SDBA eNews

November 30, 2017

Yellen: Bipartisan Reg Reform Bill Would Help Fed Tailor Regulations

The bipartisan Senate regulatory reform bill introduced by Sen. Mike Crapo (R-Idaho) and a group of Senate Democrats and Republicans, including Sen. Mike Rounds, would help the Federal Reserve tailor its supervision of financial institutions, Fed Chairman Janet Yellen told the House Financial Services Committee.

"The legislation that's been proposed, I haven't had a chance to study every detail of it, but I would say it generally incorporates those principles and is a move in a direction that we think would be good in enabling us to appropriately tailor our supervision," Yellen said of S. 2155.

During testimony before the Senate Banking Committee on Tuesday, Federal Reserve Chairman-Designate Jerome Powell expressed general support for the Senate’s bipartisan framework for regulatory reform, which he referred to as “workable” and “sensible.” The draft legislation, which is expected to receive a committee vote next week, includes a number of reg relief provisions advocated by ABA, including simplifying capital calculations for community banks.

Powell added that the Fed will continue to seek opportunities to provide relief for banks through tailored regulation that takes into account an institution’s size and risk profile. “We will continue to consider appropriate ways to ease regulatory burdens while preserving core reforms--strong levels of capital and liquidity, stress testing and resolution planning--so that banks can provide the credit to families and businesses necessary to sustain a prosperous economy,” he said. “In doing so, we must be clear and transparent about the principles that are driving our decisions and about the expectations we have for the institutions we regulate.”

Powell also noted that the financial system is significantly stronger today than it was at the time of financial crisis and told lawmakers that he does not believe that any banks today are “too big to fail.” Read Powell's testimony.

Read a section by section description of S.2155.

Senate Begins Consideration of Tax Reform Bill

After clearing an important procedural hurdle, the Senate last night began floor debate on tax reform legislation. Although no material changes have yet been made to the bill approved by the Senate Finance Committee, negotiations continue on the treatment of pass-throughs and other provisions important to the banking industry, and votes on amendments are expected today. ABA continues to engage with key lawmakers on the legislation and advocate for improvements.

Judge Rejects Legal Challenge to Mulvaney at CFPB

A federal judge on Tuesday sided with the White House and Consumer Financial Protection Bureau Acting Director Mick Mulvaney in the legal conflict over the bureau’s interim leader. Judge Timothy Kelly declined to issue a temporary restraining order sought by CFPB Deputy Director Leandra English preventing Mulvaney from performing the duties of acting director. English said she will seek to appeal the ruling and continue seeking an injunction.

Mulvaney was appointed by President Trump following Richard Cordray’s abrupt resignation as director last Friday. Named deputy director shortly before Cordray’s resignation, English sued Mulvaney and Trump on the theory that the Dodd-Frank Act makes her the bureau’s acting director during a vacancy.

The White House took the position that the Federal Vacancies Reform Act applies, allowing the president to name a currently serving Senate-confirmed official as acting director--a conclusion reached by both the Justice Department’s Office of Legal Counsel and the CFPB’s own general counsel, who over the weekend “advise[d] all Bureau personnel to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB.”

In his first day as acting director at the Consumer Financial Protection Bureau, Mick Mulvaney--who is also the director of the Office of Management and Budget--on Monday imposed a 30-day freeze on new regulations, guidance, hiring and civil money penalties at the consumer finance regulator.

ABA sent a memo to members on Monday outlining the situation and the legal questions at the heart of the conflict, and ABA staff continue to monitor the CFPB’s leadership transition closely. Read the memo.

SD Banking Division Issues Money and Mortgage Lender Reporting Guidance

House Bill 1179 passed during the 2017 Legislative Session and became effective July 1, 2017. It created limited exemptions for certain money lenders and nonresidential mortgage lenders under SDCL Chapters 54-4 and 54-14.
Official guidance on House Bill 1179 and the required annual reporting forms are posted at Annual reports must be filed with the South Dakota Division of Banking by Dec. 31, 2017.  
The reporting requirement included in House Bill 1179 is not intended to apply to loans made between family members. Additional questions can be directed to the South Dakota Division of Banking at 605.773.3421.

DOL Finalizes 18-Month Extension for Fiduciary Rule Exemptions

As the Department of Labor continues its review of the Obama-era fiduciary rule, DOL on Monday finalized its plans to extend to July 1, 2019, the compliance date for certain exemptions to the rule. The extension would apply to the best interest contract exemption, principal transaction exemption and prohibited transaction exemption 84-24. DOL granted the extension to ensure it will have sufficient time to consider public comments submitted in response to an executive order by President Trump earlier this year, which ordered that the fiduciary rule be re-examined for possible repeal or revision.

The delay marks an important advocacy victory for ABA, which has long called on DOL to extend the effective date for the exemptions to allow bankers more time to comply. In addition, DOL also extended temporary enforcement relief from field assistance bulletin 2017-02 until July 1, 2019, as ABA also advocated. Prior to that date, the department will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary rule and applicable provisions of the exemptions. Read more. For more information, contact ABA's Tim Keehan.

Ely: Congress Should Investigate FCS' Deposit-Taking Practices

In the latest issue of ABA’s Farm Credit Watch yesterday, Bert Ely called on lawmakers to investigate the deposit-taking practices and other banking activities that many FCS institutions engage in that are beyond the scope of FCS’ congressional mandate.

While FCS institutions are not authorized to accept deposits, “many associations in two of the four FCS districts--those funded by CoBank and AgriBank--accept deposits on behalf of the bank that funds them. That bank then invests the deposited funds in interest-bearing bonds it issues,” Ely explained. “These bonds can then be redeemed at any time by the FCS member/borrower, apparently without penalty.”

He added that some associations rely on these bonds--which do not carry deposit insurance--for a significant portion of their funding. As of Sept. 30, 2017, 37 of the 69 FCS associations had a total of $1.15 billion in liabilities called “other interest-bearing debt,” almost all of which was made up of “readily withdrawable deposits held by these associations,” Ely added. Read Farm Credit Watch.

FHFA Increases Conforming Loan Limits for 2018

The Federal Housing Finance Agency said Tuesday that it will raise the maximum conforming loan limits for mortgages Fannie Mae and Freddie Mac purchase in 2017 from $424,000 to $453,100. The announcement marks the second time FHFA has increased the baseline loan limit since 2006. The first increase was for 2017.

In high-cost areas, such as Los Angeles, New York, San Francisco and Washington, D.C., the maximum loan limit will be $679,650, which is 150 percent of $453,100. Meanwhile, limits will rise in all but 71 counties in the country. Read more.  View a list of counties seeing increases.

Trump Names Goodfriend to Fed Board

President Trump yesterday nominated Marvin Goodfriend to a term on the Federal Reserve Board of Governors. Goodfriend is a professor of economics at Carnegie Mellon University who previously spent more than a decade as head of research at the Federal Reserve Bank of Richmond.

Compliance AllianceQuestion of the Week

Question: There is a consumer construction loan to build a couple’s new primary residence and the bank is taking their current condo as an abundance of caution.  Would this invoke the right of rescission since the condo is being taken as an abundance of caution?

Answer: Yes, it does. There is no special rule about abundance of caution and there is a special rule that indicates that rescission would apply when taking both old and new principal residences as security:

Notwithstanding the general rule that consumers may have only one principal dwelling, when the consumer is acquiring or constructing a new principal dwelling, any loan subject to Regulation Z and secured by the equity in the consumer's current principal dwelling (for example, a bridge loan) is subject to the right of rescission regardless of the purpose of that loan. For example, if a consumer whose principal dwelling is currently A builds B, to be occupied by the consumer upon completion of construction, a construction loan to finance B and secured by A is subject to the right of rescission. A loan secured by both A and B is, likewise, rescindable.

Comment 4 to 1026.23(a)(1)

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