GAO Releases Report on Mortgage Servicing

On July 25, the GAO released a report titled “Mortgage Servicing: Community Lenders Remain Active under New Rules, but CFPB Needs More Complete Plans for Reviewing Rules.” At the request of the House Committee on Financial Services, the GAO report outlines and analyzes the effect of the CFPB’s 2013 mortgage-servicing rules and the banking regulators’ implementation of the Basel III framework on credit unions and community banks’ (collectively, community lenders) mortgage servicing activities. Specifically, the GAO report examines (i) community lenders’ participation in the mortgage servicing market, as well as the potential effect of the new mortgage servicing rules on them; (ii) the potential impact that the Basel III framework could have on community lenders’ decisions to hold or sell Mortgage Servicing Rights (MSR); and (iii) regulators’ processes for estimating the impact of the new regulations.  Read more…


CSBS Names Charles Cooper Chairman of Board of Directors; Calls for Regulatory Collaboration

On May 24, the Conference of State Bank Supervisors (CSBS) announced several new officers, including Charles G. Cooper, Commissioner of the Texas Department of Banking, who will serve as the chairman of the CSBS Board of Directors. In his new role, Cooper delivered remarks at the State-Federal Supervisors Forum on May 26, addressing the following current issues facing the banking industry: (i) community banking; (ii) cybersecurity; and (iii) financial services provided by non-depository institutions, commenting on the expansion of the Nationwide Multistate Licensing System & Registry to include check cashers, debt collectors, and money service businesses. Cooper emphasized the significance of community banks, stating, “[t]heir role in providing credit and banking services is just as important as that of the largest financial intuitions.” Observing the decline in the number of community banks, Cooper called on Congress to implement “right-size regulation through legislation,” and stressed that regulators “need to continue to right-size [their] regulatory and supervisory processes.” Regarding cybersecurity, Cooper mentioned the CSBS Executive Leadership on Cyber Security (ELOC) program, which is intended to “bring [the] cyber issue out of the backroom and into the Board room.” Finally, Cooper concluded by calling on state and federal regulators, including the newer CFPB and FinCEN agencies, to “commit to working better together.”


FDIC Provides Commentary on Responsibilities and Duties of Banks’ Boards of Directors

On April 5, the FDIC issued a special Corporate Governance Edition of its Supervisory Insights publication titled, “21st Century Reflections on the FDIC Pocket Guide for Directors.” The new edition provides guidance to community bank boards of directors as well as an expanded, community bank-focused commentary on the FDIC Pocket Guide for Directors, which was issued in 1988. It covers a range of topics, such as the proper roles of directors and officers, as well as objectives for the development of policies and procedures for risk management and strategic planning. While the existing version of the Pocket Guide remains unchanged, this edition of Supervisory Insights incorporates more recent guidance and resources that the FDIC has provided since 1988. For example, the FDIC emphasizes that, “[i]n addition to covering areas outlined in the Pocket Guide and Safety and Soundness Standards, community bank directors should ensure that senior management has established appropriate risk management policies and procedures in Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) compliance, information technology and cyber risk, and compliance with Community Reinvestment Act and consumer protection laws and regulations.”


OCC Announces Workshop for Bank Directors

On May 2 through May 4, the OCC will host a workshop in Wilmington, Delaware for directors of national community banks and federal savings associations. With a focus on directors’ duties and core responsibilities, the workshop will discuss major laws and regulations and is intended to increase familiarity with the examination process. The OCC is limiting the workshop’s capacity to the first 35 registrants.

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CFPB Adopts Procedural Rule Establishing Application Process for the Designation of Rural Areas

On March 3, the CFPB adopted a procedural rule to establish an application process for identifying an area as rural or underserved that the CFPB, pursuant its authority under the Dodd-Frank Act, had not yet designated as rural. In December 2015, Congress passed the FAST Act, which contained several provisions intended to provide regulatory relief to community banks, including implementing a process under which banks and other stakeholders could petition the CFPB for rural or underserved designations in certain areas for the purposes of Federal consumer financial law. The CFPB’s recently issued procedural rule establishes such an application process. Under the process, banks must submit an application—by mail, email or hand delivery—to the CFPB Rural Application Coordinator containing, among other things, the following: (i) identifying information for the proposed designated rural area; (ii) justification for the proposed designation, providing supporting information from the U.S. Census Bureau, the Office of Management and Budget, the Department of Agriculture, and the State Bank Supervisor; and (iii) the area’s population density, including comparative information regarding “the population density of any nearby area with a greater population density that has been designated by the Bureau as a rural area.” The CFPB will begin accepting applications on March 31, 2016.