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Examiner

The Examiner

Note: The Examiner will be taking a break next week in observance of Independence Day. The next Examiner will be issued on Friday, July 9.

“Give a man a fish and you feed him for a day. Don't teach a man to fish and you feed yourself. He's a grown man, fishing's not that hard.”
― Nick Offerman, comedian, born this day in 1970

CSBS President and CEO John Ryan Statement: OCC's Bulletin on Preemption

CSBS President and CEO John W. Ryan statement on the Office of the Comptroller of the Currency’s (OCC) recent bulletin asserting the National Bank Act would preempt certain types of state and local COVID-19 relief measures:

“State officials should continue to develop the COVID-19 relief measures they feel are appropriate based on the needs and circumstances of their citizens, despite the OCC’s recent anticipatory and categorical assertions of federal preemption.

It is the constitutional role of state officials to protect the health, safety and welfare of their citizens. Throughout the pandemic and resulting economic crisis, state regulators have focused on their mandate to ensure safety and soundness, protect consumers and promote economic growth. They are raising public awareness of relief programs and warning against scams. States are making sure their citizens have broad easy access to banking and credit services. They are ensuring their local financial institutions operate in a safe and sound manner and have appropriate liquidity to serve their communities.

Just a decade ago, Congress amended the National Bank Act to establish substantive and procedural requirements for the OCC to determine whether state law should be preempted. If the OCC feels strongly enough that a particular law has crossed the threshold set out by Congress, then it should follow the process established by Congress. 

In the meantime, state regulators will continue to focus on their citizens’ needs during the pandemic. They will also continue to work with the federal agencies to coordinate supervisory approaches and communication to the public."

To learn more, read this blog by CSBS Director of Regulatory Policy & Policy Counsel Mike Townsley on why OCC preemption bulletins do not impact state COVID-19 relief measures.

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Winners of the 2020 Community Bank Case Study Competition Announced


The student team representing Mississippi State University were announced last week as the winner of the 2020 Community Bank Case Study Competition. Each student will receive a $1,000 scholarship for their efforts, and be invited to present at the CSBS-Federal Reserve-FDIC sponsored Community Banking in the 21st Century Research and Policy Conference and published in the CSBS Journal of Community Bank Case Studies.

The CSBS Community Bank Case Study Competition, now in its sixth year, provides undergraduate students in all fields of study an opportunity to gain valuable first-hand knowledge of the banking industry. The 2020 edition of the event features 37 student teams representing 33 colleges and universities.

The 2020 competition examined the impact of Bank Secrecy Act and Anti-Money Laundering (BSA-AML) requirements on community banks. The top three scoring student teams from the final round of judging were announced live via the video below June 18 on the CSBS website: www.csbs.org.

The CSBS Community Bank Case Study Competition, now in its sixth year, provides undergraduate students in all fields of study an opportunity to gain valuable first-hand knowledge of the banking industry. The 2020 edition of the event features 37 student teams representing 33 colleges and universities.

The 2020 competition examined the impact of Bank Secrecy Act and Anti-Money Laundering (BSA- AML) requirements on community banks. The top three scoring student teams from the final round of judging were announced live via the video below June 18 on the CSBS website: www.csbs.org.

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FFIEC Announces Availability of 2019 Data on Mortgage Lending

The FFIEC this week announced the availability of data on 2019 mortgage lending transactions at 5,508 U.S. financial institutions covered by the Home Mortgage Disclosure Act (HMDA).  Covered institutions include banks, savings associations, credit unions, and mortgage companies.  

The HMDA data are the most comprehensive publicly available information on mortgage market activity.  They are used by industry, consumer groups, regulators, and others to assess potential fair lending risks and for other purposes.  

The FFIEC released several data products to serve a variety of data users.  The HMDA Dynamic National Loan-Level Dataset is updated, on a weekly basis, to reflect late submissions and resubmissions.  Aggregate and Disclosure Reports provide summary information on individual financial institutions and geographies.  The HMDA Data Browser allows users to create custom tables and download datasets that can be further analyzed.  In addition, beginning in late March 2020, the FFIEC made available Loan/Application Registers for each HMDA filer of 2019 data, modified to protect borrower privacy.

Understanding the Data

The data include a total of 48 data points providing information about the applicants, the property securing the loan or proposed to secure the loan in the case of non-originated applications, the transaction, and identifiers.  A complete list of HMDA data points and the associated data fields is found in Appendix A of the FFIEC’s Filing Instructions Guide for HMDA Data Collected in 2019.  Certain smaller-volume financial institutions are not required to report all of these data, pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). 

The 2019 HMDA data use the census tract delineations, population, and housing characteristic data from the 2011–2015 American Community Survey (ACS).  In addition, the data reflect metropolitan statistical area (MSA) definitions released by the Office of Management and Budget in 2018 that became effective for HMDA purposes in 2019.  

HMDA data comparisons across multiple years are limited by changes in HMDA definitions, values, and thresholds.  Also, comparisons for certain geographic areas are limited due to the changes in MSA and census tract boundaries and updates to the population and housing characteristics of census tracts, especially those that follow the decennial census and five-year updates based on the ACS data.

Among other uses, the data help the public assess how financial institutions are serving the housing needs of their local communities and facilitate federal financial regulators’ fair lending, consumer compliance, and Community Reinvestment Act examinations.  For example, when these regulators evaluate an institution’s fair lending risk, they analyze HMDA data in conjunction with other information and risk factors, in accordance with the Interagency Fair Lending Examination Procedures.  

HMDA data alone cannot be used to determine whether a lender is complying with fair lending laws.  The data do not include some legitimate credit risk considerations for loan approval and loan pricing decisions. Therefore, when regulators conduct fair lending examinations, they analyze additional information before reaching a determination about an institution’s compliance with fair lending laws.

Observations from the 2019 Data 

For 2019, the number of reporting institutions declined by about 3 percent from the previous year to 5,508.  The 2019 data include information on 15.1 million home loan applications.  Among them, 12.5 million were closed-end, 2.1 million were open-end, and, for another 442,000 records, pursuant to the EGRRCPA’s partial exemptions, financial institutions did not indicate whether the records were closed-end or open-end.  The number of closed-end loan applications increased by 21 percent, and the number of open-end line of credit applications decreased by 9 percent.  A total of 9.3 million applications resulted in loan originations.  Among them, 7.9 million were closed-end mortgage originations, 1.1 million were open-end line of credit originations, and, pursuant to the EGRRCPA’s partial exemptions, 335,000 were originations for which financial institutions did not indicate whether they were closed-end or open-end.  The 2019 data include 2.3 million purchased loans, for a total of 17.5 million records.  The data also include information on approximately 151,000 preapproval requests that were denied or approved but not accepted.

The total number of originated closed-end loans increased by about 2 million between 2018 and 2019, or 26 percent.  Refinance originations for 1-4 family properties increased by 78 percent from 1.9 million, and home purchase lending increased by 4 percent from 4.3 million.  

A total of 2,494 reporters made use of the EGRRCPA’s partial exemptions for at least one of the 26 data points eligible for the exemptions.  In all, they account for about 641,000 records and 330,000 originations.

From 2018 to 2019, the share of home purchase loans for first lien, 1-4 family, site-built, owner-occupied properties made to low- or moderate-income borrowers (those with income of less than 80 percent of area median income) increased slightly from 28.1 percent to 28.6 percent, and the share of refinance loans to low- and moderate-income borrowers for first lien, 1-4 family, site-built, owner-occupied properties decreased from 30 percent to 23.8 percent.

In terms of borrower race and ethnicity, the share of home purchase loans for first lien, 1-4 family, site-built, owner-occupied properties made to Black borrowers rose from 6.7 percent in 2018 to 7.0 percent in 2019, the share made to Hispanic-White borrowers increased slightly from 8.9 percent to 9.2 percent, and those made to Asian borrowers decreased from 5.9 percent to 5.7 percent.  From 2018 to 2019, the share of refinance loans for first lien, 1-4 family, site-built, owner-occupied properties made to Black borrowers decreased from 6.2 percent to 5.3 percent, the share made to Hispanic-White borrowers decreased from 6.8 percent to 6.2 percent, and the share made to Asian borrowers increased from 3.7 percent to 5.4 percent.

In 2019, Black and Hispanic-White applicants experienced higher denial rates for first lien, 1-4 family, site-built, owner-occupied conventional home purchase loans than non-Hispanic-White applicants.  The denial rate for Asian applicants is more comparable to the denial rate for non-Hispanic-White applicants.  These relationships are similar to those found in earlier years and, due to the limitations of the HMDA data mentioned above, cannot take into account all legitimate credit risk considerations for loan approval and loan pricing.

The Federal Housing Administration (FHA)-insured share of first-lien home purchase loans for 1-4 family, site-built, owner-occupied properties increased from 19.3 percent in 2018 to 20.2 percent in 2019.  The Department of Veterans Affairs (VA)-guaranteed share of such loans increased slightly to 10.6 percent in 2019.  The overall government-backed share of such home purchase loans, including FHA, VA, Rural Housing Service, and Farm Service Agency loans, was 33.4 percent in 2019, up from 33 percent in 2018.  

The FHA-insured share of refinance mortgages for first lien, 1-4 family, site-built, owner-occupied properties decreased slightly to 12.0 percent in 2019 from 12.8 percent in 2018, while the VA-guaranteed share of such refinance loans increased from 10.2 percent in 2018 to 13.5 percent in 2019. 

The share of mortgages originated by nondepository, independent mortgage companies has increased in recent years.  In 2019, this group of lenders accounted for 56.4 percent of first lien, 1-4 family, site-built, owner-occupied home-purchase loans, slightly down from 57.2 percent in 2018. Independent mortgage companies also originated 58.1 percent of first lien, 1-4 family, site-built, owner-occupied refinance loans, an increase from 56.1 percent in 2018.

The HMDA data also identify loans that are covered by the Home Ownership and Equity Protection Act (HOEPA).  Under HOEPA, certain types of mortgage loans that have interest rates or total points and fees above specified levels are subject to certain requirements, such as additional disclosures to consumers, and also are subject to various restrictions on loan terms.  For 2019, 6,507 loan originations covered by HOEPA were reported: 3,253 home purchase loans for 1-4 family properties; 442 home improvement loans for 1-4 family properties; and 2,812 refinance loans for 1-4 family properties.  

Additional HMDA Information

More information about HMDA data reporting requirements is also available at https://ffiec.cfpb.gov/.

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Agencies Issue Safety & Soundness Guidance Regarding COVID-19

Federal and State Regulatory Agencies Issue Examiner Guidance for Assessing Safety and Soundness Considering the Effect of the COVID-19 Pandemic on Financial Institutions 

The four federal agencies in conjunction with the state bank and credit union regulators this week issued examiner guidance to promote consistency and flexibility in the supervision and examination of financial institutions affected by the COVID-19 pandemic.  No action on the part of supervised institutions is required. 

Stresses caused by the spread of COVID-19 have led to significant economic strain and adversely affected global financial markets.  The interagency guidance instructs examiners to consider the unique, evolving, and potentially long-term nature of the issues confronting institutions due to the COVID-19 pandemic and to exercise appropriate flexibility in their supervisory response. 

Attachment:  Examiner Guidance Considering the Effect of the COVID-19 Pandemic on Institutions

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