Tennessee Bankers

This Week Newsletter

December 11, 2017 - Issue No. 1749

Senate Banking Committee Passes Bipartisan Reg Reform Bill

Last Wednesday, the Senate Banking Committee passed their first meaningful regulatory reform measure since the enactment of the Dodd-Frank Act. By a vote of 16-7 the bipartisan regulatory reform bill (S. 2155) championed by Sen. Mike Crapo (R-Idaho) and Sens. Jon Tester (D-Mont.), Heidi Heitkamp (D-N.D.), Mark Warner (D-Va.) and Joe Donnelly (D-Ind.). Sen. Bob Corker (R-Tenn.) was one of the 19 original cosponsors.

The bill includes several provisions TBA and the banking industry have advocated for, including:

  • Designate all mortgages held in portfolio as Qualified Mortgages for banks under $10 billion in assets
  • Simplify capital calculations for banks under $10 billion in assets
  • Raise the SIFI designation threshold from $50 billion to $250 billion in assets
  • Raise eligibility for the 18-month exam cycle from $1 billion to banks with $3 billion in assets
  • Provide relief from HMDA disclosures from small originators (less than 500 mortgages/500 open-end lines of credit for each of the two preceding years)

The legislation will now go to the Senate floor where it is expected to pass as it already has enough Democratic support to reach the 60-vote filibuster threshold. Read a section-by-section by analysis.

TN Supreme Court Issues Favorable Opinion in In re: Fletcher

The Tennessee Supreme Court recently issued an opinion in In re: Fletcher solidifying that Tennessee law protects a bank’s collateral in deposit accounts. The Tennessee Bankers Association appeared as an “amicus curiae” before the Tennessee Supreme Court in the case. The case was important because an earlier decision from the Court of Appeals threatened banks’ ability to collect against deposit accounts held by married couples.

In the Fletcher case, a married couple opened a joint checking account and deposited a substantial sum into the account. Later, the husband withdrew money from the account, deposited it in a CD, and pledged the CD as collateral for a line of credit. The husband passed away.

Under the husband’s will, his children from a previous marriage were to receive all funds that were in bank accounts that were in his name only, but the wife was to receive all funds that were part of either a “tenancy by the entirety” or were in a joint tenancy with rights of survivorship. The Tennessee Court of Appeals held that the funds withdrawn from the joint marital account and placed into the individual account were still part of a “tenancy by the entirety” even though the funds were now in an individual account. And troublingly for banks, the Court of Appeals strongly implied that a creditor could not reach any funds held in a deposit account as a tenancy by the entirety.

Along with one of the litigants from the case, the TBA asked the Tennessee Supreme Court to review the Court of Appeals decision and further requested that the Court consider the potential harm that the Court of Appeals’ ruling could have to banks. In a unanimous decision, the Tennessee Supreme Court held that funds withdrawn from a joint marital account and placed into a separate account are considered individual funds after they are withdrawn. Importantly, the Tennessee Supreme Court also recognized that Tennessee’s statutory scheme protects banks’ collateral in deposit accounts.

The TBA is pleased with the outcome and thanks Michael Harmon with Waller for representing TBA in the matter. Read the Court's Opinion.

Senate Passes Major Tax Reform Bill; Now in Conference Committee

The U.S. Senate on Dec. 2 voted 51-49 to pass a sweeping tax cut and reform bill.

Advocacy by the banking industry led to several improvements in the final Senate bill when compared to the initial bill text introduced two weeks ago. Pass-through entity shareholders, including those of Subchapter S banks, would see an effective top tax rate of 29.6 percent, thanks to a 23 percent deduction from qualified business income. This marks an important improvement from the treatment of S-corps in the initial bill.

Other key amendments in the final bill include a fix offered by Sen. Mike Rounds (R-S.D.) for a tax accounting issue affecting mortgage servicing rights.

TBA is supportive of the overall tax reform effort but is disappointed the Senate bill did not include taxation of credit unions over $1 billion. TBA and other banking groups strongly encouraged Senators to use this opportunity to address the disproportionate advantage enjoyed by tax exempt credit unions.

Although the Senate bill resembles the bill passed by the U.S. House shortly before Thanksgiving, it must now be reconciled with the House legislation. The conference committee consists of Democratic and Republican members of the House and Senate. Rep. Diane Black (R-Tenn.) is a member of the conference.

The final conference report must be signed by a majority of House conferees and a majority of Senate conferees. The resulting bill will then be subject to fresh votes in the House and Senate.

CFPB Updates Guide to TRID Forms

The Consumer Financial Protection Bureau issued a revised guide to the TILA-RESPA integrated disclosure. The guide to the TRID Loan Estimate and Closing Disclosure forms incorporates amendments and clarifications from the final rule issued in July. 

The updates amend tolerances for the total of payments, clarify fees, and transfer taxes that may be charged in connection with housing-assistance lending transactions, extend the rule to cooperative units, and outline how creditors may provide separate disclosure forms to consumers and sellers forms that reflects recent regulatory changes. Download the guide.

Senate Banking Committee Approves Powell Nomination

The U.S. Senate Banking Committee last Tuesday voted 22-1 to advance the nomination of Federal Reserve Governor Jerome Powell to serve as chairman of the Federal Reserve Board. Powell must now be confirmed by the full Senate. Current Chairman Janet Yellen's term expires in February.

TBA Webinar: Beneficial Ownership and Onboarding Legal Entity Customers

The Tennessee Bankers Association is helping you get your staff ready for beneficial ownership information, verification, and certification requirements! Beginning on or before May 11, 2018, beneficial ownership requirements apply each time the bank opens a new account for a legal entity customer. The requirement is mandatory for both new and existing legal entity customers. All bank employees responsible for making loans, opening deposit accounts, and leasing safe deposit boxes to legal entity customers must understand their responsibility under the new regulation.

In addition to beneficial ownership requirements, this Tennessee-specific webinar explains what it takes to comply with CDD regulations when making a loan, opening a deposit account, or leasing a safe deposit box to a new legal entity customer in today’s AML-focused environment. Register now for this Jan. 9 webinar.

Compliance Alliance Hot Topic Question

Q: As a RDFI (receiving depository financial institution) for ACH purposes, how long do we have to return an ACH to the ODFI (originating depository financial institution) after the transaction?          
A: Generally, NACHA rules permit returns on consumer transactions for 60 calendar days and returns on business transactions for two business days. The RDFI must have a written statement of unauthorized debit complying with NACHA guidelines to use the extended return period for consumer transactions. Some variations based on SEC type may apply. See NACHA Rules Sections 3.8 and 3.13.

Start off the new year with peace of mind and learn more about all of the tools available with TBA’s compliance solution, Compliance Alliance, by attending a free live webinar demo this week: December 12t at 10 a.m. CT or December 14 at 1 p.m. CT.

TBA On the Road

Stacey Langford, SVP of Membership, visits members in East Tennessee.

See where TBA goes while "on the road" by following @TNBankers.