Dodd-Frank News Center

OFR updates financial stability risk assessment

This story appeared in Bank Digest.

The Office of Financial Research has issued an update to its assessment of threats to financial stability, concluding that overall risks remain moderate. OFR Director Richard Berner said, however, that this assessment "should not be cause for complacency" because the agency's "analysis suggests the need to remain vigilant about emerging threats." These threats include increased risk taking in a climate of persistently low interest rates, fragile and fragmented market liquidity in some securities markets, and continued migration of financial activity outside the banking system, according to the OFR's announcement

The agency formed its assessment using updates to the OFR Financial Stability Monitor and the monitor's underlying data. The monitor is a tool the OFR developed to display a high-level summary of five areas of risk. The latest version of the monitor can found on the agency's website at financialresearch.gov/. The OFR has also published a companion analysis paper discussing specific risks that merit attention.

CFPB offers proposal for TRID effective date delay

This story appeared in Bank Digest.

Conceding a failure to file a required notice with Congress, the Consumer Financial Protection Bureau is publishing a formal proposal to delay the effective date of the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosures (TRID) rule until Oct. 3, 2015. The proposal carries a July 7, 2015, comment deadline.

TRID was scheduled to take effect on Aug. 1, 2015. However, the CFPB neglected to file a notice required by the Congressional Review Act at least 60 days before that date. By the time the error was corrected, the earliest possible effective date would have been Aug. 15, 2015, the bureau says. However, the CFPB in fact is proposing a later Oct. 3, 2015, effective date. The proposal includes some minor amendments to the rules and staff comments to conform them to the new effective date.

FHFA issues regulatory interpretation on transfer of mortgage servicing rights

This story appeared in Bank Digest.

The Federal Housing Finance Agency has issued a regulatory interpretation regarding the transfer of mortgage servicing rights under the Acquired Member Asset regulation. The issue addressed by the regulatory interpretation was whether the Acquired Member Asset regulation allows a Federal Home Loan Bank to authorize the transfer of mortgage servicing rights for loans purchased under an AMA program to a non-member of the FHLBSystem, including to an entity that is not eligible for membership.

The FHFA concluded that the AMA regulation does allow such an authorization, so long as the transfer is accomplished in such a way as not to cause the associated mortgage loan to cease to comply with any of the specific requirements in the AMA regulation.

FDIC requests renewal of information collection on stress testing

This story appeared in Bank Digest.

The Federal Deposit Insurance Corporation is submitting to the Office of Management and Budget a request to renew an information collection entitled, "Supervisory Guidance on Stress Testing for Banking Organizations with More than $10 Billion in Total Consolidated Assets."

The agency had requested comments regarding the proposed renewal on April 14, 2015, but it received no comments. The FDIC is now giving notice that it is submitting its request to renew the collection to the OMB, and it again is soliciting comments on the renewal. Comments must be received by July 27, 2015.

Mortgage servicing violations lead CFPB's recent supervisory concerns

This story appeared in Bank Digest.

Examiners continue to find mortgage loan servicers engaging in dual tracking and mishandling loss mitigation applications more than a year after regulations took effect, according to the Consumer Financial Protection Bureau’s latest "Supervisory Highlights." The report on the bureau's supervisory activities in the first four months of the year also describes violations at debt collection companies and credit reporting agencies. Two areas of concern noted by the report--consumer reporting agency handling of consumer disputes and fair lending violations by mortgage originators--are similar to violations described in the previous "Supervisory Highlights," published in March 2015.

OFR releases working paper on dynamical macroprudential stress testing

This story appeared in Bank Digest.

The Office of Financial Research released a working paper on June 18, 2015, entitled, "Dynamical Macroprudential Stress Testing Using Network Theory." This paper presents a dynamic bipartite network model to stress test a banking system's sensitivity to external shocks in individual asset classes. As a case study, the authors apply the model to investigate the Venezuelan banking system from 1998 to 2013. The model quantifies the sensitivity of bank portfolios to different shock scenarios and identifies systemic vulnerabilities that stem from connectivity and network effects, and their time evolution. As such, the model provides a framework for dynamical macroprudential stress testing.

Agencies issue final rule on loans in areas with flood hazards

This story appeared in Bank Digest.

The Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Federal Reserve Board, Farm Credit Administration, and National Credit Union Administration have issued a final rule to amend their regulations regarding loans in areas having special flood hazards to implement provisions of the Homeowner Flood Insurance Affordability Act of 2014.

The rule requires the escrow of flood insurance payments on residential improved real estate securing a loan and incorporates an exemption in the HFIAA for certain detached structures from the mandatory flood insurance purchase requirement.

In addition, the Staff Memorandum notes, the final rule implements the provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 related to the force placement of flood insurance and integrates the OCC's flood insurance regulations for national banks and federal savings associations. Some provisions of the rule are effective Oct. 1, 2015, and others are effective Jan. 1, 2016.

Agencies adopt clarifications to Basel III rules

This story appeared in Bank Digest.

In its June 16, 2015, meeting, the board of directors of the Federal Deposit Insurance Corporation approved a final rule that clarifies and amends certain elements of the advanced approaches risk-based capital requirements found in the capital rules adopted by the FDIC, Office of the Comptroller of the Currency, and Federal Reserve Board in 2013. The final rule, which was also approved by the OCC and Fed, becomes effective Oct. 1, 2015, and is based on a December 2014 proposed rulemaking issued by the agencies.

As with their proposed rule, the agencies' final rule addressed issues with residential mortgage exposures; adjustments to common equity tier 1; qualification requirements for the internal ratings-based approach; disclosure of a banking organization's supplementary leverage ratio; and client-cleared transactions. In addition, the Staff Memorandum notes, the final rule provides a clarification that the FDIC's prompt correction action (PCA) rules, codified at 12 CFR 324.403(b) are identical to PCA rules of the OCC and Fed.

Fed issues statement on Court of Federal Claims decision

This story appeared in Bank Digest.

The Federal Reserve Board has issued a statement regarding the decision of a judge for the Court of Federal Claims in the case of Starr International Co., Inc. v. U.S. The judge in that case held that neither the Fed nor the Federal Reserve Bank of New York had the legal authority to demand nearly 80 percent of American International Group's ownership as a condition of providing emergency funding at the height of the financial crisis. However, the judge held that while the government unjustifiably treated AIG much more harshly than it treated other financial institutions, no damages were owed to the company's shareholders because AIG's only alternative was bankruptcy. While the New York Fed's takeover reduced shareholders' equity to only 20 percent of what they once had, 20 percent of something is better than 100 percent of nothing, the judge said.

In response to this decision, the Fed said that it "strongly believes that its actions in the AIG rescue during the height of the financial crisis in 2008 were legal, proper and effective." The agency said that the court's decision recognizes that AIG's shareholders are not entitled to compensation and that the Fed's extension of credit to AIG prevented losses to millions of policyholders and others. The Fed also said that the terms of the credit were "appropriately tough" to protect taxpayers from risks.

 

Reed and Schumer introduce Military Consumer Protection Act

This story appeared in Bank Digest.

Senators Jack Reed (D-RI), Chuck Schumer (D-NY), and several others are introducing the Military Consumer Protection Act. The bill would give the Consumer Financial Protection Bureau enforcement power over several sections of the Servicemembers Civil Relief Act, including those relating to future financial transactions, protection against default judgments, interest rates, evictions, mortgages, and leases.