Top Story Lending Related

The CFPB has posted a Bureau Blog article announcing the Bureau's release of its Fair Lending Annual Report to Congress describing the Bureau's actions against unlawful discrimination and for advancing access to fair credit in calendar year 2023.

The OCC has reported on the performance of first-lien mortgages in the federal banking system during the first quarter of 2024.

The OCC Mortgage Metrics Report, First Quarter 2024 showed that 97.4 percent of mortgages included in the report were current and performing at the end of the quarter, an increase from 97.2 percent in fourth quarter 2023, and a decrease from 97.6 percent a year ago.

The percentage of seriously delinquent mortgages—mortgages that are 60 or more days past due and all mortgages held by bankrupt borrowers whose payments are 30 or more days past due—decreased from the previous quarter and has trended down since the first quarter of 2022.

Servicers initiated 7,408 new foreclosures in the first quarter of 2024, a decrease from the previous quarter and from a year earlier.

The Federal Reserve Board yesterday announced that the results of its annual bank stress test showed that while large banks would endure greater losses than last year's test, they are well positioned to weather a severe recession and stay above minimum capital requirements. Additionally, the Board published aggregate results from its first exploratory analysis, which will not affect bank capital requirements.

The Board's stress test is one tool to help ensure that large banks can support the economy during downturns. The test evaluates the resilience of large banks by estimating their capital levels, losses, revenue and expenses under a single hypothetical recession and financial market shock, using banks' data as of the end of last year. The individual results from the stress test inform a bank's capital requirements to help ensure a bank could survive a severe recession and financial market shock.

The Board also conducted an exploratory analysis, including two funding stresses to all banks tested and two trading book stresses to only the largest and most complex banks. The exploratory analysis is distinct from the stress test, exploring additional hypothetical risks to the broader banking system.

The two funding stresses include a rapid repricing of deposits, combined with a more severe and less severe recession. Under each element, large banks would remain above minimum capital requirements in aggregate, with capital ratio declines of 2.7 percentage points and 1.1 percentage points, respectively. Under the two trading book stresses, which included the failure of five large hedge funds under different market conditions, the largest and most complex banks are projected to lose between $70 billion and $85 billion. The results demonstrated that these banks have material exposure to hedge funds but that they can withstand different types of trading book shocks.

The FHFA has reported the U.S. house prices rose in April, up 0.2 percent from March, according to its seasonally adjusted monthly House Price Index (HPI). House prices rose 6.3 percent from April 2023 to April 2024. The previously reported 0.1 percent price increase in March was revised downward to 0.0 percent.

For the nine census divisions, seasonally adjusted monthly price changes from March 2024 to April 2024 ranged from -0.2 percent in the West South Central and Middle Atlantic divisions to +1.4 percent in the East South Central division. The 12-month changes were all positive, ranging from +3.0 percent in the West South Central division to +8.5 percent in the New England and Middle Atlantic divisions.

“U.S. house prices continued to rise in April,” said Dr. Anju Vajja, Deputy Director for FHFA’s Division of Research and Statistics. “However, the appreciation rate slowed in April amid a slight rise in both mortgage rates and housing inventory. The housing market in general began to show some signs of normalization.”

The CFPB on Tuesday announced its issuance of an interim final rule with a request for public comment to amend Regulation B to extend the compliance dates set forth in its 2023 small business lending rule and to make other date-related conforming adjustments.

The interim final rule will be effective 30 days after publication of the rule in the Federal Register. Comments will be accepted within the same 30-day period.

The rule extends compliance dates by 290 days, which is the time that has elapsed between the Texas court’s first issuance of a stay last year and the Supreme Court’s decision in CFPB v. CFSA last month. Lenders with the highest volume of small business loans must begin collecting data by July 18, 2025; moderate volume lenders by January 16, 2026; and the smallest volume lenders by October 18, 2026. The deadline for reporting small business lending data to the CFPB remains June 1 following the calendar year for which data are collected. Under the interim final rule, lenders may continue using their small business originations from 2022 and 2023 to determine their initial compliance date, or instead use their originations from 2023 and 2024.

Lenders may choose to start collecting data earlier. The rule permits lenders to collect demographic data up to one year before their compliance date to test their procedures and systems. The CFPB has also updated its grace period to reflect the revised dates. The CFPB does not intend to assess penalties for reporting errors for the first 12 months of collection, and it intends to conduct examinations only to assist lenders in diagnosing compliance weaknesses, so long as lenders engage in good faith compliance efforts.

BankersOnline has updated section 1002.114 of its Regulation B pages to reflect the changes in the interim final rule.

PUBLICATION AND EFFECTIVE DATE: Published at 89 FR 55024 in the Federal Register for 7/3/2024, with an effective date of 8/2/2024 (comments on the interim final rules will be accepted through 8/2/2024).

Yesterday, the CFPB published a Bureau Blog article announcing the Bureau's approval of a new rule to address the current and future applications of complex algorithms and artificial intelligence used to estimate the value of a home. The new rule was approved last week by the OCC (and reportedly by the FDIC). The rule is to be jointly issued by the OCC, Federal Reserve Board, FDIC, NCUA, CFPB, and FHFA once approved by each of those agencies.

The OCC has requested comment on a proposal to revise its recovery planning guidelines for certain large insured national banks, federal savings associations, and federal branches (banks).

The proposed rulemaking is part of the OCC’s effort to ensure that large banks are adequately prepared and have developed a plan to respond to the financial effects of severe stress, particularly in light of the contagion effects and systemic risks they may pose.

The proposal would:

• Expand recovery planning guidelines to apply to banks with at least $100 billion in assets
• Incorporate a testing standard for recovery plans
• Clarify the role of non-financial risk (including operational and strategic risk) in recovery planning

Comments from the public will be accepted for 30 days following publication of the proposed in the Federal Register.
Publication and comment period update: Published 7/3/2024 at 89 FR 55114. The comment period will close 8/2/2024.

The FDIC has issued FIL-36-2024 with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Florida — Leon County — affected by severe storms, straight-line winds, and tornadoes on May 10, 2024.

The Federal Housing Finance Agency has announced its conditional approval for Freddie Mac to engage in a limited pilot to purchase certain single-family closed-end second mortgages. This conditional approval follows FHFA’s first publication of a proposed new product by either Freddie Mac or Fannie Mae (the Enterprises) for public comment under the new process mandated by the Prior Approval for Enterprise Products regulation, which became effective in April 2023.

The conditional approval of a pilot for Freddie Mac purchases of second mortgages includes several limitations on the product, including:

• A maximum volume of $2.5 billion in purchases;
• A maximum duration of 18 months;
• A maximum loan amount of $78,277, corresponding to certain subordinate-lien loan thresholds in the Consumer Financial Protection Bureau’s definition of Qualified Mortgage;
• A minimum seasoning period of 24 months for the first mortgage; and
• Eligibility only for principal/primary residences.

Upon the pilot’s conclusion, FHFA will analyze the data on Freddie Mac’s purchases of second mortgages to determine whether the objectives of the pilot were met. FHFA has determined that any increase to the volume or extension of the duration of the pilot, or a conversion of the pilot to a programmatic activity, would be treated as a new product that is subject to public notice and comment and FHFA approval. Any subsequent approval would be informed by the preliminary results of the pilot.

The FDIC has issued FIL-35-2024 with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Oklahoma — Blaine, Caddo, Custer, Delaware, Jackson, Mayes, Muskogee, and Rogers Counties — affected by severe storms, straight-line winds, tornadoes, and flooding from May 19, 2024, to May 28, 2024.