January 2023 - Legislative and Regulatory Update

This month, congressional Democrats raised concerns about the rising cost of rent; Fannie Mae and Freddie Mac increased their conforming loan limits; and the Consumer Financial Protection Bureau is considering new rules for credit
rating agencies.

Details about these and other developments below. 

HOUSING POLICY

Democrats Raise Concerns about Rental Costs

A small coalition of House and Senate Democrats recently sent a letter to the White House expressing concerns about rental costs, noting: “It is clear that additional timely executive action is needed to address the urgent issue of historically high rental costs and housing instability.”

The letter calls on President Biden to direct government agencies “to
establish renter protections for individuals residing in properties financed with government-backed mortgages, including anti-price gouging protections, just-cause eviction standards, habitability standards, and protections against source-of-income discrimination.” The legislators also called on the Federal Trade Commission to issue new regulations “defining excessive rent increases as a practice that unfairly
affects commerce.”

Fannie Mae, Freddie Mac to Change Fee Structure

Fannie Mae and Freddie Mac (Fannie and Freddie) will soon eliminate the guarantee fees they charge to many lower-income borrowers while simultaneously increasing guarantee fees on many loans made to more traditional homebuyers. Guarantee fees will be eliminated for first-time homebuyers at or below 100 percent of area median income (AMI) in most of the U.S. and below 120 percent of AMI in
high-cost areas.

Fannie Mae, Freddie Mac Increase Conforming Loan Limits

Fannie and Freddie have increased their maximum conforming loan limits for purchased mortgages. The conforming loan limit represents the highest cost mortgage they are willing to purchase from mortgage originators. The limit for
one-unit properties in most parts of the country will rise to $726,200, an increase of $79,000 from $647,200 in 2022. The maximum loan limit will be $1,089,300 in parts of the country determined to have high property costs.

BANKING AND ECONOMIC POLICY

Jerome Powell: Federal Reserve Not a ‘Climate Policymaker’

Barring congressional action, it would be inappropriate for the Federal Reserve (Fed) to use monetary policy or supervisory tools to achieve climate-based goals, Fed Chairman Jerome Powell recently said. Speaking at a central bank symposium in Sweden, Mr. Powell said the Fed’s independence in setting monetary policy “has served the American public well.”

However, that independence means the agency should “stick to our knitting” and not pursue perceived social benefits that are not tightly linked to the Federal Reserve’s congressional mandate.

“Decisions about policies to directly address climate change should be made by the elected branches of government,” Mr. Powell said.

Banking Agencies Issue New Crypto Guidance

Federal banking regulators recently issued a statement highlighting key crypto risks for banking organizations and describing the agencies’ approaches to supervision in this area. The joint statement cited risks associated with fraud, legal uncertainties, misleading representations and market volatility.

The agencies cited the importance of identifying crypto risks “that cannot be mitigated or controlled” and ensuring they do not migrate to the banking system. They added that “the agencies believe that issuing or holding (cryptoassets) is highly likely to be inconsistent with safe-and-sound banking practices.”

CFPB Considering New Rules for Credit Bureaus

The Consumer Financial Protection Bureau (CFPB) recently said it will explore new rules for nationwide consumer reporting companies TransUnion, Equifax and Experian. In a statement focused on consumer complaints about the credit bureaus, CFPB Director Rohit Chopra said the agency will explore “new rules to ensure that they are following the law, rather than cutting corners to fuel their profit model.”

OCC’s Hsu Comments on Bank Risks

Comptroller of the Currency Michael Hsu recently stated that big banks may need to be broken into smaller pieces if they become too big to manage and are unable to fix significant regulatory lapses. A bank’s failure to resolve longstanding deficiencies despite reprimands from regulators or a need for restrictions on growth are evidence that a firm is likely unmanageable and needs to be broken up, according to Mr. Hsu.

Gruenberg, FDIC Board Members Sworn In

Martin Gruenberg was recently sworn in as the 22nd chairman of the FDIC. He most recently served as acting chairman. Travis Hill, who will serve as vice chairman, and Jonathan McKernan, who will serve as director, were also sworn in as members of the agency’s board of directors.

Poll: Most Banks Not Seeking to Acquire Other Institutions in 2023

Most banks that had considered an acquisition in the past 12 months say they are unlikely to do so in the near future, according to a recent survey by Bank Director Magazine and consulting firm Crowe. The firms drew their conclusion after polling nearly 250 independent directors and senior executives at U.S. banks about their merger and acquisition plans.

Consumer Sentiment Index Increases

The University of Michigan Consumer Sentiment Index increased 5.1 percent in December compared to the month prior, landing at 59.7. The December figure was down 15.4 percent from the same time in 2021. The current conditions component of the index rose 1 percent from the month prior, landing at 59.4, while the consumer expectations index increased 7.7 percent to 59.9.

CFPB: Consumer Financial Health Declined in 2022

The average financial well-being of U.S. consumers improved in December 2022 compared to the month prior, but more families reported having difficulty paying all their bills in 2022 than the year before, according to the CFPB’s annual Making Ends Meet survey.

IMF Lowers Its Global Outlook

The International Monetary Fund (IMF) lowered its outlook for global economic growth for 2023. It did so as persistently high inflation, the war in Ukraine and prolonged pandemic lockdowns in China cut into household purchasing power. The IMF now sees world economic growth slowing to 2.9 percent in 2023, compared with 3.2 percent in 2022 and 6.1 percent in 2021.

WHAT OTHERS ARE SAYING ABOUT THE FHLBANKS

“Why is it that nobody knows who the Federal Home Loan Banks are? The answer to that question is, frankly, they've never messed up. They have never been the cause of a financial crisis. Instead, they have been the stability behind each financial crisis since 1932. And the other thing about the Federal Home Loan Banks, I think is important is that they haven’t had a loss since 1932. On an advance, they’ve never lost a dime on a loan they made. There’s not another financial institution in the country that can say that.”
— Thomas Vartanian, executive director at Financial Technology & Cybersecurity Center

“The liquidity provided by the FHLBank system, together with several programs related to affordable housing and community development, have been instrumental in furthering credit unions’ role in fostering increased residential mortgage originations to all sectors of society.”
— Credit Union National Association

“We are proud to be able to provide funding alongside FHLB Dallas toward a project that will improve the lives of families.”
— Tyler Smith, senior vice president and community relations senior manager at Wells Fargo

“We sincerely appreciate Red River Bank and FHLB Dallas for their support in helping to further our mission.”
— Damon Humphrey Sr., president and executive director at Image Changers