Weekly RoundUp July 22, 2021

FHFA Eliminates Adverse Market Refinance Fee

Editor's Note
In This Issue. The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will no longer charge lenders the Adverse Market Refinance Fee; the Federal Deposit Insurance Corporation (FDIC) is seeking comment on proposed amendments to its regulations governing deposit insurance coverage; the Office of the Comptroller of the Currency (OCC) intends to propose rescinding the Community Reinvestment Act rule issued in May 2020, and will work with the Board of Governors of the Federal Reserve System (Federal Reserve) and the FDIC to put forward a joint rulemaking to revise the banking agencies’ CRA regulations; the staff of the Securities and Exchange Commission’s (SEC) Division of Investment Management released an analysis of prime money market fund liquidity buffers; and the Small Business Administration (SBA) has issued a procedural notice outlining the procedures for lenders to follow when a Paycheck Protection Program (PPP) borrower declares bankruptcy, and how to request the SBA to purchase and/or charge off a PPP loan. These and other developments are discussed in more detail below.
Editor's Note
Editor's Note
Editor's Note

Regulatory Developments

FHFA Eliminates Adverse Market Refinance Fee

On July 16, the FHFA announced that, effective August 1, 2021, Fannie Mae and Freddie Mac (Enterprises) will no longer charge lenders the Adverse Market Refinance Fee, a 50-basis point fee for loan deliveries. The fee was designed to cover projected Enterprise losses resulting from the COVID-19 pandemic. The FHFA concluded the fee is no longer necessary as a result of the effectiveness of the FHFA and Enterprises’ COVID-19 policies, and because most Enterprise borrowers have successfully exited COVID-19 forbearance. The elimination of the fee is intended to help families take advantage of the low-rate environment, reduce their housing costs and save more money. The FHFA expects those lenders who were charging borrowers this fee to pass cost savings back to borrowers.

FDIC Proposes Simplification of Deposit Insurance Rules

The FDIC issued a notice of proposed rulemaking to simplify the deposit insurance rules for trust and mortgage servicing accounts. As proposed, a deposit owner’s trust deposits would be insured in an amount up to $250,000 for each of the trust beneficiaries, not to exceed five, regardless of whether a trust is revocable or irrevocable, and regardless of contingencies or the allocation of funds among the beneficiaries. This would provide for a maximum amount of deposit insurance coverage of $1,250,000 per owner, per insured depository institution, for trust deposits. In addition, mortgage servicers’ advances of principal and interest funds on behalf of mortgagors would be insured up to $250,000 per mortgagor, consistent with the coverage for payments of principal and interest collected directly from mortgagors.

OCC To Propose Rescinding Community Reinvestment Act Rule

The OCC announced on Tuesday that it intends to propose rescinding the Community Reinvestment Act (CRA) rule issued in May 2020 and will work with the Federal Reserve and FDIC to put forward a joint rulemaking to revise the banking agencies’ CRA regulations. The OCC’s 2020 CRA rule provided objective measures to evaluate performance under the CRA of national banks and federal savings associations by, among other things, establishing metrics for evaluating performance and providing additional criteria for what qualifies for consideration as community development activities. The 2020 rule was considered controversial because the banking agencies typically move together on rulemaking actions under the CRA to ensure that all types of banking organizations are evaluated under a consistent framework. The 2020 rule became effective in October 2020 with a multiyear transition period. Because the rule was finalized, any proposal to rescind it would be subject to notice and public comment.

“To ensure fairness in the face of persistent and rising inequality and changes in banking, the CRA must be strengthened and modernized.”
– Acting Comptroller of the Currency Michael Hsu

SEC Division of IM Staff Releases an Analysis of Prime Money Market Fund Liquidity Buffers

On July 21, the staff of the SEC’s Division of Investment Management released an analysis of prime money market fund liquidity buffers. Since 2010, SEC rules have included minimum liquidity requirements for money market funds (MMFs), including a minimum of 10% of investments in daily liquid assets (DLA) and a minimum of 30% of investments in weekly liquid assets (WLA). If a MMF’s portfolio falls below the 10% DLA or 30% WLA threshold, it may not acquire any assets other than DLA or WLA until these thresholds are met. A prime MMF may impose liquidity fees or temporarily suspend redemptions if the fund’s WLA declines below 30% of its total assets. According to the analysis, to date, no MMF has used these tools. Based on data filed by MMFs on Form N-MFP, the analysis showed that prime MMFs mainly rely on government securities and repos to meet their daily and weekly liquidity thresholds. The analysis also revealed that prime MMFs’ investments in government securities increased during the pandemic, reaching an all-time high of 38% of their portfolios in August 2020.

SBA Offers Guidance on Purchase, Charge-Off for Certain PPP Loans

The SBA has issued a procedural notice outlining the procedures for lenders to follow when a PPP borrower declares bankruptcy and how to request the SBA to purchase, or purchase and charge off, PPP loans if a borrower has defaulted, closed, is deceased (in the case of self-employed individuals, sole proprietors, single-member LLCs or independent contractors), filed for bankruptcy protection, or has been indicted or convicted of a felony related to the PPP loan. The notice also lays out procedures for lenders to follow if a borrower submits a forgiveness application after the lender has submitted a request for guaranty repurchase. The PPP platform has been programmed as of July 15 to allow lenders to submit requests for guaranty purchase and charge-offs.

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