CFPB dials back on HMDA penalties;
sets stage for new rulemaking
Penalties for errors won’t be assessed for Home Mortgage Disclosure Act (HMDA) data collected in 2018 – and new rulemaking designed to reconsider aspects of 2015 HMDA reporting rules is coming, the CFPB said Thursday. In a public statement, the bureau said it does not intend to require data resubmission unless data errors are material, or assess penalties with respect to errors for data collected in 2018 and reported in 2019. Beyond that, the statement said, the agency intends to open a rulemaking to reconsider the HMDA rules, “such as the institutional and transactional coverage tests and the rule’s discretionary data points.”
The CFPB statement noted that, under a rule adopted in 2015, financial institutions are required to collect and report additional mortgage information beginning on Jan. 1, 2018. In August 2017, the agency said, it issued a final rule making technical corrections, clarifying certain reporting requirements, and increasing the threshold for collecting and reporting data on home equity lines of credit for two years. “The Bureau recognizes the significant systems and operational challenges needed to meet the impending requirements under the rule,” the statement reported. “Accordingly, for HMDA data collected in 2018 and reported in 2019, the Bureau does not intend to require financial institutions to resubmit data unless data errors are material, or to pay penalties with respect to data errors.”
Potential rulemaking in reconsideration of the 2015 rules, the statement noted, may re-examine lending-activity criteria that determine whether institutions are required to report mortgage data. “The rulemaking may also look at adjusting the new requirements to report certain types of transactions. Finally, the rulemaking may re-assess the additional information that the rule requires beyond the new data points specified under the Dodd-Frank Act,” the statement added.
Financial institutions will submit their data in 2018 under the current Regulation C, CFPB said for data collected this year. Further, for this year’s data, institutions will submit data using the Bureau’s new HMDA Platform, which will be used to upload financial institutions’ loan and application registers, review edits, certify the data, and submit the data for the filing year, the agency stated.
CHANGES AHEAD FOR PREPAID RULE, BUREAU DECLARES
Changes are coming to the final rule on prepaid accounts next month – in the meantime, the effective date of the rule will be extended, the CFPB said Thursday. In a short statement, the bureau outlined its plans to amend the rule. “The Bureau expects to issue a final rule amending certain aspects of its 2016 rule governing prepaid accounts soon after the new year,” CFPB stated, It noted that as part of the process it expects “based on its review of the comments received, to further extend the effective date of the 2016 rule to allow additional time for implementation of the final rule.” The agency noted that it had proposed changes to the rule in June, the comment period ended in August, and the record is now “closed for public input.”
A federal court in Washington is scheduled hear arguments today (Friday) over why it should (or should not) issue a preliminary injunction declaring the deputy director of the CFPB the one and only leader of the agency – or leave the current acting director in the post as the top regulator. CFPB Deputy Director Leandra English is asking U.S. District Court Judge Timothy Kelly in Washington to declare her the director of the consumer bureau, asserting that the law setting up the CFPB makes her so. She was appointed to her current post by outgoing Director Richard Cordray (who resigned shortly after appointing her). English points to the Dodd- Frank Act to support her position, which states the deputy director takes over in the absence of the director.
President Donald Trump, however, appointed Office of Management and Budget (OMB) Director Mick Mulvaney to be acting CFPB director the day Cordray stepped down (Nov. 24). Trump pointed to the Federal Vacancies Reform Act of 1998 (FVRA), which gives the president the power to appoint replacements for federal leadership vacancies.
Kelly denied a request by English late last month for a temporary restraining order to block Mulvaney from taking the director’s seat; he has served as de facto director of the agency since then. Kelly’s decision could not be appealed, but he did allow the motion for a hearing on a preliminary injunction to move forward. A decision resulting from today’s hearing could be appealed.
REPORT SINGLES OUT CU GROWTH, STATE-BY-STATE, AT END OF Q3
Federally insured credit unions in Idaho and Vermont showed the biggest surge in asset growth in the year ended Sept. 30, according to state figures from the end of the third quarter reported this week by NCUA. In a report, NCUA said that Idaho had median asset growth of 8.3% (meaning, the agency said, that half of all federally insured credit unions in the state had asset growth at or above 8.3% percent and half had asset growth of 8.3 percent or less). Vermont came in second, with median asset growth of 6.2% at the year ended Sept. 30. Nationally, median assets growth was 2.9%, the report stated. At the other end of the scale, the agency said, credit unions in the District of Columbia posted median asset loss of -1%. Assets grew slowest (at the median) in Louisiana (0.3%) and Arkansas (0.4%).
As for loans, Nevada and Oregon (at 12.3% and 11.8%, respectively) showed the fastest median growth rates; Wyoming and New Jersey (0.2% and 0.3%, respectively) were slowest. National median loan growth was 5% during the period, according to NCUA.
The agency said that 81% of credit unions across the country had positive net income during the first three quarters of 2017. All Nevada credit unions reported positive net income, and 97% of Oregon credit unions reported the same. The share of federally insured credit unions with positive net income was lowest in the District of Columbia (55%), followed by Arkansas and Delaware (both 67%).
Reflecting its net income reporting, Nevada credit unions showed highest annualized return on average assets (ROAA) during the first three quarters of the year, at 83 basis points; Vermont and Utah both clocked in with annualized ROAA of 73 bp for the same period. Credit unions in DC and Delaware showed the weakest annualized ROAA at 13 bp and 21 bp, respectively. Nationally, the median annualized ROAA was 39 bp in the first nine months of 2017, up slightly from 37 bp in the first nine months of 2016.
Membership growth, NCUA pointedly noted, remains strongest in larger credit unions, stating that about 75% of credit unions with declining memberships had assets of less than $50 million. Overall, the NCUA report stated, 50% of federally insured credit unions had fewer members at the end of the third quarter of 2017 than a year earlier; median membership growth was negative in 22 states, the agency stated. Arizona (at 2.5%) had the highest median membership growth rate over the year ending in the third quarter of 2017, NCUA stated, followed by Washington (2.4%). At the median, the agency stated, membership declined the most in the District of Columbia (-1.8%), followed by Pennsylvania (-1.2%).
A new federal credit union – with an estimated membership potential of 283,000 – has been chartered in North Carolina, and will operate under a broad charter serving employees of local government in the state, with an emphasis on business lending. NCUA this week said it chartered Civic Federal Credit Union in Raleigh to serve the employees who regularly work in local government in North Carolina, including municipal, corporate and other legal entities. The credit union, NCUA said, will operate under a “single common-bond” charter that includes persons in a trade, industry or profession (TIP). Civic FCU is the fourth FCU chartered this year.
The federal regulator said the credit union plans to emphasize mobile access and provide a “remote video experience center.” As the credit union grows, NCUA added, management plans to offer more diversified services, including real estate loans, education loans, and health savings accounts. The credit union also plans to offer multiple advanced services, including automated loan decisions, to both natural-person and commercial members, according to NCUA, and will be managed by “a board of directors and management team with proven experience in credit union management and commercial banking.”
Issued in concert with federal banking regulators, a letter providing guidance for institutions affected by a major disaster – including hurricanes and flooding – has been published by NCUA. The letter outlines the practices examiners will follow in the assessing financial and operational conditions of credit unions that have been directly affected by an event which results in a presidential declaration of a major disasters – including hurricanes and flooding.
The NCUA “Letter to Credit Unions” 17-CU-08 providing guidance is similar to the letter that was published last week by the Federal Deposit Insurance Corp. (FDIC), Office of the Comptroller of the Currency (OCC) and the Federal Reserve for banks and savings institutions. The guidance, NCUA stated, highlights the importance of examiner flexibility in addressing issues credit unions face, and the “critical need to accurately portray the financial and operating condition of those institutions.” It also encourages examiners to retain flexibility in their follow up supervisory plans, “given the unique and long-term nature of the problems these institutions face,” NCUA said.
The letter provides all federally insured credit unions with guidance given to the NCUA field staff concerning examinations of credit unions affected by a major disaster, NCUA stated. Noting that the guidance was produced jointly by the four federal financial institution regulators, NCUA advised that it is formatted for the banking regulators’ CAMELS rating system. However, the credit union regulator added, the guidance applies equally to the NCUA CAMEL rating system.
TAX BILL PROVISION RAISES QUESTIONS OF ‘FAIRNESS’
Questions remain about the impact on credit unions of provisions in the sweeping tax legislation poised to become law when President Donald Trump signs the measure (any time between now after the first of January). In particular: A provision affecting executive compensation for tax-exempt organizations (such as credit unions). Under the provision (according to an analysis distributed by the Credit Union National Assn. (CUNA)), beginning in tax years after 2017 tax-exempt entities would pay a 21% excise tax for each of the five highest-paid employees whose compensation exceeds $1 million annually. CUNA, in its analysis, said the provision is designed to create parity with respect to for-profit organizations, which may only deduct the first $1 million of employees’ compensation. However, the new law “grandfathers” compensation plans for for-profit organizations by exempting from deductibility limits for existing executive compensation contracts in effect on or before Nov. 2.
The issue is one of fairness for non-profit, tax-exempt organizations, according to the American Society of Association Executives (ASAE, which counts several NASCUS staff as members, including President and CEO Lucy Ito). The “association for associations” believes that if Congress “grandfathers” existing contractual arrangements for for-profit corporations, then tax-exempt organizations deserve the same treatment. Both ASAE and the credit union trade groups have vowed they will address the issue when a technical corrections bill comes up (likely in January) to fix a number of glitches in the tax bill.
NEW MEMBERS: Credit unions in OH, GA join to support state system
NASCUS welcomes two more credit unions to its growing membership roster: Freedom 1st CU of Dayton, Ohio – a $35 million-in-assets institution led by President and CEO Deborah DeVous, and; North Main CU of Cornelia, Georgia – a $13.6 million-in-assets, led by President and CEO Melany Ward.
BRIEFLY: Credit card payments on the rise; no NASCUS Report next week
Credit cards are being used for payments more frequently – and more often for remote versus in-person payment – a new Federal Reserve study released this week stated. Additionally, the study showed that the 10.2% growth in use of credit cards for payments was far ahead of growth of other types of payment cards – such as debit cards, which slowed in use. Payments by credit cards totaled $3.27 trillion last year, up $37.3 billion from 2015. In the years 2012-15, the annual rate of increase in credit cards for payments was 8.1%, the Fed said … NASCUS Report takes a break next week in observance of the holidays; publication will resume, as per usual, Jan. 5.
Patrick Keefe, email@example.com