SDBA eNews: July 10, 2014

In This Issue

CRA Questions and Answers Webinar: July 17

The federal banking agencies will host a webinar on July 17 to update bank management and staff on the revised interagency questions and answers about the Community Reinvestment Act, as well as related revisions to examination procedures. Webinar participants must register in advance.

The revised Q&As clarify how agencies consider community development activities that benefit a zone broader than a bank’s assessment area; offer guidance on CRA consideration for investments in nationwide funds; clarify consideration for service on a community development organization board; address how to treat loans or investments in organizations that in turn reinvest those funds; and clarify the weighting of community development lending performance in ratings.

ABA: Banks Not Covered by Minimum Wage Proposal

The Department of Labor’s proposed regulations implementing Executive Order 13658 -- President Obama's directive to raise the minimum-wage rate for workers on federal contracts from $7.25 per hour to $10.10 per hour -- would not cover banks, ABA said Monday in its HR Issues and Resources e-bulletin.

The proposal does not cover insurance contracts, such as deposit insurance, with the federal government. However, the order may impose certain affirmative action requirements on banks depending on particular activities -- serving as a paying agent for federal savings bonds, for example. Read more in HR Issues and Resources.

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Congressman Challenges Farm Credit System in Op-Ed

The Farm Credit System has overstepped its mission and crowded out private lenders, Rep. Marlin Stutzman (R-Ind.) wrote in an American Banker op-ed on Tuesday. He warned that, as a government-sponsored enterprise, the FCS also puts taxpayers at risk. Stutzman, a fourth-generation family farmer, also challenged the FCS’ increasing involvement in non-agricultural activities, in which it undercuts community banks by offering tax-advantaged pricing.

“It’s time for the Farm Credit System to focus back on the farm to help farmers,” he wrote. “As a member of the House Committee on Financial Services I will further investigate the soundness of the Farm Credit System. It’s time for the government’s manipulative policies to stop picking winners and losers.”

Stutzman’s op-ed follows a June 25 hearing on agricultural credit during which House Agriculture Committee members aggressively questioned the FCS’ top regulator. Lawmakers specifically asked about the FCS's “mission creep,” its extraordinary loan last year to Verizon and the appropriateness of a tax-advantaged GSE competing directly with banks. Read the op-ed.

ABA Encourages Banker Feedback on Reg Relief

ABA President and CEO Frank Keating yesterday asked all bank CEOs to participate in a decennial review of outdated, unnecessary or burdensome bank regulations. He encouraged bankers to submit comments via

The review -- the second conducted under the Economic Growth and Regulatory Paperwork Reduction Act -- will begin with rules on applications and reporting; powers and activities; and international operations. Keating noted that the financial agencies have narrowed the realm of potential regulatory relief, explicitly excluding CFPB and FinCEN rules, as well as any rules related to the Dodd-Frank Act or Basel III.

“Nonetheless, ABA is committed to making the best of each opportunity to call for regulatory relief, so we intend to provide comments throughout the EGRPRA process that will point to the need for relief and better supervisory policy,” Keating told the CEOs. “We welcome your input in this exercise.” Read Keating’s letter to CEOs.  Submit feedback.

Senate Committee Passes ABA-Backed Cybersecurity Bill

The Senate Intelligence Committee on Tuesday voted 12-3 to pass the ABA-supported Cybersecurity Information Sharing Act. The legislation -- which has not been publicly released due to security rules -- is expected to further enhance the cybersecurity information-sharing framework, balancing privacy protection with critical liability and antitrust provisions.

ABA and other trade groups expressed support for a draft version of the bill earlier this week and will analyze amendments to the final legislation when they are released. Read ABA’s letter.

ABA Comments on CFPB Small Creditor QM, DTI Cure Idea

The Consumer Financial Protection Bureau should make it easier for community banks to receive the small creditor qualified mortgage exemption, ABA said in a comment letter on Monday. It also urged the bureau to create a provision allowing banks to correct errors resulting in a mortgage inadvertently falling below QM standards for debt burden.

While it did not issue a regulatory proposal, the bureau requested comments on additional factors that can qualify a lender for the small creditor QM exemption and on a cure proposal when an intended QM loan exceeds the rule’s 43 percent debt-to-income limit.

ABA said the current small creditor test is too narrow, “fail[ing] to benefit a wide range of smaller banks with the capacity to offer more community-based financing essential to the markets they serve.” The association recommended limits of up to $10 billion in assets and 2,000 loans per year. It also said a DTI cure mechanism would be useful to banks and beneficial to consumers if appropriately structured. Read the letter.

CFPB Clarifies Questions on Mortgage Successors

The Consumer Financial Protection Bureau on Tuesday issued an interpretive rule clarifying that a borrower’s heir may be added to a mortgage without triggering the Ability-to-Repay rule. The clarification came in response to industry concerns that creditors may be obligated to determine the ability to repay of a successor-in-interest assuming a deceased borrower’s mortgage.

“There can be significant consequences for a successor that is not able to become an obligor on a mortgage,” the bureau said, noting that the interpretation will allow successors to seek a loan modification if necessary to keep the home. In addition to inheritances, the rule also applies to other situations, including transfers to living trusts, transfers of title from parents to children and transfers resulting from divorces. Read the rule.

Bank's TARP Repayment Brings Treasury Profits to $29.5 Billion

The Treasury Department announced last week that Popular Inc., the largest remaining bank in the Troubled Asset Relief Program, had repaid its TARP investment. Taxpayers have received a $285 million profit on their investment in Popular, and their total TARP investments in banks have netted $29.5 billion to date, the Treasury said.

The Treasury’s announcement aligns with testimony by former ABA President and CEO Ed Yingling nearly six years ago, when he told the House Financial Services Committee that the TARP bank program would be a net gain to the Treasury.

“This is an investment by the government in healthy banking institutions that will be the engines of the economic recovery,” Yingling said at the time. “In total, the government’s return on this investment is likely to range between $40 billion and $45 billion.” Read the Treasury release.  Read Yingling’s testimony.