(Nov. 19, 2021) A flexible approach is ended for supervision and enforcement of certain mortgage servicing timing requirements initiated in spring, 2020, NCUA, federal and state banking and credit union agencies and the CFPB said late last week in a joint statement.
The regulators issued the statement that the flexibility, declared as the financial impact coronavirus crisis first ramped up in April 2020, is no longer necessary given the amount of time servicers have had to adjust processes to accommodate the demands arising due to the pandemic.
Under the declaration made a year-and-a-half ago, the agencies said that they would not take supervisory or enforcement action against mortgage servicers for delays in sending certain early intervention and loss mitigation notices and taking certain actions relating to loss mitigation set out in the mortgage servicing rules, provided that servicers were making good faith efforts to provide these notices and take these actions within a reasonable time. The regulators said then that that stance would continue “until further notice.”
“More than 18 months have passed since issuance of the April 2020 Joint Statement,” the agencies said last week. “While the COVID-19 pandemic continues to affect consumers and mortgage servicers, the agencies believe the temporary flexibility described in the April 2020 Joint Statement is no longer necessary because servicers have had sufficient time to adjust their operations by, among other things, taking steps to work with consumers affected by the COVID-19 pandemic and developing more robust business continuity and remote work capabilities.”
With the temporary flexibility at an end, the agencies said they “will apply their respective supervisory and enforcement authorities, where appropriate, to address any noncompliance or violations of the Regulation X mortgage servicing rules that occur after the date of issuance of this statement,” they stated. (Regulation X implements provisions of the Real Estate Settlement Procedures Act, or RESPA.)
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(Nov. 19, 2021) One of the key expenses proposed in the agency’s 2022 operating budget is the addition of 48 full-time equivalency (FTE) positions, according to NCUA budget documents released this week.
The additional positions include:
- 29 FTEs for regional staff and supervisory examiners;
- three FTEs among regional staff “to expand the cadre of specialist examiners;”
- five FTEs in the agency’s Office of Consumer and Financial Protection to “increase the number of fair lending examinations and reviews and to strengthen the agency’s efforts to promote financial inclusion and outreach;”
- adding seven FTEs in various NCUA headquarters offices;
- two FTEs in the agency’s Office of Credit Union Resources and Expansion (CURE);
- and making permanent eight FTEs now filled “within the total NCUA staffing plan.”
The net number of FTEs is reached by cutting five positions in the Office of Chief Financial Officer and Office of Examination and Insurance (E&I), and an additional one FTE in E&I by “reorganizing responsibilities in the office.”
Employee compensation, the agency proposes, will rise by $16.7 million (6.9% over 2021 budget).
During the NCUA Board meeting Thursday, Member Rodney Hood took aim at the 48 additional positions, saying the agency “doesn’t need nearly 50 additional staff positions at this time.” He added that “it’s going to be a busy couple of weeks” as the board members work on the budget before final approval.
Chairman Todd Harper committed to working with both Hood and Vice Chairman Kyle Hauptman in hashing out a final agency budget. The proposed budget released this week, he observed, was just a starting point.
Other key NCUA budget items include:
- An increase by $8.5 million for travel (for a total of $20.8 million);
- An $11.5 million decrease in “contracted services” (to $36.7 million);
- And $2 million less in rent, utilities and communications (for a total of $5.1 million)
LINK:
NCUA Staff Draft: 2022 – 2023 Budget Justification (see page 29)
(Nov. 19, 2021) The threshold adjusts to 200 open-end lines of credit for reporting mortgage disclosure data at the start of the new year, CFPB reminded late last week.
In a publicly released letter, bureau stated that in April 2020, the agency issued a final rule amending its Regulation C (implementing the Home Mortgage Disclosure Act, HMDA) to permanently set the reporting threshold for open-end lines of credit at 200, effective Jan. 1, 2022. That threshold replaces the temporary reporting threshold of 500 open-end lines of credit.
The agency noted that, at the start of the year, an institution that originated at least 200 open-end lines of credit in each of the two preceding calendar years, and meets all other Regulation C institutional coverage criteria, will be required to collect, record, and report data about its open-end lines of credit.
For example, an institution that originated at least 200 open-end lines of credit in both calendar years 2020 and 2021, and meets all other Regulation C institutional coverage criteria, will be required to collect, record, and report data about its open-end lines of credit for calendar year 2022 to be submitted by March 1, 2023,” CFPB wrote.
LINK:
CFPB frequently asked questions (FAQs) on institutional and transactional coverage
(Nov. 19, 2021) A $345.3 million 2022 proposed budget, funded partially from an increased amount of funds transferred from the federal credit union savings insurance program, was posted this week by NCUA; a public briefing is set for Dec. 8, the agency said.
According to NCUA, its budget for next year is 1.2% higher than the previous year’s. However, components of the overall spending plan show significant changes from the previous year. For example, the agency’s capital budget (which funds such things as purchases of new equipment) is down 30.7% from the previous year (for a total of $13.1 million). The administrative budget for the National Credit Union Share Insurance Fund (NCUSIF) is down by 21.7% (to $6.2 million) from the previous year.
The overhead transfer rate (OTR), which provides funding for the NCUA’s “operating budget” of $326 million (and makes up 94.4% of the overall agency budget) will be set at 63.4%, according to the budget papers posted by NCUA. Essentially, that means the nearly two-thirds of the 2022 “operating budget” (or $206.7 million) will be paid out of the share insurance fund. The remainder of the operating budget comes from “operating fees” paid by federal credit unions.
The 2021 OTR, adopted in December last year, was 62.3%. NCUA acknowledges in its budget posting this week that the 2022 OTR will be 101 basis points higher than the previous year’s.
The OTR represents money that is transferred from NCUSIF to the operating budget of the agency to cover “insurance-related” expenses of the agency. The remainder of the operating budget is covered by the operating fee paid by federal credit unions.
NASCUS President and CEO Lucy Ito pointed out that the proposed 2022 OTR will be the second year in a row that the OTR has been increased by the agency. She also noted that, as the 2021 OTR was approved last December, that NCUA needed to reconsider how it allocates expenses.
LINK:
Agency Accepting Comments and Budget Briefing Presentation Requests
(Nov. 19, 2021) Flexibility for board meetings originally extended to FCUs during the height of the coronavirus crisis will be extended in the new year, NCUA said this week. In Letter to Federal Credit Unions (LTCU) 21-FCU-06, the agency said a federal credit union (FCU), as allowed for in March of last year, may adopt at any time by a two-thirds vote of its board of directors a bylaw amendment allowing the board to meet virtually. The provision was approved by the agency in response to person-to-person limits on meetings during the coronavirus crisis … The use of stablecoins deserves a look – and issuance should be broader than just that by banks and credit unions – Federal Reserve Board Gov. Christopher Waller said this week. Referring to a report issued Nov. 1 by the President’s Working Group on Financial Markets that advocated only federally insured financial institutions could issue the digital payments, Waller said “there may be others that better promote innovation and competition while still protecting consumers and addressing risks to financial stability.” He said he disagrees that stablecoin issuance can or should only be conducted by federally insured banks credit unions “simply because of the nature of the liability … The controversy over OCC Nominee Saule T. Omarova (who faced a confirmation hearing Thursday) was illustrated by competing headlines issued in advance by the top Democrat and Republican members of the Senate Banking Committee. The headline of the press release issued by Chairman Sherrod Brown (D-Ohio) stated “Saule Omarova is Eminently Qualified to Lead the OCC.” The headline of the release issued by Ranking Member Pat Toomey (R-Pa.) stated: “I’ve Never Seen a Nominee with More Radical Ideas.” The banking industry has also expressed skepticism about the nominee. Omarova told the panel her priorities would be helping small- to medium-sized banks invest locally.
LINKS:
Federal Credit Union Meeting Flexibility in 2022 Due to the COVID-19 Pandemic
Witness statement: Dr. Saule T. Omarova (Comptroller of the Currency Designate)
(Nov. 19, 2021) A new hurdle emerged in the Senate this week to legislation that would provide clarity to financial institutions seeking to serve legitimate cannabis businesses: disagreement about whether to include the provisions in pending legislation, or advance it as part of a larger package largely changing federal marijuana laws.
The disagreement, at least for now, imperils the future of the bill for financial institutions serving legitimate cannabis businesses.
The Secure and Fair Enforcement (SAFE) Banking Act would provide a safe harbor for credit unions and banks serving cannabis businesses in states where it is legal. More than 35 states have legalized cannabis for medical or adult use. However, federal law prohibits credit unions and banks from safely banking cannabis businesses, including those that provide them with goods and services.
The legislation has passed the House with bipartisan support and was added to the House version of the National Defense Authorization Act (NDAA), must-pass legislation by year’s end to essentially keep the military funded.
But some in the Senate want to add more provisions related to marijuana legalization to the Senate NDAA version. On Thursday, Senate Democratic leaders indicated the SAFE Banking Act would not be considered in the Senate as part of the NDAA without the broader marijuana decriminalization provisions – essentially removing the SAFE bill from the NDAA, at least for now.
(Nov. 19, 2021) Just a reminder that Dec. 9 (at 2 p.m. ET) is the next NASCUS 101 — a free, short webinar where participants learn from the NASCUS team how to make the most of an association membership. Among the topics addressed: What NASCUS is, how NASCUS contributes to the entire credit union industry, how to engage in the regulatory and legislative processes, collaboration with peers, committee and working group involvement, customized communications and more. The webinar is open to all members and prospective members. While it is free to participate, registration is required. See the link below to do so today.
LINKS:
Register here for NASCUS 101, Dec. 9, 2 p.m. ET.
(Nov. 19, 2021) Monetary policy, inflation, and cyberattacks could heighten risk to the financial system, according to the annual report issued this week by the Treasury office tasked with conducting financial research.
The report also raised concerns about risks related to low bank profitability, commercial real estate performance and hedge fund strategies.
According to the Office of Financial Research (OFR) annual report to Congress, the economy has rebounded and volatility caused by the pandemic has subsided. However, the other challenges to the financial system mean the overall risks to the financial system remain in the medium range.
According to the OFR press release, the report, highlights three key research findings related to financial system vulnerabilities:
- Macroeconomic uncertainty remains about the continuing impact of the coronavirus and the “pattern of inflation.”
- Cyber risk has grown from mounting economic costs inflicted by cyberattacks and the increasing expense required to guard against them.
- The potential risk from climate change – which has introduced vulnerabilities – is still difficult to identify, assess and forecast for the financial system.
About “sector-specific” risk, the report notes that risks tied to low rates on banks’ profits should be closely monitored. “Higher interest rates on longer-term investments, such as 10-year Treasuries, did not increase net interest margins,” OFR said. “While further research is necessary, possible explanations include lower loan demand and less willingness on the part of banks to lend at longer maturities or take on more deposits.”
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(Nov. 19, 2021) Shared locations are service facilities for purposes of multiple common bond federal credit unions (FCUs) adding underserved areas to their membership bases, as are those with electronic facilities such as video teller machines, regardless of whether those credit unions have an ownership interest in either of the facilities, under a rule finalized Thursday by the NCUA Board.
However, automated teller machines (ATMs) continue to be excluded from the service facility definition for adding underserved areas, according to the new rule.
The final rule, approved unanimously by the three-member board, will take effect 30 days after publication in the Federal Register.
The rule was proposed nearly a year ago (in December 2020) to modify Part 701, Appendix B, of NCUA’s regulations to include any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a multiple-common-bond FCU that participates in a shared branching network. “Reasonable proximity” to those shared facilities by an underserved group is a requirement under federal law for an FCU to add the group to its membership.
The proposal ran into opposition (largely from banking groups, evidenced by 680 form letters out of more than 700 total comment letters received) objecting to the definition of “service facility” to include ATMs. For the final rule, NCUA dropped ATMs from its shared service definition.
It also dropped in the final rule the requirement that FCUs seeking to add underserved groups must have an ownership interest in shared locations and electronic facilities.
The final rule does include, however, continues to mandate that a service facility must offer all three services: ability to take deposits (shares), approve loans and disburse loan proceeds
In other meeting proceedings, the NCUA Board:
- Heard an update on its new exam tools (including the (the Modern Examination and Risk Identification Tool, MERIT), noting that there are now 3,383 total MERIT system users, including 547-plus state supervisory authorities (SSAs).
- Issued a proposed 2022-2026 strategic plan for a 60-day comment period.
- Was told that the National Credit Union Share Insurance Fund (NCUSIF) is expected to reach an equity ratio of 1.28% by year’s end (if the ratio falls below 1.2% — or is projected to do so within six months – the NCUA Board is required to implement a restoration plan – including a premium – to bring the ratio above 1.2% within eight years).
LINKS:
Final Rule, Part 701, Shared Services Facilities