March 2023 Compliance Journal

Compliance Journal

March 2023

Special Focus

FDIC Simplification of Deposit Insurance Rules for “Trust Account” Category and Mortgage Servicing Accounts

Financial institutions have just short of a year to prepare for Federal Deposit Insurance Corporation’s (FDIC’s) rule which amends deposit insurance rules, Part 330. FDIC’s amendments were meant to simplify the deposit insurance regulations by establishing a ‘‘trust accounts’’ category that governs coverage of deposits of both revocable trusts and irrevocable trusts using a common calculation, and provide consistent deposit insurance treatment for all mortgage servicing account balances held to satisfy principal and interest obligations to a lender.

This article outlines the rule changes for trust deposits and mortgage servicing accounts, provides recommendations to consider in advance of the effective date, and provides links to various resources. The final rule is effective April 1, 2024.

I. Background

Before discussing the recent rule amendments, a quick mention of the current categories of deposit insurance is helpful as sections of the revised rule refer to the other categories. A mention of the standard deposit insurance coverage amount is also helpful in understanding the impact of the changes.

FDIC’s current deposit insurance ownership categories consist of: (a) single accounts; (b) certain retirement accounts; (c) joint accounts; (d) revocable trust accounts; (e) irrevocable trust accounts; (f) employee benefit plan accounts; (g) corporation/partnership/unincorporated association accounts; and (h) government accounts.

FDIC’s standard maximum deposit insurance amount (SMDIA) is $250,000 per depositor, per insured bank, for each account ownership category. This means a customer who has multiple accounts may qualify for more than $250,000 of deposit insurance coverage if the customer’s funds are deposited in different ownership categories and the requirements of each ownership category are met. Each category of coverage has requirements that need be met for deposits to be covered under the particular category. As this article is focused on the changes made to trust deposits and mortgage servicing accounts, it does not address the requirements of other categories. However, the information may be found in the resources provided at the end of the article.

II. Current Rules for Coverage of Trust Deposits Revocable Trusts

FDIC currently recognizes three different insurance categories for deposits held in connection with trusts: (1) revocable trusts; (2) irrevocable trusts; and (3) irrevocable trusts with an insured depository institution (IDI) as trustee.

The revocable trust category applies to deposits for which the depositor has evidenced an intention that the deposit will belong to one or more beneficiaries upon his or her death. The category includes deposits held in connection with formal revocable trusts—that is, revocable trusts established through a written trust agreement. It also includes deposits that are not subject to a formal trust agreement, where the IDI makes payment to the beneficiaries identified in the IDI’s

records upon the depositor’s death based on account titling and applicable State law (i.e., payable on death (POD) account). FDIC refers to accounts with a POD designation as “informal revocable trusts.”

Deposits associated with formal and informal revocable trusts are aggregated for purposes of the deposit insurance rules; thus, deposits that will pass from the same grantor to beneficiaries are aggregated and insured up to the SMDIA, currently $250,000, per beneficiary, regardless of whether the transfer would be accomplished through a written revocable trust or an informal revocable trust.

Under the current revocable trust deposit coverage rules, beneficiaries include natural persons, charitable organizations, and non-profit entities recognized as such under the Internal Revenue Code. Such beneficiaries are referred to as “eligible beneficiaries.” For FDIC deposit insurance purposes, if a named beneficiary does not qualify as a beneficiary, funds held in trust for that beneficiary are treated as single ownership funds of the grantor and aggregated with any other single ownership account that the grantor maintains at the same IDI.

Certain requirements also must be satisfied for a deposit to be insured under the revocable trust category. In particular, the grantor must intend that the funds will belong to the beneficiaries upon the depositor’s death, and this intention must be manifested in the ‘‘title’’ of the account using commonly accepted terms such as ‘‘payable-on-death to,’’ or any acronym for the terms (i.e., POD). For purposes of this requirement, ‘‘title’’ includes the IDI’s electronic deposit account records. For example, an IDI’s electronic deposit account records could identify the account as a revocable trust account through coding or a similar mechanism.

Additionally, the beneficiaries of informal revocable trusts must be named in the IDI’s deposit account records. Since 2004, the requirement to name beneficiaries in the IDI’s deposit account records has not applied to formal revocable trusts; FDIC generally obtains information on beneficiaries of such trusts from depositors following an IDI’s failure.

The calculation of deposit insurance coverage for revocable trust deposits category depends upon the number of unique beneficiaries named by a depositor. If five or fewer beneficiaries have been named, the depositor is insured in an amount up to the total number of named beneficiaries multiplied by the SMDIA, and the specific allocation of interests among the beneficiaries is not considered.

If more than five beneficiaries have been named, the depositor is insured up to the greater of: (1) five times the SMDIA; or (2) the total of the interests of each beneficiary, with each such interest limited to the SMDIA. For purposes of this calculation, a life estate interest is valued at the SMDIA.

Where a revocable trust deposit is jointly owned by multiple co-owners, the interests of each account owner are separately insured up to the SMDIA per beneficiary. However, if the co-owners are the only beneficiaries of the trust, the account is instead insured under FDIC’s joint account category. Lastly, if a revocable trust becomes irrevocable due to the death of the grantor, the trust’s deposit may continue to be insured under the revocable trust rules.

Irrevocable Trust Deposits

Deposits held by an irrevocable trust that has been established either by written agreement or by statute are insured in the irrevocable trust deposit insurance category.

March 2023

Volume 28, Number 10

Wisconsin Bankers Association 4721 South Biltmore Lane, P.O. Box 8880, Madison, Wisconsin, 53708-8880

Senior Writers

Heather MacKinnon

Scott Birrenkott

Editor Katie Reiser

Layout Sonja Vike

Copyright ©2023

Wisconsin Bankers Association. All rights reserved. Reproduction by any means of the entire contents or any portion of this publication without prior written permission is strictly prohibited. This publication is intended to provide accurate information in regard to the subject matter covered as of the date of publication; however, the information does not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent and professional person should be sought.

Calculating coverage for deposits insured in this category requires a determination of whether beneficiaries’ interests in the trust are contingent or non-contingent. This determination is best made between the customer and FDIC directly. Noncontingent interests are interests that may be determined without evaluation of any contingencies, except for those covered by the present worth and life expectancy tables and the rules for their use set forth in IRS federal estate tax regulations. Funds held for noncontingent trust interests are insured up to the SMDIA for each such beneficiary. Funds held for contingent trust interests are aggregated and insured up to the SMDIA in total.

The irrevocable trust rules do not apply to deposits held for a grantor’s retained interest in an irrevocable trust. Such deposits are aggregated with the grantor’s other single ownership deposits for purposes of applying the deposit insurance limit.

Deposits Held by an IDI as Trustee of an Irrevocable Trust

For deposits held by an IDI in its capacity as trustee of an irrevocable trust, deposit insurance coverage is governed by section 7(i) of the Federal Deposit Insurance Act (FDI Act). Section 7(i) provides that ‘‘[t]rust funds held on deposit by an insured depository institution in a fiduciary capacity as trustee pursuant to any irrevocable trust established pursuant to any statute or written trust agreement shall be insured in an amount not to exceed the standard maximum deposit insurance amount... for each trust estate.”

FDIC’s regulations governing coverage for deposits held by an IDI in its capacity as trustee of an irrevocable trust are found in Part 330.12. The rule provides that ‘‘trust funds’’ held by an IDI in its capacity as trustee of an irrevocable trust, whether held in the IDI’s trust department or another department, or deposited by the fiduciary institution in another IDI, are insured up to the SMDIA for each owner or beneficiary represented. This coverage is separate from the coverage provided for other deposits of the owners or the beneficiaries, and deposits held for a grantor’s retained interest are not aggregated with the grantor’s single ownership deposits.

III. Amendments to Trust Deposits Made by the Final Rule

FDIC’s final rule makes the following changes and clarifications to deposit insurance coverage for trust accounts:

Merger of Revocable and Irrevocable Trust Categories

The final rule amends Part 330.10 of FDIC’s regulations, which currently applies only to revocable trust deposits, to establish a new ‘‘trust accounts’’ category. This new category will now include both revocable and irrevocable trust deposits.

The types of deposits that will be included in the new category include:

(1) Informal revocable trust deposits, such as payable-on-death (POD) accounts;

(2) Formal revocable trust deposits, defined to mean deposits held pursuant to a written revocable trust agreement under which a deposit passes to one or more beneficiaries upon the grantor’s death; and

(3) Irrevocable trust deposits, meaning deposits held pursuant to an irrevocable trust established by written agreement or by statute.

Because these deposits will now be part of the same category for deposit insurance purposes, they would be aggregated when applying the deposit insurance limit.

As amended, Part 330.10 does not apply to deposits maintained by an IDI in its capacity as trustee of an irrevocable trust; these deposits are insured separately pursuant to section 7(i) of the FDI Act and Part 330.12 of FDIC’s deposit insurance regulations.

Calculation of Coverage

FDIC will use one streamlined calculation to determine the amount of deposit insurance coverage for deposits of

revocable and irrevocable trusts under the new “trust account” category. This method is already utilized by FDIC to calculate coverage for revocable trusts that have five or fewer beneficiaries. FDIC claims the current method is generally well-understood by bankers and trust depositors.

The new rule provides that a grantor’s trust deposits will be insured in an amount up to the SMDIA (currently $250,000) multiplied by the number of trust beneficiaries, not to exceed five beneficiaries. This, in effect, will limit coverage for a grantor’s trust deposits at each IDI to a total of $1,250,000; in other words, maximum coverage of $250,000 per beneficiary for up to five beneficiaries.

FDIC stated in its final rule that the $1,250,000 per-grantor, per-IDI limit is intended to be more straightforward and balance the objectives of simplifying the trust rules, promotes timely payment of deposit insurance, facilitates resolutions, ensures consistency with the FDI Act, and limits risk to the Deposit Insurance Fund (DIF).

Eligible Beneficiaries

As mentioned above, the current revocable trust deposit insurance rules provide that beneficiaries include natural persons, charitable organizations, and non-profit entities recognized as such under the Internal Revenue Code. The irrevocable trust rules do not establish criteria for beneficiaries. The final rule uses the current revocable trust rule’s definition.

The final rule also excludes from the calculation of deposit insurance coverage beneficiaries that only would obtain an interest in a trust if one or more beneficiaries are deceased, i.e., contingent beneficiary interests. The final rule codifies existing practice to include only primary, unique beneficiaries in the deposit insurance calculation. Consistent with current treatment, naming a chain of contingent beneficiaries that would obtain trust interests only in event of a beneficiary’s death will not increase deposit insurance coverage.

Finally, FDIC has also codified a longstanding interpretation of the rules under which an informal revocable trust designates the depositor’s formal trust as its beneficiary. A formal trust generally does not meet the definition of an eligible beneficiary for deposit insurance purposes. However, FDIC will treat such accounts as revocable trust accounts under the deposit insurance rules, insuring the account as if it were titled in the name of the formal trust.

Retained Interests and Ineligible Beneficiaries’ Interests

The current deposit insurance rules for trust accounts provide that in some instances, funds intended for specific beneficiaries are aggregated with a grantor’s single ownership deposits at the same IDI for purposes of the deposit insurance calculation. These instances include a grantor’s retained interest in an irrevocable trust and interests of ineligible beneficiaries that do not satisfy the definition of a revocable trust ‘‘beneficiary.’’ This adds complexity to the deposit insurance calculation, as a detailed review of a trust agreement may be required to value such interests in order to aggregate them with a grantor’s single ownership funds. In order to implement the streamlined calculation for trust deposits, FDIC is eliminating the provisions.

Under the final rule, the grantor and other beneficiaries that do not satisfy the definition of ‘‘eligible beneficiary’’ are not included in the deposit insurance calculation. Importantly, the change does not in any way limit a grantor’s ability to establish such trust interests under State law; the interests simply do not factor into the calculation of deposit insurance coverage.

Future Trusts Named as Beneficiaries

Trusts often contain provisions for the establishment of one or more new trusts upon the grantor’s death, and the final rule clarifies deposit insurance coverage in these situations. Specifically, if a trust agreement provides that trust funds will pass into one or more new trusts upon the death of the grantor(s), the future trust(s) will not be treated as beneficiaries for purposes of the calculation of deposit insurance coverage. Rather, the future trust(s) will be considered mechanisms for distributing trust funds, and the natural persons or organizations that receive the trust funds through the future trusts will be considered the beneficiaries for purposes of the deposit insurance calculation. This clarification is consistent with published guidance and does not represent a substantive change in deposit insurance coverage.

Naming of Beneficiaries in Deposit Account Records

The final rule continues to require the beneficiaries of an informal revocable trust to be specifically named in the deposit account records of the IDI.

Presumption of Ownership

Consistent with the current deposit insurance rules for revocable trusts, the final rule provides that, unless otherwise specified in an IDI’s deposit account records, a deposit of a trust established by multiple grantors will be presumed to be owned in equal shares.

Bankruptcy Trustee Deposits

FDIC will maintain the current treatment of deposits placed at an IDI by a bankruptcy trustee. Under the final rule, if funds of multiple bankruptcy estates are commingled in a single account at the IDI, each estate will be separately insured up to the SMDIA.

Deposits Covered Under Other Rules

The final rule excludes from coverage under Part 330.10 certain trust deposits that are covered by other sections of the deposit insurance regulations. For example, employee benefit plan deposits are insured pursuant to Part 330.14, and investment company deposits are insured as corporate deposits pursuant to Part 330.11. Deposits held by an IDI in its capacity as trustee of an irrevocable trust are insured pursuant to Part 330.12. In addition, if the co-owners of an informal or formal revocable trust are the trust’s sole beneficiaries, deposits held in connection with the trust are treated as joint deposits under Part 330.9. In each of these cases, FDIC did not alter the current rules.

IV. Mortgage Servicing Accounts

Current Rule

FDIC’s rules governing coverage for mortgage servicing accounts were originally adopted in 1990 following the transfer of responsibility for insuring deposits of savings associations from the Federal Savings and Loan Insurance Corporation (FSLIC) to FDIC. Under the rules adopted in 1990, deposits comprised of payments of principal and interest were insured on a pass-through basis to lenders, mortgagees, investors, or security holders (Lenders). In adopting the rule, FDIC focused on the fact that principal and interest funds were generally owned by Lenders, on whose behalf the servicer, as agent, accepted principal and interest payments. By contrast, payments of taxes and insurance were insured to the mortgagors or borrowers on a passthrough basis because the borrower owns such funds until tax and insurance bills are paid by the servicer.

In 2008, FDIC therefore amended its rules to provide coverage to Lenders based on each mortgagor’s payments of principal and interest into the mortgage servicing account, up to the SMDIA (currently $250,000) per mortgagor. FDIC did not amend the rule for coverage of tax and insurance payments, which continued to be insured to each mortgagor on a pass-through basis and aggregated with any other deposits maintained by each mortgagor at the same IDI in the same right and capacity. The 2008 amendments to the rules for mortgage servicing accounts did not provide for the fact that servicers may be required to advance their own funds to make payments of principal and interest on behalf of delinquent borrowers to the Lenders. However, this is required of mortgage servicers under some mortgage servicing arrangements.

The current rule provides coverage for principal and interest funds only to the extent ‘‘paid into the account by the mortgagors.” The current rule does not provide coverage for funds paid into the account from other sources, such as the servicer’s own operating funds, even if those funds satisfy mortgagors’ principal and interest payments. As a result, deposits into a mortgage servicing account by a servicer for the purpose of making an advance are not provided the same level of coverage as other deposits in a mortgage servicing account consisting of principal and interest payments directly from the borrower, which are insured up to the SMDIA for each borrower. Instead, the advances are aggregated and insured to the servicer as corporate funds for a total of $250,000.

Mortgage Servicing Final Rule

Under the final rule, accounts maintained by a mortgage servicer in an agency, custodial, or fiduciary capacity, for the purpose of payment of a borrower’s principal and interest obligations, will be insured for the cumulative balance paid into the account in order to satisfy principal and interest obligations to the Lender, whether paid directly by the borrower or by another party, up to the limit of the SMDIA per mortgagor. Mortgage servicers’ advances of principal and interest funds on behalf of delinquent borrowers would therefore be insured up to the SMDIA per mortgagor, consistent with the coverage rules for payments of principal and interest collected directly from borrowers.

Under the final rule, the composition of a mortgage servicing account attributable to principal and interest payments would also include collections by a servicer, such as foreclosure proceeds, that are used to satisfy a borrower’s principal and interest obligations to the Lender. These funds will be insured up to the limit of the SMDIA per mortgagor.

FDIC did not propose changes to the deposit insurance coverage provided for mortgage servicing accounts comprised of payments from mortgagors of taxes and insurance premiums. Such aggregate escrow accounts are held separately from the principal and interest mortgage servicing accounts and the deposits therein are held in trust for the mortgagors until such time as tax and insurance payments are disbursed by the servicer on the borrower’s behalf. Such deposits continued to be insured based on the ownership interest of each mortgagor in the account and aggregated with other deposits maintained by the mortgagor at the same IDI in the same capacity and right.

V. Actionable Steps

During this time before the final rule’s effective date, IDIs should take steps to help identify what deposit customers may be impacted by the combination of revocable trust and irrevocable trust categories into the one “trust accounts” category and consider potential outreach to affected customers regarding the changes to deposit insurance rules. IDIs will also have an opportunity to review the changes in coverage, train employees, and update publications if necessary.

Financial institutions who have identified customers affected by the final rule and who seek to offer additional insurance protection beyond that which is covered under FDIC’s Part 330 may want to consider reaching out to their various resources for product and pricing options for additional insurance.

In addition, covered institutions under FDIC’s Recordkeeping for Timely Deposit Insurance Determination Rule, codified at Part 370, will need to implement changes to recordkeeping and information technology capabilities. “Covered institutions,” in general, are IDIs which have 2 million or more deposit accounts during the two consecutive quarters preceding the compliance dates outlined in Part 370.

VI. Conclusion and Resources

The final rule is effective April 1, 2024. The amendments merge the revocable and irrevocable trust deposit insurance categories into one category, ‘‘trust accounts.’’ Coverage for deposits in the category will be calculated through a simple calculation. Each grantor’s trust deposits will be insured in an amount up to the SMDIA multiplied by the number of trust beneficiaries, not to exceed five. This, in effect, will limit coverage for a grantor’s trust deposits at each IDI to a total of $1,250,000; in other words, maximum coverage of $250,000 per beneficiary for up to five beneficiaries.

Accounts maintained by a mortgage servicer in an agency, custodial, or fiduciary capacity, for the purpose of payment of a borrower’s principal and interest obligations, will be insured for the cumulative balance paid into the account in order to satisfy principal and interest obligations to the Lender, whether paid directly by the borrower or by another party, up to the limit of the SMDIA per mortgagor. Mortgage servicers’ advances of principal and interest funds on behalf of delinquent borrowers will be insured up to the SMDIA per mortgagor, consistent with the coverage rules for payments of principal and interest collected directly from borrowers. Also, included in the funds insured up to the limit of SMDIA per mortgagor, collections by a servicer, such as foreclosure proceeds, that are used to satisfy a borrower’s principal and interest obligations to the Lender.

Special Focus

FDIC’s Final Rule, Simplification of Deposit Insurance Rules: https://www.govinfo.gov/content/pkg/FR-2022-01-28/pdf/2022-01607.pdf

Current FDIC Part 330 Deposit Insurance Coverage Rules: https://www.ecfr.gov/current/title-12/chapter-III/subchapter-B/part-330

FDIC Deposit Insurance Resources, generally: https://www.fdic.gov/resources/deposit-insurance/

Midwest Bankers Insurance Services, Excess Deposit Bond: https://www.mbisllc.com/MBIS/Home/MBIS/Default.aspx?hkey=1c3dc91a-1f60-4612-816f-632811b9a208

FinCEN Issues Alert on Nationwide Surge in Mail Theft-Related Check Fraud Schemes

Late February, the Financial Crimes Enforcement Network (FinCEN) issued an alert to financial institutions given the nationwide surge in check fraud schemes which target the U.S. Mail (mail theft-related check fraud). FinCEN issued the alert in close collaboration with the United States Postal Inspection Service (USPIS) to ensure that suspicious activity reports (SARs) filed by financial institutions appropriately identify and report suspected check fraud schemes that may be linked to mail theft in the United States.

Mail theft-related check fraud generally pertains to the fraudulent negotiation of checks stolen from the U.S. Mail. The term “U.S. Mail” includes all mail distributed and delivered through and by the Postal Service. This includes FirstClass Mail such as mailed letters, cards, or other correspondence, which may contain checks, money orders, personal identifiable information, and credit cards/debit cards.

Fraud, including check fraud, is the largest source of illicit proceeds in the United States and represents one of the most significant money laundering threats to the United States, as highlighted in the Treasury’s most recent National Money Laundering Risk Assessment and National Strategy for Combatting Terrorist and other Illicit Financing publications. Fraud is also one of the anti-money laundering/countering the financing of terrorism (AML/CFT) National Priorities.

Emerging Trends

Despite the declining use of checks in the United States, criminals have been increasingly targeting the U.S. Mail since the COVID-19 pandemic to commit check fraud. From March 2020 through February 2021, USPIS received 299,020 mail theft complaints, which was an increase of 161 percent compared with the same period a year earlier. Bank Secrecy Act (BSA) reporting for check fraud has also increased in the past three years. In 2021, financial institutions filed more than 350,000 SARs to FinCEN to report potential check fraud, a 23 percent increase over the number of check fraud-related SARs filed in 2020. This upward trend continued into 2022, when the number of SARs related to check fraud reached over 680,000, nearly double the previous year’s amount of filings.

Mail Theft Risks and Vulnerabilities

Criminals committing mail theft-related check fraud generally target the U.S. Mail in order to steal personal checks, business checks, tax refund checks, and checks related to government assistance programs, such as Social Security payments and unemployment benefits. Criminals will generally steal all types of checks in the U.S. Mail as part of a mail theft scheme, but business checks may be more valuable because business accounts are often well-funded, and it may take longer for the victim to notice the fraud. FinCEN and USPIS report there have been cases of Postal Service employees stealing checks at United States Postal Service (USPS) sorting and distribution facilities. However, according

to USPIS, mail theft-related check fraud is increasingly committed by non-USPS employees, ranging from individual fraudsters to organized criminal groups comprised of the organizers of the criminal scheme, recruiters, check washers, and money mules.

These criminals, located throughout the country, target USPS blue collection boxes, unsecured residential mailboxes, and privately owned cluster box units at apartment complexes, planned neighborhoods, and high-density commercial buildings. Mail theft can occur through forced entry or the use of makeshift fishing devices, and increasingly involves the use of authentic or counterfeit USPS master keys, known as Arrow Keys. Arrow Keys open USPS blue collection boxes and cluster box units within a geographic area, and a number of recent cases involve organized criminals violently targeting USPS mail carriers with the intent of stealing Arrow Keys. FinCEN and USPIS report there have also been cases of corrupt Postal Service employees who unlawfully provide Arrow Keys to criminal actors to facilitate mail theft. Illicit actors may also copy and sell stolen Arrow Keys to third-party fraudsters on the dark web and through encrypted social media platforms in exchange for convertible virtual currency.

After stealing checks from the U.S. Mail, fraudsters and organized criminal groups may alter or “wash” the checks, replacing the payee information with their own or fraudulent identities or with business accounts that the criminals control. During check washing, these illicit actors also often increase the dollar amount on the check, sometimes by hundreds or thousands of dollars. Washed checks may also be copied, printed, and sold to third-party fraudsters on the dark web and encrypted social media platforms in exchange for convertible virtual currency. In some cases, victim checks are also counterfeited using routing and account information from the original, stolen check. Illicit actors may cash or deposit checks in person at financial institutions, through automated teller machines (ATMs), or via remote deposit into accounts they control, and which they often open specifically for the check fraud schemes. Criminals may also rely on money mules and their pre-existing accounts to deposit fraudulent checks. Regardless, once the checks are deposited, the illicit actors often rapidly withdraw the funds through ATMs or wire them to other accounts that they control to further obfuscate their ill-gotten gains. The criminals may further exploit the victims by using personal identifiable information found in the stolen mail for future fraud schemes such as credit card fraud or credit account fraud.

Red Flags to Help Detect and Prevent Suspicious Activity

FinCEN and USPIS have identified red flags to help financial institutions detect, prevent, and report suspicious activity connected to mail theft-related check fraud, many of which overlap with red flags for check fraud in general. As no single red flag is determinative of illicit or suspicious activity, financial institutions should consider the surrounding facts and circumstances, such as a customer’s historical financial activity, whether the transactions are in line with prevailing business practices, and whether the customer exhibits multiple red flags, before determining if a behavior or transaction is suspicious or otherwise indicative of mail theft-related check fraud. In line with their risk-based approach to compliance with the BSA, FinCEN encourages financial institutions to perform additional due diligence where appropriate.

1. Non-characteristic large withdrawals on a customer’s account via check to a new payee.

2. Customer complains of a check or checks stolen from the mail and then deposited into an unknown account.

3. Customer complains that a check they mailed was never received by the intended recipient.

4. Checks used to withdraw funds from a customer’s account appear to be of a noticeably different check stock than check stock used by the issuing bank and check stock used for known, legitimate transactions.

5. Existing customer with no history of check deposits has new sudden check deposits and withdrawal or transfer of funds.

6. Non-characteristic, sudden, abnormal deposit of checks, often electronically, followed by rapid withdrawal or transfer of funds.

7. Examination of suspect checks reveals faded handwriting underneath darker handwriting, giving the appearance that the original handwriting has been overwritten.

8. Suspect accounts may have indicators of other suspicious activity, such as pandemic-related fraud.

9. New customer opens an account that is seemingly used only for the deposit of checks followed by frequent withdrawals and transfer of funds.

10. A non-customer who is attempting to cash a large check or multiple large checks in-person and, when questioned by the financial institution, provides an explanation that is suspicious or potentially indicative of money mule activity.

SAR Filing Request

FinCEN requests that financial institutions indicate a connection between the suspicious activity being reported in a SAR filing and the activity highlighted in the Alert by including key terms in the SAR filing. In particular, the term “FIN-2023MAILTHEFT” should be used in SAR field 2 (Filing Institution Note to FinCEN) and in the narrative. Financial institutions should also select SAR Field 34(d) (check fraud). Financial institutions should also highlight additional advisory or alert key words in the narrative, as applicable.

Financial institutions should include any and all available information relating to the account and locations involved in the reported activity, identifying information and descriptions of any legal entities or arrangements involved and associated beneficial owners, and any information about related persons or entities involved in the activity. Financial institutions also should provide any and all available information regarding other domestic and foreign financial institutions involved in the activity; where appropriate, financial institutions should consider filing a SAR jointly on shared suspicious activity.

Conclusion

Financial institutions should update their SAR filing procedures to incorporate the recommended term and check fraud field selection should a SAR need be filed due to activity highlighted in the Alert. Financial institutions should also review the list of identified red flags to ensure such activity is monitored if it is not already. The Alert (FIN-2023-Alert 0003) may be viewed at: www.fincen.gov/sites/default/files/shared/FinCEN%20Alert%20Mail%20Theft-Related%20 Check%20Fraud%20FINAL%20508.pdf

WBA has also created a consumer-facing resource to help financial institutions educate customers regarding how to avoid mail-related check fraud. This and other consumer-facing resources may be viewed under the “Consumer Content” section of the WBA website at: https://www.wisbank.com/resources/consumer-resources/ and https://www.wisbank.com/ wp-content/uploads/2023/03/Consumer-Content-Check-Fraud1.pdf

Referenced materials above:

Treasury’s “National Money Laundering Risk Assessment” (Feb 2022), pp. 6-7 https://home.treasury.gov/system/ files/136/2022-National-Money-Laundering-Risk-Assessment.pdf

Treasury’s “National Strategy for Combatting Terrorist and Other Illicit Financing” (May 2022), p. 27 https://home. treasury.gov/system/files/136/2022-National-Strategy-for-Combating-Terrorist-and-Other-Illicit-Financing.pdf

WI Supreme Court Upholds Priority of Secured Creditor Under Receivership Rules

The Wisconsin Supreme Court has released its decision to address the issue of whether properly perfected secured creditor interests were subject to unsecured creditor interests under receivership rules. WBA filed an amicus brief on behalf of the membership given the significance of the issue. In a unanimous decision, the Wisconsin Supreme Court reversed the Court of Appeals decision thereby upholding Wisconsin’s longstanding precedent of priority for properly perfected secured creditors under receivership rules.

Background

The case involves a dispute between a secured lender and unsecured creditor residents of an insolvent independent senior-living facility formerly known as The Atrium of Racine (The Atrium). Bank of New York Mellon Trust Company, (BONY) is the trustee under the terms of a November 1, 2002 Trust Indenture between the Elderly Housing Authority of the City of Racine and BONY’s predecessor trustee. The indenture describes series 2002A Fixed Rate Revenue Bonds and series 2002B Extendable Rate Adjustable Securities, each issued in the aggregate principal amount of $4,025,000. Payments of principal, premium, and interest were secured by promissory notes in the aggregate principal amount of $8,050,000 and were further secured by a mortgage and security interest also dated November 1, 2002.

The Atrium defaulted on its May 1, 2017 interest payment and stipulated with BONY on May 25, 2017 to an assignment for the benefit of creditors and the appointment of a receiver pursuant to s. 128.08(1)(b), Stats. On the date of the receiver’s appointment, bondholders were owed approximately $6,070,000 in principal on the Series 2002A and 2002B bonds.

The receiver assumed management of The Atrium and, with BONY’s consent, proceeded to market The Atrium for sale. Residents of The Atrium, however, claimed entitlement to the sale proceeds, asserting claims for $7,574,820 in entrance fees paid to The Atrium in connection with one of six versions of a residency agreement. On the receiver’s motion for declaratory relief, the circuit court properly held that the residents’ claim for entrance fees were not secured claims entitled to priority payment from the proceeds of the asset sale.

On July 31, 2019, the circuit court affirmed the receiver’s sale of The Atrium assets for $5,500,000, but the residents objected to the disbursement of the sale proceeds to BONY. The parties agreed to hold the proceeds of the sale in trust pending appeal.

On July 30, 2021, the Wisconsin Court of Appeals issued an unpublished opinion holding that the residents’ claims have priority over the properly perfected security interest of the bondholders. The result of the decision elevated the obligation to refund the entrance fees above the first mortgage securing bonds, the proceeds of which were used to finance the senior facility.

The Wisconsin Supreme Court agreed to review the issues presented by the dispute. The principal issue on appeal was whether a secured lender’s properly perfected mortgage and security interest have priority over residents’ claims for entrance fees from the proceeds of the sale of the building and assets. A secondary issue on appeal was whether the residents’ appeal was timely and sufficient to confer appellate jurisdiction. In filing the amicus brief on behalf of the membership, WBA focused on the principal issue on appeal.

Importance of Case to Banking Industry

The case involves an interpretation of priority rules of creditors. The result of the Court of Appeals decisions upended current creditor priority rules, including rules under Ch. 128 creditors’ rights, Ch. 706 real estate convenances, Ch. 779 liens, and the Uniform Commercial Code, by allowing undocumented, unrecorded liens to have priority over a properly perfected first mortgage and security interest. In particular, the decision upended s. 706.11, Stats., which makes clear that a mortgage given to certain type of lenders is superior to all later filed liens, other than real estate taxes and assessments.

The Court of Appeals decision also appeared to be in direct conflict with the Wisconsin Supreme Court opinion in BNP Paribas v. Olsen’s Mill, Inc., 2011 WI 61, 335 Wis. 2d 427, 799 N.W.2d 792. In this case, the court held that collateral could not be sold without the secured creditor’s consent. Absent the protection given to secured creditors in the Olsen’s Mill case, secured lenders would likely stop seeking the speedy enforcement available in a Chapter 128 Receivership.

The result of the Court of Appeals decision created uncertainty in Wisconsin’s long established interpretations of law regarding the priorities held by perfected secured creditors.

Wisconsin Supreme Court Decision

As outlined in the Wisconsin Supreme Court (Court) decision, the residents of The Atrium relied upon provision within documents executed between The Atrium and BONY and a statement required under securities regulations regarding the risks of investing to assert that the bondholders contracted away the superiority of their mortgage lien. The Court disagreed with the residents.

The Court looked to the receivership statutes for resolution of the issue. Section 128.17, Stats. establishes an order of payment for how a receiver is to distribute proceeds of a sale among the estate’s creditors. The order is to follow: (i) the actual and necessary costs of preserving the estate subsequent to the commencement of the proceedings; (ii) costs of administration including a reasonable attorney’s fee for the representation of the debtor; (iii) wages, including pension, welfare and vacation benefits, due to workmen, clerks, traveling or city salespersons or servants, which have been earned within 3 months before the date of the commencement of the proceedings, not to exceed $600 to each claimant; (iv) taxes, assessments and debts due the United States, Wisconsin or any county, district or municipality; (v) other debts entitled to priority; (vi) debts due to creditors generally, in proportion to the amount of their claims, as allowed; and (vii) after payment of the foregoing, the surplus, if any, shall be returned to the debtor.

The Court determined that “other debts entitled to priority” encompasses mortgages under s. 706.11, Stats. which grants a priority to mortgages that are executed by a state or national bank. The Court also determined that “debts due to creditors generally, in proportion to the amount of their claims, as allowed” applied to unsecured claims. The parties of the case agreed the bondholders were secured creditors and the residents were unsecured creditors and under the order set forth under receivership rules, the claims of the secured creditors would be prioritized over those of unsecured creditors. However, the residents argued the bondholders subordinated their secured interest to the residents’ interest in their entrance fees.

The Court looked to case law and the Restatement of Property in its review of how a party is to subordinate a security interest. The residents pointed to definitions of “permitted liens” and “permitted encumbrances” in documents executed between The Atrium and BONY. The residents construed the phrases to include entrance fees and the Court agreed.

The executed mortgage included language which stated, “permitted encumbrances” include “[l]iens permitted under Section 5.12(b) of the [Project Contract].” According to the Project Contract, “Permitted Liens shall consist of … [e]ntrance fees or similar funds deposited by or on behalf of such residents[.]” The residents argued that if the financing documents grant either permitted liens or permitted encumbrances priority over the bondholders’ mortgage lien, the entrance fees must be refunded before the mortgage is paid.

The Court looked to the language of the contract and mortgage which the relevant terms included the following:

“Pursuant to the Mortgage, the Corporation has granted to the Trustee a first mortgage lien on the campus currently owned by the corporation…subject in each case to Permitted Liens as defined in the Project Contract.”

“This Mortgage constitutes a direct and valid lien on and security interest in the Mortgaged Property subject only to Permitted Encumbrances.”

In review of the form language, the Court concluded nothing within the documents subordinated the bondholders’ mortgage. While the mortgage is subject to permitted encumbrances, the entrance fees never became liens on the real property of The Atrium, thus the residents’ claims are unsecured claims and recovery of the fees would not trump the bondholders’ perfected security interest of the mortgage; the order set forth in s. 128.17 need be applied to the payment the sale proceeds.

The Court also reviewed the use of the finding in M&I First National Bank v. Episcopal Homes Management Inc., 195 Wis. 2d 485, 536 N.W.2d 175 (Ct. App. 1995), by the Court of Appeals in its decision to deem the residents’ claim superior to the bondholders’ lien.

Judicial Spotlight

The Episcopal Homes case involved a senior-living facility that defaulted on bond repayments. In that case, a group of roughly 1,700 bondholders bought more than $11 million in bonds to fund the construction of a facility. Under a series of financing documents, the bondholders held a security interest in an account containing approximately $1,000,000 in entrance fees. The residency agreements subordinated entrance fee repayments to the bondholders’ lien. After default on bond repayment, the bondholders claimed a secured interest in a segregated entrance fee account funds. Based upon language of the rental agreements, the Court of Appeals concluded the entrance fees were effectively security deposits under Wis. Admin. Code sec. ATCP 134.02(11). Based upon language within agreements, administrative code, and public policy, the Court of Appeals held the residents’ entrance fees were protected from the bondholders’ interests.

The residents in The Atrium claim their entrance fees were like those interests of the residents in the Episcopal Homes. However, the Court determined the facts between Episcopal Homes and The Atrium were different and that the equitable powers used by the Court of Appeals in the Episcopal Homes against a segregated account containing funds traceable to residents’ entrance fees could not be used in The Atrium case as sections 706.11 and 128.17, Stats. so clearly grant the bondholders’ mortgage lien unequivocal superiority. The Court concluded it has no legal authority to extend the Court of Appeals decision in Episcopal Homes beyond a segregated account of entrance fees not in receivership to reach the distinct proceeds from the sale of real property subject to a perfected mortgage lien. The Court could not disregard the plan language under Chapter 128.

The Court‘s unanimous decision in this case upholding Wisconsin’s longstanding precedent of priority for properly perfected secured creditors under receivership rules is important. Under s. 128.17, Stats. the bondholders, given their security interest of the perfected mortgage, were entitled to payment from the proceeds of the sale of The Atrium assets before payment to unsecured creditors, the residents.

The Court’s decision may be viewed on the WBA Compliance Page located at: https://www.wisbank.com/resources/ compliance/

Advocate for Your Industry

Join WBA and your bank peers at Capitol Day or the D.C. Summit

Add your voice in support of our industry on the state level at WBA Capitol Day and on the federal level by attending the WBA/ICBA Capital Summit. As a WBA member, you can attend WBA Capitol Day in addition to the WBA/ICBA Capital Summit.* There is no registration fee. Attendees are responsible for their travel and hotel room charges during either event. Join WBA representatives and other Wisconsin bankers on:

» April 26 — WBA Capitol Day, Madison wisbank.com/CapDay

» May 14–17 — WBA/ICBA Capital Summit, Washington, D.C. — icba.org/capitalsummit

Contact WBA’s Rose Oswald Poels at ropoels@wisbank.com, Daryll Lund at dlund@wisbank.com, or Lorenzo Cruz at lcruz@wisbank. com if you have questions or want more information about WBA Capitol Day or the Washington Summit.

*Note: the WBA/ABA Washington Summit was held March 20–22 in Washington, D.C

Regulatory Spotlight

Agencies Issue Semiannual Regulatory Agendas.

The Bureau of Consumer Financial Protection (CFPB) issued its agenda as part of the Fall 2022 Unified Agenda of Federal Regulatory and Deregulatory Actions. CFPB reasonably anticipates having the regulatory matters identified in the agenda under consideration during the period from 12/01/2022, to 11/30/2023. The next agenda will be published in Spring 2023 and will update the agenda through Spring 2024. Publication of the agenda is in accordance with the Regulatory Flexibility Act. The information in the agenda is current as of 09/30/2022. The semiannual agenda may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-02037.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 11320-11321.

The Board of Governors of the Federal Reserve System (FRB) issued its semiannual regulatory agenda under the Regulatory Flexibility Act and its Statement of Policy Regarding Expanded Rulemaking Procedures. FRB anticipates having under consideration regulatory matters as indicated in the agenda during the period December 2022 through May 2023. The next agenda will be published in Spring 2023. Comments about the agenda may be submitted any time during the next 6 months. The agenda may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/ pdf/2023-02040.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 11366-11367.

The Department of the Treasury (Treasury) issued its semiannual regulatory agenda. Notice is given pursuant to the requirements of the Regulatory Flexibility Act and Executive Order which require the publication by Treasury of a semiannual agenda of regulations. Treasury is also required to publish a regulatory plan for the upcoming fiscal year. Included in the agenda are plans of Treasury’s Financial Crimes Enforcement Network (FinCEN) and Internal Revenue Service (IRS). The agenda may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-02032.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 11278-11283.

The Small Business Administration (SBA) issued its semiannual regulatory agenda. The agenda is a summary of current and projected rulemakings and completed actions of SBA. The summary information is intended to enable the public to be more aware of, and effectively participate in, SBA’s regulatory activities. SBA invites comments on any aspect of the agenda. The agenda may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-02035.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 11302-11305.

The Federal Communications Commission (FCC) issued its semiannual regulatory agenda. Twice a year, in spring and fall, FCC publishes in the Federal Register a list in the Unified Agenda of the major items and other significant proceedings under development or review that pertain to the Regulatory Flexibility Act. The agenda also provides the Code of Federal Regulations citations and legal authorities that govern the proceedings. The complete agenda will be published on the internet in a searchable format at: www.reginfo.gov. The semiannual agenda may be viewed at: https:// www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-02039.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 11330-11364.

The Securities and Exchange Commission (SEC) published the Chair’s agenda of rulemaking actions pursuant to the Regulatory Flexibility Act. The items listed in the Regulatory Flexibility Agenda for Fall 2022 reflect only the priorities of the SEC Chair, and do not necessarily reflect the views and priorities of any individual Commissioner. Information in the agenda was accurate on 10/06/2022, the date on which SEC staff completed compilation of the data. To the extent possible, rulemaking actions by SEC since that date have been reflected in the agenda. SEC invites comment on the agenda and on the individual agenda entries. SEC’s complete agenda will be available online at: www.reginfo.gov Comments are due 03/24/2023. The agenda may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/ pdf/2023-02043.pdf. Federal Register, Vol. 88, No. 35, 02/22/2023, 11376-11380.

The Department of Labor (DOL) published its semiannual regulatory agenda. The internet has become the means for disseminating the entirety of DOL’s semiannual regulatory agenda. However, the Regulatory Flexibility Act requires publication of a regulatory flexibility agenda in the Federal Register. The notice contains the regulatory flexibility agenda. The agenda may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-02030.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 11252-11256.

The National Labor Relations Board (NLRB) published its semiannual regulatory agenda. The agenda is published in accordance with Executive Order 12866, Regulatory Planning and Review, and the Regulatory Flexibility Act (RFA),

as amended by the Small Business Regulatory Enforcement Fairness Act. The complete agenda is available online at: www.reginfo.gov. Publication in the Federal Register is mandated only for regulatory flexibility agendas required under RFA. Because RFA does not require regulatory flexibility agendas for the regulations proposed and issued by NLRB, the agenda appears only on the internet at the above address. The agenda may be viewed at: https://www.govinfo.gov/ content/pkg/FR-2023-02-22/pdf/2023-02042.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 11370.

Agencies Seek Comment on Revisions to Call Report Collections.

The Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) (collectively, the agencies) seek comments on a proposal to revise the Consolidated Reports of Condition and Income (Call Reports), FFIEC 031, FFIEC 041, and FFIEC 051. The agencies also seek comment regarding, Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks, FFIEC 002; and the Report of Assets and Liabilities of a Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or Agency of a Foreign (Non-U.S.) Bank, FFIEC 002S. See the notice for specific proposed revisions to the information collections. Comments are due 04/24/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-21/ pdf/2023-03543.pdf. Federal Register, Vol. 88, No. 34, 02/21/2023, 10644-10649.

CFPB Issues Advisory Opinion on Digital Mortgage Comparison-Shopping Platforms.

The Bureau of Consumer Financial Protection (CFPB) issued an advisory opinion to address the applicability of the Real Estate Settlement Procedures Act (RESPA) section 8 to operators of certain digital technology platforms that enable consumers to comparison shop for mortgages and other real estate settlement services, including platforms that generate potential leads for the platform participants through consumers’ interaction with the platform (Digital Mortgage Comparison-Shopping Platforms). The advisory opinion describes how an operator of a Digital Mortgage Comparison-Shopping Platform violates RESPA section 8 if the platform provides enhanced placement or otherwise steers consumers to platform participants based on compensation the platform operator receives from those participants rather than based on neutral criteria. The advisory opinion is effective 02/13/2023. The advisory opinion may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-13/pdf/2023-02910.pdf Federal Register, Vol. 88, No. 29, 02/13/2023, 9162-9170.

CFPB Seeks Comment on Evaluating Financial Empowerment Training Program.

CFPB seeks comment regarding an information collection titled, Evaluation of Financial Empowerment Training Program. CFPB’s Office of Community Affairs (OCA) develops strategies to improve the financial capability of low-income and economically vulnerable consumers, such as consumers who are unbanked or underbanked. To address the needs of consumers, OCA developed Your Money, Your Goals, a suite of financial empowerment materials with an accompanying training program. The information collection focuses on evaluating Your Money, Your Goals virtual and in-person training practices in enhancing the ability of frontline staff and volunteers to inform low-income consumers about rights and options for managing their finances and how to prevent and address consumer harm. Comments are due 03/27/2023 The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-24/pdf/2023-03886.pdf Federal Register, Vol. 88, No. 37, 02/24/2023, 11903-11904.

CFPB Seeks Comment on Consumer Response Survey Regarding Complaints.

CFPB seeks comment regarding an information collection titled, Consumer Response Company Response Survey. CFPB will use the information collection to garner consumer feedback through an optional survey at the end of the consumer complaint process. Through the existing survey, consumers have the option to provide feedback on the company’s response to and handling of their complaint. The results of the feedback are shared with the company that responded to the complaint to inform its complaint handling. CFPB also uses the feedback as one of several inputs to inform its work to assess the accuracy, completeness, and timeliness of company responses to consumer complaints. Comments are due 05/08/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-09/pdf/2023-04796.pdf Federal Register, Vol. 88, No. 46, 03/09/2023, 14610.

Regulatory Spotlight

FRB Finalizes Information Collections.

The Board of Governors of the Federal Reserve System (FRB) announced final approval of an information collection titled, Reporting Requirements Associated with Regulation Y for Extension of Time to Conform to the Volcker Rule. The information collection relates to insured depository institutions that seek an extension of time to confirm its activities to the requirements of the Volcker rule. The revisions are applicable 02/28/2023. The notice may be viewed at: https:// www.govinfo.gov/content/pkg/FR-2023-02-28/pdf/2023-04082.pdf. Federal Register, Vol. 88, No. 39, 02/28/2023, 12680-12681.

FRB announced final approval of an information collection titled, Selected Balance Sheet Items for Discount Window Borrowers. FRB’s Regulation A requires that Reserve Banks review balance sheet data in determining whether to extend credit and to help ascertain whether undue use is made of such credit. Balance sheet data are collected on the FR 2046 report from certain institutions that borrow from the discount window in order to monitor discount window borrowing. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-28/pdf/2023-04081.pdf. Federal Register, Vol. 88, No. 39, 02/28/2023, 12681-12682.

FRB announced final approval of an information collection titled, Reporting, Recordkeeping, and Disclosure Requirements Associated with Regulation Q. Information collected in the collection provide FRB and other stakeholders, including market participants, with information regarding the interaction between firms and the regulatory capital framework. The revisions are applicable 03/01/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/ FR-2023-03-01/pdf/2023-04138.pdf Federal Register, Vol. 88, No. 40, 03/01/2023, 12933-12934.

FRB announced final approval of an information collection titled, Information Collections and Forms Related to Regulation MM. The information collection is utilized by mutual savings associations that wish to reorganize to form a mutual holding company under the Home Owners’ Loan Act, subsidiary holding companies of a mutual holding company, mutual holding companies, and members of applying mutual organizations. The revisions are applicable 03/01/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-01/pdf/2023-04139.pdf. Federal Register, Vol. 88, No. 40, 03/01/2023, 12936.

FRB Seeks Comment on Small Business and Farming Information Collection.

FRB seeks comment regarding an information collection titled, Survey of Small Business and Farm Lending. The survey collects unique information concerning price and certain nonprice terms of loans made to businesses and farmers. FRB plans revisions to the collection as further discussed in the notice. Comments are due 05/01/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-01/pdf/2023-04136.pdf Federal Register, Vol. 88, No. 40, 03/01/2023, 12934-12936.

FRB Seeks Comment on Regulation KK-Related Information Collection.

FRB seeks comment regarding an information collection titled, Reporting and Recordkeeping Requirements Associated with Regulation KK. Dodd-Frank Act sections 731 and 764 require FRB and other federal banking agencies to adopt regulations that establish capital requirement and initial and variation margin requirements for certain entities on all non-cleared swaps and non-cleared security-based swaps. The information collection is required pursuant to the recordkeeping requirements of the implementing regulation. Comments are due 05/01/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-01/pdf/2023-04137.pdf. Federal Register, Vol. 88, No. 40, 03/01/2023, 12936-12937.

FDIC Seeks Comment on Information Collections.

The Federal Deposit Insurance Corporation (FDIC) seeks comment regarding an information collection titled, Securities of State Nonmember Banks and State Savings Associations. FDIC has the authority to administer and enforce provisions as may be necessary with respect to state nonmember banks and state savings associations. Part 335 of FDIC’s regulations incorporates by cross-reference the Securities and Exchange Commission rules and regulations regarding the disclosure and filing requirements of registered securities of state nonmember banks and state savings associations.

Regulatory Spotlight

The information collection is used in connection with requirements under Part 335; each collection is detailed in the notice. Comments are due 03/24/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-0222/pdf/2023-03655.pdf. Federal Register, Vol. 88, No. 35, 02/22/2023, 10895-10899.

FDIC seeks comment regarding an information collection titled, FDIC National Survey of Unbanked and Underbanked Households (Household Survey). The survey was previously titled, Survey of Household Use of Banking and Financial Services. The Household Survey is scheduled to be conducted in partnership with the U.S. Census Bureau as a supplement to its June 2023 Current Population Survey. The survey collects information on U.S. households’ use of bank accounts, prepaid cards, nonbank online payment services and nonbank financial transaction services, and bank and nonbank credit. The results of the surveys will be published by FDIC, and help inform policymakers, bankers, and researchers about bank account ownership and how households use the banking system and nonbank products and services to meet their financial needs. Comments are due 03/30/2023. The notice may be viewed at: https://www.govinfo. gov/content/pkg/FR-2023-02-28/pdf/2023-04070.pdf Federal Register, Vol. 88, No. 39, 02/28/2023, 12679-12680.

FDIC seeks comment regarding an information collection related to insurance sales protections and incentive compensation policies. The first information collection in the notice is titled, Insurance Sales Consumer Protections. The disclosure requirements in the information collection apply to all FDIC-supervised insured depository institutions that sell insurance products. The second information collection is titled, Interagency Guidance on Sound Incentive Compensation Policies. The guidance helps promote that incentive compensation policies at insured state non-member banks do not encourage excessive risk-taking and are consistent with the safety and soundness of the organization. Comments are due 05/01/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-02/ pdf/2023-04257.pdf Federal Register, Vol. 88, No. 41, 03/02/2023, 13117-13119.

OCC Seeks Comment on Proprietary Trading Related Information Collection.

The Office of the Comptroller of the Currency (OCC) seeks comment regarding an information collection titled, Reporting, Recordkeeping, and Disclosure Requirements Associated with Proprietary Trading and Certain Interests in and Relationships with Covered Funds. The information collection was established pursuant to a rule required by the DoddFrank Act. Section 619 of the Dodd-Frank Act added a new section 13 to the Bank Holding Company Act that generally prohibits any banking entity from engaging in proprietary trading or from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a hedge fund or private equity fund, subject to certain exemptions. The reporting, recordkeeping, and disclosure requirement associated with the rule permit banking entities to comply and OCC to monitor and gauge risks associated with the activities. Comments are due 03/27/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-24/pdf/2023-03856.pdf Federal Register, Vol. 88, No. 37, 02/24/2023, 11978-11980.

HUD Adjusts CMPs for Inflation.

The Department of Housing and Urban Development (HUD) issued a final rule to implement 2023 inflation adjustments of civil monetary penalty (CMP) amounts required by the Federal Civil Penalties Inflation Adjustment Act, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act. The final rule also revises HUD’s policy and applies annually adjusted penalty amounts to the date the penalty is assessed after the effective date of the rule. See the final rule for specific adjusted amounts. The final rule is effective 03/17/2023. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-15/pdf/2023-03142.pdf Federal Register, Vol. 88, No. 31, 02/15/2023, 9745-9749.

HUD Issues Final Rule to Replace LIBOR.

HUD issued a final rule regarding the removal of the London Interbank Offered Rate (LIBOR) as an approved index for adjustable interest rate mortgages (ARMs) and replacing LIBOR with the Secured Overnight Financing Rate (SOFR) as a HUD-approved index for newly originated forward ARMs. HUD has also codified its removal of LIBOR and approval of SOFR as an index for newly-originated Home Equity Conversion Mortgage (HECM or reverse mortgage) ARMs. In addition, HUD has established a spread-adjusted SOFR index as the HUD-approved replacement index to transition existing forward and HECM ARMs off LIBOR. HUD also made clarifying changes to its HECM Monthly ARM regulation

and established a lifetime adjustment cap for monthly adjustable rate HECMs. The final rule is effective 03/31/2023 The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-01/pdf/2023-03952.pdf Federal Register, Vol. 88, No. 40, 03/01/2023, 12822-12829.

HUD Issues Final Rule to Implement Forty-Year Term for Loan Modifications.

HUD’s regulations allow mortgagees to modify a Federal Housing Administration (FHA) insured mortgage by recasting the total unpaid loan for a term limited to 360 months to cure a borrower’s default. The final rule amends HUD’s regulation to allow for mortgagees to recast the total unpaid loan for a new term limit of 480 months. The change will align FHA with modifications available to borrowers with mortgages backed by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which both currently provide a 40-year loan modification option. The final rule is effective 05/08/2023. The final rule may be viewed at: https://www. govinfo.gov/content/pkg/FR-2023-03-08/pdf/2023-04284.pdf Federal Register, Vol. 88, No. 45, 03/08/2023, 1425214259.

HUD Seeks Comment on Rehabilitation Mortgages.

HUD’s Federal Housing Administration (FHA) seeks information regarding barriers to the use of the FHA 203(k) Rehabilitation Mortgage Insurance Program (203(k) Program). Information provided will allow FHA to identify barriers that limit the origination of 203(k)-insured mortgages and lender participation in the program and consider opportunities to enhance the 203(k) Program. The program is meant to help HUD meet its goal of increasing the available supply of affordable housing in underserved communities. Comments are due 04/17/2023. The notice may be viewed at: https:// www.govinfo.gov/content/pkg/FR-2023-02-14/pdf/2023-03089.pdf. Federal Register, Vol. 88, No. 30, 02/14/2023, 9529-9530.

HUD Seeks Input on Loss Mitigation Information Collection.

HUD seeks comment regarding an information collection titled, FHA-Insured Mortgage Loan Servicing Involving the Loss Mitigation Program. The Federal Housing Administration’s (FHA’s) Loss Mitigation Program options and incentives efforts provide mortgagees with reimbursement for using tools to bring a delinquent FHA-insured mortgage loan current in as short a time as possible, to provide an alternative to foreclosure to the extent possible, and to minimize losses to the Mutual Mortgage Insurance Fund. The forms used as part of the information collection are part of the collection effort for non-performing insured mortgage loans. Comments are due 03/27/2023. The notice may be viewed at: https:// www.govinfo.gov/content/pkg/FR-2023-02-23/pdf/2023-03712.pdf Federal Register, Vol. 88, No. 36, 02/23/2023, 11468-11469.

HUD Seeks Comment on FHA TOTAL Mortgage Scorecard.

HUD seeks comment regarding an information collection titled, Federal Housing Administration (FHA) TOTAL Mortgage Scorecard. FHA-approved mortgagees must certify compliance with HUD regulations, Handbooks, Guidebooks, and Mortgagee Letters. Within this scope, mortgagees must certify compliance with FHA TOTAL Mortgage Scorecard requirements at 24 CFR 203.255(b)(5). The certification is performed electronically for initial access and annual ongoing access to FHA TOTAL Mortgage Scorecard. Comments are due 04/07/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-08/pdf/2023-04710.pdf Federal Register, Vol. 88, No. 45, 03/08/2023, 14384-14385.

FEMA Announces FY 2024 Assistance to Private Sector Property Insurers.

The Federal Emergency Management Agency (FEMA) announced the Fiscal Year 2024 Financial Assistance/Subsidy Arrangement (Arrangement) for private property insurers interested in participating in the National Flood Insurance Program’s Write Your Own (WYO) Program. FEMA has the authority to establish and carry out a National Flood Insurance Program (NFIP) to enable interested persons to purchase flood insurance. Under the National Flood Insurance Act, FEMA may use insurance companies and other insurers, insurance agents and brokers, and insurance adjustment organizations as fiscal agents of the United States to help it carry out the NFIP. FEMA may enter into any contracts,

Regulatory Spotlight

agreements, or other appropriate agreements with privacy insurance companies to use their facilities and services in administering the NFIP on such terms and conditions agreed upon. Under its authority, FEMA may enter into an Arrangement with WYO companies to sell NFIP flood insurance policies and programs under their own names and adjust and pay claims arising under the Standard Flood Insurance Policy. Interested insurers must submit intent to subscribe or re-subscribe to the Arrangement by 05/30/2023. The notice may be viewed at: https://www.govinfo.gov/ content/pkg/FR-2023-02-27/pdf/2023-03895.pdf Federal Register, Vol. 88, No. 38, 02/27/2023, 12389-12397.

FEMA Adjusts Statewide Per Capita Indicator for Cost Share Adjustments.

FEMA announced that the statewide per capita indicator for recommending cost share adjustments for major disasters declared on or after 01/01/2023 through 12/31/2023 is $173. The adjustment is based on an increase of 6.5 percent in the Consumer Price Index for All Urban Consumers for the 12-month period that ended December 2022. The notice applies to major disasters declared on or after 01/01/2023. The notice may be viewed at: https://www.govinfo.gov/ content/pkg/FR-2023-03-02/pdf/2023-04283.pdf Federal Register, Vol. 88, No. 41, 03/02/2023, 13138.

FEMA Issues Final Flood Hazard Determinations.

FEMA issued a notice which identifies communities in the state of Iowa, where flood hazard determinations, which may include additions or modifications of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or regulatory floodways on the Flood Insurance Rate Maps (FIRMs) and where applicable, in the supporting Flood Insurance Study (FIS) reports have been made final. The FIRM and FIS report are the basis of the floodplain management measures that a community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in FEMA’s National Flood Insurance Program (NFIP). The date of 07/19/2023, has been established for the FIRM and, where applicable, the supporting FIS report showing the new or modified flood hazard information for each community. The notice may be viewed at: https:// www.govinfo.gov/content/pkg/FR-2023-02-23/pdf/2023-03769.pdf Federal Register, Vol. 88, No. 36, 02/23/2023, 11465-11467.

FEMA Issues Final Changes in Flood Hazard Determinations.

New or modified Base (1-percent annual chance) Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, and/or regulatory floodways (hereinafter referred to as flood hazard determinations) as shown on the indicated Letter of Map Revision (LOMR) have been made final for communities in the states of Illinois, Indiana, Michigan, and Wisconsin, as listed in the table in the notice. Each LOMR revises the Flood Insurance Rate Maps (FIRMs), and in some cases the Flood Insurance Study (FIS) reports, currently in effect for the listed communities. Each LOMR was finalized as indicated in the table in the notice. The final notice may be viewed at: https:// www.govinfo.gov/content/pkg/FR-2023-02-23/pdf/2023-03764.pdf Federal Register, Vol. 88, No. 36, 02/23/2023, 11460-11465.

New or modified Base (1-percent annual chance) Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, and/or regulatory floodways (hereinafter referred to as flood hazard determinations) as shown on the indicated Letter of Map Revision (LOMR) have been made final for communities in the state of Wisconsin, as listed in the table in the notice. Each LOMR revises the Flood Insurance Rate Maps (FIRMs), and in some cases the Flood Insurance Study (FIS) reports, currently in effect for the listed communities. Each LOMR was finalized as indicated in the table in the notice. The final notice may be viewed at: https://www.govinfo.gov/content/pkg/ FR-2023-03-01/pdf/2023-04172.pdf Federal Register, Vol. 88, No. 40, 03/01/2023, 12976-12979.

FEMA Issues Proposed Flood Hazard Determinations.

FEMA seeks comment regarding proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the state of Iowa, as listed in the table in the notice. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of

Regulatory Spotlight

having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 05/24/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-23/ pdf/2023-03768.pdf. Federal Register, Vol. 88, No. 36, 02/23/2023, 11453-11454.

FEMA seeks comment regarding proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the state of Minnesota, as listed in the table in the notice. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 05/24/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR2023-02-23/pdf/2023-03766.pdf Federal Register, Vol. 88, No. 36, 02/23/2023, 11456-11457.

FEMA seeks comment regarding proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the states of Minnesota and Ohio, as listed in the table in the notice. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 05/30/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR2023-03-01/pdf/2023-04173.pdf Federal Register, Vol. 88, No. 40, 03/01/2023, 12972-12973.

FEMA seeks comment regarding proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the states of Ohio and Wisconsin, as listed in the table in the notice. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 06/05/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR2023-03-06/pdf/2023-04526.pdf. Federal Register, Vol. 88, No. 43, 03/06/2023, 13847-13848.

FEMA Seeks Comment on Information Collections.

FEMA seeks comment regarding an information collection titled, Hazard Mitigation Grant Program (HMGP) Application and Reporting. FEMA administers HMGP which is a post-disaster program that contributes funds toward the cost of hazard mitigation activities to reduce the risk of future damage, hardship, loss or suffering in any area affected by a major disaster. FEMA uses the information collected to provide financial assistance in the form of grant awards and, through grantee quarterly reporting, monitor grantee project activities and expenditure of funds. Comments are due 04/24/2023 The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-03610.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 10914-10916.

FEMA seeks comment regarding an information collection titled, Application for Community Disaster Loan (CDL) Program. The loan package for the CDL Program provides local governments that have suffered substantial loss of tax or other revenues as a result of a major disaster, the opportunity to obtain financial assistance in order to perform their governmental functions. The loan must be justified on the basis of need and actual expenses. The information collection is used in connection with the loan package materials. Comments are due 03/24/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-03612.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 10916-10917.

FEMA seeks comment regarding an information collection titled, National Flood Insurance Program Policy Forms. To provide for the availability of policies for flood insurance, policies are marketed and administered through the facilities of licensed insurance agents or brokers in various states. The information collection is used in connection with administering flood insurance requests, cancellations, and other correspondence. Comments are due 03/24/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-03607.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 10918-10919.

FEMA seeks comment regarding an information collection titled, Disaster Assistance Registration. The forms in the collection are used to obtain pertinent information to provide financial assistance, and if necessary, direct assistance to eligible individuals and households who, as a direct result of a disaster or emergency, have uninsured or underinsured, necessary, or serious expenses they are unable to meet. Revision to the information collection will improve the applicant’s experience with the disaster assistance registration process by providing a simpler, more intuitive interface and limiting required responses. Comments are due 03/24/2023. The notice may be viewed at: https://www.govinfo.gov/ content/pkg/FR-2023-02-22/pdf/2023-03611.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 10921-10923.

IRS Issues Final Rule for Single-Entity Treatment of Consolidated Groups.

The Internal Revenue Service (IRS) issued a final rule which treats members of a consolidated group as a single United States shareholder in certain cases for purposes of section 951(a)(2)(B) of the Internal Revenue Code (Code). On 12/14/2022, IRS published a proposed rule in the Federal Register under Code sections 1502 and 7805(a). No comments were received in response to the proposal and IRS has adopted the proposal as final without modification. The final rule affects consolidated groups that own stock of foreign corporations. The rule is effective 02/23/2023

The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-23/pdf/2023-03457.pdf. Federal Register, Vol. 88, No. 36, 02/23/2023, 11393-11394.

IRS Amends Electronic-Filing Requirements for Specified Returns.

IRS issued a final rule to amend the rules for filing electronically. The final rule reflects changes made by the Taxpayer First Act (TFA) and are consistent with TFA’s emphasis on increasing electronic filing. On 07/23/2021, IRS published a proposed rule in the Federal Register to provide guidance on the electronic filing rules of certain businesses. IRS received several comments regarding the proposal and after consideration of the comments, IRS has adopted the proposed rule with revisions as further explained in the final rule. The final rule affects persons required to file partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns. The final rule is effective 02/23/2023. See the final rule for applicability dates. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-23/pdf/2023-03710.pdf. Federal Register, Vol. 88, No. 36, 02/23/2023, 11754-11778.

IRS Revises Annual Information Return Forms and Instructions.

IRS issued a final rule which contains revisions for the Form 5500 Annual Return/Report of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan effective for plan years beginning on or after 01/01/2023. The revisions relate to statutory amendments to the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code enacted as part of the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) for multiple-employer plans and groups of plans. The revisions are also intended to improve reporting of certain plan financial information regarding audits and plan expenses, enhance the reporting of certain tax qualification, and other compliance information by retirement plans. Minor changes were also made to further improve defined benefit plan reporting. Other revisions are technical changes that are part of the annual rollover of the Form 5500 and Form 5500-SF and corresponding instructions. The final forms and instructions revisions are effective for plan years beginning on or after 01/01/2023. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-202302-24/pdf/2023-02653.pdf Federal Register, Vol. 88, No. 37, 02/24/2023, 11984-12105.

IRS Issues Proposed Rule on Use of Forfeitures in Qualified Retirement Plans.

IRS issued a proposed rule what would provide rules regarding the use of forfeitures in qualified retirement plans, including a deadline for the use of forfeitures in defined contribution plans. The proposed rule would affect participants in, beneficiaries of, administrators of, and sponsors of qualified retirement plans as further explained in the proposal. Comments are due 05/30/2023. The proposed rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-202302-27/pdf/2023-03778.pdf Federal Register, Vol. 88, No. 38, 02/27/2023, 12282-12285.

IRS Seeks Comment on Information Collection Related to Return of Excise Tax on Undistributed Income.

IRS seeks comment regarding an information collection titled, Request Relating to Return of Excise Tax on Undistributed Income of Real Estate Investment Trusts. IRS seeks comment concerning the collection of information regarding the return of excise tax on undistributed income of real estate investment trusts. Form 8612 is used by real estate investment trusts to compute and pay the excise tax on undistributed income imposed under section 4981 of the Internal Revenue Code. IRS uses the information to verify that the correct amount of tax has been reported. Comments are due 04/17/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-16/pdf/2023-03247.pdf Federal Register, Vol. 88, No. 32, 02/16/2023, 10214-10215.

FHFA Delays Effective Date for Final Rule Affecting Enterprise Products.

The Federal Housing Finance Agency (FHFA) issued a final rule to delay the effective date of a previously published rule which would require prior approval for new products of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises). On 12/27/2022, FHFA published in the Federal Register, a final rule which established a process for the Enterprises to provide advance notice to FHFA before offering a new activity to the market and to obtain prior approval. The final rule had an effective date of 02/27/2023. FHFA has determined that a delay of the effective date is appropriate. The effective date has been delayed until 04/28/2023. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-24/pdf/202303805.pdf Federal Register, Vol. 88, No. 37, 02/24/2023, 11779.

FHFA Seeks Comment on Community Support by Federal Home Loan Bank Members.

FHFA announced it will review all Federal Home Loan Bank (Bank) members subject to community support review in 2023 under FHFA’s community support requirements regulation. Section 10(g)(1) of the Federal Home Loan Bank Act requires FHFA to establish standards of community investment or service that Bank members must meet in order to maintain access to long-term Bank advances. Under the regulation, FHFA reviews each applicable member once every two years. The names of members currently subject to community support review can be found on the websites as listed in the notice. Comments are due 03/24/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR2023-02-22/pdf/2023-03603.pdf Federal Register, Vol. 88, No. 35, 02/22/2023, 10899-10900.

FHFA Issues Orders Related to Stress Test Reporting.

FHFA provided notice that it issued orders, with respect to stress test reporting as of 12/31/2022, under section 165(i)(2) of the Dodd-Frank Act, as amended by section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Summary instructions and guidance accompanied the orders to provide testing scenarios. Each order is applicable 03/07/2023. The orders may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-10/pdf/2023-04980.pdf. Federal Register, Vol. 88, No. 47, 03/10/2023, 14871.

SBA Amends Small Business Size Standards for Several NAICS Sectors.

The Small Business Administration (SBA) issued a final rule to increase its employee-based small business size definitions (commonly referred to as size standards) for North American Industry Classification System (NAICS) sectors related to: Mining, Quarrying, and Oil and Gas Extraction, Sector 21; Utilities, Sector 22; Manufacturing, Sector 31-33; Transportation and Warehousing, Sector 48-49; Information, Section 51; Finance and Insurance, Sector 52; Professional, Scientific and Technical Services, Sector 54; and Administrative and Support, Waste Management and Remediation Services, Sector 56. SBA has increased 144 and retained 268 employee-based size standards in those sectors. SBA has also retained the current 500-employee size standard for federal procurement of supplies under the nonmanufacturer rule. The final rule is effective 03/17/2023. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR2023-02-15/pdf/2023-02780.pdf. Federal Register, Vol. 88, No. 31, 02/15/2023, 9970-10009.

Regulatory Spotlight

FSA Seeks Comment on Inventory Property Management Information Collection.

The Farm Service Agency (FSA) seeks comment regarding an information collection titled, Inventory Property Management. FSA’s Farm Loan Programs provide supervised credit in the form of loans to family farmers to purchase real estate and equipment and finance agricultural production. Information collections established as part of FSA’s Inventory Property Management regulations are necessary for FSA to determine application eligibility for the program. Comments are due 04/17/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-15/ pdf/2023-03211.pdf Federal Register, Vol. 88, No. 31, 02/15/2023, 9855-9856.

RUS Confirms Finalization of Electric Program and Rule to Implement Sections of Agricultural Improvement Act.

The Rural Utilities Services (RUS) issued a final rule to confirm revisions to the Electronic Program. The RUS Electric Program provides loans, loan guarantees, and grants finance for the construction and improvement of rural electric infrastructure. RUS published a final rule with comment in the Federal Register on 11/30/2022, to streamline procedures for borrowers. Revisions were made to the program’s loan application requirements, approval of work plans and load forecasts, use of approved contracts and system design procedures, and program reporting requirements. RUS has confirmed the final rule as it was published and has provided a response to comments received. The final rule is confirmed as final 02/28/2023. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-17/ pdf/2023-03418.pdf. Federal Register, Vol. 88, No. 33, 02/17/2023, 10237-10238.

RUS issued a final rule to confirm provisions that implement several sections of the Agricultural Improvement Act. RUS published in the Federal Register on 12/06/2022, a final rule to implement sections 6501, 6503, 6505 and 6507 of the Agriculture Improvement Act. RUS received no substantiative comments. As a result, RUS has confirmed the final rule as published. The final rule is confirmed as final 02/21/2023. The final rule may be viewed at: https://www.govinfo.gov/ content/pkg/FR-2023-02-21/pdf/2023-03492.pdf. Federal Register, Vol. 88, No. 34, 02/21/2023, 10463.

RUS Seeks Comment on Electric Program Coverage Final Rule.

RUS seeks comment on a final rule regarding its Electric Program. The intent of the final rule is to modify its coverage ratio requirements, add an additional set of ratios, and update and add definitions. The effect of the final rule is to reduce the regulatory impact on RUS Electric Program borrowers, ensure that loan funds will be repaid in the time agreed upon, facilitate the lending for construction of rural electric infrastructure, and allow RUS to focus on feasibility and security issues while increasing customer efficiency, customer satisfaction, and service. The final rule is effective 05/30/2023 Comments are due 05/01/2023. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-01/ pdf/2023-04016.pdf Federal Register, Vol. 88, No. 40, 03/01/2023, 12806-12810.

CFTC Seeks Comment on Requests for Interpretive, No Action, and Exemptive Letter Information Collection.

The Commodity Futures Trading Commission (CFTC) seeks comment regarding an information collection titled, Procedural Requirements for Requests for Interpretative, No-Action, and Exemptive Letters. The information collection covers the requirements for voluntary requests for, and the issuance of, interpretative, no-action, and exemptive letters submitted to CFTC and related requests for confidential treatment. The collection requirements described are voluntary and apply to parties that seek such information from CFTC. Comments are due 04/24/2023. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-23/pdf/2023-03717.pdf. Federal Register, Vol. 88, No. 36, 02/23/2023, 11410-11411.

SEC Issues Final Rule to Extend Form 144 EDGAR Filing Hours.

The Securities and Exchange Commission (SEC) issued a final rule to adopt an amendment to Regulation S-T to extend the filing deadline for Form 144 from 5:30 p.m. to 10 p.m., Eastern Standard Time or Eastern Daylight Saving Time,

Regulatory Spotlight

whichever is currently in effect, on SEC business days. SEC has also adopted two technical amendments to enhance the consistency of recently revised provisions related to the filing format of Form 144. The final rule is effective 03/20/2023 The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/2023-03931.pdf. Federal Register, Vol. 88, No. 38, 02/27/2023, 12205-12210.

SEC Issues Final Rule to Shorten Securities Transaction Settlement Cycle.

SEC issued a final rule to adopt amendments to shorten the standard settlement cycle for most broker-dealer transactions from two business days after the trade date to one business day after the trade date. In addition, SEC has adopted new rules related to the processing of institutional trades by broker-dealers and certain clearing agencies. SEC has also amended certain recordkeeping requirements applicable to registered investment advisers. The final rule is effective 05/05/2023. Applicable compliance dates are discussed in Part VII of the final rule. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-06/pdf/2023-03566.pdf Federal Register, Vol. 88, No. 43, 03/06/2023, 13872-13954.

SEC Issues Revised Proposed Rule on Prohibition Against Conflicts of Interest in Certain Securitizations.

SEC issued a revised proposed rule that was initially published in September 2011 that would implement a provision under the Dodd-Frank Act prohibiting an underwriter, placement agent, initial purchaser, or sponsor of an asset-backed security (including a synthetic asset-backed security (ABS)), or any affiliate or subsidiary of any such entity, from engaging in any transaction that would involve or result in certain material conflicts of interest. The revised proposed rule takes into account developments in the ABS market since 2011 and the comments received in response to the 2011 proposed rule to provide greater clarity regarding the scope of prohibited and permitted conduct. Fundamentally, the revised proposed rule is intended to prevent the sale of ABS that are tainted by material conflicts of interest. Comments are due 03/27/2023. The revised proposed rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-0214/pdf/2023-02003.pdf Federal Register, Vol. 88, No. 30, 02/14/2023, 9678-9727.

SEC Proposes Revisions to Privacy Act Regulations.

SEC proposed amendments to regulations under the Privacy Act, as amended (Privacy Act). The proposed amendments would revise SEC’s Privacy Act regulations to clarify, update, and streamline the language of several procedural provisions. The proposed revisions, among other things would: (a) clarify the purpose and scope of the regulations; (b) update definitions so that the processes set forth in the regulations are more plainly described; (c) simplify the processes for submitting and receiving responses to Privacy Act inquiries, requests, and administrative appeals; (d) allow for requesters to electronically verify their identities; (e) provide for a shorter SEC response time to Privacy Act inquiries as to whether a specific system of records maintained by SEC contains a record pertaining to the requester, which aligns with other relevant time lines; (f) update SEC contact information; and (g) update the list of SEC systems of records that have promulgated rules exempting certain records from certain provisions of the Privacy Act. Comments are due 04/17/2023. The proposed rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-02-21/pdf/2023-03467.pdf Federal Register, Vol. 88, No. 34, 02/21/2023, 10483-10490.

SEC Issues Proposed Rule Regarding Safeguarding Advisory Client Assets.

SEC proposed a new rule under the Investment Advisers Act to address how investment advisers safeguard client assets. To affect SEC redesignation of the current custody rule for the proposed new safeguarding rule, SEC proposes to renumber the current rule. In addition, SEC proposes to amend certain provisions of the current custody rule for enhanced investor protections. SEC also proposes corresponding amendments to the recordkeeping rule under the Advisers Act and to Form ADV for investment adviser registration under the Advisers Act. Comments are due 05/08/2023. The proposed rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-09/pdf/202303681.pdf Federal Register, Vol. 88, No. 46, 03/09/2023, 14672-14792.

NCUA Issues Final Rule on Cyber Incident Notification Requirements.

The National Credit Union Administration (NCUA) issued a final rule to amend Part 748 of its regulations to require a federally-insured credit union (FICU) that experiences a reportable cyber incident to report the incident to NCUA as soon as possible and no later than 72 hours after the FICU reasonably believes that it has experienced a reportable cyber incident. The notification requirement provides an early alert to NCUA and does not require a FICU to provide a detailed incident assessment to NCUA within the 72-hour time frame. The final rule is effective 09/01/2023. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2023-03-01/pdf/2023-03682.pdf Federal Register, Vol. 88, No. 40, 03/01/2023, 12811-12817.

NCUA Issues Proposed Rule on Chartering and Field of Membership.

NCUA issued a proposed rule to amend its chartering and field of membership (FOM) rules regarding financial services to low- and moderate-income communities and expanding access to safe, fair, and affordable financial services and products generally. NCUA also proposed several changes to the FOM rules to streamline application requirements and clarify procedures. Comments are due 05/30/2023. The proposed rule may be viewed at: https://www.govinfo.gov/ content/pkg/FR-2023-02-28/pdf/2023-03684.pdf Federal Register, Vol. 88, No. 39, 02/28/2023, 12606-12621.

Compliance Notes

FRB released policy tools for its Bank Term Funding Program (BTFP) which was created to support American businesses and households by making additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. The BTFP offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging any collateral eligible for purchase by the Federal Reserve Banks in open market operations (see 12 CFR 201.108(b)), such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities. The assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress. FRB has created a Terms and Condition one-page explanation document and frequently asked questions (FAQs) document. The information may be viewed at: https://www.federalreserve.gov/monetarypolicy/ bank-term-funding-program.htm.

CFPB released updated HMDA 2023 Institutional Coverage and 2023 Transactional Coverage charts. The charts reflect the recently reduced reporting thresholds for closed-end mortgage loans. The charts may be viewed at: https:// files.consumerfinance.gov/f/documents/cfpb_hmda-institutional-coverage_2023.pdf and https://files.consumerfinance. gov/f/documents/cfpb_hmda-transactional-coverage_2023.pdf

The United States Supreme Court announced on 02/27/2023, it will review the constitutionality of CFPB’s funding. A federal appeals court ruled in October that the funding mechanism for CFPB violates the Constitution. The court will not hear arguments regarding the case until its next session in the fall. A decision is not expected until 2024. More information regarding the case may be viewed at: www.scotusblog.com/2023/02/supreme-court-will-reviewconstitutionality-of-consumer-watchdog-agencys-funding-cfpb/

FHFA announced a delay in the implementation of an upfront fee based upon certain borrowers’ DTI ratios. In January 2023, FHFA announced redesigned and recalibrated grids for upfront fees in addition to a new upfront fee for certain borrowers with a DTI ratio above 40 percent. Since the January announcement, FHFA has received feedback from mortgage industry stakeholders about the operational challenges of implementing the DTI ratio-based fee.

FHFA has decided to delay the effective date of the DTI ratio-based fee by three months to 08/01/2023, to ensure a level playing field for all lenders to have sufficient time to deploy the fee. In addition, lenders will not be subject to post-purchase price adjustments related to the DTI ratio-based fee for loans acquired by Fannie Mae and Freddie Mac

Compliance Notes

between 08/01/2023, and 12/31/2023. The announcement may be viewed at: www.fhfa.gov//Media/PublicAffairs/Pages/ Statement-from-FHFA-Director-Sandra-Thompson-on-Upfront-Fees-Based-on-Certain-Borrowers-DTI-Ratio.aspx

The White House issued a National Cybersecurity Strategy meant to set forth goals to create a resilient digital ecosystem where it is costlier to attack systems than defend them, where sensitive and private information is secured and protected, and where neither incidents nor errors cascade into catastrophic, systemic consequences. The strategy sets forth a plan for how to further protect against cybersecurity threats. The strategy may be viewed at: www. whitehouse.gov/wp-content/uploads/2023/03/National-Cybersecurity-Strategy-2023.pdf

OCC and FDIC issued their schedules of CRA evaluations to be conducted in the second and third quarters of 2023. The schedules may be viewed at the following links, respectively: www.occ.gov/news-issuances/newsreleases/2023/nr-occ-2023-20.html; www.fdic.gov/resources/bankers/community-reinvestment-act/examinationschedule/q2cra23.html; and www.fdic.gov/resources/bankers/community-reinvestment-act/examination-schedule/ q3cra23.html

IRS issued a consumer alert to warn of new scams that urge people to use wage information on a tax return to claim false credits in hopes of receiving a big refund. One scheme, which is circulating on social media, encourages people to use tax software to manually fill out the Form W-2, Wage and Tax Statement, and include false income information. In the W-2 scheme, scam artists suggest people make up large income and withholding figures as well as the employer it is coming from. Scam artists then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund. Other variations involving people using the Form 7202 regarding credits for sick leave and family leave for certain self-employed individuals or the Schedule H, household employment taxes to try to claim credits when otherwise not earned. People who attempt such scams face a wide range of penalties. The alert may be viewed at: www.irs.gov/newsroom/irs-warns-taxpayers-of-new-filing-season-scams-involving-form-w-2-wages-those-filing-fakereturns-face-potential-penalties-investigation

CFPB issued a special edition of its Supervisory Highlights that reports on unlawful “junk fees” uncovered in deposit accounts and in multiple loan servicing markets, including in mortgage, student, and payday lending. The information was generated from information found during examinations between 07/01/2022 and 02/01/2023. The special edition may be viewed at: www.consumerfinance.gov/about-us/newsroom/cfpb-uncovers-illegal-junk-fees-onbank-accounts-mortgages-and-student-and-auto-loans/

CFPB also released a blog post regarding protecting homeowners from discriminatory home appraisals. The post outlines the Connolly & Mott v. Lanham et al court case and court filings by CFPB and DOJ in connection with the case and with fair and accurate appraisals in general. The blog post may be viewed at: www.consumerfinance.gov/about-us/ blog/protecting-homeowners-from-discriminatory-home-appraisals/

FDIC released FIL-09-2023 to announce amendments to Section 19 of the FDI Act as a result of the Fair Hiring in Banking Act. Section 19 prohibits a person from participating in the affairs of an FDIC-insured institution if he or she has been convicted of an offense involving dishonesty, breach of trust, or money laundering, or has entered into a pretrial diversion or similar program in connection with a prosecution for such an offense, without the prior written consent of FDIC. Notable changes to Section 19 include:

• Certain older offenses. The Act excludes certain offenses from the scope of Section 19 based on the amount of time that has passed since the offense occurred or since the individual was released from incarceration. The Act excludes certain offenses from the scope of Section 19 that were committed by individuals 21 or younger.

• Designated lesser offenses. The Act excludes certain “lesser offenses” from the scope of Section 19.

• Criminal offenses involving dishonesty. The Act excludes certain offenses from the definition of “criminal offense involving dishonesty.”

• Expunged, sealed, and dismissed offenses. The Act excludes certain offenses from the scope of Section 19 that have been expunged, sealed, or dismissed.

Compliance Notes

• Standards for FDIC review of Section 19 applications. The Act prescribes standards for FDIC’s review of applications submitted under Section 19. FDIC will process new and pending applications under the provisions of the amended law.

The release also outlines the actions FDIC will take during 2023 as a result of the changes. FDIC’s FIL-09-2023 may be viewed at: www.fdic.gov/news/financial-institution-letters/2023/fil23009.html

FRB announced a July launch for the FedNow Service. During the first week of April, FRB will begin the formal certification of participants for launch of the service. Early adopters will complete a customer testing and certification program, informed by feedback from the FedNow Pilot Program, to prepare for sending live transactions through the system. Certification encompasses a comprehensive testing curriculum with defined expectations for operational readiness and network experience. In June, FRB and certified participants will conduct production validation activities to confirm readiness for the July launch. The announcement may be viewed at: www.federalreserve.gov/newsevents/ pressreleases/other20230315a.htm

FTC sent a report to Congress detailing the consumer issues that affect American Indian and Alaska Native (AI/ AN) populations, as well as FTC’s enforcement, outreach, and education work on the issues. The report reflects issues such as auto purchasing and financing, predatory lending, impersonation scams, tech support scams and romance scams, among others. FTC’s own consumer report data shows that government impersonation and prize, sweepstakes, and lottery scams were the most frequent scams reported to FTC from majority AI/AN ZIP codes. The report may be viewed at: www.ftc.gov/system/files/ftc_gov/pdf/p035201consumerissuesaffectingaianreport.pdf

CFPB published new findings on financial profiles of Buy Now, Pay Later borrowers. The report finds consumers using Buy Now, Pay Later were more likely to be using credit cards, payday loans, and other high-interest financial services. They are also more likely to exhibit measures of financial distress than non-users. The report may be viewed at: www.consumerfinance.gov/about-us/newsroom/cfpb-publishes-new-findings-on-financial-profiles-of-buy-now-paylater-borrowers/

CFPB also released a new Issue Spotlight examining how the financial products used to deliver public benefits, like Social Security and unemployment compensation, affect individuals’ ability to fully access the assistance provided through those programs. The Issue Spotlight outlines how governments often choose to deliver public benefits through financial products, particularly prepaid cards, which may subject recipients to fees and cut into the amount of funds the consumer receives. The release may be viewed at: www.consumerfinance.gov/data-research/research-reports/issuespotlight-public-benefits-delivery-consumer-protection/full-report/

APRIL 2023

• Principles of Banking Course

5–6 Fond du Lac; $550/attendee

12–13 Mineral Point; $550/attendee

•Residential Mortgage Lending School

11–14 Madison; $1,045/attendee

• Agricultural Bankers Conference

13–14 Wisconsin Dells; $300/ag section member or $350/non-section member attendee

• FinTech Showcase

17 Wisconsin Dells

• Power of Community Week

17–22 www.wisbank.com/BanksPowerWI

• Compliance Management School

18–20 Madison; $795/attendee

• Women in Banking Conference

25 Wisconsin Dells or virtual; team pricing available

• Community Bankers for Compliance (CBC) – Session II

26 Wisconsin Dells or virtual; membership (pricing options vary)

• Capitol Day

26 Madison

• Branch Manager Boot Camp: Session 4

27 4-part series; virtual half-days; $800/attendee

• FIPCO Software & Compliance Forum: Deposit

27 Virtual

MAY 2023

• American Mortgage Conference

1–3 South Carolina

•Personal Banker School

2–3 Wausau; $495/attendee

• HR Conference

4 Stevens Point; $245/attendee

•School of Bank Management

8–12 Madison; $1,395/attendee

• BSA/AML Conference

10–11 Wisconsin Dells; $450/attendee

• WBA/ICBA Capital Summit

14–17 Washington, D.C.

MAY 2023 (continued)

• CFO Conference

17 Madison; $245/attendee

• Directors Summit

18 Madison; $225/attendee

• Principles of Banking Course

23–24 Wausau; $550/attendee

• Trust Conference

25 Madison; $245/attendee

JUNE 2023

• BOLT Summer Leadership Summit

15–16 Wisconsin Dells; $250/attendee

• Compliance Forum: Session 1

20 Stevens Point; annual membership (pricing varies)

JULY 2023

• Community Bankers for Compliance (CBC) – Session III

25–26 Virtual half-days; membership (pricing options vary)

AUGUST

2023

•Agricultural Lending School

22–24 Madison; $895/attendee (an optional workshop is available the day before the school starts)

 For more information or to register, visit www.wisbank.com/ education, email WBA Education at wbaeducation@ wisbank.com, or call 608-441-1252.

KEY: Color-Coded Event Descriptions…

• ConferencesI Summits – One or more days, based on hot topics, industry news and best practices; scheduled time for peer networking.

• SchoolsI Boot Camps – Focused on a particular area of banking, allowing for a deep dive into that focused area over the course of two to six days.

• WorkshopsI Seminars – One-day programs, sometimes in multiple locations, focused on a specific topic or area of banking.

• WBA-Hosted Webinars – Two-hour webinars instructed with a particular focus on Wisconsin state law and rules.

• Other Events