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On March 27, 2019, the White House released a memorandum on federal housing finance that instructed the Treasury Secretary to develop (i) a “Treasury Housing Reform Plan” that addresses the roles of the government-sponsored enterprises (GSEs) – Fannie Mae and Freddie Mac – and (ii) a “HUD Reform Plan” for certain programs of the Department of Housing and Urban Development (“HUD”), the Federal Housing Administration (“FHA”), and Ginnie Mae.  Once completed, the Secretary is to submit the plans for approval by the Assistant to the President for Economic Policy.  Plans that follow the memorandum could, but not necessarily would, result in significant changes to the federal role in mortgage finance and affordable housing.

The memorandum sweeps broadly across the federal housing finance system and does not include the level of detail in the reforms that Senator Mike Crapo (R-ID), the Chairman of the Senate Banking Committee, outlined in February of this year (the “Crapo Proposals”).  The President’s memorandum and the Crapo Proposals generally are not inconsistent, although the plans ultimately resulting from the President’s memorandum could depart in various respects from the Crapo Proposals.

Although many of the goals in the President’s memorandum are general in nature and have been proposed before, including termination of the GSE conservatorships, the objectives identified in the memorandum warrant attention.  The Treasury Housing Reform Plan implementing the President’s memorandum is to address the following :

  • Preservation of the 30-year fixed-rate mortgage loan;
  • Equal access to the federal housing finance system for lenders of all sizes, charter types, and geographic locations;
  • Creation of a cash window for loan sales;
  • Authority for the Federal Housing Finance Agency to approve guarantors of conventional mortgage loans in the secondary market;
  • Possible changes to the GSEs’ policies on loan limits, program and product offerings, credit underwriting parameters, and the use of private capital to transfer credit risk;
  • Size and risk profiles for the GSEs’ retained mortgage and investment portfolios;
  • Greater definition or clarification of several activities of the GSEs, including their roles in multifamily mortgage finance and affordable housing, and of the mission of the Federal Home Loan Bank system and its role in supporting federal housing finance (the Crapo Proposals would require Fannie and Freddie to sell off their multifamily businesses, but the President’s memorandum does not include this specific requirement); and
  • Evaluation of the “QM Patch,” which exempts GSE-backed loans from certain requirements of the qualified mortgage definition under the rules of the Consumer Financial Protection Bureau.

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Continue Reading GSE Reform: The President’s March 27 Memorandum

Representatives of the Office of the Comptroller of the Currency (“OCC”), the Financial Crimes Enforcement Network (“FinCEN”), and the Federal Bureau of Investigation (“FBI”) testified on Thursday, November 29 before the Senate Committee on Banking, Housing, and Urban Affairs (“Banking Committee”) on anti-money laundering (“AML”) issues.

The testimony highlighted some tensions between the views of the different regulators, with the OCC appearing to be supportive of providing some regulatory relief to financial institutions, while FinCEN continues to see the value of the current requirements under the Bank Secrecy Act (“BSA”). Coming on the heels of reports that a bipartisan group of Senators are working on BSA reform legislation, the testimony revealed that FinCEN at least may prove reluctant to support some of the proposed reforms.…

Continue Reading Senate Testimony Highlights Tensions in BSA/AML Reform Efforts as Lawmakers Consider Bipartisan Legislation

On Tuesday October 2, leaders of the federal prudential regulators testified before the Senate Committee on Banking, Housing, and Urban Affairs (“Banking Committee”) on their agencies’ efforts to implement the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA” or the “Act”). All of the regulators expressed support for the goals of EGRRCPA, particularly with respect to tailoring regulations, and highlighted the steps being taken to implement the law.

The witnesses at the hearing were: Joseph Otting, Comptroller, Office of the Comptroller of the Currency (“OCC”); Randal Quarles, Vice Chairman for Supervision, Board of Governors of the Federal Reserve System (“FRB”); Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation (“FDIC”); and J. Mark McWatters, Chairman, National Credit Union Administration (“NCUA”).

This post summarizes below, as highlighted in the witnesses’ testimony:

  • some of the key steps these agencies have taken to implement the Act, which include the release of a number of proposed and interim final rules; and
  • the steps the agencies intend to take next, including tailoring enhanced prudential standards for larger bank holding companies (“BHCs”).

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Continue Reading After Senate Banking Committee Testimony, Where Does Dodd-Frank Reform Stand?

The Senate Banking Committee held its first hearing of 2018 earlier this week to discuss potential reform of the current U.S. regulatory framework for combating money laundering and other forms of illicit financing.  Current proposals for reform include raising the mandatory reporting thresholds for currency transactions and suspicious activity, requiring the collection of beneficial ownership information for U.S. companies at the time of incorporation, and allowing greater information sharing among financial institutions and the government.  The potential reforms are receiving initial bipartisan support on some key issues as legislators from both parties have voiced concerns over the need to update the current Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) regulatory regime.
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Continue Reading Senate Banking Committee Holds Hearing on Reform of Regulations Related to Money Laundering and Other Illicit Financing Activities

On Thursday, July 13, Federal Reserve Chair Janet Yellen testified before the Senate Banking Committee. During this hearing, Chair Yellen stated that the Federal Reserve (the “Fed”) is open to modifying the threshold for designating banks as systematically important financial institutions (“SIFIs”). She reiterated that the Fed would not oppose raising the current asset threshold—which…

On March 28, 2017, the Senate Banking Committee held a hearing entitled “Fostering Economic Growth: The Role of Financial Companies.” Sen. Mike Crapo (R-Idaho), the Chairman of the Committee, delivered opening remarks emphasizing the contribution of financial companies to the economy. He noted that smaller financial companies are underperforming compared to larger companies in part…

On March 9, 2017, the House Financial Services Committee and Senate Banking Committee conducted their first legislative mark-ups in the new Congress and approved bipartisan bills to amend several SEC-related laws.  Observers have speculated that the simultaneous advancement of this package of bipartisan bills in both chambers may indicate that key legislators are open to pursuing financial reform efforts in narrowly focused stages rather than through comprehensive legislation.

The approved bills are reintroduced versions of bills that received consideration previously — in some cases receiving near-unanimous approval by the full House — without final enactment. They are summarized below.…

Continue Reading House and Senate Panels Advance SEC Proposals

Today Senators Chuck Schumer (D-NY), Sherrod Brown (D-OH), Elizabeth Warren (D-MA) and others voiced their opposition to any attempt by President-elect Donald Trump to oust Richard Cordray, the current Director of the Consumer Financial Protection Bureau (“CFPB”), before Cordray’s term ends in July 2018. They also sent a letter to Cordray outlining and praising his…

As discussed in our recent client alert, in a December 2, 2016 whitepaper, the Office of the Comptroller of the Currency (“OCC”) outlined its authority under the National Bank Act to grant special-purpose charters on a case-by-case basis to financial technology (“fintech”) companies that provide services equivalent to certain traditional banking activities. In…