The various regulatory agencies have released statements concerning the Economic Growth, Regulatory Relief, and Consumer Protection Act Amendments which provide regulatory relief for a significant number of institutions. These affect both compliance matters, specifically, the Home Mortgage Disclosure Act (HMDA) as well as safety and soundness issues.
FDIC Statement Concerning the Home Mortgage Disclosure Act
On May 24, 2018, the President signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), a section of which amends the Home Mortgage Disclosure Act (HMDA).
The Act provides partial exemptions for some insured depository institutions and insured credit unions from certain HMDA requirements. The partial exemptions are generally available to insured depository institutions and insured credit unions:
• For closed-end mortgage loans if the institution originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years.
• For open-end lines of credit if the institution originated fewer than 500 open-end lines of credit in each of the two preceding calendar years. For closed-end mortgage loans or open-end lines of credit subject to the partial exemptions, the Act states that the “requirements of [HMDA section 304(b)(5) and (6)]” shall not apply. Accordingly, for these transactions, those institutions are exempt from the collection, recording, and reporting requirements for some, but not all, of the data points specified in current Regulation C.
The Bureau of Consumer Financial Protection (Bureau) expects later this summer to provide further guidance on the applicability of the Act to HMDA data collected in 2018. The partial exemptions are not available to insured depository institutions that do not meet certain Community Reinvestment Act performance evaluation rating standards. Guidance will include information on how this provision will be implemented.
For institutions filing HMDA data collected in 2018, the Act will not affect the format of the LARs:
• LARs will be formatted according to the previously-released 2018 Filing Instructions Guide for HMDA Data Collected in 2018 (2018 FIG).
• If an institution does not report information for a certain data field due to the Act’s partial exemptions, the institution will enter an exemption code for the field specified in a revised 2018 FIG that the Bureau expects to release later this summer.
• All LARs will be submitted to the same HMDA Platform. A beta version of the HMDA Platform for submission of data collected in 2018 will be available later this year for filers to test.
Recall the FDIC issued a statement regarding the evaluation of financial institutions’ compliance with the Home Mortgage Disclosure Act (HMDA), implemented by Regulation C. Specifically, for HMDA data collected in 2018 and reported in 2019, the FDIC does not intend to require data resubmission unless data errors are material. In addition, the FDIC does not intend to assess penalties with respect to errors in data collected in 2018 and reported in 2019. Through this supervisory approach, FDIC examination staff will give credit to institutions’ good faith compliance efforts, and the approach will help institutions identify compliance weaknesses.
Joint Statement Concerning Safety & Soundness Related Issues
The enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) affect company-run stress testing, resolution plans, the Volcker rule, high volatility commercial real estate exposures, examination cycles, municipal obligations as high-quality liquid assets, and other provisions.
The amendments made by EGRRCPA provide for additional tailoring of various provisions of the banking laws while maintaining the authority of the agencies to ensure the safety and soundness of the institutions they supervise and to apply the enhanced prudential standards in the Dodd-Frank Act that address financial stability. Using authorities established by the Dodd-Frank Act and other laws, the agencies jointly strengthened capital, liquidity, risk management, and other standards for banking organizations in response to the 2008 financial crisis.
The below summarizes interim positions the regulatory agencies will take before incorporating the changes into their regulations.
Company-Run Stress Testing
Eighteen months after EGRRCPA’s enactment, financial companies with total consolidated assets of less than $250 billion that are not bank holding companies (BHCs) will no longer be subject to the company-run stress testing requirements in section 165(i)(2) of the Dodd-Frank Act.
Resolution Plans
Consistent with EGRRCPA, the Board and FDIC will not enforce the final rules establishing resolution planning requirements in a manner inconsistent with the amendments made by EGRRCPA to section 165 of the Dodd-Frank Act.
Volcker Rule
EGRRCPA amends section 13 of the BHC Act by narrowing the definition of banking entity and revising the statutory provisions related to the naming of covered funds, effective on EGRRCPA’s date of enactment. The agencies will not enforce the final rule implementing section 13 of the BHC Act in a manner inconsistent with the amendments made by EGRRCPA to section 13 of the BHC Act.
High Volatility Commercial Real Estate (HVCRE) Exposures
EGRRCPA provides that, effective upon enactment, the agencies may only require a depository institution to assign a heightened risk weight to an HVCRE exposure if such exposure is an “HVCRE ADC Loan,” as defined in section 214 of EGRRCPA. Accordingly, a depository institution is permitted to risk-weight at 150 percent only those commercial real estate exposures it believes meet the statutory definition of HVCRE ADC Loan.
Examination Cycle
EGRRCPA increases the total asset threshold for well-capitalized insured depository institutions to be eligible for an 18-month examination cycle from $1 billion to $3 billion, making an 18-month examination cycle available to a larger number of “1-rated” institutions, and authorizes the agencies to make corresponding changes for “2-rated” institutions. The agencies intend to engage in rulemaking to implement these provisions.
Municipal Obligations as High-Quality Liquid Assets (HQLA)
EGRRCPA provides that the agencies shall treat certain municipal obligations as HQLA for purposes of their final rules establishing a liquidity coverage ratio and in other regulations incorporating the term HQLA (collectively, liquidity regulations). EGRRCPA also provides that the agencies shall amend their liquidity regulations to implement these changes no later than 90 days after the enactment of EGRRCPA. The agencies intend to engage in rulemaking to address these provisions.
Appraisals for Qualifying Rural Transactions
EGRRCPA provides an exemption to the appraisal requirements for certain transactions with values of less than $400,000 involving real property or an interest in real property that is located in a rural area, as specified in section 103 of EGRRCPA. This exemption was effective upon EGRRCPA’s enactment. The agencies are reviewing the statutory provisions to determine whether further action is necessary.
Other Provisions
A number of other changes made by EGRRCPA require agency implementation either through a rulemaking or other action; for example, the reduced reporting requirement for certain small depository institutions. The agencies intend to engage in rulemaking to address these provisions at a later date.
Ongoing Supervisory Expectations
The agencies are taking the actions outlined in this statement consistent with the purpose and direction of EGRRCPA. In this context, and consistent with the banking laws as amended by EGRRCPA, the agencies will continue to supervise and regulate financial institutions within their jurisdictions to ensure the safety and soundness of individual institutions and the stability of the broader banking system.