FEDERAL GOVERNMENT RELATIONS
Temporary Relief From Part 363 Audit/Reporting Requirements
The Federal Deposit Insurance Corp. on Tuesday issued an interim final rule (IFR) providing temporary relief from certain Part 363 audit and reporting requirements for banks that have experienced growth due to their participation in the Paycheck Protection Program and other pandemic-related government programs.
The FDIC’s IFR would allow IDIs that have experienced growth to determine whether they are subject to the requirements of Part 363 of the FDIC’s regulations for fiscal years ending in 2021 based on the consolidated total assets as of Dec. 31, 2019. Such IDIs, whose asset growth may be temporary but significant, would be otherwise required to develop processes and systems to comply with the annual independent audits and reporting requirements of Part 363 on a potentially short-term basis.
The interim final rule is effective immediately, and comments will be accepted for 30 days after publication in the Federal Register. The FDIC is also considering similar, additional targeted adjustments to further mitigate unintended consequences resulting from pandemic-related stimulus actions.
Financial Groups Urge Congress to Address EIDL, PPP Forgiveness Issues
The American Bankers Association, Independent Community Bankers of America and six other financial trade groups have urged Congress in a letter to address the Small Business Administration’s approach to loan forgiveness for borrowers that received both Economic Injury Disaster Loans and Paycheck Protection Program loans.
EIDL advances were provided to nearly one million small businesses as emergency grants, but many recipients also applied for PPP loans and “lenders did not know whether an applicant had received an EIDL advance or would receive one in the future,” the groups wrote. The SBA later reversed its guidance to indicate the forgiven amount of PPP loans must be reduced by the amount of a borrower’s EIDL advance, effectively transforming a significant portion of a grant into a loan, or wiping out PPP loan forgiveness altogether.
“At a minimum, SBA should immediately stop the transfer of any residual EIDL advance balances to PPP lender balance sheets and return them to the SBA Office of Disaster Assistance, which administers the EIDL program,” the groups asserted.
FDIC: Unbanked Americans Reach Record Low in 2019
The share of U.S. households that are unbanked continued falling in 2019, reaching 5.4%, the lowest rate yet recorded in the biennial How America Banks report of the Federal Deposit Insurance Corp. The figure fell from a high of 8.2% in 2011. The report, however, cautioned that the coronavirus pandemic – which took place after the survey was fielded – “is likely to contribute to a rise in the rate of unbanked households.”
The percentage point declines of unbanked households were largest for Black, Hispanic and multiracial households. Black households’ unbanked rate dropped from 16.8% to 13.8%, while the rate for Hispanics fell from 14.4% to 12.2%. The share of unbanked households with two or more races fell from 8.5% to 4.9%. The rate for Asian American households fell from 2.6% to 1.7%. White households saw their unbanked rate drop from 3% to 2.5%. Among the unbanked, 29% reported that not having enough money for a minimum balance requirement was the main reason.
Three quarters of unbanked Americans said they were not at all or not very interested in having a bank account. The survey no longer tracks a separate category for “underbanked” Americans but reported on consumers’ use of nonbank financial services and credit. It showed that 72.5% of households accessed bank credit in 2019, up from 69.5% in 2017, while just 4.8% accessed nonbank credit – such as payday loans and pawn shops – down from 7.5% in 2017.
CFPB Extends GSE ‘Patch’
The Consumer Financial Protection Bureau has extended the government-sponsored enterprise “patch,” which exempts Fannie Mae and Freddie Mac mortgage loans from parts of the Qualified Mortgage rule.
The patch provides QM status to loans purchased or guaranteed by the GSEs, even if they exceed the rule’s 43% debt-to-income limit. Previously scheduled to expire on Jan. 10, 2021, the CFPB has extended the patch until the mandatory compliance date of a pending rule to amend the QM loan definition in Regulation Z.
FHFA Again Extends Forbearance Purchases
The Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac will extend from Oct. 31 to Nov. 30 the deadline on buying qualified loans in forbearance and several loan-origination flexibilities.
Flexibilities include alternative appraisals, alternative methods for documenting income and expanded use of power of attorney.
FDIC Issues Guide to MDI, CDFI Partnerships
The Federal Deposit Insurance Corp. has published a new resource guide to promote private and philanthropic investment partnerships with FDIC-insured Minority Depository Institutions and Community Development Financial Institution banks.
“Investing in the Future of Mission-Driven Banks” is designed to build supportive partnerships between these banks and other financial institutions, private companies and philanthropic organizations.
The FDIC has also created an MDI and CDFI bank locator that includes every FDIC-insured mission-driven bank and branch in the country.
Beige Book: Economy Rebounding, but Growth Remains Slight to Modest
Economic activity continued rebounding in all regions in the United States, but growth was slight to modest, according to the Federal Reserve’s seventh Beige Book release of the year. Consumer spending continued picking up, but some districts reported retail sales leveling off and a considerable degree of uncertainty.
In many districts banking contacts had concern that delinquency rates may rise in coming months, citing various reasons, but delinquency rates have remained stable, according to the Fed. Residential housing markets continued to experience steady demand for new and existing homes, the Fed reported; demand for mortgages has been the key driver of overall loan demand, as commercial real estate conditions continue to deteriorate.
Unemployment showed improvement across most districts, but growth remained slow, with employment gains most consistently with manufacturing firms. Most districts reported tight labor markets, attributed to concerns about health and childcare.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.