Banking Regulatory Agencies Finalize Rules on Real Estate Appraisals and Regulatory Treatment of Emergency Capital Facilities

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On September 29, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve) and the Federal Deposit Insurance Corporation (FDIC), together with the OCC and the Federal Reserve (the “Agencies”), published final rules temporarily deferring real estate appraisal requirements for financial institutions and mitigating the regulatory capital and liquidity effects for banks that participate in certain COVID-related Federal Reserve liquidity facilities. The final rules are identical or substantially similar to interim final rules currently in effect that were issued earlier this year. The final rule on real estate appraisals temporarily allows financial institutions to defer completion of appraisals and evaluations on certain residential and commercial real estate transactions for up to 120 days after closing. The final rule on the Federal Reserve liquidity facilities provides that banking organizations that participate in the Federal Reserve’s Money Market Mutual Fund Liquidity Facility and Paycheck Protection Program Liquidity Facility are permitted to exclude exposures acquired through their participation in such programs when determining their compliance with the Agencies’ regulatory capital rule and/or liquidity coverage ratio rule. OCC Release. Federal Reserve Release. FDIC Release. 

Agencies Issue Corrections to Standardized Approach for Counterparty Credit Risk; Final Rule

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On September 17, the OCC along with the Board of Governors of the Federal Reserve System and the FDIC published a final rule that makes technical corrections to certain provisions of the capital rule related to the standardized approach for counterparty credit risk (SA-CCR), which is used for calculating the exposure amount of derivative contracts. Final Rule.

CFTC Finalizes Rules to Improve Swap Data Reporting

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On September 17, the Commodity Futures Trading Commission (CFTC) approved three final rules to revise CFTC regulations for swap data reporting, dissemination and public reporting requirements for market participants. The CFTC also approved a final rule that will permit derivatives clearing organizations organized outside of the U.S. to be registered with the CFTC. The CFTC also approved a supplemental notice of proposed rulemaking regarding amendments to the CFTC’s regulations that govern bankruptcy proceedings for commodity brokers. Release.

Rating Agency Developments (September 3 – September 16)

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On September 16, DBRS Morningstar released an updated methodology titled Rating U.S. Wholesale Securitizations. Methodology.

On September 16, KBRA released a research report titled Global ABS Conference Recap: Day One. Report.

On September 15, KBRA released a research report titled Structured Finance: Virtual Conference: Credit & COVID-19 – Is the Worst Behind Us? Report.

On September 11, DBRS Morningstar released an updated methodology titled Third-Party Due-Diligence Criteria for U.S. RMBS Transactions. Methodology.

On September 11, KBRA released a research report titled RMBS Credit Indices: August 2020. Report.

On September 3, DBRS Morningstar released a report titled Rating European Consumer and Commercial Asset-Backed Securitizations. Methodology.

HUD Announces Flexibilities for CARES Act’s Emergency Solutions Grant Program

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On September 9, the Department of Housing and Urban Development (HUD) announced additional requirements and flexibilities for $3.96 billion in emergency solutions grants provided to states and units of local government under the CARES Act. These flexibilities allow for additional eligible activities for which the recipients can use the funds and also extends the obligation deadline for the recipients. Release.

NY Fed Announces New CMBS Counterparties for 13(3) Facilities

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On September 9, the Federal Reserve Bank of New York announced the first wave of new counterparties selected as part of the expansion program announced earlier in September. Widening the eligibility criteria for agency CMBS counterparties is intended to increase the operational capacity and reach of agency CMBS purchases. Two firms were selected to support the Commercial Paper Funding Facility (CPFF). Seven additional firms were selected to support the Secondary Market Corporate Credit Facility (SMCCF). The application process is open and ongoing and the New York Fed has announced its intention to name additional counterparties and agents, as applicable, for the CPFF, SMCCF and Term Asset-Backed Securities Loan Facility in the coming weeks. Release.

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

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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

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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

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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

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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.