SDBA eNews: June 9, 2016

In This Issue

RuralX Summit to be Held in Aberdeen

People from across the region who are committed to making rural places even better will gather July 19-20 in Aberdeen to experience the RuralX Summit.

RuralX stands for Rural Experience; a “come as you are” convergence of thinkers and doers with a desire to share creative energy, positive motivation and compelling new ways to “ruralize their potential” in the places they call home. The lively, inspirational summit will inspire critical conversations, connect people with ideas, encourage community-to-community collaboration and transform ideas into action.

Community leaders, economic development corporations, entrepreneurs, business owners, educators, students, farmers, ranchers and forward-thinking residents who want to make the most of their rural community’s potential are invited to attend. The RuralX Summit is hosted by Dakota Resources. Learn more and register.

CFPB Adds Three Regulations to Online Tool

The Consumer Financial Protection Bureau has updated its Web-based eRegulations tool to include the Real Estate Settlement Procedures Act (Regulation X), the Home Mortgage Disclosure Act (Regulation C) and the Truth in Savings Act (Regulation DD). The bureau also updated a section on the Truth in Lending Act (Regulation Z) to reflect recent changes. View eRegulations.

Question of the Week

We have a customer who is considering borrowing money for home improvements but wants to use cattle as the collateral to the loan. What disclosures would need to be done if there is no real property involved?

Answer: Only Truth in Lending disclosures are required, similar to a consumer loan. TRID disclosures are not required, because even though the loan is for consumer-related home improvement, it is not secured by a dwelling. Note, however, that since it is a home improvement loan, it will be subject to HMDA and you will be required to obtain the government monitoring information (if you are a HMDA bank).

Not a Compliance Alliance member? Learn more about membership with Compliance Alliance by attending one of our live demos:

Compliance rules and regulations change quickly. For timely compliance updates, subscribe to Compliance Alliance’s email newsletters.

Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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Contact Alisa DeMers, SDBA, at 800. 726.7322 or via email.

Hensarling Unveils Proposal for Dodd-Frank Overhaul

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) on Tuesday announced plans for new legislation that he called a “market-based, equity financed Dodd-Frank off-ramp," according to ABA Newsbytes. The Financial Choice Act would effectively roll back the Dodd-Frank Act’s regulatory regime by allowing banks that elect to hold high capital levels to be exempt from certain regulatory requirements of DFA and Basel III.

Hensarling said that Dodd-Frank has imposed excessive regulation on the financial system, particularly on community banks. “We are losing, on average, one community financial institution each day--and they are not dying from natural causes but from the sheer weight, volume, complexity and expense of Washington’s rules,” Hensarling said. “[E]nding and replacing the mistake of Dodd-Frank is the necessary start if we ever hope to restore real economic growth in America.”

To take advantage of the regulatory exemptions under the Financial Choice Act, banks would need to have a composite CAMELS rating of 1 or 2 and maintain a 10 percent non-risk weighted leverage ratio--a significantly higher standard than those currently required by DFA or Basel III. “Banks will opt into the…new regime only if it makes them more competitive--in other words, if it lets them better serve customers at lower cost,” Hensarling said.

In an alternative approach to addressing “too big to fail” institutions, Hensarling’s plan also replaces Dodd-Frank’s Orderly Liquidation Authority provision with a new chapter of the Bankruptcy Code designed to accommodate the failure of a large, complex financial institution, repeals the authority of the Financial Stability Oversight Council to designate firms as systemically important, and restricts the Federal Reserve’s ability to make discounted loans or bail out financial firms or creditors. In addition, Hensarling’s proposal would reform the Consumer Financial Protection Bureau, impose enhanced penalties for fraud or deception, and create greater opportunity for investment by repealing the Volcker Rule and other DFA provisions limiting capital formation.

Securing regulatory relief for banks of all sizes is at the heart of ABA’s Agenda for America’s Hometown Banks, and the association on Tuesday said it appreciated Hensarling’s contributions to the conversation on Capitol Hill.

“Members from both sides of the aisle agree that parts of Dodd-Frank just aren’t working. Any law that generates more than 24,000 pages of proposed and final rules will inevitably include problems that should be fixed,” said ABA EVP James Ballentine. “We look forward to working with the committee and anyone who will help remove obstacles that make it harder for America’s banks to serve their customers and meet the needs of their local communities.” Read Hensarling’s speech. Read ABA’s executive summary.

ABA, Associations: GSE Reform Must Come from Congress

Several financial and housing groups--including ABA-- yesterday called for Congress to tackle comprehensive reform of Fannie Mae and Freddie Mac.

In a letter to Federal Housing Finance Agency Director Mel Watt, the associations said that policymakers must focus on fixing the structural flaws that led to the collapse of the housing finance system during the financial crisis in order to protect taxpayers, preserve access to credit and ensure stability in the housing market. While they acknowledged the work FHFA has done to address the GSEs’ operational issues and foster transparency, they added that sweeping reform of the system is the only way to prevent another financial crisis.

“[T]he current state of conservatorship has provided stability, but policymakers and stakeholders need to continue to work together on the important efforts to advance housing finance reform through a legislative solution,” the groups wrote. “Absent reform, we run the risk of continuing to kick the can down the road without ensuring ongoing access to mortgage credit for millions of future homeowners.” Read the letter.

ABA Concerned over Addition to Uniform Residential Loan Application

ABA and several trade associations yesterday wrote to FHFA Director Watt urging the agency to omit from the Uniform Residential Loan Application a proposed question that asks borrowers to indicate their language preference. The groups pointed out that the inclusion of the question raises serious compliance and legal concerns.

For example, the question’s inclusion would raise compliance questions with respect to Dodd-Frank mortgage rules, which are “outside the purview of the Federal Housing Finance Agency and within the purview of the Consumer Financial Protection Bureau… and other agencies.”

The associations further pointed out that including a language preference question would create a reasonable expectation that the customer would receive communication in their designated language and that there are currently no rules to guide lenders on what they should do in light of a borrower’s response. If a borrower indicated a non-English preference and the lender did not proceed in that language, the lender could be exposed to UDAAP liability, they added.

“At this point, the inclusion of the subject question would only create confusion, uncertainty and potential liability,” the groups wrote. “Given the implications across federal agencies, we urge the FHFA to abandon this proposal or, at the very least, seek broader interagency and stakeholder input before proceeding further with this addition to the URLA.” Read the letter.

ABA, ICBA Weigh in on Small Business Lending Bill

In a joint letter to Senate leadership on Tuesday, ABA and the Independent Community Bankers of America (ICBA) provided feedback on the Small Business Lending Oversight Act of 2016, a bill that would enhance the oversight of the Small Business Administration’s 7(a) loan program. The associations expressed their commitment to working with both House and Senate leadership as the bill moves forward to ensure that 7(a) loans remain accessible to small businesses and cost-effective for the financial institutions offering them.

“We want to ensure that community banks, many of whom provide a limited number of 7(a) loans to customers, are able to continue to offer these loans in a cost efficient way to their customers,” the groups wrote. “It would be harmful to entrepreneurs if any lender exited the program due to an imbalanced or overly restrictive cost and fee structure.” Read the letter.

Overtime Exemption Guide Helps Bankers Comply with DOL Rule

The Department of Labor recently released its final rule doubling the salary level used to determine whether employees are exempt from overtime pay under the Fair Labor Standards Act. As part of its service to ABA members, the firm Employment Law Compliance offers for sale a toolkit to provide step-by-step guidance to complying with the new rules. Components specifically designed for the banking industry include model job evaluations for the most common bank positions, job evaluation questionnaires and position-by-position assessment tools.

Bankers can also subscribe to ABA’s free email bulletin, ABA Newsbytes: Human Resources for timely and relevant human resources news, information and regulatory updates on issues that affect HR staff and policies of financial institutions. Subscribe now. Read more about the Banker's Overtime Exemption Guide

Trade Groups Urge Congress to Fund FSA in Appropriations Bill

ABA, together with several financial and agricultural trade groups, last week wrote to Congress urging lawmakers to include additional funding for the Farm Service Agency’s direct operating loan and guaranteed operating loan programs in the 2017 agriculture appropriations spending bill.

The groups pointed out that the FSA is currently facing a financial shortfall and will run out of funding in June, leaving many beginning farmers and those not fully served by commercial creditors without access to vital credit.

“Access to annual operating credit is a make-or-break issue for many farmers, especially those just starting out,” the groups wrote. “Access to credit can largely determine whether or not farmers can continue working their lands, and for beginning farmers, it can determine whether or not they decide to pursue a career in agriculture in the first place.” Read the letter.