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Regulatory Brief for August 2021: Digital Banking Guidance & a Focus on Inclusion

Risk & Compliance

Regulatory Brief for August 2021: Digital Banking Guidance & a Focus on Inclusion

Posted by Stephanie Lyon on Sep 7, 2021 6:00:00 AM
Stephanie Lyon
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Each month, the Ncontracts compliance team talks about the most pressing regulatory updates and trends (and what you need to know and do about them) in the Ncast podcast Regulatory Brief. Our team goes into deeper detail and covers more topics in these episodes of the Ncast.  

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Remember you can always log into Ncomply for updates and implementation guides on changes to state and federal regulations. 

Here are a few highlights from the Ncast Regulatory Brief from August 2021: 

FFIEC guidance on IT and digital banking. The Federal Financial Institutions Examination Council (FFIEC) issued new guidance titled “Authentication and Access to Financial Institution Services and Systems,” replacing earlier guidance from 2005 and 2011. The guidance has a risk management focus and provides financial institutions with examples of effective authentication and practices for digital banking services and information systems. It offers insight into identifying risks and controls for business customers, consumers, employees, and third parties that access digital banking services and systems. 

Making inclusion a priority for FIs 

CFPB issues Juneteenth clarification. President Biden signed the Juneteenth National Independence Day Act into law on Thursday, June 17, 2021—just two days before the holiday. Since the holiday fell on a Saturday, many financial institutions were caught off guard and weren’t sure if it was to be observed Friday, June 18th, or Saturday, June 19th. This had an impact on disclosures, especially in the mortgage area, with considerations for business continuity and vendor management. 

In August, the CFPB issued an interpretive rule on Juneteenth’s impact on Regulation Z. It said that if the relevant time period began on or before June 17, 2021, then Saturday, June 19, 2021, was a business day. If the relevant time period began after June 17, 2021, then Saturday, June 19, 2021, was a non-business day.  

Fannie Mae and rental payment history. Beginning September 18, 2021, Fannie Mae’s Desktop Underwriter will enable single-family lenders—with permission from mortgage applicants—to automatically identify recurring rent payments in the applicant’s bank statement data to deliver a more inclusive credit assessment. This is incredibly helpful to long-term renters who are trying to purchase their first home and may not have an extensive credit history. Currently, fewer than five percent of renters have their rent payments reported on their credit bureau report—putting many prospective first-time homebuyers at a disadvantage. There is also a significant percentage of Hispanic and African- American applicants who have little established credit history, and some have specifically stated that their single biggest obstacle to getting a mortgage is lack of credit history.  

It's important to note that only consistent rent payments will be considered. “Any records of missed or inconsistent rent payments identified in the bank statements will not negatively affect the applicant's ability to qualify for a loan sold to Fannie Mae.” In short, it’s a rule that intended to only help—never hurt—prospective borrowers. 

Board diversity data. The New York Department of Financial Services (NYDFS) announced it will collect data on gender, racial, and ethnic composition of boards of New York-regulated banking and non-depository financial institutions with more than $100 million in assets. It also applies to entities authorized to engage in virtual currency business activity. The data will allow NYDFS to measure progress towards diversity, equity, and inclusion (DEI) goals and increase transparency and accountability. Meanwhile the SEC will be requiring most companies listed on Nasdaq to satisfy minimum targets for gender and ethnic diversity on their boards, or to explain in their public disclosures why they are unable to meet those targets starting in 2022.  

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Topics: Risk & Compliance