Legislative Update - 10/10/2019

last updated on Thursday, October 10, 2019 in Public Policy Network

Welcome to the fall edition of the Public Policy Newsletter. This edition will provide our latest analysis and updates from Washington, D.C. on a variety of issues impacting Federal Home Loan Bank of Des Moines. Also provided is a complete overview of all of our Government Relations events over the past year. We greatly appreciate all who participated in these events and contributed to their success. Thank you for all of your support!

The goal of this newsletter is to more fully inform all members of the Public Policy Network of events we are hosting and issues that impact the Bank. Your input matters and is critical to our success. Please let us know your thoughts and how we can better serve you!

Issue Analysis and Updates

Government Funding

Congress returns from its two week recess on October 15th. Before adjourning, Congress passed and the President signed into law a short term spending bill (H.R. 4378) that funds the government through November 21st. The bill also extends through November 21st authorization for the National Flood Insurance Program and the Export Import Bank.

The short term continuation in government funding allows Congress more time to negotiate long term funding for FY 2020. To date, the House has passed 10 of the 12 Appropriation bills, while the Senate has not passed any yet. The Senate Appropriations Committee has passed 10 of the 12 Appropriation bills out of committee.

If Congress is unable to pass all 12 appropriations bill by Nov 21, then Congress would need to pass another short term extension in funding to prevent a government shutdown. Funding for the southern border wall continues to be a contentious issue. The issue caused a partial government shutdown for 35 days last December and January.

It is too early to say if another government shutdown could occur. We will continue to monitor all developments including if the impeachment inquiry in the House could have any impact on funding negotiations.

Fortunately, not at issue is the debt limit. In July, Congress passed a two-year suspension of the debt limit allowing Treasury to borrow and not run at risk of defaulting on its debt through July 31, 2021.

Current Expected Credit Loss (CECL)

In July, our President and CEO, Mike Wilson, wrote a letter to Congress expressing concern about the impact that the Current Expected Credit Loss (CECL) accounting standard could have on our member institutions.

Many members have said that CECL could impact the availability of affordable credit. Our members are the lifeblood of their communities. In some towns, a single financial institution is the only available provider of credit for families and small businesses.

The letter asks Congress to hold hearings to fully assess CECL’s effect on financial institutions and their ability to serve their communities. It also asks Congress to consider and adopt the CECL Consumer Impact and Study Bill of 2019. This legislation directs federal financial regulators to analyze the impact of CECL on financial institutions and their ability to provide credit.

READ THE FULL LETTER HERE

Cannabis Banking Bill

On Sept. 25, the House passed by a vote of 321-103 the SAFE Banking Act (H.R. 1595) to establish a cannabis banking safe harbor in states where cannabis is legal. Senate Banking Committee Chairman Mike Crapo (R-ID) has said he would like the committee to consider similar legislation this year.

Senator Crapo is supportive of many of the provisions in the House-passed bill, however, he would like to address the safety of cannabis products and their marketing. In a recent Politico article, he said, “We need to be careful that we don't facilitate the marketing of very high-potency products to children."

We will continue to monitor developments. While Senator Crapo’s intent is for the Senate Banking Committee to vote on a cannabis banking bill this year, any potential resolution of the differences between the House and Senate bills would likely not occur until next year.

Fannie and Freddie Capital Retention

On September 30th, FHFA and Treasury announced that they would allow Fannie Mae and Freddie Mac to retain capital reserves up to $45 billion combined. The agreement also increases Treasury’s liquidation preferences in Fannie and Freddie up to $39 billion combined. FHFA Director Mark Calabria noted that this “is an important milestone on the path to reform.”

Prior to the agreement, FHFA and Treasury had allowed Fannie and Freddie to retain only $3 billion each in capital reserves with the remainder of their net income going to Treasury.

"GSE Patch" and QM Rule Review

In July, the Consumer Financial Protection Bureau (CFPB) announced it would allow the “GSE Patch” to expire and review the “definition of a qualified mortgage.”

A qualified mortgage (QM) provides “lenders legal protection from lawsuits that claim the lender failed to verify a borrower’s ability to repay” (Urban Institute). For many loans, the borrower’s total monthly debt-to-income (DTI) ratio cannot exceed 43 percent to receive this legal protection.

Loans eligible for purchase by Fannie Mae and Freddie Mac have an exemption from the 43 percent DTI cap requirement. This exemption, known as the “GSE Patch,” is set to expire on January 10, 2021, or when Fannie and Freddie exit conservatorship, whichever comes first.

While the CFPB has said it will let the GSE Patch expire, it is also considering whether to change the existing QM rule for all lenders. It is currently reviewing a variety of proposals, including those that would alter or suspend the 43 percent DTI cap.

Events Around Our District

ABA Washington Summit

Early April kicked off a jam-packed six-week event calendar. We started with a Member reception in Washington, D.C. during the ABA Washington Summit. Our Government Relations and Relationship Manager teams welcomed over 100 FHLB Des Moines members and state ABA affiliates from across the district after their visits to Capitol Hill. We had a packed room and many great conversations!

Day two started with the Hawaii round table with special guest, Senator Brian Schatz. We convened 20 people who have various backgrounds working on housing access and affordability. The desire to work together and enthusiasm to make a real difference in the lives of those who struggle to have a decent, affordable home was apparent. We are excited to see what this group does in the future. It was an honor to be a small part of a movement to help those less fortunate in Hawaii.

After an invigorating conversation with Senator Schatz, the FHLB Des Moines Community Investment staff hosted a presentation to members and community partners on our AHP award process. Lots of information presented and many great questions.

After we discussed the technical aspect of AHP Awards, we heard three project presentations. It was helpful to see the how various projects completed the funding puzzle to get housing projects from ideas to full of residents. Thank you to our members, First Hawaiian Bank, Central Pacific, and Bank of Hawaii and our housing partners, AHED, Cloudbreak Hawaii, and Hale Mahaolu for your determination and commitment to helping Hawaiian families have a decent and affordable place to call home!

We ended our time in Hawaii with an interactive lunch including a game of Bingo. The goal was to meet new people and connect on projects that are somewhere between an idea spark to working on funding stacks. It was fantastic to see the room a buzz and the follow-up stories are heartwarming. We can’t wait to see what the new connections will mean for struggling Hawaiians.

ICBA Capitol Summit

We ended April with a Member reception in Washington, D.C. during the ICBA Capitol Summit. Our Government Relations team welcomed FHLB Des Moines members and state ICBA affiliates from across the district after their visits to Capitol Hill. It was nice to hear so many great conversations!

Director’s Conference

May brought more time in Washington, D.C. with many of the FHLB Des Moines Directors, executive team and Government Relations team for the Director’s Conference hosted by the Council of Federal Home Loan Banks. In addition to a full program with many great speakers, we were able to meet with members of Congress to discuss issues important to FHLB Des Moines, the FHLB system, and issues back home. Thank you to everyone who traveled to our nation’s capital, Senators and Representatives who took time out of their very busy day, and to the Congressional staff who were instrumental in scheduling so many meetings in a very short amount of time!

Jefferson City, MO Check Presentations and Round Table

August brought the Congressional recess and in-state events. We kicked off a string of events with a ceremonial check presentation in Jefferson City, MO honoring two of our 2018 AHP Award projects and the respective recipients. We were honored to have Congressman Blaine Luetkemeyer (MO-3) join us for the event.

• Congratulations to our first member, Bloomsdale Bank, and our first housing partner, Comtrea, for the $160,000 AHP award for the Mary’s House of Hope at A Safe Place Transitional Housing project in Pevely, MO.
• Congratulations to our second member, Bank of Old Monroe, and our second housing partner, Old Monroe Senior Citizen Housing Complex, for the $298,400 AHP award for the Old Monroe Senior Citizen Housing Complex project in Old Monroe, MO.

The presentations were followed by a Jefferson City, MO round table with special guest, Congressman Blaine Luetkemeyer (MO-3). We convened 17 local leaders with various backgrounds working in housing access and affordability.

St. Cloud, MN Round Table

Rounding out August was a round table in St. Cloud, MN. We were honored to have special guest, Congressman Tom Emmer (MN-6) join us for the conversation. We convened 11 people who have various backgrounds working on secure, decent, and affordable housing.

NAFCU Member Reception

September began with a Member reception in Washington, D.C. during the NAFCU Congressional Caucus.  Our Government Relations team welcomed FHLB Des Moines members from across the district after their visits to Capitol Hill.  It was great to have such in-depth conversations with everyone who joined us.

While it was a whirlwind of events, it was fantastic to meet so many of our members focused on our communities!