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IBA E-News 3-8-19



Statehouse Summary

The Indiana General Assembly reached its halfway point early last week. The House finished all first-half legislative work on Monday, while the Senate finished its first-half work by Tuesday evening. Of the 1,349 bills that were filed by both the House and Senate, just over 200 Senate bills and 200 House bills survive, having received affirmative third-reading votes. These bills now move to the opposite chamber for review, debate and possible alteration. House and Senate committees have over five weeks to hear bills that have been sent to their respective committees from the chamber of origin.

Click here to reference the entire IBA bill track list as updated, with dead bills removed from last weeks’ legislative activity.




Fannie, Freddie Update Pooling Requirements for Single Security

Freddie Mac and Fannie Mae have published letters to lenders detailing changes in certain requirements for loans included in the new Uniform Mortgage-Backed Security, which both enterprises will begin issuing in June.
Fannie and Freddie announced adjustments to interest rate spreads and fees in response to the Federal Housing Finance Agency’s recently issued final rule on its single-security initiative.

The rule directs the government-sponsored enterprises to align cash flows and prepayment activities for investors who purchase the uniform security.

Read Fannie Letter.

Read Freddie Letter.

Read more from FHFA.

CFPB Seeks Public Comment on PACE Loans

The Consumer Financial Protection Bureau on Monday requested public feedback on Property Assessed Clean Energy (PACE) loans, a controversial type of financing that allows homeowners to pay for energy-efficient retrofitting – such as solar panels and high-efficiency air conditioners – through their property tax assessments, and which often take lien priority over the first mortgage lien.

S. 2155, the regulatory reform law enacted last year, requires the CFPB to apply the Truth in Lending Act’s ability-to-repay requirements and civil liability provisions to PACE loans.

The bureau specifically requested examples of PACE loan documentation, current origination standards and practices, to which parties to a PACE loan TILA’s civil liability provisions should apply, unique features of PACE loans and potential implications of regulating PACE loans under TILA. Comments are due 60 days after the advance notice of proposed rulemaking is published in the Federal Register. 

Read the ANPR.

FFIEC Issue Policy Statement on Examination Reports

As part of its ongoing exam modernization initiative, the Federal Financial Institutions Examination Council on Wednesday issued a policy statement aimed at promoting clarity and consistency of examination reports. The policy statement – intended to reduce regulatory burden for community banks – includes principles that “set forth minimum expectations of what should be included in all reports of examination.”

Among other provisions, the principles establish that all ROEs should present conclusions and issues in order of importance; document the condition and risk profile of the institution; discuss the adequacy of the institution’s risk management practices; and document issues of supervisory concern or warranting prompt corrective action.

Concurrently, the agencies are rescinding their 1993 Interagency Policy Statement on the Uniform Core Report of Examination. 

Read the policy statement.

Fed Floats Rule Change Targeting ‘Narrow Bank’ Concept

The Federal Reserve on Wednesday sought public comment on whether it should reduce the rate of interest paid on excess reserves for banks with a so-called “narrow” model that involves holding a large proportion of its assets on reserve at the Fed. Specifically, the Fed floated an approach of paying zero interest on the excess balances of these institutions.

The advance notice of proposed rulemaking appeared to take aim at the narrow bank model, which involves taking deposits from institutional investors and holding virtually all of them at the Federal Reserve Banks – and passing on the interest on excess reserves (IOER) rate to depositors, less a small spread to cover operational expenses. The New York Fed has not approved the membership application of a narrow banking firm called TNB; that matter is currently in litigation.

“The Board is concerned that [pass-through investment entities], by maintaining all or substantially all of their assets in the form of balances at Reserve Banks and having the ability to attract very large quantities of deposits at a near-IOER rate, have the potential to complicate the implementation of monetary policy,” the Fed indicated. In addition, the Board is concerned that PTIEs could disrupt financial intermediation in ways that are hard to anticipate, and could also have a negative effect on financial stability.” Comments on the ANPR are due 60 days after it is published in the Federal Register. 

Read the ANPR.