ABA Urges Bankers to Contact Lawmakers in Support of Farm Credit Fairness Bill

With net farm income declining since 2013, and with many consumers in rural America struggling to find access to credit, ABA is asking bankers to contact their lawmakers in support of the Enhancing Credit Opportunities in Rural America Act (H.R. 1872 and S. 1641).

The bills would end taxation of interest earned from agricultural real estate loans, promoting greater access to credit for rural communities and reducing costs to borrowers. In addition, they would help bring greater parity between banks and the tax-advantaged Farm Credit System, making it easier for banks to support the farm sector through real estate loans. Bankers can visit Secure American Opportunity—ABA’s new grassroots engagement site—to contact their lawmakers. Take action now

ABA Survey: Credit Quality Tops List of Concerns for Ag Lenders

With the farm economy in the midst of a prolonged downturn, the primary concern among ag lenders remains credit quality and the deterioration of agricultural loans, according to the latest agricultural lenders survey conducted by ABA and Farmer Mac. Respondents said they were also concerned about lender competition—particularly from the Farm Credit System, which 73.5% named as their primary competitor—as well as weakening loan demand and a shrinking market due to farm consolidation.

“Bankers are naturally concerned for their farmers and ranchers as the ag economy continues to regain its footing,” said ABA Chief Economist James Chessen. “Bankers know the cycles of agriculture very well and will continue to work side-by-side with their customers as they have done in the past. While uncertainty has risen, banks are well prepared to continue their support for the ag community through these challenging times.”

Farm profitability remained stressed in 2019, and the majority of ag lenders—82.5%—reported declines in farm profitability this year, with declines extending across all reporting regions. The approval rate for ag loans was 75.1%, and survey respondents said they expect the approval rate for renewal requests to be close to 90% in the year ahead.

While more than half of ag lenders report that demand for agricultural production loans held steady over the last 12 months, 45.3% of lenders with assets between $50 million and $250 million reported increased demand. Nearly half of lenders said they expect land values to decline in 2020, and noted that an average of 37.8% of land in their markets is above market value. View the survey results.

ABA Calls for Interoperability as Fed Moves Ahead with 'FedNow' Service

As the Federal Reserve moves ahead with its plan to develop the FedNow real-time payments settlement service, ABA in a comment letter last Thursday noted that “FedNow can contribute to a better, faster and safer payment system if implemented correctly.” However, ABA emphasized that the FedNow service—which is not expected to be operational until 2023 or 2024—must be interoperable with existing faster payments systems (including the Clearing House’s RTP network) on day one. The association raised concerns about signals from the Fed that have suggested that FedNow would not be interoperable at the time of implementation, but would strive to become so at a later date.

“A faster payments ecosystem that does not provide interoperability between systems with similar levels of service and security will fragment the market. It will also result in excessive costs and inefficiencies for banks, increase costs, and produce inferior customer experiences,” ABA cautioned. “If FedNow is not interoperable with existing faster payment services, depository institutions . . .will need to decide which service [they] will offer to their customers, while recognizing that they will be unable to send or receive payments to users of the other service.

ABA also emphasized the need for the Fed to prioritize bank-only access and provide new liquidity management tools as it develops FedNow. The association also called on the agency to work constructively with core providers to ensure smooth implementation for community banks and create a flat pricing model that offers the same per-item fees regardless of institution size, among other things. Read the comment letter. For more information, contact ABA’s Steve Kenneally.

New Infographic Provides Tips to Protect Veterans from Phone Scams

A new infographic from the ABA Foundation, Association of Military Banks of America and the Better Business Bureau provides tips for veterans, active duty servicemembers and their families on how to protect themselves from financial scams targeting the military. The infographic highlights findings from a recent report that found that military consumers lost more money on employment scams, credit repair and debt relief scams and home improvement scams last year compared to all consumers.‌

“As a member of the military, you are presented with unique challenges—deployments, relocations and eventually, a transition to civilian life and a new career,” said ABA Foundation Executive Director Corey Carlisle. “It can be difficult to navigate major financial decisions in the midst of constant change. That’s why it’s important to educate our service members on best practices as well as red flags to look out for when managing their personal finances.”

To guard against potential phone scams, ABA, AMBA and the BBB encourage servicemembers and their families to: not trust caller ID; avoid providing personal information to callers; verify the caller and the business online; contact their financial institution immediately if they suspect they have been scammed; and report scams to the BBB’s Scam Tracker. View the infographic.

With Windows 7 Product Support Ending, Article Outlines Bank Options for Upgrading

Jan. 14, 2020, is the day that Microsoft will discontinue product support for Windows 7. At that point, Microsoft will begin charging a fee for patches and related maintenance for Windows 7 users. By some estimates, just over 60% of financial institutions are either on Windows 10 or are in the process of migrating to it. A new free article on the ABA Banking Journal offers practical advice on questions to ask and options to consider as the clock ticks down.

The article notes that banks face special issues related to a software migration. Will the bank’s third-party software—such as accounting, appraisal or core applications—need to be upgraded? Is the hardware—PCs, ATMs/ITMs, and DVRs—under warranty? What do banks need to know about newer software that enables Microsoft to collect data from users?

The author points out that some banks may find that it makes sense to pay for Windows 7 support for a time, rather than migrating immediately to Windows 10. The decisions banks face about upgrading to Windows 10, he says, are “more complicated than they seem—and the time to make them is running short.” Read the article.

Podcast: Enlisting Trusted Caregivers to Help Prevent Elder Fraud

Nearly 15% of Americans—more than 34 million people—are serving as caregivers for adults over 50. In November, recognized as National Family Caregiver Month, the ABA Banking Journal Podcast is taking a look at how banks can support caregivers in their mission while protecting the privacy and safety of the bank customers receiving care. Kieth Cockrell, head of specialty client services at Bank of America, joins the podcast to discuss:

Bank of America’s “Trusted Contact” feature, which allows customers to designate an alternative contact person and was recently rolled out to all retail bank accounts.
Frauds and scams that seniors can fall victim to and how trusted contacts have facilitated direct conversations with the victimized customers that stopped the scam.
How designating a trusted contact—which doesn’t provide account access the way joint accounts or power of attorney do—can make it easier for have sometimes hard conversations with customers who need financial caregiving.
Bank of America’s overall elder fraud prevention and anti-fraud programs and resources, including efforts to prevent wire transfer fraud.

Listen to the episode. Learn more about the ABA Foundation’s Safe Banking for Seniors program

Hacker Hour: Active Directory Tiering

Servers and domain administrator user accounts are some of the most critical assets to secure on your network. Through active directory tiering and the use of privileged access workstations, organizations can create a network where access is allowed on an “as-needed” basis.

Join SBS CyberSecurity on Nov. 22 for the free webinar Hacker Hour: Active Directory Tiering. Learn more about what active directory tiering is, how separating critical and non-critical assets through active directory can protect information, and how, when coupled with other controls, it can help secure your network from a wide array of threats.

Ag Solar Electrical Investment Analysis Webinar Series

The University of Nebraska and Ohio State University are hosting a solar electric webinar series in December focused on professional development for individuals who interact with farmers and rural businesses. The series is focused on reaching rural lenders who work with farmers and rural businesses considering investments in photovoltaic solar.

Photovoltaic (PV) panels are an increasingly common sight on homes, farms and businesses across the Midwest. Declining cost of PV solar installations makes installing a distributed solar electric system enticing for many farmers. Evaluating the financial investment in solar requires careful consideration of system costs, the value of production, and operation and maintenance costs. Unfortunately, some proposals are hard to understand making it difficult to make fully informed investment decisions.

This four-part webinar series will provide you with resources and tools to help consult farmers who are considering investing in a solar electric system, so they are able to make fully informed investment decisions. Although the webinars are geared to an agricultural audience, the information that will be shared applies to anyone looking for information on making a wise solar energy investment, such as rural bankers and lenders.

The webinar series is offered at no cost due to support from the USDA North Central Sustainable Agriculture Research and Education program. Learn more. Register for the webinar.

Question of the Week

Question: For HMDA reporting, the purpose is to construct 45 additional apartment units but collateral is existing 68 unit apartment complex and land where borrower will build the additional units. The payment terms are 24 payments of interest only thru March 15, 2021, then payments of P & I starting April 15, 2021, amortized over 25 years. Would it be considered a construction loan and not reportable or construction to perm all in one and reportable?

Answer: If you are doing the construction to perm, then it would be reportable unless otherwise excluded. If you are doing construction-only, which is planned to be taken out by another loan, it is temporary financing and not HMDA reportable.

Section 1003.3(c)(3) provides that closed-end mortgage loans or open-end lines of credit obtained for temporary financing are excluded transactions. A loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time.

Comment 1 to §1003.3(c)(3): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/3/#3-c-3-Interp-1

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