SDBA eNews

October 26, 2017

SDBA Encourages Bankers to Share Video Showcasing Bank Responses to Hurricanes

The ABA unveiled a new video spotlighting how bankers pitched in and responded to the wave of devastating hurricanes that hit Texas, Florida and Puerto Rico this fall.

In Texas, the six-minute video spotlights the efforts of one community Bank in Rockport, where Hurricane Harvey made landfall. It also showcases a commercial lender working as a first responder in the Houston area, bank support for small business recovery and food relief and even a Pennsylvania bank whose employees personally delivered a truckload of supplies.

Meanwhile, in Florida, the video shows how a community bank helped business customers flooded by Hurricane Irma run payroll over the bank’s systems, how a regional bank deployed a mobile branch to open right away and how a community bank provided much-needed supplies to a local nonprofit.

ABA continues to urge bankers to join the association and its employees in supporting the ongoing recovery from hurricanes Harvey, Irma and Maria. Watch the video and donate.

Senate Votes to Overturn CFPB's Arbitration Rule

The Senate Tuesday night voted to overturn the Consumer Financial Protection Bureau’s controversial final rule on arbitration by a vote of 51 to 50. With a tie-breaking vote by Vice President Mike Pence, the Senate exercised its authority under the Congressional Review Act to reject new federal regulations.

The House voted in July to overturn the rule. Once President Trump signs the resolution, as expected, the action by the Senate will stop the rule from taking effect and prevent government agencies from issuing any similar rule in the future. “Today’s vote to overturn the CFPB’s arbitration rule is a win for consumers,” said ABA President and CEO Rob Nichols. “As we and others made clear in our multiple comments to the CFPB, the rule was always going to harm consumers and not help them. Today’s vote puts consumers first rather than class-action lawyers.”

The vote marks a hard-fought victory for the banking industry and for ABA, which has been vocally opposed to the rule since it was proposed in 2015. In comments to the CFPB and lawmakers, ABA has repeatedly pointed out that the arbitration rule would have imposed significant costs on consumers and banks of all sizes while enriching plaintiffs’ lawyers--a finding that was confirmed by a separate report issued by the Treasury Department on Monday. An additional study by the OCC estimated that the rule would have increased the cost of credit by approximately 25 percent, once lenders factored in the cost of class-action litigation.

ABA Issues Staff Analysis of CFPB's Small-Dollar Lending Rule

ABA has issued a staff analysis of the Consumer Financial Protection Bureau’s final small-dollar lending rule that curtails short-term, small-dollar consumer loans, as well as the OCC’s decision to rescind its guidance on direct deposit advance services, which it noted was inconsistent with the CFPB’s final rule. The analysis summarizes key provisions of the rule, including a helpful exemption the CFPB granted for banks making small-dollar accommodation loans, following advocacy by ABA.

Under the rule--which was finalized earlier this month--lenders making 2,500 or fewer small-dollar loans in each of the current and previous years and for whom these loans account for less than 10 percent of revenues are exempt entirely from the rule. The accommodation loan exemption applies regardless of the size of the lender offering it. In addition, for banks that exceed the threshold for the accommodation loan exemption, the final rule preserves the ability of these banks to offer installment loans of 46 days or more, which ABA believes will allow banks to innovate and increase their responsible small-dollar credit products.

ABA continues to study the 1,690-page rule and will update its staff analysis as needed. In addition, the association is seeking feedback from bankers on whether banks are planning to increase small-dollar consumer lending, and if so, whether there are other regulatory impediments that ABA should address. View the staff analysis. For more information, contact ABA's Jonathan Thessin.

ABA Calls for Reforms to Fannie, Freddie

Testifying before the House Financial Services Committee yesterday, ABA member banker Brenda Hughes outlined ABA’s principles for GSE reform, highlighting the necessity of legislative action to ensure that lenders of all sizes across the country can continue meeting the needs of mortgage borrowers. Hughes is SVP and director of mortgage and retail lending for First Federal Savings of Twin Falls, Idaho.

As Congress moves forward with housing reform, Hughes stressed that the GSEs should: be confined to a secondary market role; agree to support all segments of the primary market; carry an explicit, fully-priced and fully transparent guarantee from the federal government for all mortgage-backed securities; be capitalized appropriately; and have sound and fair underwriting standards. Additionally, any reforms need to preserve the “To Be Announced” market, consider and protect the vital role played by the Federal Home Loan Banks, allow credit risk transfers required by FHFA to be continued and expanded, and require any affordable housing efforts undertaken by the GSEs to be delivered through and driven by the primary market.

“Reform need not be radical or extreme, but comprehensive. Legislation need not create an entirely new secondary market structure,” Hughes said. “In fact, guided by these key principles, we believe that relatively tailored legislation that takes a surgical approach to make necessary alterations to the current system is desirable and can achieve needed comprehensive reform.” Read Hughes' testimony.

Universal Residential Loan Application to Include Language Preference Question

The Federal Housing Finance Agency announced last Friday that it will include a language preference question on its updated Universal Residential Loan Application. The question will allow borrowers to specify if they wish to communicate in a language other than English and identify their preferred language. The new URLA form--which FHFA plans to issue this later this year--will go into effect beginning in July 2019 and will be mandatory for loans made by Fannie Mae and Freddie Mac beginning in February 2020.

In response to numerous concerns raised by ABA and other industry groups about the legal risks that such a question would pose for lenders, FHFA included additional disclosure language intended to inform borrowers that their loan transaction is likely to be conducted in English, and that communications may not be available in their language of choice. The text also states that the language designation is for information collection purposes only, and is not intended to create an expectation that the lender will proceed with the transaction in the borrower’s specified language.

In addition, the text includes information on the language services available to borrowers and directs them to various language access resources. Fannie and Freddie will also make available an optional disclosure in several languages informing borrowers of language resources, FHFA said.

ABA expressed disappointment over FHFA’s decision to move forward with the question and remains concerned that the inclusion of the question will raise questions of liability under rules not promulgated by FHFA and for which FHFA cannot provide safe harbor or alleviate concerns through disclosures. ABA will continue to analyze the text in the coming days to determine if those concerns will be adequately addressed. View the question text. For more information, contact ABA's Joe Pigg.

CCC's Noreika: National Bank Charters Should Be an Option for Fintech Firms

Acting Comptroller of the Currency Keith Noreika last week reiterated his view that companies providing financial products and services should be subject to the same regulations and examinations as traditional banks, while emphasizing that a path should exist for these companies to apply for a national bank charter.

“Providing a path for these companies to become national banks is pro-growth, can reduce regulatory burden for those companies, and can bring enhanced services to millions of people served by the federal banking system,” Noreika said. He added, however, that “national charters… will never be compulsory and should be just one choice for companies interested in banking,” along with other options like state charters and partnerships or mergers with existing banks.

Noreika noted that as the OCC continues to explore offering a special-purpose national fintech charter, fintech companies themselves must fully understand the requirements of being an OCC-regulated institution. “A national bank charter is a special thing, and the OCC will not undermine its value by granting charters to companies that are not ready to meet our admittedly high expectations,” he said.

Noreika also addressed criticism that providing a national fintech charter would inappropriately blur the line between banking and commerce, which some in the industry have suggested. “The folks who suggest that the OCC is considering granting charters to nonfinancial companies are wrong,” he said, adding that “we should not let fear prevent a constructive discussion of where commerce and banking coexist successfully today and where else it may make sense in the future.” Read the speech.

FDIC, CFPB to Host Webinar on Financial Education for People with Disabilities

The FDIC and the CFPB will host a joint webinar Nov. 15 at 1 p.m. CT to provide an overview of financial education resources that can be helpful for people with disabilities. The webinar will focus specifically on the FDIC’s Money Smart curriculum and the CFPB’s Your Money, Your Goals tools for disabled persons. Read more.

Office of Financial Research Introduces New Monitoring Tools

The Office of Financial Research yesterday introduced two new monitoring tools to assist with tracking and measuring of factors that pose risks to financial stability. The first tool, the Financial System Vulnerability Monitor, is a heat map of 58 indicators of potential vulnerabilities designed to give early warnings for further investigation. The second tool, the Financial Stress Index, measures system-wide stress, providing a daily market-based snapshot of stress in global financial markets derived from 33 financial market indicators. Learn more.

Compliance AllianceQuestion of the Week

Question: While at a recent compliance training, the instructor stated that a standard flood hazard determination (SFHD) is required when making, increasing, renewing and extending a loan. That being said, I know SFHD are good for seven years. Am I interpreting the regulation that even though the SFHD has a seven-year term if you are making, increasing, renewing or extending a loan you should still run a new flood determination?

Answer: You may rely on a previous determination, for up to seven years, using the SFHDF when you are increasing, extending, renewing or purchasing a loan secured by a building or a mobile home. However, the "making" of a loan is not listed as a permissible event that permits you to rely on a previous determination. So if the bank is increasing, renewing and extending credit, then it is possible that you may rely on a previous determination using the SFHDF as long as the original determination was made not more than seven years before the date of the transaction, the basis for the determination was set forth on the SFHDF, and there were no map revisions or updates affecting the security property since the original determination was made. However, you must obtain a new determination using a new SFHDF, when "making" a loan. See Question and Answer number 68 from the 2009 Interagency Questions and Answers Regarding Flood Insurance

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Contact Alisa DeMers, SDBA, at 800.726.7322 or via email.