From States to Congress: Looking Out for CUs and Members

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The California Credit Union League — along with the California Community Bankers Network — has sent a letter to Gov. Gavin Newsom requesting that he delay the implementation of the California Consumer Privacy Act (CCPA) until Jan. 2, 2021.

The short six-month delay would allow all financial institutions to stay laser focused on helping citizens stay in their homes and financially recover from the COVID-19 crisis.

NCUA: Capital Adequacy and Business Lending (PPP Loans)
The California and Nevada Credit Union Leagues have sent a letter to National Credit Union Administration Chairman (NCUA) Chairman Rodney Hood asking for clarification on the impact of PPP loans on credit unions’ risk-based net worth calculations and requesting that credit unions, like banks, be able to exclude from regulatory capital PPP loans pledged as collateral to the Federal Reserve’s PPP Lending Facility. The NCUA has also issued an Interim Final Rule (IFR) that fulfills both of these requests.

The IFR, which is effective upon publication in the Federal Register, amends the NCUA’s capital adequacy regulation to provide that covered PPP loans receive a zero percent risk weight; provides that covered loans pledged as collateral for a non-recourse loan to the Federal Reserve’s PPP Lending Facility can be excluded from a credit union’s calculation of total assets for the purposes of calculating its net worth ratio; and amends the definition of commercial loans to exclude PPP loans.

The IFR also clarifies that a credit union director may obtain a PPP Loan from the credit union on the board that the director serves, provided that the related business follows the same process as any similarly situated member or account holder of the credit union and the director is not an officer or key employee of the credit union. However, regarding loans to directors, the Federal Credit Union Act, NCUA’s rules on insider lending, and relevant provisions of a credit union’s bylaws still apply.

Real Estate Appraisals
The NCUA’s latest Letter to Credit Unions 20-CU-10 recaps the NCUA Board’s final rule to increase the residential appraisal threshold from $250,000 to $400,000. The raised threshold provides long-term regulatory relief to credit unions and members, and it increases flexibility for credit unions struggling with mortgage pipeline delays due to appraisals during the COVID-19 pandemic. You can view the final rule here.

The letter also recaps an interim final rule to temporarily allow credit unions to defer appraisals and written estimates of market value for up to 120 days after the closing of a loan. This flexibility will expire on Dec. 31, 2020.

Loan Modifications and TDR
The Leagues have received questions regarding the provisions under the CARES Act, Sec. 4013, that allows financial institutions the option to temporarily suspend certain requirements under U.S. generally accepted accounting principles (GAAP) related to troubled debt restructurings (TDR) for a limited period of time to account for the effects of COVID-19.

On April 7, the NCUA, along with federal banking agencies and the CFPB, issued a revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. The Interagency Statement provides guidance on two categories of loan modifications that can receive TDR relief:

  • Eligible loans under Sec. 4013: Under Section 4013, credit unions can suspend TDR reporting for any loan modification related to COVID19, executed on a loan that was current as of Dec. 31, 2019, and executed at any time during the applicable period.
  • Other loans: As confirmed by FASB, short-term modifications are not considered TDRs if the borrower is current at the time of the loan modification. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

Please see the Leagues’ explanation of the TDR guidance here.

Credit Reporting
Section 4021 of the CARES Act amends the Fair Credit Reporting Act (FCRA) to create new Coronavirus-related reporting requirements. If a furnisher makes an accommodation with respect to one or more payments on a credit obligation or consumer account, the furnisher should continue to report the account as current if the consumer fulfills the terms of the accommodation. However, for accounts that were already delinquent before the accommodation was made, the furnisher is permitted to continue reporting the account as delinquent unless the consumer brings the account current. In addition, section 3513 of the CARES Act addresses the furnishing of certain student loans for which payments are suspended.

Some League members have questioned how to properly code accounts for credit reporting so that accounts with accommodations continue to be reported as current. There is no hard and fast rule on coding the accounts. However, credit unions know from past disasters in California that typically credit unions simply just report the account as current (no special codes for disaster or deferral). The Leagues understand that the Consumer Data Industry Association (CDIA) and/or credit reporting agency representatives may have other recommendations. Unless the credit reporting agencies mandate special coding, the Leagues recommend keeping it simple.

The Leagues also would like to point out resources from regulatory agencies that support the requirements of Section 4021 of the CARES Act to report accounts as current if the consumer fulfills the terms of the accommodation. Please see:

FRB Increases Availability of Intraday Credit
Yesterday the Fed also announced temporary actions aimed at increasing the availability of intraday credit extended by Federal Reserve Banks on both a collateralized and uncollateralized basis. The board is: 1) suspending uncollateralized intraday credit limits (net debit caps) and is waiving overdraft fees for institutions that are eligible for the primary credit program; and 2) permitting a streamlined procedure for secondary credit institutions to request collateralized intraday credit (max caps). These temporary actions will be applied immediately and will remain in effect until Sept. 30, 2020 unless the board communicates otherwise prior to that date.

CLF Membership Encouraged
The NCUA issued Letter to Credit Unions 20-CU-08 regarding Enhancements to the Central Liquidity Facility Membership and Borrowing Authority. In this letter, the NCUA also encourages credit unions who are not already members in the CLF to join. CLF stock subscriptions provide the credit union system and the Share Insurance Fund a vital contingent source of funds to assist with systemwide liquidity events, which may be necessary in addressing the impact of the COVID-19 pandemic on individual credit unions, groups of credit unions, and the Share Insurance Fund. The Leagues have heard that the NCUA is also reaching out directly to individual credit unions encouraging their membership in the CLF.

Temporary Regulatory Relief
The NCUA is providing temporary regulatory relief during the Coronavirus pandemic. The agency’s principles-based approach enables a credit union to adjust its policies and procedures to reflect the current environment, provided those policies and procedures continue to meet the principles outlined in a temporary final rule. Read more here.

FHLB Can Accept PPP Loans as Collateral
In addition to the Federal Reserve’s PPP Lending Facility (PPPLF), which allows PPP loans as collateral, the FHFA announced today that Federal Home Loan Banks (FHLBanks) can also accept PPP loans as collateral when making loans, called advances, to their members. Accepting PPP loans will provide additional liquidity for small and community banks to borrow from their FHLBank to support the small businesses in their communities. 

FHFA on Mortgage Servicer Liquidity
The Federal Finance Housing Agency has announced the alignment of Fannie Mae and Freddie Mac's policies regarding mortgage servicer obligations to advance scheduled monthly principal and interest payments for single-family mortgage loans. Once a GSE servicer has advanced four months of missed payments on a loan, it will have no further obligation to advance scheduled payments. CUNA raised these concerns in its letter to FHFA.

Updated Check-Fraud Tip Sheet
The Secret Service, in partnership with the Treasury Department, has launched a “Know Your U.S. Treasury Check” campaign and provided an updated Quick Tips fact sheet on how credit unions can protect their operations and members from check fraud. CARES Act checks will start mailing out in late April. Click here to learn which security features to look for on checks.

These stimulus checks can also be verified on the Treasury Check Information (TCIS) Check Verification site.

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