Consumer Compliance Outlook: Second Issue 2020

Federal Reserve Statements Related to the COVID-19 Emergency and Consumer Compliance


Flood Insurance Compliance in Response to the Coronavirus (CA 20-7)

Mortgage Loans (Reg. H, 12 C.F.R. 208)

  • This Federal Reserve Consumer Affairs (CA) letter provides two flood insurance questions and answers to assist state member banks in their efforts to meet the financial needs of their customers.
  • The first question addresses the extent to which a bank would be required to make a new flood zone determination and provide new notices of special flood hazards for the extended loan if the bank works with its borrowers by extending maturities/payments or balloon payments because of the COVID-19 emergency.
    • Generally, although there is no emergency exception in the regulation, the Federal Reserve will take into account an institution’s good-faith efforts, demonstrably designed to support consumers and to comply with the flood insurance requirements.
  • The second question describes lender compliance options in connection with the extended renewal grace period provided in FEMA Bulletin W-20002 (dated March 29, 2020).


Interim Final Rule Regarding Reserve Requirements of Depository Institutions

Savings Deposit Accounts (Reg. D, 12 C.F.R. Part 204)

  • This Federal Reserve interim final rule removes the six-per-month limit on certain kinds of transfers and withdrawals from savings deposit accounts.
  • The rule is intended to provide depository institutions’ customers more convenient access to their funds.


Interim Final Rule Regarding Real Estate Appraisals (12 C.F.R. Part 225)

Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions Affected by the Coronavirus

Real Estate Appraisals and Evaluations (12 C.F.R. Part 225; Reg. B, 12 C.F.R. Part 1002)

  • The Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued an interim final rule to address how banks should conduct appraisals and evaluations during the COVID-19 emergency. (The National Credit Union Administration (NCUA) separately issued an identical Interim Final Rule.)
    • The rule provides a temporary deferral of the requirement for an appraisal or an evaluation for 120 days after closing for loans booked through December 31, 2020.
  • The interim final rule states that the agencies expect institutions to use best efforts and available information to develop a well-informed estimate of the collateral value of the subject property and to develop an appropriate risk mitigation strategy if the appraisal or evaluation ultimately reveals a market value significantly lower than the expected market value.
  • The risk mitigation strategy should consider safety and soundness risk to the institution, balanced with mitigation of financial harm to borrowers affected by COVID-19.
  • In addition, the Board, the Consumer Financial Protection Bureau (Bureau), FDIC, NCUA, and OCC in consultation with the state financial regulators, issued a separate interagency statement that reminds banks about flexibility in the agencies’ appraisal regulations, including under Regulation B, which implements the Equal Credit Opportunity Act.


Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)

Loans (Consumer statutes and regulations applicable to loans)

  • The Board, Bureau, FDIC, NCUA, and OCC issued this statement to clarify the interaction between the March 22 interagency statement and the Coronavirus Aid, Relief, and Economic Security (CARES) Act and to describe consumer protection considerations for working with borrowers.
  • The agencies encourage financial institutions to consider prudent arrangements that can increase the potential for financially stressed residential borrowers to keep their homes.
  • When exercising supervisory and enforcement responsibilities related to consumer compliance, the agencies will take into account the unique circumstances impacting borrowers and institutions resulting from the COVID-19 emergency.
  • The agencies will also take into account an institution’s good faith efforts, demonstrably designed to support consumers and comply with consumer protection laws.
  • In addition, the agencies expect that supervisory feedback for institutions will be focused on identifying issues, correcting deficiencies, and ensuring appropriate remediation to consumers.
  • Finally, the agencies do not expect to take a consumer compliance public enforcement action against an institution, provided that the circumstances were related to the COVID-19 emergency, the institution made good-faith efforts to support borrowers and to comply with the consumer protection requirements, and the institution responded to any needed corrective action.


Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act

Mortgage Loans (Reg. X, 12 C.F.R. Part 1026)

  • The Board, Bureau, FDIC, NCUA, OCC, and Conference of State Bank Supervisors (CSBS) issued this statement to provide regulatory flexibility for mortgage servicers on certain timelines and actions required under Regulation X for certain loss mitigation initiatives, including under the CARES Act.
  • The agencies restated a portion of the CARES Act, which states that borrowers in a federally backed mortgage loan may request forbearance from their mortgage servicer. In response, servicers must allow borrowers to defer their mortgage payments for up to 180 days and possibly longer.


Home Mortgage Disclosure Act (HMDA) Quarterly Reporting During the COVID-19 Pandemic (CA 20-6)

Mortgage Loans (Reg. C, 12 C.F.R. Part 1003)

  • On March 26, 2020, the Bureau issued a statement to inform its supervised financial institutions that it does not intend to cite in an examination or initiate an enforcement action for failure to report the quarterly HMDA data.
  • The Federal Reserve CA Letter 20-6 serves as notice that the Board will take the same approach to provide its supervised financial institutions with flexibility, reduce administrative burden, and allow the institution to focus its time and attention on serving its customers.


Joint Statement Encouraging Responsible Small-Dollar Lending in Response to COVID-19 (SR 20-7/CA 20-5)

Small-Dollar Loans (Consumer statutes and regulations applicable to smalldollar loans)

  • The Board, Bureau, FDIC, NCUA, and OCC issued this statement to encourage financial institutions to offer responsible small-dollar loans to both consumers and small businesses.
  • Responsibly offered small-dollar loans can help consumers meet their needs for credit because of temporary cash-flow imbalances, unexpected expenses, or income shortfalls during periods of economic stress or disaster recoveries.
  • The current regulatory framework allows financial institutions to make responsible small-dollar loans, including, but not limited to, open-end lines of credit, closed-end installment loans, and appropriately structured single payment loans.


Federal Reserve Statement on Supervisory Activities

All products and services (All consumer statutes and regulations)

  • This Federal Reserve statement explains that, for all firms, the Federal Reserve will focus on continued monitoring and analysis of operations, liquidity, capital, asset quality, and impact on consumers.
  • For larger institutions, the Federal Reserve will also focus on monitoring operational resiliency and potential impacts on broader financial stability.
  • For supervised institutions with less than $100 billion in total consolidated assets, the Federal Reserve generally intends to cease examination activity except where the examination work is critical to safety and soundness or consumer protection or is required to address an urgent or immediate need.
    • “Critical” examination work could include, but is not limited to, for example, examinations of less-thansatisfactorily rated state member banks where the Federal Reserve is aware of consumer protection issues that are an immediate threat to consumers or monitoring identifies an unusual circumstance.
  • For supervised institutions with assets greater than $100 billion, the Federal Reserve intends to defer a significant portion of planned examination activity based on its assessment of the burden on the institution and the importance of the examination activity to the supervisory understanding of the firm, consumer protection, or financial stability.
  • The Federal Reserve is generally extending the time periods for remediating noncritical existing supervisory findings by 90 days.


Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus

Loans (Consumer statutes and regulations applicable to loans)

  • The Board, Bureau, FDIC, NCUA, OCC, and CSBS issued this statement to encourage financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19.
  • It explains that the agencies view loan modification programs as positive actions that can mitigate adverse effects on borrowers because of COVID-19.
  • The statement describes the agencies’ interpretation of how current accounting rules under U.S. GAAP apply to certain COVID-19-related modifications.
  • Working with borrowers that are current on existing loans generally would not be considered Troubled Debt Restructurings (TDRs).


Joint Statement on Community Reinvestment Act (CRA) Consideration for Activities in Response to COVID-19 (CA 20-4)

All products and services (Reg. BB, 12 C.F.R. Part 288)

  • The Board, FDIC, and OCC issued this statement to confirm that, pursuant to the CRA, the agencies will favorably consider retail banking services and retail lending activities in a financial institution’s assessment areas that are responsive to the needs of low- and moderate-income individuals, small businesses, and small farms affected by COVID-19, consistent with safe and sound banking practices.
  • Additionally, in light of the declaration of a national emergency, this statement clarifies that financial institutions will receive CRA consideration for community development activities.


Supervisory Practices Regarding Financial Institutions Affected by the Coronavirus (SR 20-4/CA 20-3)

All products and services (All consumer statutes and regulations)

  • This Federal Reserve SR/CA letter encourages financial institutions to review SR 13-6/CA 13-3, “Supervisory Practices Regarding Banking Organizations and Their Borrowers and Other Customers Affected by a Major Disaster or Emergency,” for examples of efforts that financial institutions may want to consider in working with customers affected by COVID-19.


Interagency Statement on Pandemic Planning (SR 20-3/CA 20-2)

All products and services (Not applicable)

  • The Federal Financial Institutions Examination Council (Board, Bureau, FDIC, NCUA, OCC, and State Liaison Committee) issued this statement to encourage financial institutions to review and update their business continuity plans to address the threat of a pandemic outbreak and its potential impact on the delivery of critical financial services.


Agencies Encourage Financial Institutions to Meet Financial Needs of Customers and Members Affected by the Coronavirus

All products and services (All consumer statutes and regulations)

  • The Board, Bureau, FDIC, NCUA, OCC, and CSBS issued this press release to encourage financial institutions to meet the financial needs of customers and members affected by the Coronavirus.
  • The agencies will provide appropriate regulatory assistance to affected institutions subject to their supervision.