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    US Agencies Publish Regulatory Updates in December 2021

    December 23, 2021

    The Federal Deposit Insurance Corporation (FDIC) published its Quarterly Banking Profile for the third quarter of 2021. The report includes featured articles on conditions across major commercial real estate property types and covers implications of the record deposit inflows for banks during the pandemic. The National Credit Union Administration (NCUA) Board issued a final rule to permit federal credit unions to purchase mortgage servicing assets, referred to as mortgage servicing rights in the proposed rule, from other federally insured credit unions subject to certain requirements; the final rule becomes effective on April 01, 2022. Additionally, US Agencies issued a notice on the determination of the results of the review of the definition of qualified residential mortgage, the community-focused residential mortgage exemption, and the exemption for qualifying three-to-four unit residential mortgage loans.

    FDIC Report on Quarterly Banking Profile

    The report highlights that two-third of all banks reported annual improvements in quarterly net income. The report includes a special feature that analyzes conditions across major commercial real estate property types and discusses FDIC-insured institutions’ exposure to commercial real estate loans, credit quality, and potential challenges ahead. Market conditions improved with economic recovery in 2021, but some of the changes the commercial real estate industry experienced in the pandemic may be long-lasting. The issues facing CRE will be important considerations for a large share of the banking industry. Initially the pandemic threatened to significantly challenge banks’ commercial real estate loan quality, but loan delinquency rates remained low through third quarter 2021 against the backdrop of economic rebound, stimulus support, and loan forbearance.

    Final Rule on Mortgage-Servicing Assets

    The final rule removes the prohibition, on federal credit unions, from purchasing mortgage-servicing rights under the Investment Rule. The final rule also removes the current defined term “mortgage servicing rights” in the Investment Rule and replaces it with the term “mortgage servicing assets.” The final rule explicitly permits a federal credit union to purchase mortgage-servicing assets from other federally insured credit unions, provided

    • after the last full examination of the credit union, the federal credit union received a composite Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity (CAMELS) rating of 1 or 2, which also included a Management rating of 1 or 2.
    • the underlying mortgage loans of the mortgage-servicing assets are loans the federal credit union is empowered to grant.
    • the federal credit union purchases the mortgage servicing assets within the limitations of the federal credit union's board of directors' written purchase policies.
    • the board of directors, or the federal credit union's investment committee, approves the purchase in advance.

    Notice on Review Under Credit Risk Retention Regulation

    The US Agencies that are providing notice of determination of the results of the review are Board of Governors of the Federal Reserve System (FED), the Department of Housing and Urban Development (HUD), FDIC, the Federal Housing Finance Agency (FHFA), the Office of the Comptroller of the Currency, the U.S. Treasury (OCC), and the U.S. Securities and Exchange Commission (SEC). As part of the Credit Risk Retention Regulations, the agencies are required to review the definition of qualified residential mortgage periodically, the community-focused residential mortgage exemption, and the exemption for qualifying three-to-four unit residential mortgage loans. After completing the review, the agencies have determined not to propose any change to the definition of qualified residential mortgage, the community-focused residential mortgage exemption, or the exemption for qualifying three-to-four unit residential mortgage loans.

     

    Related Links

    Effective Date: April 01, 2022 (Rule on Mortgage-Servicing Assets)

    Keywords: Americas, US, Banking, Securities, Commercial Real Estate, Credit Risk, Financial Stability, Mortgage Servicing Assets, Lending, Residential Mortgage Loans, FDIC, NCUA, US Agencies

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