March 2023 - Legislative and Regulatory Update

This month, the Federal Housing Administration extended its COVID-19
loss mitigation program; the Consumer Financial Protection Bureau unveiled new
data-sharing rules; and the Federal Reserve increased interest rates by 25
basis points.  

Details about these and other developments below. 

HOUSING POLICY

FHA Extends COVID-19 Loss Mitigation Options

The Federal Housing Administration (FHA) recently announced it will extend and expand its COVID-19 loss mitigation program, known as the COVID-19 Recovery Loss Mitigation Program. Under the program, homeowners with an FHA-backed loan who experience a COVID-related financial hardship can reduce or defer their mortgage payments.

The FHA has extended the program through February 2025 and expanded it to include financial hardships not related to COVID-19. FHA borrowers can apply for the program through October 2024.

The FHA guarantees mortgages made to certain lower-income and first-time homebuyers.

Biden Administration to Lower Mortgage Insurance Premiums for Some Homebuyers

In related news, the FHA announced it will reduce its annual mortgage insurance premium, a fee that the FHA charges to many of its homebuyers. The cut equals 30 basis points, or a 0.3 percent reduction in its annual premium. The effect will be a reduction in the fee from 0.85 percent to 0.55 percent.

Vice President Kamala Harris and Housing and Urban Development (HUD) Secretary Marcia Fudge recently announced the fee reduction in Bowie, Maryland.

BANKING AND ECONOMIC POLICY

Congressman McHenry to Prioritize Digital Assets

House Financial Services Committee Chairman Patrick McHenry (R-NC) will prioritize legislation this year addressing digital asset and cryptocurrency rules. Mr. McHenry expressed reservations against granting regulators sole responsibility to develop policies on digital assets, saying that Congress should not “cede these important issues to regulators…or to the judicial branch.”

CFPB Proposes Reductions in Credit Card Late Fees

The Consumer Financial Protection Bureau (CFPB) recently released a proposal that would force credit card companies to reduce the monthly late fees they charge. As proposed, the CFPB would alter the credit card “late fee safe harbor” in three ways: reduce the cap on monthly late fees from $30 to $8; end the annual inflation adjustment feature; and cap late fees at 25 percent of the minimum payment.

Credit card companies could charge late fees above $8 “so long as they could prove the higher fee is necessary to cover their incurred collection costs,” according to
the CFPB.

The Independent Community Bankers of America responded by saying, “Credit card late fees — which are clearly disclosed and represent a small portion of the cost of credit cards to customers — deter late payments and help offset the significant
costs to issuers.”

CFPB Unveils Data-Sharing Rules

The CFPB recently unveiled proposed rules related to data-sharing. The proposal would require all businesses to make a consumer’s financial information available to them or to a third party at the consumer’s direction.

Federal Reserve Issues Final Guidelines for Access to
Payment Systems

The Federal Reserve (Fed) recently announced guidelines for evaluating requests for master accounts with the Fed or access to the Fed’s financial services. The finalized guidelines are similar to those first proposed by the Fed in 2021, which came amid growing requests from fintech firms and entities with novel bank charters to gain access to the payments system.

The guidelines include a framework to provide clarity on the level of scrutiny that Fed Banks will apply to different types of institutions with varying degrees
of risk.

Borzekowski Nominated to Lead Office of Financial Research

President Biden recently nominated Ron Borzekowski as director of the Office of Financial Research (OFR). Mr. Borzekowski is currently executive director of Yale University’s Data-Intensive Social Science Center. He previously led the OFR at the CFPB and was a senior economist at the Federal Reserve.

Treasury Rejects Raising Credit Union Interest Rate Cap

The Treasury Department recently told the National Credit Union Administration (NCUA) that it does not see a compelling reason to raise the 18 percent interest rate ceiling for loans made by federal credit unions. Treasury told NCUA that the Federal Credit Union Act established the 18 percent rate ceiling based on the expectation that federal credit unions would use their nonprofit structure to offer affordable credit.

Fed Raises Interest Rates by 25 BPS

The Federal Open Market Committee (FOMC) recently raised the federal funds target rate by 25 basis points to a range of 4.75 percent to 5 percent. The increase followed a 25-basis-point hike in February. In its statement announcing the rate increase, the FOMC said inflation “has eased somewhat but remains elevated.”

Most Business Owners See Recession as Likely But
Remain Optimistic

Two-thirds of small- to medium-sized business owners said a recession was likely in 2023, but most also believe their businesses will be in better shape by this time next year, according to a new survey by New Jersey-based Provident Bank.

Sixty-seven percent of respondents said a recession was likely this year. Inflation, supply chain-related delays, rising wages, trouble attracting and retaining talent, and the economic fallout of the pandemic were cited as the most widely anticipated challenges for businesses in 2023.

WHAT OTHERS ARE SAYING ABOUT THE FHLBANKS

“Today, credit unions continue to derive significant benefits from being a part of the FHLBank system.”
— Credit Union National Association

“My family and I are so appreciative for this assistance from FNBT and FHLB Dallas. It has truly been a Godsend.”
— U.S. military veteran Angel Flores

“We are grateful for the partnership with FHLB Dallas to continue offering
affordable housing.”
— John Wise, vice president of fair and responsible banking at Trustmark 

“Our long-time relationship with FHLB Dallas enables us to benefit communities through the Affordable Housing Program.”
— Patty Parina, vice president and relationship manager at Wells Fargo