CFTC Further Extends Certain No-Action Relief to Market Participants in Response to COVID-19

 

On September 11, the Commodity Futures Trading Commission (CFTC) announced the Division of Swap Dealer Intermediary Oversight (DSIO) and the Division of Market Oversight (DMO) are further extending certain elements of the temporary no-action relief issued in response to the COVID-19 pandemic that are set to expire on September 30. The extended relief expires January 15. Such relief includes relief for affected firms from CFTC regulations related to voice trading and other telephonic communications, as well as time-stamping requirements when located in remote, socially-distanced locations. No-action relief will also be extended for SEFs and DCMs from certain CFTC regulations regarding audit trails, recording of oral communications, and related requirements as a result of the displacement of trading personnel from their normal business sites. Release.

SEC Updates and Expands Disclosures for Banking Registrants

 

On September 11, the U.S. Securities and Exchange Commission (SEC) announced that it has adopted rules to update and expand the statistical disclosures that bank and savings and loan registrants provide to investors. The rules also eliminate certain disclosure items that are duplicative of other Commission rules and requirements of U.S. GAPP or IFRS. Release.

Adverse Market Refinance Fee Implementation Now December 1

 

Fannie Mae and Freddie Mac have postponed the implementation date of their Adverse Market Refinance Fee from September 1 to December 1, per direction from the Federal Housing Finance Agency (FHFA). Certain Fannie Mae and Freddie Mac loans will also be exempt from the Adverse Market Refinance Fee. The fee is intended to cover costs to Fannie Mae and Freddie Mac associated with protections extended to renters and borrowers affected by COVID-19. Release.

Treasury and IRS Issue Guidance on Deferred Payroll Taxes

 

On August 28, the U.S. Treasury Department and the IRS issued guidance to employers regarding the executive action taken earlier this month to defer certain employee payroll taxes through the end of the year. The guidance allows employers to defer payment through the end of 2020 of the employee’s portion of Social Security payroll tax for employee’s earning monthly pre-tax wages of $4,000 or less. Release.

Rating Agency Developments (August 24 – September 1)

 

On September 1, KBRA published its Structured Finance: CMBS report titled Coronavirus (COVID-19): Affiliate of On-Demand Office Provider Regus Files for Bankruptcy—CMBS Exposure Examined. Report.

On September 1, DBRS Morningstar published its methodology titled DBRS Morningstar Global Structured Finance Related Methodologies. Methodology.

On August 28, DBRS Morningstar published its methodology titled U.S. Residential Mortgage Servicer Rankings. Methodology.

On August 28, DBRS Morningstar published its methodology titled U.S. Residential Mortgage Originator Rankings. Methodology.

On August 28, KBRA published its report titled CMBS/RMBS: Single-Borrower SFR Comprehensive Surveillance. Report.

On August 27, KBRA published its rating methodology titled ABS: Global Auto Loan ABS Rating. Methodology.

On August 24, KBRA published its research report titled Structured Credit: Coronavirus (COVID-19): U.S. BSL CLO Sector Exposure Map: July 2020. Report.

SEC Modernizes the Accredited Investor Definition

 

The Securities and Exchange Commission (SEC) amended the definition of “accredited investor” to more effectively identify institutional and individual investors that have the knowledge and expertise to participate in private capital markets. The amendments allow individuals to qualify as accredited investors based on measures of financial sophistication, including professional knowledge, experience or certification, as well as existing tests for income or net worth. The updates to the definition also expand the entities that may qualify as accredited investors. Release.

CFPB Issues Report on Impacts of COVID-19 on Consumer Credit

 

On August 31, the Consumer Financial Protection Bureau (CFPB) issued a report examining the early impact of the COVID-19 pandemic on consumer credit. The report noted no significant negative impact on consumer credit or delinquencies, focusing on mortgage, auto loans, credit cards and student loans, from March 2020 to June 2020, suggesting programs such as the CARES Act may have positively impacted consumer credit during this time. Report.

CFPB Proposes New Category of Qualified Mortgages

 

On August 18, the Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking (NPRM) to create a new category of qualified mortgage (QM) loans exempt from Regulation Z’s ability-to-repay requirements. The new “Seasoned QM” category would include certain fixed rate, first lien loans that the creditor has held in portfolio for a seasoning period of 36 months and that meet certain performance requirements at the end of such period. The proposal would also permit loans in temporary forbearance as a result of disaster or pandemic-related emergencies to qualify for Seasoned QM status if certain conditions are met. Comments on the proposal will be due 30 days after publication in the Federal Register. Release. NPRM.

CFTC Approves Proposed Amendments to Margin Requirements for Swap Dealers and Major Swap Participants

 

On August 14, the Commodity Futures Trading Commission (CFTC) approved two proposed amendments to margin requirements for Swap Dealers and Major Swap Participants (the “CFTC Margin Rule”). The first proposal would, among other changes, revise the method for determining whether an entity comes within the scope of the initial margin requirements under the CFTC Margin Rule and the timing for compliance. The second proposal would permit the application of separate minimum transfer amounts for initial and variation margin, as well as a minimum transfer amount of up to $50,000 for separately managed accounts. Each proposal will be subject to a 30-day comment period following publication in the Federal Register. Release.

Regulatory Agencies Finalize Changes to Covered Fund Provisions of the Volcker Rule

 

On July 31, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the U.S. CFTC, the Federal Deposit Insurance Corporation (FDIC), and the U.S. Securities and Exchange Commission (SEC) published a final rule amending the regulations that implement Section 13 of the Bank Holding Company Act (the “BHC Act”), commonly known as the Volcker Rule. The final rule, which goes into effect on October 1, is intended to improve and streamline the covered fund provisions of Section 13 of the BHC Act. The final rule aims to accomplish this by, among other things, permitting the following activities: qualifying foreign excluded funds; revising the exclusions from the definition of “covered fund” for foreign public funds, loan securitizations, public welfare investments, and small business investment companies; creating new exclusions from the definition of covered fund for credit funds, qualifying venture capital funds, family wealth management vehicles, and customer facilitation vehicles; modifying the definition of “ownership interest”; and providing that certain investments made in parallel with a covered fund, as well as certain restricted profit interests held by an employee or director, need not be included in a banking entity’s calculation of its ownership interest in the covered fund. OCC Bulletin. Federal Register Final Rule.