April 27, 2023
New FHFA Rule Significantly Affects Consumers
A new rule from the Biden administration affecting mortgage loans has significant impacts for consumers.
The rule from the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac loans, changes the calculations used to structure mortgage fees. Specifically, the changes address a borrower’s credit score and down payment sizes. Individuals with a higher credit score will see increased mortgage fees while those with lower credit scores will see decreased fees. The agency’s intention is to make buying homes more affordable for people who are “limited by wealth or income” and to ensure “a level playing field” for sellers.
“Many are rightfully questioning why borrowers who have worked diligently to build high credit scores should be penalized, and the simple answer is they shouldn’t be,” said MBA President Jackson Hataway. “Affordable housing is a critical issue in our country and state that we can and must solve. Unfortunately, this poorly thought through rule fails to do so. It will only hurt the well-being of lower credit borrowers in the long-term by chilling the mortgage market further.”
MBA encourages its members to contact their federal lawmakers to express their opposition to this rule and how it is detrimental to their customers.
House Financial Committee Advances Luetkemeyer’s CFPB Reform Bills
The House Financial Services Committee passed two of Congressman Blaine Luetkemeyer’s bills to reform the Consumer Financial Protection Bureau on Wednesday evening.
“These bills would bring notable changes to the director’s power and put the bureau in line with other financial regulators. Further, they will eliminate the ability to use the bureau as a tool to carry out political vendettas and prevent massive policy swings with each administration,” Luetkemeyer said.
“We thank Congressman Luetkemeyer for his leadership in sponsoring these much-needed bills to reform the CFPB,” said MBA President Jackson Hataway. “As this legislation advances, we will continue to share with our congressional delegation what can happen when an agency is under the sole direction of one individual.
In a memo to the committee, the American Bankers Association said the CFPB in the last few years has repeatedly ignored the legal boundaries set by Congress and noted “there must be more accountability.”
Lawmakers Reintroduce SAFE Banking Act
A bipartisan group of lawmakers reintroduced the SAFE Banking Act, which addresses the conflict between state law and federal law over cannabis banking. The measure was introduced by Sens. Jeff Merkley, D-Ore., and Steve Daines, R-Mont., and Reps. Dave Joyce, R-Ohio, and Earl Blumenauer, D-Ore.
In a recent Missouri Independent article about cannabis and banking, MBA President Jackson Hataway said the “divide between the federal and the state perspective … puts banks in a kind of tricky position.”
Although the SAFE Banking Act has been passed by the House in several previous sessions, it has failed to pass Congress.
“So we remain in the current quagmire we’re stuck in,” Hataway told the Missouri Independent, “where you have a lot of states like Missouri that have upward pressure from businesses to have a secure and safe banking environment.”
MBA encourages its members to reach to their federal lawmakers to express their support for the SAFE Banking Act.
Bankers: Support Congressional Action to Disapprove 1071 Final Rule
MBA encourages bankers to contact their federal lawmakers and urge them to support a Congressional Review Act resolution that expresses disapproval of the Consumer Financial Protection Bureau’s final rule implementing Section 1071 of the Dodd-Frank Act. This rule requires financial institutions to collect and report credit application data for small businesses, including women-owned and minority-owned small businesses.
Under the rule, banks and other lenders that make at least 100 small-business loans in each of the two preceding calendar years will be required to collect 21 data points on credit applications from businesses that make $5 million or less in gross annual revenue. MBA has joined the banking industry in expressing concerns about the burden this rule could have on smaller institutions and credit for small businesses.
On Wednesday, the Texas Bankers Association filed a lawsuit to block implementation of the final rule.
“We fully support TBA’s lead to stop the CFPB from placing unnecessary and unreasonable burdens on banks that creates additional hurdles for businesses,” said MBA President Jackson Hataway.
ABA, State Groups: U.S. Banking Sector Remains Resilient
In a letter to congressional leaders, MBA joined the American Bankers Association and its fellow state bankers associations in expressing how the U.S. banking system remains the deepest and most resilient in the world. The groups also shared that the diversity of banks serving communities across the country continues to be a source of strength for the nation’s economy.
“The nation’s 4,700 banks, including community banks, midsize banks, regional banks, and large, globally active banks, compete every day for Americans’ business,” the associations said. “While banks may have different business models and strengths, institutions succeed when they meet the needs of the communities they serve.”
The associations urged policymakers and regulators to retain America’s competitive advantage by ensuring that banks of all sizes with diverse business models are allowed to compete and succeed in serving the needs of their communities. This can be done by tailoring regulatory rules and supervision to a bank’s risk profile, they said.
“Americans know that there is no safer place for their hard-earned cash than in a bank, especially one they have come to trust over time,” the associations said. “To reinforce that trust and confidence, we respectfully ask that you foster a business environment that allows all segments of the banking sector to compete and thrive.”
ABA, Associations: Regulatory Overreach Could Reduce Credit Access
Credit cards are a safe, accessible and affordable form of consumer credit, but that could be at risk if CFPB and Congress impose imprudent regulations, according to a letter sent to Consumer Financial Protection Bureau by the American Bankers Association and two banking and credit union associations. If federal caps on late fees, interchange fees or other bank fees go into effect, the consequences of reduced credit access will be significant, the groups said.
“Recent proposed regulations targeting late fees would have significant adverse impacts on the costs and availability of credit cards and would create new barriers to entry for smaller financial institutions,” the associations said.
As
previously shared, MBA President Jackson Hataway said the proposal harms consumers because it reduces competition among providers and limits consumers’ access to credit. Hataway said a reduction in the late fee safe harbor would force many community banks to eliminate their credit card offerings to customers.
FDIC: ‘Authorize Positive, Settle Negative’ Overdraft Fees Present Risks of Unfairness
The Federal Deposit Insurance Corporation issued guidance to ensure that supervised institutions are aware of the consumer compliance risks associated with charging an overdraft fee on a transaction that was authorized against a positive balance but settled against a negative balance, a practice commonly referred to as “Authorize Positive, Settle Negative.” FDIC previously identified concerns with this practice in its June 2019 Consumer Compliance Supervisory Highlights. This guidance expands on the 2019 Supervisory Highlights article by discussing the FDIC’s concerns with both the available and ledger balance methods used by institutions when assessing overdraft fees. This guidance also clarifies that disclosures describing transaction processing may not mitigate these concerns.
The Office of the Comptroller of the Currency also issued a bulletin to banks addressing the risks associated with overdraft protection programs.
Deadline Nears for Banking Leadership Missouri Applications
The deadline to submit applications for MBA’s 2023-24 Banking Leadership Missouri program is Friday, May 5. The 12-month program is designed specifically for bankers with broader responsibilities, those in a management role or bankers who have potential for senior management. Bankers seeking to enhance their leadership abilities and knowledge of the banking industry are encouraged to apply.
“Banking Leadership Missouri focuses on developing a solid understanding of the banking industry and the skills necessary for leadership that participants can put into practice immediately,” said Cheri Messerli, MBA senior vice president. “Many graduates of Banking Leadership Missouri now lead their banks in various capacities, including CEO, president, vice president, director and manager.”
The program begins in June 2023 and concludes June 2024. A maximum of 25 Missouri bankers will be selected to participate in the ninth class of Banking Leadership Missouri.