July 2023 - Legislative and Regulatory Update

This month, two credit union trade groups announce their intention to merge, the Consumer Financial Protection Bureau shines the spotlight on the high cost of
rental housing and the banking industry readies for expected capital reform for
large banks. 

Details about these and other developments below. 

HOUSING POLICY

CHLA Asks FHFA to Slow Down its Credit Score Revamp

The Community Home Lenders of America (CHLA) sent a letter to Sandra Thompson, director of the Federal Housing Finance Agency (FHFA), urging a
slower implementation of changes to the credit score reporting process. The letter, also sent to the CEOs of Fannie Mae and Freddie Mac, expresses appreciation to the FHFA for “its efforts to improve the credit score reporting process and to offer more mortgage access with lower costs in mortgage transactions.” CHLA supports
a slower implementation timeline to allow for access to more data and a more
robust engagement process that will be critical in providing feedback about
proposed changes.

CFPB’s Chopra: Corporate Landlords Are Driving Up Housing Costs

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra shared prepared remarks for “The White House Blueprint for a Renters Bill of Rights,” an effort by the Biden administration to address high housing costs for renters. Mr. Chopra raised concerns about corporate investors and their rising influence over rental housing during his remarks. “Today’s renters increasingly must deal with large corporate property managers working for private equity funds, rather than local landlords living in the community. Corporate investor ownership has surged, climbing to more than 45 percent of rental units,” he said. He also raised concerns about corporate use of artificial intelligence in the rental process, which he said could lead to rental hikes and denial of housing.

BANKING AND ECONOMIC POLICY

Crackdown on NSF Fees Raises Banker Concerns

Bankers are pushing back against efforts by regulators to punish banks for assessing multiple nonsufficient funds (NSF) or overdraft fees when a consumer doesn't have enough money in their bank account. Regulators are seeking civil penalties against banks for charging multiple fees when a customer overdraws their account. If a merchant submits the transaction to a bank for a second time, the consumer could potentially incur multiple NSF fees. The Biden administration has called these fees “junk fees” and has sought to eliminate them, and a number of banks have publicly announced the elimination of NSF fees. The Minnesota Bankers Association has sued the FDIC for issuing supervisory guidance on NSF fees instead of following a formal rulemaking process.

Industry Poised to Push Back Against Capital Reform

The Federal Reserve (the Fed), the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller (OCC) appear to be in alignment on new risk-based capital rules for banks with at least $100 billion of assets but trade groups have been vocal in expressing concerns, according to American Banker. "While we will comment extensively on the proposal and recommend changes to avoid economic harm, we remain disappointed that the agencies are moving forward without data, analysis, or findings from the Federal Reserve's holistic review on capital to justify such changes," said Kevin Fromer, head of the Financial Services Forum, a trade group representing the eight-largest financial institutions in the country. Any changes are still a way off. The public will have 120 days to weigh in on the proposed rule, then they are subject to regulatory revision before regulators vote.

Fed Seeks Buyers for $18.5B in Signature Bank Loans

The FDIC is seeking to sell an $18.5 billion performing loan portfolio from the failed Signature Bank, a New York bank that failed in March. The portfolio consists of 201 performing capital-call loans tied to a number of well-known firms, including Blackstone and Starwood Capital Group.

NAFCU and CUNA Trade Groups to Merge

The National Association of Federally Insured Credit Unions and the Credit Union National Association say they will merge as long as their members vote in favor of it. The combined entity would be led by Jim Nussle, who is currently president and chief executive of CUNA. "By bringing together these two powerful credit union associations we are doubling down on our commitment to ensure the growth and prosperity of all credit unions across the nation and the 137 million Americans they serve," Mr. Nussle said. A merged entity would serve credit unions more efficiently and effectively, without redundancies, the two groups announced. A vote would occur this fall with the merger taking place no earlier than January 2024, the
groups said.

WHAT OTHERS ARE SAYING ABOUT THE FHLBANKS

“I knew it didn’t have to be paid back immediately and that allowed us to get our feet in the door. I can’t say enough good things about RCLF (Renaissance Community Loan Fund) and how they connected us with FHLB Dallas and the SBB (Small Business Boost loan).”
— Angela Perrin, owner at Kudzu Cotton Boutique in Natchez, Mississippi

“The DRA (Disaster Rebuilding Assistance) from FHLB Dallas is an important tool to help our communities recover and rebuild. The funds have helped in the economic rehabilitation of communities along the Mississippi Gulf Coast after Hurricane Ida wreaked havoc.”
— Lauren Wilson, community development analyst at The First Bank

“We are grateful for the support from FHLB Dallas and the HELP program which is transforming our community into one of homeowners.”
— Hannah Ricks, CRA analyst at Centennial Bank