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Federal regulators discuss Covid-19 responses during Senate hearing
On May 12, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Oversight of the Financial Regulators,” which primarily focused on responses by the Federal Reserve Board (Fed), FDIC, OCC, and NCUA to the Covid-19 pandemic. Committee Chairman Mike Crapo (R-ID) opened the hearing by thanking the regulators for crafting regulatory responses to assist financial institutions in meeting the needs of affected borrowers, and encouraged the regulators to find ways to provide flexibility for financial institutions that lend to households and businesses. Crapo also stressed the importance of making sure the Fed’s Main Street Lending Program (covered by a Buckley Special Alert) and the Municipal Liquidity Facility (coved by InfoBytes here) are “up and running quickly,” and expressed continued concerns that the “inclusion of population thresholds for cities and states that were not a part of the CARES Act will still impede access to smaller and rural communities.” Ranking Member Sherrod Brown (D-OH) argued, however, that the regulators’ relief measures have not favored consumers.
Fed Vice Chair for Supervision Randal K. Quarles provided an update on the Fed’s Covid-19 regulatory and supervisory efforts. When asked during the hearing when the Main Street Lending Program would be operational, he declined to give an exact date but emphasized it is the Fed’s “top priority,” and that he did not anticipate it will take months. When questioned about whether the Fed is taking measures to “ensure businesses are getting equitable access to the [lending] facilities,” Quarles stated that the Fed relies on banks to do the underwriting, but will supervise the banks to make sure the underwriting is done “safely and fairly.”
OCC Comptroller Joseph M. Otting also discussed a range of actions taken by the agency in response to the pandemic and outlined additional OCC priorities and objectives, including its proposal to modernize the Community Reinvestment Act (CRA). Senator Menendez (D-NJ) asked whether the OCC should revisit the proposed CRA rewrite, citing the inability of some small businesses—particularly minority-owned businesses—to obtain relief under the Payroll Protection Program (PPP). In response, Otting argued that the rewrite (done in conjunction with the FDIC—see InfoBytes CRA coverage here) should actually be accelerated “because it will drive more dollars into low and moderate income communities” impacted by the pandemic. However, several Democrats on the Committee disagreed and called for a separate hearing to discuss the CRA proposal.
FDIC Chairman Jelena McWilliams also addressed actions undertaken to maintain stability and to provide flexibility to both banks and consumers. Among other things, McWilliams stated that banks should rely on borrowers’ statements certifying that their economic need is legitimate when making PPP loans. “Our instruction to banks has been to make sure these loans are not being traditionally underwritten [and] to take a look at the certification that the borrower is providing,” McWilliams said during the hearing. She also emphasized that all banks must comply with fair lending laws when making PPP loans, whether or not specific guidance has been issued.
NCUA Chairman Rodney E. Hood also outlined agency measures in response to the pandemic. Among other things, Hood noted that the NCUA has issued guidance to support credit union industry participation in the PPP and approved several regulatory changes concerning the classification of PPP loans for regulatory capital and commercial underwriting purposes.
The following day, the House Subcommittee on Consumer Protection and Financial Institutions also held a roundtable with the federal regulators to discuss Covid-19 responses.
Federal agencies launch joint housing assistance website
On May 12, the CFPB, the Federal Housing Finance Agency (FHFA), and the Department of Housing and Urban Development (HUD) announced a new mortgage and housing assistance website, which consolidates the CARES Act mortgage and rent relief protections, tips to avoid Covid-19 related scams, and tools for homeowners and renters to determine if their property is federally backed. The release details the steps the CFPB has taken in response to the Covid-19 pandemic, including informing consumers of their protections under newly created programs and releasing a policy statement concerning the responsibilities of credit reporting companies and furnishers. The release also outlines efforts that FHFA’s regulated entities and HUD have taken to address the national emergency, including forbearance options for homeowners and eviction protections for renters who live in multifamily properties that are backed by Fannie Mae or Freddie Mac.
FDIC’s proposal addresses deposit insurance assessment effects of PPP, PPPLF, and MMLF participation
On May 12, the FDIC announced a proposed rulemaking that addresses the deposit insurance assessment effects of participating in the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) and the Federal Reserve Board’s Paycheck Protection Program Lending Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMLF). The FDIC notes that because PPP loans are fully guaranteed by the SBA, and PPPLF and MMLF transactions are conducted with the Board on a non-recourse basis, the proposed rule ensures that participating banks are not subjected to “significantly higher deposit insurance assessments.”
According to FDIC’s Financial Institution Letter, FIL-56-2020, the proposed rule would remove the effect of participating in the programs (i) on various risk measures used to calculate a bank’s assessment rate; (ii) on certain adjustments to a bank’s assessment rate; (iii) by providing an offset to a bank’s assessment for the increase to its assessment base attributable to participation in the MMLF and PPPLF; and (iv) when classifying banks as small, large, or highly complex for assessment purposes. The FDIC is proposing an effective date by June 30 with an application date of April 1 to ensure the changes cover assessments starting in the second quarter of 2020.
Comments on the proposed rule will be accepted for seven days after publication in the Federal Register.
Special Alert: California Assembly to introduce legislation for Covid-19-related relief for mortgage loans, vehicle-secured credit, PACE financing, and deferred deposit transactions
We understand that the California State Assembly will shortly propose amendments to Assembly Bill No. 2501 to create the “COVID-19 Homeowner, Tenant, and Consumer Relief Law of 2020.” As of posting of this Alert, the proposed legislation is not available on California’s legislative service website. The proposed law would provide relief to homeowners, tenants, and vehicle owners by prohibiting creditors and loan servicers from taking specified actions, including initiating foreclosures or repossessions, during the period from the date of enactment of the proposed law through the 180-day period following the date that California Governor Gavin Newsom declares the emergency related to Covid-19 has ended. Additionally, the proposed law would require servicers to place certain loans that become delinquent into automatic forbearance for a period of at least six months.
The proposed law appears similar to portions of an appropriations bill, “Take Responsibility for Workers and Families Act,” which was introduced in the U.S. House of Representatives on March 23, 2020, prior to the enactment of the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and failed to pass. We understand that the proposed law is scheduled to be heard before the California State Assembly Banking Committee on May 19.
Arkansas Insurance Department issues bulletin to insurers regarding compliance and licensing
On May 11, the Arkansas Insurance Department issued a bulletin regarding compliance and licensing for admitted and surplus lines insurance carriers doing business in Arkansas. Insurers and other regulated entities are advised that they must continue to expeditiously adjust claims during Covid-19. The bulletin also provides guidance on regulatory filing deadlines, the permissibility of electronic filings and signatures, the status of on-site examinations by the department, license renewals, and continuing education deadlines.
Arkansas Insurance Department rescinds several Covid-19-related bulletins
On May 11, the Arkansas Insurance Department issued a bulletin announcing the rescission of certain Covid-19 related bulletins issued under Executive Order 20-03. Among others, Bulletin 16-2020 regarding the suspension of title insurance audits and Bulletin 18-2020 regarding Covid-19 financial regulatory compliance, are suspended as of May 11, 2020.
Maryland Collection Agency Licensing Board issues advisory notice to collection agencies
On May 11, the Maryland State Collection Agency Licensing Board issued an advisory notice regarding voluntary cessation of collection agency activity. The board noted its expectation that collection agencies that voluntarily cease business operations in Maryland do so in compliance with their respective business continuity plans to manage any related disruptions in compliance and otherwise wind down operations in an orderly manner that protects consumers from harm. The notice sets forth certain minimum requirements that a collection agency must meet, including promptly notifying the owner of consumer claims assigned to the collection agency if collection of the consumer claims will cease and remitting any and all consumer payments held in custodial accounts. Collection agencies temporarily or permanently ceasing operations must provide the board with documentation explaining its plans to meet the expectations set forth in the guidance.
Federal Reserve published updates to the Municipal Liquidity Facility term sheet
On May 11, the Federal Reserve Board issued a press release to publish updates to the Municipal Liquidity Facility (MLF) term sheet. As previously covered by InfoBytes (here and here), the MLF was established to provide liquidity to state and local governments so they could continue to provide services for their citizens. The Federal Reserve Board also published FAQs regarding the MLF and a Pricing Appendix.
Kansas Insurance Department Covid-19 FAQs contain guidance for insurance companies and broker-dealers
On May 11, the Kansas Insurance Department updated its Covid-19 FAQs, which, among other things, address how the department is handling licensing for insurance agents and registration for broker-dealers and investment advisers during the pandemic.
Kansas Office of the State Bank Commissioner issues guidance on re-opening of bank facilities
On May 11, the Kansas Office of the State Bank Commissioner (OSBC) issued guidance regarding the re-opening of closed bank lobbies and branches due to Covid-19. The OSBC expects that bank lobbies and branches closed due to the pandemic will begin a gradual reopening, in line with the statewide phased approach, with the objective of a full re-opening by June 15, 2020. However, banks operating across multiple counties are encouraged to consult county-level re-opening procedures, which may be more stringent than state-level procedures. The guidance also acknowledges that certain branches with limited or restricted access may not be able to re-open. The OSBC requests that banks provide written notice of the effective dates of branch and lobby re-openings, even if those re-openings are staggered within the organization.