Regulatory Compliance Weekly Roundup: Oct. 6, 2023
This week the Supreme Court heard oral arguments in the case of Consumer Financial Protection Bureau v. Community Financial Services Assn. The core question in the case is whether or not the CFPB's funding mechanism is unconstitutional. The financial services industry has been closely watching this case and the impact it could have on the Bureau's structure and authority.
We posted about the arguments here and included several articles at the bottom of the post with analysis of the arguments. If podcasts are your preferred medium, check out the most recent edition of NAFCU's Credit Union Policy Podcast, which features Jennifer Mascott, Assistant Professor of Law and Co-Director of The C. Boyden Gray Center for the Study of the Administrative State at the George Mason University Antonin Scalia Law School, to discuss the oral arguments.
A ruling in the case is expected in April of 2024.
The Bureau also published the 2024 HMDA Filing Instructions Guide and the Supplemental Guide for Quarterly Filers for 2024. These resources will help financial institutions who are required to collect and report HMDA data resource to help financial institutions file HMDA data collected in 2024 and reported in 2025.
You can read more about the guides and HMDA filing thresholds in CUNA's CompBlog here.
Late last week, FinCEN published 25 new questions and answers to their FAQ on the Beneficial Ownership Information (BOI) reporting rule, which is set to be put into place on January 1, 2024. They also published an Introduction to Beneficial Ownership Reporting Brochure. These new materials come on the heels of the Small Entity Compliance Guide published earlier in September.
While this additional guidance provides more information for businesses on how to submit required information to the database, credit unions continue to wait for the agency to finalize the BOI Access Rule, which will describe how credit unions may obtain this information from the database in fulfilling their CDD obligations. FinCEN has stated that they are working intensively to finalize this rule.
NCUA Chairman Todd Harper and Board Member Rodney Hood both spoke this week at the American Credit Union Mortgage Association's 2023 Annual Conference. Speeches like these can give us a taste of priorities on their radar that could possibly result in future rulemakings or supervisory priorities.
Chairman Harper touched on the complexities of the housing market and the economy, noting that while mortgage delinquency remains relatively low and home equity has remained strong, sharp declines in inventory and rising interest rates are having dramatic impacts on home affordability and household financial stress. He noted that this household stress is translating into rising delinquency rates for car loans and credit cards. Additionally, he cautioned that the reintroduction of student loan payments and the rising costs of insurance will only make things worse.
He also spoke about bias in mortgage lending. He discussed an FDIC working paper that found that minority borrowers face higher mortgage denial rates and pay higher interest rates, even after controlling for credit risk and other factors. He noted that the NCUA's Office of the Chief Economist applied the analysis to credit union data and got similar results. He also spoke about appraisal bias and the NCUA's efforts with other agencies to establish quality control standards for AVMs. He highlighted the agency's allocation of additional resources for fair lending supervision and urged credit unions to review their practices to ensure equitable access to credit.
Finally, Chairman Harper stressed the importance of the NCUA's consumer financial protection program, adding that "safety and soundness and compliance with consumer financial protection laws do not compete with one another. It’s not a zero-sum game. The two — safety and soundness and consumer financial protection — go together hand in glove." NCUA has sometimes had a reputation for this dichotomy in the past - examiners or staff are either in the safety and soundness camp or the consumer protection camp.
Board Member Hood's remarks also highlighted potential dark clouds on the horizon, citing a housing outlook from Fannie Mae suggesting the housing market is poised for its sharpest slowdown since 2011. He noted the increasing difficulty of homebuying and some of the factors at play.
Turning to what to do about it, Board Member Hood stated: "There’s no question we need action on the public policy front. There may not be much we can do about the interest rate environment beyond ensuring that financial institutions are carefully attuned to interest rate risks. But we should certainly be urging policymakers — in both the legislative and executive branches and at the federal, state, and local levels — to focus on creative ways to encourage more investment in affordable housing. Such solutions could include regulatory reforms, adjustments to onerous zoning restrictions that restrict new construction, and investments to boost the supply of homes."
For credit unions looking to expand their mortgage lending, he urged them to look at how they can make use of financial technology to make the mortgage lending process "faster, simpler, and more efficient," and referenced the agency's commitment to not holding back credit unions from exploring fintech opportunities. Addressing competition, he highlighted that many credit unions are well-positioned to nurture home ownership in underserved areas.
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