May 2022 — Legislative and Regulatory Update

This month, a banker from Boston touted the strength of the Federal Home Loan Bank system; foreclosures rose in the first quarter; and the Federal Reserve announced a 50-basis-point rate hike.

Details about these and other developments are below.

HOUSING POLICY

American Bankers Association’s Vice Chairwoman: Don’t Mess with FHLB System’s Success

In a recent American Banker op-ed, the American Bankers Association’s Vice Chairwoman, Julieann Thurlow, told policymakers “don’t mess with (the) success” of the Federal Home Loan Banks (FHLBs).

Ms. Thurlow — whose bank, Reading Cooperative Bank in Reading, Massachusetts, is a member of the Federal Home Loan Bank of
Boston — said that the 11 regional home loan banks play a critical role in supporting the economy.

“For the last nine decades, they have been an invaluable and often
behind-the-scenes partner for banks and other regulated financial institutions invested in making communities better,” Ms. Thurlow wrote.

Freddie Mac Reports $3.8B in First Quarter Income

Freddie Mac reported net income of $3.8 billion for the first quarter of 2022, an increase of 37 percent year-over-year, even as purchase and refinance activity continued to decline.

The company’s net worth climbed to $31.7 billion, up nearly $13 billion from the same time last year. Its single-family mortgage portfolio now stands at $1.9 trillion, a year-over-year increase of 17 percent, due to house price appreciation and strong home purchase activity.

“Freddie Mac delivered a strong first quarter performance, with net income exceeding both the first and fourth quarters of 2021,” said Freddie Mac CEO
Michael DeVito.

Foreclosures Rise as Pandemic Relief Expires

Foreclosures ticked up in the first quarter as pandemic-related consumer protections expired and lenders increasingly took steps to repossess homes. Roughly 24,000 people had new foreclosures listed on their credit reports in the quarter, up from about 9,000 in the fourth quarter, according to a Federal Reserve Bank of New York report. Foreclosures are still about a third of what they were before the pandemic.

Existing Home Sales Fall for Third Straight Month

Existing home sales declined 2.4 percent in April — the third straight month of declines — to a seasonally adjusted annual rate of 5.61 million, the National Association of Realtors recently reported. The median existing home price was $391,200, up 14.8 percent from last year.

BANKING AND ECONOMIC POLICY

Fed Announces 50-Basis-Point Rate Hike

The Federal Reserve (Fed) recently announced it will increase the target range for the federal funds rate to 0.75 to 1 percent, and it signaled that “ongoing increases in the target range will be appropriate.”

“Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the committee that additional 50-basis-point increases should be on the table at the next couple of meetings,” Fed Chairman Jerome Powell said in a press conference following the announcement.

The Federal Open Market Committee also said it will begin drawing down its portfolio of Treasury securities and mortgage-backed securities.

CFPB Releases Enforcement Memo Related to FDIC Insurance

Amid concerns about the recent collapse of a popular stablecoin, the Consumer Financial Protection Bureau (CFPB) released an enforcement memo instructing businesses to not misrepresent claims about Federal Deposit Insurance Corp. (FDIC) insurance. “People know and trust the FDIC name and logo, and firms must not prey on that trust by making deceptive representations about deposit insurance,” CFPB Director Rohit Chopra said in a statement.

GOP Lawmakers Skeptical of Merits of Central Bank Digital Currency

A group of Republican lawmakers led by House Financial Services Committee Ranking Member Patrick McHenry, R-NC, recently urged the Fed to carefully examine whether the benefits of creating a central bank digital currency would outweigh the risks of doing so.

IRS Updates Contribution Limits for Health Savings Accounts

The Internal Revenue Service recently released inflation-adjusted contribution limits for health savings accounts for 2023. For calendar year 2023, the annual limitation on deductions is $3,850 for individuals and $7,750 for families with high deductible health plans.

SEC Reopens Comment Period for Executive Compensation Disclosure Requirements

The Securities and Exchange Commission recently reopened a comment period on a proposed rule requiring new disclosures concerning companies’ executive compensation. The proposed rule — which was originally proposed in 2015 but never finalized — would require a reporting company’s proxy statement and other disclosures to include a table showing actual compensation paid to key executives, among other information.

U.S. Adds 428,000 Jobs in April

The U.S. economy added 428,000 nonfarm jobs in April according to a recent Labor Department report. Gains were strongest in leisure and hospitality, manufacturing and transportation, and warehousing.

The unemployment rate held steady at 3.6 percent in April, and the labor force participation rate was little changed at 62.2 percent, down slightly from the
previous month.

Consumer Sentiment Rebounds in April

The University of Michigan Consumer Sentiment Index increased 10.6 percent in April to 65.7 in preliminary results for the month. However, the April figure remained down 25.6 percent from a year ago. The current conditions component of the index increased by 1.3 percent to 68.1, while the consumer expectations index rebounded 18 percent to 64.1.

GDP Fell 1.4 Percent in First Quarter

Real gross domestic product decreased at a seasonally adjusted annual rate of 1.4 percent in the first quarter of 2022, according to the Commerce Department’s advance estimate. This stands in contrast to a 6.9 percent increase in the fourth quarter of 2021.

The first quarter estimate reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending.

“Operation FINALLY HOME is fortunate to work with partners and sponsors such as FHLB Dallas who help us honor heroes with homes.”
— Rusty Carroll, executive director of Operation FINALLY HOME

“We’re grateful for our partnership with FHLB Dallas, without which this grant would not be possible.”
— Donna Richardson, senior vice president and CRA officer at Frost Bank

“Grants from FHLB Dallas and their member institutions have enabled us to increase our impact (in the communities we serve).”
— Sarah Baughman, director of development for Adult and Teen Challenge of Texas

“Grant programs like the (Affordable Housing Program) make it possible to meet needs that otherwise might not have been met and use our resources to positively impact the lives of so many individuals.”
— Jannease Seastrunk, vice president of Community Relations and CRA officer at Red River Bank

“FHLBank advances remained readily available to members during the financial crisis at very attractive rates.”
— Moody’s Analytics