Monthly Archives:' July 2015

CFPB Challenged

The Consumer Financial Protection Bureau (CFPB), established on July 21, 2011, was challenged by Senator Ted Cruz and Representative John Ratcliffe with the introduction of (S. 1804, H.R. 3118). Both bills move to abolish the Bureau, saying that while the Bureau was intended to “help consumers by regulating and reigning in larger financial institutions,” in actuality, “big banks have only gotten bigger and the number of smaller banks and options for consumers have only decreased.” Separately, Chairman Richard Shelby of the Senate Banking Committee progressed legislation that would place the Bureau within the appropriations process and replace its director-driven governance model with a five-member commission. 

In survey results released by SNL Financial last week, 33% of respondents identified the creation of the CFPB as the byproduct of Dodd-Frank that has most impacted their bank. SNL Financial conducted the online survey of 616 banking industry professionals. The survey ran from July 2, 2015-July 17, 2015.

Congress Passes Bill to Continue SBA Lending

On Thursday, July 23, the Small Business Administration (SBA) announced it had reached its annual lending limit for its biggest loan program, the 7(a) loan, two months before the government’s current fiscal year ended. Consequently, applications for small business loans filed by over 1,100 potential borrowers had to be put on hold. The SBA’s lending limit for the 7(a) loan program was capped at $18.75 billion a year.

Congress moved quickly and the Senate quickly passed a bill that would raise the SBA’s annual lending cap for the 7(a) loan program to $23.5 billion. The House approved the bill on Monday, July 27, sending it to President Obama’s desk. The president is expected to sign the bill, which should then restart the application review process for those 1,100 borrowers currently in limbo by the end of the week.

Risks & Opportunities Facing Financial Services

Comptroller of the Currency Thomas J. Curry recently discussed risks and opportunities facing financial services during remarks before the New England Council in Boston, MA. During his speech, the Comptroller commented on interest rate risk, compliance risk, cybersecurity, and the role collaboration can play in mitigating these risks. He also discussed opportunities to improve business operations as well as service to customers.

More specifically, Curry emphasized that the inevitable rise in interest rates could greatly affect loan quality, particularly loans that were not carefully underwritten to begin with, and that ”loans that are typically refinanced, such as leveraged loans,” would be particularly severely affected. The final and “perhaps the foremost risk facing banks today,” according to Curry, is cyber threats. Curry outlined the agency’s efforts to curtail cyber intrusion in the banking industry, highlighting the June 30 release of its Semiannual Risk Assessment . Curry noted lastly that information-sharing is just as important as self-assessment and supervisory oversight and he strongly recommend that financial institutions of all sizes participate in the Financial Services Information Sharing and Analysis Center, a non-profit information-sharing forum established by financial services industry participants to facilitate the sharing of physical and cyber threat and vulnerability information. Collaboration among banks of all sizes and non-bank providers, Curry stated, can be a “game-changer” in more ways than one.”

Read Curry’s remarks

Credit Through Online Marketplace Lending

On July 20, the Federal Register published the Department of the Treasury’s Request For Information on Expanding Access to Credit Through Online Marketplace Lending (RFI). The RFI seeks public comment on the three specific areas relating to the online marketplace lending industry: (i) business models of and products offered to consumers and small businesses; (ii) potential expansion of access to credit to the historically underserved; and (iii) the ways in which the financial regulatory framework can develop to support safe growth within the industry. According to the RFI, online marketplace lending delivers lower costs and faster decision times than traditional lenders, but, so far, the loans are usually only originated to prime or near-prime consumers. However, some online marketplace lenders are developing product structures and underwriting models that may allow for originating loans to non-prime borrowers at lower interest rates. With the rapid growth occurring in the online lending industry, the RFI aims to assist the Treasury Department in examining online lenders’ potential “to expand access to credit, and how the financial regulatory framework can develop to ensure the industry grows safely.” Comments are due August 31, 2015.

Joint IRS-HUD Administration for LIHTC Proposed

A report by the U.S. Government Accountability Office (GAO) says that Congress should consider designating the Department of Housing and Urban Development (HUD) as a joint administrator with the Internal Revenue Service (IRS) of the Low-Income Housing Tax Credit (LIHTC) program. The GAO suggests HUD should be given responsibility for regular monitoring of housing finance agencies and analyzing the effectiveness of the program. Joint administration with HUD could better align program responsibilities with each agency’s mission and more efficiently address existing oversight challenges.

The report, conducted at the request of Senate Judiciary Committee Chairman Charles Grassley, R-Iowa, cites “minimal” oversight by the IRS of the LIHTC and points out that the IRS already shares joint administration duties with other agencies both the New Markets Tax Credit (NMTC) program and the Historic Tax Credit (HTC) program.

What GAO Recommends

Congress should consider designating HUD as a joint administrator of the program. HUD’s role should include oversight responsibilities (such as regular monitoring of HFAs) to help address deficiencies GAO identified. Treasury agreed HUD could be responsible for analyzing the effectiveness of LIHTC, with IRS continuing to enforce tax law. HUD and IRS did not comment on the matter for congressional consideration. HUD supported consideration of a structure for enhanced interagency coordination. The association representing HFAs disagreed with the matter. GAO maintains that joint administration would strengthen program oversight.

Senators Ask CFPB for Small Business Loan Data

On July 10th U.S. Sen. Cory Booker (D-NJ) with fellow senators issued a letter urging the Consumer Financial Protection Bureau (CFPB) to expedite the agency’s rulemaking (Regulation B) around publicly available small business loan data, pursuant to Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The request was made due to the lack of public data which makes it difficult for lenders to identify, control and increase lending across all communities.

The letter states, ““There are nearly 28 million small businesses in the United States. While entrepreneurship can open the door to achieve the American Dream, it can be difficult for entrepreneurs to get their businesses started. Access to capital is often limited in underserved and underrepresented communities—the same communities that disproportionately endure financial hardship and lack broader access to opportunities….Current data collection efforts are fragmentary and provide an incomplete picture of lending in the small business marketplace. Regulation B will facilitate the enforcement of fair lending laws and help identify the credit needs of women-owned, minority-owned, and all small businesses.”

Read the Letter

FDIC's Advisory Committee on Community Banking Scheduled to Meet

The Federal Deposit Insurance Corporation (FDIC) has announced that its Advisory Committee on Community Banking will meet on Friday, July 10. Staff will provide an update on a number of issues, including examination frequency and offsite monitoring; call report streamlining; the cybersecurity assessment tool; and recent rulemakings. There also will be discussions about high volatility commercial real estate loans and review of banking regulations under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA).

The meeting is open to the public and will be held from 9:00 a.m. to 3:00 p.m. EDT in the FDIC Board Room on the sixth floor of FDIC headquarters located at 550 17th Street, NW, Washington, D.C. The meeting also will be webcast live. The agenda for the meeting and a link to the webcast are available at https://www.fdic.gov/communitybanking/2015/2015-07-10_agenda.html.

Cybersecurity Assessment Tool Released

The FDIC & FFIEC have released a Cybersecurity Assessment Tool to help financial institutions with less than $1 Billion in total assets identify their cybersecurity risks and determine their preparedness. The Assessment provides a repeatable and measurable process for financial institutions to measure their cybersecurity preparedness over time.

The Assessment consists of two parts: Inherent Risk Profile and Cybersecurity Maturity. The Inherent Risk Profile identifies the institution’s inherent risk before implementing controls. The Cybersecurity Maturity includes domains, assessment factors, components, and individual declarative statements across five maturity levels to identify specific controls and practices that are in place. While management can determine the institution’s maturity level in each domain, the Assessment is not designed to identify an overall cybersecurity maturity level. To complete the Assessment, management first assesses the institution’s inherent risk profile based on five categories: 1.)Technologies and Connection Types 2.) Delivery Channels 3.) Online/Mobile Products and Technology Services 4.) Organizational Characteristics 5.) External Threats. Management then evaluates the institution’s Cybersecurity Maturity level for each of five domains: 1.) Cyber Risk Management and Oversight 2.) Threat Intelligence and Collaboration 3.) Cybersecurity Controls 4.) External Dependency Management 5.) Cyber Incident Management and Resilience.

Learn More About the Cybersecurity Assessment Tool

FFIEC Cybersecurity Assessment Tool Presentation View Slides (PDF) | View Video

The FDIC encourages institutions to comment on the usability of the Cybersecurity Assessment Tool, including the estimated number of hours required to complete the Assessment, through a forthcoming Federal Register Notice. FDIC-supervised institutions may direct questions on the FFIEC Cybersecurity Assessment Tool through https://fdicsurveys.co1.qualtrics.com/jfe/form/SV_4JgpIWXWB9Gjps1.

CFPB Proposes Two-Month Extension of Know Before You Owe Mortgage Rule

The Consumer Financial Protection Bureau (CFPB)has issued a proposed amendment to the Know Before You Owe mortgage disclosure rule, which proposes to move the rule’s effective date from August 1st to October 3, 2015. The rule, also called the TILA-RESPA Integrated Disclosure rule, requires easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for a homebuyer. The Bureau is issuing the proposal to correct an administrative error that would have delayed the effective date of the rule by at least two weeks, until August 15 at the earliest. The Bureau believes that moving the effective date may benefit both industry and consumers with a smoother transition to the new rules. The Bureau further believes that scheduling the effective date on a Saturday may facilitate implementation by giving industry time over the weekend to launch new systems configurations and to test systems. A Saturday launch is also consistent with existing industry plans tied to the original effective date of Saturday, August 1.

The FDIC has revised its interagency examination procedures to reflect the requirements of the TILA/RESPA integrated disclosures (TRID) rule. The revised procedures also reflect the following amendments to other provisions of TILA Regulation Z and RESPA Regulation X:

  1. The alternative definition of the term “small servicer” for certain nonprofit entities in the mortgage servicing rules
  2. The provisions in the ability-to-repay/qualified mortgage rule that give creditors or assignees meeting certain requirements a limited period of time in which to review a transaction and “cure” excess points and fees for purposes of maintaining QM status
  3. Additional exempt transactions under the appraisal rule for higher-priced mortgage loans

The proposal is open for public comment until July 7.