Get Ready for General Qualified Mortgage Final Rule

In April 2021, the Consumer Financial Protection Bureau (CFPB) delayed the deadline for compliance with its revised general qualified mortgage (QM) rule to October 1, 2022. But it’s a good idea for banks to start reviewing the requirements now and determine how they’ll need to update their procedures to incorporate the new rule. QMs — which avoid certain risky features and meet other requirements designed to make them safer and easier for borrowers to understand — are presumed to comply with ability-to-repay rules.

Currently, for a loan to be a QM, the borrower must have a total monthly debt-to-income ratio (including mortgage payments) of 43% or less. The revised rule greatly simplifies the definition of a QM by discarding the debt-to-income limit in favor of a price-based model. For loan applications received on or after March 1, 2021, but before October 1, 2022, lenders have the option of complying with either the current or the revised general QM loan definition. (Note: Separate rules apply to “seasoned” QMs.)

New lease accounting rules back on banks’ radar

After several delays — including a one-year postponement due to COVID-19 — the new lease accounting standard is scheduled to take effect for private companies for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. If your compliance efforts have been on hold, it’s time to ramp them up again. The upcoming transition to the new rules may influence current negotiations between banks and their loan customers, and banks that lease their facilities, equipment or other fixed assets should prepare for the rules’ potential impact on their balance sheets and regulatory capital. Plus, the standard’s transition approach may require banks to implement certain changes before the rules take effect.

Guide to conducting due diligence on FinTech companies

Community banks are under increasing pressure to provide their customers with digital products and services, and many banks are partnering with financial technology (FinTech) companies as a strategy for developing innovative, customized, cost-effective solutions. These partnerships can be complex ventures that involve a variety of risks, so thorough due diligence is critical. To assist banks with these efforts, federal banking agencies have published “Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks.”

The due diligence practices described in the guide are voluntary and don’t establish any new risk-management requirements. But they provide valuable guidance on what community banks should be looking for when they evaluate potential FinTech providers in six areas: 1) business experience and qualifications, 2) financial condition, 3) legal and regulatory compliance, 4) risk management and controls, 5) information security, and 6) operational resilience.

For more guidance regarding your bank’s compliance, contact Jack Matthis at jmatthis@atacpa.net.

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