(April 2, 2021) Two new summaries – of a interim final rule concerning enhancements to NCUA’s Central Liquidity Facility (CLF) and of an NCUA “regulatory alert” on CFPB’s expanded exemptions concerning higher-priced mortgage loans (HMPLs) – were published by NASCUS this week.
As a benefit of membership, only members have access to the summaries.
Regarding the CLF enhancements, the NCUA Board approved the interim final rule (IFR) at its meeting March 18. Generally, it extends provisions enacted under the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that expanded CLF access beyond natural person credit unions to include access for corporate credit unions or a group of corporates. That expansion, implemented under an interim rule a year ago, was due to expire Dec. 31, 2020, but was extended through Dec. 31, 2021, under the Consolidated Appropriations Act, 2021, enacted into law late last year. Also extended are provisions approved in April governing CLF capital stock subscriptions by agent members.
The IFR also extends and clarifies the regulatory provisions related to a member withdrawing from CLF membership: The immediate withdrawal period for credit unions that joined the CLF between April 29, 2020, and Dec. 31, 2020, now continues through Dec. 31, 2021; for those joining between Jan. 1 and Dec. 31, 2021, the immediate withdrawal period continues through Dec. 31, 2022.
The rule took effect March 24; comments are due by May 24.
Regarding the regulatory alert on HPMLs issued in mid-March, the summary addresses the CFPB’s rule issued in February. The rule exempts from the HPML escrow requirement any loan made by a bank or credit union and secured by a first lien on the principal dwelling of a consumer if:
- the institution has assets of $10 billion or less (as of Dec. 31 in the preceding year);
- the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; and
- certain of the existing HPML escrow exemption criteria are met.
Proposed in July, CFPB said the rule represents the last mandatory rulemaking to implement the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S.2155).
LINKS:
NASCUS Summary: Interim Final Rule, Central Liquidity Facility (CLF) (members only)
(April 2, 2021) Information on how credit unions and banks use artificial intelligence (AI) in their activities, including fraud prevention, personalization of customer services, credit underwriting, and more is sought under a request for information released this week by NCUA, CFPB and the federal banking agencies.
The agencies are seeking input from a broad audience, including not only financial institutions, but also trade associations, consumer groups, and other stakeholders. The agencies said they want to better understand:
- financial institutions’ use of AI, including machine learning;
- appropriate governance, risk management, and controls over AI;
- challenges in developing, adopting, and managing AI; and
- whether clarifications are needed.
Regarding clarifications, the agencies said they are seeking to learn whether any are necessary from the agencies that would be helpful for financial institutions’ use of AI “in a safe and sound manner and in compliance with applicable laws and regulations, including those related to consumer protection.”
Comments are due June 1 (60 days after the RFI’s publication in the Federal Register).
LINK:
Agencies Seek Wide Range of Views on Financial Institutions’ Use of Artificial Intelligence
(April 2, 2021) Seven policy statements issued in 2020 from late March to early June that provided temporary flexibilities to financial institutions in the areas of consumer mortgages, credit reporting, credit cards, and prepaid cards are rescinded as of April 1 (Thursday), the Consumer Financial Protection Bureau (CFPB) announced this week.
The bureau also said it was rescinding its 2018 bulletin on supervisory communications and replacing it with a revised one describing its use of matters requiring attention (MRAs) “to effectively convey supervisory expectations.” That new bulletin, 2021-01, states that “effective immediately,” the bureau will no longer use “supervisory recommendations” in these communications.
“We are now over a year into the disruptive and deadly COVID-19 crisis. The virus has affected industry as well as consumers, but individuals and families have been hardest-hit by the pandemic’s health and economic impacts,” said CFPB Acting Director Dave Uejio. “Providing regulatory flexibility to companies should not come at the expense of consumers. Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities. The CFPB’s first priority, today and always, is protecting consumers from harm.”
The rescinded policy statements were issued between March 26 through June 3, 2020, and temporarily provided financial institutions with flexibilities regarding certain regulatory filings or compliance with consumer financial laws and regulations. The bureau said the rescissions “reflect the Bureau’s commitment to consumer protection, and the fact that financial institutions have had a year to adapt their operations to the difficulties posed by the pandemic.”
The bureau, in its release, included links to each policy statement rescission notice and the new MRA bulletin.
Rescission of Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic (March 26, 2020)
Rescission of Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act (March 26, 2020
(April 2, 2021) Two supervisory actions were taken this week, the first by NCUA as it closed one credit union (the first of the year) and by the Texas Credit Union Department which conserved another.
NCUA closed tiny Indianapolis’ Newspaper FCU (in Indianapolis), initially conserved in January, on Wednesday. The $6.4 million FCU (with 1,143 members) became the first federally insured credit union closed in 2021, NCUA said. It was chartered 60 years ago and served current and past employees of the Indianapolis Star and a few other select employee groups in the city. Elements Financial FCU, also of Indianapolis – a $2 billion credit union – assumed most of the credit union’s shares; however, a portion of shares was retained by the NCUA.
In January, NCUA said the credit union was conserved because of unsafe and unsound practices. This week, the agency said liquidation was necessary “after determining the credit union was insolvent and has no prospect for restoring viable operations on its own.”
Earlier in the week, NCUA announced it was named by the Texas Credit Union Department as conservator of the $106.2 million, 12,500-member Edinburg Teachers CU (of Edinburg, Texas). The credit union serves several education-based and other employee groups as well as their family members, according to NCUA.
In a release, NCUA said it and the TCUD would work to resolve operating issues at the credit union with the goal of protecting member assets and seeking a resolution to identified problems. “Neither the Texas Credit Union Department, nor the NCUA have made any decisions about the long-term future of the credit union; however, continued service to members is a priority,” the agencies said in a joint statement.
LINKS:
Indianapolis’ Newspaper Federal Credit Union Closes, Most Shares Assumed by Elements Financial
Edinburg Teachers Credit Union Conserved
(April 2, 2021) If you couldn’t meet the deadline for filing your comment letter on a proposed rule affecting credit union service organizations (CUSOs), you’ve got more time: late last week, NCUA extended the comment period 30 days, to April 30.
The proposed rule would expand the list of permissible activities of CUSOs, deeming as permissible for the service organizations the origination of any type of loan that a federal credit union may originate. The proposal would also grant the NCUA Board additional flexibility to approve permissible CUSO activities and services.
Comments are also sought on broadening federal credit unions’ authority to invest in CUSOs.
The proposal originally held a March 29 comment deadline. Late last week, the agency said it was extending the deadline 30 days (on a unanimous notation vote by the NCUA Board); the notice of extension was published Wednesday in the Federal Register. It was ssued Jan. 14 on a vote of 2-1 of the NCUA Board, with then-Board Member Todd Harper dissenting (Harper was elevated to the chairman’s post later that month). Harper, making his objection, noted the NCUA’s lack of direct supervisory authority over CUSOs and indicated the proposal raised potential consumer protection concerns.
LINK:
NCUA Board Extends Comment Period for Proposed CUSO Rule
(April 2, 2021) The Oregon Department of Consumer and Business Services has an opening for a mortgage banker/broker examiner (financial examiner 2). The closing date for the position is April 12. For more information, see the NASCUS State Job Announcements page (link below) … Mortgage lending data from 2020 is now available via the FFIEC’s Home Mortgage Disclosure Act (HMDA) platform, it was announced this week. The data, published by the exam council, come from about 4,400 HMDA modified loan application register (LAR) filers … A joint webinar of NCUA and the FDIC will be held April 27 (at 1 p.m.) on youth financial education, in celebration of April as National Financial Capability Month, the credit union and banking agencies announced this week. The 90-minute program will dive into the importance of financial account access and financial education for young people participating in employment programs.
LINKS:
NASCUS State Job Announcements
2020 HMDA Data on Mortgage Lending Now Available
Registration: Account Access and Financial Education for Youth Participating in Employment Programs
(April 2, 2021) NASCUS has reappointed Steve Pleger, senior deputy commissioner of the Georgia Department of Banking and Finance, as its representative on the FFIEC’s State Liaison Committee (SLC), one of five members of the committee. Pleger was named to a second two-year term on the committee, which represents state supervisory interests before the exam council.
Also appointed to the committee are:
- Ohio Division of Financial Institutions Superintendent Kevin Allard (appointed by the American Council of State Savings Supervisors (ACSSS) for a first full two-year term.
- Arkansas Bank Department Commissioner Susannah Marshall (designated by CSBS) to a first two-year term.
The terms of all three end on March 31, 2023.
The other members of the SLC are Tom Fite, Director, Indiana Department of Financial Institutions (selected by the FFIEC); and Melanie Hall, Commissioner, Montana Division of Banking and Financial Institutions, (also selected by the exam council).
Meanwhile, NCUA Board Chairman Todd Harper has been named FFIEC chairman for a two-year term running through March 31, 2023. Also named to the council was Acting Comptroller of the Currency Blake Paulson, who will serve as its new vice chairman for the same two-year term.
“Congratulations to former NASCUS Chairman Steve Pleger for taking on another term as the state credit union system’s representative on the SLC; he has well-represented the interests of state credit union supervisors,” said NASCUS President and CEO Lucy Ito. “And congratulations to other continuing and new members of the committee; we look forward to working with them.”
Ito also extended salutations to NCUA’s Harper to lead the exam council. “Chairman Harper is a terrific choice to lead the council, particularly with his strong understanding of the financial services regulatory framework, its interaction with credit unions, and his commitment to communication, cooperation and coordination,” Ito said.
LINKS:
Marshall Appointed to FFIEC State Liaison Committee, Allard and Pleger Re-Appointed
Todd M. Harper Named FFIEC Chairman
(April 2, 2021) Seemingly pulling no punches, the CFPB late this week sent a warning to mortgage servicers: unprepared for an expected surge in homeowners needing assistance is unacceptable – and the companies should “gear up.”
In a compliance bulletin, the bureau said mortgage servicers should take “all necessary steps” to prevent a wave of what it called “avoidable foreclosures” coming this fall. “Millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall,” the bureau stated in the bulletin. “Servicers should dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help.”
The bureau said it will closely monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation. CFPB added that it will consider a servicer’s overall effectiveness in helping consumers when using its discretion to address compliance issues that arise.
“Our first priority is ensuring struggling families get the assistance they need,” bureau Acting Director Dave Uejio said in a statement. “Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”
In its release, the agency stated that as of January approximately 2.7 million borrowers remained in federally- backed mortgages with access to forbearance; 2.1 million borrowers, the bureau said, were in forbearance and at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages not in forbearance programs were at least 90 days delinquent, the agency said.
CFPB added that industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. Beginning with the expiration of the federal foreclosure moratoriums put in place by last year’s Coronavirus Aid, Relief, and Economic Security (CARES) Act at the end of June, CFPB said, “mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance.”
To meet this surge, servicers will need to plan now, the bureau said. “In its oversight of mortgage servicers, the CFPB is focused on preventing avoidable foreclosures,” the agency added.
Particular attention will be paid, the bureau said, to how well servicers are being proactive, working with borrowers, addressing language access, evaluating income fairly, handling inquiries promptly, and preventing avoidable foreclosures
LINK:
CFPB April 1, 2021 compliance bulletin.
(April 2, 2021) Evictions by major multistate landlords, eviction management services and private equity firms, among others, will be targeted for investigation by the CFPB and the Federal Trade Commission (FTC) the agencies said in a joint release this week.
Acting Director Dave Uejio and Federal Trade Commission (FTC) Acting Chairwoman Rebecca Slaughter in the release said the action was aimed at helping stop illegal evictions and protecting consumers facing economic hardship resulting from the coronavirus crisis.
“We will not tolerate illegal practices that displace families and expose them – and by extension all of us – to grave health risks,” the pair said. “Evicting tenants in violation of the CDC (Centers for Disease Control and Prevention), state, or local moratoria, or evicting or threatening to evict them without apprising them of their legal rights under such moratoria, may violate prohibitions against deceptive and unfair practices, including under the Fair Debt Collection Practices Act (FDCPA) and the Federal Trade Commission Act.”
The two agency leaders cited a CFPB report released at the beginning of March which, they asserted, found that renters are particularly endangered, with more than 8.8 million tenants behind on rent. They said those tenants at risk of homelessness are disproportionately people of color, primarily Black and Hispanic families.
Federal, state, and local governments, they noted, have put in place protections against evictions to keep people in their homes and to stop the spread of COVID-19. “Research has shown that eviction moratoriums save lives,” they said. They added that the CDC extended the federal moratorium on evictions by three months.
“Unfortunately, there are reports that major multistate landlords are forcing people out of their homes despite the government prohibitions or before tenants are aware of their rights,” the agency leaders stated. “Depriving tenants of their rights is unacceptable. Many of the tenants at risk of eviction are older Americans and people of color, who already experience heightened risks from COVID-19.”