Compliance Update – January 2020

Question
For the Regulation CC the availability threshold adjustments, effective July 1, 2020, does the bank need to send a change in terms?

Answer
The final rule which addresses the threshold adjustments effective July 1, 2020 states: the bank does need to send the change in terms (aka fund availability policy). However, the bank may have arrangements for electronic delivery or provide the change in terms in the monthly statement. The final rule also states: In addition, a bank need not set forth the entirety of its revised funds-availability policy in its change-in-terms notice.  If a bank chooses to provide the notice by sending a completely new availability disclosure, the bank must direct the customer to the changed terms in the disclosure by use of a letter or insert, or by highlighting the changed terms in the disclosure.

Reference
Regulation CC: 12 CFR 229 final rule. Federal Register, July 3, 2019, page 31694.

Question
During a private flood insurance review, it was noted that a few policies do not meet FEMA’s requirements for acceptance. If the loan is covered by flood insurance and the borrower is fine with the policy, is there an issue?

Answer
In the Interagency Q&A for Loans in Areas Having Special Flood Hazards. Question 64 addresses the circumstances under which a bank may rely on a private insurance policy that does not meet the criteria established by FEMA in Mandatory Purchase of Flood Insurance Guidelines. If your bank determines that the policy does not meet those circumstances, also consider:

• The amount of risk involved with allowing the policy to stand;
• Is the risk in alignment with your established policies and procedures, strategic plan and risk management;
• Is the risk acceptable to the bank;
• What would be required to ensure that the loan is adequately covered e.g., another policy

Note: Ensure that your lending policies, underwriting, and personnel understand the requirements of the regulation and FEMA, and that training reinforces the requirements.

Reference
Interagency Q&A on Loans in Areas Having Special Flood Hazards, Questions 63 and 64, July 2009.

The OCC and FDIC proposed rule to modernize Community Reinvestment Act (CRA) regulations was published in the Federal Register. This kicked off the proposal’s 60-day comment period.

Comments will be due to the agencies by March 9.

Review of the proposal, includes provisions on defining;

1. Small-business loans
2. Promoting lending to family farms
3. Codifying pre-approved CRA activities
4. Allow community banks with $500 million or less in assets to opt into the revised framework

Federal Reserve Gov. Lael Brainard the week of January 6, 2020 laid out the Fed’s efforts to develop new CRA metrics and tests, noting that an interagency proposal with the OCC and FDIC would be the best approach for reform.