FEDERAL GOVERNMENT RELATIONS
Housing Agencies Release New Requirements to Reduce Appraisal Bias
The Federal Housing Administration and Federal Housing Finance Agency announced Wednesday new policies allowing borrowers to challenge property appraisals if they believe they were inaccurate or biased.
FHA's new requirement for lenders participating in its single-family mortgage program will enable borrowers to request a re-assessment if they believe bias was involved. At the same time, FHFA's new reconsideration of value, or ROV, policies at Fannie Mae and Freddie Mac will let borrowers request that an appraiser re-assess the appraised value of a property due to potential appraisal reporting deficiencies or inappropriate selection of comparable properties. The policies will take effect later this year.
In 2023, FHFA and the Department of Housing and Urban Development, which oversees FHA, established a working group to develop consistent ROV standards. Among other things, the FHA policy will require lenders to disclose to borrowers that they may request an ROV with instructions that explain the process, including what information will be required from a borrower and the expected ROV processing times. Also, underwriters should be trained to identify and remedy appraisal deficiencies, including racial and ethnic bias. The Fannie and Freddie policies have similar requirements.
"We know that biased home appraisals not only disproportionately harm homeowners of color, but stunt economic opportunity for the communities we serve," HUD Acting Secretary Adrianne Todman said. "Today, we are announcing a new step in our work to root out racial and ethnic bias in home valuations, which will give borrowers greater ability to have their home valuation reconsidered."
House Lawmakers Scrutinize Proposed Bank Merger Policy Proposals
Lawmakers from both parties questioned recent efforts by the banking agencies to change how regulators evaluate bank merger applications Wednesday. Representatives from the Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. appeared before the House Financial Services Subcommittee on Financial Institutions and Monetary Policy to discuss proposed policy revisions by both agencies. The FDIC proposed expanding the criteria it uses to review merger applications in March. The OCC has proposed ending the time limit for automatic approvals of mergers of the banks that it supervises.
In his opening remarks, Subcommittee Chairman Andy Barr, R-Ky., said clear expectations and timeliness for bank merger approvals are critical. "Mergers of financial institutions can promote competition and generate cost savings that can then be passed on to consumers through lower interest rates on loans, reduced fees and higher interest paid on deposits," Barr said. "Bank mergers, especially those involving midsize and regional banks, help preserve a robust banking system and promote competition. They also allow community banks to overcome onerous regulations and meet technology needs."
Rep. David Scott, D-Ga., noted that when banks publicly announce that they are exploring a merger, time matters. "Uncertainties about progress [and] outcomes weigh on our customers, local communities, employees, shareholders," he said. Scott asked how the FDIC can assure banks and the public that regulators will make decisions promptly and fairly that are in the best interests of everyone.
Watch a recording of the hearing
CFPB Report Claims Health Savings Accounts Have 'Hidden Costs'
In a new report published Wednesday, the Consumer Financial Protection Bureau said the "complex" fee structures for many health savings accounts may "obscure the true cost of the product" and, combined with low-interest yields, reduce the amount of funds consumers can spend on healthcare products.
In the document, the CFPB said that HSAs could include monthly maintenance fees, paper statement fees, outbound transfer fees, and account closure fees. The report also alleged that HSAs "consistently offer relatively low-interest rates" and that some consumers faced higher expenses due to the higher deductibles required for an insurance plan to offer an HSA. "When consumers end up with an HSA with high fees and inferior terms, it directly reduces the funds they can allocate to their healthcare needs," the authors concluded.
The CFPB didn't propose any new rulemaking in response to the report's conclusions, but in an accompanying statement, it characterized HSAs as having "costly, complex and captive junk fee structures." Such fees "are costly and typically unavoidable," the bureau said.
FOMC Sees 'Lack of Further Progress' in Reducing Inflation
Citing a "lack of further progress" in recent months in dialing back inflation, the Federal Open Market Committee announced Wednesday that it will maintain the target range for federal funds rate at 5.25-5.5%. The FOMC also reiterated that it does not expect to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward the Federal Reserve's 2% goal.
"So far this year, the data have not given us that greater confidence," Fed Chairman Jerome Powell said in a news conference. "In particular, readings on inflation have come in above expectations. It is likely that gaining such greater confidence will take longer than previously expected."
When asked whether the FOMC may raise rates later this year, Powell said that outcome was unlikely. "I think we'd need to see persuasive evidence that our policy stance is not sufficiently restrictive to bring inflation sustainably down to 2% over time. That's not what we think we're seeing," he said.
CFPB Claims 'Complex' Pricing Drives Up Cost of Financial Products
The Consumer Financial Protection Bureau Tuesday published research alleging that when financial institutions attach "complex" pricing structures to products such as credit cards, mortgages and checking accounts, consumers pay more for those products. The bureau said its research has implications for understanding how so-called "junk fees" impair competitive pricing but didn't propose any new policies as a result of the findings.
For the experiment, researchers divided participants into three groups of sellers and buyers, with different rules in each group for how sellers could price their products. For example, one group of sellers was allowed to pitch products using only a single price point, while another group could pitch products using up to 16 "subprices" that added up to a single price. The report concluded that allowing sellers to incorporate complex pricing schemes increased their asks by more than 60% and increased actual transaction prices by more than 70%.
The CFPB claimed the results show how breaking up prices into various fees can increase costs for a range of financial products. "These findings contribute to a growing consensus of research and real-world observations showing that junk fees increase overall prices beyond what a fair and competitive market would allow," the CFPB said in a statement.
Report: Biden Administration to Ease Federal Marijuana Restrictions
The Biden administration will soon propose easing federal restrictions on cannabis by reclassifying the drug for the first time in 50 years, the Associated Press and other media outlets reported Tuesday. Under the proposal, marijuana would be reclassified so it is no longer a strictly controlled Schedule I drug but, instead, a Schedule III drug, which would expand the availability of cannabis for medicinal purposes. Examples of Schedule III drugs include testosterone and Tylenol with codeine.
FHFA Issues Fair Lending Final Rule
The Federal Housing Finance Agency issued a final rule on Monday codifying many of its existing practices and programs regarding fair housing and fair lending oversight of its regulated entities: Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
Among other provisions, the rule makes changes to Fannie's and Freddie's Equitable Housing Finance Plans to promote greater accountability, adds oversight of unfair or deceptive acts or practices to FHFA's fair housing and fair lending oversight programs, requires additional certification of compliance by all the entities, and establishes more precise standards related to fair housing, fair lending and equitable housing principles for the entities' boards.
The final rule also creates a new requirement for FHLBs to annually report on any actions they voluntarily take to address barriers to sustainable housing opportunities for underserved communities. However, it does not require the FHLBs to undertake such actions or engage in the planning process required of Fannie or Freddie.