Regulatory relief for community banks continues to be a central topic, marked in the past week by a speech from Federal Reserve Chair Yellen on the Federal Reserve's approach to the supervision of community banks.  This week, the House Financial Services Committee is scheduled to mark up several piece of legislation that would amend a number of the new mortgage rules and amend some of the securities laws that relate to smaller registered companies.  Additionally, with respect to mortgages, the CFPB proposed a handful of potentially important changes to its recently implemented mortgage rules and sought comment on other elements of the mortgage rules.

The full set of developments over the past week was as follows:

The Economy

  • April jobs report
    • Unemployment rate at 6.3%, down from 6.7% in March.
      • Rate now below the 6.5% target rate in the FOMC's January 2014 statement as the rate at which increases in the target rate for the federal funds rate could be considered.
    • Summary available at http://www.bls.gov/news.release/empsit.nr0.htm.
  • Federal Open Market Committee meeting, April 29-30.
    • $5 billion step reductions in monthly purchases of agency MBS and longer-term Treasury securities to continue: $20 billion of MBS and $25 billion of Treasuries in May.
    • FOMC reaffirms "view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2 percent inflation."
    • Note that the January 2014 FOMC Statement indicated that a 6.5% unemployment rate could be the rate at which the FOMC could begin to consider increases in the target rate for federal funds.
    • Statement available at http://www.federalreserve.gov/newsevents/press/monetary/20140430a.htm.
    • Federal Reserve Bank statement regarding purchases of Treasury securities and MBS available at http://www.newyorkfed.org/markets/opolicy/operating_policy_140430.html.

Community Banking

  • "Tailored Supervision of Community Banks," Remarks by Federal Reserve Chair Yellen before the ICBA 2014 Washington Policy Summit (May 1).
    • Changes in accounting standards for credit losses on loans and securities – Federal Reserve working with FASB to produce final standard that will permit community banks to use loss-estimation techniques that build upon current credit-risk management techniques, rather than require these banks to use complex models.
    • Federal Reserve exploring greater off-site examination work.
    • New consumer compliance guidance for community banks.
      • CA 13-19, risk-focused supervision.
      • CA 13-20, extending frequency of consumer compliance and CRA examinations.
    • Remarks available at http://www.federalreserve.gov/newsevents/speech/yellen20140501a.htm.
  • Community Banking in the 21st Century, Federal Reserve System/CSBS Second Annual Community Banking Research Conference.
  • Minutes of April 4 meeting of Federal Reserve Community Depository Institutions Advisory Council now available at http://www.federalreserve.gov/aboutthefed/cdiac.htm.

Auto Lending

Credit Reporting

Cybersecurity

Mortgage Lending

  • CFPB proposed changes to mortgage rules (April 30).  Proposed changes and requests for comment available at http://www.consumerfinance.gov/newsroom/cfpb-proposes-minor-changes-to-mortgage-rules-to-ensure-access-to-credit/
    • "Small servicer" definition: alternative definition that would apply to certain nonprofit entities that service for a fee loans on behalf of other nonprofit chapters of same organization.  Comments due 30 days after publication in the Federal Register.
    • Qualified mortgage/ability-to-repay: certain interest-free, contingent subordinate loans originated by nonprofit creditors will not be counted towards the credit extension limit that applies to the nonprofit exemption from ability-to-repay requirements.  Comments due 60 days after publication in the Federal Register.
    • Qualified mortgages: Cure period for points and fees in excess of QM limits on loans originated with good-faith expectation that points and fees would qualify. Comments due 60 days after publication in the Federal Register.
  • CFPB requests comment on two other issues without proposed language changes.
    • Whether and how to provide a limited, post-consummation cure or correction provision for loans that are originated with the good faith expectation of qualified mortgage status but that actually exceed the 43-percent debt-to-income ratio limit that applies to certain qualified mortgages.
    • Feedback and data from smaller creditors regarding implementation of certain provisions in the CFPB mortgage rules that are tailored to account for small creditor operations and how their origination activities have changed in light of the new rules.
  • House Financial Services Committee markup of proposed mortgage legislation on May 7.
    • H.R. 1779, the Preserving Access to Manufactured Housing Act of 2013.
      • Clarification of definition "mortgage originator."
      • Amendments to definition of "high cost mortgage" and corresponding thresholds.
    • H.R. 2673, the Portfolio Lending and Mortgage Access Act.
      • Safe harbor from liability under QM rule for mortgage loans held on balance sheet by community financial institutions.
    • H.R. 3211, the Mortgage Choice Act of 2013.
      • Modifications to definition of "points and fees" to exclude insurance and taxes held in escrow and fees paid to affiliated companies as a result of their participation in an affiliated business arrangement.
    • H.R. 4521, the Community Institution Mortgage Relief Act of 2014.
      • Exemption of community financial institutions from escrow requirements for loans held in portfolio.
      • Amendment of RESPA to instruct CFPB to provide regulatory relief for servicers that annually service 20,000 or fewer mortgage loans.
    • Bill text and Committee Memorandum available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=378782.

Mortgage Servicing/Foreclosures

Risk Management

  • OCC "Compliance Risk" and "Risk Assessment" workshops for directors of national community banks and federal savings associations scheduled for May 6-7 in San Diego, CA.

Russia/Ukraine

  • Treasury Department adds 7 Russian government officials and 17 entities to Specially Designated Nationals list, including SMP Bank and InvestCapitalBank (April 28).
  • Visa and MasterCard suspend network support for credit and debit cards issued by SMP Bank and InvestCapitalBank (April 29).

Securities Laws

  • House Financial Services Committee markup of proposed securities legislation on May 7.  Legislation includes (but is not limited to):
    • H.R. 4554, the Restricted Securities Relief Act.
      • Amendments to Rule 144 concerning public resale of stock.
      • Amendment to Section 18(b) of Securities Act of 1933 to exempt from state regulation security offered in compliance with Rule 144A.
    • H.R. ____, the Encouraging Employee Ownership Act of 2014 (discussion draft).
      • Amendments to SEC Rule 701 to raise threshold of securities sold in 12-month period from $5 million to $20 million for purpose of requiring new disclosures.
    • H.R. ____, the Private Placement Improvement Act (discussion draft).
      • Amendments to SEC Rule 506 to remove certain restrictions on small businesses attempting to raise capital under Title II of JOBS Act.
    • H.R. ____, to require the Securities and Exchange Commission to revise the definition of a well-known seasoned issuer to reduce the worldwide market value threshold under the definition (discussion draft).
      • WKSI public float threshold reduced from $700 million to $250 million.
    • H.R. ____, the Startup Capital Modernization Act of 2014 (discussion draft).
      • Amendments to various provisions of Regulation A.
      • Expansion of definition of "exempted transactions" under '33 Act to include resale of securities acquired in an exempted transaction.
    • H.R. 2629, the Fostering Innovation Act.
      • Amendments to public float thresholds of Rule 12b-2 regarding non-accelerated filers and exemptions form securities laws and Sarbanes-Oxley.
    • Bill text and Committee Memorandum available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=378782.

Small Business Loans

Swaps and Derivatives

Third Party Providers

Unfair and Deceptive Practices

Bank Closings

  • None. 

Congressional Action

Upcoming Events

  • May 6-7
    • OCC workshops for directors on "Compliance Risk" and "Risk Assessment" in San  Diego, CA.
  • May 7
    • Senate Banking Committee hearing, "Drivers of Job Creation."
    • House Financial Services Committee markups.  For details see Mortgage Lending andSecurities Laws above.
    • FDIC cybersecurity webinar.  See FIL-21-2014, available at http://www.fdic.gov/news/news/financial/2014/fil14021.html.
  • May 8
    • SEC full Commission meeting.
    • House Financial Services Committee hearing, "The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System."
  • May 19
    • FSOC conference on asset management industry and its activities.
  • May 29
    • FDIC San Francisco Region Bankers' Forum: The Development and Launch of a New Banking Product: A UDAP Primer.
  • June 2-4
    • OCC workshop, "Mastering the Basics: A Director's Challenge," Nashville TN.
  • Sept. 23-24
    • Community Banking in the 21st Century, Federal Reserve/CSBS research conference.

Regulatory Comment Deadlines

  • May 27 – CFPB: revisions to Reg E to allow certain international remittance providers to estimate fees and rates through July 21, 2020.  
  • May 27 – SEC: standards for covered clearing agencies.  
  • May 27 – CFTC: swap reporting and recordkeeping requirements under 17 CFR part 45.  
  • June 9 – federal banking agencies: standards for asset management companies and state agencies.  
  • 30 days from publication in the Federal Register – CFPB: "small servicer" definition.
  • June 12 – OCC: increased assessments for national banks and federal thrifts over $40 billion.  
  • June 13 – federal banking agencies: revisions to definition of eligible guarantee under advanced approaches risk-based capital rule.
  • June 13 – federal banking agencies: changes to denominator of supplementary leverage ratio.
  • June 20 – FDIC: filing and disclosure requirements for securities issued by state savings associations.  
  • July 1 – SEC: recordkeeping, reporting, and notification requirements for security-based swap dealers and major security-based swap participants.
  • 60 days from publication in the Federal Register – SEC: recordkeeping, reporting, and notification requirements for security-based swap dealers and major security-based swap participants.