President Donald Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) into law on May 24.
The bill, which eases some Dodd-Frank Act requirements, overwhelmingly passed in the U.S. House of Representatives on May 22. The final tally was 258-119 votes for the bill. Thirty-three Democrats voted for the bill. It previously passed the Senate March 14 by a vote of 67 to 31.
The bill’s passage is considered a significant win for the banking industry; it was supported by community banks, banking associations and credit unions.
Key provisions of the bill, not tied to asset size, include:
TRID Relief. The bill removes the three-day waiting period when a lender extends a second offer of credit with a lower APR.
Exemption for Appraisal Requirement. Removes the requirement to use a state-certified or licensed appraiser on rural mortgages of less than $400,000.
HMDA Exemption. Banks that originate fewer than 500 closed-end mortgages or 500 open-end lines of credit are exempted from collecting HMDA data, provided they have a “satisfactory” CRA rating.
Tiered relief provisions in the Act include:
Small BHC policy. The bill raises the Fed’s Small Bank Holding Company Policy Statement asset threshold to $3 billion from $1 billion.
Exam Cycle. Well-managed, well-capitalized banks with less than $3 billion in assets qualify for an 18-month exam cycle.
QM Loans. A new category for qualified mortgages for banks with less than $10 billion in assets. QM loans would be deemed to comply with the ability to repay requirements of TILA but would not have to follow Appendix Q of the ability-to-repay rule. Banks need to retain the loan in portfolio, subject to limited exceptions such as transferring the loan to another qualifying institution.
Escrow Exemption. Banks under $10 billion in assets that make fewer than 1,000 first lien mortgages on principal dwelling are exempted from TILA escrow requirements.
Capital Rules. Establishment of a Community Bank Leverage Ratio of no less than 8 percent or no more than 10 percent for community banks with less than $10 billion in assets.
Volcker Exemption. For banks with less than $10 billion in assets and whose total trading assets and liabilities don’t exceed 5 percent of total assets exempted from the Volcker rule.
Some of the other provisions of the bill include:
- Veterans Administration lenders required to demonstrate material benefit to borrower when refinancing their mortgage.
- Federal Savings Associations with assets of $20 billion or less can elect to operate with national bank powers.
- Credit bureaus to provide consumers with free security freezes.
- Active duty service members can access free credit monitoring.
- Foreclosure relief provisions for service members made permanent.
- Bank employees who disclose suspected elder abuse to law enforcement gain certain protections.
- U.S. Treasury to study cybersecurity threats to the banking system. Treasury also to establish voluntary financial literacy best practices for higher education to assist students in making borrowing decisions.
While the bill provides the banking industry with modest relief, and most measures are designed to help community banks, it does keep most of the provisions of the 2010 Dodd-Frank Act in place.
“This hard-fought, long-awaited community bank regulatory relief legislation will put community banks in an enhanced position to foster local economic growth and prosperity. By unraveling some of the suffocating regulatory burdens community banks face, they are better able to unleash their full economic potential to the benefit of their customers and communities,” said Rebeca Romero Rainey, president and CEO of the Independent Community Bankers of America.
“For the first time in nearly a decade, lawmakers from both parties have chosen to right-size financial rules that were not working as intended and holding the economy back,” said Rob Nichols, president and CEO of the American Bankers Association. “There is certainly more to do to recalibrate regulations and tailor them based on a bank’s risk profile and business model, but the common-sense changes included in S.2155 will help America’s banks, particularly community banks, get back to the basics of lending to creditworthy borrowers and businesses.”