News from Washington: Regulatory Updates
The
Consumer Financial Protection Bureau (Bureau) extends the comment period on its Advance Notice of Proposed
Rulemaking (ANPR) relating to the Home Mortgage Disclosure Act (HMDA). 
On June 27, 2019, the Bureau announced that it extended the comment deadline from July 8 to October 15 on its recent ANPR that is evaluating whether to make changes to the HMDA data fields that institutions are required to collect under the HMDA final rule issued in October 2015.
The ANPR also solicits comments on the requirement that institutions report certain business- or commercial-purpose transactions under Regulation C. The extension is intended to provide commenters with the opportunity to review the HMDA data collected by financial institutions in 2018, which was released on August 30, 2019. There is a Federal Register notice announcing the comment period extension.
Agencies host the 2019
Interagency Minority Depository Institution (MDI)
Conference.
On June 25–26, the Federal Reserve Board (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) hosted the biennial Interagency MDI and Community Development Financial Institution (CDFI) Bank Conference in Arlington, VA. The purpose of the conference was to preserve and promote MDIs by connecting their leadership with regulators, networking among peers, and discussing relevant topics, such as federal program support, cybersecurity, innovation and supervision. Federal Reserve Governor Michelle Bowman delivered remarks in which she suggested ways the agencies can ease regulatory burdens on MDIs.
On a related note, the Board recently released its annual MDI Report to Congress titled Preserving Minority Depository Institutions. The report details the ways in which the Board is working to meet its congressional mandate to preserve and promote MDIs. Finally, the FDIC presented the findings of a new MDI study that concluded that MDIs have experienced significant growth and that the share of mortgages granted to minority borrowers in high-minority and low- to moderate-income census tracts has improved.
The Bureau and the Board issue
final amendments to Regulation CC regarding funds
availability.
On June 24, 2019, the Bureau and the Board issued a final rule under the Expedited Funds Availability Act (EFAA) of 1987. The final rule implements the statutory requirement in the EFAA to adjust dollar amounts under the act and to implement amendments made in the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The EFAA generally provides that dollar amounts in the EFAA shall be adjusted every five years by the “annual percentage increase” in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), rounded to the nearest multiple of $25. The final rule generally provides that adjustments made to the dollar amounts in Regulation CC will be based on the aggregate percentage increase during the five-year period (accounting for year-to-year negative movements), but it always will be either zero or upward and never downward. The amendments apply to dollar amounts specified in Regulation CC, such as the minimum amount of deposited funds that must be available the next business day for certain check deposits and the threshold for determining whether an account has been repeatedly overdrawn. The final rule also implements EGRRCPA amendments extending EFAA coverage to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam. Finally, the final rule adopts a schedule setting forth the effective dates of inflation adjustments, occurring on a five-year cycle.
The Board, the FDIC, and the
OCC released an updated list of distressed or
underserved nonmetropolitan middle-income
geographies.
On June 17, 2019, the Board, the FDIC, and the OCC announced the availability of the 2019 list of distressed or underserved nonmetropolitan middle-income geographies, where revitalization or stabilization activities are eligible to receive Community Reinvestment Act (CRA) consideration under the community development definition. These geographies are designated by the agencies in accordance with their CRA regulations (the criteria for designating these areas are available on the Federal Financial Institutions Examination Council’s website).
The designations continue to reflect local economic conditions, including triggers such as unemployment, poverty, and population changes. As with past releases, the agencies incorporate a one-year lag period for geographies that are no longer designated as distressed or underserved in the current release (geographies subject to the one-year lag period in 2018 are eligible to receive consideration for community development activities for 12 months after publication of the current list).
The Board publishes Perspectives
from Main Street: Stakeholder Feedback on Modernizing the Community Reinvestment Act.
On June 13, 2019, the Board released a report summarizing the feedback it received from bankers and community group representatives at 29 nationwide roundtable discussions on the state of, and potential revisions to, the Community Reinvestment Act (CRA). The roundtable discussions, held at the Board and Reserve Banks between October 2018 and January 2019, involved over 400 participants, including representatives from the FDIC and the OCC. The Federal Reserve hosted these discussions to inform interagency efforts to strengthen and modernize the CRA regulatory framework. The report reflects roundtable discussions regarding assessment areas, underserved communities, and performance test structure, evaluating performance, defining community development activities, and additional CRA topics.
Fannie Mae and Freddie Mac issue guidance about their standards for accepting private flood insurance policies for loans they purchase.
On June 5, 2019, the Federal National Mortgage Association (commonly known as Fannie Mae) released a Selling Guide to address the effect of the recent private flood insurance rule issued by the Board, FDIC, OCC, National Credit Union Administration, and Farm Credit Administration (collectively, the agencies) on Fannie Mae’s purchasing guidelines. The Federal Home Loan Mortgage Corporation (commonly known as Freddie Mac) also released a Seller Guide with a similar message on June 5, 2019. Both of the government-sponsored enterprises (GSEs) report they are not subject to the agencies’ private flood insurance rule and their prior standards for accepting private flood insurance policies from lenders who sell their loans to the GSEs remain in effect.
The GSEs accept private flood insurance policies as an alternative to National Flood Insurance Program (NFIP) policies, but some limitations apply. For private flood insurance, Fannie Mae’s guide states: “To qualify, the terms and amount of coverage must be at least equal to that provided under an NFIP policy based on a review of the full policy issued by the private insurer. In addition, the insurer must meet the rating requirements in the Selling Guide for private insurers.” Freddie Mac has a similar policy.
The
Bureau settles with Freedom Mortgage Corporation
(Freedom Mortgage) to resolve HMDA violations.
On June 5, 2019, the Bureau announced a settlement with Freedom Mortgage to resolve violations of HMDA and Regulation C, which require lenders to collect, record, and report certain mortgage applicant information or to report when an applicant chooses not to provide this information. According to the consent order, Freedom Mortgage reported inaccurate information to the Bureau for mortgage applicants’ race, ethnicity, and sex from 2014 through 2017. For example, certain loan officers were told by managers or other loan officers to report applicants as non-Hispanic white regardless of whether that was accurate. Freedom Mortgage was one of the 10 largest HMDA reporters nationwide for all four years. Under the terms of the consent order, Freedom Mortgage must pay a civil money penalty of $1.75 million and implement a compliance plan to prevent future HMDA violations.
The Board, the FDIC, and the
OCC issue host state loan-to-deposit
ratios.
On May 28, 2019, the Board, the FDIC, and the OCC issued the host state loan-to-deposit ratios that the agencies will use in determining compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. In general, Section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production and prohibits bank branches controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production.
Section 109 also provides a process to test compliance with these statutory requirements. The first step in the process involves a loan-to-deposit ratio test that compares a bank’s statewide loan-to-deposit ratio with the host state loan-to- deposit ratio for banks in a particular state. A second step is conducted if a bank’s statewide loan-to-deposit ratio is less than one-half of the published ratio for a particular state or if data are not available at the bank to conduct the first step. The second step requires the appropriate agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches. A bank that fails both steps is in violation of Section 109 and is subject to sanctions by the appropriate agency. The updated host state loan-to-deposit ratios are available.
The Bureau begins a
symposia series on consumer protection issues.
On April 18, 2019, the Bureau announced a symposia series to facilitate dialogue on consumer protection issues and to assist the Bureau in its policymaking process. The topics will include behavioral law and economics, small business loan data collection, disparate impact and the Equal Credit Opportunity Act, cost-benefit analysis, and consumer-authorized financial data sharing. Each symposium will feature a discussion panel of leading experts in the relevant field.
The first symposium was held on June 25 and focused on the Dodd–Frank Wall Street Reform and Consumer Protection Act’s prohibition on “abusive acts or practices.” The symposium featured a panel of academic experts to discuss the various policy issues and a panel of legal experts to discuss how the abusive standard has been used in practice. The Bureau’s website contains a video recording of the event as well as the panelists’ written statement.