COVID-19 UPDATES / GOVERNMENT RELATIONS
Paycheck Protection Program Flexibility Act Passes Senate
On Wednesday the Senate unanimously passed Rep. Dean Phillips (D-MN) and Chip Roy’s (R-TX) H.R. 7010, Paycheck Protection Program Flexibility Act of 2020. The bill, outside of a technical correction clarifying the 60/40 rule, is unchanged from the House-passed version. H.R. 7010 would: extend forgiveness for expenses beyond the eight-week covered period to 24 weeks; change restrictions limiting non-payroll expenses to 40% of loan proceeds (changing current 75/25 calculation to 60/40); and change the restrictions that limit loan terms to two years to five years for new loans, as well as applying the five-year term to loans retroactively if agreed upon by the lender and the borrower, among other changes. The president is expected to sign the bill in the coming days.
CFPB, CSBS Issue Joint Guidance on CARES Act Forbearance, Foreclosure
The Consumer Financial Protection Bureau and the Conference of State Bank Supervisors issued joint guidance for borrowers on the mortgage relief provisions included in the CARES Act. The law requires servicers of federally backed mortgages to provide forbearance to borrowers facing financial hardships due to COVID-19 for up to two consecutive 180-day periods, and waive additional interest, fees or penalties beyond the amounts scheduled. The guidance includes the relevant rules and guidelines governing CARES Act forbearance, along with answers to several frequently asked questions.
OCC Issues Proposals on Bank Activities, Innovation
The OCC Thursday proposed changes to its rules for national bank and federal savings association activities and operations to ensure that they can continue to meet the shifting needs of consumers, businesses and communities.
The proposed rule would make a number of changes to update, streamline or clarify existing rules related to permissible derivatives activities for national banks; the ability of national banks and federal thrifts to engage in certain tax equity finance transactions; and national bank and thrift membership in payments systems. It would also address certain corporate governance issues for national banks, financial literacy programs and capital stock issuance and repurchases.
In addition, the OCC released an advanced notice of proposed rulemaking seeking comments on several issues related to digital technology and innovation. These include, among other provisions: hurdles to bank innovation; digital banking activities not covered by existing regulations; cryptocurrencies and cryptoassets; distributed ledger technology; artificial intelligence and machine learning; new payments technologies; and challenges faced by smaller institutions with respect to technology. Comments on both documents are due by August 3.
CFPB Provides Flexibility on Electronic Card Disclosures During Pandemic
The CFPB this week issued a statement providing temporary flexibility for credit card issuers when providing electronic versions of disclosures that are required to obtain electronic consent from a consumer in accordance with the E-Sign Act and Regulation Z. The bureau noted that due to the COVID-19 pandemic, a higher-than-normal volume of consumers may be reaching out to issuers, and that cumbersome requirements and long call center wait times could slow their ability to access needed relief.
The bureau noted that it would take a “flexible supervisory and enforcement approach” to issuers’ electronic provision of disclosures during oral telephone interactions when a consumer is seeking a new credit card account, a temporary reduction in APRs or fees on an existing account, or a low-rate balance transfer.
“In these instances, the bureau does not intend to cite a violation in an examination or bring an enforcement action against an issuer that during a phone call does not obtain a consumer’s E-Sign consent to electronic provision of the written disclosures required by Regulation Z, so long as the issuer during the phone call obtains both the consumer’s oral consent to electronic delivery of the written disclosures and oral affirmation of his or her ability to access and review the electronic written disclosures,” the CFPB said. The agency noted that it expects issuers to take “reasonable steps” to verify consumers’ electronic contact information during the phone call.
FHFA Finalizes Changes to FHLB Housing Goals
The Federal Housing Finance Agency has finalized several changes to the housing goals for the Federal Home Loan Banks. The changes affect all FHLBs that purchase mortgages through the Acquired Member Asset Program and will be phased in over a three-year period.
Under the existing framework, FHLBs whose AMA purchases exceed $2.5 billion in a given year are subject to the housing goals. Goals performance is evaluated by comparing the proportion of an FHLB’s purchases that were affordable with the proportion originated in its district reported as affordable in Home Mortgage Disclosure Act data.
The final rule eliminates the $2.5 billion volume threshold and the retrospective evaluation using HMDA data and instead sets a single prospective mortgage purchase housing goal as a share of each FHLB’s total AMA purchases. It also establishes a process through which FHLBs could propose alternative goals to the prospective goals set in the regulation and simplifies and expands the eligibility criteria to allow government-backed loans to count for goals purposes.
FHFA Publishes Credit Risk Transfer Tool
The Federal Housing Finance Agency has published a Credit Risk Transfer spreadsheet tool based on the re-proposed capital rule for Fannie Mae and Freddie Mac. The tool shows how CRT formulas work and allows users to input assumptions and calculate the amount of capital the enterprises are required to hold.
CFPB Issues FAQs on Remittance Rules
The Consumer Financial Protection Bureau issued frequently asked questions on remittance rules related to the COVID-19 pandemic. The FAQs discuss whether failing to deliver remittance funds to designated recipients by the disclosed date of availability due to certain government-mandated closures is an error under the rule.
Fed Expands Access to Municipal Liquidity Facility
The Federal Reserve Board has expanded access to its Municipal Liquidity Facility. Under the new terms, all U.S. states will be able to have at least two cities or counties eligible to directly issue notes to the MLF regardless of population. The program will offer up to $500 billion in lending to states and municipalities to help manage cash-flow stresses caused by the coronavirus pandemic.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.