Open for Comment
Enhanced Disclosure
An interim rule by the Federal Reserve Board amending Regulation Z to improve disclosures for closed-end mortgages, home equity lines of credit and originator fees. The plan would require a recalculation of annual percentage rates for certain mortgages, prohibit brokers from receiving certain types of payments and require lenders to give borrowers more notice before reducing their home equity line. Published July 22 in the Federal Register with comments due Sept. 21.
BSA for Nonbanks
An advance notice of proposed rulemaking by the Financial Crimes Enforcement Network soliciting comment on how to require mortgage brokers and other nonbanks to comply with the Bank Secrecy Act. Fincen asked whether nonbanks should have to file suspicious activity reports as banks do. The agency suggested that BSA rules for nonbanks could first apply to their residential mortgages and then Fincen could consider expanded rules for other types of loans. Published July 21. Comments due Aug. 20.
Liquidity Risk
Proposed guidance by federal regulators that would require financial institutions to more closely monitor their liquidity risk. The guidance stresses the importance of cash-flow projections; diversified funding sources; stress testing; a cushion of liquid assets and a formal, well-developed contingency plan for measuring, monitoring and managing liquidity risk. It mirrors standards released by the Basel Committee on Banking Supervision in September. Published July 6. Comments due Sept. 4.
MSB Definition
A proposal by Fincen that would attempt to clarify which companies qualify as money-services businesses. The proposal would revise the definition of such businesses by describing with more clarity the types of financial activities subject to Bank Secrecy Act rules. Published May 12. Comments due Sept. 9.
Recent Actions
Bank Failures I
Regulators closed two banks in Florida and one in Oregon on Aug. 7. They included $463 million-asset First State Bank in Sarasota, Fla., and $97 million-asset Community National Bank of Sarasota County in Venice, Fla. Stearns Bank in St. Cloud, Minn., assumed virtually all of the two banks' deposits, which totaled about $480 million, and acquired roughly all of their assets as well.
Regulators also closed $209 million-asset Community First Bank in Prineville, Ore. Home Federal Bank in Nampa, Idaho, agreed to assume most of the failed bank's $182 million in deposits and buy 94% of its assets.
Lockhart Exit
James B. Lockhart, the director of the Federal Housing Finance Agency, announced Aug. 6 that he would leave the job. Ed DeMarco, FHFA's chief operating officer and senior deputy director for housing mission and goals, will become the acting director. Lockhart, the first director in FHFA's history, is expected to leave this month.
Servicer Conflicts
The Federal Financial Institutions Examination Council issued a statement Aug. 6 telling servicers to avoid conflicts of interest if they are modifying both first and subordinate lien loans on a property. The council warned that workouts of first-lien loans should not be influenced by the effect on a subordinate lien holder, and vice versa.
2nd-Lien Losses
The Federal Deposit Insurance Corp. on Aug. 3 updated guidance from three years earlier that deals with accounting for losses on second liens. The agency reiterated that institutions should be mindful of potential losses on second mortgages and other types of home equity loans as the foreclosure crisis continues.
PPIP Test
The FDIC on July 31 announced a pilot sale of receivership assets meant to test the funding model of its Legacy Loans Program, which is a component of the administration's overall plan — known as the Public-Private Investment Program — to help institutions cleanse their balance sheets of toxic assets. The agency gave few details, but sources said the test sale involves just over $1 billion of assets from $4.9 billion-asset Franklin Bank, which failed in Houston last November.
Bidders can choose one of two options: share control with the FDIC of a limited liability company and initially own 20%, or split ownership 50-50 with the agency. Under the second choice, an investor could propose FDIC leverage of up to $6 for every $1 of equity in the LLC. The agency would also guarantee the debt.
Bank Failures II
Regulators shuttered five banks on July 31: $1.6 billion-asset Mutual Bank in Harvey, Ill.; $706 million-asset Peoples Community Bank, a thrift in West Chester, Ohio; $166 million-asset First BankAmericano in Elizabeth, N.J.; $119 million-asset Integrity Bank in Jupiter, Fla.; and $103 million-asset First State Bank of Altus in Oklahoma. The combined estimated cost of the five failures was almost $1 billion.
FHLB Securitization
FHFA Director Lockhart said in a report to Congress July 30 that the agency is not considering ways for the Federal Home Loan banks to securitize mortgages. The banks had hoped securitization would help them compete with mortgage programs run by Fannie Mae and Freddie Mac.
NY Fed Appointment
The Federal Reserve Bank of New York on July 27 announced the appointment of Kathryn Wylde, the president and chief executive of the Partnership for New York City, to its board. She filled a board seat previously held by Stephen Friedman, an alumnus of Goldman Sachs. Friedman had faced controversy over his dual ties to Goldman and the Fed board, and he resigned his seat in May.
Bank Failures III
State regulators closed seven institutions on July 24, including six owned by $2.8 billion-asset Security Bank Corp. in Macon, Ga.
The FDIC sold the deposits and most of the assets of the failed subsidiaries of Security to $35 million-asset State Bank and Trust Co. in Pinehurst, which had raised $300 million in capital from institutional investors to complete the deal. The resolution of the six banks was estimated to cost the government $807 million.
Regulators also closed $61 million-asset Waterford Village Bank in Clarence, N.Y.
Basel Rules
The Basel Committee on Banking Supervision on July 13 said it will require institutions to set aside capital for certain "resecuritization" assets, including collateralized debt obligations and asset-backed commercial paper. The asset classes were not addressed in the 2006 Basel II standards but have been blamed for losses since then.
The committee amended Pillar 1 of Basel II to require a 20% risk-weight for senior resecuritizations with a triple-A rating and also revised Pillar 2 to require "rigorous and sustained" supervision of compensation practices.
Bank Failures IV
Four more banks failed on July 17, including $1.9 billion-asset Vineyard Bank in Rancho Cucamonga, Calif., and $1.5 billion-asset Temecula Valley Bank in Temecula, Calif. California Bank and Trust acquired most of the holdings of Vineyard, and First-Citizens Bank and Trust Co. in Raleigh, N.C., took over the operations of Temecula Valley.
Regulators also closed $275 million-asset BankFirst in Sioux Falls, S.D., and $115 million-asset First Piedmont Bank in Winder, Ga.
Bank Failures V
State regulators closed $70 million-asset Bank of Wyoming, based in Thermopolis, on July 10. Central Bank and Trust in Lander, Wyo., agreed to assume all $59 million of the failed bank's deposits and acquire about $55 million of its assets. The failure was estimated to cost $27 million.
PPIP Managers
The Treasury announced on July 8 the nine fund managers it had selected to help run the legacy securities portion of the Public-Private Investment Program. They are: AllianceBernstein LP and its subadvisers Greenfield Partners LLC and Rialto Capital Management LLC; Angelo, Gordon & Co. LP and GE Capital Real Estate; BlackRock Inc.; Invesco Ltd.; Marathon Asset Management LP; Oaktree Capital Management LP; RLJ Western Asset Management LP; TCW Group Inc., and Wellington Management Co. LLP.
The Treasury plans to divide $30 billion equally among the managers. They are charged with raising at least $500 million of capital from private investors, which will be matched by the Treasury.
Actions Expected Soon
Overdraft Fees
The Fed is considering whether to require banking companies to get customers' permission before charging overdraft fees. Under a proposal issued late last year, the Fed said it was considering whether overdraft protection should be an opt-in or opt-out feature.
Comments Closed
Private-Equity Investment
A proposal by the FDIC that would restrict private-equity investment in failed banks. Under the plan, private-equity investors that buy failed banks would have to retain ownership of the bank for at least three years and maintain a minimum 15% Tier 1 leverage ratio during that time.
Bidders on failed banks who already own majority stakes in other banks would have to issue cross guarantees and pay for losses to the Deposit Insurance Fund. The plan would also institute disclosure requirements for bidders and prohibit certain institutions from participating. Published July 9. Comments were due Aug. 10.
Mortgage Registration
A proposal by federal banking and thrift regulators that would require all mortgage originators to register with a national licensing database. Under the plan, any originator, including bank employees and nonbank lenders, must register with the Nationwide Mortgage Licensing System and Registry. Each originator would be assigned an identification number. Published June 9. Comments were due Aug. 10.
