STATE GOVERNMENT RELATIONS
Holcomb Continues Face Covering Executive Order
Gov. Holcomb announced on Wednesday that he is extending Executive Order 20-37 for face coverings to Sept. 25. Additionally, he announced that Indiana is to remain in Stage 4.5 of the Back on Track plan through Sept. 25. Indiana has been in Stage 4.5 of the reopening plan since July 3 and has had a statewide face covering requirement since July 27.
FEDERAL GOVERNMENT RELATIONS
FHFA Delays GSE Refi Fee to Dec. 1
The Federal Housing Finance Agency on Tuesday delayed a 50 basis point fee it had planned to start imposing on Fannie Mae and Freddie Mac refinanced mortgages. Instead of taking effect Sept. 1, the fee will be imposed Dec. 1, and it will exempt refinance loans with balances of less than $125,000 to preserve refi accessibility for low-income borrowers.
A broad coalition of state bankers associations and national financial trade groups and consumer organizations have expressed concern about the fee, citing the cost of $1,400 it would add to a typical refinance at a time when many consumers are attempting to reduce household expenses, and warned that its Sept. 1 effective date would raise costs for loans already in the application pipeline.
Fed Updates Monetary Policy in Response to Low Inflation, Employment Trends
The Federal Open Market Committee yesterday revised its monetary policy statement and long-run goals to reflect the challenges of operating in a persistent low-rate, low-inflation environment. The new statement keeps the Fed “highly focused on fostering as strong a labor market as possible for the benefit of all Americans,” Fed Chairman Jerome Powell said yesterday, as well as maintaining its 2% inflation target over time.
Based on the evidence of the past several years, the new statement reflects the Fed’s view that “a robust job market can be sustained without causing an outbreak of inflation,” Powell said. “Going forward, employment can run at or above real-time estimates of its maximum level without causing concern, unless accompanied by signs of unwanted increases in inflation or the emergence of other risks that could impede the attainment of our goals.”
The statement also emphasizes that the Fed will “seek to achieve inflation that averages 2% over time,” Powell added. “Following periods when inflation has been running below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”
Finally, “our new statement explicitly acknowledges the challenges posed by the proximity of interest rates to the effective lower bound,” Powell said. “By reducing our scope to support the economy by cutting interest rates, the lower bound increases downward risks to employment and inflation. To counter these risks, we are prepared to use our full range of tools to support the economy.”
Agencies Finalize Three Rules Issued as Part of Pandemic Response
The federal banking agencies on Wednesday finalized several rules originally issued as interim final rules during the spring weeks of the emergency coronavirus response. The final rules:
• Set the community bank leverage ratio at 8% through 2020 and increase it to 8.5% for 2021 before it returns to 9% on Jan. 1, 2022, as required in the CARES Act (unchanged from interim final rule);
• Revise the definition of eligible retained income for all institutions subject to the agencies’ capital rule to make any applicable automatic limitations on capital distributions more gradual (unchanged from interim final rule);
• Give banks implementing the current expected credit loss standard this year the option to delay for two years the phase-in of the standard’s regulatory capital effects (finalized with clarifications and adjustments in response to public comments).
PPP Forgiveness Webinar Rescheduled
The “Basics of PPP Loan Forgiveness and the SBA PPP Loan Forgiveness Platform” webinar hosted by the federal financial regulatory agencies and the Conference of State Bank Supervisors, originally scheduled for Aug. 27, has been rescheduled to Thursday, Sept. 3, at 3 p.m. EDT. A recording of the session will be available on Friday, Sept. 4, using the same link that is being used for registration. The forgiveness process for Paycheck Protection Program loans and other recent changes to the program will be discussed.
Bowman: In Exams, Fed to Focus on Exposure to COVID-Stressed Industries
As the Federal Reserve ramps up its post-COVID-19 examination program, Fed Gov. Michelle Bowman indicated in a speech on Wednesday that examiners’ “initial focus will be to assess higher-risk banks, particularly those with credit concentrations in higher-risk or stressed industries.” Among the stressed industries highlighted in her speech were travel, leisure and hospitality, as well as oil and gas production and aviation manufacturing.
Bowman added that the Fed will consider the “unique and challenging conditions” facing banks during the coronavirus pandemic and “continue to be sensitive to the capacity of each bank to participate in examinations and strive to prevent undue burden on banks struggling with crisis-related operational challenges.”
McWilliams Emphasizes Innovation’s Role in Financial Inclusion
Financial innovation can deliver “tremendous benefits” to consumers and help minority depository institutions (MDIs) enhance participation in the mainstream financial system, Federal Deposit Insurance Corp. Chairman Jelena McWilliams said Wednesday.
Speaking at a webinar hosted by the American Financial Exchange, she outlined steps the FDIC is taking to facilitate community bank and MDI innovation, including its proposal for a standard-setting partnership and voluntary certification program to ease the challenge of introducing new tech at banks.
“For community banks, including MDIs, the path to innovation may seem daunting,” McWilliams said. “The cost to innovate is often prohibitively high. They may lack the expertise, information technology infrastructure, or research and development budgets to independently develop and deploy their own technology.”
FHFA Extends Loan Processing Flexibilities for GSEs Through September
To continue providing support to mortgage borrowers during the coronavirus pandemic, the Federal Housing Finance Agency has indicated it would extend through Sept. 30 certain previously announced loan processing flexibilities.
These flexibilities – which were set to expire at the end of this month – include allowing alternative appraisals on purchase and rate term refinance loans, alternative methods for documenting income and verifying employment before loan closing, and expanding the use of power of attorney and remote online notarizations to assist with loan closings.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.