In This Issue

• House Committee Approves Regulatory Relief Bills
• FinCEN Proposes Enhanced Customer Due Diligence
• Farm Credit Regulator Addresses FCS 'Reputation Risk'
• ABA Seeks Clarifications on CFPB Servicing Rule
• FDIC Withdraws Lists of 'High-Risk' Merchant Customers
  
• ABA Renews Ag Secondary Market Agreement with Farmer Mac

House Committee Approves Regulatory Relief Bills

The House Financial Services Committee has approved three ABA-supported regulatory relief bills, according to Daily ABA Newsbytes. The committee yesterday voted 44-9 to pass H.R. 4042 -- introduced by Reps. Blaine Luetkemeyer (R-Mo.) and Ed Perlmutter (D-Colo.) -- which would delay the implementation of Basel III’s rules on mortgage servicing assets until a thorough study documents the effects on banks’ retention of servicing rights for mortgages they originate.

The panel also voted 31-23 to approve Luetkemeyer’s H.R. 5148, which would ease appraisal rules on mortgages of $250,000 or less to keep those loans more affordable. On Tuesday it approved by a voice vote H.R. 3240, which calls for the Government Accountability Office to study the effects on consumers of Regulation D’s monthly limits on savings account withdrawals.

FinCEN Proposes Enhanced Customer Due Diligence

The Financial Crimes Enforcement Network yesterday proposed a rule that would make customer due diligence requirements under the Bank Secrecy Act explicit and add a requirement for banks to identify the beneficial owners of customers incorporated as a legal entity.

Under the proposal, banks must identify the natural person or persons that own or control a legal entity that is a customer. Banks would be expected to obtain this information from the customer on a form when an account is opened. The requirement would apply to all entities except those that are already exempt from FinCEN’s customer identification program rules.

FinCEN said it would not “require that financial institutions verify that the natural persons identified on the form are in fact the beneficial owners.” However, the agency said its proposal lays out minimum standards, so “existing or future guidance, regulations or supervisory expectations may provide for additional requirements or steps that should be taken to mitigate risk.”

Although the proposal addresses several issues expressed by ABA to FinCEN in a letter two years ago, ABA remains concerned about the expansion of the BSA information collection and monitoring responsibilities implicated in the proposal. Comments are due 60 days after publication in the Federal Register. Read the proposed rule. For more information, or to provide input to ABA’s comment letter, contact ABA’s Robert Rowe.

Farm Credit Regulator Addresses FCS 'Reputation Risk'

Farm Credit Administration Chairman Jill Long Thompson in a recent speech warned that Farm Credit System lenders’ non-farm-related activities posed “reputation risk” to the entire FCS. Her statement likely referred to FCS lender CoBank’s widely reported $725 million loan to support Verizon’s purchase of a European telecom company, Bert Ely said yesterday in ABA’s Farm Credit Watch e-bulletin. The loan was “an excellent example of creating reputation risk,” he wrote.

Long Thompson referenced her June testimony before a House Agriculture subcommittee at which several members asked pointed questions about the Farm Credit System’s commitment to its mission. Although she defended the “legality” of loans “that some considered to be outside the realm of the [FCS’] mission,” she noted that “sticking to your mission is one important way that you can manage reputation risk.”

She also insisted that the FCA is an “independent, arms-length regulator” but that non-mission-centric activities undermine that perception -- reinforcing, Ely commented, “the widely held and understandable belief that the FCA is a ‘captured’ regulator.” Read the speech.  Read Farm Credit Watch.

ABA Seeks Clarifications on CFPB Servicing Rule

ABA on Tuesday wrote to the Consumer Financial Protection Bureau seeking clarifications on several mortgage servicing rule questions bankers face.

Specifically, ABA asked how the bureau’s 120-day delinquency threshold applies to rolling delinquencies, when a delinquent borrower resumes making scheduled payments but never becomes current on the loan. ABA also sought clarification on the periodic statement requirement for loans that have been charged off, and it urged the bureau to adopt its interim final rule on exceptions for bankruptcies as proposed.

Finally, ABA urged the bureau to issue clarifications that will not require major systems modifications, as banks continue to test new systems for the mortgage rules that took effect in January and prepare for the TILA-RESPA integration next year. Read the letter.

FDIC Withdraws Lists of 'High-Risk' Merchant Customers

 
The FDIC on Monday updated several pieces of guidance on banking third-party payment processors. The agency was responding to confusion over whether bankers were expected to stop serving TPPPs when processing transactions on behalf of merchants that fall into categories -- such as firearm sellers, payday lenders and telemarketers -- identified by the FDIC as “high-risk.”

In so doing, the FDIC withdrew these lists from previous guidance, which had been associated with the Justice Department’s Operation Choke Point.

“The lists of examples of merchant categories have led to misunderstandings regarding the FDIC’s supervisory approach to institutions’ relationships with TPPPs, resulting in the misperception that the listed examples of merchant categories were prohibited or discouraged,” the agency said. “Accordingly, as part of clarifying our guidance, the FDIC is removing the lists of examples of merchant categories from outstanding guidance and [a Supervisory Insights] article.”

The FDIC emphasized that banks following the outstanding guidance on serving TPPPs would not be criticized for maintaining those account relationships. In an email on Monday to compliance officers, ABA said it was encouraged by the FDIC’s refocusing, provided it translates to on-the-ground exam practices. ABA will continue its advocacy to end Choke Point and its manifestation in prudential regulation. Read the updated guidance. For more information, contact ABA’s Rich Riese.

ABA Renews Ag Secondary Market Agreement with Farmer Mac

ABA, through its Corporation for American Banking subsidiary, has renewed its alliance with Farmer Mac to offer ABA members assistance in selling their agricultural loans in the secondary market. The agreement offers ABA members advantaged pricing on select, fixed-rate farm and ranch loans.

“With this agreement, our members will continue to have better access to Farmer Mac and the benefits that the secondary market for agricultural mortgages can bring to their customers,” said ABA EVP Bill Kroll. “Our alliance with Farmer Mac not only provides our member banks with preferred rates on long-term fixed-rate farm and ranch loans, it also enables banks to shift the credit and interest rate risk away from the bank and provides them with increased lending capacity and greater liquidity.” Read more.