Senators Criticize the Bureau of Consumer Financial Protection’s Decision to Ease Home Mortgage Disclosure Act Reporting Requirements

On April 28, 19 Democratic senators sent a letter to the Bureau of Consumer Financial Protection (“Bureau”) protesting both its decision to temporarily suspend quarterly mortgage lending reporting requirements under the Home Mortgage Disclosure Act (“HMDA”) during the COVID-19 pandemic, and to permanently reduce the number of entities that must provide certain types of  reporting under the HMDA’s implementing regulation (Regulation C). Under Regulation C, lenders must collect and report to the Bureau information about the ethnicity, race, and gender of mortgage applicants and borrowers, along with other information.

On March 26, the Bureau announced that it was suspending Regulation C’s quarterly reporting requirement for financial institutions that report at least 60,000 covered loans and applications in the preceding calendar year. This action was intended “to provide lenders with flexibility and reduce administrative burden” during the COVID-19 pandemic.

On April 16, the Bureau also adopted a final rule amending Regulation C. The rule increases the threshold for reporting data about closed-end mortgage loans from 25 to 100. As a result, starting in July of this year, institutions that originate fewer than 100 closed-end mortgage loans in either of the preceding calendars years will not have to report such data. The rule also increases the permanent threshold for collecting and reporting data about open-end lines of credit from 100 to 200, starting in January of 2022.

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Reminder from the OCC: National Banks Not Subject to Visitorial Powers of State Authorities

On Friday, April 24, 2020, the Office of the Comptroller of the Currency (the “OCC”) issued a short bulletin reminding federally chartered banks (i.e., national banks, federal savings associations, and federal branches and agencies of foreign banks) and other interested parties that the OCC has exclusive visitorial authority over federally chartered banks.  The bulletin states that federally chartered banks need not comply with requests for information from or other exercises of visitorial powers by state regulators, and urges federally chartered banks that receive such requests to contact their OCC examiners-in-charge.

The bulletin is a reminder that federally chartered banks are not subject to states’ administrative oversight authority (though they may be subject to an action in court to enforce applicable state law).  This application of visitorial exclusivity derives from the U.S. Supreme Court’s decision in Cuomo v. The Clearing House, LLC, 557 U.S. 519 (2009), which was codified in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The bulletin mentions that, particularly in light of COVID-19, it is imperative that federally chartered banks be able to implement federal relief programs (such as the Paycheck Protection Program under the CARES Act) without unnecessary delay.

CFTC Extends Certain Comment Periods for Pending Proposed Rules in Response to Covid-19

On April 10, 2020 the Commodity Futures Trading Commission ( the “CFTC” or the “Commission”) extended certain currently-open comment periods for several pending proposed rules in light of the COVID-19 pandemic.  The Commission completed voting to adopt the relatively short extensions on Thursday, April 9.  The measure passed by a final tally of 3-2, with both the Democratic commissioners dissenting on the basis that the extensions were too short, making them meaningless.  Of the extensions, Chairman Heath P. Tarbert said “[t]hese extensions reflect my commitment to providing market participants with additional flexibility during this pandemic.  Commenters on recently proposed rules will now have at least 90 days, and in many cases more, to provide feedback that we value tremendously as we seek to finalize rules.”

After consultation with market participants, in order to identify relief and assistance that would support orderly and liquid markets, the Division of Market Oversight (“DMO”) sought to extend the comment period for the five proposed rules discussed below.  The extensions are applicable to rules proposed by DMO with comment periods that began in January and February of 2020.  Extensions were approved to allow the comment periods for all the proposed rules relating to swap data reporting to terminate on the same date – May 22, 2020.

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Federal Reserve Announces Main Street Lending Program and Other Facilities to Provide Credit to Businesses, States, and Municipalities Impacted by COVID-19

Yesterday, the Board of Governors of the Federal Reserve System announced the creation of four new liquidity facilities and the expansion of three previously announced liquidity facilities to provide credit to borrowers impacted by the COVID-19 pandemic. Whereas the previously announced programs primarily targeted certain financial markets and their participants (such as the markets for commercial paper and U.S. Treasury securities), the new programs announced today will be used to support loans to U.S. businesses, as well as certain U.S. states and municipalities.

Click here to read Covington’s client alert regarding the Federal Reserve’s announcements.

CFTC Announces Fourth Wave of No-Action Relief in Response to COVID-19

On March 31, 2020, the Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) announced the release of a targeted, temporary no-action letter aimed at foreign affiliates of futures commission merchants (FCMs).  This relief is meant to ease regulatory burdens in the face of the global COVID-19 pandemic.  In short, the relief relaxes restrictions on CFTC registrants’ affiliated foreign brokers by allowing them to address the needs of the registrants’ U.S.-based customers without having to register as introducing brokers.   The CFTC has now issued four waves of no-action relief.  It issued the first two waves on March 17, 2020, and a third wave three days later.

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CFPB Releases Guidance on FCRA and Regulation V Compliance During COVID-19

On April 1, 2020, the Consumer Financial Protection Bureau (“CFPB”) released a statement on “Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act.” This statement provides guidance outlining the CFPB’s expectations of furnishers and consumer reporting agencies (“CRAs”) during the COVID-19 pandemic, and signals that the CFPB will take a flexible supervisory and enforcement approach to compliance with the Fair Credit Reporting Act (“FCRA”) and its implementing regulation, Regulation V.

The key points of the CFPB’s guidance are discussed below. Continue Reading

Federal Reserve Board Announces Six-Month Delay of Effective Date of Control Framework

Yesterday, March 31, 2020, the Board of Governors of the Federal Reserve System (the “Board”) announced a six-month delay in the effective date of its final rule implementing a revised control framework.  Previously, in January, the Board unanimously approved a final rule establishing a comprehensive, simplified framework for determining when an investor company exhibits control over an investee company for the purposes of the Bank Holding Company Act and the Home Owners’ Loan Act.  The final rule was set to go into effect today, April 1.  Yesterday’s action delays the effective date until September 30, 2020.

In an associated Federal Register notice, the Board indicated that the delay is intended to “allow companies additional time to consult with Board staff about existing investments and relationships,” which will afford companies “greater flexibility to focus on COVID-19-related issues.”  The announcement is the latest in a series of efforts by legislators and financial regulators to delay or ease regulatory requirements in response to the ongoing global pandemic.  These efforts include relief from the application of the Current Expected Credit Losses methodology beyond that provided for in Section 4014 of the recently-passed CARES Act, a 30-day extension for certain banking organizations to file call reports or FR Y-9C reports for the first quarter of 2020, a six-month delay in implementation of changes to the Board’s Payment System Risk Policy for intraday credit, Consumer Financial Protection Bureau no-action relief allowing for late filing of Home Mortgage Disclosure Act data, and Commodity Futures Trading Commission no-action relief allowing for late filing of Dodd-Frank Act compliance reports.

Federal Reserve Establishes Temporary FIMA Repo Facility

Yesterday, March 31, 2020, the Board of Governors of the Federal Reserve System (the “Board”) announced the creation of a temporary repurchase agreement facility for foreign and international monetary authorities (the “FIMA Repo Facility” or the “Facility”) to facilitate liquidity for central banks and other international monetary authorities.  The FIMA Repo Facility is the latest in a series of special liquidity programs that the Board has established to stabilize financial markets in light of economic conditions caused by the global COVID-19 pandemic.  Other initiatives include the establishment of a Money Market Mutual Fund Facility, a Primary Dealer Credit Facility, and a Commercial Paper Funding Facility.

Rationale

The Federal Open Market Committee of the Federal Reserve System established the Facility in order to facilitate easier access to U.S. dollars, thereby providing liquidity for lenders in the authorities’ respective jurisdictions.  It will also reduce pressures on these authorities to sell U.S. Treasury securities to increase their markets’ liquidity.  “Stabilizing foreign dollar markets . . . will support foreign economic conditions and thereby benefit the U.S. economy through many channels, including confidence and trade,” the Board stated in a series of FAQs accompanying the announcement.

Participant Eligibility Requirements

Access to the FIMA Repo Facility is limited to FIMA account holders.  These are generally central banks and other international monetary regulatory bodies.  The Board’s FAQs indicated that “[m]ost FIMA account holders” will be eligible to apply to use the FIMA Repo Facility.  The Board must approve applicants before they may access the Facility.

Mechanics

Participants may use the FIMA Repo Facility to temporarily exchange Treasury securities on the Federal Reserve’s System Open Market Account for U.S. dollars, thereby providing liquidity for lenders in their respective jurisdictions.  They must agree to buy back the securities upon maturity.  Presumptively, this term would be overnight, but can be extended “as needed,” according to the FAQs.  Each transaction will be conducted at an interest rate of twenty-five points over the Interest Rate on Excess Reserves, which is currently 0.10 percent.

Duration

The Board’s announcement stated that the FEMA Repo Facility will begin lending on April 6, 2020, “and will continue for at least 6 months.”

Federal Reserve and FFIEC Offer Regulatory Reporting Relief

Earlier this week, the Federal Reserve provided financial institutions with $5 billion or less in total assets a thirty-day extension to the deadline for filing certain first quarter bank holding company financial reports, and the Federal Financial Institutions Examination Council (FFIEC) provided a similar thirty-day extension of the deadline for all institutions (regardless of size) to submit their March call reports.

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