capitol comments
August 2017

WINDOWS ON THE STATE CAPITOL
By Governmental Consultant Services, Inc. - lobbyists for Community Bankers of Michigan
 
PAC Auction Critical to CBM Advocacy Efforts - "Count Me In"
 
The 2017 Annual Community Bankers PAC Auction Fundraiser, is held in conjunction with the CBM Annual Convention and Trade Show September 13-15, 2017, Grand Traverse Resort and Spa.
 
The purpose of the CBM PAC is to elect candidates and reelect lawmakers who have voting records in support of the goals and vision of the Community Bankers of Michigan.
 
At the PAC Auction, community bankers use their individual financial resources to help elect candidates to public office - men and women who share CBM interests and concerns about public policy issues. Let us "Count You In." Join us at the PAC Auction
 
If you have questions, contact: Mary Anne Czubko or Mike Tierney
E-mail: maryanneczubko@cbofm.org - Phone 517-336-4430 - Fax 517-336-7833
 
Legislative Panel Discussion:
 
On Friday morning during the convention, CBM Lobbyists Bill Zaagman and Marcia Hune will moderate a legislative discussion panel that will include the Chairman of the House Financial Services Committee, Diana Farrington; Representative Larry Inman, a member of the House Appropriations Committee and retired VP of Empire National Bank of Traverse City; Senate Banking and Financial Services Committee Chairman, Senator Darwin Booher; and Senate Banking and Financial Services Committee Vice Chair, Senator Curtis Hertel.
 
Michigan Governor Rick Snyder will also speak to convention attendees in a video message to community bankers.
 
HB 4532 Signed by Governor Snyder, Now PA 54 of 2017
 
The new law has direct impact on property records management in terms of recording marital status and transfer of property. It eliminates the requirement that marital status is stated and recorded on the document.
 
Sponsored by Rep. Mary Whiteford, the now PA 54 of 2017 eliminates, effective April 6, 2017, the requirement in Public Act 79 of 1915 that all written instruments conveying or mortgaging real estate, or any interest in real estate, must state whether male grantors, mortgagors, or other parties executing the instrument are married or single.
 
The bill retains a current provision that after ten years an instrument that was offered for record and recorded in the office of a register of deeds without showing the marital status, the record of the instrument or a transcript of it may be given in evidence in all cases and would be effective for all purposes as a legal record. It would be recognized to be as valid and effective as if it had contained a statement showing the marital status.
 
August Primary Elections Shape the November Ballot
 
House of Representatives Special Elections
 
Two open seats in the Michigan House of Representatives will be filled in November, as the August primaries sorted out the candidates. Both House seats, the 1st and 109th are Democratic leaning seats.  
 
The 1st District, was an 11-way Democratic primary with Tenisha Yancey emerging as the winner with 32.9 percent. Yancey is an attorney who has worked as an assistant prosecutor in Wayne County. Trailing her was Pamela Sossi at 30 percent.
 
The Republican nominee is Mark Corcoran (R), in a district with an overwhelming Democratic base.
 
In the 109th District, three elected officials and a well-known political staffer in the district were vying for the Democratic slot in the November election.
 
Marquette City Commissioner Sara Cambensy won in a slim victory in the Democratic primary race to replace former state Rep. John Kivela, D-Marquette.
 
Cambensy won with 3,477 votes over second place finisher Jeremy Hosking, regional manager for U.S. Sen. Debbie Stabenow. Hosking won the population center of Marquette County but lost Alger County by a big margin and finished with 3,344 votes. Marquette County Commissioner Joe Derocha finished third with 2,435.
 
Cambensy will face Republican Richard Rossway, marketing executive at ABC-TV 10 and CW-5 in Marquette.
 
Two Mayors Races to Watch: Detroit and Lansing
 
Detroit Mayor Mike Duggan and Coleman Young II will face off in November's general election to be the next mayor of Detroit. Duggan received 69 percent of the vote in the primary to 27 percent for Young.
 
For the first time in 12 years, Lansing will elect a new mayor this fall -- either state Rep. Andy Schor, D-Lansing, or At-Large City Council Member Judi Brown Clarke. Mayor Virg Bernero decided in February, after 12 years in office, that he wouldn't seek re-election.
 
Schor and Clarke were the top vote-getters on a night that drew low turnout, but high aspirations among the candidates. Schor earned 68 percent of the mayoral votes cast, to Clarke's 23 percent. Unofficial results showed Schor with 8,401 to Clarke's 2,873.
 
The two were among five contenders for city's top job. Two dozen City Council hopefuls pushed the field to a record 29 candidates on the primary ballot.
 
Fall Session: Monitoring Legislation of Interest to Community Bankers of Michigan

HB 4087
- Requires posting in a conspicuous spot at any location offering money transmission services, a sign listing fees charged for money orders and other money transmission services. The bill requires signage at any money transmission location. Introduced by Representative Love and referred to the Committee on Financial Services.

HB 4374 
was introduced to amend the Michigan Notary Public Act by adding new requirements for the appointment or reappointment of a Notary Public. The new requirements include the completion of an education program as well as passing an exam before being appointed or reappointed by the Secretary of State. The bill would also impose the requirement that a notary public keep, maintain, and protect an official journal of every notarial act performed. Introduced by Representative Webber and referred to the Committee Judiciary
 
HB 4508 would create the Cyber Civilian Corps Act to establish the Michigan Cyber Civilian Corps program within the Department of Technology, Management, and Budget (DTMB). The constant advancements in informational technology bring new cyber threats. According to the bill sponsor, Representative Iden, the State of Michigan detects tens of thousands of cyberattacks every day. These threats are not only aimed at governments, though; businesses and nonprofits are also at risk for cyberattacks. Therefore, to protect government agencies and private entities in the state, a framework to provide for a team of trained individuals to help in times of disaster is crucial. The bill has been referred to Committee on Energy and Technology.
 
HB 4580 - In 2008 MSHDA implemented two mortgage refinancing programs to help homeowners avoid foreclosure. MSHDA income limits applied (low- to moderate-income levels), as well as other eligibility criteria such as having an overall good credit history. MSDHA's refinancing programs were statutorily capped at three years, ending in April 2011.
 
Under Section 44(3) of the State Housing Development Authority Act, the Authority was granted the ability to make loans, and to purchase or participate in loans made to individual purchasers for acquisition and long-term financing or refinancing of newly rehabilitated, newly constructed, or existing one- to four-unit housing units including residential condominium units.
 
However, under subsection 6 of the act, with regard to refinancing, the Authority has been prohibited from making, purchasing, or commencing participation in loans to individual purchasers under subsection 3 since April 3, 2011. (See Background for additional information.)
 
House Bill 4580 would delete this sunset provision and allow the refinancing of such projects if certain requirements are met. Introduced by Representative Farrington and referred to the Committee on Banking and Financial Institutions.
 
HB 4588 - In an effort to address exploitation of financially endangered adults, the bill would authorize a broker-dealer or investment adviser to provide access to or copies of records that are relevant to a suspected or attempted financial exploitation of a financially endangered adult, to agencies charged with administering state adult protective services laws and to law enforcement, either as part of a referral to the agency or to law enforcement. It would require financial advisors to report suspected cases of financial abuse of elderly or other vulnerable adults and posting of information. Introduced by Representative Brinks and referred to the Committee on Financial Services.
 
HB 4589 - Would require financial advisors to report suspected cases of financial abuse of elderly or other vulnerable adults. It authorizes certain actions to protect financially endangered adults from financial exploitation in relation to securities and provide protection from civil liability for those actions.
 
The bill would prescribe the powers and duties of certain state governmental officers and agencies. If a qualified individual, defined as an agent, investment adviser representative, or other individual who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser, reasonably believes that financial exploitation of a financially endangered adult may have occurred, may have been attempted, or is being attempted, the qualified individual shall promptly notify the administrator and the department of health and human services. Introduced by Representative Graves and referred to the Committee on Financial Services.
 
SB 238 - The bill would amend the Regulatory Loan Act to prohibit a licensee from paying a person a fee for locating a potential borrower for the licensee or referring a potential borrower to the licensee.
 
Merchant referral programs allow community banks and other lending institutions to attract business through referrals from local merchants and customers in the institutions' existing client network. These programs are allowed in over 40 states, but in Michigan, by rule, licensees subject to the Regulatory Loan Act are prohibited from paying any person for loan applications or recommendations (R 493.20). Some people believe that this prohibition prevents licensees from working with local businesses and keeps Michigan out of the modern lending marketplace. Therefore, it has been suggested that licensees in the State should be allowed to participate in referral programs. The bill addresses lending practices, and clarifies authority to pay referral fees under The Regulatory Loan Act. Introduced by Senator Booher and referred to Committee on Financial Services.
 
SB 361 - The bill would clarify tax base of financial institutions. Introduced by Senator Booher and referred to the Committee on Finance.
 
SB 362 - The bill would clarify apportionment for unitary business groups. Introduced by Senator Booher and referred to the Committee on Finance.
 
SB 386 - The bill would modify grounds of delinquent tax foreclosure proceedings to invalidate for a foreclosure. It would amend the General Property Tax Act to allow a person claiming to have an interest in property foreclosed due to unpaid taxes to seek to invalidate the foreclosure on any of the grounds described in Michigan Court Rule (MCR) 2.612, if the property had not been transferred to a person other than the foreclosing governmental unit. The bill also would require, instead of allow, a foreclosing governmental unit to cancel a foreclosure under certain circumstances if the property had not been transferred to a person other than the governmental unit after a foreclosure judgment was entered.
 
By allowing a person with an interest in property to challenge a foreclosure judgment in additional circumstances, the bill could lead to the identification of an interested party who would pay back taxes to prevent a foreclosure sale. Alternatively, depending on the outcome of the litigation, the bill could delay a foreclosure auction that would raise funds to pay the back taxes and return the property to productive. It was introduced by Senator Emmons, and referred to Committee on Tax Policy.
 
SB 430 - The bill revises definition of financial licensing acts in the Consumer Financial Services Act. Introduced by Senator Gregory and referred to the Committee on Banking and Financial Institutions. It is tie-barred to SB 431
 
SB 431  - The bill would require licensing of certain small loan providers. Introduced by Senator Gregory and referred to the Committee on Banking and Financial Institutions. It is tie-barred to SB 432.
 
SB 432   - The bill would address payday lending, and provide for general revisions. Introduced by Senator Robertsonand referred to the Committee on Banking and Financial Institutions. It is tie-barred to SB 431.  
Financial Institution Regulatory Agencies Issue Advisory on Appraiser Availability

Reviews of Shared National Credit Portfolio Find Risk Remains High Underwriting and Risk Management Practices Continue to Improve
Risk in the portfolio of large syndicated bank loans declined slightly but remains elevated, according to the Shared National Credit (SNC) Program Review released today by the Federal Reserve Board (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

The high level of credit risk in the SNC portfolio stems primarily from distressed borrowers in the oil and gas (O&G) sector and other industry sector borrowers exhibiting excessive leverage. The review also found that credit risk management practices at most large agent banks continued to improve, consistent with the
2013 Interagency Guidance on Leveraged Lending .

The 2017 SNC portfolio included 11,350 credit facilities to 6,902 borrowers, totaling $4.3 trillion, up from $4.1 trillion in 2016. U.S. banks held the greatest volume of SNC commitments at 45.3 percent of the portfolio, followed by foreign banking organizations and non-bank entities. The review relied on the results of examinations conducted in the third quarter of 2016 and the first quarter of 2017.

Loans were reviewed and stratified by the severity of their risk-special mention, substandard, doubtful, or loss-in order of increasing severity. Classified commitments include commitments rated substandard, doubtful and loss.

Other findings include:
  • The percentage of non-pass commitments decreased year-over-year from 10.3 percent to 9.7 percent of the SNC portfolio. Commitments rated special mention and classified decreased from $421.4 billion in 2016 to $417.6 billion in 2017.
  • Leveraged lending was the primary contributor to the overall special mention and classified rate. Leveraged loans comprised 64.9 percent of all SNC special mention and classified commitments. O&G loans comprised 25.7 percent of all SNC special mention and classified commitments.
  • The agencies noted $317 billion of leveraged loans in the respective agent banks' lowest-rated pass category, raising additional supervisory concerns should economic conditions decline.
  • The share of credits rated special mention and classified held by non-bank entities fell from 60.8 percent in 2016 to 56.1 percent this year. This trend began in 2015 and is due to a relatively low dollar volume (10.7 percent) of O&G loans held by non-banks.
  • As a result of underwriting improvements, non-pass loan originations are at a de minimis level. However, examiners noted the use of aggressive projections as a common theme in the non-pass originations.
The agencies conduct SNC reviews in the first and third calendar quarters with some banks receiving two examinations and others participating in a single review each year. The agencies provide results from the semiannual examinations in a combined report in order to present a complete view of the entire SNC portfolio comparable to prior years' reports. The next report will be published following the first quarter 2018 SNC examination.

Comment: For additional information, see the
SNC Program Review Report, SNC includes any loan and or/formal loan commitment, and any asset such as real estate, stocks, notes, bonds, and debentures taken as debts previously contracted, extended to borrowers by a federally supervised institution, its subsidiaries, and affiliates that aggregates to $20 million or more and is shared by three or more unaffiliated supervised institutions.
CFPB Actions
CFPB Releases "Know Before You Owe" Disclosures for Overdrafts

Washington, D.C.
- The Consumer Financial Protection Bureau (CFPB) today [August 4] unveiled new Know Before You Owe overdraft disclosure prototypes designed to improve the model form that banks and credit unions already provide to consumers weighing overdraft coverage. The Bureau is currently testing four prototypes that each have a simple, one-page design aimed at making the costs and risks of opting in to overdraft coverage easier to understand and evaluate. People who frequently attempt to overdraw their checking accounts typically pay almost $450 more in fees if they opted in to debit card and ATM overdraft coverage, according to a new CFPB study published today. The study found that most of these frequent overdrafters are financially vulnerable, with lower daily balances and lower credit scores than people who do not overdraft as often.

"Our study shows that financially vulnerable consumers who opt in to overdraft risk incurring a rash of fees when using their debit card or an ATM," said CFPB Director Richard Cordray. "Our new Know Before You Owe overdraft disclosure prototypes are designed to help consumers better understand the consequences of the opt-in decision."

Prototypes of the Know Before You Owe overdraft disclosure are available at:
http://files.consumerfinance.gov/f/documents/201708_cfpb_A-9-form-ficus_overdraft-model-forms-prototypes.pdf 

An overdraft occurs when consumers lack the funds in their account to cover a transaction, but the bank or credit union pays anyway. Financial institutions may charge a fee for this service, typically around $34 per transaction, and require that the account deficit be repaid with subsequent deposits. In 2010, federal regulations began requiring financial institutions to obtain a consumer's consent in advance before charging overdraft fees on most debit card transactions and ATM withdrawals. Consumers who do not opt in to overdraft coverage will generally have debit card purchases and ATM withdrawals declined with no charge if their account doesn't have enough funds to cover the transaction at the time they attempt it.

In addition to debit card transactions and ATM withdrawals, consumers can overdraw their account through checks, online bill payments, or direct debits from lenders or other billers. Banks and credit unions can charge overdraft fees on checks or electronic payments made through the Automated Clearing House system, and on debit card payments set up on a recurring basis. Charging these fees does not require the consumer to opt in, because those fees are not covered by the 2010 rule.

Comment:
This proposal is NOT an overdraft protection rule but rather testing of possible disclosures. Rulemaking is a lengthy process, and it would likely not be completed before Cordray leaves office.
FDIC Actions
FDIC Issues Updates to the Risk Management Manual of Examination Policies

Summary

The FDIC Risk Management Manual of Examination Policies (Examination Manual) has been updated. The Report of Examination Instructions were updated primarily to incorporate guidance from the FDIC Board of Directors to examiners regarding supervisory recommendations, including matters requiring board attention (MRBA) and deviations from safety and soundness principles underlying statements of policy, among others. Instructions also were added for new Report of Examination schedules or updated for existing schedules as needed. A new Bank of Anytown reflects these instructions. The updated Manual is available on the FDIC's website as a resource for all FDIC-supervised institutions.

Statement of Applicability to Institutions with Total Assets Under $1 Billion: This FIL applies to all FDIC-supervised financial institutions.

Highlights:

The revised Report of Examination Instructions:

 

  • Implement the July 29, 2016, FDIC Board of Directors statement on the Development and Communication of Supervisory Recommendations, by instructing examiners that:
    • Supervisory Recommendations must address meaningful concerns; be communicated clearly and in writing in a Report of Examination (ROE) or on official FDIC letterhead; and discuss corrective action;
    • Supervisory Recommendations in ROEs are to be communicated on the Examination Conclusion and Comments (ECC), Risk Management Assessment, or the MRBA schedules as appropriate; and
    • Supervisory Recommendations related to deviations from the safety and soundness principles underlying statements of policy, guidance, or guidelines that are not included as appendices to FDIC Rules and Regulations are to be summarized on the ECC schedule and discussed in more detail on other report schedules including the MRBA schedule, if appropriate.
  • Include updated instructions for preparing the ECC and Concentrations schedules as well as the Officer's Questionnaire.
  • Include instructions for the Information Technology and Operations Risk Assessment schedule added to the ROE last fall.
  • The new Bank of Anytown reflects the new or revised ROE instructions.
Printable Format: FIL-31-2017 - PDF
FDIC Updates Affordable Mortgage Lending Guide Information on State Housing Finance Agencies

Summary

The FDIC has updated the Affordable Mortgage Lending Guide, Part II: State Housing Finance Agencies to reflect the most up-to-date information available about the mortgage programs offered through state housing finance agencies (HFAs).
Statement of Applicability to Institutions with Less Than $1 Billion in Assets: This Financial Institution Letter applies to all FDIC-insured institutions.

Highlights:
Printable Format: FIL-30-2017 - PDF
 
Comment: This Guide provides invaluable information to banks that must satisfy the "investment" test of CRA.
FDIC Conferences & Events

Announcements of upcoming FDIC-sponsored events, events the FDIC will participate in as panelists and guest speakers, events where the FDIC will have an exhibit booth, and an archive of products created at earlier conferences, symposia and workshops.

Board Meetings

Video of Board Meeting (Video Help)

FDIC-Sponsored Events
Event Title
Location
Dates
Webinar
Aug.16, 2017
Webinar
Aug. 24, 2017
Arlington, VA
Aug. 31, 2017
Arlington, VA
Sept. 7-8, 2017
Deposit Insurance Coverage - Seminar for Bankers
Webinar
Sept. 15, 2017

OCC Actions  

OCC Bank Accounting Advisory Series Updated

WASHINGTON - The Office of the Comptroller of the Currency (OCC) released an update to the Bank Accounting Advisory Series (BAAS).

The BAAS covers a variety of topics and promotes consistent application of accounting standards among national banks and federal savings associations.

This edition of the BAAS reflects accounting standards issued by the Financial Accounting Standards Board on topics such as the recognition and measurement of financial instruments, leases, and revenue recognition. Additionally, this edition includes recent answers to frequently asked questions from the industry and examiners.

The BAAS does not represent official rules or regulations of the OCC. Rather, it represents the OCC's Office of the Chief Accountant's interpretations of generally accepted accounting principles and regulatory guidance based on the facts and circumstances presented. National banks and federal savings associations that deviate from these stated interpretations may be required to provide justification to the OCC.

The OCC updates the BAAS annually.

Related Link
OCC Hosts Compliance and Operational Risk Workshops in Baltimore

WASHINGTON - The Office of the Comptroller of the Currency (OCC) will host two workshops in Baltimore at the Sheraton Baltimore North Hotel, September 12-13, for directors of national community banks and federal savings associations supervised by the OCC.

The Compliance Risk workshop on September 12 combines lectures, discussion, and exercises on the critical elements of an effective compliance risk management program. The workshop also focuses on major compliance risks and critical regulations. Topics of discussion include the Bank Secrecy Act, Flood Disaster Protection Act, Fair Lending, Home Mortgage Disclosure Act, Community Reinvestment Act, and other compliance areas of interest.

The Operational Risk workshop on September 13 focuses on the key components of operational risk-people, processes, and systems. The workshop also covers governance, third-party risk, vendor management, and cybersecurity.

The workshop fee is $99. Participants receive a pre-workshop reading package and course materials, and assorted supervisory publications. The workshop is limited to the first 35 registrants.

The workshops are taught by experienced OCC staff and are offered nationwide to enhance and expand the skills of national community bank and federal savings association directors. To register for this workshop, visit www.occ.gov/occworkshops .
OCC Issues Revised Comptroller's Licensing Manual Booklet

Summary

The Office of the Comptroller of the Currency (OCC) issued today the "Failure Acquisitions" booklet of the Comptroller's Licensing Manual. This revised booklet replaces the "Failure Acquisitions" booklet issued in April 1998. The booklet sets forth the OCC's policies and procedures for national banks and federal savings associations (collectively, banks) seeking to participate in the Federal Deposit Insurance Corporation's (FDIC) process for resolving a failing insured depository institution (IDI).

Note for Community Banks

This guidance applies to all OCC-supervised banks.

Highlights

This revised booklet
  • provides an overview of policy considerations and evaluative factors that the OCC considers when reviewing a bank's interest in acquiring a failing IDI through the FDIC's failure resolution process.
  • provides banks with guidance when considering a bid on a failing IDI.
  • outlines requirements and procedures that banks should follow when completing the process to submit a bid.
  • lists references to informational resources.
Further Information

Please contact Karen Marcotte, Manager for Licensing Activities, at (202) 649-6260.

Comment: Fortunately, there are still very few bank failures!
Acting Comptroller Discusses Responsible Innovation and Granting National Bank Charters to Financial Technology Companies

WASHINGTON-Acting Comptroller of the Currency Keith A. Noreika today discussed responsible innovation during an appearance before the Exchequer Club. His remarks provided the audience an update on the agency's Office of Innovation as well as the agency's work related to granting national bank charters to financial technology companies.

Related Links

Remarks (PDF)

Comment: As reported in prior issues, the FinTech charter is opposed by ICBA and CSBS.
Statement by the Acting Comptroller of the Currency Regarding the Consumer Financial Protection Bureau's Final Rule on Arbitration Agreements

WASHINGTON - Acting Comptroller of the Currency Keith Noreika made the following statement regarding the Consumer Financial Protection Bureau's (CFPB) final rule on arbitration agreements (Final Rule), which was published in the Federal Register on July 19, 2017.

The Office of the Comptroller of the Currency has only begun its review of the CFPB's data and analysis underlying that agency's Final Rule. Nothing so far diminishes my concerns that the rule may adversely affect the institutions within the federal banking system and their customers.

The Final Rule prevents banks from using an effective risk mitigation tool and will eliminate one option consumers have to resolve their concerns without the cost and delay of litigation. Ultimately, the rule may have unintended consequences for banking customers in the form of decreased availability of products and services, increased related costs, fewer options to remedy consumer concerns, and delayed resolution of consumer issues. The rule may turn out to be the proverbial straw on the camel's back.

It is important that the OCC economists take the time necessary to conduct their independent review of the data and analysis used to support and develop the Final Rule. Unfortunately, since the CFPB published the rule in the Federal Register prior to providing its data for our analysis and we have requested additional data in order to conduct a thorough review, the OCC cannot complete our thorough review in the limited time before a petition must be filed with the Financial Stability Oversight Council (FSOC), pursuant to Section 1023 of the Dodd-Frank Act.

Given that Congress is considering use of the Congressional Review Act to overturn the CFPB's Final Rule, I will not petition the FSOC to stay the effective date of the rule. I hope Congress will act on this opportunity to preserve effective alternatives for consumers to resolve their disputes without lengthy and costly litigation and to reduce the "piling on" of legal and regulatory burden that I discussed in my testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, on June 22, 2017.

Comment: It is still far from certain that Congress will overturn this rule. However, this statement definitely provides fuel for litigation efforts in opposition.
Federal Reserve Actions
Federal Reserve Board Invites Public Comment on Two Proposals; Corporate Governance and Rating System for Large Financial Institutions

The Federal Reserve Board on Thursday [August 3rd] requested public comment on a corporate governance proposal to enhance the effectiveness of boards of directors. The proposal would refocus the Federal Reserve's supervisory expectations for the largest firms' boards of directors on their core responsibilities, which will promote the safety and soundness of the firms.

Boards' core responsibilities include oversight of the types and levels of risk a firm may take and aligning the firm's business strategy with those risk decisions. Additionally, the proposal would reduce unnecessary burden for the boards of smaller institutions.

The corporate governance proposal is made up of three parts. First, it identifies the attributes of effective boards of directors, such as setting a clear and consistent strategic direction for the firm as a whole, supporting independent risk management, and holding the management of the firm accountable. For the largest institutions, Federal Reserve supervisors would use these attributes to inform their evaluation of a firm's governance and controls. Second, it clarifies that for all supervised firms, most supervisory findings should be communicated to the firm's senior management for corrective action, rather than to its board of directors. And third, the proposal identifies existing supervisory expectations for boards of directors that could be eliminated or revised.

The Board also requested public comment on a proposal to better align the Board's rating system for large financial institutions with the post-crisis supervisory program for these firms.

The proposed rating system would only apply to large financial institutions, such as domestic bank holding companies and savings and loan holding companies with $50 billion or more in total consolidated assets, as well as the intermediate holding companies of foreign banking organizations operating in the United States.

Consistent with existing practice, the new rating system would not apply to insurance companies supervised by the Board. Firms with less than $50 billion in total consolidated assets, including community banks, would continue to use the current rating system, which reflects long-standing supervisory practices for those firms.

The Board's Federal Register notices are attached. Comments will be accepted for 60 days.

For media inquiries, call 202-452-2955.

Comment: Corporate governance concerns are a current hot button for examiners.
Other Federal Action and News 
FTC, State, and Local Partners Announce Joint Conference on Protecting Military Consumers

The Federal Trade Commission, state, and local authorities will convene a conference in Los Angeles on Sept. 7, 2017 to help educate military consumers and train military attorneys, law enforcement personnel, and consumer protection officials to address consumer fraud and other issues that affect servicemembers and their families. This event follows the FTC's recent successful Military Consumer Financial Workshop, held July 19 in San Antonio.

The
Protecting Military Consumers: A Common Ground Conference will discuss current and emerging issues affecting servicemembers and their families such as student loans and for-profit colleges, identity theft, imposter scams, debt collections, mortgage disputes and real estate fraud.

"We must protect those who protect our nation," said FTC Acting Chairman Maureen Ohlhausen. "Servicemembers and their families who are victims of or targeted for scams can rely on advisors, advocates, and legal resources for help - especially in Southern California. That is why we continue to promote these resources to our military and veterans through events like this one."

The conference will include an overview of federal, state, and local consumer protection laws such as the Servicemembers Civil Relief Act, the Military Lending Act, and the FTC's and Consumer Financial Protection Bureau's rules and regulations.

There also will be an opportunity for servicemembers and military attorneys to learn about resources that can help them prevent, detect and defend against consumer fraud, including counseling and information, one-on-one dispute resolution, fraud investigations for civil and criminal prosecution and legal representation.

The conference will take place at the Los Angeles Police Department Headquarters, 100 W 1st St, Los Angeles, CA 90012 from 9 am to 1 pm Pacific Time. The entire conference will also be streamed live online. An RSVP is suggested, as space is limited. To RSVP, please email only your name and affiliation (if any) to
militaryla@ftc.gov (link sends e-mail) . A detailed agenda will be published at a later date.

Comment: MLA rules changed significantly effectively for credit extended after October 3, 2016.
FTC to Host Cybersecurity Roundtables with Small Businesses

The Federal Trade Commission is hosting small business owners in a series of public roundtables across the United States to discuss the most pressing challenges small businesses face in protecting the security of their computers and networks.

The Engage, Connect, and Protect Initiative: Small Business and Data Security Roundtables are part of an ongoing initiative by Acting FTC Chairman Maureen K. Ohlhausen aimed at helping small businesses, which included the launch of a new website in May focused on
helping small business owners avoid scams and protect their computers and networks from cyberattacks. There are more than 28 million small businesses nationwide, employing nearly 57 million people, according to the Small Business Administration (SBA).

The first roundtable event took place July 25 in Portland, Oregon, in partnership with the National Cyber Security Alliance (NCSA), the SBA, and other organizations. This event will be followed by a roundtable discussion in Cleveland, Ohio, on September 6, hosted by the FTC and the Council of Smaller Enterprises and in collaboration with the SBA. Another roundtable event will take place later in September in Des Moines, Iowa, sponsored by the NCSA.

The roundtables will bring together FTC staff along with the SBA and other federal partners, industry associations, and the small business community. The comments and feedback generated by the roundtables will be used to help the FTC and its partners provide additional education and guidance for small business owners on cybersecurity issues.

Small business owners also can provide feedback on cybersecurity issues they face by emailing
  smallbizcyber@ftc.gov (link sends e-mail) . Find out more about some of the questions the roundtables will explore on the FTC's Business Blog .

Comment: The information from the FTC can be useful to banks' small business customers. Consider educating customers through these resources.
Publications, Articles, Reports, Studies, Testimony & Speeches
Chicago Fed Releases Article Entitled 'A New Era of Community Banking'

The 11th annual Community Bankers Symposium, cosponsored by the Federal Reserve Bank of Chicago, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), was held at the Chicago Fed on November 18, 2016. This article [released July 20] summarizes key presentations and discussions at the event.

Key speakers for the 2016 symposium were Charles Evans, president and CEO, Federal Reserve Bank of Chicago; Thomas Curry, comptroller, OCC; Maryann Hunter, deputy director, Board of Governors of the Federal Reserve System; Thomas Hoenig, vice chairman, FDIC; and Jim Glassman, head economist, JPMorgan Chase. About 175 participants, mostly executive officers and directors of community banking organizations in the Seventh Federal Reserve District,
1 gathered to discuss both the opportunities and emerging risks for community banks. The major themes of the symposium were the current state of the economy, cybersecurity, technological innovation, and alternative lending models.

Comment: To read the article in its entirety, click
 here.
Selected Federal Rules - Proposed

Proposed rules are included only when community banks may want to comment. Date posted may not be the same as the
Federal Register Date.
 
08.03.2017              The Federal Reserve Board on Thursday [August 3rd] requested public comment on a corporate governance proposal to enhance the effectiveness of boards of directors. The proposal would refocus the Federal Reserve's supervisory expectations for the largest firms' boards of directors on their core responsibilities, which will promote the safety and soundness of the firms. Comments must be received 60 days after publication in the Federal register.

07.19.2017             
The OCC, Board, and FDIC (collectively, the agencies) are inviting comment on a proposed rule to amend the agencies' regulations requiring appraisals of real estate for certain transactions. The proposal would increase the threshold level at or below which appraisals would not be required for commercial real estate transactions from $250,000 to $400,000. This proposed change to the appraisal threshold reflects comments the agencies received through the regulatory review process required by the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) and completed in early 2017. For commercial real estate transactions with a value at or below the proposed threshold, the amended rule would require institutions to obtain an evaluation of the real property collateral that is consistent with safe and sound banking
practices if the institution does not obtain an appraisal by a state certified or licensed appraiser. Comments must be received 60 days after publication in the Federal register.

07.14.2017              The Bureau of Consumer Financial Protection (Bureau or CFPB)
proposes amendments to Regulation C that would, for a period of two years, increase the threshold for collecting and reporting data with respect to open-end lines of credit so that financial institutions originating fewer than 500 open-end lines of credit in either of the preceding two years would not be required to begin collecting such data until January 1, 2020. Comments closed July 31, 2017.

07.05.2017             
The Bureau of Consumer Financial Protection (Bureau) is proposing to amend Federal mortgage disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act that are implemented in Regulation Z. The proposed amendments relate to when a creditor may compare charges paid by or imposed on the consumer to amounts disclosed on a Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith. Specifically, the proposed amendments would permit creditors to do so regardless of when the Closing Disclosure is provided relative to consummation. Comments must be received 60 days after publication in the Federal register.

05.31.2017              The Board is
  proposing to amend Regulation CC to address situations where there is a dispute as to whether a check has been altered or is a forgery, and the original paper check is not available for inspection. Comments closed August 1, 2017.

04.13.2017              The Bureau of Consumer Financial Protection (Bureau)
  proposes amendments to Regulation C to make technical corrections to and to clarify certain requirements adopted by the Bureau's Home Mortgage Disclosure (Regulation C) final rule ( 2015 HMDA Final Rule or the Final Rule), which was published in the Federal Register on October 28, 2015. The Bureau also proposes a new reporting exclusion. Comments on the proposal will be due 30 days after it is published in the Federal Register.
Selected Federal Rules - Upcoming Effective Dates

Not all final rules are included. Only rules affecting community banks are reported, but we make no guarantees that these are all the final rules your bank needs to know about.

09.30.2017              Joint Agencies: Loans in Areas Having Special Flood Hazards A lender that loses the small lender exemption shall mail or deliver to the borrower no later than September 30 of the first calendar year in which the lender loses its small lenders exemption a notice in writing, or if the borrower agrees, electronically, informing the borrower of the option to escrow all premiums and fees for any required flood insurance and the method(s) by which the borrower may request escrow, using language similar to the model clause in appendix B. A lender loses the exemption when its assets are ≥ $1 billion. This applies to any loan secured by residential improved real estate or a mobile home that is outstanding on July 1 of the first calendar year in which the lender no longer qualifies for the small lender exemption (exception is for lenders with <$1 billion in assets).

10.01.2017             
Prepaid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z)   The CFPB is issuing this final rule to create comprehensive consumer protections for prepaid accounts under Regulation E, which implements the Electronic Fund Transfer Act; Regulation Z, which implements the Truth in Lending Act; and the official interpretations to those regulations. The final rule modifies general Regulation E requirements to create tailored provisions governing disclosures, limited liability and error resolution, and periodic statements, and adds new requirements regarding the posting of account agreements. Additionally, the final rule regulates overdraft credit features that may be offered in conjunction with prepaid accounts. Subject to certain exceptions, such credit features will be covered under Regulation Z where the credit feature is offered by the prepaid account issuer, its affiliate, or its business partner and credit can be accessed in the course of a transaction conducted with a prepaid card. DATES: This rule is effective on October 1, 2017. The requirement in § 1005.19(b) to submit prepaid account agreements to the Bureau is delayed until October 1, 2018. See the CFPB's prepaid rule implementation page .
                               
Comment: The CFPB issued a Final Rule on April 25, 2017 delaying to delay the October 1, 2017 effective date of the rule governing Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) (the Prepaid Accounts Final Rule) by six months, until April 1, 2018.

10.03.2017              Although the Military Lending Act was effective October 3, 2016, credit cards are exempt until October 3, 2017.
80 Fed Reg 43560

10.10.2017             
  Amendments to Federal Mortgage Disclosure Requirements under the Truth in Lending Act (Regulation Z) This final rule modifies the federal mortgage disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act that are implemented in Regulation Z. This rule memorializes the Bureau's informal guidance on various issues and makes additional clarifications and technical amendments. This rule also creates tolerances for the total of payments, adjusts a partial exemption mainly affecting housing finance agencies and nonprofits, extends coverage of the TILA-RESPA integrated disclosure (integrated disclosure) requirements to all cooperative units, and provides guidance on sharing the integrated disclosures with various parties involved in the mortgage origination process.

10.19.2017             
Mortgage Servicing Rules   The CFPB updated its mortgage servicing rules and expanded foreclosure protections. The final rule provides protections when a mortgage is transferred between servicers. Mortgage servicers must now offer mitigation services more than once if a borrower brings their mortgage current, then again becomes delinquent. The rule provides additional protections to mortgagors who acquired the mortgage, often through death or divorce. The rules require servicers to provide periodic statements to borrowers in bankruptcy in certain circumstances. The statements must contain specific information tailored for bankruptcy and about loss mitigation options. The CFPB published a summary for consumers on its website. Servicers have a full year from the October 19, 2016, publication date (and for some changes 18 months) to implement the rules.

10.19.2017             
Safe harbors from FDCPA liability for actions complying with mortgage servicing rules under RESPA and Reg. Z The CFPB specified mortgage servicing rules in Regulations X and Z. This interpretive rule constitutes an advisory opinion for purposes of the FDCPA and provides safe harbors from liability for servicers acting in compliance with specified mortgage servicing rules in three situations: Servicers do not violate FDCPA section 805(b) when communicating about the mortgage loan with confirmed successors in interest in compliance with specified mortgage servicing rules in Regulation X or Z; servicers do not violate FDCPA section 805(c) with respect to the mortgage loan when providing the written early intervention notice required by Regulation X to a borrower who has invoked the cease communication right under FDCPA section 805(c); and servicers do not violate FDCPA section 805(c) when responding to borrower-initiated communications concerning loss mitigation after the borrower has invoked the cease communication right under FDCPA section 805(c).

01.01.2018             
Home Mortgage Disclosure (Regulation C) The CFPB amended Regulation C to implement amendments to HMDA made by section 1094 of the Dodd-Frank Act. Consistent with section 1094 of the Dodd-Frank Act, the CFPB is adding several new reporting requirements and clarifying several existing requirements. The CFPB is also modifying the institutional and transactional coverage of Regulation C. The final rule also provides extensive guidance regarding compliance with both the existing and new requirements.
                               
Comment: In 2018, all banks covered by Regulation C that originated at least 25 covered closed-end mortgage loans in either of the two preceding calendar years (2016 and 2017), OR all banks covered by Regulation C that originated at least 100 covered open-end lines in either of the two preceding calendar years (2016 and 2017) must report. Those reports are due in 2019. For HMDA data collected on or after January 1, 2018, bank's will collect, record, and report additional information about originations of, purchases of, and applications for covered loans. Data collection and reporting applies to most residential mortgage loan applications regardless of their ultimate disposition; it is not limited to loans that are approved. There are 25 new data points.

04.01.2018             
Prepaid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z) The CFPB is issuing this final rule to create comprehensive consumer protections for prepaid accounts under Regulation E, which implements the Electronic Fund Transfer Act; Regulation Z, which implements the Truth in Lending Act; and the official interpretations to those regulations. The final rule modifies general Regulation E requirements to create tailored provisions governing disclosures, limited liability and error resolution, and periodic statements, and adds new requirements regarding the posting of account agreements. Additionally, the final rule regulates overdraft credit features that may be offered in conjunction with prepaid accounts. Subject to certain exceptions, such credit features will be covered under Regulation Z where the credit feature is offered by the prepaid account issuer, its affiliate, or its business partner and credit can be accessed in the course of a transaction conducted with a prepaid card. DATES: This rule was originally effective on October 1, 2017 but a Final Rule published April 25, 2017 amended the effective date until April 1, 2018. The requirement in § 1005.19(b) to submit prepaid account agreements to the Bureau is delayed until October 1, 2018. See the CFPB's prepaid rule implementation page .

05.11.2018              FinCEN is issued
final rules under the Bank Secrecy Act to clarify and strengthen customer due diligence requirements for: Banks; brokers or dealers in securities; mutual funds; and futures commission merchants and introducing brokers in commodities. The rules contain explicit customer due diligence requirements and include a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions.

07.01.2018             
Availability of Funds and Collection of Checks The Board is amending subparts A, C, and D of Regulation CC, Availability of Funds and Collection of Checks (12 CFR part 229), which implements the Expedited Funds Availability Act of 1987 (EFA Act), the Check Clearing for the 21st Century Act of 2003 (Check 21 Act), and the official staff commentary to the regulation.1 In the final rule, the Board has modified the current check collection and return requirements to reflect the virtually all-electronic check collection and return environment and to encourage all depositary banks to receive, and paying banks to send, returned checks electronically. The Board has retained, without change, the current same-day settlement rule for paper checks. The Board is also applying Regulation CC's existing check warranties under subpart C to checks that are collected electronically, and in addition, has adopted new warranties and indemnities related to checks collected and returned electronically and to electronically-created items.

10.01.2018
              Prepaid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z) Although the CFPB's rule regarding prepaid accounts is effective 10.01.2017, the requirement to submit account agreements to the CFPB is effective 10.03.2018. See the CFPB's prepaid rule implementation page .
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NEWS & EVENTS
 
Community Bankers for Compliance 2017
Enrollment Pro-rated  
 
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UPCOMING EDUCATIONAL AND INFORMATIVE EVENTS 

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DIFS/CBM Michigan Bank Directors' College

Wed. - Sept. 13, 2017
Grand Traverse Resort & Spa, Traverse City

Agenda

Brochure

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2017 CBM Annual Convention & Expo

Wed. - Fri.

September 13-15, 2017

Grand Traverse Resort & Spa, Traverse City

Register Here

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2017 Community Bankers for Compliance School

Indianapolis, IN 

Deposit/Operations Compliance
Monday/Tuesday
October 16 & 17, 2017

Lending Compliance
Wed./Thurs./Fri.
October 18, 19 & 20, 2017

Register Here

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CEO Community Bank Leadership Network 
 
Fri. - Nov. 3, 2017
CBM Training Center
East Lansing

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Community Bankers for Compliance Program
4th Qtr. Seminar

Tues. - Nov. 28, 2017
Eagle Eye Golf Club

More info to follow.

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Click here to view past webinars that are available as an Archived (on-demand) Link that can become part of your training library.

In This Issue

© 2017 Independent Bankers Association of Texas
 in cooperation with the Community Bankers of Michigan. 
All rights reserved.
  Shannon Phillips Jr., Editor  

 

© Community Bankers of Michigan
3505 Coolidge Road - Suite 200 I East Lansing, MI 48823
Phone:  517-336-4430 I Fax: 517-336-7833 I info@cbofm.org