► CFPB Adjusts Exemption Thresholds for Escrows
The CFPB has adjusted asset size exemption thresholds for banks under Regulation Z. The asset size for
banks exempt from the requirement to establish an escrow account for higher-priced mortgages under Reg. Z
will rise from $2.05 billion to $2.07 billion. Read more.
► Bureau Publishes Annual CMP Inflation Adjustments
The CFPB on January 12 published a final rule adjusting for inflation the maximum amount of each civil
penalty within the Bureau's jurisdiction, as required by federal law. The rule took effect on January 15,
2017. Read the final rule.
ABA: FLOOD PROPOSAL COULD CREATE CONFUSION FOR LENDERS
ABA on January 6 commented on a proposal by the federal regulatory agencies to implement the 2012 Biggert-Waters flood insurance reform law’s efforts to stimulate a robust marketplace for private flood insurance that
would offer a competitive alternative to the National Flood Insurance Program. The proposal revisits a proposed
rule issued three years ago by the agencies.
As proposed, the rule offers two paths to help lenders accept flood insurance:
A compliance aid to assist with the acceptance of policies that meet the explicit statutory definition of
“private flood insurance;” and
Standards lenders can follow when using their discretion in instances where policies fall outside the
ABA supports both the compliance aid and the path for a lender to exercise discretion, but noted that, while well-intentioned, the proposal could create further confusion for lenders and delays for borrowers. For example, in
both cases, lenders would be required to conduct a detailed analysis of a private flood insurance policy and
compare it to a standard flood insurance policy issued under the NFIP, which could actually impede the
acceptance of private flood insurance.
The rule also proposes standards for accepting flood insurance policies from mutual aid societies – guarantees
from religious or cultural institutions to rebuild property in the case of flood or other hazard, often employed in
cases where religious principles forbid traditional insurance. While ABA supports this provision, it emphasized
that the rule must clearly articulate when a mutual aid policy will be deemed acceptable, given that these
commitments rarely, if ever, resemble a standard flood insurance policy. Read the letter. See ABA's
Regulatory Chart for more information.
OCC FOCUSING ON SALES OVERSIGHT, MORTGAGE RISKS
In the wake of the scandal over fake accounts created at Wells Fargo, the Office of the Comptroller of the
Currency has added a strong emphasis on governance of sales practices to its risk supervision for large banks,
according to the agency’s Semiannual Risk Perspective released on January 5. “Control breakdowns over the
governance of retail product sales practices can erode trust in the banking system,” the agency said. “Effective
systems to detect and address fraud and possible unfair or deceptive practices in a timely manner, including
effective complaint management systems, are critical.”
At midsize and community banks, OCC will continue to focus on strategic risk, credit risk, compliance risk and
cyber resiliency – themes broadly unchanged from six months ago. In addition to sales practices, for larger
institutions the agency will focus on compliance risk management – particularly change management dealing with
the TILA-RESPA integrated disclosures, flood insurance, the Home Mortgage Disclosure Act and new Military
Lending Act rules – as well as operational risk and third-party risk.
Credit risk is rising, the agency found, as an ongoing trend in easing underwriting is compounded by “increased
risk layering,” such as more policy exceptions, higher loan-to-value ratios and weaker covenants. OCC noted
particular concern about commercial real estate concentration risk at community banks.