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  • Senate passes bipartisan financial regulatory reform bill

    Federal Issues

    On March 14, by a vote of 67-31, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) (the bill)—a bipartisan regulatory reform bill crafted by Senate Banking, Housing, and Urban Affairs Committee Chairman Mike Crapo, R-Idaho—that would repeal or modify provisions of Dodd-Frank and ease regulations on all but the biggest banks. (See previous InfoBytes coverage here.) The bill’s highlights include:

    • Improving consumer access to mortgage credit. The bill’s provisions state, among other things, that: (i) banks with less than $10 billion in assets are exempt from ability-to-repay requirements for certain qualified residential mortgage loans; (ii) appraisals will not be required for certain transactions valued at less than $400,000 in rural areas; (iii) banks and credit unions that originate fewer than 500 open-end and 500 closed-end mortgages are exempt from HMDA’s expanded data disclosures (the provision would not apply to nonbanks and would not exempt institutions from HMDA reporting altogether); (iv) amendments to the S.A.F.E. Mortgage Licensing Act will provide registered mortgage loan originators in good standing with 120 days of transitional authority to originate loans when moving from a federal depository institution to a non-depository institution or across state lines; and (v) the CFPB must clarify how TRID applies to mortgage assumption transactions and construction-to-permanent home loans, as well as outline certain liabilities related to model disclosure use.
    • Regulatory relief for certain institutions. Among other things, the bill simplifies capital calculations and exempts community banks from Section 13 of the Bank Holding Company Act if they have less than $10 billion in total consolidated assets. The bill also states that banks with less than $10 billion in assets, and total trading assets and liabilities not exceeding more than five percent of their total assets, are exempt from Volcker Rule restrictions on trading with their own capital.
    • Protections for consumers. Included in the bill are protections for veterans and active-duty military personnel such as: (i) permanently extending the protection that shields military personnel from foreclosure proceedings after they leave active military service from nine months to one year; and (ii) adding a requirement that credit reporting agencies provide free credit monitoring services and credit freezes to active-duty military personnel. The bill also addresses general consumer protection options such as expanded credit freezes and the creation of an identity theft protection database. Additionally, the bill instructs the CFPB to draft federal rules for the underwriting of Property Assessed Clean Energy loans (PACE loans), which would be subject to TILA consumer protections.
    • Changes for bank holding companies. Among other things, the bill raises the threshold for automatic designation as a systemically important financial institution from $50 billion in assets to $250 billion. The bill also subjects banks with $100 billion to $250 billion in total consolidated assets to periodic stress tests and exempts from stress test requirements entirely banks with under $100 billion in assets. Additionally, certain banks would be allowed to exclude assets they hold in custody for others—provided the assets are held at a central bank—when computing the amount such banks must hold in reserves.
    • Protections for student borrowers. The bill’s provisions include measures to prevent creditors from declaring an automatic default or accelerating the debt against a borrower on the sole basis of bankruptcy or cosigner death, and would require the removal of private student loans on credit reports after a default if the borrower completes a loan rehabilitation program and brings payments current.

    The bill now advances to the House where both Democrats and Republicans think it is unlikely to pass in its current form.

    Federal Issues Federal Legislation Bank Regulatory Dodd-Frank S. 2155 CFPB HMDA Mortgages Licensing TILA TRID Servicemembers Volcker Rule Student Lending Consumer Finance Bank Holding Companies Community Banks Privacy/Cyber Risk & Data Security

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  • House Financial Services Committee holds hearing on data security, breach notifications

    Privacy, Cyber Risk & Data Security

    On March 7, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled “Legislative Proposals to Reform the Current Data Security and Breach Notification Regulatory Regime” to discuss data security and breach notification rules and cybersecurity supervision and examination standards for reporting agencies. Subcommittee Chairman Blaine Luetkemeyer, R-Mo., opened the hearing by stating that “[f]orty-eight states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands have all enacted differing laws requiring private companies to notify individuals of breaches of personal information,” and emphasized the need for a “national solution” to create data security safeguards and responsible notification processes.

    Legislation. The hearing discussed two legislative proposals sponsored by Representatives Luetkemeyer and Patrick McHenry, R-NC, respectively: the “Data Acquisition and Technology Accountability and Security Act” (DATAS Act) and the “Promoting Responsible Oversight of Transactions and Examinations of Credit Technology Act of 2017” (PROTECT Act). The DATAS Act would, among other things, (i) establish broad standards for data protection across industries; (ii) create new federal post-data breach notification requirements; and (iii) establish steps that covered entities must take to notify regulators, law enforcement, and victims after certain types of data breaches. Included within the PROTECT Act are provisions that would (i) subject large consumer reporting agencies to cybersecurity supervision and examination measures; (ii) amend the FCRA to allow consumers to request security freezes be placed, removed, or temporarily lifted on their credit reports; (iii) provide provisions for fees and exceptions from such fees; and (iv) prohibit consumer reporting agencies from including a consumer’s Social Security number in a credit report or being used as a method to identify a consumer.

    Hearing Testimony. The hearing’s four witnesses provided testimony related to current issues with data beaches and protecting consumer information, and commented on the inconsistencies in data breach laws. Among the issues discussed were (i) the challenges of creating a “universal, unique identifier” separate from a Social Security number; (ii) efforts to establish streamlined, uniform, national data breach notification, security, and credit freeze standards; and (iii) the need for U.S. businesses that handle sensitive financial information to implement measures to protect the data and maintain consumers’ trust. Massachusetts Assistant Attorney General and Director of Data Privacy & Security for the Attorney General’s Consumer Protection Division, Sara Cable, stated in her written testimony and during the hearing that the proposed DATAS Act’s consumer notice provisions would “leave consumers in a worse position than the status quo.” She also expressed concern that the bill “allows entities to push the cost of the data security crisis onto consumers without providing any meaningful remedy, strips the state Attorneys General of the authority they are presently and actively using to protect their consumers from breaches, and hamstrings efforts of the States to enact laws in response to future risks in an era of increasing and rapidly evolving technology.” 

    Privacy/Cyber Risk & Data Security House Financial Services Committee Data Breach FCRA Federal Legislation

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  • House passes several bills focused on regulatory relief

    Federal Issues

    On March 6, the House passed H.R. 2226, the “Portfolio Lending and Mortgage Access Act,” amending TILA and expanding the safe harbor provisions provided to qualified residential mortgages held in portfolio by banks with less than $10 billion in assets. Under the bill, a mortgage lender would not be subject to civil liability for violating specified ability-to-repay requirements if, among other things, the loan was originated and held continuously in portfolio by a covered institution and complies with certain limitations and requirements related to prepayment penalties and points and fees..

    On the same day, the House also passed H.R. 4725, the “Community Bank Reporting Relief Act,” to amend the Federal Deposit Insurance Act to reduce the regulatory reporting burden on community banks. Specifically, federal banking agencies would be required to issue regulations allowing qualified depository institutions with less than $5 billion in assets to submit abbreviated call reports (consolidated reports of condition and income) every other quarter rather than submitting full call reports every quarter.

    Finally, by a vote of 264-143, the House passed H.R. 4607, the “Comprehensive Regulatory Review Act,” a measure to amend the Economic Growth and Regulatory Paperwork Reduction Act of 1996’s regulatory review process. Among other things, the bill requires federal financial regulators to perform a comprehensive review at least every seven years, instead of every ten years as currently required, to identify regulations that may be tailored to limit burdens on insured depository institutions. 

    Federal Issues Federal Legislation U.S. House Qualified Mortgage Mortgages Community Banks EGRPRA Federal Deposit Insurance Act Bank Regulatory

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  • House passes bill to ease operational risk capital requirements for banks

    Federal Issues

    On February 27, in a bipartisan vote of 245-169, the House passed H.R. 4296, which would ease the operational risk capital requirements for banks based on several factors. Specifically, the bill would prohibit the establishment of such requirements unless they are based primarily on the risks posed by a bank's current activities and are determined by a forward-looking assessment of its potential losses and not solely on historic losses. The requirements must also allow for certain adjustments based on certain operational risk mitigants. House Financial Services Committee Chairman Jeb Hensarling stated in a press release issued by the Committee that “H.R. 4296 simply amends the method of how reserve capital is calculated” and that “banks would still retain sufficient reserves to weather an economic storm, but they would also be able to put the billions of dollars currently sitting on the sidelines to work to help fuel the economy.”

    Federal Issues Federal Legislation U.S. House House Financial Services Committee

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  • House passes bill that would effectively overturn Madden; others amend RESPA disclosure requirements and adjust points and fees definitions under TILA

    Federal Issues

    On February 14, in a bipartisan vote of 245-171, the House passed H.R. 3299, the “Protecting Consumers Access to Credit Act of 2017,” to codify the “valid-when-made” doctrine and ensure that a bank loan that was valid as to its maximum rate of interest in accordance with federal law at the time the loan was made shall remain valid with respect to that rate, regardless of whether the bank subsequently sells or assigns the loan to a third party. As previously covered in InfoBytes, this regulatory reform bill would effectively overturn the 2015 decision in Madden v. Midland Funding, LLC, which ruled that debt buyers cannot use their relationship with a national bank to preempt state usury limits. Relatedly, the Senate Banking Committee is considering a separate measure, S. 1642.

    The same day, in a separate bipartisan vote of 271-145, the House approved H.R. 3978, the “TRID Improvement Act of 2017,” which would amend the Real Estate Settlement Procedures Act of 1974 (RESPA) to modify disclosure requirements applicable to mortgage loan transactions. Specifically, the bill states that “disclosed charges for any title insurance premium shall be equal to the amount charged for each individual title insurance policy, subject to any discounts as required by either state regulation or the title company rate filings.”

    Finally, last week on February 8, the House voted 280-131 to pass H.R. 1153, the “Mortgage Choice Act of 2017,” to adjust definitions of points and fees in connection with mortgage transactions under the Truth in Lending Act (TILA). Specifically, the bill states that “neither escrow charges for insurance nor affiliated title charges shall be considered ‘points and fees’ for purposes of determining whether a mortgage is a ‘high-cost mortgage.’” On February 12, the bill was received in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs.

    Federal Issues Federal Legislation U.S. House Usury Lending RESPA TILA Mortgages Disclosures Madden

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  • House passes HMDA relief for small banks

    Federal Issues

    On January 18, by a vote of 243-184, the House passed H.R. 2954, to amend HMDA to exempt low-volume mortgage lenders from certain disclosure requirements. If enacted, the bill would exempt depository institutions from maintenance of records and disclosure requirements if, (i) for closed-end mortgage loans, “the depository institution originated less than 500 closed-end mortgage loans in each of the 2 preceding calendar years”; and (ii) for open-end lines of credit, “the depository institution originated less than 500 open-end lines of credit in each of the 2 preceding calendar years.” On January 19, the bill was received in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs.

    Federal Issues U.S. House Federal Legislation HMDA CFPB Senate Banking Committee Mortgages

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  • House Passes Legislation Modifying Systemic Risk Designation Requirements

    Federal Issues

    The House voted 288-130 on December 19 to pass legislation modifying Dodd-Frank Act asset requirements for systemic risk designations of bank holding companies. Under H.R. 3312, the Systemic Risk Designation Improvement Act of 2017, bank holding companies that are subject to increased capital requirements and heightened supervision by the Federal Reserve (Fed) will no longer be automatically designated as systemically important financial institutions (SIFIs) if their asset threshold is $50 billion or greater. Instead, the Fed will review a bank holding company’s size, interconnectedness, infrastructure, “global cross-jurisdictional activity,” and complexity to determine whether it should be designated as a SIFI. Relatedly, the Senate Banking Committee is currently considering a separate measure, S. 2155, which would, among other things, increase the SIFI asset threshold to $250 billion.

    Federal Issues Federal Legislation Dodd-Frank SIFIs Bank Regulatory

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  • Senate Banking Committee Approves Financial Regulatory Relief Bill

    Federal Issues

    On December 5, the Senate Banking Committee approved bill S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act, which would alter certain financial regulations under the Dodd-Frank Act of 2010. While not as sweeping as previous legislative relief proposals (see previous InfoBytes coverage on House Financial CHOICE Act of 2017), the bill was introduced and passed the Committee with bipartisan support. The bill’s highlights include, among other things:

    • Consumer Access to Credit. The bill deems mortgage loans held in portfolios by insured institutions with less than $10 billion in assets to be “qualified mortgages” under TILA, and removes the three-day waiting period for TILA-RESPA Integrated Disclosures if the second credit offer is a lower rate. The bill also instructs the CFPB to provide “clearer, authoritative guidance” on certain issues such as the applicability of TRID to mortgage assumptions and construction-to-permanent loans. Additionally, the bill eases appraisal requirements on certain mortgage loans and exempts small depository institutions with low mortgage originations from certain HMDA disclosure requirements.
    • Regulatory Relief for Certain Institutions. The bill exempts community banks from Section 13 of the Bank Holding Company Act if they have, “[i] less than $10 billion in total consolidated assets, and [ii] total trading assets and trading liabilities that are not more than five percent of total consolidated assets” – effectively allowing for exempt banks to engage in the trading of, or holding ownership interests in, hedge funds or private equity funds. Additionally, the bill raises the threshold of the Federal Reserve’s Small Bank Holding Company Policy Statement and the qualification for certain banks to have an 18-month examination cycle from $1 billion to $3 billion.
    • Protections for Consumers. Included in an adopted “manager’s amendment,” the bill requires credit bureaus to provide consumers unlimited free security freezes and unfreezes. The bill also limits certain medical debt information that can be included on veterans’ credit reports.
    • Changes for Bank Holding Companies. The bill raises the threshold for applying enhanced prudential standards from $50 billion to $250 billion.

    The bill now moves to the Senate, which is not expected to take up the package before the end of this year.

    Federal Issues Senate Banking Committee Dodd-Frank Federal Legislation TILA RESPA TRID Federal Reserve OCC FDIC Mortgages HMDA Credit Reporting Agency

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  • House Financial Services Committee Passes Bill That Would Pre-empt State Usury Laws

    Federal Issues

    On November 15, the House Financial Services Committee (Committee) announced the passage of H.R. 3299, “Protecting Consumers Access to Credit Act of 2017,” which would amend the “Revised Statues and the Federal Deposit Insurance Act” to explain that bank loans that were valid as to their maximum rate of interest in accordance with federal law at the time the loan was made shall remain valid with respect to that rate, regardless of whether the bank subsequently sells or assigns the loan to a third party. This would have the effect of preempting contrary state usury laws and effectively overturn the 2015 decision in Madden v. Midland Funding, LLC.

    The bill passed Committee 42-17.

    InfoBytes previously covered the bill’s introduction and also, a similar measure introduced in the Senate.

    Federal Issues House Financial Services Committee Usury Lending Federal Legislation Madden

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  • House Passes Flood Insurance Bill Reforming and Reauthorizing National Flood Insurance Program

    Federal Issues

    On November 14, the House voted 237-189 to pass legislation reforming and reauthorizing the National Flood Insurance Program (NFIP) for five years before it expires next month. As previously covered in InfoBytes, President Trump signed a three-month extension to the NFIP at the beginning of September in order to provide Congress additional time to establish a long-term financial solution for the program. The 21st Century Flood Reform Act (H.R. 2874) is designed to better facilitate compliance and clarify guidance for lenders and borrowers, and will, among other things, (i) change annual limits on premium increases for insurance obtained through the NFIP; (ii) require FEMA to consider the differences in flood risk between coastal and inland flood hazards when establishing premium rates; (iii) require FEMA to clearly communicate to policyholders the full flood risk to, and flood claims history of their property, and the effect of filing any additional claims; (iv) allow private insurers to continue selling policies on behalf of the NFIP, while also being allowed to sell their own private flood coverage; (v) revise federal flood mapping requirements, establish premium rates based on applicable flood insurance rate maps, and revise and clarify aspects of the appeals process; (vi) amend the Biggert-Waters Flood Insurance Reform Act of 2012 to clarify the time periods within which communities may consult with FEMA regarding mapping changes and submit data for consideration by the agency; (vii) revise the Flood Mitigation Assistance program to provide assistance for additional multiple loss properties; and (viii) amend the Flood Disaster Protection Act of 1973 to increase penalties against lenders and GSEs for violations of the mandatory purchase requirement from $2,000 to a maximum of $5,000 per violation.

    H.R. 2874 now heads to the Senate.

    Federal Issues U.S. House Flood Insurance National Flood Insurance Program Federal Legislation Disaster Relief Trump

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