Update: NCUA, Senate Banking Comm., CFPB, FHFA, and Treasury

Regulatory books

The National Credit Union Administration (NCUA) has submitted a request letter to the chairman of the Senate Banking Committee. The letter outlines the agency’s actions to aid credit unions to date, as well as activity it deems necessary in legislative actions.

They cover items from capital and liquidity issues to charter enhancements. The California and Nevada Credit Union Leagues generally support these items, minus a few, such as expansive vendor authority.

NCUA Chairman Urges Exemption from CECL
In a letter sent today, NCUA Board Chairman Rodney Hood urged the Financial Accounting Standards Board to permanently exempt credit unions from complying with FASB’s current expected credit losses methodology (CECL).

Hood notes that the NCUA uses the incurred loss model when it supervises and examines the 5,236 credit unions under its purview for safety and soundness — nearly 70 percent of which are less than $100 million in assets. Attempting to recognize all expected credit losses is fraught with data collection challenges for the smallest credit unions that the agency supervises, he wrote.

NCUA to Identify Emerging Credit Risks
In its latest Letter to Credit Unions 20-CU-12, the NCUA says examiners will contact federally insured credit unions between May 4 and May 18 to review a list of questions regarding three areas: operational status, lobby service, and liquidity planning. The agency’s initial credit union outreach during the COVID-19 pandemic has focused on operational status and liquidity, but it is now expanding outreach to also identify any emerging credit risks. Credit unions can prepare by reviewing the list of questions included in the letter.

NCUA Won’t Criticize Prudent CU Relief Efforts
The NCUA issued a reminder today that agency examiners will not criticize a credit union’s efforts to provide prudent relief for borrowers when such efforts are conducted in a reasonable manner with proper controls and management oversight, including the following: new funds, temporary loan modifications, permanent loan modifications, and monitoring and reporting of loan modifications.

On April 7, the NCUA joined with other federal financial institutions regulators, in consultation with state financial regulators, to issue a revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus that discusses accounting and reporting considerations related to passage of the CARES Act. It describes a variety of strategies credit unions can use to work with borrowers who experience financial hardship because of the COVID-19 pandemic, as well as how credit unions should monitor and report loan modifications.

NCUA Reg Changes to PPP Requirements
In the NCUA Board’s Letter No. 20-CU-11, the agency discusses recent regulatory changes after its approval of an interim final rule regarding the calculation of RBNW and the regulatory capital treatment of PPP loans. It also provides clarification on PPP loans to credit union officials and non-members based on the most recent information from the SBA.

These regulatory changes will become effective upon publication of the interim final rule in the Federal Register. Read more here.

NCUA Mentoring Grants: Minority Depository Institutions
Small, low-income credit unions designated as Minority Depository Institutions (MDIs) by the NCUA may apply for mentoring grants from May 1 – June 30. Grants up to $25,000 are available to help small institutions establish mentoring programs with larger, low-income-designated credit unions that can provide expertise and guidance in serving low-income and underserved populations.

Application guidelines are available on the NCUA’s website. For more information, click here.

CFPB on Waiving Loan-Related Waiting Periods
The Consumer Financial Protection Bureau has issued an interpretive rule clarifying that consumers can exercise their rights to modify or waive certain required waiting periods under the TILA-RESPA Integrated Disclosure Rule and Regulation Z rescission rules. The bureau also issued an FAQ document that addresses when creditors must provide appraisals or other written valuations to mortgage applicants in order to expedite access to credit for consumers affected by the COVID-19 pandemic.

In the rule, the CFPB clarifies that: 1) If a consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency, 2) the consumer’s brief statement describing the emergency identifies a financial need that is due to the COVID-19 pandemic, and 3) the emergency necessitates consummating the credit transaction before the end of an applicable TRID Rule waiting period or must be met before the end of the Regulation Z Rescission Rules waiting period, then the consumer has a bona fide personal financial emergency that would permit the consumer to utilize the modification and waiver provisions, subject to the applicable procedures set forth in the TRID Rule and the Regulation Z Rescission Rules.

Regulation Z does not mandate that creditors inform consumers of their ability to use the modification and waiver provisions in the TRID Rule or the Regulation Z Rescission Rules if the consumer has a bona fide financial emergency. Some consumers may be unaware that these provisions may be available to them. Thus, the bureau encourages creditors to consider voluntarily informing consumers during the COVID-19 pandemic of their ability to utilize the modification and waiver provisions for bona fide personal financial emergencies if the consumer has a need to obtain funds due to the COVID-19 pandemic prior to the end of an applicable waiting period.

You can access the interpretive rule here. Access the guidance here. Access the ECOA/Reg B FAQ here.

FHFA: No Lump-Sum Repayment Required
On April 27, the Federal Housing Finance Agency (FHFA) issued guidance for loans sold on the secondary market. The guidance, issued to combat consumer misinformation and available here, states that borrowers in forbearance will not be required to pay back the missed payments in a lump sum. It also states that even though this guidance only covers Fannie Mae and Freddie Mac mortgages, all mortgage lenders are encouraged to adopt a similar approach.

Since many credit unions keep loans in portfolio and don't sell to government sponsored enterprises (GSEs), this additional guidance may be helpful in working with members. Credit unions are encouraged to take measures such as setting up repayment plans, making loan modifications that add the payment to the end of the mortgage, or making loan modifications that reduce the member's monthly payment.

Treasury IFR: Additional PPP Criterion for Seasonal Employers
The Treasury Department released a new PPP Interim Final Rule allowing seasonal employers an alternative in determining their payroll period for PPP loans. The current rule allows for a seasonal employer to determine its maximum loan amount for purposes of the PPP by reference to the employer’ average total monthly payments for payroll “the 12-week period beginning February 15, 2019, or at the election of the eligible [borrower], March 1, 2019, and ending June 30, 2019.”

Under the new rule, a seasonal employer may alternatively elect to determine its maximum loan amount as the average total monthly payments for payroll during any consecutive 12-week period between May 1, 2019 and Sept. 15, 2019.

‘Ask the Regulators’ Archived Webinar
You can access the archived “Ask the Regulators” webinar, hosted April 24 by federal financial institution regulatory agencies, including the NCUA. It addresses the accounting and regulatory reporting implications of the revised Interagency Statement issued on April 7, including clarification of the interaction between current accounting rules and section 4013 of the CARES Act, and supervisory considerations on past due and non-accrual regulatory reporting.

In the weeks leading up to this webinar, the Leagues received questions regarding the provisions under the CARES Act, Sec. 4013, that allows financial institutions the option to temporarily suspend certain requirements under U.S. generally accepted accounting principles (GAAP) related to troubled debt restructurings (TDR) for a limited period of time to account for the effects of COVID-19. You can view the explanation of TDR guidance here.

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