August 2, 2019 Banconomics Compliance News Report

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  • one top compliance news item
  • action by federal regulators (distilled for your convenience)
  • distraction of the week

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August 2, 2019

Top Stories

Reg Z is making moves

Not again... CFPB is sorry not sorry. Two big announcements came out this week about everyone's favorite regulation. No, you cannot go back to bed and pretend it's not happening.

Let's start first with the dollar adjustments...The agency issued a final rule on Thursday that announced it's fixing the regulation text and interpretations to Reg Z, aka Truth and Lending Act (TILA) aka the reason bankers drink. This final rule changes the dollar amounts for provisions that implement TILA and amendments to TILA. These are included under the CARD Act, the HOEPA Act and the Dodd-Frank Act. CFPB is adjusting the amounts based on the annual percentage change reflected in the CPI in effect on June 1, 2019.

Tell me specifics...For open-end consumer credit plans under the CARD Act amendments to TILA, the new dollar amount in 2020 for the safe harbor for a first violation penalty fee will increase to $29 and the new dollar amount for the safe harbor for a subsequent violation penalty fee will increase to $40. For HOEPA loans, the new total loan amount threshold for high-cost mortgages will be $21,980. 

Anything else? Yup. The adjusted points-and-fees dollar trigger for high-cost mortgages will be $1,099. For qualified mortgages, the max threshold for total points and fees in 2020 will be 3 percent of the total loan amount for a loan greater or equal to $109,898; $3,297 for a loan amount $65,939-$109,898; 5 percent of the total loan amount for a loan $13,737-$21,980; and 8 percent of the total loan amount for a loan that is less than $13,737.

When do I have to get my you-know-what together for this? The final rule is effective on January 1, 2020. Be prepared.

Okay, tell me the second big announcement...Reg Z: the gift that keeps on giving. The Bureau also issued a heads up that they will propose a rule allow Temporary GSE QM loans, otherwise known as qualified mortgages that are eligible for purchase or guarantee by Fannie Mae or Freddie Mac, to expire in January 2021 or after a short extension. This gives a little bit of a grace period, as originally this category of QMs was schedule to expire no later than January 10, 2021.

That wasn't so bad... anything else? The Bureau is also deciding whether it will propose revisions to Reg Z's general qualified mortgage definition in preparation for the planned expiration. It is also looking for information about possible revisions are part of this advanced notice of proposed rule making. In other words, it wants you to comment on their status.

BANCONOMIC's take...the dollar adjustments weren't exactly unexpected. CFPB is required to calculate annual dollar amounts for specific provisions under Reg Z based on the annual percentage change in the CPI. But almost four years after TILA/RESPA dropped, CFPB is still making changes to the rule. And banks are still trying to keep up.

Want to read it for yourself? Read the Federal Register final rule for the number breakdown again and the Federal Register for the advanced notice of rule making.

Other Important Compliance News

The Trump admin puts on its superman belt to reduce risk from refinancing lending

Not another superhero story... Paging Clark Kent. HUD announced Thursday that it will join forces with the FHA to help reduce risk associated with cash-out refinance lending. According to the press release, the changes will retain a homeowner's ability to convert home equity to cash through a government-sponsored mortgage and improve the risk profile of HUD's housing finance programs. As HUD's sidekick, FHA pledges to lower its maximum loan-to-value requirements for cash-out refinance transactions from 80 percent to 85 percent. This change will be effective for loans with case numbers assigned on or after September 1, 2019 and lines up with the maximum cash-out LTV allowed by the Government Sponsored Enterprises. Joining the Trump administration's version of the justice squad is Ginnie Mae, who says it's taking more action to manage risks associated with "loan churning" within mortgages insured by the VA. Take that, Avengers.

HUD Press Release

CFPB is giving you some time to think things through

No, you can't break up with it. The Bureau wants to give you time to make comments on amendments to Regulation F, otherwise known as the Fair Debt Collection Practices Act, and Regulation C, which contains HMDA. Here's the breakdown:

For Regulation F - Originally, the Bureau proposed amendments that would impose Federal rules on the Fair Debt Collection Practices Act that regulate debt collectors. The new comment deadline is September 18, 2019.

For Regulation C -  The Bureau originally proposed two amendments to Reg C that would increase the current 25 or 100-loan coverage threshold for reporting data about closed-end mortgage loans either in the past two years would not have to report the data. In addition, the original proposal would adjust the coverage threshold for reporting data about open lines of credit by:

  • extending to January 1, 2022 the current temporary coverage threshold of 500 open-end lines of credit; 
  • setting the permanent coverage threshold at 200 open-end lines of credit when the proposed extension of the temporary coverage threshold expires; and
  • incorporate the interpretations and procedures from the rule that CPFB issued to implement section 104(a) of the Economic Growth Regulatory Relief and Consumer Protection Act (yes, we know that's a mouthful).

Federal Register Notice for Reg FFederal Register Notice for Reg C

 Treasury announces important things like marketable borrowing estimates

That sounds... exciting? The U.S. Department of Treasury seems to think so. It announced its current estimates of privately-held net marketable borrowing for July-September 2019 and October-December 2019 quarters. During the July-September 2019 quarter, the Treasury anticipates borrowing $433 billion in privately-held net marketable debt. That is assuming an end-of-September cash balance of $350 billion. This is a lot more than the Treasury estimated in April. Like $274 billion more. During the October-December 2019 quarter, the Treasury anticipates borrowing $381 billion in privately-held net marketable debt, which assumes an end-of-December cash balance of $410 billion. The change in borrowing is due to a lower net cash flow that was partially offset by the lower end-of-quarter cash balance.

Treasury Press Release.

FDIC wants to change recordkeeping for timely deposit insurancdetermination

What now? The FDIC is changing the "Record Keeping for Timely Deposit Insurance Determination" rule to try and clarify the rule's requirements. Because transparency is a good thing. FDIC believes that the clarification will better align the burdens of the rule with the benefits and make technical corrections. This will be effective October 1, 2019. 

Federal Register Notice

Distraction of the Week

August 2nd - World War I caused major economic instability throughout the world, and Americans bankers were considering creating an emergency currency within a week. On August 2, 1914, Woodrow Wilson met with New York Foreign exchange officials to discuss the option of giving the British an unprecedented $100,000,000 of credit.

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