By David Smith of Accume Partners

One can say for certain that there has been a lot of change with the new administration.  President Trump has appointed new members to several key agencies that has, and could further impact, financial institutions.  The extent of the impact will not be fully known until the coming months are upon us.  There also has been a shift from the focus on adding new regulations to allow for some de-regulation, which could be very beneficial to financial institutions.

First, let us take a look at the newly nominated head of the Consumer Financial Protection Agency (CFPB), Kathy Kraninger.  President Trump announced on Saturday June 16th that he will be nominating Kathy Kraninger to head the CFPB.  Mick Mulvaney has been keeping the seat warm since he was appointed as acting Director of the CFPB on November 25, 2017.  Ms. Kraninger was recently associate director at the Office of Management and Budget.  She has also held many positions on Capitol Hill.   In her current position, Kraninger oversees the budget for financial regulators.  She must be approved by the Senate before she can take over the position.  Kraninger may continue with de-regulation or she may hold off on the current momentum.

In addition, here are other agencies that are undergoing changes.

CFPB President Donald Trump nominated Kathy Kraninger to lead the Consumer Financial Protection Bureau where Mick Mulvaney is now acting director.
CFTC Dawn Stump (Republican) and Dan Berkovitz (Democrat) are awaiting their confirmation as Commissioners.
FDIC Thomas Hoenig, Vice Chair (Republican) Term to end in Q2 of 2018. President Trump will select a Democrat for the Vice Chair and Internal Director.
SEC Robert Jackson is President Trump’s Democratic pick for Commissioner. Kara Stein will remain in her post as Commissioner until a new nominee is announced.

*Sources can be found at the end of the article

The good news for financial institutions is that some regulatory relief is finally here!!!  What does this mean for you exactly?  On May 24th, 2018, President Donald Trump signed S. 2155 – Economic Growth, Regulatory Relief, and Consumer Protection Act into law.  The new bill was a critical first step toward bringing regulatory relief to financial institutions.  The bill:

  • Provides Qualified Mortgage designation for most mortgages held in portfolio by banks with less than $10 billion in assets;
  • Makes it easier for lenders to close loans without waiting when rates decrease;
  • Ends mandated stress tests for banks with under $100 billion in assets;
  • Relieves banks that originated fewer than 500 mortgage loans per year from the expanded Home Mortgage Disclosure Act (HMDA) data points;
  • Provides relief from appraisal requirements for smaller mortgages in rural areas;
  • Simplifies capital calculations for community banks;
  • Institutes longer exam cycles for community banks; and
  • Provides relief from the Volcker Rule for most community banks.

Some provisions of the regulatory reform bill took effect immediately while others have future specified effective dates (examples below).  Further still, some are open-ended and will require rulemakings by the regulatory agencies to take effect.  The focus of this article is to discuss some of the major points of the bill, how they may impact your institution, and when they will take effect.

One of the most discussed rule changes by bankers stemming from the bill is Section 104 – Home Mortgage Disclosure Act Adjustment and Study (HMDA relief).  Unfortunately, it has an unspecified effective date requiring further regulations to take effect.  Once it is effective, banks that originate fewer than 500 closed-end mortgage loans or less than 500 open-end lines of credit in each of the two preceding calendar years will be relieved from complying with the new expanded data points that took effect January 1, 2018.  This will reduce the necessary time and efforts to properly collect and report all of the expanded data fields.

Other significant aspects of the law with unspecified effective dates are noted below.  Section 101 – Minimum Standards for Residential Mortgage Loans, provides that certain mortgage loans that are originated and retained in portfolio by institutions with less than $10 billion in consolidated assets will be deemed qualified mortgages under the Truth in Lending Act (TILA) while maintaining consumer protections.  Section 109 – No Wait for Lower Mortgage Rates, removes the three-day wait period required for the combined TILA/RESPA mortgage disclosure if a creditor extends to a consumer a second offer of credit with a lower annual percentage rate.  Section 103 – Appraisal Exemption for Rural Areas, provides an exemption from any appraisal requirement if certain conditions are met (rural area, loan less than $400,000, originator has a federal regulator and originator documents three or more appraisers and documents lack of availability).   These three aforementioned changes allow more flexibility for lenders.  Section 201 – Highly Capitalized Banks, requires the federal banking agencies to develop a specified Community Bank Leverage Ratio (the ratio of a bank’s equity capital to its consolidated assets) for banks with assets of less than $10 billion. Such banks that exceed this ratio shall be deemed to be in compliance with all other capital and leverage requirements.

Some sections that are effective immediately (just needing regulations to be confirmed) include Section 210 – Examination Cycle, raises the consolidated asset threshold from $1 billion to $3 billion for well-managed and well-capitalized banks to qualify for an 18-month examination cycle.  Section 203 – Community Bank Relief, provides that banking entities will be exempt from Section 13 of the Bank Holding Company Act (Volcker Rule) if they have less than $10 billion in total consolidated assets, and total trading assets and trading liabilities that are not more than 5% of total consolidated assets.

The aforementioned changes are only a highlight of the handful of regulations impacted by the law.  This is a groundbreaking effort to reverse some of the recent onslaught of additional regulatory requirements.  This is a change from the increased regulation and scrutiny we are seeing elsewhere, such as from the New York Department of Financial Services.  The regulatory pullback from the law is a welcome breath of fresh air from bankers.  Stay tuned and watch out for the effective dates stemming from the law and how the changes impact your institution.

David is a Director in the Risk & Regulatory Advisory Services Practice for Accume Partners and has over 13 years of regulatory compliance experience in the financial institutions industry.  He provides regulatory compliance services to the firm’s financial institutions clients. David performs and oversee consumer compliance audits and consulting reviews (all lending, deposit, and alphabet regulations), specialty audits and reviews (BSA/AML, Fair Lending, UDAAP and CRA) and compliance management audits for a wide range of clients. David is a former regulator with the Office of the Comptroller of Currency. David can be reached at or at 570-606-7423.