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After ABA Advocacy, FEMA Reverses Decision on Flood Insurance During Shutdown
Effective immediately, the Federal Emergency Management Agency will allow operations of the National Flood Insurance Program to resume, even while the government remains partially shut down, the agency announced last Friday. The move was retroactive to Dec. 21, ultimately leaving no lapse in NFIP availability.
ABA, along with members of Congress and other trade groups, strongly objected to FEMA’s surprise decision earlier last week halting regular operations, despite Congress’ passage and the President's signature of a bill to reauthorize the NFIP before the shutdown began.
ABA applauded FEMA's action. The association has emphasized in its public statements that suspending the sale and renewal of NFIP policies could complicate and potentially delay loan closings for borrowers seeking mortgages where NFIP coverage is required. For more information, contact ABA's Joe Pigg or Diana Banks.
Federal Government Remains Shuts Down; Bank Regulators Remain Open
With the federal government shut down since Dec. 22, several agencies have closed all but essential operations. Federal banking regulators--the Consumer Financial Protection Bureau, FDIC, Federal Reserve and OCC--have remained open as their funding does not come from congressional spending. However, federal lending programs, including the Small Business Administration, Federal Housing Administration and USDA programs, have been curtailed.
While the shutdown persists, the Securities and Exchange Commission is prioritizing investor protection and market integrity functions; the Commodity Futures Trading Commission has likewise shut down all but essential market support functions. The Financial Crimes Enforcement Network is continuing to process industry anti-money laundering filings. For more information, visit individual agency and department websites.
Banks of all sizes have already begun working with affected customers--principally federal employees and contractors, who will not be paid during a protracted shutdown--to waive fees or provide other accommodations. With many government employees going without paychecks as the government shutdown persists, the Consumer Data Industry Association has issued guidance for reporting forbearance information to consumer reporting agencies during a protracted shutdown.
CDIA reminded institutions that they may reference FAQ 45 of the Credit Reporting Resource guide for guidance on furnishing forbearance data to consumer reporting agencies in the Metro 2 format. View the FAQ. For more information, contact ABA's Nessa Feddis.
CFPB Issues Policy Guidance on HMDA Data Release
The Consumer Financial Protection Bureau has released its policy guidance describing the Home Mortgage Disclosure Act loan-level data it plans to release publicly in 2019.
Significantly, in response to concerns raised by ABA about the need to protect consumer privacy, the Bureau announced that it would not release property addresses, applicants’ credit scores or automated underwriting results. As expected, the CFPB will release “certain information with reduced precision,” including borrower ages, loan amount and number of units in the dwelling.
In addition, the Bureau also announced that it would begin the rulemaking process in 2019 to consider what HMDA data it will disclose in future years. ABA has long called for a formal rulemaking on the public disclosure of HMDA data and will continue to work closely with the agency to ensure its concerns about consumer privacy are addressed. Read more. For more information, contact ABA's Rod Alba.
Agencies Finalize Three-Year Phase-In for CECL's Regulatory Capital Effects
As expected, the financial regulatory agencies on Dec. 21 issued a final rule giving banks the option to phase in over a three-year period the day-one adverse effects of the Current Expected Credit Loss standard on regulatory capital.The CECL standard, which goes into effect in 2020 for SEC registrants, 2021 for non-SEC banks that are FASB-defined "public business entities," and 2022 for all other banks, requires an estimate of expected credit losses over the life of the portfolio to be effectively recorded upon origination.
In related news, the Federal Reserve issued a statement noting that to reduce uncertainty, it will maintain its current framework for calculating loan loss allowances in supervisory stress tests until after the 2021 test cycle. With regard to company-run stress tests, the Fed said that it would “not issue supervisory findings on firms’ stressed estimation of the allowance under CECL in CCAR’s qualitative assessment any earlier than 2022.” View the final rule. Read the Fed's statement.
Luetkemeyer Introduces Bill to Block CECL Implementation
Citing concerns over the wide-reaching effects the Current Expected Credit Loss standard could have on the U.S. economy, Rep. Blaine Luetkemeyer (R-Mo.) on Dec. 21 introduced legislation that would make implementation contingent on a quantitative impact study. Along with the bill, Luetkemeyer and eight of his Republican colleagues sent letters to SEC Chairman Jay Clayton and FASB Chairman Russell Golden to express their concerns about the standard.
In the letter, the lawmakers urged FASB to take several steps to ensure that industry stakeholders are fully prepared for implementation and that the potential economic consequences of CECL are broadly understood, including conducting a cost-benefit analysis.
“As the premier authority on accounting standards, FASB must work to ensure any changes involving accounting standards acknowledge the effects the rule will have on market stability, accounting unpredictability and access to credit,” the lawmakers said. Read the letters and the bill text.
ABA Seeks Stress Test Relief for 'Category IV' Regional Banks
In a letter to Federal Reserve Vice Chairman for Supervision Randal Quarles in late December, ABA urged the Fed to issue an interim final rule providing relief from the 2019 stress testing cycle for smaller regional institutions (“Category IV banks”).
Under its proposed framework for applying enhanced prudential standards to banking firms with $100 billion or more in assets, the Fed created four distinct categories of standards that seek to reflect the risks of firms in the group. The Fed defines Category IV banks as institutions with total consolidated assets of $100 billion or more that do not meet the thresholds for one of the other three categories and are generally not as likely to have as significant of an impact on financial stability as a Category I, II or III institution.
ABA noted that providing immediate relief for Category IV banks would provide much needed clarity and avoid waste. The association added that in the absence of a supervisory stress test, regulators should provide guidance describing expectations for Category IV banks’ 2019 capital planning activities. Read the letter. For more information, contact ABA's Hugh Carney.
Podcast: Community Bankers' Regulatory Optimism for 2019
Charlie Schmalz is optimistic about the policy environment for community banks. As chairman of ABA’s Community Bankers Council and president and CEO of East Wisconsin Savings Bank in Kaukauna, Wis., he outlines provisions in S. 2155 that will help his bank--including Qualified Mortgage designation for portfolio loans and the community bank leverage ratio--and describes it as “the beginning of commonsense banking legislation that needs to be passed.”
In this episode, Schmalz highlights the program for the upcoming ABA Conference for Community Bankers, Feb. 10-13 in San Diego, and he talks about the persistence of the mutual banking model, capital issues that mutuals face, community bank technology plays, the economy in eastern Wisconsin--and the best place to get Wisconsin cheese curds.
CFPB Adjusts Exemption Thresholds for Escrows, HMDA
The Consumer Financial Protection Bureau has adjusted asset size exemption thresholds for banks under Regulation Z and Regulation C. The thresholds are effective as of Jan. 1, 2019.
The asset size for banks exempt from the requirement to establish an escrow account for higher-priced mortgages under Reg Z will rise from $2.112 billion to $2.167 billion. The asset size exemption threshold for financial institutions reporting under the Home Mortgage Disclosure Act and Reg C will rise from $44 million to $45 million. View the Reg Z adjustment. View the Reg C adjustment.
Question of the Week
Question: With the lapse in funding for the NFIP, is it true that no new policies can be written?
Answer: On Dec. 28, 2018, FEMA announced that it will resume the sale of new insurance policies and the renewal of expiring policies.
This press release rescinds initial guidance that was issued on December 26, 2018 to suspend sales operations as a result of the current lapse in annual appropriations. The National Flood insurance Program has been reauthorized by congress until May 31, 2019.
The guidance is located here: https://www.fema.gov/news-release/2018/12/28/fema-resumes-selling-flood-insurance-policies-during-appropriations-lapse
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