SDBA eNews

August 20, 2020

ABA, Groups Criticize New GSE Fee on Refinances, Call for Withdrawal

In a surprise move last week, Fannie Mae and Freddie Mac announced that they will impose an “adverse market refinance fee” of 50 basis points for no-cash-out and cash-out refinance mortgages with delivery dates on or after Sept. 1, 2020 (for Fannie Mae loans) or with settlement dates on or after Sept. 1 (for Freddie Mac loans). This fee—which would amount to an additional $1,400 for the typical consumer, based on the average GSE loan size—would either be paid up front or be added to the mortgage interest rate.

ABA joined several other financial services, housing and consumer groups in a joint statement last Thursday strongly criticizing this action by the GSEs and calling for the withdrawal of the fee. “The additional 0.5% fee on Fannie Mae and Freddie Mac refinance mortgages will raise costs for families trying to make ends meet in these challenging times,” the groups said. “The pricing increase is particularly harmful for our nation’s low- and moderate-income homeowners and for the emerging, but unsteady improvements to the national economy.”

ABA President and CEO Rob Nichols also raised these concerns in a strongly-worded letter to FHFA Director Mark Calabria. Calling the GSEs’ action “bad public policy,” Nichols urged Calabria to intervene and rescind the proposed fee. “Adding this fee and making it effective in less than three weeks’ time will throw the current refinance market into disarray,” he wrote. “Borrowers who have a refinance in process but who have not locked in their rate will suddenly be faced with new costs, perhaps threatening their ability to move forward. Longer term, the fee puts downward pressure on the entire refinance market, threatening economic recovery.”

He added that “while other federal entities are doing their utmost to keep rates low and ABA members are working diligently to help borrowers into more affordable options, the Enterprises and the FHFA should not be taking actions that stymie those efforts.”‌

Senators Raise Concerns Over GSE Refinance Fee

A group of Democratic senators yesterday wrote to Federal Housing Finance Agency Director Mark Calabria raising concerns about a recent announcement that Fannie Mae and Freddie Mac will impose an “adverse market refinance fee” of 50 basis points for no-cash-out and cash-out refinance mortgages—a move strongly criticized by ABA and several other financial trade associations last week.

“Given the Enterprises’ commitment to facilitating mortgage lending and refinancing over the last few months, we were surprised to see an unexplained new fee added to the cost of refinance loans that will be implemented just three weeks after it was announced,” the senators wrote. “This sudden additional charge will affect loans currently in the refinance process and could cause both confusion and increased costs for homeowners.”

Senate Banking Committee Chairman Mike Crapo (R-Idaho) also wrote to Calabria last week questioning this move by the GSEs and requesting that FHFA respond in writing to several questions about the fee and why the agency deemed it necessary. Read the Democrats’ letter. Read Crapo’s letter.

CFPB Proposes New Qualified Mortgage Category

The Consumer Financial Protection Bureau Tuesday proposed to create a new category of “seasoned” qualified mortgages. This designation would apply to portfolio loans that have met certain performance requirements over a 36-month seasoning period, including having no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days.

Additionally, to receive seasoned QM status, loans must be secured by a first lien; have a fixed rate with fully amortizing payments and no balloon payments; must not exceed 30 years; and total points and fees must not exceed specified limits. Creditors would also need to consider the borrower’s debt-to-income ratio or residual income and verify their obligations and income. The proposal would not specify a DTI limit, nor require creditors to use appendix Q to Regulation Z in calculating and verifying debt and income.

The bureau proposed that this new rule take effect on the same date as a separate final rule amending the general QM definition that is currently out for public comment. Comments on the proposal will be due 30 days after publication in the Federal Register. ABA is reviewing the proposal and will file a comment letter. Read the proposed rule. For more information, contact ABA’s Rod Alba.

Financial Regulators Clarify Use of Cease and Desist Orders in BSA/AML Enforcement

The federal financial regulatory agencies last Thursday issued a joint statement addressing how they will address noncompliance with the Bank Secrecy Act/anti-money laundering requirements. The statement describes the circumstances under which an agency would issue a mandatory cease and desist order or, at its discretion, issue formal or informal enforcement actions or other supervisory actions to address BSA/AML deficiencies.

In the statement—which does not create new expectations or standards—the agencies noted when enforcement actions would be tailored “to address the deficiencies that are specific to the institution, as identified during the supervisory process,” and that such actions would be issued “based on a careful review of all the relevant facts and circumstances.”

The statement clarifies that an agency will issue a cease and desist order for BSA/AML noncompliance in cases where an institution fails to establish and maintain a reasonably designed BSA/AML compliance program or fails to correct a previously reported problem with its BSA/AML compliance program. An agency may also take a formal or informal action against an institution for other BSA/AML program concerns or deficiencies related to Suspicious Activity Report filings and other recordkeeping requirements. Read the statement.

FinCEN Statement Outlines Approach to BSA Enforcement

The Financial Crimes Enforcement Network on Tuesday issued a statement describing its approach to Bank Secrecy Act enforcement and the factors it evaluates in determining the appropriate response to and enforcement of BSA violations.

The statement outlines the various types of action FinCEN may pursue when it identifies an actual or possible BSA violation, including issuing a warning letter, an injunction or equitable relief, settlements, civil money penalties, criminal referral or taking no action. It also lists the range of factors FinCEN considers when evaluating an appropriate disposition upon identifying actual or possible violations of the BSA. Read the statement. For more information, contact ABA’s Rob Rowe.

SDBA Offering 2020 Bank Technology Conference Virtually

There is still time to register for the SDBA's Virtual Bank Technology Conference on Sept. 9-10. 

The conference is designed to provide support as you keep on top of technology trends and scams, navigate the business of banking, and build and sustain your bank’s technology strategy. Join host and emcee, Trent Fleming, as we discuss timely technology topics that can help you as you make decisions that impact your bank, your staff and your customers. 

On Wednesday, Sept. 9, from 10 a.m. to noon CDT, Fleming will present "Operational Efficiency Self-Assessment," followed by "Business Continuity and FFIEC Appendix J: Be Prepared and Compliant" by Jim Rumph with WIPFLI. On Thursday, Sept. 10, from 2-4 p.m. CDT, Jon Waldman with SBS CyberSecurity will present "How to Build a Valuable Incident Response Plan," followed by "Bank Technology and Customer Expectations" by Lisa Gold Schier with the American Bankers Association. 

Sessions will also be recorded and available for pre-registered attendees to watch at their convenience if they cannot make one of the sessions. Learn more and register.

SDBA to Hold New Accounts Seminar Virtually in October

The SDBA will hold the 2020 New Accounts Seminar as a three-part webinar series on Oct. 13, 14 and 15.

The webinar series will encompass opening personal, business, trust, and fiduciary accounts and is customized to South Dakota law. It provides answers to the most complicated and challenging questions asked by customers and employees. Day one agenda will cover opening personal and consumer accounts, day two will cover business accounts, and day three will cover trust and fiduciary accounts.

With more than 40 years of banking experience, presenter Suzie Jones has a reputation of being extremely knowledgeable and high energy with a unique ability to take technical information and make it interesting and applicable. A detailed and comprehensive PDF of her PowerPoint presentation is included in the registration, customized to state law and serves as an invaluable resource for bankers across the state. A comprehensive 200-plus page Opening New Accounts and Documentation Compliance Manual customized to South Dakota law is separately available for a discounted purchase price for SDBA webinar participants.

Sessions will also be recorded and available for pre-registered attendees to watch at their convenience if they cannot make one of the sessions. Learn more and register

FDIC's Money Smart News Offers Virtual Education Resources

In the latest issue of Money Smart News, the FDIC shared success stories from educators in adapting the Money Smart curriculum for virtual training sessions while continuing to meet community needs. The issue also includes COVID-19 resources for banks and consumers and new instructional videos released for Money Smart for Adults trainers. Read more.

 Compliance Alliance

Question of the Week

Question: For the electronic delivery of a periodic statement under Regulation E, is the bank required to notify a customer that it is available?

Answer: For customers that would like to receive their statements electronically, they must provide E-SIGN consent first--but once they provide that, they no longer need to receive paper statements, and also do not need to receive any sort of notification letting them know that their statements are available as long as everything is adequately disclosed to them in their account-opening E-SIGN documentation. However, it is a common best practice to have "statement is available" notifications sent out via email, as both a courtesy to the customer and a way to demonstrate for the record that the statements were "delivered" to them.

(1) Form of disclosures. Disclosures required under this part shall be clear and readily understandable, in writing, and in a form the consumer may keep, except as otherwise provided in this part. The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer-consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). A financial institution may use commonly accepted or readily understandable abbreviations in complying with the disclosure requirements of this part.

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 and ask for our Membership Team.

 Northern Plains Appraisal

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