OCC Issues Bulletin on Refinance Risk in Commercial Lending

Regulatory Developments

OCC Issues Bulletin on Refinance Risk in Commercial Lending
On October 3, the OCC issued a bulletin to provide banks with guidance for managing credit risk associated with refinance risk, which the OCC describes as the risk that borrowers will be unable to refinance existing debt under reasonable terms under current market conditions. This bulletin focuses on the effect of refinance risk on credit risk in commercial loan transactions and portfolios and transaction and portfolio-level refinance risk management. The bulletin does not address other risks, such as interest rate risk.

CFPB Issues Supervisory Highlights Focused on Auto Finance
On October 7, the CFPB released its 35th issue of Supervisory Highlights, focused on auto finance and covering select examinations generally completed between November 1, 2023 and August 30, 2024. Supervisory observations address violations involving origination disclosures, repossession activities, servicing practices, add-on products, and furnishing deficiencies. The Supervisory Highlights also discusses recent supervisory developments and public enforcement actions.

Agencies Announce Annual Update to Dollar Thresholds for Consumer Credit and Lease Transactions Under Truth in Lending and Consumer Leasing Rules
On October 4, the CFPB and Federal Reserve announced the annual update of dollar thresholds for consumer lease transactions subject to Regulation M, implementing the Consumer Leasing Act, and consumer credit transactions subject to Regulation Z, implementing the Truth in Lending Act. Based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect as of June 1, 2024, the exemption threshold under Regulation M and Regulation Z will increase from $69,500 to $71,900, effective January 1, 2025. Private education loans and loans secured by real property remain subject to Regulation Z regardless of the dollar amount.

CFPB, Federal Reserve, and OCC Announce Annual Update to Appraisal Threshold for Certain Higher-Priced Mortgage Loans
On October 4, the CFPB, Federal Reserve, and OCC announced the annual update of the dollar threshold for higher-priced mortgage loans that are subject to special appraisal requirements. Based on the percentage increase in the CPI-W in effect as of June 1, 2024, the exemption threshold for special appraisals for higher-priced mortgage loans will increase from $32,400 to $33,500, effective January 1, 2025.

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