Year End Newsletter
Washington Policy Update
Allison Karakis, Director of Legislative Affairs
The origins of the annual New Year’s Eve ball drop can be traced to Royal Navy Captain Robert Wauchope who invented the time ball in 1829. These devices dropped at the same hour each day to help ships keep accurate time, which was essential to determine longitude while at sea. Adolph Ochs, former owner of The New York Times, adapted the practice to bring attention to the newspaper’s headquarters at the newly re-named Times Square. He had a 5-foot wide iron ball covered in light bulbs lowered from the flagpole on the roof of the building at midnight to ring in 1908.
As we counted down the final weeks of 2020, Congress was under extreme pressure to reach an agreement on an additional COVID-19 relief bill before prior provisions expired. In the nearly nine months since passage of the CARES Act, negotiations on the next relief package had repeatedly started, only to break down each time. Frustrated by the impasse, a bipartisan group released two bills totaling $908 billion. The group lumped the most contentious items – state and local government funding and liability protections – into one bill. The other larger bill contained items with broad support from both parties and became the basis for the package passed by Congress just before Christmas. As many celebrated the long-awaited relief agreement, the president unexpectedly voiced his opposition to the bill and demanded changes. He ultimately signed the bill on Sunday, Dec. 27.
In the final days of the 116th Congress, the president sent lawmakers scrambling after he vetoed the National Defense Authorization Act. Congress has successfully reached an agreement on this legislation for the past 59 years. With strong bipartisan support, the House and Senate voted to override the veto, a first during the Trump administration.

The new Congress took office this past Sunday with the Democrats holding a thin majority in the House and the Senate majority awaiting the outcome of two Georgia runoffs on Tuesday, Jan. 5.
COVID-19 Relief Package and Omnibus Spending Bill
Congress reached an agreement on a $2 trillion combined COVID-19 relief and omnibus spending bill that funds the government through September 2021. The COVID-19 relief bill of more than $900 billion includes individual payments of $600 per individual and provides 11 weeks of $300 per-week emergency unemployment benefits. Other bill provisions include: 
  • CDC eviction moratorium extended to Jan. 31, 2021
  • $25 billion in emergency rental assistance
  • Establish a 4% minimum credit rate for the low-income housing tax credit
Paycheck Protection Program (PPP):
  • Provided $284 billion in funding for the next round of PPP through March 31, 2021
  • Created two set-asides for community lenders:
  • $15 billion for small community banks, credit unions and agricultural credit institutions
  • $15 billion for mission-based community lenders such as community development financial institutions (CDFIs) and minority depository institutions (MDIs)
  • Expanded PPP eligibility to small nonprofits, including 501(c)(6) organizations, destination marketing organizations and housing cooperatives with 300 or fewer employees
  • Streamlined forgiveness for PPP loans less than $150,000

Financial Services:
  • $12 billion for community development investment through CDFIs and MDIs by establishing a $9 billion Emergency Capital Investment Program (ECIP) administered by the Department of the Treasury and $3 billion to the CDFI Fund
  • Extended a CARES Act provision allowing banks and credit unions to temporarily delay the adoption of Current Expected Credit Loss (CECL)
  • Extended CARES Act temporary relief from troubled debt restructurings
OCC Proposes CRA General Performance Standards
The Office of Comptroller of the Currency (OCC) issued a proposed rule on its approach to determine the general performance standards under its recently updated Community Reinvestment Act (CRA). Banks subject to the general performance standards will be evaluated based on the distribution of their retail loans, the quantified dollar value of their qualifying activities and the distribution of their branches in each assessment area and at the bank level, and the level of their community development activities in each assessment area and at the bank level.
The proposed rule:
  • Calculates historical CRA activity levels and corresponding performance ratings under the general performance standards had they been in place. The OCC would set the CRA evaluation measures such that the proportion of banks that would have received presumptive ratings of outstanding’ and ‘satisfactory’ under the general performance standards would be no greater than the historical proportion of banks that received assigned ratings of ‘outstanding’ and ‘satisfactory’ under the previous CRA regulations.

  • Provides that a precipitous decrease in CRA activities would be considered as part of the assessment of performance context. This would be defined as a decline of 10% or greater in a bank’s performance on the general performance standards that could not be explained by market conditions or other performance context factors. 
CFPB Issues Final Rule on QM Loans and Creates New Seasoned QM Category
The Consumer Financial Protection Bureau (CFPB) issued final rules for qualified mortgage (QM) loans. For the General QM Final Rule, a loan receives a conclusive presumption that the consumer had the ability to repay if the annual percentage rate does not exceed the average prime offer rate for a comparable transaction by 1.5 percentage points or more as of the date the interest rate is set. A loan receives a rebuttable presumption that the consumer had the ability to repay if the annual percentage rate exceeds the average prime offer rate for a comparable transaction by 1.5 percentage points or more, but less than 2.25 percentage points.
Another final rule created a new category of Seasoned QMs that meet certain performance and underwriting requirements and comply with general restrictions on product features, points and fees. The loan must “season” by meeting certain performance requirements at the end of the seasoning period. Specifically, the loan can have no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days at the end of the seasoning period. The creditor or first purchaser also generally must hold the loan on portfolio until the end of the seasoning period.