news.cuna.org/articles/118129-compliance-ncua-updates-2020-supervisory-priorities

Compliance: NCUA updates 2020 supervisory priorities

July 17, 2020

NCUA sent a letter to credit unions (20-CU-22) this week updating the agency’s 2020 supervisory priorities to reflect economic conditions emerging in the wake of the COVID-19 pandemic, as well as other statutory and regulatory changes.

A detailed analysis of the updates can be found on CUNA’s CompBlog.

Updates include:

  • Examiners will review a credit unions’ good faith efforts to comply with the CARES Act. When necessary, appropriate actions will be taken to ensure credit unions are meeting their obligations under the new law. Examination areas of interest related to good faith efforts in complying with the following:
    • Categorization of certain loan modifications;
    • PPP Loans
    • Change requirements for reporting loan modifications related to the COVID-19 pandemic to the credit reporting agencies;
    • Foreclosure moratorium on all single family, federally backed mortgage loans between March 18, 2020 and May 17, 2020. Fannie Mae, Freddie Mac, FHA, VA and USDA subsequently extended the prohibition to June 30, 2020. The foreclosure moratorium expiration for mortgages purchased by Fannie Mae and Freddie Mac currently extends until August 31, 2020; 
    • Up to a 360-day forbearance for borrowers with a single-family, federally backed mortgage loan that experience a financial hardship related to the COVID-19 pandemic; and
    • Up to a 90-day forbearance for borrowers with a multifamily, federally backed mortgage loan that experience a financial hardship related to the COVID-19 pandemic.
  • NCUA will review the actions taken by credit unions to assist borrowers facing financial hardship. Credit union policies, the use of loan workout strategies, risk management practices, as well as any new strategies that have been implemented to assist borrowers impacted by the pandemic will be reviewed.
  • NCUA will not be assessing credit unions’ efforts to transition to the CECL standard until further notice. 
  • Allowance for loan and lease loss accounts will be reviewed for adequacy as it relates to the pro-cyclical effects of economic downturns
  • Liquidity risk, as the economic impact of the pandemic may result in additional stress on a credit unions balance sheet;
  • Consumer compliance reviews will also now include compliance with the changes put in place as a result of the pandemic, including practices relating to the remittance fund transfer rule changes of Regulation E relating and concerning TILA Real Estate Settlement Procedures Act and Regulation Z Rescission rules that permit members to waive the waiting periods.
  • As a result of the pandemic, NCUA has transitioned to examining for evaluating critical security controls -- rather than conducting the cybersecurity maturity assessments via ACET;
  • NCUA will collect data on the type of services provided to hemp business during the examination process;
  • NCUA will continue to conduct BSA/AML reviews during every examination.  Emphasis will continue to be on CDD and beneficial ownership requirements.