(April 23, 2021) The set of proposed rules proposed earlier this month by the CFPB aimed at preventing “avoidable foreclosures” as the emergency federal foreclosure protections expire is the focus of a recent summary from NASCUS.
As are all NASCUS summaries, it is available to members only.
CFPB said, on April 9 when it issued the proposals, that is seeks to “ensure that both servicers and borrowers have the tools and time they need to work together to prevent avoidable foreclosures, recognizing that the expected surge of borrowers exiting forbearance in the fall will put mortgage servicers under strain.”
The NASCUS summary outlines the key provisions of the proposal, which include:
- A special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after Dec. 31, 2021.
- A provision permitting servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
- Temporary changes to certain required servicer communications to ensure that borrowers receive key information about their options at the appropriate time during the pandemic.
Comments on the proposals are due May 10.
(April 23, 2021) In a follow-up to its action last week essentially freezing foreclosures until year’s end, the CFPB this week issued an interim final rule stating that tenants can hold debt collectors (including lawyers) accountable for illegal evictions in the face of a moratorium on such actions outlined by federal health authorities.
Based on the Fair Debt Collection Practices Act (FDCPA), the rule requires debt collectors to provide written notice to tenants of their rights under the eviction moratorium issued by the federal Centers for Disease Control (CDC). The bureau said the rule also prohibits debt collectors from misrepresenting tenants’ eligibility for protection from eviction under the Centers for Disease Control (CDC) moratorium.
Under the rule, CFPB said debt collectors, including attorneys, seeking to evict tenants for non-payment of rent must provide tenants who may have rights under the CDC order with clear and conspicuous written notice of those rights. The notice must be provided on the same date as the eviction notice, or, if no eviction notice is required by law, on the date that the eviction action is filed, the bureau said.
Phone calls or electronic notices such as text messages or emails are not sufficient; the notice must be in writing. Sample language to satisfy the rule’s disclosure requirements is included in the rule, the CFPB said.
The bureau added that its rule does not preempt more protective state laws, which some states (and localities) have adopted to enforce their own eviction moratoria. Debt collectors may also be required to provide notice of these moratoria, the bureau noted.
The rule takes effect May 3 (which the bureau said “will give debt collectors time to come into full compliance.” Debt collectors may begin complying with the rule before the compliance date, the bureau added.
It’s a short comment period for the rule: it ends May 19.
LINK:
CFPB Rule Clarifies Tenants Can Hold Debt Collectors Accountable for Illegal Evictions
(April 23, 2021) The House passed NASCUS-backed legislation this week (again) aimed at providing a safe harbor for financial institutions seeking to serve legitimate cannabis-related businesses in states where the activity is legal. The Secure and Fair Enforcement Banking Act (SAFE Banking Act) of 2021 (H.R. 1996), adopted on a 321-101 vote, is similar to legislation that made its way through the House in the last Congress, but ultimately did not come up for a vote in the Senate. Senate Majority Leader Chuck Schumer (D-N.Y.) has indicated the Senate would consider the bill as part of broader legislation addressing marijuana use … Implementation of the new current expected credit losses (CECL) accounting standard – particularly technical issues related to purchased financial assets with credit deterioration (PCDs) and troubled debt restructurings (TDRs)– will be the subject of a three-hour virtual event scheduled for May 20, the Financial Accounting Standards Board (FASB) said this week. The virtual roundtable on CECL will be webcast live from 9 a.m. to noon ET. FASB said the roundtable – which it also termed a “listening session” – is aimed at helping FASB members and staff gather additional feedback on implementation for the CECL standard … Businesses and tax-exempt organizations with less than 500 employees — including credit unions — can receive a tax credit toward Medicare taxes they pay for providing paid time off for each employee receiving an anti-COVID-19 vaccination and for any time needed to recover from the injection, the Treasury and the IRS said this week. The announcement came after comments earlier in the day by President Joe Biden (D) outlining the program in a televised address. The Treasury and tax agency said that, as an example of use of the program, if an eligible employer offers employees a paid day off to be vaccinated the employer can receive a tax credit equal to the wages paid to its workers for that day (up to certain limits).
LINKS:
FASB to Host Virtual Credit Losses Roundtable on May 20, 2021
(April 23, 2021) While no new regulations were proposed or finalized, the NCUA Board did indicate at its meeting Thursday that final rules on two NASCUS-supported proposals – on capitalization of interest and derivatives — are nearing the point of being considered soon, according to comments during this week’s meeting.
In open session of the NCUA Board, Chairman Todd Harper said staff is “working through” issues on proposed rules for capitalization of interest and on derivatives. Harper said he was hopeful to see actions on the proposals “in the near future.”
The issue of action on proposed or pending regulations was brought up by Board Member Rodney Hood. Thursday’s meeting included only board briefings, on cybersecurity and an interim final rule addressing the impact of savings growth due to the coronavirus crisis on credit union capital.
Hood, in his comments, suggested the board work in the future “in a bipartisan manner” to develop board meeting agendas for “robust rulemaking opportunities.” Hood indicated that there are proposed rules awaiting action (and proposals waiting to be unveiled) that he and the other board members want to see move forward.
The capitalization of interest rule was proposed in November by the NCUA Board; it would remove the prohibition in agency rules against the capitalization of interest in connection with loan workouts and modifications, particularly as they struggled with the financial impact of the coronavirus crisis.
NASCUS, in its February comment letter, supported the proposal and called for its expeditious completion. NASCUS also recommended the agency reconsider the blanket prohibition against additional advances, to cover credit union fees and provide them with “the full range of options for managing and structuring loan work outs as other depository institutions.”
The derivatives rule was proposed in October; it would make the agency’s regulation less prescriptive and more “principles-based,” expanding federal credit unions’ authority to purchase and use derivatives as part of their interest-rate risk (IRR) management. NASCUS likewise supported the proposal in its December comment letter, calling for two changes: eliminate the redundant supervisory notice requirements where applicable, and incorporate exempt derivatives transactions directly into part 741.219 of NCUA rules – the section that covers federally insured state-chartered credit unions (FISCUS) and investment requirements.
NASCUS also noted that the proposal continues recognition by NCUA of the primacy of state law in determining investment authority for FISCUs.
Both items were issued for comment without objection by any members of the board.
NASCUS comment: Proposed Rule — Derivatives (RIN 3133–AF29)
(April 23, 2021) Following the Thursday NCUA Board meeting, NASCUS President and CEO Lucy Ito echoed the comments the association filed earlier this year that the agency should move forward quickly on finalizing the capitalization of interest rule. “As we said in February, we have no doubt credit unions will exercise the ability to capitalize interest to the benefit of their members in need. We are confident in the ability of state examiners to provide supervisory oversight of loan workouts and modifications,” she said. “Modernizing the existing and overly prescriptive limitations related to credit union loan modifications is crucial. When finalized, this rule will benefit both credit unions and economically distressed members – sorely needed relief for both.”
(April 23, 2021) Meanwhile, the NCUA Board did hear two briefings during its Thursday meeting: on cybersecurity and on an interim final rule (IFR) it adopted late last week on regulatory relief due to savings surges at credit unions.
Regarding the IFR, the board on April 16 announced it had adopted, by notation vote, the IFR that reduces the earnings retention requirement for credit unions classified as adequately capitalized, and permits an undercapitalized credit union to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth during the coronavirus crisis. The rule is substantially similar to a rule adopted in May 2020 but that lapsed at year-end. The rule took effect immediately and remains in place until March 31, 2022.
In a release last week, the agency said that, due to the pandemic’s continued financial and economic disruptions, it was necessary to reintroduce the two temporary relief measures.
Under the first provision of the IFR (reducing the earnings retention requirement for credit unions classified as adequately capitalized), NCUA said those credit unions unable to meet the requirement will not have to submit a written application requesting approval to decrease their earnings retention amount.
Under the second provision (permitting an undercapitalized credit union to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth due to the crisis), if a credit union becomes less than adequately capitalized for reasons other than share growth, it must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.
A 60-day comment period, ending June 18, is also open for the IFR.
The briefing on cybersecurity provided a status update (including threats and mitigation trends). Johnny Davis, the agency’s top cybersecurity expert, focused on supply chain risk management in his presentation, noting the agency will host a table-top exercise on the issue in August. He said the agency is looking for credit unions to volunteer to participate in the exercise, to gauge if there are additional items for due diligence consideration by the agency.
Davis noted that NCUA will be working with the Treasury Department, the Department of Homeland Security, and other law enforcement and intelligence agencies to carry out the planned exercise with credit unions.
NASCUS President and CEO Lucy Ito said the association looks forward to the inclusion of state supervisory authorities in this effort and other NCUA table-top exercises to more fully capture the totality of the national credit union environment in modeling supply chain attacks and other possible cyber intrusions.
At the end of the conversation at the meeting, Board Member Hood made a pitch for NCUA to procure examination authority over vendors to credit unions. Davis, in response to Hood’s query, said doing so would require an additional eight to 11 agency staff members, and an annual budget of up to $2 million (although Hood indicated that if NCUA obtains vendor exam authority, he would favor the FDIC’s model of not increasing its budget, at least initially).
“It’s important to note that NCUA would focus only on those significant service providers in core processing and payment arenas that are not already covered in the work that we do jointly with the FFIEC and our banking (regulatory) counterparts,” Davis said.
He added that “selected entities” subject to oversight would need to pose a significant concentration risk to credit unions in regard to service and products being consumed. “Exams would not be on an annual basis; likely a three to five year life cycle,” he said, calling that “very similar to collective audit spread of security controls.”
Davis said that “lifecycle” would also give the agency a chance to continuously monitor effectiveness, noting that “operational efficiencies would occur over time.”
Regarding vendor exam authority for NCUA, NASCUS supports the agency obtaining the power over technology service providers (TSPs) that provide services to federally insured credit unions — provided that any such authority requires NCUA to rely on state examinations of such service providers where such authority exists at the state level. Further, NASCUS supports efforts to strengthen state regulatory exam and supervision of third parties providing services to state-chartered credit unions.
Later this year, NASCUS, in partnership with the Credit Union Natl. Assn. (CUNA), hosts the Sept. 3-Nov. 9 Cybersecurity eSchool, a multi-week, virtual program developed to explore latest popular and important cybersecurity topics, including strategies and tactics on how to keep credit union data safe.
LINKS:
Temporary Regulatory Relief in Response to COVID-19 – Prompt Corrective Action
April 2021 NCUA Board Presentation: Cybersecurity Update (Current Events and Trends)
Cybersecurity eSchool, in Partnership with CUNA
(April 23, 2021) Pierre Jay Awards winners — Patty Idol, Sarah Vega and Kim Santos (pictured from left to right in the collage below) — were recognized Thursday for winning the 2020-2021 awards, which are the highest honors bestowed by NASCUS for persons or entities demonstrating service, commitment and leadership to the state system. The virtual presentation featured testimonials from friends, colleagues and family members in honoring the winners (see photos below). See the link below to watch the recording of the event.