 20, 2013
INTERCHANGE RULING GETS EXPEDITED APPEAL. The U.S. circuit court of appeals yesterday ordered an expedited appeal of a lower court’s ruling overturning the Federal Reserve’s debit interchange rule. Both parties in the case requested an expedited appeal. The Fed argued that vacating the rule without an expedited appeal would remove any cap on debit interchange fees, and that a faster appeal would help allay regulatory uncertainty. Filings in support of the Fed’s appeal, including friend of the court briefs, are due October 21.
SENS. CORKER, WARNER DISCUSS HOUSING-FINANCE BILL. Sen. Bob Corker (R-TN) and Sen. Mark Warner (D-VA) were interviewed yesterday by the real estate website Zillow about their legislation (S. 1217) – to wind-down Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency. The Senators said during the discussion that the bill’s provision to require a 10 percent risk retention for private investors would exceed what would have been required during the last housing downturn and would ensure that taxpayer funds are only required in the worst circumstances. The interview is available on Zillow.com here.
SEC ADOPTS FINAL MUNI ADVISOR RULE. The Securities and Exchange Commission (SEC) adopted a final rule on municipal advisor registration under the Dodd-Frank Act, making some improvements to the original proposal. The final rule will narrow the original proposal’s scope of who must register as a municipal advisor by more narrowly defining what constitutes “investment strategies” on which municipal advisors give advice. It also provides exemptions for a few traditional banking products and services, as well as for individuals who are serving in official capacities with municipalities. In addition, the final rule will not require individuals working for registered municipal advisory firm to individually register as municipal advisors. The final rule does not exempt banks in their entirety, as AmBA had advocated. Remaining concerns for bankers include the definition of what is captured as “advice” given on “investment strategies” and what exactly is exempted as a traditional banking product or service. AmBA will carefully review the final rule when it is published. The SEC’s temporary registration regime has been extended until July 1, 2014, when the final rule takes effect.
CFPB RELEASES MORTGAGE DATA TOOL. The Consumer Financial Protection Bureau (CFPB) launched an interactive mortgage information tool using information collected under the Home Mortgage Disclosure Act. The tool includes county maps of mortgage applications and originations, data tracking mortgage volumes, and the prevalence of Federal Housing Administration or Veterans Administration financing.
September 16, 2013
CFPB ISSUES FINAL MORTGAGE RULE CHANGES. The Consumer Financial Protection Bureau (CFPB) on Friday approved several final revisions to the mortgage rules taking effect in January. The changes include provisions related to loan origination, rural and underserved areas, thresholds for points and fees, and servicing. The revisions include an AmBA-supported clarification that tellers and other staff will not be considered loan originators “for merely providing loan originator or creditor contact information to the consumer," provided they do not direct the consumer to a particular loan originator or creditor based on an assessment of the consumer’s financial characteristics or discuss particular credit terms. The changes also clarify that monthly insurance premium structures are not covered by the loan originator compensation rule’s ban on financed premiums, and extend to all smaller creditors the exemption from the ban on high-cost mortgages featuring balloon payments.
September 13, 2013
BANKING PANEL PLANS HOUSING-FINANCE BILL THIS YEAR. Senate Banking Committee leaders said at a hearing yesterday they intend to produce a bipartisan housing finance reform bill by the end of the year. Additional hearings on the issue this fall “will give the entire Committee the opportunity to explore the various modifications and wholesale changes that we will consider, Chairman Tim Johnson (D-SD) said. “Ranking Member [Mike] Crapo and I are undertaking this in-depth process with the goal of reaching agreement by the end of the year.” Sen. Crapo cited the House Financial Services Committee’s bill (H.R. 2767) and White House statements on the issue, saying it “appears we now are experiencing the first moment since the crisis that the White House, the Senate, and the House are all moving forward or advocating for reform. Given this circumstance, we must use this opportunity to concentrate on building consensus around ending the conservatorships, while building a stable secondary market that brings back private capital and avoids repeating the mistakes of the past.”
CFPB ISSUES PAYROLL-CARD WARNING. The Consumer Financial Protection Bureau (CFPB) yesterday issued a bulletin reminding employers that they cannot require their employees to receive wages on a payroll card. The bulletin warns that the CFPB will pursue anyone who violates consumer protection rules, including employers and financial institutions that issue payroll cards. “The Bureau intends to use its enforcement authority to stop violations before they grow into systemic problems, maximize remediation to consumers, and deter future violations,” the Bureau said.
September 12, 2013
BANKING PANEL DISCUSSING HOUSING FINANCE ISSUES. The Senate Banking Committee is holding a hearing this morning on “essential elements of housing finance reform.” Witnesses include the CEO of SunTrust Mortgage, the Director of housing finance and policy for the Center for American Progress, and Moody’s Analytics Chief Economist Mark Zandi. “Recognizing that there are many details that need to be explored and discussed by the full Committee…we plan to hold hearings this fall to explore the finer points of proposed changes,” Committee Chairman Tim Johnson (D-SD) said in his opening statement. “This will give the entire Committee the opportunity to explore the various modifications and wholesale changes that we will consider. Ranking Member Crapo and I are undertaking this in-depth process with the goal of reaching agreement by the end of the year.”
AmBA Details Basel III Impact on Sub S Banks. AmBA has prepared a summary of how the new Basel III capital conservation buffer rule will impact banks organized as S corporations under the tax code. The paper notes that the rule, which prohibits shareholder distributions if a bank’s capital is below the buffer limit, could force S-corp shareholders to pay taxes on a bank’s income without receiving a distribution of that income. “This is a very serious issue for S corporation banks and their shareholders,” the paper says. “The same shareholders that are required to pay taxes on income not received are the shareholders that will likely be required to provide the additional capital required under the [rule].” AmBA noted that it has raised these concerns in letters, meetings and calls with policymakers and will continue to do so to obtain relief for Sub S banks. Read the paper.|
September 10, 2013
AmBA Emails ‘Tough Questions’ in Advance of CU Hill Visits. AmBA in an email yesterday urged members of Congress to ask credit union representatives -- in town for the National Association of Federal Credit Union’s “Congressional Caucus” -- “tough questions” when they visit Capitol Hill this week.“Credit unions are in town with one sole purpose: Lobbying Congress to maintain their huge government subsidy provided to them at taxpayer expense,” AmBA said. Among other things, the email urged lawmakers to ask credit unions whether they should retain their tax subsidy if they no longer focus on low- and moderate-income customers, as their charter mandates. It also suggested asking why credit unions should retain their preferential tax treatment when other cooperatives pay taxes.
September 9, 2013
POST EDITORIAL MISCHARACTERIZES QRM DEBATE. The Washington Post published an editorial last week lamenting the regulators’ decision to re-propose their Qualified Residential Mortgage (QRM) so that it aligns with the Qualified Mortgage (QM) rule from the Consumer Financial Protection Bureau. The editorial suggests that the new QRM proposal improperly removes down payment requirements and is inconsistent with the intent of the Dodd-Frank Act. The Coalition for Sensible Housing Policy, of which AmBA is a member, issued a statement noting that the “QRM as re-proposed will do precisely what Dodd-Frank intended; help to avoid another meltdown in the mortgage-backed security market.” “While regulators have decided to base the QM and QRM definition on other, reliable indicators of mortgage default, down payments are and will continue to be required by lenders, investors, insurers, and guarantors as part of their own underwriting requirements,” the Coalition said.
September 6, 2013
Credit Unions' Tax Exemption 'Unjustifiable.' The credit union industry’s tax exemption is an “unjustifiable $10 billion tax expenditure” that should be repealed, Kenneth Kies and Bert Ely said in a paper released this week. They reviewed how credit unions have evolved and now closely resemble banks, and they cited several bipartisan precedents for eliminating credit unions’ tax exemption.
FBI Warns of OpUSA Cyber Attacks. The FBI has warned financial institutions to take precautionary measures in anticipation of distributed denial of service attacks, or DDoS, that criminal hackers have planned for this month. Most of the targets of the attacks, which are expected to comprise Phase I of an effort known as “OpUSA,” are U.S. government agencies and financial institutions.
ANALYSTS QUESTION QM RULE’S ‘SAFE HARBOR’ PROTECTION. An article in today’s American Banker newspaper cites concerns among industry analysts that the “safe harbor” provision in the qualified mortgage (QM) rule does not provide the level of protection from lawsuits that many had hoped.“In theory, under the Consumer Financial Protection Bureau's final mortgage rules, low-priced loans that meet all the criteria of QM are supposed to be largely immune from consumer lawsuits,” the article says. “But lawyers are warning that in practice, consumers might successfully challenge a bank if it fails to fit any one of the many criteria laid out by the CFPB in defining the term.” Addressing the difficulty of meeting those requirements, the newspaper quotes former OCC Chief Counsel Julie Williams, who notes that the criteria are “quite extensive and quite complex.”
FDIC TO CONSIDER DUALLY PAYABLE DEPOSITS. The FDIC board will meet next Tuesday to discuss the final rule on the definition of an insured deposit. As proposed, the FDIC’s rule would clarify that dually payable deposits in foreign branches of U.S. banks do not qualify for deposit insurance. In an April comment letter, AmBA argued that the proposal does not fully address the FDIC’s stated concerns and creates new challenges for the FDIC and for financial institutions. We proposed that the FDIC determine that deposits in overseas branches of U.S. banks are “deposit liabilities” under the Federal Deposit Insurance Act, which would resolve depositor preference concerns
September 5, 2013
CFPB TO TESTIFY IN HOUSE NEXT WEEK. House Financial Services Committee Chairman Jeb Hensarling (R-TX) this week announced the Committee’s tentative schedule for September, including a full Committee hearing next week on the semi-annual report of the Consumer Financial Protection Bureau (CFPB). That hearing is scheduled for 9:00 a.m. on Thursday, September 12, and will feature CFPB Director Richard Cordray. Also next week, the Oversight and Investigations Subcommittee will meet September 10 on reducing waste, fraud, and abuse in housing programs. The Monetary Policy and Trade Subcommittee will hold a hearing the afternoon of September 12 on the history of the Federal Reserve. The following week, the full Committee is planning a September 19 hearing on the Terrorism Risk Insurance Act, while the Capital Markets Subcommittee will hold a hearing on the Securities and Exchange Commission’s proposed rules governing money market mutual funds.
BANKING PANEL TO CONSIDER EX-IM BANK, HUD NOMINATIONS. The Senate Banking Committee will hold a nomination hearing Tuesday, September 10, on the nominations of Wanda Felton to be First Vice President of the Export-Import Bank of the United States and Katherine O’Regan to be an Assistant Secretary in the Department of Housing and Urban Development (HUD).
CFPB WARNS CREDIT REPORT ‘FURNISHERS’ ON INFORMATION ACCURACY. The CFPB released a bulletin yesterday warning businesses that supply consumer information to credit reporting agencies to follow up on consumer disputes. A business must then review, investigate, respond, and, if necessary, correct inaccurate information in order to comply with the Fair Credit Reporting Act, the Bureau said. The CFPB said that all businesses that furnish consumer credit information must have “reasonable systems and technology in place” to review credit disputes. “The CFPB will continue to evaluate compliance with the requirement to review ‘all relevant information’ by furnishers subject to its supervisory and enforcement authorities,” the Bureau said. “The CFPB is monitoring complaints received from consumers and will prioritize examinations and other actions on the basis of risks posed to consumers.”
NEVADA CITY NIXES EMINENT DOMAIN PLAN. The city council of North Las Vegas, Nevada, voted yesterday to end a plan to seize mortgages through eminent domain in order to refinance them. The council voted 5-0 to terminate their advisory services agreement with the company behind the Nevada plan and similar schemes in several California jurisdictions and not to move forward with any programs put forward by the company. AmBA opposes using eminent domain as a means to address foreclosure issues, arguing that such plans would harm housing markets and the very communities they are intended to help. AmBA and the California Bankers Association have recently filed an amicus brief in a U.S. district court in opposition to an eminent domain plan in Richmond, California.
September 4, 2013
INTERNATIONAL DERIVATIVES FRAMEWORK RELEASED. The Bank for International Settlements and the International Organization of Securities Commissions this week released a final policy framework for margin requirements for non-centrally cleared derivatives. The standards are intended to ensure that all financial firms and systemically important non-financial entities using derivatives that are not cleared by a central clearinghouse will exchange sufficient collateral to protect against the risk of default. The framework applies to all derivatives transactions between the covered entities except for physically settled foreign exchange forwards and swaps.
CFPB NAMES DEPUTY DIRECTOR. The Consumer Financial Protection Bureau (CFPB) announced this morning that Steve Antonakes has been named Deputy Director. Antonakes had been serving as the Acting Deputy Director of the CFPB. He also will continue his duties as Associate Director for Supervision, Enforcement, and Fair Lending, the CFPB said. Antonakes joined the CFPB in November 2010 as the Assistant Director for Large Bank Supervision. He previously served as Massachusetts Commissioner of Banks and is a former bank examiner.
August 30, 2103
Banks Notch $42.2B in Q2 Earnings. FDIC-insured banks and savings institutions earned $42.2 billion in the second quarter, 22.6 percent more than the industry’s $34.4 billion earnings a year ago, the FDIC said yesterday. The average return on assets -- a standard measure of bank profitability -- rose to 1.17 percent, up from 0.99 percent a year ago but trailing its average between 2000 and 2006. Profitability rose as year-on-year noninterest income growth of 11.1 percent outstripped a 1.7 percent fall in interest income. The banking industry has had 16 consecutive quarters of profits increasing year-over-year, the agency said. Over half of all institutions reported an improvement in quarterly net income from a year ago, and those reporting first-quarter net losses fell to 8.2 percent -- the lowest proportion since 2006. Asset quality continued to improve as troubled loans and leases fell. Charge-offs were $14.2 billion in the first quarter, down $6.3 billion -- or 30.7 percent -- from a year earlier. The number of institutions on the problem bank list dropped from 612 to 553 -- the ninth straight quarter they declined. The Deposit Insurance Fund balance rose from $35.7 billion to $37.9 billion during the quarter, stemming primarily from assessment revenues, officials said. “Banks continued their strong performance with robust earnings supported by a diverse product base, lower losses and an ongoing improvement in asset quality,” said AmBA Chief Economist James Chessen. “At the same time, institutions face challenges as they recover from a one-two punch of rising compliance costs and weaker-than-normal loan demand that makes it difficult to grow topline revenue.”
U.S. Leads in Credit Rating Reform, FSB Finds. The United States has moved ahead of Europe in removing references to credit rating agencies’ ratings in financial regulations, a report from the Financial Stability Board said yesterday. Ratings continue to play a “significant role” in bank capital requirements, the FSB noted. The FSB -- an international body of financial regulators drawn from G-20 economies -- attributed U.S. progress to implementation of the Dodd-Frank Act, which sets stringent requirements for removing references to agency ratings. An FSB peer review highlighted the development of alternative creditworthiness standards, firms’ own internal risk assessment systems and references to ratings in private contracts as continued obstacles to full implementation of its recommendations on agency ratings.
August 27, 2013
Fed Asks Judge to ‘Stay’ Interchange Decision. The Federal Reserve yesterday formally requested that Judge Richard Leon allow the current debit interchange rule to remain in place while the Fed appeals his decision overturning the rule. The Fed argued that numerous parties would suffer “irreparable harm” if the rule was not temporarily stayed and that serious legal questions on the merits of the case remain. It also pointed out that the plaintiffs -- representatives of the retail and restaurant industries -- also support retaining the current rule pending appeal. Leon ruled last month that the Fed’s rule violated congressional intent in the Dodd-Frank Act by setting the interchange fee cap too high and failing to allow merchants to choose multiple unaffiliated PIN and signature networks for each card transaction they process.
Majority of Bank Customers Pay No Monthly Fees. A majority -- 55 percent -- of bank customers pay no monthly account fees for banking services, according to an AmBA survey released yesterday. An additional 10 percent of customers pay $3 per month or less. Only 14 percent of customers pay over $10 per month in fees according to the survey, conducted annually for AmBA by Ipsos Public Affairs since 1998. The number of people paying no fees fell from 59 percent, thanks in part to government-imposed reductions in debit interchange fees that banks collect from merchants. “While providing free checking accounts has become more challenging in today’s regulatory environment, a competitive financial marketplace -- along with prudent account management from bank customers -- means most people still pay nothing for the great service banks provide across multiple convenient channels,” said AmBA SVP Nessa Feddis.
CFPB Names New Senior Staffers. The Consumer Financial Protection Bureau yesterday announced several senior staff appointments. Kathleen Ryan, formerly senior regulatory counsel at JPMorgan Chase and senior counsel at the Federal Reserve, will be deputy assistant director of the bureau’s office of regulations. Elizabeth Ellis, previously an advisor to the CFPB’s chief of staff, will serve as deputy assistant director in the office of financial institutions and business liaison. The CFPB also announced that Cheryl Parker Rose of the Bill and Melinda Gates Foundation will serve as assistant director of intergovernmental affairs and that Christopher Carroll, a Johns Hopkins University economist, will be the bureau’s chief economist and assistant director of research.
August 22, 2013
FED APPEALS INTERCHANGE RULING. The Federal Reserve yesterday appealed a federal circuit court’s ruling overturning its debit interchange rule. The Fed also asked the court to allow the current rule to remain in place pending the appeal and said that it did not intend to issue an interim rule reducing the interchange fee cap. Representatives of the retail industry indicated that they also would support maintaining the current rule pending appeal. “The Federal Reserve’s decision to appeal is the right thing to do for consumers who value debit cards and the financial institutions that serve them,” AmBA President and CEO Frank Keating said. “We’re encouraged that all parties have asked for a stay and will seek an expedited appeal, which would avoid the market disruption and consumer harm that other alternatives would cause.”
FDIC TO ISSUE NEW QRM PROPOSAL. The FDIC Board announced yesterday that it has scheduled a meeting next week to discuss a new proposal to implement the Dodd-Frank Act’s qualified residential mortgage (QRM) and credit risk retention requirements. The second proposal is expected to align the regulators’ QRM standards with the CFPB’s final qualified mortgage (QM) rule.
August 21, 2013
AmBA SEEKS DELAY FOR IRA REPORTING FORMS. The IRS should delay changes to reporting forms that would require additional information about certain assets in individual retirement accounts (IRAs) ABA and SIFMA said in a joint letter yesterday. The changes are scheduled to take effect in calendar year 2014. “Unfortunately, the effective date of 2014 does not give sufficient time for IRA custodians and trustees to design, build, and implement the systems and programming changes that are necessary to capture and report the new information required once the draft forms are made final,” we wrote. Our joint letter requests a delay until January 1, 2015.
We also sought clarifications on the term “readily tradable” and the application of a new code for distribution of assets other than cash.
CYBERSECURITY WEB BRIEFING TOMORROW. AmBA will host a free, members-only telephone briefing and webcast (link requires log-in) tomorrow, August 22, from 3:00 – 5:00 p.m. Eastern. The briefing will provide member banks with an overview of the current cybersecurity threats banks face and will highlight AmBA cybersecurity resources and the services of the Financial Services Information Sharing and Analysis Center (FS-ISAC). AmBA’s Doug Johnson is moderating the program and speakers from the FBI, Treasury, and FS-ISAC will be featured.
August 20, 2103
FED PAPER CITES NEED FOR IMPROVED CAPITAL PLANNING. The Federal Reserve released a paper yesterday finding that large banks have improved their capital planning in recent years but have more work to do, including improvements to accounting for risks that are most relevant to their specific activities, forecasting stresses’ effects on capital needs, and capital planning oversight. The paper also described the Fed’s expectations for large banks’ internal capital planning and the range of practices observed through annual comprehensive capital analysis and review.
IRS LAUNCHES FATCA REGISTRATION SYSTEM. The IRS yesterday launched an online registration system for foreign banks and other financial institutions required to register with the agency under the Foreign Account Tax Compliance Act (FATCA). The system allows institutions to provide required information about their branches and affiliate groups. Institutions can establish online accounts, customize home pages, designate contact personnel, and receive status updates in “a secure environment,” the IRS said. Foreign financial institutions are required to register starting in January 2014.
August 19, 2013
FED FINALIZES ASSESSMENT RULE. The Federal Reserve Board on Friday issued a final rule instituting an annual assessment on banks and savings associations with $50 billion or more in total consolidated assets and non-bank financial companies designated by the Financial Stability Oversight Council for Fed supervision. The rule describes how the Fed will choose which firms to assess during each calendar year, identify the amount of each firm’s assessment, and collect the funds. The Fed addressed several concerns AmBA had raised in a June comment letter. The final rule includes AmBA’s recommendations to provide notice of the assessment no later than June 30 in order to limit the assessment’s effect on earnings disclosures, and to remove the Shared National Credit program from the assessment basis. The Fed did not adopt AmBA’s requests to exclude certain expenses from the assessment basis and to not charge banks for costs associated with supervising non-banks.
August 16, 2013
SWAPS CLEARING RULE EXEMPTS FCS BANKS, CREDIT UNIONS. The Commodity Futures Trading Commission (CFTC) adopted a final rule this week that provides a swaps-clearing exemption for cooperatives, including Farm Credit System (FCS) lenders and credit unions, regardless of their asset size. Banks are exempt from clearing requirements only if they have total assets of $10 billion or less. The final rule permits a qualifying cooperative to avoid clearing swaps subject to the clearing requirements in the Dodd-Frank Act, “provided that the cooperative’s members are either non-financial entities or other cooperatives whose members are non-financial entities.” AmBA has strongly urged the CFTC not to treat banks and cooperatives differently, explaining that there is no policy justification for granting large cooperatives a broader clearing exemption than banks.
CFPB RELEASES MORTGAGE-RULES EXAM GUIDANCE. The Consumer Financial Protection Bureau (CFPB) yesterday issued revised examination procedures to accompany its new rules on ability-to-repay, points and fees, servicing disclosures and personnel, dual-tracking, and appraiser credentials. The updates apply to the exam manuals for the Truth in Lending Act and the Real Estate Settlement Procedures Act. The Bureau said that it is coordinating its procedures with other federal banking regulators to promote a consistent regulatory experience
August 14, 2013
REP. HENSARLING PUSHES HOUSING-FINANCE REFORM. House Financial Services Committee Chairman Jeb Hensarling (R-TX) spoke before the Bipartisan Policy Center (BPC) yesterday, touting his legislation (H.R. 2767) to reform the housing-finance system. “It’s been nearly five years since the financial crisis, which was caused in large part by Washington policies that incented, mandated and browbeat financial institutions to loan money to people to buy homes they ultimately could not afford,” Chairman Hensarling said. “It’s been three years since the Dodd-Frank Act failed to do anything about Fannie Mae and Freddie Mac and their record taxpayer-funded bailout. Now it’s time for action to create a sustainable housing finance system – sustainable for taxpayers, for homeowners and for our economy.” Chairman Hensarling was critical of the approach to housing-finance reform taken in a Senate bill (S. 1217), saying it would set up a new federal bureaucracy that would end up “picking winners and losers.”
“If, at the end of the day, taxpayers are still on the hook, then I fear all you’ve done is put Fannie and Freddie in the Federal Witness Protection Program, given them cosmetic surgery and a new identity and released them on an unsuspecting public,” he said.
During a question and answer period after his speech, Chairman Hensarling stated that he is “speaking to many people” about ways to improve his legislation and that he is open to changes. He also said the House leadership is “anxious” to bring a bill to the floor, and that he is optimistic the Senate will pass a bill as well. Also, speaking before the same group yesterday was AmBA President and CEO Frank Keating, who addressed the need to focus on “sustainable homeownership” and outlined the reform goals of the BPC Housing Commission on which he served.
FED. DISTRICT COURT TO HOLD STATUS HEARING ON NEXT STEPS FOR INTERCHANGE. All parties to the interchange lawsuit, including the Federal Reserve and retailers, are meeting this morning with the district court that ruled against the Board’s interchange rule to discuss potential next steps before the judge issues a final ruling. While the Board could indicate whether or not it intends to appeal, it is also possible that it may ask for more time to evaluate its options. The court ruled earlier this month that the Fed “disregarded Congressional intent” when it included fixed costs, fraud prevention costs, fraud losses, and network fees when calculating the debit interchange fee cap. The court also ruled that the Fed’s interpretation of the “network exclusivity” provision of the rule – requiring multiple, unaffiliated PIN debit networks – also strayed from the intent of the Durbin amendment and, in fact, should require multiple PIN and signature network capability for every single transaction.
PCAOB PROPOSES AUDIT REPORT CHANGES. The Public Company Accounting Oversight Board (PCAOB) yesterday proposed a set of major changes to what auditors must report about the companies they audit. The new standards would require auditors to address “critical audit matters” within their opinions and would modify language on auditors’ responsibilities regarding fraud and information outside of the financial statements. AmBA expects the proposal to increase the size of most public bank auditor reports significantly.
HUD ‘CONCERNED’ ABOUT EMINENT DOMAIN PROPOSALS; REMAINS NON-COMMITTAL. The Housing and Urban Development Department (HUD) wrote to three Republican Members of the California House delegation yesterday, telling them that HUD “is concerned” about plans by several California municipalities to seize mortgage loans through eminent domain. The Members had asked HUD to clarify its position in a June letter. “At the same time, HUD recognizes that eminent domain is an inherent and often indispensable tool for local governments to accomplish important public purposes,” the Department wrote. “Notions of using eminent domain to condemn and refinance mortgages, however, raise a number of potential and novel issues that state and local governments and the courts will have to consider and resolve. “The letter concludes that HUD does not know at this time whether any new mortgage created under the plan would qualify for Federal Housing Administration insurance, and that they will not be able to respond properly “until such plans produce concrete, analyzable results.
August 12, 2013
AmBA OPPOSES FTC PROPOSAL ON REMOTE PAYMENTS. AmBA said in a comment letter last week that the Federal Trade Commission (FTC) should withdraw a proposal that would ban telemarketers’ use of remotely created checks and payment orders, and instead should instead focus on addressing deceptive and abusive actions by telemarketers. Recognizing that some telemarketers are “unscrupulous” in how they handle payments over the phone, AmBA explained that the proposal would nonetheless “harm consumer interests, including improperly prohibiting legitimate telemarketers from using [remotely created checks].” This would create “an unauthorized direct regulation of banks engaged in the intermediation of lawful transactions,” AmBA said.
FHFA SEEKS COMMENTS ON REDUCING GSE ROLE IN MULTI-FAMILY HOUSING. The Federal Housing Finance Agency (FHFA) on Friday requested comments on how it can reduce Fannie Mae’s and Freddie Mac’s roles in financing multifamily housing. The FHFA is seeking to shrink Fannie’s and Freddie’s multifamily market shares by 10 percent in 2013. The Agency identified several alternatives it might pursue, including restricting the terms of available loans, simplifying and standardizing products, and limiting either property financing or business activities. Comments are due by October 8.
PRESIDENT SIGNS STUDENT LOAN BILL. The President signed into law a bill (H.R. 1911) that links the interest rates on federal student loans to the government’s borrowing costs. The legislation sets the annual interest rate on Direct Stafford loans and Direct Unsubsidized Stafford loans at the yield on 10-year Treasury notes plus 2.05 percent, with a rate cap of 8.5 percent. Graduate student loans are capped at 9.5 percent and PLUS loans at 10.5 percent.
BANKS, GSEs FILE SUIT OVER EMINENT DOMAIN PLAN. Mortgage-bond trustees representing mortgage investors, Fannie Mae, and Freddie Mac filed a lawsuit this week against the city of Richmond, California, seeking to block the city’s plan to acquire underwater mortgages through eminent domain if bond investors do not accept its offer to buy the mortgages at substantial discounts. The plaintiffs argued that the plan violates the U.S. Constitution’s takings, commerce, and contracts clauses, and that it would cause “significant harm” to the mortgage investors, interstate commerce, the national housing market, and Richmond residents. In related news, the Federal Housing Finance Agency said yesterday that it has “serious concern” about such plans, arguing that “the use of eminent domain for altering contractual arrangements raises several core issues – the conflict of federal and state interests; assuming that a legitimate state interest may exist, the legality of such a plan; operation of such a plan and its impact on mortgage markets; safety and soundness concerns; valuation matters; and, creation of losses to the conservatorships.” The Agency concluded that seizing mortgages through eminent domain “presents a clear threat to the safe and sound operations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks…would run contrary to the goals set forth by Congress for the operation of conservatorships by FHFA and presents a direct relationship to FHFA’s [oversight] responsibility…” The FHFA stated that its responses may include legal challenges, as well as regulations that restrict Fannie’s and Freddie’s operations in eminent domain jurisdictions. AmBA has strongly opposed using eminent domain to restructure underwater mortgages.
August 6, 2013
COURT OVERTURNS FED INTERCHANGE RULE. A federal district court yesterday vacated the Federal Reserve’s rule setting debit interchange fees under the Dodd-Frank Act. The court ruled that the Fed “clearly disregarded Congressional intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transaction.” The court argued that the Fed should not have considered fixed costs, fraud prevention costs, fraud losses, and network fees when calculating the fee cap, as those were outside the considerations allowed under Dodd-Frank. The court also ruled that the Act requires merchants to have at least four network options, or two each for PIN and signature transactions. AmBA explained that the court’s decision will harm banks of all sizes and make it more difficult for institutions to serve their customers. “We question the court’s analysis that the statute doesn’t permit all the costs associated with an individual transaction to be part of the allowable costs,” AmBA President and CEO Frank Keating said. “From our perspective, that’s a plain misreading of the statute. “The price controls enacted as a result of the Durbin Amendment served one purpose – further lining the pockets of our nation’s big-box retailers at their own customers’ expense. It was – and still is – all about trying to help retailers increase profit margins while providing no real benefit to consumers… We urge the Federal Reserve to pursue all legal means to mitigate the harm this decision will cause to consumers, community banks, and all institutions that provide financial services to local communities.” The current rate cap will remain in effect until the Fed revises its rule.
PRESIDENT TO ADDRESS HOUSING-FINANCE REFORM. President Obama is scheduled today to give a speech on housing finance reform, during which he is expected to promote a reduced role for the federal government similar to legislation (S. 1217) by Sen. Bob Corker (R-TN) and Sen. Mark Warner (D-VA) that would wind down Fannie Mae and Freddie Mac and create a new public mortgage guarantor with a narrower mandate and taxpayer protections. Press reports cite a White House fact sheet stating that a “reformed system must have a limited government role, encourage a return of private capital, and put the risk and rewards associated with mortgage lending in the hands of private actors, not the taxpayers…” The President also is expected to call for continued federal down payment assistance and government financing for low-income housing developments, as well as for the creation of additional mortgage-refinance programs.
BATSA RE-INTRODUCED IN HOUSE. Rep. Jim Sensenbrenner (R-WI) and Rep. Bobby Scott (D-VA) on Friday introduced AmBA-supported legislation (H.R. 2992) intended to clarify the Constitutional requirement for a physical presence nexus for states to impose taxation. The Business Activity Tax Simplification Act (BATSA) would modernize existing law to ensure that states and localities can impose business activity taxes only on businesses that have a physical presence, defined as employees or property, in the taxing jurisdiction. The legislation would ensure fairness, minimize costly litigation for both state governments and taxpayers, and create legal certainty for businesses, while ensuring that businesses continue to pay business activity taxes to states that provide them with direct benefits and protections. The bill has six additional cosponsors, including Judiciary Committee Chairman Bob Goodlatte (R-VA), who introduced previous versions of the legislation.
COURT DISMISSES DODD-FRANK LAWSUIT. A federal district court last week dismissed a legal challenge to several provisions of the Dodd-Frank Act, including the creation of the Consumer Financial Protection Bureau, the Financial Stability Oversight Council, and the FDIC’s orderly liquidation authority. The court ruled that the plaintiffs – a Texas community bank, a think tank, a seniors’ advocacy group, and 11 state attorneys general – did not have standing to bring the suit and did not demonstrate a sufficient likelihood of injury from the law.
HOUSE REPUBLICANS QUESTION CFPB DEPARTURES. Republican leaders of the House Financial Services Committee and Oversight and Government Committee wrote to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray this week regarding the recent departures of several Bureau employees and “the lack of transparency” at the CFPB. “In particular, recent news reports indicate that senior CFPB employees, including Raj Date, Gary Reeder, Chris Haspel, and Mitch Hochburg, have left the CFPB in order to profit from rules they helped create,” the Members wrote. [I]t appears that former CFPB employees are now offering financial products in a market sector created by the very rules they were in a position to influence while working in senior leadership positions at the CFPB.” The letter asks for all communications between the named employees regarding the Qualified Mortgage rule, as well as documentation on the CFPB’s attrition rates.
CFPB TO STUDY BUNDLED FINANCIAL PRODUCTS. The CFPB yesterday requested comments on a proposed data collection from 2,700 low-income individuals who are considered unbanked, under-banked, or having “thin or no credit files.” The Bureau said it intends to collect data on these customers’ assets, savings, credit scores, and debt-to-income ratio in order to understand “the impact of bundled products and services on the financial decision-making of economically vulnerable consumers.”
July 25, 2013
AmBA, TRADE GROUPS TO TESTIFY ON CYBERSECURITY. AmBA, The Financial Services Roundtable, and the Securities Industry and Financial Markets Association (SIFMA) are providing joint testimony this afternoon for a Senate Commerce Committee hearing on cybersecurity cooperation between the private and public sectors. Mark Clancy, Managing Director at the Depository Trust & Clearing Corporation, is our joint witness. He will state our support for a cybersecurity bill (S. 1553) introduced by the Committee’s leadership that would facilitate private and public sector collaboration to establish voluntary standards and best practices to address cyber-attacks. “For the financial services industry, cyber threats are a constant reality and a potential systemic risk to the industry,” his written testimony states. “Our markets and financial networks are predicated on trust and confidence. The trusted transfers and transactions that occur hundreds of millions of times a day are a fundamental prerequisite for modern capital markets, investors, consumers, and governments to conduct business and drive economic growth.” Clancy also will tell the Committee that the industry “believes strongly in the importance of private sector leadership” on cybersecurity, while recognizing the need to partner with the government to address threats.
House Panel Approves Hensarling Housing Bill. The House Financial Services Committee yesterday voted 30-27 to approve the housing reform bill introduced by Rep. Jeb Hensarling (R-Texas). The committee made only technical changes, rejecting several Democratic amendments. Two Republicans voted against the bill; no Democrats voted in favor. As passed, the bill would wind down Fannie Mae and Freddie Mac within five years, replace them with a “public utility” to oversee the creation and maintenance of a single platform for the private sale of mortgages and end all federal guarantees. It also would reduce the mortgage insurance coverage provided by the Federal Housing Administration to only 50 percent of the mortgage being insured and re-target the FHA to serve first-time and low-income homebuyers. AmBA said that it believes that a federal guarantee for certain loans is still needed to maintain a stable housing market and that it will work toward that goal as the legislative process goes forward. The bill also contains several AmBA-advocated regulatory relief provisions.
Sens. Moran, Tester, Kirk Introduce AmBA-Supported Reg Relief Bill. Sens. Jerry Moran (R-Kan.), Jon Tester (D-Mont.) and Mark Kirk (R-Ill.) yesterday introduced a bill to provide regulatory relief to banks. The bill, S. 1349, is very similar to the AmBA-supported H.R. 1750, introduced in May by Rep. Blaine Luetkemeyer (R-Mo.). The Senate bill would exempt banks with $10 billion in assets or less from Sarbanes-Oxley management attestation requirements, require the Federal Reserve to increase its small bank holding company asset threshold from $500 million to $5 billion, and both expand the Qualified Mortgage safe harbor and provide exemptions from escrow requirements on first-lien mortgages for lenders with less than $10 billion in assets.
Senate Approves Compromise Student Loan Bill. The Senate yesterday approved, in an 81-18 vote, a compromise bill that would link the interest rates on federal student loans to the government’s borrowing costs. The bill would set the annual interest rate on Direct Stafford loans and Direct Unsubsidized Stafford loans at the yield on 10-year Treasury notes plus 2.05 percent, with a rate cap of 8.5 percent. Graduate student loans and PLUS loans would carry higher rates, with each capped at 9.5 percent and 10.5 percent respectively.
The bill, which is expected to be quickly approved by the House and signed by the president, resolves a stalemate over how to handle the recent doubling of Stafford loan rates. Those rates increased to 6.8 percent on July 1, when a six-year-old measure that had cut them in half expired. The new rates will apply to loans originated on or after that date.
July 24, 2013
HOUSE COMMITTEE APPROVES HOUSING-FINANCE BILL. The House Financial Services Committee this morning approved its housing-finance reform legislation (H.R. 2767), by a vote of 30-27. The Committee made only technical changes to the legislation, which we expect to reach the House floor following the August recess. ABA will continue to work with Members on improvements to the bill as the legislative process goes forward, including in the areas of maintaining a federal guarantee for certain loans and providing full coverage for loans insured by the Federal Housing Administration. We outlined our positions on the bill’s provisions in a detailed memo to the Committee on Monday.
AmBA TESTIFIES ON CORKER-WARNER HOUSING-FINANCE BILL. A Senate housing-finance reform bill (S. 1217) by Sen. Bob Corker (R-TN) and Sen. Mark Warner (D-VA) is “a positive first step” toward creating a sustainable and limited federal role in a healthy mortgage market, Community Bank of Tri-County Chairman and CEO Michael Middleton told the Senate Banking Securities Subcommittee yesterday. Middleton was testifying on AmBA’s behalf. The Corker-Warner bill would wind down Fannie Mae and Freddie Mac and create a new public mortgage guarantor with a narrower mandate and taxpayer protections. Middleton commended the legislation for following “principles long advocated by AmBA,” including a smaller federal role that allows a vibrant and accessible private marketplace to emerge. “The approach taken properly realigns a significant portion of the residential mortgage process so that it is conducted by the private sector,” he said. Middleton also suggested several improvements for the legislation, including adjusting “first loss” requirements to ensure enough private-sector entities participate, providing a different regulatory structure for the Federal Home Loan Banks, paying more attention to multifamily housing, and imposing similar reforms on the Farm Credit System.
SENATE TAX-REFORM MARKUP PLANNED FOR FALL. Senate Finance Committee Chairman Max Baucus (D-MT) announced yesterday that his panel will mark up a tax reform bill sometime this fall, between September and November. He urged Senators to participate in the Committee’s “blank slate” approach to tax reform by sending letters specifying which tax breaks they would like retained in a reformed tax code. AmBA has urged the Committee to re-examine the large tax breaks for the credit unions and the Farm Credit System. We will make further recommendations to the Committee soon.
July 23, 2013
AmBA OFFERS DETAILED COMMENTS ON HOUSING-FINANCE BILL. AmBA wrote to House Financial Services Committee Members yesterday to state our views on the draft housing-finance reform bill by Chairman Jeb Hensarling (R-TX), which the Committee is marking up this morning. Our memo explained that while the federal role in mortgage finance needs to be significantly reduced, a federal guarantee for certain loans is still needed to maintain a stable housing market. The draft legislation would wind down Fannie Mae and Freddie Mac within five years and end all federal guarantees. We expressed support for several other provisions in the bill related to the government-sponsored enterprises (GSEs), including those that reduce the maximum loan amount eligible for sale to Fannie and Freddie, revise guarantee fees to ensure the government is compensated for the risk it takes on, and limit GSE purchases to Qualified Mortgages (QM). AmBA also offered support for some, though not all, of the bill’s provisions to reform the Federal Housing Administration (FHA), its intent to create an open-access securitization platform, and the creation of a covered bond market.The bill includes several regulatory relief provisions that AmBA has long advocated and continue to support, including a delay to the Dodd-Frank mortgage rules, a delay and study of the Basel III rules, changes to the points and fees definition under QM, an exemption for small servicers from Dodd-Frank rules, and clearer exam standards.
AmBA, TRADE GROUPS URGE CONGRESS TO STOP EMINENT DOMAIN MORTGAGE SEIZURES. AmBA and 11 other trade groups yesterday urged Congress to prevent municipalities from seizing mortgages under eminent domain powers in order to refinance them through federal housing programs. “While we support a broad range of programs to assist struggling homeowners and the communities in which they reside,” our joint letter said, “we are firm in our belief that using the power of eminent domain in this manner would harm our nation’s housing markets and the very communities it is intended to help. “The introduction of this new risk to the housing finance system would freeze the return of private capital to our markets at a time when many in Congress are looking for ways to increase the role of the private sector and decrease the federal government’s footprint.” Our joint letter expressed support for a provision in housing-finance reform legislation by Financial Services Committee Chairman Jeb Hensarling (R-TX) that would prevent the FHA and the GSEs from “putting taxpayers behind the refinancing of a mortgage seized by eminent domain.”
FARM CREDIT TALKING POINTS AVAILABLE. AmBA has prepared talking points on Farm Credit System (FCS) taxation to assist state executives and bankers to engage with their Senators, particularly Members of the Senate Finance Committee. We are working to include FCS tax reform in the broader tax reform debate that Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) began last month. AmBA wrote to Chairman Baucus and Ranking Member Hatch regarding tax reform for the FCS on Friday.
AmBA CONTINUES TO URGE DELAY TO CFPB MORTGAGE RULES. AmBA wrote to the Consumer Financial Protection Bureau (CFPB) yesterday regarding its recent clarifications to pending mortgage origination rules and revisions to the mortgage servicing rules. AmBA continued to advocate a delay to the mortgage rules, stating that the planned January 24, 2014, effective date is “unrealistic,” and that “a limited delay of the effective date of these rules is the only option that assures an orderly transition to the new mortgage regulatory structure.” We also explained that the current rules covering the definition of “loan originator” are “confounding and extremely challenging to apply in the real world” and need to be simplified, and that the test for inclusion of third party charges into the points and fees test is unclear. In a separate letter regarding revisions to the mortgage servicing rule, AmBA recommended redefining “first notice or filing” to align with state laws related to foreclosure proceedings, expanding exceptions to the 120-day foreclosure ban, clarifying terminology related to missing document submission, and expanding the period for short-term forbearance.
July 8, 2013
AmBA, AmBASA COMMENT ON BROKER-DEALERS. ABA and its AmBA Securities Association (AmBASA) subsidiary on Friday provided information on the duties of brokers, dealers, and investment advisers to the Securities and Exchange Commission (SEC). The SEC is considering whether and how to engage in rulemaking under Section 913 of the Dodd-Frank Act that would impose a “standard of care on broker-dealers when providing personalized investment advice to retail customers.” AmBA and AmBASA explained their support for “efforts to mitigate investor confusion regarding the standard of care a financial intermediary exercises when providing personalized investment advice to its retail clients.” Such efforts should not, however, “reduce investor choice or access to the investor education that helps them better understand concepts and options available to them when they make important financial decisions,” we wrote.
Fed Addresses Community Banker Concerns in Basel III Revisions. AmBA staff identified several ways the Basel III rule was improved to address concerns raised by AmBA and its members and to ease the burden on many institutions -- particularly community banks. In particular, the risk weights for residential mortgage loans that apply under current rules will continue to apply. In addition, banking organizations with less than $15 billion in assets may continue to count existing trust preferred securities as capital, consistent with the grandfathering set by the Dodd-Frank Act. AmBA had been particularly vocal about the initial plan to require a phase-out of TruPS for all banks and noted that many community banks would have had trouble replacing their TruPS with new sources of capital. AmBA also raised major concerns about the original plan to require banks to recognize in their capital the value of unrecognized gains and losses in “available for sale” securities. That proposal would have placed banks in the position of facing major hits to capital when interest rates rise, as they have already begun to do, just when the economy is emerging from recession. The final rule addresses this problem, but only in part. Most banks will be able to choose whether or not to adopt this treatment of their unrecognized gains and losses, while large internationally active banks will be required to do so, reducing but not removing the likely negative impact on the overall economy as bank capital contracts. No material changes were made from the original plan with respect to the treatment of mortgage servicing assets, which must be deducted from capital under the rule. Also, no relief was afforded savings and loan holding companies with assets less than $500 million from the capital rule. The Fed declared that more work with regard to these firms remained to be done. Aspects of the rules that significantly interfere with the ability of banks to serve their customers in a safe and sound manner will be the subject of further AmBA advocacy efforts.
July 5, 2013
HOUSE MEMBERS ASK FEMA TO ADDRESS FLOOD INSURANCE RATES. House Financial Services Committee Ranking Member Maxine Waters (D-CA) and bipartisan group of 26 other House Members this week asked the Federal Emergency Management Agency (FEMA) to use whatever authority it has to mitigate rate increases for the National Flood Insurance Program. “While [the Biggert-Waters Flood Insurance Reform Act] is intended to help the program become financially sound by moving policyholders to actuarial rates and phasing out some subsidies, we have recently become aware of an unintended consequence of this otherwise well-meaning legislation,” the Members wrote, explaining that some homeowners may see a substantial increase in their rates. “While Congress has shown it is willing to act to address these issues, we believe that FEMA has the authority to administratively address some of the affordability issues arising from Biggert-Waters. We urge you to use whatever discretion you have in order to address these affordability concerns.” AmBA and other industry groups are planning a forum on Capitol Hill to address affordability issues.
AmBA Concerned About Basel External Audit Proposal. AmBA expressed several concerns about the Basel Committee on Banking Supervision’s external bank audit proposal in a comment letter Tuesday. The proposal is intended to guide bank supervisors in their relationships with banks’ external auditors. AmBA said the BCBS proposal is unnecessarily prescriptive, relies too much on rules versus good judgment, relies too heavily on audit standards not well-known in the United States, discourages local regulators’ decision-making, appears to require new disclosures and unnecessarily increases burdens on auditors and audit committees. AmBA also is concerned that the proposal “appears to create a new and direct reporting relationship for the external auditor with the banking supervisors on a very frequent basis. The proposal will be improved by clarifying that this relationship is between the external auditor and the audit committee rather than between the external auditor and the supervisors.”
FED FINALIZES BASEL III RULE. The Federal Reserve Board yesterday issued a final rule implementing the Basel III regulatory capital framework and related Dodd-Frank Act changes, setting the minimum regulatory capital requirements for financial institutions. The Fed’s staff memo on the final rule is available here. The final rule includes a new common equity Tier 1 ratio of 4.5 percent of risk-weighted assets, raises the minimum Tier 1 capital ratio from 4 percent to 6 percent of risk-weighted assets, and would set a new conservation buffer of 2.5 percent of risk-weighted assets. While these levels are unchanged from the proposed rule, the final rule includes several important improvements that reflect the significant input from thousands of AmBA member banks and all of the state bankers associations. In particular, the risk weights for residential mortgage loans that apply under current rules will continue to apply, and banking organizations with less than $15 billion in assets may continue to count existing trust preferred securities as capital. The final rule also partly addresses AmBA concerns with the original proposal’s plan to require banks to recognize in their capital the value of unrecognized gains and losses in “available for sale” securities. Most banks now will be able to choose whether or not to adopt this treatment of their unrecognized gains and losses, while large internationally active banks will be required to do so. The change will reduce the likely negative impact on the overall economy as bank capital contracts.
AmBA will continue to advocate for changes to aspects of the rule that significantly interfere with the ability of banks to serve their customers in a safe and sound manner. “Basel III exists because Basel I and II didn’t get it right,” said AmBA President and CEO Frank Keating. “For that reason, we shouldn’t expect this rule to be perfect either – it’s clear that more needs to be done.” ABA resources on the rule can be found our Basel III webpage.
SEN. CRAPO SEEKS GAO REVIEW OF CFPB’S DATA COLLECTION EFFORTS. Senate Banking Committee Ranking Member Mike Crapo (R-ID) wrote to the Government Accountability Office (GAO) yesterday, asking that it investigate the consumer spending data-collection efforts of the Consumer Financial Protection Bureau (CFPB). “While CFPB officials have stated that the CFPB is truly not collecting [personally identifiable financial information], we do not know what information it collects, on how many accounts, or how this information is being used,” Sen. Crapo wrote. “In addition to regulatory and privacy concerns, this also raises data security issues especially since the CFPB’s Inspector General has already identified deficiencies in this area.”
FINANCE PANEL LEADERS BEGIN TAX-REFORM PUSH. Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) last week sent a Dear Colleague letter seeking other Senators’ input on needed reforms to the tax code’s exclusions, deductions, and credits – so-called “tax expenditures.” Their letter emphasizes that it is important to start with a “blank slate” on the issue.“[W]e both believe that some existing tax expenditures should be preserved in some form,” the Senators wrote. “But the tax code is also littered with preferences for special interests. To make sure that we clear out all the unproductive provisions and simplify in tax reform, we plan to operate from an assumption that all special provisions are out unless there is clear evidence that they: (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.”
AmBA COMMENTS ON ACH PROPOSALS. AmBA on Friday expressed support in a letter to NACHA, the Electronic Payments Association for four proposed rule changes related to third parties in the Automated Clearing House (ACH) network. The four proposals would ensure that the originator in a consumer debit authorization is clearly identified, even if using a third party; allow a receiver’s authorization to be provided to the originator or its third party; clarify business relationships between third parties and their service providers; and clarify what parties are subject to audit requirements. AmBA also asked the organization to consider issuing rules to require that third-party service providers and third-party senders create and be subject to complying with their own risk management policies, and to facilitate the transfer of data throughout each step of a payment transaction.
June 27, 2103
Keating in Wall Street Journal: Feds Must Clear ‘Mortgage Minefield’. Contradictory rules have created a mortgage lending “minefield” for bankers that threatens the housing recovery, AmBA President and CEO Frank Keating wrote in a Wall Street Journal op-ed this morning. The minefield, Keating said, results from the Housing and Urban Development Department’s decision to use disparate impact analysis to enforce fair lending laws on the one hand, and the Consumer Financial Protection Bureau’s Qualified Mortgage standards on the other hand. “The QM requirements will result in an immediate tightening of credit, with banks substituting a one-size-fits-all federal mandate for their own good judgment and sound underwriting,” Keating said. “Many creditworthy borrowers . . . will be cut off from the dream of home ownership.” He added that racial disparities in wealth may “mean that members of some races will be denied credit at a higher rate than others -- and voila, disparate impact.” To clear up the issue and reduce uncertainty for bankers and their customers, Keating said, regulators should modify the rules to ensure no conflict exits. If they do not “clear the minefield” before the CFPB’s January 10 compliance date, he explained, “the ultimate casualties will be the nascent housing recovery and the American home buyer.”
AmBA SUBMITS STATEMENT FOR TOO-BIG-TO-FAIL HEARING. “As Congress debates the effectiveness of the Dodd-Frank Act and what changes might be appropriate, it is important to look at the role that banks of all sizes play in supporting our economy, and evaluate the impact that any current and prospective laws might have on banks’ ability to support growth in our nation,” AmBA said in a statement for the record submitted for yesterday’s House Financial Services Committee hearing on Dodd-Frank and “too big to fail.” “We must ensure that our diverse banking industry remains equipped to support the needs of our large and diverse economy,” AmBA wrote. “Plans that seek to limit the size of banks, directly or indirectly, would have unintended, wide-reaching consequences for consumers, the financial services industry, and the broader economy… Federal regulators must continue to effectively implement provisions to end too big to fail. No policymaker should use this goal as an excuse to reach other nonrelated policy goals, such as breaking up banks based on size.”
SENATORS URGE ‘CLEAR DIRECTION AND LEADERSHIP’ ON CROSS-BORDER TRANSACTION RULES. Six Democratic Senators wrote to Treasury Secretary Jacob Lew yesterday to “express concerns regarding the process of reforming the derivatives market, specifically the development of workable cross-border rules.” The letter explained that the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have issued “different and somewhat conflicting” proposals on the subject. “With clear direction and leadership, the CFTC and SEC can and should work with domestic and international regulators to ensure that the global derivatives market promotes transparency, efficiency and risk mitigation,” the Senators said. “To achieve this coordination, more time is needed for domestic harmonization and sequencing with regulations that occur abroad.” The House has passed AmBA-supported legislation (H.R. 1256) that would require the SEC and the CFTC to issue rules jointly on the application of the Dodd-Frank Act to cross-border securities transactions.
June 26, 2013
BANKING PANEL MEMBERS INTRODUCE HOUSING FINANCE REFORM BILL. A bi-partisan group of Senators led by Sen. Bob Corker (R-TN) and Sen. Mark Warner (D-VA) yesterday introduced legislation – S. 1217, the Housing Finance Reform and Taxpayer Protection Act – that would wind-down Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency, replacing them with a privately capitalized system intended to preserve market liquidity and protect taxpayers from the possibility of bailouts. “This bi-partisan legislation is a positive first step in what is certain to be a long process toward creating a sustainable, rational, and limited role for the federal government in supporting and regulating a mortgage market that is appropriately and predominately filled by the private sector,” AmBA President and CEO Frank Keating said. “The bill follows principles long advocated by AmBA, and builds upon the framework detailed by the Bi-Partisan Policy Center’s Housing Commission.” Senate Banking Committee Chairman Tim Johnson (D-SD) said that he and Ranking Member Mike Crapo (R-ID) “plan to turn the Committee’s attention to broader housing finance reform after we address the more timely issue of FHA solvency.” Sens. Jon Tester (D-MT), Mike Johanns (R-NE), Kay Hagan (D-NC), Heidi Heitkamp (D-ND), Dean Heller (R-NV), and Jerry Moran (R-KS) are original cosponsors of S. 1217.
SUPREME COURT TO CONSIDER RECESS APPOINTMENTS CASE. The U.S. Supreme Court agreed yesterday to consider the case challenging President Obama’s appointments of three members to the National Labor Relations Board (NLRB) in January 2012. Two appeals courts have ruled against the Administration, with the U.S. Court of Appeals for the District of Columbia ruling that the NLRB appointments were unconstitutional because the Senate was not actually in recess at the time, and also that recess appointments could only be made between sessions of Congress. The Supreme Court will seek to determine whether the President can make recess appointments while the Senate is meeting in pro forma sessions every three days, whether appointments can be made only between sessions of Congress, and whether the vacancies in question must also have occurred during the Congressional recess in which the appointments are made. The case, which likely will be heard in the fall, has implications not only for the NLRB’s rulings since 2012, but also for the appointment of Richard Cordray to lead the Consumer Financial Protection Bureau, which occurred on the same day as the NLRB appointments.
CFPB PROPOSES MORTGAGE RULE REVISIONS. The Consumer Financial Protection Bureau (CFPB) yesterday proposed several revisions to the mortgage rules taking effect in January 2014, including in the areas of loan origination, rural and underserved areas, thresholds for points and fees, and servicing. The proposal includes an AmBA-advocated clarification that tellers and other staff should not be considered loan originators “for merely providing loan originator or creditor contact information to the consumer," provided that the person does not discuss particular credit terms and does not "direct the consumer based on an assessment of the consumer’s financial characteristics." The proposal also clarifies that monthly insurance premium structures are not covered by the loan originator compensation rule’s ban on financed premiums, and revises two exceptions to small creditors operating in predominantly “rural” or “underserved” areas. Comments on the proposal are due July 22.
OCC FINALIZES LENDING LIMITS RULE. The OCC last week issued its final lending limits rule, incorporating several AmBA recommendations and extending the compliance date to October. 1. The final rule allows banks to use the current exposure method for measuring derivative exposure, as they are currently allowed to do for capital purposes. It also allows bank to use the “collateral haircut” methods for securities financing transactions that some banks currently use under capital rules, and enables banks to use their own developed models through an approval process.
June 19, 2013
QM Will Restrict Mortgage Credit, AmBA Member Tells Congress. The Consumer Financial Protection Bureau’s ability-to-repay rule and Qualified Mortgage guidelines will restrict mortgage credit, especially to those “on the margins,” James Gardill told the House Financial Services Subcommittee on Financial Institutions yesterday during testimony on AmBA’s behalf. The chairman of Wesbanco Inc. in Wheeling, W.Va., Gardill emphasized that QM results in excessive restrictions on non-QM loans, that QM loans themselves limit lending and that compliance by the January 10 deadline may further restrict lending. “The heightened penalties and liabilities applicable in the ability-to-repay rule are tremendously burdensome,” Gardill said. Meanwhile, he explained, the QM guidelines incentivize lenders to extend credit to “only the best-qualified borrowers,” thus “limit[ing] credit to credit-challenged communities and demographics.” Gardill also said that if the CFPB does not extend the compliance deadline, banks may “reduce, or even eliminate, their mortgage lending activities in the short term” in order to remain in full compliance, further reducing access to credit.
AmBA Report Briefs Policymakers on Emerging Payments. As the electronic payment environment changes rapidly, policymakers should focus on three essential aspects of the payments landscape, AmBA said in a report that will be sent to members of Congress today. Policymakers should ensure that consumer protection laws apply to every part of the electronic payment process, including new nonbank participants; that all participants in the payment system maintain robust, bank-like controls that protect the system’s integrity and assist in mandated law enforcement efforts; and that participants in the market all play on a level regulatory playing field. Banks developed the first electronic payment system -- the credit card -- over 50 years ago and have continued to innovate, AmBA’s Emerging Payments Advisory Group said. In recent years, the group added, new entrants have developed novel products and devices, including mobile phone platforms and virtual wallets. The report called for a balance between fostering an environment of innovation and experimentation while also ensuring that the payments landscape functions well for all parties. As new participants enter the marketplace for electronic payments, the report said, policymakers should ensure that it remains consumer-friendly, dependable and fair. AmBA’s Emerging Payments Advisory Group consists of representatives from 13 banks representing a cross-section of American banking from throughout the country, including national, regional, community and mutual banks.
June 18, 2013
AmBA TESTIFYING ON QM RULE, HOME OWNERSHIP. James Gardill, Chairman of Wesbanco Inc. in Wheeling, West Virginia, is testifying on AmBA’s behalf this morning at a House subcommittee hearing to examine the effects of the Dodd-Frank Act on home ownership. Gardill will tell the Financial Services Financial Institutions Subcommittee that the Qualified Mortgage rule issued under Dodd-Frank will limit mortgage credit for many creditworthy borrowers because the QM guidelines narrow lending parameters and impose high risks on those lending outside of these parameters. He will also state that the QM framework may also limit the ability to lend to a diverse group of consumers, with fair lending and Community Reinvestment Act implications, and that the QM rule’s implementation date should be delayed.
June 14, 2013
Senators Emphasize Community Bank Concerns During Hearing. Senators from both parties questioned whether the regulatory burden on community banks was too heavy during a Senate Banking Committee hearing yesterday on community bank performance. “The regulatory framework that emerged out of Dodd-Frank has made it increasingly difficult for community banks to operate and maintain business presence in many communities,” said ranking member Mike Crapo (R-Idaho). "Community banks are disproportionately affected by increased regulation because they are less able to absorb additional costs." Elizabeth Warren (D-Mass.) expressed concern that “small banks are still subject to many regulations that were written for the larger financial institutions,” and Heidi Heitkamp (D-N.D.) told the Politico newspaper that “when you look at the overall thrust of Dodd-Frank -- which was to eliminate ‘too big to fail’ -- I think for many community banks, this has become ‘too small to succeed.’” During testimony, officials provided an overall optimistic view of community banks’ performance without significantly addressing regulatory burden. Community bank failures in the years following the 2008 financial crisis mostly resulted from risky real estate loans and poor underwriting, said the Government Accountability Office’s Lawrence Evans. Today, added FDIC Chief Economist Richard Brown, community banks continue to play a “crucial role,” representing 95 percent of all banking organizations, 46 percent of small loans to businesses and farms and a majority of deposits in rural areas and small cities. “Community banks that grew prudently and that maintained diversified portfolios or otherwise stuck to their core lending competencies . . . exhibited relatively strong and stable performance over time,” Brown said.
Credit Union Taxation Among Senate Finance Committee Options. The credit union tax exemption is one of the tax expenditures identified for reform in a “tax options” paper released by the Senate Finance Committee yesterday. Under the heading of “Revise the requirements for tax-exempt status for organizations engaged in commercial activity,” committee staffers offered an option to “[d]disallow tax-exempt status for certain organizations engaged in business activities, such as credit unions, nonprofit hospitals or certain types of insurance firms.” The tax options paper series summarizes ideas that have been presented to the Finance Committee in more than 30 hearings. It is designed to guide discussion as committee members prepare to take up comprehensive reform of the tax code. ABA in letters and meetings with lawmakers and inside-the-beltway ads this year has urged Congress to rethink the credit union industry's outdated special tax treatment.
CFPB Offers Mortgage Rule Implementation Webpage. The Consumer Financial Protection Bureau has assembled compliance resources for its suite of mortgage rules on a single webpage. The page features small entity compliance guides, videos, reference charts and a list of rural and underserved counties. The page covers the ability-to-repay and Qualified Mortgage, HOEPA, loan originator, ECOA, appraisals, escrow and servicing rules..
OCC Releases Booklet on ‘Common Sense’ Community Banking. The Office of the Comptroller of the Currency yesterday released a booklet called “A Common Sense Approach to Community Banking,” in which it outlines the regulator’s view of how community banks can thrive. Aimed at bank directors and senior management, the booklet focuses on risk assessment and management, strategic and capital planning and OCC supervisory expectations. “There are a lot of publications out there that describe both the difficulties and opportunities that confront community banks,” said Central District Deputy Comptroller Bert Otto. “In developing this publication, we asked ourselves, ‘What distinguishes community banks that thrive from those that either just barely survive or eventually fail?
Fannie, Freddie Remain ‘Critical Concerns’ in FHFA Report. The Federal Housing Finance Agency considers Fannie Mae and Freddie Mac “critical concerns” despite their recent run of profitability, according to the agency’s annual report released yesterday.
The FHFA saw the GSEs challenged by ongoing stress in the housing market, a sluggish economic environment and uncertainty about their future. Even so, the GSEs remain central to the U.S. housing market, the FHFA said, guaranteeing 77 percent of all mortgages in 2012. The Federal Home Loan Banks reported a third straight year of profits, the agency also said, with 2012 marking their most profitable year since 2007.
June 13, 2013
CFPB: Overdraft Fees, Account Closures ‘Merit Further Analysis’. Bank overdraft policies and fees are “highly complex” and vary widely by institution, the Consumer Financial Protection Bureau said in a white paper released this morning. The CFPB also said that customers who have opted in to overdraft protection are at greater risk than those who have not. The study found that customers who opt in under the Regulation E requirement pay more in in overdraft protection charges and non-sufficient funds fees than those who do not opt in. Those who opt in are also more likely to have their accounts involuntarily closed for negative balances. The CFPB found that 27 percent of accounts opened during 2011 were charged for overdraft protection or NSF, and that the average total of fees paid over the year was $225. Six percent of accounts opened in 2011 were involuntarily closed due to unpaid negative balances. It also reported wide variations in fees, policies, coverage limits and opt-in rates, which, the bureau said, “raises questions about the degree to which even the most sophisticated consumer could readily anticipate and manage the cost of engaging in a series of transactions at one institution or compare the cost of overdrafting at different institutions.” “Our findings . . . indicate that certain practices and procedures merit further analysis to determine whether they are causing the kind of consumer harm that the federal consumer protections laws are designed to prevent,” the CFPB concluded.
Senate Passes 2013 Farm Bill. The Senate passed the 2013 farm bill last night by a 66-27 vote. The Agriculture Reform, Food, and Jobs Act of 2013 (S. 954) authorizes agriculture programs for another five years, ending direct payments, streamlining programs, continuing support for crop insurance without a means test and repealing term limits on farm operating loans. The House version of the legislation is expected to reach the floor in coming weeks, followed by a conference to reconcile the two bills.
June 12, 2013
AmBA SUPPORTS DERIVATIVES BILLS; HOUSE CONSIDERATION TODAY. AmBA wrote to House Members yesterday in support of two bills on derivatives scheduled for consideration today. The first bill (H.R. 634), scheduled for consideration on the suspension calendar reserved for uncontroversial matters, would “provide much-needed clarity that end users would not be subject to margin requirements” under the Dodd-Frank Act, our letter explained. The second bill (H.R. 1256) would require the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to jointly adopt rules setting forth the application of Title VII of the Dodd-Frank Act to cross-border transactions. “We support the bill’s goal of promoting consistency between the cross-border application of all Title VII rules,” AmBA explained. “Market participants that engage in swaps and security-based swaps need clarity and would benefit from consistency between CFTC and SEC rules.”
AmBA URGES FARM BILL PASSAGE WITH CROP INSURANCE. The House of Representatives should move forward with the 2013 Farm Bill and keep crop insurance intact and affordable, AmBA and several other trade groups said in two letters to the House yesterday. “Failure to pass a five-year farm bill before the end of September would mean continued uncertainty for farmers, ranchers and their rural communities,” our first joint letter said. “It would also mean that American taxpayers would see none of the budget savings achieved.” In the second letter, AmBA and the other trade groups expressed concern that amendments could make crop insurance unaffordable, reducing the pool of participants and increasing risk. “The Farm Bill approved by the House Agriculture Committee strengthens and enhances crop insurance protection,” we wrote. “We urge you and your colleagues to reject amendments that discourage producer participation or undermine private sector delivery.”
BANKING PANEL SCHEDULES REVERSE MORTGAGES HEARING. The Senate Banking Committee announced this morning that the Housing Subcommittee will hold a hearing next week on the “long term sustainability for reverse mortgages.” The hearing is scheduled for the morning of Tuesday, June 18. It had previously been scheduled for last week, but was postponed.
June 10, 2013
CFPB Releases Compliance Guides on Loan Origination, Servicing. The Consumer Financial Protection Bureau on Friday issued small entity compliance guides for the loan originator and mortgage servicing rules that were finalized in January and take effect January 10, 2014. These are the final compliance guides to be released for the bureau's suite of mortgage rules. The loan originator rule regulates how and by whom loan originators are paid, governs their qualifications and identification, prohibits mandatory arbitration clauses and waivers of federal statutory causes of action in contracts, among other provisions. The mortgage servicing rules cover error resolution and information requests, lender-placed insurance, early intervention and continuity of contact with delinquent consumers, loss mitigation, interest rate adjustment notices for ARMs and prompt crediting of mortgage payments, among other provisions. Servicers with 5,000 or fewer mortgage loans and that do not service loans they did not originate may qualify for exemptions from portions of the rule. The guide covers some additional exemptions from the rule.
Bank Economists Forecast Stronger Growth Ahead. Economic growth will accelerate this year to 2.1 percent over the course of 2013 and 2.8 percent in the first half of 2014, the AmBA Economic Advisory Committee said Friday. The committee of 13 chief economists at some of the nation’s largest banks attributed the outlook to a sustainable housing recovery with higher construction levels, home sales, and prices, with residential investment forecast to rise 15 percent over 2013. “This strong growth demonstrates that housing has finally caught up with the broader economic recovery,” said EAC Chairman Scott Anderson, chief economist at Bank of the West in San Francisco. Anderson also pointed to rising consumer confidence. “Higher equity prices and rising home values, along with declining gas and energy prices, have helped consumers cope with rising taxes and reduced federal spending,” Anderson said. “The wealth effect created by rising home values will boost consumer sentiment and spur increased spending.” Consumer credit growth will also increase this year, the committee forecast. The EAC forecast that federal fiscal policy will exert a smaller drag on growth over the next year as the federal deficit declines to below $600 billion in FY 2014. It also saw job growth accelerating to over 200,000 per month in 2014, up from 175,000 in May. The committee also expected the Federal Reserve to “dial down” asset purchases before the end of 2013 as a result of projected growth. “A premature exit from accommodative policy by the Federal Reserve could hurt the housing recovery and the broader economy,” Anderson said. Watch a video of Anderson’s remarks.
OCC Revises Guidance on Appeals, Appealable Matters. The Office of the Comptroller of the Currency issued a bulletin Friday that revises the agency’s appeals policy and provides additional guidance on what matters can be appealed. It describes the OCC’s goal for disputes to be handled in an “informal, amicable manner” and the role of the OCC ombudsman both before and during an appeal. The bulletin provides a longer and more detailed list of appealable matters, which include exam ratings, individual loan ratings, fair lending-related decisions and material supervisory determinations among many others. It also clarifies that if a bank’s lack of compliance with an existing enforcement action requires additional enforcement action, the proposed new action is not appealable. Among many other revisions, the bulletin also includes new sections on definitions, informal appeals, appeals to the deputy comptroller, second-tier appeals and fair lending-related appeals.
Congressional Dems to Feds: Help Surviving Spouses Keep Homes. Federal agencies should take action to avoid foreclosures against surviving spouses whose late spouse was the sole signatory of a home loan, three congressional Democrats said last week. In a letter to the heads of eight federal agencies, Sen. Richard Blumenthal (D-Conn.) and Reps. Maxine Waters (D-Calif.) and Lois Capps (D-Calif.) said that surviving spouses who are not co-signers of their home loans usually cannot obtain loan modifications without assuming the loan, which in turn requires being up-to-date on payments. “We urge each of your agencies to use all powers at your disposal to ensure that financial institutions provide surviving spouses with full information about a loan, as well as help them to assume mortgages if they seek to, avoid foreclosure, and stay in their homes,” they said. “In addition, as your agencies implement legal settlements with homeowners who were wrongfully foreclosed upon, we ask that you examine that eligibility of surviving spouses for the legal redress to which their late partners may have been entitled.”
OCC Reminds Bankers of Swap Clearing Rules. The Office of the Comptroller of the Currency issued a bulletin Thursday to remind bankers of Commodity Futures Trading Commission rules on swaps. The rules require banks to clear certain interest rate swaps and credit default swaps with a derivatives clearing organization. For swap dealers and major participants in the swaps market, mandatory clearing began on March 11. Banks that are not dealers or major participants must begin clearing their swaps today. “A bank that has not started the process and that cannot qualify for a clearing exception should adjust its activities and develop a contingency plan for managing its risks without the swaps that will be subject to mandatory clearing,” the agency said, adding that joining a DCO by June 10 may be difficult if a bank has not started the process. Banks with less than $10 billion in asset and swaps between affiliates are exempt from the CFTC’s rules.
June 7, 2013
BILL APPROVED TO CREATE INSURANCE LICENSING BOARD. The Senate Banking Committee yesterday approved, by voice vote, an insurance licensing bill (S. 534) that would create a non-profit, independent board to provide a mechanism for multistate licensing for insurance producers. AmBA and its American Bankers Insurance Association (AmBIA) subsidiary support the legislation because it “would move the current agent and broker licensing system from one based upon reciprocity to one based upon uniformity,” AmBIA explained. Insurance agents would be able to apply for membership in the board and “become licensed to sell insurance in multiple states, but states will maintain their full authority in regulating the business of insurance,” the Committee said. “This will reduce costs and red tape for insurance agents and brokers who operate in multiple states, and will allow consumers to maintain relationships with their insurance agents if they relocate to another state.” The Committee also approved the nomination of Fred Hochberg to continue as Export-Import Bank President and Chairman, by a vote of 20-1.
REGULATORS URGED TO ADDRESS FORECLOSURES AGAINST SURVIVING SPOUSES. House Financial Services Committee Ranking Member Maxine Waters (D-CA), Sen. Richard Blumenthal (D-CT), and Rep. Lois Capps (D-CA) wrote to eight federal agencies this week, urging them to take steps to address foreclosures against surviving spouses who may not be signatories to their mortgage loans. “We urge each of your agencies to use all powers at your disposal to ensure that financial institutions provide surviving spouses with full information about a loan, as well as help them to assume mortgages if they seek to, avoid foreclosure, and stay in their homes,” they wrote. “In addition, as your agencies implement legal settlements with homeowners who were wrongfully foreclosed upon, we ask that you examine that eligibility of surviving spouses for the legal redress to which their late partners may have been entitled.”
SENATE HEARING SCHEDULED ON FINANCIAL CRISIS, COMMUNITY BANKS. Senate Banking Committee Chairman Tim Johnson (D-SD) announced the Committee will hold a hearing next week titled “Lessons Learned From the Financial Crisis Regarding Community Banks.” The hearing, scheduled for the morning of Thursday, June 13, will include testimony from representatives of the Government Accountability Office and FDIC, as well as the FDIC Inspector General.
June 6, 2013
AmBA-Supported Flood Insurance Amendment Adopted. The House last night adopted, by a 281-146 vote, an AmBA-supported amendment that would delay for one year some rate increases in the National Flood Insurance Program. Rep. Bill Cassidy (R-La.) offered the amendment during the chamber’s consideration of the Department of Homeland Security appropriations bill. AmBA and its American Bankers Insurance Association subsidiary expressed support for the provision in a letter to Cassidy and all House members earlier this week. "While both AmBA and AmBIA remain committed to moving to actuarial rates for flood insurance coverage under the NFIP, we recognize that a greater transition period may be necessary in order to ensure continued affordability for thousands of middle and low income homeowners and small businesses," the groups wrote.
SEC Proposes Floating NAV, Fees, Restrictions for MMFs. The Securities and Exchange Commission yesterday voted to issue a proposal to increase the regulation of money market mutual funds. The 5-0 vote called for adopting either or a combination of two alternative approaches. The first alternative would require institutional prime MMFs to have a floating net asset value, instead of the current practice of fixing the NAV at $1 per share. Retail MMFs, defined as those with $1 million-per-day redemption limits, would be exempt.The second alternative would allow MMFs to continue using a stable NAV but would require the fund to impose a 2 percent liquidity fee on redemptions when the weekly liquid asset level falls below 15 percent of total assets. It would also allow funds to stop redemptions for up to 30 days in order to boost liquidity. The SEC will accept comments on the proposal for 90 days from its publication in the Federal Register.
Fed Clarifies Swaps Pushout Status of Foreign Banks. The Federal Reserve Board yesterday issued an interim final rule clarifying that uninsured U.S. branches and agencies of foreign banks will be treated as insured depository institutions for purposes of Section 716 of the Dodd-Frank Act -- the so-called “swaps pushout” provision -- which takes effect July 16. Insured depository institutions are permitted up to a two-year period to comply with Section 716 with the possibility of an additional one year extension. The pushout provision prohibits swap dealers from accessing federal assistance, such as the discount window. The rule establishes a procedure for swap dealers that are state member banks or uninsured U.S. branches of foreign banks to request a transition period. “This approach is also consistent with the legislative history, which suggests Congress intended to treat uninsured branches and agencies as insured depository institutions,” said the Fed. The rule takes effect June 5, and comments will be accepted through August 4
June 5, 2013
WHITE HOUSE ANNOUNCES EFFORTS TO ADDRESS ‘PATENT TROLLS’. The White House yesterday outlined a patent reform package aimed at curbing abusive patent litigation. The package includes seven legislative proposals and five executive actions. The Patent and Trademark Office will require patent applicants and holders to disclose and update the “real party in interest” on all patents, train its examiners to give extra scrutiny to overly broad patents, and educate the public about abusive patent litigation. “The risk of abusive patent litigation and disingenuous license fee demands by non-practicing entities or ‘patent trolls’ is a serious and growing problem for banks of all sizes,” AmBA President and CEO Frank Keating said. “We sincerely appreciate the White House’s announcement of a package of executive actions and legislative recommendations designed to protect against frivolous litigation and ensure high-quality patents. We are particularly pleased the package includes recommendations to address end-user and demand letter issues, which are very important to smaller banks.”
CFPB RELEASES EXAM GUIDANCE ON NEW MORTGAGE RULES. The Consumer Financial Protection Bureau (CFPB) yesterday issued interim examination procedures to accompany its new rules on appraisals, escrow accounts, and compensation and qualifications for loan originators. The Bureau said the updates are the first of many, and that it is coordinating its procedures with other federal banking regulators to promote consistent regulation.
AmBA, AmBIA SUPPORT DELAY IN FLOOD INSURANCE RATE INCREASE. AmBA and its American Bankers Insurance Association (AmBIA) subsidiary wrote yesterday to Sen. Mary Landrieu (D-LA) to state support for her efforts to delay the impact of pending flood insurance rate increases under the Biggert/Waters Flood Reform Act of 2012. “While our associations remain committed to the goal of moving to full actuarial rates for National Flood Insurance Program coverage,” AmBA and AmBIA wrote, “we also recognize the importance of completing the affordability study mandated under Biggert/Waters and ensuring that the transition to actuarial rates be done in a measured way that is sensitive to the economic circumstances of impacted homeowners and small businesses.” The letter follows AmBA and AmBIA’s joint letter this week to Rep. Bill Cassidy (R-LA) supporting his planned amendment to delay the rate increases.
HOUSE MEMBERS SEEK DELAY IN CFTC CLEARING REQUIREMENTS. Missouri’s five Republican House Members, along with Rep. Rodney Davis (R-IL), wrote to the Commodity Futures Trading Commission (CFTC) yesterday to ask for an extension to the June 10 compliance deadline for the clearing requirements under Title VII of the Dodd-Frank Act. The letter explained that many institutions process a relatively small number of covered transactions, so they often lack the resources to implement the new requirements in the time allowed. In addition, many institutions “have complained about the readiness of the affirmation platforms they depend on for clearing,” they wrote.
June 4, 2013
AmBA, AmBIA SUPPORT FLOOD INSURANCE RATE DELAYS. AmBA and its American Bankers Insurance Association (ABIA) subsidiary wrote yesterday to support an amendment by Rep. Bill Cassidy (R-LA) that would temporarily delay some rate increases in the National Flood Insurance Program (NFIP). Rep. Cassidy plans to offer the amendment to the Homeland Security appropriations bill that the House plans to consider later this week. "While both AmBA and ABIA remain committed to moving to actuarial rates for flood insurance coverage under the NFIP, we recognize that a greater transition period may be necessary in order to ensure continued afford ability for thousands of middle and low income homeowners and small businesses," our letter said. "Therefore, we support your amendment, which would delay any phase-out of grandfathered NFIP rates for existing policy holders for one year."
AmBA COMMENTS ON PROPOSED MORTGAGE REVISIONS. AmBA sent two comment letters to the Consumer Financial Protection Bureau (CFPB) yesterday regarding its proposed amendments to Qualified Mortgage rules under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). The first letter addresses the use of government-sponsored enterprise and federal agency purchase, guarantee, or insurance eligibility for determining qualified mortgage status; and the determination of debt and income for purposes of originating qualified mortgages. The second letter addresses the servicing-related proposals, noting that the “proposed revisions will provide improved certainty regarding eligibility for the small servicer exemption,” but outlining additional clarifications that are needed.
AmBA OPPOSES FREDDIE’S PLANNED LOW-VOLUME FEE. AmBA said in a letter to the Federal Housing Finance Agency (FHFA) yesterday that they Agency should encourage Freddie Mac to reconsider its planned new $7,500 fee for low-volume mortgage originators. The fee will apply to banks that sell mortgages to Freddie with an aggregate unpaid principal balance less than $5 million annually, or that service mortgages for Freddie with an aggregate unpaid principle balance of less than $25 million annually.
“AmBA is concerned with the impact that this new fee will have on community banks’ ability to do business with Freddie Mac in a cost effective way,” our letter said. “This is of particular concern because Freddie Mac has traditionally served a large segment of the community bank market… Importantly, this new fee would seem to run directly counter to a number of explicit goals in the Federal Housing Finance Agency’s Strategic Plan…”
June 3, 2013
CFPB UPDATES COMPLAINT DATABASE. The Consumer Financial Protection Bureau (CFPB) announced on Friday that its consumer complaints database is now searchable by state. The database includes more than 113,000 individual consumer complaints on financial products and services, including mortgage loans, bank accounts and services, student loans, and credit cards, as well as credit reporting and money transfers with the latest release.
Virginia Bankers Ask Congress to Tackle Patent Abuse. Abusive patent litigation continues to threaten community banks, the Virginia Bankers Association said Thursday in a letter to House Judiciary Committee Chairman Robert Goodlatte (R-Va.). “Legislation is needed to curtail the risk of abusive patent litigation and the disingenuous license fee demands by non-practicing entities, also referred to as ‘patent trolls,’” VBA wrote. “NPEs continue to manipulate the patent law, threatening litigation accompanied by licensing fee demands designed to extract a ‘tax’ on the very innovation created to support and benefit consumers and the economy.” NPEs hold patents but do not use or manufacture the patented technology or concept; instead, they solicit “licensing fees” from firms that use common but patented technology, threatening legal action if a fee is not paid. “Banks are now one of the top ten industries targeted by NPEs and like many industries, when faced with threats of expensive patent litigation (estimated to cost between $500K and $3.5M) many banks -- especially smaller institutions -- find that their only option is to settle rather than . . . defend themselves against frivolous claims of patent infringement,” VBA said.
May 30, 2013
Beebe Taps Charlie Robinson for Treasurer Vacancy. Governor Beebe this week named former Legislative Auditor Charles Robinson to the post of State Treasurer, filling the vacancy in office created by the recent resignation of former Treasurer Martha Shoffner. Robinson worked for 34 years in the Division of Legislative Audit, including 28 years as head of the division until his retirement in 2007.
Banks Notch $40.3B in Q1 Earnings, Highest Average ROA Since 2007. FDIC-insured banks and savings institutions earned $40.3 billion in the first quarter, $9.3 billion more than the industry’s $34.8 billion profit a year ago, the FDIC said yesterday. The average return on assets -- a standard measure of bank profitability -- rose to 1.12 percent, up from 1 percent a year ago and reaching its highest level since the second quarter of 2007. The banking industry has had 15 consecutive quarters of profits increasing year-over-year, the agency said. Half of all institutions reported an improvement in quarterly net income from a year ago. Those reporting first-quarter net losses fell to 8.4 percent, down from 10.6 percent a year earlier. Asset quality continued to improve as troubled loans and leases fell. Charge-offs were $16 billion in the first quarter, down $5.8 billion -- or 26.7 percent -- from a year earlier. The number of institutions on the problem bank list dropped from 651 to 612 -- the eighth straight quarter they declined. The Deposit Insurance Fund balance rose from $33 billion to $35.7 billion during the quarter, stemming primarily from assessment revenues, officials said. “Banks performed strongly in the first quarter, with asset quality continuing to improve and earnings remaining strong due to aggressive cost controls,” said AmBA Chief Economist James Chessen. “At the same time, topline revenue growth continues to be a struggle as businesses delay borrowing due to concern about rising healthcare costs, tax increases and the pace of our economic recovery. Until the fog of uncertainty dissipates, rapid loan growth is unrealistic.”
CFPB Amends Ability-to-Repay Rule. The Consumer Financial Protection Bureau yesterday amended its final ability-to-repay rule, adding an AmBA-advocated exception that allows the compensation paid by lenders or brokers to loan originators not to count toward the rule’s points and fees threshold. The bureau also changed its original rule to provide a two-year transition period during which small creditors -- including those that do not operate predominantly in rural or underserved areas -- can offer balloon payment qualified mortgages if they hold the loans in portfolio. Small creditors are those with less than $2 billion in assets that make up to 500 first-lien mortgages a year. The CFPB said that it will use the two-year transition period to study whether the definitions of “rural” or “underserved” should be adjusted, and to work with small creditors to transition to other types of products, such as adjustable rate mortgages, that satisfy other qualified mortgage definitions. AmBA welcomed the CFPB's adjustments but also expressed concern that they didn't go far enough. AmBA had urged the bureau, for instance, to increase the small creditor asset threshold to $10 billion and otherwise expand the QM safe harbor for balloon loans. "AmBA is disappointed ... that recommended changes to limitations on balloon mortgage loans were not adopted, other than to permit balloon mortgages to be made by small lenders under certain conditions during a two-year transition period,” AmBA EVP Bob Davis said. “The sheer volume of rules, uncertainty resulting from complexity and ongoing alterations, and questions about vendor readiness and training deadlines raise serious questions about the viability of the January 2014 effective date,” Davis added. “The likely response is that many lenders will seek protection in ever more conservative underwriting standards, jeopardizing the housing recovery.”
CFPB Delays Credit Insurance Provision. The Consumer Financial Protection Bureau announced yesterday that it is delaying the effective date of the credit insurance provision of the loan originator compensation rule until January 10, 2014. The rule was originally scheduled to take effect June 1. This delay will enable the CFPB to consider carefully the inclusion of monthly premium structures in a ban on financed premiums, which the industry has long interpreted to include only single-premium payments that were rolled into the loan principal. Monthly paid premiums are commonly sold by banks, and it would be challenging -- if not impossible -- to unwind such programs by June 1, AmBA and its AmBIA subsidiary said in a comment letter last Thursday. The groups added they did not believe the prohibition should apply to monthly premium structures, but that if the CFPB decided to bar them anyway, banks would need an additional year to comply.
Final Garnishment Rule Issued. The Treasury Department yesterday adopted a final rule to amend the regulation governing the garnishment of federal benefit payments that are directly deposited to accounts at financial institutions. The rule, which takes effect June 28, establishes procedures that a financial institutions must follow when it receives a garnishment order against an account holder who receives certain types of Federal benefit payments by direct deposit, including Social Security and veterans’ benefits. The rule requires financial institutions that receive a garnishment order to identify the garnishment order as federal, municipal or court ordered, as well as ensure that the account holder has access to an amount equal to the sum of the federal benefit or to the current balance of the account, whichever is lower. Financial institutions must also determine whether a federal benefit payment has been deposited in an account during a two-month “look back” period.
May 28, 2013
AmBA Urges Banker Contacts on Reg Relief Bill. AmBA is asking bankers to send customized letters to their House members urging them to support and co-sponsor H.R. 1750, the Community Lending Enhancement and Regulatory Relief Act, which would relieve regulatory burdens on community banks. The bill, introduced by Rep. Blaine Luetkemeyer (R-Mo.), includes several provisions that AmBA has long advocated, including expanding the Qualified Mortgage safe harbor, giving an exemption from annual privacy notice requirements for institutions that have not changed their privacy practices, requiring a cost-benefit analysis for any new or amended accounting principle, and exempting smaller institutions from the Sarbanes-Oxley Act’s management attestation requirements. “The legislation is part of a sincere effort underway in Congress to address community banks’ concerns with the growing regulatory burdens… ,” AmBA’s Action Alert says. “AmBA has been a leader in advocating for these measures and we need your help to move this effort forward.” AmBA has provided customizable talking points to help bankers and their employees compose effective, individualized letters that apply to their bank.
ABIA Supports Delay of Credit Insurance Premium Rule. AmBA and its American Bankers Insurance Association subsidiary last week expressed support for the Consumer Financial Protection Bureau’s proposal to delay a section of its loan originator compensation rule that would prohibit the financing of single-premium credit insurance offered in connection with residential mortgages. The bureau proposed the delay after ABIA flagged issues with language included in the preamble of the final rule. While the original proposal would have barred, as of June 1, adding a lump-sum premium to a mortgage loan amount at closing, the final rule’s preamble included other more common premium structures in the prohibition. AmBA, ABIA and six other trade groups in a comment letter Thursday noted that monthly paid premiums are commonly sold by banks, and that it would be challenging if not impossible to unwind such programs by June 1. They added they did not believe the prohibition should apply to monthly premium structures, but that if the bureau decided to bar them anyway, banks would need an additional year to comply.
CBO: Taxpayers to Net $10 Billion From TARP Bank Programs. Support provided to financial institutions under the Troubled Asset Relief Program will result in a net profit to taxpayers of $10 billion, according to the latest report from the Congressional Budget Office. CBO estimates a net gain to the government of $17 billion from TARP’s Capital Purchase Program, and $8 billion from the Targeted Investment Program. This $25 billion gain will be partially offset by TARP’s $15 billion in assistance to American International Group. Taking into account other TARP programs, including aid to the automotive industry and grant programs aimed at avoiding home mortgage foreclosures, the total cost of TARP is expected to be $21 billion.
May 24, 2013
AmBA-Advocated Bills Rack Up Co-Sponsors. Sens. Angus King (I-Maine) and Kelly Ayotte (R-N.H.) on Wednesday signed on as co-sponsors of S. 731, the AmBA-advocated bill to stop and study implementation of the Basel III capital rules. That brings the legislation's cosponsor total to 13. Earlier this week, eight House members signed on as co-sponsors of H.R. 1553, the AmBA-advocated exam fairness bill, bringing its co-sponsor total to 88. And S. 710, which would exempt banks from municipal advisor registration requirements, now has 11 bipartisan sponsors and co-sponsors.
AmBA Raises Concerns About New Freddie Fee on Community Banks. Freddie Mac this week announced its intention to charge a new fee -- beginning Jan. 1, 2014 -- to seller/servicers who do not maintain a minimum volume of business. According to Freddie Mac Bulletin 2013-8, Freddie will assess a "low activity fee" of $7,500 to banks that do not:
- Sell mortgages to Freddie Mac with an aggregate unpaid principal balance greater than $5 million during the immediately preceding calendar year; or
- Service -- or act as a servicing agent for -- mortgages for Freddie Mac with an aggregate UPB of at least $25 million as of December 31 of the immediately preceding calendar year.
New seller/servicers will not be subject to these thresholds until they have been approved for a full calendar year. AmBA is concerned about the impact that this new fee will have on community banks’ ability to do business with Freddie Mac in a cost effective way. Association staffers have begun discussions with Freddie Mac officials about potential alternatives and ways to alleviate the impact of such fees. ABA also is soliciting feedback from potentially affected banks.
Fed Issues Report on Interchange Rule's Small Bank Exemption. The Federal Reserve yesterday released its annual report assessing how its debit interchange standards are affecting small issuers. The standards, which implement the so-called Durbin Amendment to the Dodd-Frank Act, were adopted in 2011 as Regulation II. Banks with less than $10 billion in assets are exempt from rule's price caps but not from its prohibition on network exclusivity. The report found that in 2012, small banks received an average of 43 cents per transaction, about the same as before the interchange fee rules took effect. The average per-transaction fee was 1.3 times that received by non-exempt issuers. The report also found that about 16 percent of small debit card issuers incurred compliance costs under the network exclusivity provisions, which require issuers to have at least two unaffiliated networks on every debit card. Compliance costs totaled 72 cents per card initially, with an additional $1.19 per card required per year in ongoing compliance. “The Fed’s findings don’t reflect the sentiments we’ve heard from community bankers across the country, who find the idea of government price controls repugnant,” said AmBA Executive Vice President Ken Clayton. “Time will tell whether offering a product for twice as much as your competitors is sustainable in an environment where merchants are always looking for the lowest cost." "The real victims of the Durbin Amendment are consumers who pay higher fees while receiving none of the lower prices retailers promised them throughout the interchange debate,” he said.
May 23, 2013
BASEL STOP-AND-STUDY BILL GAINS COSPONSORS. AmBA-supported legislation (S. 731) by Sen. Joe Manchin (D-WV) and Sen. Dean Heller (R-NV) that would require regulators to conduct a comprehensive study of the Basel III capital proposals continues to gain cosponsors. Sen. Angus King (I-ME) and Sen. Kelly Ayotte (R-NH) signed on to the bill yesterday, and we expect Sen. Saxby Chambliss (R-GA) to also sign on this week. We continue to urge bankers and their employees to write their Senators, urging them to cosponsor the legislation.
CFPB ANNOUNCES SUPERVISION AGREEMENT WITH STATE REGULATORS. The Consumer Financial Protection Bureau (CFPB) announced yesterday that the Bureau and the Conference of State Bank Supervisors have agreed to a framework for coordinated supervision and enforcement intended to govern situations in which CFPB and a state bank supervisor share jurisdiction. The framework addresses coordinating exam schedules, developing comprehensive supervisory plans for particular institutions, coordinating information requests, streamlining information sharing, and providing advance notice of corrective action, the CFPB said.
GOLDMAN REPORT FINDS NO FUNDING ADVANTAGE FOR LARGE BANKS. Goldman Sachs has released a report showing that the largest financial institutions no longer enjoy a funding advantage of smaller competitors, refuting the findings of previous studies on the issue. “Within the universe of bond-issuing U.S. banks, the six largest banks did indeed experience a slight funding advantage – of just 6bp [basis points] on average – from 1999 until the financial crisis began in mid-2007,” the Goldman report says. “The advantage widened sharply during the crisis, but then reversed to a significant funding disadvantage for most of 2011 and 2012. Today, the bonds of these six banks still trade at a roughly 10bp disadvantage to the bonds of other banks.” The report also argues that previous studies had skewed results because they included non-bank financial institutions and foreign institutions.
May 22, 2013
LEW ADDRESSES BROWN-VITTER, BASEL III DURING SENATE HEARING. During a Senate Banking Committee hearing yesterday on the Financial Stability Oversight Council report, Treasury Secretary Jacob Lew yesterday expressed concerns about the Brown-Vitter bill to raise capital requirements on the largest banks. “There are a number of regulatory approaches that would considerably raise the costs of being a large bank,” he said in response to a question from Sen. Sherrod Brown (D-OH). “I think we have to see where that process ends in order to answer the question of whether we have fully solved the [too-big-to-fail] problem.” He added that asset size “is one factor, but it’s not the only factor” in determining systemic risk. In response to a question from Sen. Bob Corker (R-TN) whether he would consider “bifurcating” Basel III so that there could be a simplified capital ratio for community banks, Sec. Lew said that the regulators are looking for ways to make capital requirements “commensurate with risk.” He added that regulators need to look ahead to all potential threats, not just the previous crisis, while recognizing that there is not a “one-size-fits-all approach” that can address the issue.
Regulators, AmBA Respond to Oklahoma Tornado Tragedy. Federal regulators and the banking industry responded yesterday to Monday’s devastating tornado in Moore, Okla., just south of Oklahoma City. The FDIC encouraged banks to work constructively with borrowers experiencing difficulty in Oklahoma’s affected areas by extending repayment terms, restructuring existing loans or easing terms for new loans. These activities, if done in a manner consistent with sound banking practices, can contribute to the health of local communities and serve the long-term interests of lending institutions, the FDIC said. In an interview with MSNBC’s Andrea Mitchell yesterday (right), AmBA President and CEO Frank Keating described the challenges as the operation in Oklahoma moved from “rescue” to “recovery.” A former Oklahoma governor, he presided over the recovery from a deadly 1999 tornado outbreak in Moore. Keating said that thousands of largely working-class families would need assistance with home repairs or rebuilding, mortgage payments, car repairs, and insurance. “A lot of them are very fragile financially,” he told Mitchell. Keating also discussed tornado preparedness with CNN’s Anderson Cooper, advising on the need for homeowners and renters to have sufficient property and casualty insurance with tornado coverage and underground storm shelters. In an e-mail to AmBA member bank CEOs, Keating suggested that those who wish to help the victims consider giving through the Salvation Army, American Red Cross, or the Oklahoma Bankers Association Foundation.
FFIEC Delays Call Report Changes After AmBA Letter. The Federal Financial Institutions Examination Council announced yesterday that it will defer the implementation of the Call Report’s data collection on consumer deposits and fees to March 2014. Other changes will be delayed to December 2013. The delay, which followed a request from AmBA’s Frank Keating and two other trade group leaders on Friday, applies to all but two of the several proposed changes to the Call Report. The proposed changes were originally to take effect June 30. “Given that the proposed changes in the data requested to be added to the Call Report are so significant,” the CEOs wrote, “the proposed timeline for providing this new information is operationally unworkable.” Earlier this year, FFIEC proposed new items for the Call Report that, among others, would require banks to break out data on consumer deposits, consumer account fees and remittances. According to FFIEC, the changes that will take effect on June 30 relate to the scope of Schedule RI-A for bank equity capital and to reporting changes for large and highly complex institutions for deposit insurance assessment purposes.
AmBA: Banking Sector Leads in Cybersecurity. The U.S. financial services industry is a leader in cybersecurity practices with a solid framework and existing regulations, Charles Blauner told the House Energy and Commerce Committee yesterday. Blauner, global head of information security at Citigroup, testified on AmBA’s behalf at the hearing. Cybersecurity is a top priority for banks, he said. “We have invested an enormous amount of time, energy and resources to put in place the highest level of security, and we are subject to stringent regulatory requirements.” He also emphasized the value of public-private collaboration in protecting against cyber threats, and encouraged the timely sharing of information. “It is of utmost importance to increase the volume, timeliness and quality of threat information shared by U.S. law enforcement and intelligence agencies with private sector entities so that they may better protect themselves against cyber threats,” he said, expressing support for the Cyber Intelligence Sharing and Protection Act recently passed by the House.
Regulators Share AmBA Concerns on FASB Classification Proposal. Federal bank regulators have weighed in on the Financial Accounting Standards Board’s proposed changes relating to classifying and measuring financial instruments. In a joint comment letter, the Federal Reserve, FDIC, National Credit Union Administration, and OCC shared several concerns expressed by AmBA in its letter last week. Among these concerns are that the guidance’s application “could have the unintended consequence of requiring relatively simple traditional lending products . . . to be measured entirely at [fair value through net income].” They also said that the guidance would “significantly increase complexity and operational burden for all financial institutions, but particularly for community banks.” AmBA encourages bankers to share their views with FASB and has provided a sample comment letter that bankers can use.
May 21, 2013
Hearings This Week on FSOC, Qualified Mortgage, Cybersecurity. Several congressional committees will hold hearings this week on banking-related matters. Today at 10 a.m., the Senate Banking Committee will receive Treasury Secretary Jacob Lew’s report on the Financial Stability Oversight Council. Lew will testify on FSOC tomorrow before the House Financial Services Committee. Also today at 10 a.m., the House Energy and Commerce Committee will hear from witnesses on cybersecurity, with testimony from Citigroup’s Charles Blauner on behalf of AmBA. The House Financial Services Subcommittee on Financial Institutions and Consumer Credit will examine effects of the Consumer Financial Protection Bureau’s ability-to-repay rule and “qualified mortgage” standards, and the House Agriculture Committee will hear industry perspectives on the future of the Commodity Futures Trading Commission. Tomorrow, the House Financial Services Subcommittee on Oversight and Investigations will examine how the Justice Department would handle large financial firms during criminal proceedings.
AmBA Calls for Revisions to Proposed CRA Guidance. Proposed updates by the OCC, the Federal Reserve, and the FDIC to Community Reinvestment Act Q&As might discourage community development, AmBA warned in a comment letter Friday. The agencies proposed revising the Q&As to provide clearer guidance to banks seeking CRA credit for their community development activities. Banks have long been granted CRA credit for activities outside their assessment areas when they have demonstrated that they have “adequately addressed” needs within these areas, a standard that conveyed regulators’ understanding that many banks have a broader view of the communities they serve. But the agencies proposed that CRA activities not be conducted “in lieu of” those directly benefiting their assessment areas. AmBA expressed concern that this language would discourage banks from regional or statewide activities beyond their narrow assessment areas. AmBA also objected to a proposal that would treat community development negatively under some performance contexts and imply a duty to include community development lending as a mandatory part of lending test performance. AmBA supported using a school’s Title I status and an individual’s Medicaid eligibility as criteria for community development eligibility. It also urged flexibility in permitting credit for investments in nationwide funds.
Treasury Seeks Comments on Rules for Tax Treatment of Bad Debts. The Treasury Department and Internal Revenue Service yesterday issued a notice requesting comments on Treasury’s “Conclusive Presumption Regulations," which allow banks under certain circumstances to conclusively presume a debt to be partially or wholly worthless, thereby triggering a tax deduction for such bad debt. Treasury specifically is seeking comment on whether and what modifications should be made to the rules in light of bank regulatory changes to loan charge-offs. The notice is separate from -- and will not affect -- AmBA’s March 29 application to the IRS to use its Industry Issue Resolution program to resolve serious disagreements that have arisen in recent years between banks and their IRS examiners over application of the conclusive presumption regulations and other issues.
May 20, 2013
CFPB Issues Final List of Rural, Underserved Counties. The Consumer Financial Protection Bureau on Friday issued a rule clarifying technical aspects of its escrow rule, and it released a final list of rural and underserved counties to use in conjunction with the regulation. The escrow rule, which goes into effect June 1, generally extends the required duration for escrow accounts on higher-priced mortgage loans from one year to a minimum of five years. But the rule exempts from its requirements such loans made by certain small creditors that operate predominately in rural or underserved counties included on the list. The bureau noted that since the methods for determining rural and underserved status were not changed from its proposed rule, the final list is identical to the preliminary list that the CFPB posted on March 12. Creditors may rely on the final list as a safe harbor to determine whether a county is rural or underserved for loans made from June 1, 2013, through December 31, 2013, the CFPB said. A 2014 list of qualifying counties will be posted later.
House Approves SEC Cost-Benefit Bill. The House on Friday approved by a 235-161 vote an AmBA-supported bill (H.R. 1062) that would require the Securities and Exchange Commission to do a thorough cost-benefit analysis before proposing a new regulation. The Financial Services Committee approved the bill by a 31-28 vote on May 13. AmBA expressed support for the bill in a letter to committee members prior to their vote. “Many banks and members of the public assume that new regulations will only apply to the largest banks that are the most active in the securities markets, but that is not true,” AmBA said. “H.R. 1062 would ensure that the best possible assessment is made of the costs and impacts of new regulations so that regulated entities are not subject to unnecessary costs that outweigh any potential regulatory benefit.”
AmBA Supports Reg Relief Bill. AmBA on Friday wrote to Rep. Blaine Luetkemeyer (R-Mo.) and other House Financial Services Committee members to express support for a regulatory relief bill (H.R. 1750) that Luetkemeyer recently introduced. “Regulatory burdens on the banking industry have grown dramatically in recent years, stretching the resources of banks across the country and hindering their ability to help local businesses grow and create jobs,” AmBA EVP James Ballentine wrote. “H.R. 1750 contains many helpful provisions that AmBA has long advocated to ease regulatory burdens.” Those provisions include measures that would streamline banks’ privacy notice requirements, exempt banks with $10 billion in assets or less from Sarbanes-Oxley management attestation requirements, and expand the “qualified mortgage” safe harbor.
AmBA Urges Regulators to Delay Call Report Changes. AmBA and two other trade groups in a letter Friday urged the federal banking regulators to announce a delay in the deadline for proposed Call Report revisions that originally were supposed to be implemented in June. The revisions, among other things, would require banks to break out data on consumer deposits, consumer account fees and remittances. “Given that the proposed changes in the data requested to be added to the Call Report are so significant, the proposed timeline for providing this new information is operationally unworkable,” the groups wrote.
BloombergBusinessweek Article Questions CU Growth. AmBA’s efforts to force a conversation on changes in the credit union industry were featured in a Bloomberg Businessweek article last week titled “Have Credit Unions Become Stealth Banks?” The article documents how credit unions have evolved from mom-and-pops and in some cases are competing with banks that are many times smaller. “The median credit union still runs out of a single branch and holds assets of about $20 million. But the largest in the U.S., the Navy Federal Credit Union, founded to serve sailors and Marines, now has $54 billion in assets,” the article says. By comparison, only 1.4 percent of all U.S. banks have assets of more than $10 billion. Credit unions such as Tinker in Oklahoma and OnPoint in Oregon have assets in the $3 billion-plus range, dwarfing most commercial banks in their states.” The article notes that credit union changes have prompted banks and AmBA to press Congress to rethink the industry’s special treatment.
May 17, 2013
AmBA TO TESTIFY AT CYBERSECURITY HEARING. The House Energy and Commerce Committee will hold a hearing next week on “cyber threats and security solutions.” Charles Blauner, Global Head of Information Security for Citi, will testify on AmBA’s behalf. Blauner is expected to tell the Committee how the organization and regulation of the financial services sector bolsters cybersecurity and reduces the risks associated with cyber-attacks, as well as how timely information-sharing between the public and private sectors is key to cybersecurity protection. The hearing is scheduled for Tuesday, May 21, at 10:00 a.m.
HOUSE DEBATING BILL TO REQUIRE REGULATORY COST-BENEFIT ANALYSIS. The House this morning is considering AmBA-supported legislation (H.R. 1062) that would require the Securities and Exchange Commission (SEC) to do a thorough cost-benefit analysis before proposing a new regulation. The Financial Services Committee approved the bill last week, by a vote of 31-28.
SENATE CREDIT UNION BILL RE-INTRODUCED. Sen. Mark Udall (D-CO) yesterday re-introduced AmBA-opposed legislation (S. 968) that would more than double the member business-lending cap for certain credit unions, from 12.25 percent to 27.5 percent of total assets. AmBA remains opposed to expanding the lending powers of a tax-exempt industry at the expense of tax-paying community banks. We will continue to work against this legislation, as we have successfully done for the past several Congresses.
May 16, 2013
Holder: No Bank is Too Big to Jail. Attorney General Eric Holder said yesterday that his March 6 remarks suggesting that some banks may be too big to prosecute were misconstrued. “I said it was difficult at times to bring cases against large financial institutions because the potential consequences that they would have on the financial system,” Holder said in response to a question at a Senate Judiciary Committee oversight hearing. “But let me make it very clear that there is no bank, there’s no institution, there’s no individual, who cannot be investigated and prosecuted by the United States Department of Justice.” Holder noted that Justice has brought thousands of financially-based cases in recent years, and that the department considers many factors as it decides whom to prosecute. “But let me be, very, very, very clear: banks are not too big to jail. If we find a bank or financial institution that has done something wrong, if we can prove it beyond a reasonable doubt, those cases will be brought.”
Senate to Vote on Cordray Nomination Next Week. Senate Majority Leader Harry Reid (D-Nev.) said yesterday that he will hold a vote next week on the nomination of Richard Cordray to continue as director of the Consumer Financial Protection Bureau, according to press reports. The vote is not expected to succeed since 43 Republican senators have pledged to block the confirmation of any CFPB director nominee unless the bureau’s structure is reformed. The Senate Banking Committee approved the nomination March 19 by a 12-10 party-line vote.
Reps. Stivers, Perlmutter Seek Flexibility in Mortgage Disclosure Rule. AmBA and several other trade groups sent joint letters yesterday to Reps. Steve Stivers (R-Ohio) and Ed Perlmutter (D-Colo.) thanking them for their help in urging the Consumer Financial Protection Bureau to adjust a provision in its proposed mortgage disclosure rules that could cause costly delays in closings. The provision requires that borrowers receive their final closing disclosure three business days prior to closing, and that if a cost that the borrow must pay to close increases during that time, a new statement and waiting period must be initiated. Because changes frequently occur in the three days prior to a closing, the three-day-restart provisions can reduce consumers’ ability to make changes to their purchase, put their mortgage rate lock at risk and even cause their purchase contract to expire, the trade groups explained. Reps. Stivers and Perlmutter, both members of the House Financial Services Committee, have asked fellow Representatives to cosign a letter to the CFPB urging more flexibility in the rule.
May 15, 2013
TBTF HEARING UNDERWAY; NEW REPORT SUGGESTS ISSUE SOLVED. The House Financial Services Oversight and Investigations Subcommittee is holding a hearing this morning (currently underway) on whether the orderly liquidation authority under Title II of the Dodd-Frank Act “enshrines taxpayer-funded bailouts.” The hearing also will examine whether large firms designated as systemically significant enjoy funding advantages. The Bipartisan Policy Center released a report yesterday finding that the FDIC’s proposed recapitalization strategy for systemically important firms should solve the “too-big-to-fail” (TBTF) problem. The report examined the FDIC’s proposed “single point of entry” recapitalization plan, which imposes losses on a financial firm’s shareholders and unsecured debt holders but not on taxpayers.
AmBA COMMENTS ON FASB IMPAIRMENT STANDARD. AmBA urged the Financial Accounting Standards Board (FASB) in a comment letter yesterday to consider the “U.S. Banking Industry Model” for its impairment accounting standard, rather than FASB’s proposal requiring life-of-loan estimates on loan and debt security allowances for loan and lease losses. AmBA explained that the Banking Industry Model would address perceived weaknesses in current “allowance for loan and lease losses” rules, with significantly less operational change than the FASB proposal. In a second letter to both FASB and the International Accounting Standards Board (IASB), AmBA encouraged both boards to continue efforts to agree on one impairment model world-wide.
May 13, 2013
Bernanke Signals Toward Higher Capital Requirements. Significant steps are being taken to address “too big to fail,” and regulators have the authority to do more if needed, Federal Reserve Board Chairman Ben Bernanke said Friday. “Between Dodd-Frank and the Basel III rules, we are greatly strengthening the capital and liquidity requirements for large financial institutions,” he said in a question-and-answer session after a closely watched speech. Bernanke suggested that these measures -- which include counter-party credit limits, stress tests and the regulators’ orderly liquidation authority -- should be given time to be evaluated before imposing additional requirements. He added, however, that he and several Federal Reserve Board colleagues are leaning toward higher capital requirements. “Rather than arbitrarily saying the banks can be no larger than such and such a size, for example, I would argue that what we need to do is make sure that larger institutions have to have more and better quality capital,” he said.
He noted that the Fed will be supplementing the Basel III capital rules with large bank surcharges and that it also has discretion to set higher leverage ratios than Basel III. He also said the Fed is considering requiring bank holding companies to have a certain amount of senior debt.
AmBA SUPPORTS DELAY FOR NFIP RATE INCREASES. AmBA wrote to Sen. Mary Landrieu (D-LA) yesterday in support of her amendment to delay rate increases in the National Flood Insurance Program (NFIP) for 180 days. Sen. Landrieu is expected to offer the amendment to a water resources bill (S. 601) that the Senate is considering this week. “It has become clear since the passage of the Biggert/Waters Flood Insurance Reform Act last year that additional actions are needed to ensure continued affordability and to help bring private market participants more fully into the flood insurance space, while still moving to full actuarial rates,” AmBA wrote. “While the AmBA remains committed to moving to actuarial rates for flood insurance coverage under the NFIP, we recognize that a longer transition period is necessary in order to ensure continued affordability for thousands of middle and low income homeowners and small businesses.”
AmBA CONTINUES EFFORTS AGAINST EMINENT DOMAIN PROPOSALS. AmBA joined with more than 20 other organizations yesterday to state serious concerns with eminent domain schemes in five more California jurisdictions that would allow the municipalities to acquire certain underwater mortgages held in securities. “Under the 5th Amendment of the U.S. Constitution and California law, eminent domain powers can only be exercised when the proposed taking is for a public use or benefit and when just compensation has been provided to the former owner of the property,” our joint letter to the city of El Monte, California, said. “The…proposal does not satisfy either requirement. The coalition sent similar letters to the cities of La Puente, Orange Cove, Pomona, and San Joaquin, each of which has entered into an Advisory Services Agreement with Mortgage Resolution Partners that envisions using their eminent domain powers to acquire certain underwater mortgage loans held by private-label mortgage-backed securities.
AmBA WORKS AGAINST FARM CREDIT SYSTEM EXPANSION. AmBA and the Independent Community Bankers of America yesterday asked Senators and House Members not to support any amendments that would expand lending authority for the Farm Credit System (FCS) during the upcoming consideration of the Farm Bill. “The FCS is a Government Sponsored Enterprise (GSE) that competes directly with banks and other non-government credit providers,” our joint letter explained. “The FCS enjoys funding and tax advantages that place private capital at a disadvantage, and, as a GSE, places taxpayers at risk…. We would oppose, for example, any effort to allow FCS to extend credit not only to farmers, but also for the credit and related needs of “businesses they rely on” or similarly worded amendments. Allowing FCS to extend credit to “businesses” opens up a vast, new and undefined lending category… “AmBA and ICBA believe Congress should establish measurable lending targets for all FCS lenders to meet in serving young, beginning and small farmers in order to ensure the benefits bestowed upon them by taxpayers are going to those who need assistance the most.”
AmBA URGES PASSAGE OF SEVERAL DERIVATIVES BILLS; MARKUP TODAY. AmBA wrote to the House Financial Services Committee yesterday to state our views on nine derivatives-related bills that the Committee is marking up this morning. We expressed strong support for bills to clarify that end users would not be subject to margin requirements for uncleared swaps (H.R. 634); to reform the swaps push-out requirement to allow banks to continue engaging in commodity, equity, and some structured finance products (H.R. 992); to provide for a full assessment of the costs and benefits of Securities and Exchange Commission (SEC) regulations (H.R. 1062); to extend to savings and loan holding companies the new SEC shareholder registration and deregistration thresholds enacted under the JOBS Act (H.R. 801); In addition, we stated support for provisions in a bill (H.R. 677) that would clarify that inter-affiliate swaps should be exempt from many of the anticipated swap regulations, but urged the Committee to remove the limitation on transactions involving swap dealers and major swap participants that are insured depository institutions and to address a reporting provision to ensure it increases transparency without causing confusion to the users of reported information.
May 7, 2013
AmBA URGES PASSAGE OF SEVERAL DERIVATIVES BILLS; MARKUP TODAY. AmBA wrote to the House Financial Services Committee yesterday to state our views on nine derivatives-related bills that the Committee is marking up this morning. We expressed strong support for bills to clarify that end users would not be subject to margin requirements for uncleared swaps (H.R. 634); to reform the swaps push-out requirement to allow banks to continue engaging in commodity, equity, and some structured finance products (H.R. 992); to provide for a full assessment of the costs and benefits of Securities and Exchange Commission (SEC) regulations (H.R. 1062); to extend to savings and loan holding companies the new SEC shareholder registration and deregistration thresholds enacted under the JOBS Act (H.R. 801); In addition, we stated support for provisions in a bill (H.R. 677) that would clarify that inter-affiliate swaps should be exempt from many of the anticipated swap regulations, but urged the Committee to remove the limitation on transactions involving swap dealers and major swap participants that are insured depository institutions and to address a reporting provision to ensure it increases transparency without causing confusion to the users of reported information.
TAX REFORM REPORT RELEASED. The Joint Committee on Taxation (JCT) yesterday released a report on the Ways and Means Committee Tax Reform Working Groups. The report includes a summary of present law and suggestions for reform submitted to the 11 working groups. Ways and Means Chairman Dave Camp (R-MI) and Ranking Member Sander Levin (D-MI) said their panel “will dig into [the report’s] details over the coming weeks.”
FANNIE, FREDDIE PURCHASES TO APPLY QM STANDARDS. The Federal Housing Finance Agency (FHFA) announced yesterday that Fannie Mae and Freddie Mac will limit purchases of mortgages to “qualified mortgages” under the ability-to-repay rule from the Consumer Financial Protection Bureau (CFPB). Fannie and Freddie will apply the QM standards to mortgages with applications dated from January 10, 2014. “Effectively, this means Fannie Mae and Freddie Mac will not purchase interest-only loans, loans with 40-year terms, or those with points and fees exceeding the thresholds established by the rule,” the FHFA said. It is our understanding that Fannie and Freddie will stop purchases of loans with points and fees over 3 percent.
CFPB Issues ‘Small Entity Compliance Guides’ to Mortgage Rules. The Consumer Financial Protection Bureau yesterday published Small Entity Compliance Guides to three of the bureau’s recently finalized mortgage rules related to expanded Home Ownership and Equity Protections Act coverage, appraisals and appraisals for higher-risk mortgages. The guides are intended to provide an overview of the rules in a plain language and FAQ format so that the content is more accessible for a range of industry constituents, especially smaller businesses with limited legal and compliance staff.
AmBA Asks Congress to Clarify Law on Non-Deliverable Forwards. AmBA, its AmBA Securities Association subsidiary and other trade groups asked Congress to clarify that non-deliverable forwards should be subject to the same regulation as other foreign exchange forwards. In a letter to the Senate Agriculture Committee, which oversees commodity trading regulation, the groups explained that an unintentional oversight in the language of the Dodd-Frank Act resulted in NDFs being regulated more heavily than similar forwards. An NDF is a type of foreign exchange forward contract that is settled in a single currency (usually U.S. dollars) due to difficulties in moving another currency outside the home country of one of the parties. Under Dodd-Frank, the Treasury Department exempted most foreign exchange forwards from regulation as swaps, but not NDFs; the groups said that “this result was unintended by Congress.” “There is not valid public policy reason for treating NDFs differently,” the groups wrote, adding that NDFs are “an important tool to facilitate trade and investment between the U.S. and developing market countries.”
House Financial Services Committee Schedules Derivatives Markup. The House Financial Services Committee has announced that it will hold a full-committee markup on Tuesday, May 7, for legislation to address the derivatives title of the Dodd-Frank Act and the Jumpstart Our Business Startups, or JOBS, Act. The bills to be marked up were the subject of a Capital Markets Subcommittee hearing last month.
May 2, 2013
CFPB Modifies Remittance Rule with ABA-Suggested Changes. The Consumer Financial Protection Bureau modified its final remittance rule yesterday, incorporating several changes that AmBA and other trade groups requested in a January comment letter.
The CFPB responded to AmBA concerns by, among other things, extending the rule's compliance deadline by 180 days to October 28 -- twice the length of the originally proposed deadline. It also reduced institutions’ liability for losses due to sender’s errors.
In addition, the CFPB made optional in certain circumstances a sending bank’s requirement to disclose fees that a recipient’s financial institution may charge. It also made it optional for the sending bank to disclose how much tax might be deducted before the funds reach the recipient. In place of these disclosures, the CFPB required a simple disclaimer that foreign taxes and recipient bank fees may apply.
HOUSE PANEL TO MARK UP DERIVATIVES LEGISLATION. The House Financial Services Committee announced yesterday that it will hold a full Committee markup next week of legislation to address the derivatives title of the Dodd-Frank Act and the JOBS Act. The bills to be marked up were the subject of a Capital Markets Subcommittee hearing last month. The markup is scheduled for Tuesday, May 7, at 10:00 a.m. Next Wednesday, the Monetary Policy and Trade Subcommittee will hold a hearing on the reauthorization of the Defense Production Act.
REP. WATT NOMINATED FOR FHFA. As expected, President Obama announced yesterday the nomination of Rep. Mel Watt (D-NC) to be Federal Housing Finance Agency (FHFA) Director. Senate Banking Committee Chairman Tim Johnson (D-SD), whose panel has jurisdiction over the nomination, called Rep. Watt “a superb pick to lead the FHFA.” House Financial Services Committee Chairman Jeb Hensarling (R-TX) said Rep. Watt is a “well-respected” Member, but that “he is not the issue.” “FHFA Acting Director Ed DeMarco has emphasized protecting the interests of taxpayers and reforming Fannie and Freddie,” Chairman Hensarling said. “Unsurprisingly, this has put him in conflict with the Administration. Whoever sits in the FHFA Director’s chair needs to continue DeMarco’s policies. If they simply do whatever the Administration wants, they will have failed.” Committee Ranking Member Maxine Waters (D-CA) offered her endorsement of the nomination, saying Rep. Watt’s previous “legislative work demonstrates unwavering commitment to protecting consumers, expanding affordable rental housing, and providing prudent oversight of financial institutions.” Rep. Watt, a Member of the Financial Services Committee, is in his 11th term representing the Charlotte-based 12th district. The FHFA has been headed by an Acting Director since 2009. The President yesterday also nominated Tom Wheeler to head the Federal Communications Commission (FCC), and announced that FCC Commissioner Mignon Clyburn temporarily will serve in the role until Wheeler is confirmed.
May 1, 2013
CFPB Modifies Remittance Rule with AmBA-Suggested Changes. The Consumer Financial Protection Bureau modified its final remittance rule yesterday, incorporating several changes that AmBA and other trade groups requested in a January comment letter.
The CFPB responded to AmBA concerns by, among other things, extending the rule's compliance deadline by 180 days to October 28 -- twice the length of the originally proposed deadline. It also reduced institutions’ liability for losses due to sender’s errors.
In addition, the CFPB made optional in certain circumstances a sending bank’s requirement to disclose fees that a recipient’s financial institution may charge. It also made it optional for the sending bank to disclose how much tax might be deducted before the funds reach the recipient. In place of these disclosures, the CFPB required a simple disclaimer that foreign taxes and recipient bank fees may apply.
AmBA, Associations Urge Fed to Reconsider Foreign Bank Rules. AmBA and other trade groups urged the Federal Reserve to reconsider, or at a minimum delay, new rules on the supervision of foreign banking organizations. Under the Dodd-Frank Act, the Fed has proposed to require foreign banks with significant U.S. operations to create intermediate holding companies for their U.S. subsidiaries, meet higher capital requirements and maintain stronger liquidity positions. The groups argued that international bank regulation should be based on cooperation, and that the Fed’s “ring-fenced, balkanized approach . . . could both impair economic recovery and growth and increase, rather than decrease, systemic risk.” They added that such ring-fencing -- especially if mandated reciprocally by other countries’ regulators -- might limit swift movement of capital in crises and create crippling layers of capital and liquidity burdens. The Fed’s proposal also jeopardizes progress on the development of international regulatory standards, they said.
Obama Expected to Nominate Watt to FHFA Post. President Obama today is expected to nominate Rep. Mel Watt (D-N.C.) to be director of the Federal Housing Finance Agency, according to press reports. Watt, who currently serves on the House Financial Services Committee, would replace Edward DeMarco, who has served as the agency's acting director since 2009.