STATE GOVERNMENT RELATIONS
DFI Releases Revised Q&A on Changes in SEA 395
The Indiana Department of Financial Institutions has released a revised Q&A regarding the law changes resulting from SEA 395. Specifically, Q10 was revised to clarify that finance charges may be imposed on the nonrefundable prepaid finance charge (NRPFC) for both loans under chapter 3 and credit sales under chapter 2 subject to certain conditions. The revisions were made to clarify that the Department’s position applied to both chapter 3 loans (in the original question), as well as chapter 2 credit sales (added/clarified in the revised question).
In addition, there has been confusion between the ability to take a minimum finance charge versus the new tiers in the NRPFC. Q13 clarifies that this is an either/or proposition, and that the recent law changes did not change the minimum finance charge statute.
Lastly, Q14 is meant to address questions that have recently been brought to the DFI’s attention arising from the use of certain retail installment agreement forms being utilized by auto dealerships and then assigned to financial institutions/financing companies through indirect programs, regarding the manner in which the NRPFC is collected from a consumer in relation to the contractual terms.
FEDERAL GOVERNMENT RELATIONS
State Associations Urge FHFA Director to Rescind 'Ill-Advised' Refi Fee
Fifty-one state bankers associations wrote to Federal Housing Finance Agency Director Mark Calabria yesterday urging him to rescind the 50 basis point fee on refinance loans announced by Fannie Mae and Freddie Mac last week. This “adverse market refinance fee” would increase the cost for a typical borrower by an estimated $1,400 at a time when many are already experiencing financial hardships due to the coronavirus pandemic.
“While other federal entities are doing their utmost to keep rates low and the President has issued orders directing agencies to use all powers within their means to assist struggling homeowners in the current economic crisis, it is unfathomable that FHFA would allow Fannie Mae and Freddie Mac to undercut those efforts,” the state associations wrote. “We urge you to direct Fannie Mae and Freddie Mac to rescind this fee increase. It is ill-advised and clearly contrary to current efforts aimed at supporting a crisis-stricken economy while homeowners persevere through a public health crisis.”
Read the state association letter
Senators Raise Concerns Over GSE Refinance Fee
A group of Democratic senators on Wednesday wrote to Federal Housing Finance Agency Director Mark Calabria raising concerns about a recent announcement that Fannie Mae and Freddie Mac will impose an “adverse market refinance fee” of 50 basis points for no-cash-out and cash-out refinance mortgages – a move strongly criticized by several financial trade associations last week.
“Given the Enterprises’ commitment to facilitating mortgage lending and refinancing over the last few months, we were surprised to see an unexplained new fee added to the cost of refinance loans that will be implemented just three weeks after it was announced,” the senators wrote. “This sudden additional charge will affect loans currently in the refinance process and could cause both confusion and increased costs for homeowners.”
Senate Banking Committee Chairman Mike Crapo (R-Idaho) also wrote to Calabria last week questioning this move by the GSEs and requesting that FHFA respond in writing to several questions about the fee, and why the agency deemed it necessary.
Agencies to Host PPP Loan Forgiveness Webinar
The federal financial regulatory agencies and the Conference of State Bank Supervisors will host a joint webinar for bankers on Thursday, Aug. 27, at 11 a.m. EDT to discuss the forgiveness process for Paycheck Protection Program loans, as well as other recent changes to the program.
FOMC Minutes Highlight Economic Uncertainty Due to Virus
Certain segments of the economy were beginning to show improvement in recent days, but the trajectory of the economy overall will continue to depend on the course of the coronavirus, according to minutes from the most recent Federal Open Market Committee meeting released Wednesday.
While consumer spending rallied, members observed that the business sector showed far less improvement, with many Federal Reserve districts continuing to report high levels of uncertainty and risk. Meanwhile, labor market gains slowed relative to May and June, and reports of COVID-19 resurgences led to additional local restrictions in certain areas.
The committee remained concerned that these additional waves of outbreaks could result in protracted economic disruptions that could lead lenders to tighten conditions, stymieing the flow of credit to households and business. They also flagged potential financial stability risks “if one of the more adverse scenarios regarding the spread of the virus and its effects on economic activity was realized.”
Potential vulnerabilities include the highly leveraged nonfinancial corporate sector, members noted. Additionally, “the anticipated increase in Treasury debt over the next few years could have implications for market functioning.”
CFPB Proposes New Qualified Mortgage Category
The Consumer Financial Protection Bureau has proposed creating a new category of “seasoned” qualified mortgages. This designation would apply to portfolio loans that have met certain performance requirements over a 36-month seasoning period, including having no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days.
Additionally, to receive seasoned QM status, loans must be secured by a first lien; have a fixed rate with fully amortizing payments and no balloon payments; must not exceed 30 years; and total points and fees must not exceed specified limits. Creditors would also need to consider the borrower’s debt-to-income ratio or residual income and verify their obligations and income. The proposal would not specify a DTI limit, nor require creditors to use appendix Q to Regulation Z in calculating and verifying debt and income.
The bureau proposed that this new rule take effect on the same date as a separate final rule amending the general QM definition that is currently out for public comment. Comments on the proposal will be due 30 days after publication in the Federal Register.
FinCEN Statement Outlines Approach to BSA Enforcement
The Financial Crimes Enforcement Network has issued a statement describing its approach to Bank Secrecy Act enforcement and the factors it evaluates in determining the appropriate response to and enforcement of BSA violations.
The statement outlines the various types of action FinCEN may pursue when it identifies an actual or possible BSA violation, including issuing a warning letter, an injunction or equitable relief, settlements, civil money penalties, criminal referral or taking no action. It also lists the range of factors FinCEN considers when evaluating an appropriate disposition upon identifying actual or possible violations of the BSA.
DOL Issues Interim Final Rule on Lifetime Income Illustrations
The Department of Labor has issued an interim final rule implementing section 203 of the bipartisan Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 requiring that defined contribution plans [such as 401(k) plans] include two lifetime income illustrations on a plan participant’s pension benefit statement at least once every 12 months. The rule is intended to help workers better gauge their ability to save for a secure retirement.
Under the rule, plan administrators will be required to express a plan participant’s current account balance both as a single life annuity and as a survivor annuity income stream. The rule will take effect one year after publication in the Federal Register, and the DOL will accept comments on the rule for 60 days.
ARRC Releases Libor Transition Guides for ARMs, Student Loans
The Alternative Reference Rates Committee has released reference rate transition guides for adjustable-rate mortgages and student loans that reference the London Interbank Offered Rate. With Libor not guaranteed to be available after 2021, the guides help market participants transition to the Secured Overnight Financing Rate, the ARRC’s recommended Libor alternative. Each guide covers key external and internal milestones, transition risks and stakeholder effects and workstreams.
Download the ARM Transition Guide
Download the student loan transition guide
ICYMI - Florida Court Dismisses Case Seeking Agent Fees for “Agents” of PPP Loans
In a decision handed down earlier this week, the U.S. District Court for the Northern District of Florida dismissed a court case seeking to establish whether or not “agents” are entitled to agent fees for PPP loans. Four banks were named as defendants in the case. The court determined that agents were not entitled to fees and dismissed the case.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.