Markets Wired

Register Now to Learn About Requirements for Ongoing Customer Due Diligence

ALEXANDRIA, Va. (April 9, 2018) – Credit unions with questions about complying with customer due diligence requirements in the Bank Secrecy Act can get valuable information on a National Credit Union Administration webinar scheduled for April 25.

The Financial Crimes Enforcement Network in 2016 issued a final rule updating the Bank Secrecy Act’s requirements for effective BSA and anti-money-laundering programs (opens new window). The webinar, “BSA Compliance – Customer Due Diligence,” will address these requirements for credit unions.

This 60-minute webinar is scheduled to begin at 2 p.m. Eastern. Online registration is available here (opens new window).

The webinar panel—Sandra Sojka, a regulatory policy officer with FinCEN’s Policy Division; Janet Carruthers, a fraud and risk analysis specialist with NCUA’s Office of Examination and Insurance; and Andre Lucas, the director of compliance, Maryland/District of Columbia Credit Union Association—will review the basic requirements of the 2016 rule, including:

• Reducing compliance and reputation risk with ongoing member due diligence;
• Enhancing risk-based procedures by including timely and accurate SAR reporting; and
• Improving the overall BSA/AML program with specific procedures.

You can submit questions in advance at [email protected]. The email’s subject line should read, “BSA Compliance – Customer Due Diligence.” This webinar will be closed captioned and then archived online here approximately three weeks following the live event.

The Bank Secrecy Act webinar is the first of five webinars NCUA’s Office of Credit Union Resources and Expansion will host in the coming months. Topics include: the agency’s streamlined community development financial institutions certification program, 2018 grant initiatives, and Share Insurance calculations. Details about each webinar will be available in the near future.

The Office of Credit Union Resources and Expansion supports low-income-designated credit unions and credit unions interested in a low-income designation; minority credit unions; credit unions seeking changes in their charters, bylaws, or fields of membership; and groups organizing to start new credit unions.

The Federal Financial Institutions Examination Council (FFIEC) members today issued a joint statement to describe matters that financial institutions should consider if they are determining whether to use cyber insurance as a component of their risk management programs.

The FFIEC members do not require financial institutions to maintain cyber insurance. The evolving cyber insurance market and the shifting cyber threat landscape may, however, prompt financial institutions to consider whether cyber insurance would be an effective part of their overall risk management programs. 

The joint statement notes that cyber attacks are increasing in volume and sophistication and that traditional general liability insurance policies may not provide effective coverage for all potential exposures caused by cyber events. Cyber insurance could offset financial losses from a variety of exposures—including data breaches resulting in the loss of confidential information—that may not be covered by more traditional insurance policies. Financial institution management should assess the scope of coverage of current insurance and consider how cyber insurance may fit into the institution’s overall risk management framework.

As with any insurance coverage, cyber insurance does not diminish the importance of a sound control environment. Rather, cyber insurance may be a component of a broader risk management strategy that includes identifying, measuring, mitigating, and monitoring cyber risk exposure.

Financial institutions may find additional information on risk management and cybersecurity risk management on the FFIEC’s website at http://www.ffiec.gov (opens new window).

Statement: Joint Statement on Cyber Insurance and Its Potential Role in Risk Management Programs

Board Action Bulletin

Advertising Rule Gives Credit Unions New Options on Advertising

ALEXANDRIA, Va. (April 19, 2018) – The National Credit Union Administration Board held its fourth open meeting of 2018 at the agency’s headquarters today and unanimously approved two items:

• A final rule reducing regulatory burdens on federally insured credit unions with assets of $10 billion or greater by removing certain current capital planning and stress testing requirements.
• A final rule revising parts of the agency’s advertising rule to provide regulatory relief by allowing an additional advertising option, expanding exemptions, and eliminating one requirement.

Final Stress-Testing Rule Tailors Requirements to Covered Credit Unions’ Size

The NCUA’s capital planning and stress testing requirements would provide a measure of regulatory relief under a final rule (Part 702) approved by the Board.

The NCUA Board rule requiring capital planning and stress testing for federally insured credit unions with assets of $10 billion or greater anticipated the possibility of covered credit unions being allowed to conduct stress tests once the NCUA had completed three stress tests. The Board approved a proposed rule making changes at its October 2017 open meeting.

Under the final rule approved today, credit unions with assets of less than $20 billion will continue to develop annual capital plans, but those plans will no longer be submitted to the NCUA each year by May 31. Credit unions with assets greater than $20 billion will continue to submit plans that must be approved by the agency.

Under the final rule, the NCUA will no longer be required to conduct supervisory stress tests. Credit unions subject to the rule will conduct stress testing themselves. NCUA has reserved the right to conduct stress tests on covered credit unions if it deems such action necessary.

Credit unions with assets of less than $15 billion will no longer be subject to stress-testing requirements. Credit unions with assets greater than $15 billion will be required to conduct stress testing, though credit unions with assets greater than $20 billion will be subject to a 5 percent minimum stress test capital ratio.

The final rule, available online here (opens new window), will become effective June 1, 2018.

Rule Provides Options when using NCUA’s Official Advertising Statement

Credit unions will gain an added measure of flexibility and regulatory relief in complying with the NCUA’s advertising rule under a final amending rule (Part 740) approved by the Board.

The advertising rule had required federally insured credit unions to use one of three versions of the NCUA’s official statement in all advertising. Today’s approved rule adds a fourth version, allowing a credit union to state “insured by NCUA.” To provide additional regulatory relief, the Board is expanding a current exemption from the advertising statement requirement regarding radio and television advertisements and eliminating the requirement to include the official advertising statement on statements of condition required to be published by law.

The final rule, available online here (opens new window), will become effective 30 days after publication in the Federal Register.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

---

NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the United States, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. At MyCreditUnion.gov (opens new window), NCUA also educates the public on consumer protection and financial literacy issues.

“Protecting credit unions and the consumers who own them through effective regulation”

ALEXANDRIA, Va. (May 3, 2018) – The National Credit Union Administration Board has revised its 2018 meeting schedule.

The open meeting originally scheduled for July 26 has been moved to Aug. 2. All open Board meetings are scheduled to begin at 10 a.m. Eastern. The revised meeting schedule is as follows:

• May 24
• June 21
• No July Meeting
• August 2
• September 20
• October 18
• November 15
• December 20

The Board meeting calendar is available online on the agency’s Board Meeting Calendar webpage. The meeting schedule is subject to change.

The NCUA’s Board holds open meetings at the agency’s central office located at 1775 Duke St., Alexandria, Virginia, and offers a livestream available through main page of the agency’s website, NCUA.gov. The NCUA also provides live updates during all open Board meetings on Twitter on @TheNCUA (opens new window).

The agency’s Board Actions webpage also has Board agendas, which are posted one week in advance of each open meeting; copies of Board Action Bulletins, which summarize the results of each open meeting; and copies of Board memorandums and other documents related to items being considered by the Board at its open meetings.

The NCUA posts videos of open Board meetings as part of the agency’s ongoing efforts to provide transparency and allow people who are unable to attend meetings the opportunity to become better informed. An interval between the meeting and posting is necessary for the videos to comply with Section 508 of the Rehabilitation Act for the hearing and visually impaired.

 

ALEXANDRIA, Va. (May 4, 2018) – Credit unions interested in becoming designated as Community Development Financial Institutions can get valuable information on an upcoming webinar hosted by the National Credit Union Administration.

The webinar, “Benefits of CDFI Certification,” is scheduled for Wednesday, May 16, beginning at 2 p.m. Eastern. Online registration is available here (opens new window). Participants will be able to log into the webinar and to view it on mobile devices using this link. Participants should allow pop-ups from this website.

The webinar’s panel will include: Ikenna Nwankpa, Community Development Revolving Loan Fund program officer, and Pamela Williams, Minority Depository Institutions program manager, with the NCUA’s Office of Credit Union Resources and Expansion; Michelle Dickens, associate program manager of Certification, Compliance Monitoring, and Evaluation with the Community Development Financial Institutions Fund; and Terry Katzur, executive vice president of ELGA Credit Union, Burton, Michigan.

The NCUA will offer live Twitter updates during the webinar on @TheNCUA, and participants can ask questions over Twitter during the presentation. Registrants can submit questions in advance at [email protected]. The email’s subject line should read, “Benefits of CDFI Certification.” Please email technical questions about accessing the webinar to [email protected].

This webinar will be closed captioned and then archived online here approximately three weeks following the live event.

The webinar, the second of five the Office of Credit Union Resources and Expansion will be hosting, will include credit union success stories and how the NCUA’s streamlined certification process makes getting a CDFI designation easier. Future webinars will cover topics including the agency’s 2018 grant initiatives and understanding the National Credit Union Share Insurance Fund.

NCUA’s Office of Credit Union Resources and Expansion supports low-income-designated credit unions and credit unions interested in a low-income designation; minority credit unions; credit unions seeking changes in their charters, bylaws, or fields of membership; and groups organizing to start new credit unions.

The Federal Financial Institutions Examination Council (FFIEC) today announced the availability of data on mortgage lending transactions at 5,852 U.S. financial institutions covered by the Home Mortgage Disclosure Act (HMDA). Covered institutions include banks, savings associations, credit unions, and mortgage companies. Released today are loan-level HMDA data that cover 2017 lending activity submitted by financial institutions on or before April 18, 2018. The data include:

• Applications, originations, purchases of loans, sales of loans, denials, and other actions related to applications
• Loan amounts
• Loan types (conventional, Federal Housing Administration (FHA), Veterans Administration (VA), Rural Housing Service (RHS), or Farm Service Agency (FSA))
• Purposes (home purchase, home improvement, or refinancing)
• Property types (1–4 family, multifamily, or manufactured housing)
• Owner occupancy
• Preapprovals (home purchase loans only)
• Property locations (metropolitan statistical area (MSA), state, county, and census tract)
• Applicant and co-applicant characteristics (race, ethnicity, sex, and income)
• Pricing-related data
• Type of purchasers
• Whether a particular loan is subject to the Home Ownership and Equity Protection Act (HOEPA)
• Whether a particular loan is secured by a first or a subordinate lien, or is unsecured

Unlike in past years, the HMDA loan-level data made available to the public will not remain static, but will be updated, on an ongoing basis, to reflect late submissions and resubmissions. Accordingly, loan-level data downloaded from https://ffiec.cfpb.gov/ (opens new window) at a later date will include any such updated data. An April 18, 2018, static dataset used to develop the observations in this statement about the 2017 data is available here: https://www.consumerfinance.gov/data-research/research-reports/cfpb-data-point-mortgage-market-activity-and-trends/ (opens new window). In addition, beginning in late March 2018, Loan/Application Registers (LARs) for each HMDA filer of 2017 data, modified to protect borrower privacy, were made available at https://ffiec.cfpb.gov/data-publication/ (opens new window).

 

Understanding the Data

The 2017 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 MSA definitions released by the Office of Management and Budget in 2015 that became effective for HMDA purposes in 2016.

Caution should be used when comparing HMDA data across multiple years for specific geographic areas due to the changes in MSA and census tract boundaries and updates to the population and housing characteristics of census tracts that followed the decennial census and five-year updates based on the ACS data.

The HMDA data are the most comprehensive publicly available information on mortgage market activity. 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 and consumer compliance examinations. 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 available at https://www.ffiec.gov/PDF/fairlend.pdf (opens new window).

HMDA data alone cannot be used to determine whether a lender is complying with fair lending laws. The data do not include many potential determinants of loan application and pricing decisions, such as the applicant’s credit history and debt-to-income ratio, the loan-to-value ratio, and other considerations. Therefore, when regulators conduct fair lending examinations, including ones involving loan pricing, they analyze additional information before reaching a determination about an institution’s compliance with fair lending laws.

 

Observations from the 2017 Data

For 2017, the number of reporting institutions declined by about 13 percent from the previous year to 5,852. Contributing to the decline were Regulation C changes requiring HMDA collection and reporting from depository institutions only if, in each of the two preceding calendar years, they originated at least 25 home purchase loans, including refinancings of home purchase loans, that are not excluded under 12 CFR § 1003.4(d).¹

The 2017 data include information on 12.1 million home loan applications, of which 7.3 million resulted in loan originations, and 2.1 million in purchased loans, for a total of more than 14.1 million actions. The data also include information on approximately 481,000 requests for preapprovals for home purchase loans.

The total number of originated loans of all types and purposes decreased by more than 1 million between 2016 and 2017, or 12.4 percent. Refinance originations decreased by more than 33 percent, and home purchase lending increased by more than 4 percent.

From 2016 to 2017, the share of first-lien home purchase loans for 1–4 family, site-built, owner-occupied properties made to low- and moderate-income borrowers (those with income of less than 80 percent of area median income) rose slightly from 26.2 percent to 26.3 percent, and the share of refinance loans to low- and moderate-income borrowers increased from 16.9 percent to 22.9 percent.²

In terms of borrower race and ethnicity, the share of home purchase loans for 1–4 family properties made to black borrowers rose from 6.0 percent in 2016 to 6.4 percent in 2017, the share made to Hispanic-white borrowers remained unchanged at 8.8 percent, and those made to Asian borrowers rose from 5.5 percent to 5.8 percent. From 2016 to 2017, the share of refinance loans made to black borrowers increased from 5.0 percent to 6.0 percent, the share made to Hispanic-white borrowers increased from 6.2 percent to 6.8 percent, and those made to Asian borrowers fell from 5.5 percent to 4.0 percent.

In 2017, black and Hispanic-white applicants experienced higher denial rates for 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 discussed above, cannot take into account potential differences in risk characteristics across demographic groups.

The FHA-insured share of first-lien home purchase loans for 1–4 family, site-built owner-occupied properties declined from 25.0 percent in 2016 to 22.6 percent in 2017. The VA-guaranteed share of such loans remained at approximately 10 percent in 2017. The overall government-backed share of such purchase loans, including FHA, VA, RHS, and FSA loans, was 36.3 percent in 2017, down slightly from 38.7 percent in 2016.

The FHA-insured share of first-lien refinance mortgages for 1–4 family, site-built owner-occupied properties increased to 13.2 percent in 2017 from 12.0 percent in 2016, while the VA-guaranteed share of such refinance loans decreased from 12.2 percent in 2016 to 11.4 percent in 2017.³

The share of mortgages originated by nondepository, independent mortgage companies has increased sharply in recent years. In 2017, this group of lenders accounted for 56.1 percent of first-lien owner-occupied home-purchase loans, up from 53.3 percent in 2016. Independent mortgage companies also originated 55.8 percent of first-lien owner-occupied refinance loans, an increase from 52.2 percent in 2016, which was the first year in which independent mortgage companies made the majority of such loans since at least 1995.

The 2017 HMDA data also include information on loan pricing for loans classified as “higher-priced.” Higher-priced loans are defined as loans with annual percentage rates (APRs) that exceed the average prime offer rates (APORs) by at least 1.5 percentage points for first-lien loans and at least 3.5 percentage points for subordinate lien loans. The data on the incidence of higher-priced lending show that 6.9 percent of first-lien loans originated in 2017 have APRs that exceed the loan price reporting thresholds, up slightly from about 5.5 percent in 2016.

As noted above, the HMDA data also identify loans that are covered by HOEPA. Under HOEPA, certain types of mortgage loans that have interest rates or total points and fees above specified levels also are subject to certain requirements, such as additional disclosures to consumers, and are subject to various restrictions on loan terms. For 2017, 3,533 loan originations covered by HOEPA were reported: 1,836 home purchase loans; 764 home improvement loans; and 933 refinance loans.

 

Additional HMDA Information

Financial institution disclosure statements and MSA and nationwide aggregate reports for 2017 HMDA data are available at https://ffiec.cfpb.gov/data-publication/ (opens new window). Tools to search and analyze the HMDA data are available at https://www.consumerfinance.gov/hmda (opens new window). More information about HMDA data reporting requirements is available at https://ffiec.cfpb.gov/ (opens new window).

Questions about HMDA supervision should be directed to the institution’s supervisory agency at the following phone numbers:

• Federal Deposit Insurance Corporation: 877.275.3342; hearing impaired — 800.925.4618
• Board of Governors of the Federal Reserve System, HMDA Assistance Line: 202.452.2016
• National Credit Union Administration, Office of Consumer Financial Protection: 703.518.1140
• Office of the Comptroller of the Currency, Compliance Risk Policy Division: 202.649.5470
• Consumer Financial Protection Bureau: 202.435.7000
• Department of Housing and Urban Development, Office of Housing: 202.708.0685

---

 

¹ 12 CFR 1003.2 (definition of “financial institution”) (effective January 1, 2017).

² Many refinance loans are “streamlined refinances” and data on borrower income are sometimes not collected by lenders for such loans. Such refinances do not contribute to the estimates for low- and-moderate income borrowers’ share of refinance activity.

³ For historical and more detailed data derived from the annual HMDA records, see https://www.consumerfinance.gov/data-research/research-reports/cfpb-data-point-mortgage-market-activity-and-trends/ (opens new window).

The Federal Financial Institutions Examination Council (FFIEC) today issued new examination procedures on the final rule, “Customer Due Diligence Requirements for Financial Institutions,” issued by the Financial Crimes Enforcement Network (FinCEN) on May 11, 2016.

These examination procedures apply to banks, savings and loan associations, savings associations, credit unions, and branches, agencies, and representative offices of foreign banks.

The new examination procedures replace those in the current “Customer Due Diligence — Overview and Examination Procedures” section of the FFIEC’s Bank Secrecy Act/Anti-Money Laundering Examination Manual (opens new window). In addition, a new overview and examination procedures were developed for the beneficial ownership requirements for legal entity customers.

The FFIEC member agencies created these procedures in close collaboration with FinCEN and the U.S. Department of the Treasury.

FinCEN’s 2016 final rule clarifies customer due diligence requirements and also includes a new requirement for covered financial institutions to identify and verify the identity of beneficial owners of certain legal entity customers. Banks and other covered financial institutions must comply with this rule beginning on May 11, 2018.

 

Attachments:

Customer Due Diligence – Overview and Examination Procedures (opens new window)

Beneficial Ownership for Legal Entity Customers – Overview and Examination Procedures (opens new window)

ALEXANDRIA, Va. (May 14, 2018) – The video recording of the April 19, 2018, open meeting of the National Credit Union Administration Board is now available on the agency’s website.

Archived videos of past Board meetings may be viewed here, and each video remains on the site for one year.

At the April open meeting, the Board unanimously approved two items:

• A final rule reducing regulatory burdens on federally insured credit unions with assets of $10 billion or greater by removing certain current capital planning and stress testing requirements.
• A final rule revising parts of the agency’s advertising rule to provide regulatory relief by allowing an additional advertising option, expanding exemptions, and eliminating one requirement.

The NCUA posts these videos as part of the agency’s ongoing efforts to provide transparency and to allow those unable to attend Board meetings the opportunity to become better informed. An interval between the meeting and posting is necessary for the videos to comply with Section 508 of the Rehabilitation Act for the hearing and visually impaired.

The Board Actions page of the NCUA’s website has more information, including Board agendas, which are posted at least one week in advance of each open meeting; copies of Board Action Bulletins, which summarize the meetings; copies of Board memorandums and other documents.

ALEXANDRIA, Va. (May 23, 2018) – Low-income federally insured credit unions interested in becoming certified community development financial institutions can apply to use the National Credit Union Administration’s streamlined application process beginning June 4.

During the streamlined application period, which runs until June 22, credit unions submit loan origination data to the NCUA’s Office of Credit Union Resources and Expansion. The agency will perform an analysis to determine each credit union’s likelihood for certification.

If the results of the NCUA’s analysis suggest a credit union is a strong candidate for the streamlined process, the NCUA will provide the credit union with the application materials. The credit union then completes the application and submits it to the Community Development Financial Institutions Fund, which makes the final determination on the certification.

If credit unions do not meet specific eligibility criteria for the streamlined application process, they can still apply through CDFI using the standard form (opens new window).

The NCUA’s online program guide (opens new window) has all the necessary instructions for applying. An archived copy of the agency’s May 16 CDFI webinar will be available online here in approximately two weeks.

Credit unions that obtain CDFI certification can take advantage of training and competitive award programs provided by the CDFI Fund. These resources enhance credit unions capacity to provide underserved communities with access to safe and affordable financial services. The CDFI Fund webpage (opens new window) has complete information.

NCUA’s Office of Credit Union Resources and Expansion supports low-income-designated credit unions and credit unions interested in a low-income designation; minority credit unions; credit unions seeking changes in their charters, bylaws, or fields of membership; and groups organizing to start new credit unions.