(June 25, 2021) The Supreme Court ruled this week that the director of the Federal Housing Finance Authority (FHFA) may be fired by the president, overturning the agency’s structure which held that the director could only be removed “for cause” – and the same day, that’s what the president did. The White House said that President Joe Biden (D) had fired FHFA Director Mark Calabria (in office since 2019) and replaced him (as acting director) with Sandra Thompson, who has served as deputy director of the agency’s division of housing mission and goals since 2013. She worked before that for more than 23 years at the FDIC … The loan interest rate ceiling for federal credit unions will remain at 18% through March 10, 2023, under action taken Thursday by unanimous vote of the NCUA Board – the 23rd time the board has approved the ceiling since it was initially set in 1987 … Farewell to Jay Murray who has retired as CEO of Vizo Financial Corporate CU effective June 1 after nearly 30 years with the corporate — and congrats to David Brehmer who had been serving as president is now president and CEO of VFCCU … The House on Thursday joined the Senate (both with bipartisan – if narrowly so – votes) to repeal the OCC’s “true lender” rule. President Biden has indicated he will sign it into law. The rule, the first financial regulator rule from the Trump era to be overturned by Congress, aimed to determine when a bank is a “true lender” within the context of a partnership between it and a third party. It had been criticized by consumer groups and others, saying it leaves customers vulnerable to predatory “rent-a-bank” schemes, in which an agreement is made between a bank and a third party to advance the loan – but then the bank takes over the loan once the transaction is completed.
(June 25, 2021) NASCUS President and CEO Lucy Ito said the state system embraces both new rules, which the association had supported. On interest capitalization, Ito said the new rule will provide greater flexibility for the credit union system to work with economically distressed members. “This rule will expand the options for loan repayments by members working to regain their economic footing as the financial impact of the coronavirus crisis begins to recede,” she said.
On the CECL standard rule, Ito thanked the board for heeding the state system’s suggestions on recognizing fiscal years and clarifying eligibility for small, state-chartered credit unions subject to GAAP.
She also took note of comments by NCUA Board Vice Chairman Kyle Hauptman about CECL and its applicability to credit unions as financial cooperatives. “Vice Chairman Hauptman keenly observed the cooperative structure of credit unions differentiates them from other financial intermediaries,” Ito said.
However, she added that “NASCUS believes CECL should apply to credit unions given their business functions as depositories and lenders. We look forward to working with NCUA on tools and resources to assist credit unions in complying with CECL in a cost-effective and time-effective manner.”
(June 25, 2021) Allowing otherwise healthy credit unions to continue to focus on serving their members through rules providing regulatory relief from prompt corrective action has once again won the support of the state system, NASCUS said in a comment letter filed late last week.
NASCUS filed the comment on NCUA’s temporary regulatory relief rule in response to COVID-19-prompt corrective action, which took effect April 19. The rule allowed NCUA to waive the earning retention requirement for any federally insured credit union classified as adequately capitalized. It also allowed certain qualifying undercapitalized FICUs to submit simplified net worth restoration plans (NWRPs). The rule extended action taken in spring 2020 as the financial impact of the pandemic became apparent.
“The extraordinary effects of the COVID-19 pandemic and subsequent government efforts to mitigate the resulting economic dislocation strained the regulatory capital of some otherwise healthy credit unions,” NASCUS wrote. “The changes made by the IFR provide targeted regulatory relief without unduly increasing risk to the share insurance fund.”
LINK:
NASCUS Comments on Temporary Regulatory Relief Rule in Response to COVID-19-Prompt Corrective Action
(June 25, 2021) Updates to four sections of the BSA/AML manual for examiners were announced by the FFIEC this week, with the intention of offering “further transparency into the examination process and support risk-focused examination work,” the exam council said.
The four updated sections, all in portable document format (PDF), are:
- International Transportation of Currency or Monetary Instruments Reporting
- Purchase and Sale of Monetary Instruments Recordkeeping
- Reports of Foreign Financial
- Special Measures
As it typically does, the exam council noted that the updates should not be interpreted as new instructions or increased focus on certain areas; instead, it said, the updates “offer further transparency into the examination process and support risk-focused examination work.”
The exam council said NCUA, the Fed, FDIC), OCC and the council’s State Liaison Committee (SLC) worked closely with Treasury’s Financial Crimes Enforcement Network (FinCEN) on Monday’s updates, which it said are identified by a 2021 date label on the FFIEC BSA/AML InfoBase.
The updated sections are accessible on the InfoBase “what’s new” page.
LINK:
FFIEC BSA/AML InfoBase – What’s New
(June 25, 2021) Final rules on capitalization of interest by federally insured credit unions, and on mitigating the day-one effect of the current expected credit loss (CECL) accounting standard on capital levels at credit unions, were approved – both unanimously – by the NCUA Board at its Thursday meeting.
Both rules are supported by NASCUS.
The interest capitalization rule is slated to take effect 30 days after publication in the Federal Register; however, NCUA staff indicated that credit unions could begin using its provisions now. The CECL rule takes effect immediately.
The interest capitalization rule removes the prohibition on capitalizing interest in connection with loan workouts and modifications. Adopted as proposed (without change), the agency said the final rule establishes documentation requirements to “help ensure that the addition of unpaid interest to the principal balance of a mortgage loan does not hinder the borrower’s ability to become current on the loan.”
The final rule makes several technical changes to the regulations to improve their clarity and update certain references
NCUA Office of Examination and Insurance Director Myra Toeppe indicated that, although the official effective date of the rule is 30 days after publication, credit unions are encouraged to use its provisions as soon as possible without facing enhanced scrutiny from examiners.
NASCUS had urged NCUA, when filing its comment letter in February, to act expeditiously in finalizing the rule, arguing that doing so would give credit unions greater flexibility to work with economically distressed members and provides “consumer protection guardrails that protect against the unlikely chance that a credit union engages in unfair lending practices.”
Regarding state laws on interest capitalization, NCUA’s final rule notes that the agency is not inclined to provide a blanket preemption of any or all state laws that may relate to capitalization of interest. “FCUs may need to evaluate the application of relevant state laws on a case-by-case basis and may contact the NCUA for its opinion in the event a particular state law raises a preemption issue,” the agency wrote.
On the rule dealing with the impact of the CECL accounting standard (which takes effect for most credit unions in January 2023), a phase-in period of three years is established for adverse effects on credit unions’ regulatory capital. Credit unions with less than $10 million in assets would be exempted from using the standard to figure loan loss reserves.
The final rule has two changes from the proposal, as advanced by NASCUS. First, the rule makes a technical change (for clarity) removing references to specific calendar dates in the transition period for the phase in. The rule now consistently refers to fiscal years.
The second change clarifies that state-chartered FICUs with less than $10 million in assets and that are required by state law to comply with generally accepted accounting practices (GAAP) are eligible for the transition phase-in.
NASCUS, in its comments last year, supported the rule and NCUA’s efforts to mitigate the impact of the accounting standard. However, NASCUS also noted that the accounting standard remains of concern. “NASCUS, many state credit union regulators, and many state credit union system stakeholders remain concerned that the CECL methodology will be counter-productive when implemented for the credit union system,” NASCUS wrote.
LINKS:
Final Rule, Part 741, Appendix B, Capitalization of Interest.
Final Rule, Part 702, Current Expected Credit Loss Methodology
(June 25, 2021) In another development during Thursday’s NCUA Board meeting, two members discussed the future of an advisory council from among the credit union system for NCUA – something NASCUS has long supported and called for again in the wake of this week’s meeting.
Board Member Rodney Hood spoke in favor of an advisory group (noting that other federal financial regulators have such councils); NCUA Board Chairman Todd Harper reminded that he supported such a group for NCUA – and other forms of “community outreach” – during Senate confirmation hearings in 2019. However, no decisions were made by the board on any advisory group for NCUA.
NASCUS’ Lucy Ito suggested the agency should consider action soon.
“NASCUS fully agrees with Chairman Harper and Board Member Hood on the value of a credit union advisory body at NCUA,” Ito said. She noted that in April 2017, NASCUS enacted a public policy advocating for the creation of an “NCUA Federally Insured Credit Union Advisory Council.”
“As administrator of the NCUSIF, NCUA should form an advisory council of federally insured credit unions to provide NCUA with advice and guidance on issues related to share insurance regulation and supervision,” Ito said. “Such an advisory council should consist of equal numbers of state chartered and federally chartered credit unions and should convene at least twice annually with the NCUA Board in public meetings.”
(June 25, 2021) The timing of mortgage lenders’ compliance with federal disclosure rules may have been disrupted with the abrupt implementation of the new “Juneteenth” federal holiday late last week – perhaps even delaying mortgage closings – the CFPB said it was aware of concerns those disruptions have raised.
In a statement, bureau Acting Director Dave Uejio said the concerns revolved around mortgage lender compliance with Truth in Lending Act (TILA) and TILA-RESPA (Real Estate Settlements Protection Act) Integrated Disclosure (TRID) timing requirements. “The CFPB recognizes that some lenders did not have sufficient time after the Federal holiday declaration to consider whether and how to adjust closing timelines,” Uejio wrote. “The CFPB understands that some lenders may delay closings to accommodate the reissuance of disclosures adjusted for the new Federal holiday.”
Uejio said both TILA and TRID requirements generally protect creditors from liability for bona fide errors and permit redisclosure after closing to correct errors.
The acting CFPB director said any guidance ultimately issued by the CFPB would consider the limited implementation period before the holiday and would be issued after consultation with both federal and state financial institution regulators “to ensure consistency of interpretation for all regulated entities.”