Congress was the source of the two most significant developments over the past week.  Three days ago, on Sunday, Mar. 16, Senate Banking Committee Chairman Tim Johnson and ranking member Mike Crapo introduced GSE reform legislation.  Their bill would substantially change the role of the federal government in the secondary market and, among other things, confirm the CFPB's standards for qualified mortgages as the framework for underwriting.  The probability of passage in 2015 is low, but the bill may set the threshold from which future discussions will proceed.  The second event was the mark-up last Thursday, March 13, of several pieces of legislation by the House Financial Services Committee, including a bill that exempts many investments in collateralized loan obligations from Volcker Rule prohibitions. 

Major developments over the past week include the following:




  • Credit for community development efforts in locations outside assessment area, notably in rural and distressed communities.


  • Mortgage fraud – Justice Department OIG issues audit report on efforts of DOJ to address mortgage fraud (Mar. 13).
    • "DOJ did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements."
    • Deficient statistics on fraud cases.
    • Report available at
  • Greater emphasis on accountability of senior management in BSA/AML enforcement proceedings.
    • See remarks of Comptroller Curry under BSA/AML above.

Federal Reserve Board

Housing Reform

  • Senate Banking Committee Chairman Tim Johnson (D-SD) and ranking member Mike Crapo (R-ID) release housing reform bill, the "Housing Finance Reform and Taxpayer Protection Act of 2014" (Mar. 16).
    • Discussion draft and other materials available at
    • Chairman has announced intent to mark up bill before Senate recess begins on April 11.
    • Primary regulator modeled on FDIC: Federal Mortgage Insurance Corporation
      • Oversees insurance of qualifying mortgage-backed securities.
      • Regulates and supervises:
        • Guarantors.
        • Aggregators.
        • Private mortgage insurers.
        • Servicers.
        • Small lender mutuals
      • Establishes Securitization Platform.
      • FHFA to become an independent office within FMIC; fully absorbed after Fannie Mae and Freddie Mac are prohibited from engaging in new business.
      • Fannie Mae and Freddie Mac to be wound down.
    • Mortgage Insurance Fund
      • Explicit federal government guarantee.
      • Covers losses of principal and interest – after private market takes first 10% of mortgage losses.
        • First loss position not assigned to any particular class of market participants.
      • Funded initially by assessments on Fannie Mae and Freddie Mac and then by fees on FMIC-backed securities.
      • FMIC may extend coverage to otherwise ineligible securities in "unusual and exigent market conditions."
    • Mortgage originations
      • All entities now eligible to make mortgage loans may continue to do so and will be regulated by current supervisor.
      • Underwriting may be affected: FMIC will insure MBS only if underlying mortgages meet standards for qualifying mortgages under CFPB rules.
    • Mortgage-backed securities
      • All FMIC-backed securities issued through the Securitization Platform, an independent cooperative owned by its members and regulated by the FMIC.
      • All FMIC-backed securities required to use a Uniform Securitization Agreement.
      • Non-FMIC-backed securities may also use the Platform; FMIC may approve an Optional Uniform Agreement.
    • Guarantors
      • MBS eligible for MIF insurance only if privately guaranteed.
      • FMIC has FDIC-type authority over guarantors: approval of guarantors, supervision and examination, authority to set capital requirements, and resolution authority.
      • Special rules for  multi-family guarantors.
    • Aggregators
      • Entities that purchase mortgage loans for delivery to Securitization Platform.
      • FMIC has FDIC-type authority over aggregators: approval, supervision and examination, authority to set capital requirements, and resolution authority.
      • Regulation to differ based upon aggregator's affiliation (or not) with an insured depository institution.
      • Each Federal Home Loan Bank may establish aggregator subsidiary.
    • Private mortgage insurers
      • Entities that guarantee eligible mortgage loans collateralizing FMIC-backed securities.
      • FMIC has some regulatory authority over PMIs: approval, supervision and examination, enforcement authority.
      • Authority to set capital requirements unclear; may be left to state insurance regulators.
      • FMIC may recommend resolution, but authority rests with state insurance regulator.
    • Servicers
      • FMIC must approve servicers of eligible loans.
      • Bi-annual examinations; more frequently if substantial reason to believe regulatory violations.
    • Small lenders
      • Term covers all banking institutions with less than $500 billion in consolidated assets.
      • FMIC may establish and capitalize a small lender mutual to purchase mortgage loans for cash, provide securitization services, and assist in retaining servicing rights.
    • Affordable housing
      • Incentive-fee based structure to support funds that support affordable housing.
      • FMIC may adjust guarantee fees to provide other incentives.
      • Current affordable housing goals eliminated.
    • Shareholders of Fannie Mae and Freddie Mac
      • Resolution plans required for the GSEs.
      • Specific treatment of shareholders unclear.
      • Sponsors have indicated that fate of shareholders to be resolved in ongoing litigation.

Mortgage Lending

Third Party Service Providers

Too Big to Fail

Volcker Rule

  • Collateralized loan obligations – House Financial Services Committee approves H.R. 4167, the Restoring Proven Financing for American Employers Act.
    • Investments in most CLOs issued before Feb. 1, 2014, are grandfathered.
      • Non-grandfathered CLO investments must be divested by 2017.
    • Definition of "ownership interest," which subjects CLO investments to Volcker, is revised to provide that investor has no such interest if investor has only the right to participate in the removal for cause or in selection of a replacement investment manager or investment adviser.
    • Bill text and related material available at

Bank Closings

  • None.

Congressional Events

Upcoming Events

  • Mar. 18-19
    • Federal Open Market Committee
  • Mar. 20
    • SEC Commission meeting; closed to public.
    • Federal Reserve to release results of supervisory stress tests.
  • Mar. 21-24
    • Federal Reserve, International Research Forum on Monetary Policy.
      • Invitation only.
  • Mar. 24
    • Federal Reserve, Crowdfunding for Community Development Finance.
      • Invitation only, but portions live-streamed.
  • Mar. 24-25
    • Federal Reserve, 2014 Financial Innovations Roundtable.
      • Strategies and Innovations for Health-Related Community Investing.
      • Invitation only.
  • Mar. 26
    • Federal Reserve to release CCAR results.
  • Mar. 30 – Apr. 2
    • Federal Reserve Bank of San Francisco, 2014 National Interagency Community Reinvestment Conference, Chicago.
      • Fully booked
  • Mar. 31
    • OCC Symposium, “Building on 150 Years: The Future of National Banking."
  • Apr. 3
    • CFTC public roundtable on effect on commercial end-users of Dodd-Frank rules.
  • Apr. 4
    • CFTC public roundtable to discuss end-user issues under Dodd-Frank.
      • Preliminary information available at

Regulatory Comment Deadlines

  • Mar. 21 – BCBS: Second consultative paper on securitization framework.
  • Mar. 24 – SEC: amendments to Regulation A.
  • Mar. 28 – OCC: heightened expectations for large national banks and federal savings associations.
  • Mar. 31 – Federal Reserve: amendments to Policy Statement on Payment System Risk and to Regulation HH (financial market utilities) to reflect international Principles for Financial Market Infrastructures.
  • April 1 – CFPB: supervision of larger international money transmitters.
  • April 11 – BCBS: Basel III: The Net Stable Funding Ratio.
  • April 15 – Federal Reserve: repeal of Regulation P.
  • April 16 – Federal Reserve: advance notice of proposed rulemaking on physical commodity holdings by financial holding companies.
  • April 21 – Federal Reserve: modification of definition of “creditor” in Identity Theft Red Flags Rule.
  • April 21 – Federal Reserve: repeal of Regulation DD.
  • May 2 – Federal Reserve: Application of Regulation CC to electronic checks and electronic returned checks.
  • 60 days after publication in the Federal Register – SEC: standards for covered clearing agencies