SDBA eNews

January 23, 2020

ABA, Groups Highlight TRID Burden Ahead of CFPB Assessment

As the Consumer Financial Protection Bureau prepares to conduct its five-year assessment of the 2013 TILA-RESPA Integrated Disclosure Rule, ABA joined several other financial trade groups in an extensive comment letter detailing how the rule has imposed significant and unnecessary costs and liabilities on lenders. While the groups largely agreed with the CFPB’s assessment plan, they emphasized the need to assess the rule’s effect on both consumer protection and market operations.

Acknowledging that it may be challenging to capture the true cost of TRID in the CFPB study, the groups offered findings from ABA’s annual real estate surveys conducted over the course of the TRID implementation period, which “undeniably demonstrate that TRID caused disruptions in mortgage operations, mitigated only by extraordinary efforts and expenditures by industry participants.” They added the regulatory effects of TRID continue to be “substantial” and that “there is a critical need to focus on compliance burden reduction.”

The groups recommended significant reforms to the TRID rule, including wholesale revisions to TRID’s complex “tolerance” rules and re-disclosure requirements, as well as clarifications to unclear and disproportionate liability provisions and improvements to the cure mechanisms.

As part of the ongoing effort to quantify and communicate the effects of TRID, the groups also said they plan to conduct an additional survey on the rule and expect to submit results to the CFPB by the end of February.

FDIC, OCC Issue Joint Statement on Heightened Cybersecurity Risk

With the potential for cyberattacks against the U.S. rising as a result of geopolitical tensions, the FDIC and OCC last week issued a joint statement reminding financial institutions of the principles of sound cybersecurity risk management. These principles include response and resilience capabilities, protection against unauthorized access, secure configuration of systems and services, data protection and employee training.

The agencies emphasized that “while preventative controls are important, financial institution management should be prepared for a worst-case scenario and maintain sufficient business continuity planning processes for the rapid recovery, resumption and maintenance of the institution’s operations.”

They noted that one step financial institutions can take is to ensure that their data backup and restoration practices are consistent with industry standards or frameworks such as Sheltered Harbor—an industry-led initiative created to protect customers, financial institutions and public confidence in banks in the event of a catastrophic cyber attack. Read moreLearn more about Sheltered Harbor.

ABA Joins Banks, State Associations as Investor in Fintech Venture Fund

As part of an effort to accelerate financial-sector innovation and incubate fintech startups that are well-equipped to partner with banks, Canapi Ventures yesterday announced $545 million in commitments for its two inaugural venture capital funds—including a passive investment from ABA. More than 35 banks, as well as several state bankers associations, are also investors in Canapi. The passive fund investment by ABA complements the association’s recent direct investments in two fintech startups: Finxact and Summit Technology Group.

Co-led by former Comptroller of the Currency and Promontory Financial Group founder Gene Ludwig and Live Oak Bank chairman and CEO Chip Mahan—who themselves have been instrumental in launching fintech startups like Promontory Interfinancial Network and nCino—Canapi also draws on the expertise of its bank investors to evaluate fintech firms and help portfolio companies grow revenue and meet the needs of the banking sector.

“We believe our model is unique in that it aligns the interests of both banks that want to use innovative technologies as well as the companies creating those technologies and represents a true ‘win-win’ for all parties involved,” said Ludwig. Canapi’s first investment last year was in Nashville-based Built Technologies, whose construction lending platform has been endorsed by ABA since 2018. Read more.

U.S. House Members Caution Crapo on Changes to Cannabis Bill

The four bipartisan lead sponsors of the SAFE Banking Act—passed by the House last fall—on Tuesday wrote to Senate Banking Chairman Mike Crapo (R-Ohio) cautioning him not to limit the bill’s safe harbor for financial institutions that choose to serve legitimate cannabis businesses in states where it is legal. The letter came after Crapo last month expressed significant concerns about the bill, particularly related to public health and safety and money laundering.

Reps. Ed Perlmutter (D-Colo.), Denny Heck (D-Wash.), Steve Stivers (R-Ohio) and Warren Davidson (R-Ohio) emphasized that the purpose of the bill is not to legalize marijuana, but to resolve a discrepancy between federal and state law in order to ensure public safety and provide regulatory certainty to financial institutions. They warned against changes that would impose “unworkable burdens on financial institutions, or would jeopardize the larger, bipartisan effort to address public safety concerns associated with cash-only transactions.”

ABA made similar comments in a letter to Crapo earlier this month, noting that the SAFE Banking Act is a “narrowly tailored” approach focused on getting state-sanctioned marijuana proceeds off the streets and into regulated financial institutions. Read the lawmakers’ letter. Read ABA’s letter.

Colorado Banking Regulator Denies Community Bank Acquisition by Credit Union

The Colorado State Banking Board last week denied the sale of a Colorado community bank to one of the state’s largest credit unions. The board found that the deal—in which Boulder, Colorado-based Elevations Credit Union would purchase the assets of Cache Bank and Trust, headquartered in Greeley—did not meet the requirements of state law.

In a letter to the state regulator earlier last week, the Colorado Bankers Association cited a state statute regarding the sale of assets between state-chartered banks, which essentially establishes “that a bank may only sell the bulk of its assets to another bank.”

CBA CEO Don Childears welcomed the board’s decision, emphasizing the need for a level playing field between taxpaying banks and tax-exempt credit unions. “We welcome the (sale) transaction between Elevations and Cache,” he said. “Elevations simply needs to convert from a tax-subsidized credit union to a taxpaying bank.” Read more

Podcast: Buyer, Seller Scarcity to Drive 2020 M&A Trends

Increasing scarcity of both buyers and sellers will drive bank mergers and acquisitions in 2020, a top bank deal lawyer says on the latest episode of the ABA Banking Journal Podcast. In the episode, Rob Klingler—an Atlanta-based partner at Bryan Cave Leighton Paisner—outlines what to expect in the year ahead, including:

  • Scarcity of selling banks, driven by a strong M&A pace in previous years and a paltry de novo pipeline. Banks that are less than 20 years old represent less than 10% of remaining charters, while banks that are over 100 years old—and thus less likely to sell—account for nearly half of charters.
  • Increasing scarcity of buyers, as many fast-growing acquisitive banks have reached sizes where their interest in absorbing smaller community banks declines.
  • Growth in non-traditional transactions, such as quasi-de novo organizers acquiring an existing charter.
Listen to this episode. Read Klingler’s 2020 M&A outlook.

Bank Compliance School to be Held in Minneapolis

Compliance is one of the most crucial and consuming issues in the financial services industry today. Regulatory agencies are making it clear through their examinations that no institution can afford to be without a comprehensive, well-managed compliance program. Your compliance officer must be able to run the process, including a bank-wide training program, like a well-oiled machine. 

The Minnesota Bankers Association will hold its Bank Compliance School on March 30 to April 2, 2020, in Minneapolis. The purpose of this school is to provide students with the knowledge and understanding of laws and regulations that impact lending practices, deposit functions, marketing and management by: 

  • Developing an understanding of federal laws and regulations.
  • Developing basic management skills and effective techniques for compliance administration.
  • Providing instruction designed to supplement in-bank training programs and benefit students through exposure to the experience and knowledge of other students.

SDBA members will receive member rate to attend the school. Learn more and register. Questions, contact Mary at 952.857.2629.

Graduate School of Banking Colorado Offers Scholarship

The Graduate School of Banking at Colorado (GSBC) partners with the SDBA to offer the GSBC Future Leaders Scholarship. The scholarship, in the amount of $1,460, will be awarded to a recipient each year of their schooling. The scholarship will be awarded to one banker per state, per year, and the student must enroll as a first-year student. 

GSBC’s annual school session is a 25-month program hosted each July at the University of Colorado Boulder. For 70 years, banks have trusted GSBC to prepare the next generation of community bank leaders. This legacy, combined with a cutting-edge curriculum, expert faculty and state-of-the-art facilities, make GSBC’s program a premier bank management training program for community banks nationwide.

The 70th annual school session will be held July 19-31, 2020, in Boulder. The scholarship application deadline is March 1, and candidates will be notified by March 31 of selection decisions. Enrollment for the school is open until April 2020.  Apply for the GSBC scholarship. Learn more about and apply for the school

Compliance Alliance

Question of the Week

Question: We have a few questions about mortgage payments. Our core is set up so that mortgage payments are applied in the following order:

  1. The monthly escrow is put into the escrow account.
  2. The remainder is applied to interest.
  3. If anything remains after interest is paid, it is put toward the principle.

Are we allowed to apply mortgage payments this way? Is there anything in regulation that dictates how to apply mortgage payments?

Answer: There is not a prohibition in doing that under the federal regulations. It would be up to the bank's loan agreement regarding how payments are applied. As long as the bank's loan agreement does not state otherwise, there should not be an issue with applying payments in that way.

Not a member? Learn more about membership with Compliance Alliance by attending one of our live demos:

Compliance rules and regulations change quickly. For timely compliance updates, subscribe to Compliance Alliance’s email newsletters.

Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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