(Feb. 12, 2021) The CFPB is voicing a more aggressive tone under the leadership of Acting Director Dave Uejio, as evidenced by two initiatives he announced this week.
Uejio is serving in the acting role after former Director Kathleen Kraninger resigned Jan. 20 (at the request of the incoming Biden administration), and as Rohit Chopra, President Joe Biden’s pick to be bureau director for a five-year term, awaits Senate confirmation.
First, Uejio announced that it is searching to build out its stable of attorneys “at all experience levels” in multiple agency functions. The recruiting effort, according to Uejio, is aimed at assisting the agency to achieve “vigorous oversight of all applicable federal laws and the fullest utilization of our legal authorities”
In a blog post, he said Americans’ financial lives “have suffered tremendously as a result of the COVID-19 pandemic, the associated economic dislocation, and ongoing racial inequity.”
“The CFPB was created for moments like this,” he wrote.
“We must hold accountable companies that break the law and harm American consumers and small businesses during this time of incredible financial stress,” the agency acting director stated. “To do this, we need the fullest talents and passion of the American public. The Bureau has one of the most remarkable workforces I have ever seen, and I invite you to seize the moment and join us.”
Second, and later in the week, Uejio announced that the bureau’s division of consumer education should “redouble its efforts to ensure the Bureau engages all consumers who are economically suffering,” a change in strategic direction for the unit. He also signaled a more vigorous response from the agency on consumer complaints, especially those submitted by minority communities.
In a letter to bureau staff, he pointedly noted that consumer complaints – particularly those submitted by “Black, Brown and Indigenous communities” – “get the response and the relief that they deserve.”
“I understand that some companies have been lax in meeting their obligation to respond to complaints,” Uejio wrote. “It is the Bureau’s expectation that companies provide substantive responses that address the issues consumers describe in their complaints.
“I also understand that consumer advocates have found disparities in some companies’ responses to Black, Brown, and Indigenous communities,” Uejio continued. “This is unacceptable. I have asked Consumer Response (the unit in the agency that follows consumer complaints) to prepare a report highlighting the companies with a poor track record on these issues. We will be publishing this analysis and the senior leadership of these companies can expect to be hearing from me,” he wrote.
LINK:
CFPB Blog Post: Calling attorneys interested in joining the CFPB
Consumers and their experiences to be at the foundation of CFPB policymaking
(Feb. 12, 2021) A reprieve for financial institutions from reserve requirements on transactions accounts, implemented last March to keep money flowing amid the coronavirus pandemic, will be permanent under a final rule approved this week by the Federal Reserve Board.
Last year, the Fed Board issued an interim rule setting the transaction account reserve requirement to zero and sought comments on making this permanent; none were submitted. The Fed’s final rule takes effect March 12.
The Fed’s Reg D implements the Fed’s authority under Section 19 of the Federal Reserve Act to require reserves. Section 19(b)(2) of the act requires each depository institution to maintain reserves against its transaction accounts, nonpersonal time deposits, and Eurocurrency liabilities, as prescribed by Board regulations, for the purpose of implementing monetary policy.
Reserve requirements for nonpersonal time deposits and Eurocurrency liabilities have been set at 0% since 1990, so the only reserving required since then was on transaction accounts.
The Fed announced the interim rule and request for comments on zero reserving March 15, 2020. At the time, it said that more than 2,500 depository institutions maintained, in aggregate, $150 billion in account balances to satisfy their Reg D reserve balance requirements.
LINK:
Regulation D: Reserve Requirements of Depository Institutions
(Feb. 12, 2021) The New York State Department of Financial Services (NYDFS) was cited, again, this week for its position on financial risk through climate change in a report issued by the San Francisco Federal Reserve Bank.
In the report — which outlined the efforts state, national and international financial regulators have taken to identify, assess and manage climate-related financial risks – the New York agency’s actions on the issue are outlined (namely, that it has asked financial institutions under its supervision to incorporate climate-related risks in its exams).
In November, the international Financial Stability Board (FSB) released a report that also noted the New York efforts in its report The Implications of Climate Change for Financial Stability. That report noted that the state advised financial institutions to integrate financial risks from climate change into their governance, risk-management and business strategy frameworks. That direction was reportedly the first time a state supervisory agency for financial institutions has taken such an approach.
New York took additional action on the issue this week, writing to banks that they may receive credit under the New York Community Reinvestment Act (NYCRA) for certain activities intended to address and mitigate the effects of climate change. The agency also provided a non-exhaustive list of activities that may qualify for CRA credit under state rules.
LINK:
SF Fed Report: Climate Change Is a Source of Financial Risk
NYDFS letter on CRA credit for climate change mitigation efforts
(Feb. 12, 2021) Credit unions required to file reports on home mortgage loan applications made last year have until March 1 to do so, NCUA reminded this week in a Regulatory Alert.
In the alert (21-RA-03), the agency said all federally insured credit unions with assets of more than $47 million in assets as of Dec. 31, 2019, must file the application reports as required under the Home Mortgage Disclosure Act (HMDA), and implemented by the Consumer Financial Protection Bureau’s (CFPB’s) Regulation C.
There are some limiting provisions for reporting under the rule, the agency pointed out. For example, the closed-end mortgage loan threshold increased from 25 to 100 effective July 1, 2020. “Credit unions that originated fewer than 100 covered closed-end mortgage loans in 2018 or 2019 are not required to report any closed-end mortgage loan information for 2020,” the agency wrote, noting that Section 1003.3(c) of Regulation C lists excluded (not covered) transactions.
All data submitted, the agency said, must be done through the Federal Financial Institution Examination Council’s (FFIEC) HMDA Platform and that no other submission methods are permitted. An authorized representative of the credit union with knowledge of the data submitted must certify to the accuracy and completeness of the data submitted, the agency noted.
LINK:
Submission of 2020 Home Mortgage Disclosure Act Data (NCUA Regulatory Alert, 21-RA-03)
(Feb. 12, 2021) Congratulations to the Massachusetts Division of Banks (credit union supervision) on being reaccredited by NASCUS. Established in 1989, the NASCUS Accreditation Program administers and assures quality standards of states’ credit union examination and supervision by applying national standards of performance to a state’s credit union regulatory program. More than 85% of all state-chartered credit union assets are supervised by NASCUS-accredited state agencies … A self-assessment tool banks can use to evaluate their preparedness for the expected cessation at year’s end of the London Interbank Offered Rate (LIBOR) as a reference rate for products and services was released this week by the Office of the Comptroller of the Currency (OCC). The agency, in Bulletin 2021-7, said the tool can be used to assess the appropriateness of the bank’s LIBOR transition plan, bank management’s execution of the plan, and related oversight and reporting … Here’s to a happy (and safe) President’s Day holiday on Monday; NASCUS’ offices will be closed in observance of the holiday.
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(Feb. 12, 2021) A final rule on what records can be used to support the insured status of a joint ownership share account is slated for action during an open meeting to be held virtually Thursday (Feb. 18) by the NCUA Board.
Also on the agenda for the meeting, which gets underway at 10 a.m. ET (and which will be live streamed via the Internet): a quarterly report on the National Credit Union Share Insurance Fund (NCUSIF) and a briefing for the board on the Consolidated Appropriations Act, 2021, and the Emergency Capital Investment Program (ECIP) created under that statute.
The proposal on joint ownership share accounts, issued by the board last May, would allow account records information other than a signature card support the insured status of a joint ownership share account in a credit union. The aim of the proposal – which mirrors a rule adopted in 2019 by the FDIC Board – is aimed at facilitating prompt payment of share insurance in the event of a federally insured credit union’s failure “by explicitly providing alternative methods that the NCUA could use to determine the owners of joint accounts, consistent with the NCUA’s statutory authority,” the proposed rule summary stated.
NASCUS, in its comment supporting the proposal, wrote that providing federally insured credit unions flexibility in satisfying the signature card requirement with information in joint account records acknowledges that account opening practices have evolved substantially over the last nearly 50 years. NASCUS agreed with the proposal’s overall approach – and offered a modest change: replacing the phrase “such as” with “including, but not limited to.” Doing so, NASCUS wrote, would allow NCUA to “make clear on the face of the regulation that other evidence in the account records may be sufficient to establish qualifying joint ownership of a share account.”
The insurance fund report slated for next week is expected to show the fund’s equity ratio as of Dec. 31, 2020. Last September, the agency reported a 13-basis-points (bp) decline in the ratio to 1.22% during the six months ending June 30. That ratio was 16 bp lower than the fund’s “normal operating level” (target level) of 1.38% and within 2 bp of the level (1.2%) below which the agency would be required to deploy a restoration plan.
The drop in the ratio in the first half of last year was attributed to rapid share growth amid the COVID-19 pandemic. Agency staff said during the September open board meeting that the fund equity ratio was expected to rise to 1.32% by year-end 2020, following credit unions’ adjustments in their 1% NCUSIF capitalization deposit.
LINK:
NCUA Board Feb. 18 open meeting agenda
(Feb. 12, 2021) A continuing partnership with state supervisors “will be invaluable” to ensuring a viable dual-chartering credit union system, NCUA Board Chairman Todd Harper said in a webinar Thursday, his first public event as new leader of the agency
During the 90-minute event – billed as the “Chairman’s Webinar” – Harper outlined his priorities as chairman, which include a variety of other issues.
“My whole heart is in the NCUA, its vital work, and the mission of the credit union system,” he said. In particular, he said he looked forward to working with credit unions and other key stakeholders in responding to the economic fallout caused by pandemic, positioning the agency to meet future challenges, and strengthening NCUA’s commitment to consumer financial protection.
More specifically, regarding his priorities, he cited capital and liquidity, consumer financial protection, cybersecurity, and diversity, equity and economic inclusion. “In the months ahead, these priorities will guide the agency’s decisions,” he said. He also said credit unions, in order to compete, must be able to safely and securely use technology to deliver member services and adopt financial innovations – but emphasize security and equity in providing those services.
“We must also strengthen the agency’s consumer financial protection program to ensure that all consumers receive the same level of protection regardless of their financial provider of choice,” he said.
Referring to state regulators, the new NCUA chairman said the supervisors play an important role in ensuring safety and soundness. He said the dual chartering system is a “critical asset that helps the credit union system be dynamic and thriving.” A continuing partnership between NCUA and state regulators, as the credit union system addresses the economic fallout from the pandemic, he said, “will be invaluable.”
In other comments, Harper said:
- CUs must live up to their mission of providing access for their members to credit and savings – including members of modest means. ”NCUA must do all that it can, then, to advance economic equity and justice,” he said.
- In the aftermath of the killing of George Floyd last summer, the credit union system has an obligation to address racial justice directly and chart a better course for the nation’s future. “We especially must enhance support for minority deposit institutions, low-income credit unions and community development credit unions that are “on the front lines of serving the underserved “– as well as compliance with fair lending laws to counter discrimination in lending.
- Future challenges, such as climate change, must also be addressed (since, he said, it disproportionately affects underserved communities).
Harper also noted issues on the horizon for the agency, which include finalizing the capitalization of interest rule, developing a rule to phase in the current expected credit loss (CECL) accounting rule, and exploring the impact of additional economic stimulus approved by Congress on net worth ratios.
In comments from NCUA staff during a questions and answer period of the event, it was noted that the rollout of the new MERIT exam program is delayed until the second half of this year. The impact of the coronavirus crisis was specifically pointed to as the cause.
Also, according to NCUA Director of Examination and Insurance Myra Toeppe (in response to a question submitted by a participant), a decision on an insurance premium has not yet been reached. She said the agency would be finalizing the equity ratio for the insurance fund first, and presenting that at the NCUA Board meeting next week. “We need to get the calculation finalized and then move on from there,” she said.
LINK:
Presentation: NCUA Chairman’s Feb. 11, 2021 webinar
(Feb. 12, 2021) The new “seasoned qualified mortgage” (QM) from CFPB is the focus of the latest summary published by NASCUS and now available on the association’s website (to members only).
The rule was finalized by the agency in December. It takes effect March 21, but its mandatory compliance date is not until July 1.
The “seasoned QM” rule, the CFPB said then, 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 it is a first-lien, fixed-rate loan with 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 debt-to-income (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 in portfolio until the end of the seasoning period.
LINK:
Summary: CFPB Seasoned Qualified Mortgage Loan Final Rule