MBA Asks Federal Agencies to Finalize Rule on Regulatory Reductions

The Mortgage Bankers Association, in a letter to federal regulatory agencies, requested the agencies provide final rules stemming from their proposal to simplify certain aspects of their capital rules.

The July 24 letter to the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System asks the agencies to move forward with final rules “as soon as possible” to create more certainty for financial institutions and eliminate regulatory challenges these institutions currently face.

The Agencies’ Proposal, issued in September 2017, focused on two specific areas: 1) regulatory deductions and 2) High Volatility Commercial Real Estate.

Under the first, the Agencies proposed to increase the cap on the amount of mortgage servicing assets that can be included in Tier 1 capital from 10% to 25%; and eliminate the 15% cap on the aggregate amount of MSAs, deferred tax assets and certain other assets that can be included in Tier 1 capital.

“While MBA supports the Agencies’ efforts to simplify the rules in order to reduce unnecessary complexity and eliminate provisions that create unnecessary burdens and hinder financial stability and economic growth, it is important for the industry to have final rules issued as soon as possible,” wrote MBA Senior Vice President of Public Policy and Industry Relations Stephen O’Connor. “Therefore, we respectfully urge the Agencies to finalize the provisions in the Proposal relating to the regulatory deduction rules promptly. The lack of final rules continue to create capital planning challenges for many banks due to lack of certainty on several issues addressed in the Proposal.”

MBA said finalizing the Proposal (reflecting the recommendations by MBA and many member institutions as well as other stakeholders to increase the proposed 25% cap to 50% and reduce the 250% risk weighting to no more than 130%) immediately will provide significant benefits for Finance and Treasury teams at depository institutions.

“If the Agencies will not finalize the Proposal in the next week, MBA would appreciate some feedback from the Agencies on the timeframe for finalizing it,” O’Connor wrote. “Such feedback would provide some level of certainty for the industry.”

In the second area, MBA noted the HVCRE component has largely been superseded by contrary provisions in the recently enacted S.2155, Economic Growth, Regulatory Relief and Consumer Protection Act, signed into law this past May. Therefore, MBA said, “it would seem appropriate to formally withdraw it, and focus instead on finalizing the regulatory deduction as soon as possible. We note that, separate and apart from the Proposal, the Agencies will need to initiate a new rulemaking to conform current HVCRE regulations to S. 2155.”