June 22, 2022
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CFPB gathering overdraft data for regulatory follow-up

The Consumer Financial Protection Bureau said it intends to use information it is gathering from financial institutions on their overdraft practices to identify institutions for further regulatory review.

The CFPB said in a new blog post that it has asked more than 20 institutions for data on five consumer-impact metrics. The bureau said it is also seeking detailed information on entities’ overdraft and non-sufficient-funds practices.

The CFPB said it will use this information for further examination and review, to provide feedback to each affected institution, and to share with other regulators, though it will not be made public.

Source: CFPB
House OK's credit union expansion to underserved areas

The House passed a broad financial inclusion measure with language that would allow credit unions to expand into underserved areas, after an intense fight by the banking industry to drop the language.

Representatives narrowly rejected an amendment that would have dropped the credit union proposal, as well as removed other portions of the bill. Enacted by a vote of 215-207, three Democrats voted no on H.R. 2543, the Financial Services Racial Equity, Inclusion, and Economic Justice Act. It remains unclear whether the Senate will pass the measure.

The bill would allow credit unions to apply to the National Credit Union Administration to expand their service into areas that may not have adequate access to financial branches, including areas that lack a depository institution within 10 miles. Lending in these areas would not be subject to lending caps under the proposal.

The House also adopted an amendment saying that nothing prevents community banks from opening branches in underserved areas. In addition, the bill now includes the text of the Payment Choice Act, which protects the right to pay in cash at all retail establishments for transactions under $2,000.

Credit unions say low-income areas are increasingly becoming "banking deserts" with few options for residents to obtain financial services. They contend that the bill is a way for them to help these communities at a time when bank branch closures are accelerating, particularly as a result of the pandemic.
Source: ICBA
Public input on big bank customer service

The Consumer Financial Protection Bureau is seeking input from the public regarding their experience with customer service at big banks as it looks to enforce a legal provision requiring a timely response from banks to customers requesting information.

The regulator wants to determine how customers can assert their rights to better customer service at big banks. Under the 2010 Consumer Financial Protection Act, consumers have the right to get information, including supporting written documentation, about their account from a large bank or credit union with over $10 billion in assets. According to the CFPB, financial institutions covered by this provision must comply with customer requests for information in a timely manner.

In particular, the CFPB asked the public what information people request from their bank, how they are using this information, what information they are currently unable to obtain and what customer service obstacles are getting in the way of their requests. The CFPB also wants to know the public's experiences with regard to the quality of bank responses to their questions, wait times, disconnected calls and the ability to speak to a person at a specific location.

The regulator said the initiative is part of efforts to restore relationship banking in a time of increasing digitization. The public may submit comments within 30 days after the publication of the request for information in the Federal Register.

Source: S&P Global Market Intelligence
CRA proposal tailored to community banks

The proposed update to Community Reinvestment Act regulations would improve clarity, consistency, and transparency in CRA compliance for all stakeholders, including banks and community organizations, FDIC Acting Chairman Martin Gruenberg said.
Gruenberg also said the proposal tailors CRA evaluations and data collection to bank size, complexity, and business type. He cited the proposal’s categories for small, intermediate, and large banks and noted small banks would continue to be evaluated under the existing regulatory framework.
In a national news release after the proposal was issued, ICBA said it is encouraged that the proposal would tailor CRA evaluations and data collection for community banks, though regulators should ensure the plan meets the needs of all community banks and the communities they serve.

ICBA released a summary of the banking agencies’ proposed update to CRA regulations.
The summary—which spotlights the plan’s proposed updates to asset thresholds, assessment area rules, and more—is designed to help community bankers submit personalized comments on the proposal by the Aug. 5 comment deadline.
Source: FDIC; ICBA
Slowdown in CRE lending

The banking industry is bracing for a drop in commercial real estate lending activity as the Federal Reserve gets more aggressive in raising interest rates.

The Fed's hawkish pivot to a 75-basis-point rate hike at its June meeting is raising red flags about the future of CRE loan growth. Equity analysts believe CRE investors are likely to retreat into safer havens rather than CRE projects.

"A few banks have indicated to us that certain CRE deals no longer make sense due to higher rates and that alternative investments (like the 5-year Treasury at 3.5%) may result in a significant slow down in CRE activity," B. Riley analyst Steve Moss wrote. "CRE investors are likely to be sensitive to the relative rate of return for a Treasury bond versus a CRE project."
Source: S&P Global Market Intelligence
Request for agriculture policy changes

House Minority Leader Kevin McCarthy (Calif.) and House Agriculture Committee Republican Leader Glenn "GT" Thompson (Pa.) called on the Biden administration to reverse regulatory burdens on U.S. agriculture production. The letter outlines administrative actions to address farm input costs, reverse recent environmental policy decisions, and end certain climate rules.

Source: ICBA
Fannie Mae executes $19b CIRT transaction

Fannie Mae executed its sixth credit insurance risk transfer transaction of 2022, CIRT 2022-6, which became effective May 1, transferring $725 million of mortgage credit risk to private insurers and reinsurers.

The covered loan pool for CIRT 2022-6 comprises about 63,000 single-family mortgage loans with an outstanding unpaid principal balance of roughly $19.3 billion. The covered pool includes collateral with loan-to-value ratios of 60.01% to 80.00% acquired between August 2021 and September 2021.

The loans included in the transaction are fixed-rate, generally 30-year term, fully amortizing mortgages.

With CIRT 2022-6, the company will retain risk for the first 55 basis points of loss on the covered loan pool. If the $106.3 million retention layer is exhausted, 24 insurers and reinsurers will cover the next 375 bps of loss on the pool, up to a maximum coverage of $725 million.

Coverage for the deal is provided based upon actual losses for a term of 12.5 years. The aggregate coverage amount may be decreased after one year from this transaction and each month afterward depending on the paydown of the insured pool and the principal amount of insured loans that become seriously delinquent.

Fannie Mae may cancel the coverage on the transaction at any time on or after five years of the effective date through payment of a cancellation fee.
Source: Fannie Mae
Home loan demographics

The Federal Financial Institutions Examination Council said closed-end home purchase loans for first-lien, one- to four-family, site-built, owner-occupied properties made to Black or African American borrowers accounted for 7.9% of mortgage lending transactions in 2021, up from 7.3% in 2020, while those made to Hispanic-White borrowers increased slightly to 9.2% from 9.1%, and those made to Asian borrowers were up at 7.1% from 5.5%.

Source: FFIEC
Crypto sell-off resumes

Cryptocurrency markets experienced another round of sell-offs after the Celsius Network decentralized finance platform halted withdrawals and trading services.
The latest sell-off sent the crypto sector’s market capitalization below $1 trillion for the first time since early 2021 and led Binance—the world’s largest crypto marketplace—to freeze Bitcoin withdrawals.

Source: ICBA
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With the exception of official announcements, the Arkansas Community Bankers Association Board of Directors, Officers and staff disclaim any responsibility for opinions expressed and statements made in articles published in Arkansas Community Bankers NewsWatch 2022.

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