(Feb. 5, 2021) Three summaries of recent NCUA proposals were posted this week by NASCUS, dealing with the addition of a new component to the examination rating system, lending by CUSOs, and the agency’s communications program.
More specifically, the summaries (which are available to members only) outline:
- A proposal to add an “S” (for market sensitivity) to the CAMEL rating system. At its January meeting, the NCUA Board voted unanimously to issue a proposal (for a 60-day comment period) to add the component to its rating system — an addition long supported by NASCUS for the federal regulator – especially since 24 states have already incorporated the component into their own exams. The proposal would also redefine the “L” (Liquidity Risk) component in the existing rating system. According to NCUA, if adopted, the rule would likely take effect in the first quarter of 2022. The agency said that the proposal would provide greater clarity and transparency regarding credit unions’ sensitivity to market risk and liquidity risk exposures once adopted. “The proposed addition would make the NCUA’s rating system more consistent with the other financial institution regulators’ ratings system both at the federal and state levels,” the agency said. NASCUS President and CEO Lucy Ito said, when the proposal was issued last month, that state examiners have observed for some time that the extended low-yield environment may encourage greater risk taking by financial institutions. “We urge the agency to finalize this proposal as soon as possible following the comment period and as soon as practicable following necessary technical re-programming,” she said.
- A plan to allow CUSOs to make any loan a federal credit union (FCU) can make. Also at its January meeting, the board issued a proposal (for a 30-day comment period) that would add to the agency’s list of permissible CUSO services the expanded lending powers. The proposal expands the list of permissible loans by CUSOs from only business loans, consumer mortgage loans, student loans, and credit cards to any type of loan an FCU may originate, including, for example, automobile and small-dollar (payday) loans – the two types NCUA said would likely draw the newest involvement by CUSOs.
- A “request for information” (RFI) from credit unions on NCUA’s communications methods. Earlier last month, the NCUA released the RFI (for a 60-day comment period) on its communications processes in an effort, it said, to “promote efficiency and increase transparency.” Specifically, the agency said, the RFI “seeks public input on how the agency can maximize efficiency and minimize burdens associated with obtaining information on federal laws, regulations, policies, guidance, and other materials relevant to federally insured credit unions.” The RFI contained questions about the effectiveness of its press releases, social media content, and the timing and frequency of agency communications. There are also questions related to improving the agency’s websites, online data resources, and the delivery and format of supervisory guidance, NCUA said.
LINKS:
Summary: Proposed Rule, CAMELS Rating System
NASCUS Summary: Proposed rule, CUSOs (part 712)
Summary: Request for Information, NCUA Communications & Transparency
(Feb. 5, 2021) A regulatory alert focusing on 2021 threshold adjustments published by CFPB for Regulations C, Z and V was issued this week by NCUA, noting that all three were effective Jan. 1.
The alert notes that, in January, the bureau published annual adjustments for exemption thresholds under the Home Mortgage Disclosure Act (Regulation C) and the Truth in Lending Act (Regulation Z). The asset-size thresholds, the alert points out, exempt some credit unions from data collection under Regulation C and from escrow account requirements for higher-priced mortgage loans and specific qualified mortgages under Regulation Z.
The CFPB published an annual adjustment to the maximum amount consumer reporting agencies may charge consumers for making a file disclosure to a consumer under Regulation V, the alert also notes
More specifically the alert states:
- The Reg C exemption threshold increased to $48 million (meaning credit unions with $48 million or less in assets as of Dec. 31, 2020, are exempt from collecting HMDA data this year);
- The Reg Z escrow and small creditor qualified mortgages (QMs) asset-size exemption threshold increased to $2.23 billion (meaning lenders with assets of less than $2.23 billion at the end of last year are expect if other provisions of Reg Z are also met). The limit also applies during a grace period, in certain circumstances, with respect to transactions with applications received before April 1, 2022.
- The ceiling on the allowable amount a consumer reporting agency may charge for a consumer report in 2021 increased to $13. “The ceiling does not affect the amount a credit union may charge its members or potential members, directly or indirectly, for obtaining a credit report in the normal course of business,” NCUA noted.
(Feb. 5, 2021) New NCUA Board Chairman Harper met with state regulators this week during a regularly scheduled conference call of state regulators. During the hour-long “regulator to regulator” session, the new NCUA leader outlined his priorities for the agency in 2021 and responded to questions from the state supervisors … An advisory warning financial institutions of a proliferation of fraud schemes tied to health care or health insurance services bought and paid for amid the COVID-19 pandemic was issued this week by the Treasury’s Financial Crimes Enforcement Network (FinCEN). The agency said law enforcement and financial institutions have detected numerous instances of potential frauds to health care benefit programs, health insurance, and COVID-19 health care relief funds. The advisory also stated that frauds have also been seen related to COVID-19 relief funds for health care providers, such as those provided under the Paycheck Protection Program (PPP) and Health Care Enhancement Act (HCEA) … The Federal Reserve now says 2023 (rather than 2024) is the launch time for its planned FedNow instant payments system. The agency said the one-year, shortened timeframe is the result of “significant strides” made over the last several months toward program milestones. The Fed said it continues to take a phased approach to launching the service, with the initial launch set for two years from now to include core clearing and settlement functionality and key value-added features, such as a request-for-payment capability and tools to support participants in their handling of payment inquiries, reconcilements and certain exceptions … The Texas Credit Union Department has a job opening for a Director of Examination Support Activities (Director IV); see the State Job Announcements page on the NASCUS website for more information.
LINKS:
FinCEN advisory (FIN-2021-A001)
Federal Reserve updates FedNowSM Service launch to 2023
(Feb. 5, 2021) Two NASCUS events are on the horizon for March, and now’s the time to register to ensure participation in either (or both, in some cases).
On March 16, NASCUS hosts – in conjunction with the Wisconsin Department of Financial Institutions and The Wisconsin Credit Union League – the Wisconsin Executive Forum. It focuses on issues of interest to credit union board members and management. The three-hour, virtual meeting features an update on national issues and developments related to the COVID-19 pandemic (from NASCUS EVP and General Counsel Brian Knight), an overview of duties, liabilities and protections of credit union directors (from Wisconsin Credit Union League Director of Legal Affairs John C. Engel), and succession and strategic planning (from lawyer David Reed, partner in Reed and Jolly, PLLC).
The event runs from 9 a.m. to noon CT.
On March 17 and 18, NASCUS hosts the regulator-only National Meeting of state credit union supervisors. The event for top state regulators (also a virtual event) takes a close look at key issues and gives the supervisors a forum to discuss common challenges, and exchange ideas in a confidential setting. Among the issues likely up for discussion: climate change as a safety and soundness issue, the future of payment systems, and issues of interest with NCUA.
Agendas and registration for both events is posted on the NASCUS website.
LINK:
NASCUS Upcoming Events (WI Executive Forum, National Meeting)
(Feb. 5, 2021) A proposed rule allowing credit unions to capitalize interest should be finalized “expeditiously,” NASCUS said in a comment letter to NCUA this week, noting its support for the rule.
“We have no doubt credit unions will exercise the ability to capitalize interest to the benefit of members in need and are confident in the ability of state examiners to provide supervisory oversight of loan workouts and modifications,” NASCUS wrote.
The comment letter was filed in response to the NCUA Board’s proposal issued Nov. 19., the board suggested, in issuing the proposal, that continuing to prohibit the authorization of additional advances to finance unpaid interest may be overly burdensome. Removing the prohibition, the board asserted, would “assist a federally insured credit union’s good-faith efforts to engage in loan workouts with borrowers facing difficulty because of the economic disruption that the COVID- 19 event has caused.”
NASCUS agreed, writing its comment letter that finalizing the proposal would provide credit unions’ greater flexibility to work with economically distressed members. “That enhanced flexibility benefits distressed credit union borrowers by expanding the options for repayment programs as the member regains their economic footing,” NASCUS wrote. “Concurrently, provisions of the rule protecting the best interests of the borrower provide consumer protection guardrails that protect against the unlikely chance that a credit union engages in unfair lending practices.”
The state system made one recommendation through the NASCUS letter: that the agency reconsider the blanket prohibition contained in the proposal against additional advances to cover credit union fees and provide credit unions the full range of options for managing and structuring loan work outs as other depository institutions.
“Credit unions have both the ability and integrity to balance the interests of the credit union, distressed borrowers, and other members,” NASCUS wrote.
(Feb. 5, 2021) Catherine Galicia – with a long resume of service on Capitol Hill — has been selected as chief of staff by Board Chairman Todd Harper, the credit union regulator announced this week. She had been serving as senior policy counsel since 2019 to Harper, who was a board member at the time. Before joining the agency, she headed the CFPB’s legislative affairs office and has also worked for Banco Popular as vice president for government affairs, where she led the bank’s Washington office.
In a release, NCUA said Galicia is one of the highest-ranking Latinas in a Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) agency (which are NCUA, the FDIC, the OCC and the Federal Reserve), referring to a 1989 law enacted in the wake of the savings and loan crisis. She worked on Capitol Hill for 15 years, NCUA noted, during which time she served as counsel for Sens. Chris Dodd (D-Conn.) and Tim Johnson (D-S.D.) during their respective periods chairing the Senate Banking Committee; for Sen. Evan Bayh (D-Ind.) as staff director of the International Trade and Finance Subcommittee and Banking Committee counsel; as legislative director and financial service policy aide to Rep. Jim Maloney (D-Conn.); and as legislative director and financial service policy aide for Rep. Nydia Velázquez (D-N.Y.).
She holds a bachelor’s degree in history from the University of Connecticut and a Juris Doctor degree from Rutgers University School of Law. She is a member of the Massachusetts Bar Association.
LINK:
Harper Names Catherine Galicia as Chief of Staff
(Feb. 5, 2021) NASCUS’ latest summary of CFPB actions outlines the new rule on season qualified mortgages (QMs) under the Truth-in-Lending Act (Regulation Z); the summary was posted this week.
The summary is available to members only; the rule takes effect March 21.
In early December, the bureau finalized its “seasoned QM” rule, which creates a new category for first-lien, fixed-rate covered transactions that have met certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.
A loan becomes eligible as a seasoned QM, the bureau stated when the rule was finalized, when as a first-lien, fixed-rate loan has no balloon payments and meets certain other product restrictions. As under the general QM final rule, the bureau said, the creditor must also consider the consumer’s DTI ratio or residual income, income or assets other than the value of the dwelling, “and debts and verify the consumer’s income or assets other than the value of the dwelling and the consumer’s debts.”
The loan must also “season” by meeting certain performance requirements at the end of the seasoning period, CFPB said. Specifically, according to the bureau, the loan can have no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days at the end of the seasoning period. The creditor or first purchaser also generally must hold the loan on portfolio until the end of the seasoning period.
LINK:
NASCUS Summary: CFPB Seasoned Qualified Mortgage Loan Final Rule
(Feb. 5, 2021) The new chairman of the NCUA Board will discuss his priorities for the agency and the credit unions it supervises during a 90-minute webinar set for next week, the agency said this week.
Chairman Todd Harper will host the webinar Feb. 11 at 2 p.m. ET, the agency said in a release. During the event, Harper is also anticipated to address the agency’s supervisory activities and recently issued guidance and regulations.
The webinar is open to the public and there is no charge, although advance registration is required.
“Open communication with stakeholders aids the NCUA in achieving its safety and soundness mission and consumer financial protection oversight responsibilities. Such interactions also assist the agency in developing effective and efficient regulations,” Harper said in a statement in this week’s announcement. “I look forward to participating in this webinar and sharing my regulatory philosophy and other thoughts about our priorities and programs with stakeholders.”
Harper was named chairman of the three-member board by President Joe Biden Jan. 25, succeeding Rodney Hood in the position. Harper will chair his first meeting of the board one week after the Feb. 11 webinar. The Feb. 18 meeting is set for 10 a.m. ET.
Registered participants of the webinar may submit questions during the presentation or in advance by emailing [email protected]. The email should have this subject line: NCUA Chairman’s Webinar.
LINK:
Register Now for NCUA Chairman’s Webinar on Feb. 11
(Feb. 5, 2021) CFPB will end the agency’s “pause” on quarterly Home Mortgage Disclosure Act (HMDA) reporting for large issuers, CARD Act data collection and more, according to a public blog post by the agency’s acting director.
Dave Uejio, named the bureau acting director by President Joe Biden Jan. 20, also noted his desire to retain maximum flexibility for Biden’s nominee as bureau director – Rohit Chopra — and his plan to review past regulatory actions to determine how those actions best fit with the bureau’s consumer protection mission and purpose.
Last March, in response to the economic and financial impact of the coronavirus crisis, the bureau announced that as of March 26, 2020 “and until further notice, the CFPB does not intend to cite in an examination or initiate an enforcement action against any institution for failure to report its HMDA data quarterly.” Uejio’s blog post is, essentially, the “further notice” that the pause has ended.
Also in the blog post, Uejio said he has directed the agency’s division of Research, Markets, and Regulations (RMR) to take immediate steps to analyze housing insecurity (including mortgage foreclosures) and consumer finance barriers to racial equity, and to include a racial equity impact in policy proposals.
He also directed RMR to focus rulemaking on the pandemic response. To that end, he told the division to focus the mortgage servicing rulemaking on pandemic response to avert, to the extent possible, a foreclosure crisis when the COVID-19 forbearances end in March and April; and explore options for preserving the status quo with respect to qualified mortgage (QM) and debt collection rules.