Appraisals for HPMLs

Friday, January 18, the six federal financial regulatory agencies issued the final rule that establishes new appraisal
requirements for "higher-priced mortgage loans."  The rule
implements amendments to the Truth in Lending Act made by the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).  Under
the Dodd-Frank Act, mortgage loans are higher-priced if they are secured by a
consumer's home and have interest rates above certain thresholds.

higher-priced mortgage loans, the rule requires creditors to use a licensed or
certified appraiser who prepares a written appraisal report based on a physical
inspection of the interior of the property.  The rule also requires
creditors to disclose to applicants information about the purpose of the
appraisal and provide consumers with a free copy of any appraisal report.

the seller acquired the property for a lower price during the prior six months
and the price difference exceeds certain thresholds, creditors will have to
obtain a second appraisal at no cost to the consumer.  This requirement
for higher-priced home-purchase mortgage loans is intended to address
fraudulent property flipping by seeking to ensure that the value of the property
legitimately increased.

The rule exempts several types of loans, such as qualified mortgages,
temporary bridge loans and construction loans, loans for new manufactured
homes, and loans for mobile homes, trailers and boats that are dwellings. The
rule also has exemptions from the second appraisal requirement to facilitate
loans in rural areas and other transactions. 

Special Report

Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors.

Employment has continued to expand at a moderate pace but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has shown further improvement. Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable... Read more in the Baker Market Update.

Capitol Comments

January 2013 edition of Capitol Comments is now
available on the IBAT website.

in this issue include:

  • CFPB final rule: Ability-to-Repay;
  • CFPB final rule: Escrow requirement under Truth in
  • CFPB final rule: High cost and homeowner counseling
    amendments to Reg. Z and RESPA;
  • New law eliminates physical notice of fees on ATMs;
  • CFPB: When a final rule is posted online, that's
    official issuance;
  • Children's Online Privacy Protection changes;
  • CFPB launches CARD Act inquiry;
  • OCC names Amy Friend Chief Counsel;
  • CFPB Semiannual Regulatory Agenda;
  • Fed survey reveals consumers want debt protection
  • GAO report analyzes bank failures;
  • FTC Report on Dodd Frank's affect on interchange fee;
  • OCC Mortgage Metrics Report for the Third Quarter
  • OCC Semiannual Risk Perspective Report; and
  • Obama Administration's December housing scorecard.

CFPB Mortgage Servicing Rules

CFPB released mortgage servicing rules last Thursday, and there's some good
news for community banks in the new rules.  Mortgage servicers that
service 5,000 or fewer loans and service only mortgage loans that they or an
affiliate originated or own are exempt from most of the rules.  This
exemption will carve out almost all community banks.  These small
servicers are not exempt from interest rate adjustment notices for
adjustable-rate mortgages, but most of our community banks do not make
adjustable rate mortgage loans. The bad news is that with onerous restrictions
on balloon mortgage loans going into effect next year, adjustable rate
mortgages may become more attractive to Texas' community banks.

IBAT's October 9, 2012 comment letter, we suggested that this rule
shouldn't go into effect until September 1, 2013, at the earliest. The CFPB
apparently was listening as the effective date is January 10, 2014.

Ed A. Lopez

Clinton D. Dunn, Chairman of the Board and Chief Executive Officer announced
today that the Board of Directors has elected Ed A. Lopez, Executive Vice
President, Chief Lending Officer/Loans and Special Assets, Advisory Director,
and Executive Committee Member.  Mr.
Lopez has served in Texas banks located in: Corpus Christi, Laredo and Seguin,
and previously was employed by the FDIC Division of Liquation.

Mr. Lopez has a BBA degree from Texas A&I University and
a graduate of the Graduate School of Banking at the University of

Congratulations Scott Hauser

Partner and Friend Scott Hauser of Chubb Insurance Group will be assuming the
leadership role of West Territory Community Bank Leader in 2013.  Along
with serving as the senior referral source, Scott will assist with marketing
efforts, new business acquisition, regulatory compliance, strategy
implementation, state planning and training of community bank specialists and
subject matter experts within the Chubb Insurance organization. 

joined Chubb in May 2011 from ACE USA and has more than 20 years of insurance
experience.  For the past 10 years he has specialized in professional
liability coverage for privately held companies, not-for-profits and financial

Scott's entry with Chubb, IBAT Financial Services has reaped the benefit of his
knowledge of  the community banking industry, his experience and expertise
of the various offerings for insurance to community banks and his "can
do" approach that is so important to us and our partnership with our
insurance providers.  We are happy for Scott but even more delighted that
IBAT will be able to continue to work with him, for the benefit of our Members.
We congratulate Scott on his well-deserved accomplishment and applaud Chubb for
their recognition and promotion of such an exemplary Insurance Professional!

100 Years in Business

IBAT would like to congratulate Guaranty Bond Bank for their 100 Year Anniversary. A long-time member of IBAT, Guaranty Bond Bank has embarked on a year-long celebration, starting with a Family Fun Day at the main branch in Mount Pleasant on January 20th. IBAT was part of the special day and presented them with a resolution.

As expected, the bank has changed in many aspects over the years and has been shaped by many local, national and world events. But one thing always remained the same: the spirit of the Guaranty employees. Looking at the anniversary book and being part of the celebration made us understand the pride, spirit and service that went into the bank.

The service we're talking about... it's not stopping for a year of fun and celebration. The bank is challenging all employees to individually dedicate 100 hours of service to the charity of their choice.

Each branch is celebrating on different dates throughout the year. Guaranty Bond Bank is using social media to promote the 100 year celebration. Follow them on Facebook and Twitter!    

Financial Stability

Last week, the Federal Reserve Bank of Dallas issued a special report, Financial Stability: Traditional Banks Pave the Way, calling for an end to "too big to fail" policies and proposing that traditional banking models are the only hope for a recovery of confidence in the American banking system.

In his introduction to the report, Richard Fisher, President and CEO of the FRB Dallas, offered thought-provoking analysis of the industry's current status, and asked questions of its future: "When it comes to our financial sector, we've seemingly stumbled into a place where we never wanted to be. Just as disturbing, we don't know how to get out. Do we simply accept that big banks will get bigger? Do we try to rein in their excesses through all-encompassing regulation, even if it risks burdening small and medium-sized banks that had little to do with the financial crisis? Or do we dedicate ourselves to creating a diverse financial system in which no bank is too big to fail?"

The report consisted of five essays, penned by Dallas Fed economists, on the theme of rethinking America's banking system.  Each part can be found here:

CFPB Final Rule

The CFPB issued this final rule[i]
to implement the Dodd-Frank Act's amendments to the Truth in Lending
Act and the RESPA. The final rule amends Regulation Z by expanding the
types of mortgage loans that are subject to the protections of the Home
Ownership and Equity Protections Act of 1994 (HOEPA), revising and
expanding the tests for coverage under HOEPA, and imposing additional
restrictions on mortgages that are covered by HOEPA, including a
pre-loan counseling requirement. The final rule also amends Regulation Z
and RESPA by imposing certain other requirements related to
homeownership counseling, including a requirement that consumers receive
information about homeownership counseling providers.

The rule is effective January 10, 2014.

MLK Holiday Hours

The IBAT offices will be closed on Monday, January 21, 2013. Regular business hours will resume on Tuesday, January 22. Due to the holiday, our weekly eNewsletter, Bottom Line, will be published on Wednesday next week.

Survey Results

AUSTIN, Texas (January 8, 2013) - According to Abound Resources' recent survey of community bank executives, CEOs of community banks are much more pessimistic going into 2013 than they were going into 2012.  The primary driver of the pessimism is an increasingly difficult regulatory environment. 

In 2012, despite uncertainty about the economy and regulations, CEOs felt they could plan for the impact of regulations.  However, going into 2013 they are concerned about increasing regulations, uncontrolled powers of the Consumer Financial Protection Bureau (CFPB) and increasing inconsistency among bank examiners.

"This year CEOs are decidedly more pessimistic than they have been since we launched our annual survey four years ago," said Brad Smith, President and CEO of Abound Resources. More than one-third (36%) of bank CEOs report they are either very or somewhat pessimistic about their bank's outlook for 2013. In 2012, only 21% were pessimistic and none were very pessimistic. Only about one-quarter (28%) are optimistic or very optimistic about 2013, compared to 45% in 2012.

Other major issues of concern are a weak economy and loan demand.  Both of these factors were mentioned by 67% of CEOs as major concerns in 2013.

In terms of setting growth priorities for 2013, growing commercial loans, growing mortgages and mortgage originations and increasing market share among the small business segment were the top three.

On the operating side of the equation, priorities are consistent with prior year surveys in that streamlining work flows and increasing operational and technology efficiencies are the primary focus. 

2013 is the year of workflow improvements. In 2012, streamlining workflows was cited by 45% of CEOs as a priority, second to improving efficiency ratios and becoming more efficient (64%). This year, workflow is the number one efficiency and cost saving priority for CEOs (60%), followed closely by improving the efficiency ratio (58%). According to Brad Smith, President and CEO of Abound Resources, "There is a built-up demand for improving workflow since so few banks made workflow improvements last year. Workflow improvement projects are tricky as middle management is often resistant to changing how they work, or they don't know how to make changes beyond a few tweaks."

A complimentary copy of a White Paper analyzing the complete survey results is available for download at


TechMecca 2013

us next Monday and
Tuesday, January 21-22
, at the Omni Fort Worth Hotel for the
11th annual TechMecca Technology Conference & Expo.

TechMecca is the largest regional community bank technology show, but this
year's show has an expanded emphasis on the C-O-R-E issues affecting community banks:

C -
O -
R - Risk
E -
Enterprise Efficiency

TechMecca features nationally-acclaimed speakers Joe Calloway and Jim Van Dyke,
two of today's most dynamic and sought-after speakers. They will help you work
out the challenges of your own business and personal relationships.

levels of officers, management and employees are invited to attend the 2013
event in Fort Worth.

83rd Texas Legislature

The 83rd Texas Legislature
convened last Tuesday, January 8, and will consume much of our time and
attention over the now 133 remaining days (not that anyone's counting).
Yesterday, IBAT sent out the first of our weekly IBAT Legislative Insider
newsletters to keep you updated throughout the session.  However, there
are several things you can do to be involved throughout the session.  Please
consider the following: 

  1. Sign up
    to attend IBAT's Community Banking Day at the Capitol, March 5-6 in
  2. Register
    to receive Legislative Action Alerts from IBAT via text
    message.  We promise not to misuse your information by giving it to
    anyone else, market to you or otherwise "cry wolf" during the
    legislative session. Our texting service is reserved for the rare
    instances when a quick, large-scale response is needed from the IBAT
  3. Consider
    holding a PAC drive in your bank.  A strong
    political action committee makes IBAT more effective in advocating for the
    issues that are important to your bank.  Contact Mae Beth Palone at mbpalone@ibat.org if you need
    more information.

Leadership Division Region 9

join your IBAT colleagues and Leadership Division members in the Houston and
surrounding area on January
for an Educational Forum: Opportunity, Risk &
Regulatory Implications in 2013 featuring guest presenters:

  • Kurt
    Purdom, Director, Bank and Trust Supervision, Texas Department of Banking
  • Dr.
    James Bexley, Sam Houston State University School of Banking
  • Robert
    Hoag, Doeren Mayhew Financial Institutions Group

meeting will be at Integrity Bank, 4040 Washington Avenue in Houston and is
sponsored by Integrity Bank and Doeren Mayhew Group.

register, click here.

Silver Alerts




Andrews Police Department is searching for William L Townsley, diagnosed with an
Altered Mental State, WHITE, MALE, 72 years old, DOB 09/25/1940, HEIGHT 5' 3",

The senior
citizen was last seen at 0400, 01/13/2013 at 1010 NW 8TH STREET,
driving a SILVER, 2010 TOYOTA TACOMA with TX License Plate BL43900.

enforcement officials believe this senior citizen's disappearance poses a
credible threat to HIS/HER own health and safety.

If you have
any information regarding this missing senior citizen, contact the ANDREWS
POLICE DEPARTMENT at 432-967-0657.

News Media
Point of Contact is
POLICE DEPARTMENT at 432-523-5545.





with Alzheimer's, WHITE,
MALE, 80 years old, DOB 01/28/1932,
WEARING DARK BLUE JACKET, BLUE JEANS, WHITE TEE SHIRT UNDER BROWN SHIRT.                                                                                           

The senior
citizen was last seen at 2015, 01/15/2013 at BRIANWOOD AND

enforcement officials believe this senior citizen's disappearance poses a
credible threat to HIS/HER own health and safety.

If you have
any information regarding this missing senior citizen, contact the MIDLAND POLICE DEPARTMENT at 432-413-5021.

Media Point of Contact is
DEPARTMENT at 432-413-5021


Secure Loans

All IBAT member banks make loans secured by real estate (both commercial and residential), and a substantial portion of those loans are kept "in-portfolio." Additionally, many of these loans do not have an escrow arrangement for insurance and taxes. As property tax due dates are right around the corner, we wanted to make sure you were "covering your bases" with your customers responsible for paying their own taxes, especially with respect to tax lien loans.

In recent years, there has been a proliferation of entities and individuals offering "tax lien loans." In many cases, these companies scour the tax records, and solicit those who have not yet paid their property taxes. While improvements have been made to this situation over the past several legislative sessions, there are still some significant pitfalls for you as a lender.

First and foremost, these lenders take a priority lien position in the property just as if they were the taxing authority. Your collateral value will clearly be diminished in virtually all of these situations. The loans generally are at high interest rates, and come with hefty fees, potentially impacting your borrower's ability to repay. Thus, both your customer and your bank will be adversely affected if such a loan is used for taxes.

While most of you already have a good system in place, please consider some or all of the following actions to mitigate some potentially expensive problems:

Procedures should be in place to annually contact your residential and commercial real estate loan customers (as necessary) to remind them that evidence of paid taxes is a requirement of the loan covenants. This is especially important if there are indications (late or missed payments, overdrafts, etc.) of financial problems. You may also wish to advise them that if they are having potential problems paying the taxes due, they should visit with their loan officer to discuss possible options, like adding the taxes on to their existing loan. Additionally, you might wish to remind them that allowing a priority lien to be imposed on the property (such as a tax lien) violates one of the promises in the deed of trust, and is an event of default;

If you send payment notices or periodic statements, you might consider a notice on some or all of these stating that third party property tax lien transfers create a priority lien on the property and violates the loan agreemen;

Please remember that evidence of taxes paid does not disclose the source of the funds utilized to pay said taxes. If your customer has contracted with a tax lien lender, there is simply no way to tell other than to check the public records. A notice of tax lien transfer must be sent to the first lien holder of record under state law, but only "after the fact"; and

Your home equity loan portfolio is obviously also subject to risk in this area.

Proper procedures and proactive measures can clearly alleviate potential problems and unnecessary diminution of collateral values. Tax lien lenders are licensed and regulated by the Office of the Consumer Credit Commissioner, 512/936-7600 or feel free to call Shannon Phillips at IBAT (800/749-4228) if you have questions or comments.