THIS WEEK: CORONAVIRUS RESPONSE – State system backs PPP loan rule … Summary looks at TRID adjustments … NCUA’s Hood supports TCPA exception … Letters describe military as ‘low income’ … and update off-site exam program; Guide outlines HMDA reporting; New appraisal thresholds reviewed; StateFocus examines legislative action; BRIEFLY: PCA rule takes effect, ideas on ‘returning to normal,’ BSA webinar planned; Welcome OH CEO
Rule implementing PPP loans
earns support from state system …
The state credit union system supports NCUA’s rule implementing the Paycheck Protection Program (PPP), noting the regulation “removes unnecessary and unintended obstacles to credit union participation in the PPP and facilitates the delivery of the program’s benefits to thousands of credit union small business members,” NASCUS wrote in a comment letter this week.
The letter to NCUA – responding to the agency’s April 21 request for comments on its interim final rule (IFR) implementing the PPP component of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) – commended NCUA for “moving expeditiously in response to the COVID-19 pandemic crisis.” The IFR also took effect April 21; the modifications it made to NCUA existing rules stay in effect until Dec. 31, unless extended.
NASCUS told the agency it supports adding PPP loans to the category of low-risk assets, which assigns the loans a 0% risk weight. The state system also agrees, NASCUS wrote, that PPP loans pledged as collateral to the Federal Reserve’s PPP Facility should be excluded from the calculation of regulatory capital.
“Credit unions have closed billions of dollars of loans for their members as part of the federal government’s response to the COVID-19 crisis,” NASCUS wrote. “The additional liquidity provided by the PPP Facility will enable participating credit unions to make new loans available to members in need of credit during the pandemic.”
The association also threw its support behind the IFR’s provisions excluding PPP loans from the agency’s definition of “commercial loan.” NASCUS told the agency that there is little safety and soundness risk associated with the loans; therefore, NASCUS said, applying the enhanced due diligence under existing rules to the loans “is of little supervisory benefit.”
“We also agree that eliminating the regulatory and supervisory burdens of the commercial loan rule as an impediment to credit union participation in the PPP is sound public policy and consistent with Congress’ intent for implementation of the CARES Act,” NASCUS told the agency.
NASCUS also supported the agency in issuing the IFR without advance notice and comment and delayed effective date. “Given that the PPP is well underway and has a limited duration, it is in the best interest of the public and the credit union system to immediately remove these barriers to credit union participation in the program,” NASCUS wrote.
“The IFR is important in helping to ensure that credit unions are not penalized solely for contributing to the administration of the PPP and participating in the PPP Facility.,” the association said. “The state credit union system stands prepared to continue doing its part to aid in the national response to the economic fallout from the pandemic.
Summary looks at NCUA reg alert on TRID adjustments …
Among the latest summaries from NASCUS: an outline of NCUA’s May 12 Regulatory Alert urging credit unions to advise mortgage borrowers with a need for immediate access to funds that they can forego waiting periods for some of the loans, due to the coronavirus crisis.
In the alert (20-RA-03) NCUA noted that in late April the CFPB issued an interpretative rule that consumers affected by the coronavirus pandemic can exercise their rights to modify or waive certain required waiting periods under the Truth in Lending Act/Real Estate Settlement Procedures Act (TILA-RESPA) integrated disclosure rule (also known as the “TRID” rule) and Regulation Z rescission rules.
NCUA’s alert said the interpretive rule (which took effect May 4) “provides that the need to obtain funds and not delay closing for reasons related to the COVID-19 pandemic may be a ‘changed circumstance’ or ‘bona fide personal emergency’ which would permit borrowers to waive waiting periods under both rules, or permit a credit union to amend some TRID documents.”
The agency also noted that, while the rule does not require credit unions to inform borrowers of their ability to forego the waiting periods, it encouraged credit unions to “advise borrowers with a need for immediate access to funds of the right and manner to utilize these waiver provisions.”
Hood voices support for TCPA call exception …
NCUA Board Chairman Rodney Hood has voiced support to a third-party petition to the Federal Communications Commission (FCC) to allow financial institutions to make some automated calls to consumers under an “emergency purposes exception” of the Telephone Consumer Protection Act (TCPA) in light of the COVID-19 pandemic.
In a May 19 letter (released by the agency last week via a press release), Hood told FCC Chairman Ajit Pai that NCUA has supported and encouraged federally insured credit unions to provide credit union members with prudent debt relief and help members understand the range of relief possibilities. “Consumers may benefit from additional information about the various loan relief programs and options that may be available to them,” Hood wrote. “Autodialed calls providing information about payment deferrals, fee waivers, loan term extensions, other loan modifications, and forbearance could assist consumers during this challenging time.”
Hood asserted that credit unions and other financial institutions were not seeking permission to make automated calls related to advertising, telemarketing, or seeking payment on a debt. He wrote that financial institutions must remain subject to the TCPA’s existing restrictions on autodialed advertising and debt collection calls. “Finally, I note that federally insured credit unions, like other financial institutions, remain subject to all other consumer protection laws that apply to any loans that are the subject of autodialed calls.”
A petition from financial institutions and others has asked the FCC to determine that, in light of the COVID-19 pandemic, certain automated calls should fall under the emergency purposes exception of the Telephone Consumer Protection Act. Hood said the petitioners were asking the commission to find permissible calls in three “broad” categories: options for loan modifications, changes to how consumers access their institution’s services, and warnings about potential fraud.
Letters describe how ‘low-income’ military will be counted …
Designating military personnel as “low-income” credit union members, announced May 7, requires some changes in how NCUA counts those members – but that won’t require federally insured credit unions (FICUs) to do anything, as the agency will handle the back-office actions, NCUA said in a letter this week.
In its letter to credit unions (LTCU 20-CU-16), NCUA said its May announcement that military personnel would be designated as “low-income members” required a methodology change to how the agency calculates the number of low-income members of the institution for determining the “low-income credit union” (LICU) designation from the agency.
The agency said its primary methodology for determining low-income status is to geocode members’ addresses obtained through credit union exams, and assign incomes based on those addresses. “However, the geocoding process cannot account for military personnel with Army/Air Post Office (APO) or Fleet Post Office (FPO) mailing addresses,” the agency said. “As a result, they were excluded from the analysis as to whether the majority of the credit union’s membership are low-income members,”
To correct for that, the agency said in the letter that it would no longer exclude members with an APO or FPO mailing address. Instead, the agency said it will now total the number of members with the military mailing address. NCUA said those members will be included in the total number of members served, and a percentage will be reflected as low-income members in determining whether the majority of the credit union’s members are low-income.
“This change to the low-income designation methodology will be handled by the NCUA — it does not result in any additional burden or requirements for credit unions,” the letter stated.
The agency intends to apply the new methodology immediately. Additionally, NCUA acknowledged that an APO or FPO mailing address may not cover all military members at credit unions (and may limit some credit unions serving military members from qualifying for low-income status). To make up for that, and to qualify for the designation, the agency suggested credit unions provide additional information, such as:
- A list identifying members who are active-duty military personnel;
- “Granular data” for military members, including active-duty and members of the Reserve and the National Guard. Data could include actual income, paygrade, years of service, or rank of its military members;
- “Any relevant analysis” that demonstrates that all or some portion of the credit union’s military membership, including active-duty and members of the Reserve and the National Guard, qualify as low-income.
… and update agency off-site exam, supervision program
NCUA is continuing its offsite exam and supervision work as a result of the coronavirus crisis, but expects to return to issuing examination reports, according to a second letter to credit unions (LTCU 20-CU-17) issued this week by the agency. Changes in the letter take effect June 1.
According to the letter, the agency’s offsite policy for all workers and contracted support staff will remain in effect until further notice. “However, the NCUA may conduct onsite work at a credit union if necessary to address serious or time-sensitive matters,” it said.
NCUA said that, generally, credit unions will not be required to provide information to conduct offsite work. But, more information can mean less time in the future with examiners. “The more information a credit union can provide for offsite reviews, the more likely the NCUA will not have to return to the credit union until the next examination cycle,” the agency said.
Further, the agency said its regional offices will continue to coordinate with state supervisory authorities on examination and supervision efforts for federally insured, state-chartered credit unions.
Since March 16 (when the policy was first announced), NCUA said it had conducted offsite examination work at more than 100 credit unions (median asset size: of $56 million). The agency said, however, that both credit union staff and examiners “have also noted that completing an examination offsite may take longer than an onsite examination.”
Examination reports, the agency said, would be issued for exams completed offsite. However, NCUA said it acknowledged that credit unions need to focus on providing service to their members. “Any corrective actions issued to a credit union will consider the impact of the COVID-19 pandemic on the credit union’s operations and financial condition, and will be prioritized appropriately,” the agency said.
The agency said it would not criticize credit union efforts to provide prudent relief for members during the pandemic. “However, examiners will consider whether such efforts elevate, or reduce, a credit union’s risk exposure. If a credit union has taken on additional risk, even if done prudently, this may be reflected in the credit union’s applicable CAMEL and risk ratings,” NCUA said.
NCUA added that it has instituted an “enhanced internal review” process for all exam reports, and advised credit unions to work with examiners and supervisory examiners if they require flexibility in meeting deadlines or have concerns about exam reports.
Guide outlines HMDA reporting thresholds
Changes in the reporting thresholds under mortgage reporting rules are now reflected in the Small Entity Compliance Guide published by CFPB this week.
In April, the bureau issued a final rule amending its regulations under the Home Mortgage Disclosure Act (HMDA) that set the permanent threshold for collecting and reporting data about closed-end mortgage loans at 100 loans. That’s up from 25 loans. The rule takes effect July 1.
The final rule also increased the permanent threshold for collecting and reporting data about open-end lines of credit from 100 to 200, effective Jan. 1, 2022, when the current temporary threshold of 500 of open-end lines of credit expires, the agency said.
CFPB said its compliance guide – which the agency systematically updates as new and amended rules are issued – is aimed at highlighting information that financial institutions and those that work with them “might find helpful when implementing the HMDA Rule.” Among other things, the guide outlines within the rule key changes and effective dates, institutional coverage, transactional coverage, reportable data, recordkeeping and reporting, enforcement provisions and more.
Summary reviews new appraisal thresholds
An increase in the real estate appraisal threshold from $250,000 to $400,000, effective April 30, is the focus of a new summary of an NCUA interim final rule (IFR), published by NASCUS and now posted on the association’s website.
Under the final rule, NCUA said in April when the board adopted it, if property involved in a residential real estate transaction is below the new higher threshold, federally insured credit unions will be required to obtain written estimates of the market value of the real estate, consistent with safe and sound practices.
The agency also noted then that the final rule explicitly incorporates the existing statutory requirement that appraisals be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). Additionally, NCUA said, the final rule aligns the agency’s appraisal rule with the requirements of the Federal Reserve, the FDIC and the OCC.
In its comment letter filed in January, NASCUS supported the proposal to raise the threshold, but urged the agency to consider an even higher threshold level. “NASCUS would support an even higher threshold and believes there is merit to considering $500,000 as a threshold,” the association wrote. Doing so, NASCUS asserted, would not compromise safety and soundness, would not adversely affect consumer protection, and might result in a benefit to consumers.
Also in April, the board approved the same threshold level of $400,000 below which appraisals would not be required for residential real estate-related transactions.
StateFocus examines latest legislative action
Recent legislative actions in the states – including a new credit union charter law in the District of Columbia, debate over liability protection in Ohio, defeat of a foreclosure moratorium in Illinois, and consumer protection in California – are highlighted the latest issue of StateFocus, sent this week to all NASCUS members. The newsletter, provided as a member service to association members, is published monthly (or more frequently, as warranted) to shine a light on action in the states – including recent legislative and regulatory developments, as well as other issues of interest in the states to the credit union system.
BRIEFLY: IFR on PCA easing takes effect; Guide shares ideas about ‘returning to normal;’ Agency plans BSA webinar June 17; Welcome new Millstream CU CEO
An earnings retention requirement is waived for “adequately capitalized” credit unions and net worth restoration plan requirements eased for some “undercapitalized” credit unions under an interim final rule from NCUA that took effect Thursday. The rule, issued last week by the NCUA Board and out for comment until June 29, is one of the actions taken by the agency to help ensure that federally insured credit unions (FICUs) remain operational and liquid during the COVID-19 crisis. The interim rule expires Dec. 31 … Assisting credit unions and other financial institutions in determining how to safely return workers to offices and other facilities during the COVID-19 pandemic is the focus of a guide highlighted to NASCUS members this week in a separate communication. The guide was produced by the Financial Services Sector Coordinating Council (FSSCC), a private group; see the link below for details … “Best practices” and pitfall avoidance for credit union Bank Secrecy Act (BSA) compliance programs will be discussed during a webinar slated June 17 hosted by NCUA, the agency said this week. The 90-minute session – “The Bank Secrecy Act: Review and Reminders” – has a scheduled start time at 3 p.m. and runs for 90 minutes, the agency said. Topics will include timely Section 314(a) records searches; BSA training for appropriate staff; and real-world case studies of BSA compliance failures. There is no charge for the event; advance registration is required … Congratulations to Joshua Reams, new president and CEO of Millstream Credit Union in Findlay, Ohio; former Millstream CEO Karen Reams retired in March 2020.
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