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Central Banker | Summer 2013

Rules and Regulations

Stress Tests, Mortgage Markets among Latest Dodd-Frank Act Proposed and Final Rules

Agencies Request Comments on the Following Proposed Rules

NCUA proposes a Minority Depository Institution Preservation Program

The National Credit Union Administration (NCUA) is requesting comment on a proposed program designed to encourage the preservation of Minority Depository Institutions (MDIs). The NCUA envisions a program of proactive steps and outreach efforts to promote and preserve minority ownership in the credit union industry and its role in minority communities. Comments are due by Sept. 30, 2013.

OCC, FRS and FDIC jointly propose guidance for certain company-run stress tests

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRS) and the Federal Deposit Insurance Corp. (FDIC) are requesting comment on jointly proposed supervisory guidance for company-run stress test requirements for banking organizations with total consolidated assets of more than $10 billion but less than $50 billion. The stress test requirements were published in October 2012. This proposed supervisory guidance serves to assist the banking companies in meeting stress test rule requirements. Comments are due to the OCC and the FDIC by Sept. 25, 2013, and to the FRS by Sept. 30, 2013.

OCC, FRS and FDIC jointly propose new leverage ratio standards for BHCs and subsidiary insured banks

The OCC, FRS and FDIC are requesting comment on a jointly proposed rule to amend leverage ratio standards for certain U.S. banking organizations. The proposed rule would apply to any U.S. top-tier bank holding company (BHC) with at least $700 billion in total combined assets or $10 trillion in assets under custody (covered BHC) and any subsidiary insured depository institution (IDI) of the BHCs or covered BHCs. Comments are due by Oct. 21, 2013.

CFPB, SEC/CFTC Release Final Rules Related to Mortgage Markets, Identity Theft Prevention Programs

CFPB adopts rules related to mortgage servicing, higher-priced mortgages and qualified mortgages

The Consumer Financial Protection Bureau (CFPB) previously issued several final rules concerning mortgage markets, including the Ability-to-Repay rule under the Truth in Lending Act (TILA), the Mortgage Servicing Rule under the Real Estate Settlement Procedures Act (RESPA), the Mortgage Servicing Rule under TILA and an amended Escrow Rule under TILA.

This rule implements several amendments and clarifications, including:

  • amending the pre-emption commentary in RESPA;
  • clarifying the adjustable-rate mortgage provisions of TILA;
  • providing clarifications regarding repayment and prepayment requirements for higher-priced mortgage loans (HPMLs) under TILA;
  • clarifying the exemption for small servicers under TILA;
  • revising and adopting an interpretation regarding the ability-to-pay compliance under TILA;
  • clarifying loan meeting eligibility requirements under TILA; and
  • amending appendix Q of TILA.

The rule is effective on Jan. 10, 2014, except for the amendment to Section 1026.35(e)—regarding repayment and prepayment requirements for HPMLs—which was effective as of July 24, 2013.

CFPB rules for supervision of nonbank covered persons

This CFPB final rule establishes the procedures by which a nonbank covered person may be subject to CFPB supervision pursuant to reasonable cause that a person is or has engaged in conduct that poses risks to consumers with regard to the consumer financial products or services offered. The procedures outline notice requirements, available rebuttal options for the noncovered person, CFPB determination procedures and available relief. The rule was effective as of Aug. 2, 2013.

CFPB exempts certain creditors from ability-to-pay determinations, definition of qualified mortgages

Regulation Z generally prohibits a creditor from making a mortgage loan unless the creditor determines that the consumer will have the ability to repay the loan. This CFPB final rule provides an exemption to these requirements for creditors with certain designations, loans pursuant to certain programs, certain nonprofit creditors and mortgage loans made in connection with certain federal emergency economic stabilization programs. The final rule also provides additional definitions for qualified mortgages and modifies the fee calculation requirements. The rule is effective on Jan. 10, 2014.

CFPB delays effective date for prohibition on creditors and insurance premiums

On Feb. 15, 2013, the CFPB issued a final rule adopting loan originator compensation requirements under Regulation Z. The rule included an effective date of June 1, 2013, for Section 1026.36(i), which dealt with financing single-premium credit insurance. On May 10, 2013, the CFPB published a rule proposing to delay the June 1, 2013, effective date. This rule delays the effective date to Jan. 10, 2014.

CFPB amends escrow rules, definitions for rural and underserved counties; posts list of rural and underserved counties

This CFPB final rule clarifies the method for making “rural” and “underserved” designations and retains certain existing protections for higher priced mortgage loans (HPMLs). This rule amends the final rule published in the Federal Register on Jan. 22, 2013. Additionally, the CFPB is posting a final list of rural and underserved counties on its public web site for use with mortgages consummated from June 1, 2013, to Dec. 31, 2013. This rule was effective as of June 1, 2013, except for the addition of Section 1026.35(e)—regarding repayment and prepayment requirements for HPMLs—which will be effective from June 1, 2013, through Jan. 9, 2014.

SEC, CFTC set final rules regarding identity theft prevention programs and procedures

These joint final rules and guidelines from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) require certain financial institutions and creditors to establish written identity theft prevention programs designed to detect, prevent and mitigate identity theft. The joint rules also require credit and debit card issuers to implement identity verification procedures where a change of address notification and a subsequent request for an additional or replacement card are received within a short period of time. These rules and guidelines were effective as of May 20, 2013, with a compliance date of Nov. 20, 2013.

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