FDIC Issues Two New Deposit Insurance Resources

The FDIC has developed two new resources to help bank employees and depositors understand FDIC deposit insurance coverage: (1) a large-print version of the brochure Your Insured Deposits and (2) a computer-based, interactive training module called FDIC Deposit Insurance Coverage for Bankers.

Insured institutions may access and order the FDIC's two new deposit insurance resources on the FDIC's Web site at www.fdic.gov/deposit/deposits/.

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NYS Law Abolishes Yield Spread Premiums

Effective August 17, 2012, Governor Cuomo signed A.7329/S.886, which became Chapter 404 of the Laws of 2012.  The law adds Banking law Section 3-a, which states that a person who makes or brokers a home loan may not receive compensation based on, or varies with, any of the loan terms.  Compensation based on the loan amount (principal) is permitted.

The amendment also bans yield spread premiums - compensation paid by a lender to a mortgage loan broker based on the difference between a stated interest rate or loan yield preferred by the lender.

Brokers being paid on the basis of a yield spread premium, as opposed to a percentage of the loan amount or points, may be inclined to steer applicants to lenders offering loans at higher rates, thus acting in their own or the lender’s interests and not the interest of their applicant-client.

CFPB Proposal Requires Free Appraisal Reports

The CFPB issued a proposed rule that would require creditors to inform consumers of their right to receive a free copy of appraisal reports and home-value estimates within three days of applying for a mortgage loan. Creditors then would be required to provide the reports to consumers as promptly as possible, but no later than three days before closing -- regardless of whether credit is extended, denied, incomplete or withdrawn.

New Appraisal Requirements Proposed

The regulatory agencies issued a proposed rule under Dodd-Frank that would establish new appraisal requirements for “higher-risk mortgage loans.”

The proposal would require creditors to use a licensed or certified appraiser to prepare a written report based on a physical inspection of the property’s interior. The proposal also would mandate that creditors disclose information about the appraisal’s purpose and provide consumers with a free copy of the appraisal report.

CFPB Proposes Mortgage Servicing Rules

The Consumer Financial Protection Bureau proposed two sets of rules aimed at mortgage servicers. The first set, issued under the Truth in Lending Act, would require servicers to provide monthly mortgage statements that include a breakdown of payments by principal, interest, fees, and escrow; the amount of and due date of the next payment; recent transaction activity; and notices about fees. It also would require more advanced warning about interest rate adjustments on most adjustable-rate mortgages; advanced notice and pricing information before charging customers for “force-placed” insurance; and earlier information and alternatives for avoiding foreclosure. The second set of rules, issued under the Real Estate Settlement Procedures Act, would govern the handling of consumer accounts, correcting errors, and evaluating borrowers for alternatives to avoid foreclosure.  Comments are due October 9, with final rules expected in January 2013.

NYS Law on Out of State and Interstate Branching Activities

On July 18, 2012, Governor Cuomo signed S.677-B / A.10567A, which became Chapter 180 of the Laws of 2012.  The Chapter amends various provisions of the state banking laws that address in state and out of state branching activities of out of state banks, national banks and thrifts seeking to do business in New York.  The law updates and conforms state law branching rules to the branching activity sections of the Dodd-Frank Act.

NYS Reciprocal Public Deposits Bill Signed Into Law

This month, Governor Cuomo signed the reciprocal public deposits bill (Chapter 128 of the Laws of 2012), a measure that authorizes local governments to use reciprocal deposit services to increase the FDIC deposit insurance coverage of municipal deposits. This law, effective immediately, increases deposit insurance coverage from the current level of $250,000 per account to the maximum $50 million. Read more in The Gold Book.

Banking Agencies Issue Host State Loan-to-Deposit Ratios

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency recently issued the host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on June 30, 2011.In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production. Section 109 also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production.

Section 109 provides a process to test compliance with the statutory requirements. The first step in the process involves a loan-to-deposit ratio screen that compares a bank's statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a particular state.

A second step is conducted if a bank's statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate banking agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank's interstate branches.

A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate banking agency.

The updated host state loan-to-deposit ratios are attached.

Attachment (22 KB PDF)

NYBA Supports Increasing FDIC Insurance Coverage

The New York Bankers Association (NYBA) sent a letter to Governor Cuomo urging that he sign legislation which NYBA strongly supports (A.8971(Magnarelli)/S.5135(Martins)) that would authorize the State of New York, its local governments and public authorities to use reciprocal deposit services to increase the FDIC deposit insurance coverage of municipal deposits.  In the letter, the NYBA  points out that use of such security – which is already allowed in 47 states and the District of Columbia - would increase funds available for local lending, reduce the costs of managing deposits for the State and its constituent depositories, and increase the speed of recovery of any public deposits in a bank failure.  Because all deposits in excess of the FDIC insurance limit need to be fully collateralized in New York, permitting New York banks to participate in a reciprocal deposit service could eliminate the need to collateralize more than 90% of all deposits held by New York local governments.  In addition, increasing deposit insurance coverage from the current level of $250,000 per account to the maximum $50 million level would free up billions of dollars of local government deposits.  These funds could then be available for small business, mortgage, consumer and other loans in the local communities from which the deposits are drawn.

CFPB Issues Proposed Mortgage Regulation

The Consumer Financial Protection Bureau has issued two new proposed rules.  The first consolidates the mortgage disclosures required by the Truth in Lending Act and RESPA. This proposal impacts both application and closing disclosures and seeks to simplify loan terms and cost information.  Comments on this proposal must be submitted by either September 7, 2012 (for certain sections of the proposal) or November 6, 2012.

The second proposal deals with high cost mortgages and homeownership counseling requirements. Its comment period ends on September 7, 2012.

For more information on these proposed rules, visit http://www.consumerfinance.gov/

Caution Passing FDIC Fees to Customers

The FDIC has become aware that certain insured depository institutions are charging customers an "FDIC fee" or similarly described fee, apparently to compensate for some or all of its FDIC deposit insurance assessment costs. This Financial Institution Letter 33-2012 communicates the FDIC’s concerns and expectations when institutions assess these types of fees.

For further information visit www.fdic.gov or the FDIC chapter of The Gold Book.

The FDIC has become aware that certain insured depository institutions (IDIs) are charging customers an "FDIC fee" or similarly described fee, apparently to compensate the IDI for some or all of its FDIC deposit insurance assessment costs. This Financial Institution Letter (FIL) communicates the FDIC’s concerns and expectations when IDIs assess these types of fees.The FDIC has become aware that certain insured depository institutions (IDIs) are charging customers an "FDIC fee" or similarly described fee, apparently to compensate the IDI for some or all of its FDIC deposit insurance assessment costs. This Financial Institution Letter (FIL) communicates the FDIC’s concerns and expectations when IDIs assess these types of fees.The FDIC has become aware that certain insured depository institutions (IDIs) are charging customers an "FDIC fee" or similarly described fee, apparently to compensate the IDI for some or all of its FDIC deposit insurance assessment costs. This Financial Institution Letter (FIL) communicates the FDIC’s concerns and expectations when IDIs assess these types of fees.

OCC Integration of OTS

Pursuant to the Dodd-Frank Reform Act, the OCC took over supervision of federal savings associations on July 21, 2011. In an effort to integrate OTS policy guidance documents into a common set of supervisory policies that apply to both national banks and federal savings associations, the OCC has implemented a process of rescinding OTS documents that are, for example, no longer useful because of the elimination of the OTS or the passage of time or that duplicate existing OCC guidance.

Rescinded OTS Documents and Prevailing OCC Documents can be found at: http://www.occ.gov/news-issuances/bulletins/2012/2012-15a.pdf

International Collections

A new chapter, International Collections, has been added to The Gold Book. The uniform rules, published by the International Chamber of Commerce (ICC) outline interbank collection procedures for foreign deposits. The Gold Book highlights excerpts of the general provisions governing international collections.

Did you know?

Last week, the Federal Reserve Board announced the availability of a new video that explains how borrowers who believe they were financially harmed during the mortgage foreclosure process in 2009 and 2010 can apply for a free, independent foreclosure file review.

Both English and Spanish versions of the video are available for viewing on the Federal Reserve Board's website and on YouTube.

Did You Know?

FinCen Releases Guidance on Currency Transaction Report for Aggregation of Businesses with Common Ownership

On March 19, 2012, FinCEN released guidance on how institutions should report currency transactions regarding the aggregation of multiple transactions conducted by businesses with common ownership.

Although businesses may share a common ownership, there is a presumption that separate corporations are independent entities. Therefore, the currency transactions of separately incorporated businesses should not automatically be aggregated as being on behalf of any one person simply because those businesses are owned by the same person.

If a financial institution determines that these businesses (or one or more of the businesses and the private accounts of the owner) are not operating separately or independently of one another or their common owner - e.g., the businesses are staffed by the same employees and are located at the same address, the bank accounts of one business are repeatedly used to pay the expenses of another business, or the business bank accounts are repeatedly used to pay the personal expenses of the owner - the financial institution may determine that aggregating the businesses' transactions is appropriate because the transactions were made on behalf of a single person.

When determining whether to aggregate transactions as being on behalf of the same person, a financial institution must use its knowledge of relevant facts and circumstances. There are no universal rules applicable to any situation.⁶ Once a financial institution determines that the businesses are independent, then it should not aggregate the separate transactions of these businesses. Alternatively, once a financial institution determines that the businesses are not independent of each other or their common owner, then the transactions of these businesses should be aggregated going forward.

FIN-2012-G001 for more information and examples.

What's New: HSA Adjustments

The IRS has released the 2013 inflation adjusted amounts for Health Savings Accounts. See the Health Savings Accounts chapter of the Gold Book for all annual contribution limitations and high deductible health plan annual deductibles.

What's New: Compliance Resources Updated

The Compliance Resources chapter of The Gold Book has been updated. Updated information includes Financial Institution Regulators, Useful Telephone Numbers, and Useful Web Sites.

 

What's New: Reporting Non-Resident Alien Interest

The United States has maintained a longstanding policy of not taxing interest on deposits of nonresident aliens as a way to encourage foreign investment in U.S. banks. Except with respect to nonresident aliens from Canada, the U.S. has not required the reporting of interest on deposits to the IRS. On April 19, 2012, however, the IRS reversed this policy of the non-reporting of interest on deposits. Interest on deposits will still not be taxed, but when paid to certain nonresident aliens, it must be reported to the IRS. The final regulations under Treasury Regulations § 1.6049-4(b)(5)(i) and § 1.6049-8 will require U.S. financial institutions to report interest aggregating $10 or more paid to nonresident aliens commencing on or after January 1, 2013. Read more in the Backup Withholding chapter of The Gold Book.

What's New: HMDA threshold exemption adjustments

The Bureau of Consumer Financial Protection has recently published a change in the asset-size exemption threshold for depository institutions based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold has been adjusted to increase to $41 million from $40 million. The adjustment is based on the 3.43 percent increase in the average of the CPI-W for the twelve-month period ending in November 2011. Therefore, depository institutions with assets of $41 million or less as of December 31, 2011 are exempt from collecting data in 2012. See the Home Mortgage Disclosure Act chapter of The Gold Book for more information about the act.