(March 12, 2021) Requirements for exemptions for some credit unions from establishing escrow accounts for certain high-priced mortgage loans (HPMLs) are outlined in a “regulatory alert” sent Wednesday from NCUA.
The message from the agency noted that in February the CFPB published its final rule that provides the exemption for smaller banks and credit unions. 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.
The rule was proposed in July. At that time, the CFPB said it represents the last mandatory rulemaking to implement the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S.2155).
Wednesday’s “alert” notes that qualifying institutions that have established HPML escrow accounts on or after April 1, 2010, will have 120 days after the Feb. 17 effective date of the final rule to cease providing escrows for HPMLs to take advantage of the new exemption.
“The HPML provisions of Regulation Z require that a creditor establish an escrow account for certain first-lien HPMLs,” the alert states. “While the HPML provisions include an exemption for small creditors operating in rural or underserved areas that meet certain requirements, the exemption under the EGRRCPA is an additional exemption for qualifying insured credit unions.”
However, the alert also notes some caveats. It states that even if an insured credit union qualifies for the exemption from the escrow account requirement, “if, at consummation, the transaction is subject to a forward commitment for sale to a purchaser that does not qualify for an exemption from the escrow account requirement, an escrow account is required under the HPML provisions, unless the transaction is otherwise exempt from the requirement.”
(March 12, 2021) Sexual orientation discrimination and gender identity discrimination is prohibited under equal credit opportunity regulations, CFPB said this week in an interpretive rule. Further, the subhead for the press release issued by the agency announcing the rule read that the financial industry “is on notice that Bureau will not tolerate illegal discrimination against the LGBTQ+ community.”
CFPB Acting Director Dave Uejio said the interpretive rule is intended to clarify prohibitions under regulations implementing the Equal Credit Opportunity Act (ECOA). Uejio asserted that the action is to make clear that lenders cannot discriminate based on sexual orientation or gender identity. The bureau said discrimination includes that based on actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other associations.
“The CFPB will ensure that consumers are protected against such discrimination and provided equal opportunities in credit,” Uejio said in the release. The agency also indicated that it would take enforcement actions under the ECOA “to hold financial institutions accountable for their actions that violate ECOA.”
The bureau stated that in 2016 it held that the law supports arguments that the prohibition against sex discrimination also affords broad protection from discrimination based on an applicant’s sexual orientation and gender identity under ECOA (which implements the bureau’s Regulation B).
It also asserted that a Supreme Court decision last year (Bostock v. Clayton County, Georgia) held that the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 encompasses sexual orientation discrimination and gender identity discrimination. On top of that, the agency said, a request for information (RFI) it issued last summer to solicit public comments and information to identify opportunities to prevent credit discrimination and encourage responsible innovation under ECOA and Regulation B (including how Bostock should be interpreted) supports the agency’s action this week.
(March 12, 2021) Two officers were named this week to the NASCUS Credit Union Advisory Council (CUAC), which represents the credit union members of the association in leadership. Mike Ryan, general counsel of BECU in Tukwila, Wash., was elected vice chairman of the CUAC and Jeff Dahlstrom, president of Southeast Financial Credit Union in Franklin, Tenn., was elected the CUAC secretary/financial advisor. Mike Williams, of Colorado Credit Union in Denver chairs the CUAC. Meanwhile, the NASCUS Regulator Board (which represents the regulator members of the association) approved the appointment of Patti Perkins, director of the Idaho Department of Finance to the NASCUS Audit Committee.
(March 12, 2021) NASCUS also this week published a summary of CFPB’s proposal to delay the general “qualified mortgage” loan proposal, which would push the mandatory compliance date back by 15 months to Oct. 1, 2022.
The summary is available to members only.
Last week, the bureau issued the notice of proposed rulemaking (NPRM) to delay the rule, which was only finalized in December. Under the previous rule (the one on the books before the December rule was finalized), the requirement for general QM loans was that the borrower’s debt-to-income ratio (DTI) not exceed 43%.
Under the new rule adopted in December, which was slated to take effect July 1 but is proposed to be delayed to next year, a price-based approach was installed for limiting lending in replacement of the specific 43% DTI limit after determining that a loan’s price is a strong indicator of a consumer’s ability to repay.
Acting Director Uejio said last week that extending the compliance date would ensure that homeowners struggling with the financial impacts of the COVID-19 pandemic have the options they need.
The agency noted that if the proposal is finalized, a number of things would remain in place. That is: the old, DTI-based general QM definition; the new, price-based General QM definition; and the GSE Patch (unless the GSEs exit conservatorship prior to Oct. 1, 2022) would all remain available as long as the lender received the consumer’s application prior to Oct. 1, 2022.
Comments on the proposal are due April 5.
(March 12, 2021) Clear communication to federally insured state credit unions (FISCUs) of which regulations do and do not apply to them – and also providing a clear chain of regulatory citations applicable to any given issue being communicated – are among the recommendations NASCUS made this week to NCUA about its communications and transparency.
In a comment letter on the agency’s requestion for information (RFI) about its communications practices, NASCUS placed strong emphasis on how the agency communicates information about regulation and compliance relevant to the state system. NASCUS wrote that, often, the agency’s communications “fall short in clearly communicating to FISCUs what applies and how.”
The association pointed to NCUA’s annual (and recent) regulatory review, which identifies provisions of agency rules under review – but without identifying to FISCUs which of those provisions apply. Another example, NASCUS stated, was a May 2020, NCUA Letter to Credit Unions (20-CU-16, “Low-Income Designations: Qualifications of Military Personnel”). NASCUS noted that the communication cites the agency’s low-income designation rule, 12 C.F.R 701.34, but fails to provide FISCUs the corresponding citation applying that provision to state credit unions (12 C.F.R 741.204).
“There is simply no reasonable justification for preserving an organizational framework for compliance guidance that requires FISCUs to spend time searching through the regulations to determine if the information being evaluated applies to them and how it applies to them,” NASCUS wrote.
In order to clearly communicate compliance obligations, the association urged NCUA to reorganize its regulations to consolidate all rules applicable to FISCUs, a long-standing goal of the state system. NASCUS stated that doing so would “much more clearly communicate compliance obligations and reduce the regulatory burden of FISCUs constantly having to search through dozens of NCUA rules to identify references to rules that apply to them.”
NASCUS also recommended that all NCUA communications applicable to FISCUs should contain all relevant regulatory and statutory citations, including the reference to Part 741 of NCUA’s rules that applies the subject matter of NCUA communications to FISCUs. “Going forward there should never be an NCUA compliance communication applicable to FISCUs that does not contain a reference to Part 741,” NASCUS wrote.
In other comments, NASCUS recommended:
- The agency maintain a list of interagency statements and guidance on the NCUA.gov website where other regulatory and supervisory guidance is presented, rather than only as a press release or a “letter to credit unions.”
- On credit union mergers and conversions, that the agency provide both an individual transaction data set as well as systemic data (as was done prior to 2018). “The aggregate systemic data is valuable to stakeholders thinking strategically about the effect and implications of trends in consolidation and charter conversion on the system as a whole,” NASCUS wrote.
- Creation of a dedicated page on the agency website to provide information for de novo state credit unions seeking to apply for federal share insurance (and referred the agency to the FDIC website (FDIC.gov) for an example of a deposit/share insurance application page). Additionally, NASCUS recommended, the agency should provide a link to NASCUS for parties seeking information on conversion to a credit union charter. “NASCUS can provide additional information and contacts for state regulators were NCUA to provide a link to NASCUS,” the association wrote. “Providing a link to NASCUS for additional information would be similar to NCUA’s webpage dedicated to Financial Literacy and Education which provides helpful links to various non-profits dedicated to financial literacy.”
- Clarification by the agency of what publications and guidance can be expected to be communicated by way of the “NCUA Express,” an e-mail information delivery service of the agency. “NASCUS has experienced an intermittent inconsistency in receipt of email communications from that otherwise excellent service resulting in our resubmitting credentials from time to time,” NASCUS stated. “In addition to the interruption in receipt of notices, NCUA Express does not always appear consistent in communicating all guidance documents issued and published on NCUA.gov. For example, NCUA Legal Opinions are not communicated by way of this platform.”
- More clear delineation between data for FISCUs and FCUs.
LINK:
NASCUS comment letter: NCUA RFI on communications and transparency
(March 12, 2021) After a delay of nearly two months since approval, two proposals from NCUA – on simplifying rules for risk-based capital and on adding an “S” to the exam rating system – have been finally opened for 60-day comment periods, following publication this week in the Federal Register. Comments on both proposals are due for both May 10.
On Jan. 14, the agency board approved the two proposals to be issued for comment. The proposal on simplifying risk-based capital – an advance notice of proposed rulemaking (ANPR) adopted on a 2-1 vote with (then) Board Member Todd Harper dissenting – outlines two approaches to simplifying risk-based capital requirements.
Under the first, the agency contemplates replacing the risk-based capital rule with a risk-based leverage ratio requirement, which would use relevant risk attribute thresholds to determine which complex credit unions would be required to hold additional capital. The second approach would retain the risk-based capital rule (approved in 2015 and revised numerous times, with two delays in effective dates, and now set to take effect Jan. 1, 2022) but would enable eligible complex FICUs to opt in to a “complex credit union leverage ratio” (CCULR) framework to meet all regulatory capital requirements.
The CCULR approach would be modeled on the “community bank leverage ratio” (CBLR) framework implemented under the 2018 economic growth and regulatory relief law.
The proposal on adding an “S” – for “market sensitivity” – to the agency’s CAMEL examination rating system is aimed at ensuring the agency’s exams of credit unions include a specific look at market-risk sensitivity. In conjunction with this would be a modification in the review of credit union liquidity and asset/liability management for the “L” in CAMEL.
In January, NCUA said the proposal would bring the agency’s rating system up to date with a change that banking regulators incorporated decades ago. It would also satisfy a recommendation the agency’s inspector general has been advancing for about the past five years. It was approved for comment unanimously by the agency board.
To date, 24 state credit union regulatory agencies have adopted the “S” for state-chartered credit unions.
LINKS:
NASCUS summary: ANPR, Simplification of the RBC Requirements (Parts 702 & 703) (members only)
NASCUS summary: Proposed rule: CAMELS Rating System (members only)
(March 12, 2021) Two new summaries of final rules on corporate credit union purchase of subordinated debt, and on joint ownership share accounts, were posted by NASCUS this week.
Both are available to members only.
In October the NCUA Board approved a new corporate credit union rule that, as proposed, included a section on corporate purchase of credit union subordinated debt. However, the portion on purchase of subordinated debt was left out of the final rule. The board said then it would adopt that portion of the rule once it had finalized the subordinated debt final rule. Since that rule was adopted in December, the board then finalized late last month the subordinated debt portion of the corporate rule. NASCUS supported the provision.
The final rule takes effect Jan. 1.
The joint ownership share accounts final rule was approved by the NCUA Board at its Feb. 18 meeting. The rule, which takes effect March 26, would allow account records information other than a signature card to support the insured status of a joint ownership share account in a credit union. The final rule provides federally insured credit unions with an alternative method to satisfy the membership card or account signature card requirement. NASCUS supported the proposal.
LINKS:
NASCUS summary: Corporate Credit Unions (purchase of subordinated debt) (members only)
NASCUS summary: Joint Ownership Share Accounts (members only)
(March 12, 2021) A policy unveiled early last year by CFPB that limited the extent of the agency’s response to certain abusive acts or practices affecting consumers was rescinded Thursday, the bureau announced. CFPB said it intends now to “exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress.” The release said the bureau intends these changes “to better protect consumers and the marketplace from abusive acts or practices, and to enforce the law as Congress wrote it.” Then-Director Kathleen Kraninger originally set the policy in place last year … Nellie Liang – a nominee for the Federal Reserve Board in 2018 (but whose nomination was never considered by the Senate Banking Committee, let alone the full Senate) – will be nominated as Treasury undersecretary for domestic finance, the White House said Thursday. The position is responsible for a wide variety of policy, including that for credit unions, banks and other financial institutions. Liang, an economist, is a former top Fed staff member … Meanwhile, the nomination of Rohit Chopra to be the next director of the CFPB received a tie vote this week in the Senate Banking Committee on a recommendation by the committee for confirmation. The tied recommendation will proceed, however, to consideration by the full Senate under rules adopted by the Senate early this year … NCUA and the federal banking agencies Thursday released a proposed list of 24 questions and answers addressing the private flood insurance provisions of the 2012 Biggert-Watters Flood Insurance Reform Act. Comments are due in 60 days. The proposal includes some references to a set of Q&As proposed last year and published July 6 in the Federal Register. Those Q&As only included two on private flood insurance, the agencies noted, adding that the rules for private insurance had just been finalized in 2019. The regulators said they plan to publish a final document in the Federal Register that will consolidate Thursday’s proposed private insurance Q&As with the 2020 proposed Q&As.
Agencies Release Proposed New Interagency Questions and Answers Regarding Private Flood Insurance
(March 12, 2021) Two interim final rules – one on the agency’s Central Liquidity Facility, the other on asset thresholds pertaining to large credit unions – are slated for action Thursday (March 18) by the NCUA Board.
The three-member board, meeting in a virtual setting with audio transmitted via the Internet, will also receive a briefing on the NCUA Guaranteed Note (NGN) and Asset Management Estates Programs.
The interim rule on the CLF is under part 725 of the agency’s rules and regulations (governing operations and membership in the facility). The asset thresholds interim rule pertains to parts 700 (definitions), 702 (capital adequacy), 708a (bank conversions and mergers), 708b (mergers among credit unions), and 790 (NCUA operations).