Biggert-Waters Flood Insurance Law

Many community bankers have expressed concern about the implementation of the Biggert-Waters flood insurance law, which expands flood zones to include many new coastal and inland areas and could result in dramatic flood insurance rate increases.  

Last week resulted in the first legislative success, led by Congressman Bill Cassidy (R-LA), the passage of an amendment on the Department of Homeland Security Appropriations legislation in the House of Representatives to delay implementation premium adjustments in Section 207 of Biggert-Waters.

Senators Thad Cochran (R-MS) and David Vitter (R-LA), yesterday introduced The Responsible Implementation of Flood Insurance Reform Act, which would delay the period of phasing-in rates, give flexibility for state and local governments to assist with subsidizing flood insurance, and reform the Federal Emergency Management Agency (FEMA) flood mapping procedure.

Senator Mary Landrieu (D-LA) also offered an amendment to the Farm Bill that would delay premium increases for three years. Although the amendment ultimately did not receive a vote due to parliamentary procedures, it received significant attention on the Senate Floor and in the national media, and has helped move the process forward and raise awareness of the issue.

IBAT will continue to work with the Texas delegation to push for reasonable reforms and affordability of this critical program.

2013 Leadership Conference

The 28th Annual IBAT Leadership Conference kicks off this week at the Horseshoe Bay Resort.  A record-setting group of attendees, including 99 first-timers, will be on hand Friday, as Duck Dynasty's Jase Robertson takes the stage (and sticks around for photos and autographs to follow). Attendees of the conference will also be treated to three days of industry-specific education, inspiring leadership lessons and relationship building with fellow community bankers.

Even if you can't make it to Horseshoe Bay, follow all of the action with the Twitter hashtag #LDC13 or on the Leadership Division Facebook page.

Safe Deposit Boxes

“Safe deposit boxes are obsolete, soon to be history, fading away fast, loss leaders, relics from the past and on their way to oblivion.” These are several of the negative and totally incorrect statements made recently in a news story published by a large New York business news publication.

The reporter who wrote this story called me before publishing his safe deposit box article and requested answers to numerous safe deposit questions. Unfortunately he omitted all of my positive comments and the beneficial aspects of renting safe deposit boxes to consumers. These deletions and numerous incorrect statements caused many of my nationwide clients to suggest that I write a rebuttal article with the proper safe deposit box information.

Bankers Interviewed

Before writing his article, in addition to me, the reporter also interviewed many New York bankers, primarily from the larger nationwide mega banks. He received nothing but negative comments and an entirely different and incorrect perspective regarding safe deposit boxes. These bankers told him they were phasing out safe deposit boxes because consumers no longer wanted or needed them. Due to this lack of consumer demand, they considered safe deposit boxes as unnecessary, unimportant customer service and not a beneficial profit center. They also decided they would not devote any additional time, money or resources to train their employees or secure these boxes properly. To save money, many of these mega banks have converted their safe deposit box service into a less expensive, but extremely dangerous “Self-Service” vault access system that completely eliminates staffing, renter’s signature identification, historic dual control key locks and proper vault access requirements. Due to these actions, I am aware of at least fifteen very large box renter disappearance claims which will soon create significant losses, large legal fees and very expensive safe deposit box litigations. This is obviously the reason these institutions have decided to discontinue this service.

Box Contents Not Insured

Fortunately, the reporter did correctly inform his readers that in case of a burglary, fire, flood, hurricane, tornado or a mysterious disappearance, safe deposit box contents are not insured by FDIC, NCUA or any financial institution. Unfortunately, he neglected to mention that, except for flood losses, this box content insurance is readily available and easily obtained from a box renter’s own insurance agent. This is done by requesting a “Personal Article Floater”, which is merely a rider attached to a home owner’s insurance policy and specifies what items are insured. Written property appraisals are usually required by the insurance companies.

Another box content insurance coverage option is also available and reasonably priced through the insurance provider Safe Deposit Box Insurance Coverage (www.sdbic.com). Their safe deposit box coverage is very unique, does not require the disclosure of a box renter’s contents or any written property appraisals and does insure flood damaged box contents and any other man-made or natural disaster.

Home Safes Not Safe

Purchasing a home safe and the many advantages of using this type of property protection were covered extensively in this article. Based on the size of the home safe, prices usually range from $300 to several thousand dollars according to a very large New York safe company owner who was interviewed. He stated, “I think our business has definitely increased by 20% or 25% a year because of robberies, burglaries, disasters and our nation’s current financial crisis.”  

Again I totally disagree with this home safe, property protection recommendation. Unfortunately, I am a previous home safe owner who is also a past victim of a home burglary. Even with our substantial home security system, all of my family’s valuable possessions that were stored inside an expensive 300 pound safe disappeared in one very traumatic afternoon. Because of this burglary, I am not a strong proponent of storing valuables in a home safe. The former chief of the FBI’s Financial-Crimes Section was also interviewed and agreed with me, that if you do purchase a safe it is only as secure as the good security system that protects your home. He now owns a home safe but he stated; “That’s why I don’t keep anything terribly valuable in it.”  

When you compare this home safe protection to existing safe deposit boxes, you will find that most bank and credit union boxes are located inside a solid steel or concrete vault, protected by a thick vault door armed with door contacts, heat, motion and vibration detectors and a security system that is continuously monitored. It is possible that these safe deposit vaults could be compromised, but with over 25 million boxes rented nationwide, police reports indicate that, compared to home burglaries, these vault burglaries do not occur often. When this reporter contacted his local law enforcement experts, a former New York City Police Captain, he stated; “As a place to store valuables, the safe deposit box is the safest option.”

Disaster Protection

Recently we have all seen on TV the terrible destructive tornados in Oklahoma and Super Storm Sandy’s wind and water damage along the east coast. Mother Nature’s disasters have destroyed thousands of homes and businesses in a very short period of time. Our personal property, family heirlooms and many other valuable items can all disappear in a matter of seconds. The graphic TV and newspaper coverage of the strength of Tinker Federal Credit Union’s safe deposit vault in Moore, Oklahoma was amazing and definitely saved twenty-four lives. The entire credit union building was completely demolished in a matter of minutes by an EF 5 (250 MPH) tornado. Following the disaster, the vault, the employees, the members and all the valuable property stored inside the safe deposit boxes were still intact.

In Conclusion:

Historically and in our current financial environment, the safe deposit service is still considered a financial institution’s best marketing tool. It attracts and enables institutions to cross-sell additional financial services to very affluent consumers. With today’s strong push towards automation, on-line bill paying, ATMs, debit cards and many other electronic services, consumers are no longer required to come into a brick and mortar facility. Renting a safe deposit box continues to be the only service that requires individuals and businesses to come through your lobby doors.

Today there are thousands of banks and credit unions nationwide offering this valuable safe deposit box service correctly and they are actively promoting it to their customers and members. Because of this, many financial institutions have 90% to 100% of their boxes rented and there continues to be long waiting lists for their most popular box sizes.

Consumers, banks and credit unions should all be aware, “Safe Deposit Boxes Are NOT on Their Way Out” as the recent NY news article predicts. There will never be a better security option available to protect our valuables and safe deposit boxes are going to be around for many years to come.

About the Author: David P. McGuinn, President of Safe Deposit Specialists, is a former banker and is often referred to nationwide as the safe deposit GURU. In all 50 states he has trained over 250,000 safe deposit personnel since 1969 and has served as President of the American Institute of Banking and the American, Texas and Houston Safe Deposit Associations. During the past 45 years, McGuinn’s safe deposit employee training, manuals, compliance products and other marketing resources have been recognized as the accepted national standard for the financial industry.

Shelby Car Show

Rare and vintage Shelby Cobras and Mustangs will be on display when LegacyTexas Bank in Plano presents the fourth annual Shelby Car Show on Saturday, June 22. The family-friendly event is free of charge and open to the public. The show is co-hosted by the bank and the Shelby Cobra Association of Texas and sponsored by Dallas Mustang.

LegacyTexas Bank President Phil Dyer says the day’s events will feature something for every member of the family. “This is a community event for car enthusiasts of all ages,” he said. “We’ll have a variety of fun activities, food, live music, and well over 100 cars on display. We anticipate this will be our best show yet.”

The event will be held from 10:00am until 2:00 pm at the bank’s corporate headquarters at 5000 Legacy Drive in Plano. The event will showcase rare Shelby Mustang models from Shelby American as well as cars from Shelby family’s private collection. This will mark the fourth consecutive year LegacyTexas Bank has hosted the Shelby event and coincides with the bank’s celebration of 50 years of service.

About LegacyTexas Bank

LegacyTexas Bank is an independent community bank with $1.7 billion in assets and is majority owned by the Shelby family of North Texas.  In business since 1963, LegacyTexas Bank currently has 20 branches throughout Collin, Dallas, Tarrant and Parker Counties. LegacyTexas Group is the financial holding company for LegacyTexas Bank and also includes LegacyTexas Insurance Services and LegacyTexas Title. For more information, visit LegacyTexasBank.com.

TWIA Update

The 83rd Legislature failed to produce any "major" changes related to the Texas Windstorm Insurance Association (TWIA) and that leaves Coastal Counties with an unresolved concern. As reported in the Bottom Line earlier in the Legislative session, with litigation outstanding, reserves remain high - which caused TDI to request that TWIA's board consent to seek an order of rehabilitation.  That was tabled at the March 25th TWIA Board meeting following numerous comments from coastal stakeholders who remained optimistic that the 83rd Legislature would produce the necessary solution in lieu of receivership. But no such solution was borne through the Legislature and the May TWIA Board meeting was postponed until June 18th.

The Independent Insurance Agents of Texas were successful in their support of SB 1702 which extends the certificate of compliance program two years to a current expiration of August 31, 2015, with certain stipulations.  It is thought that this extension allows more than 20,000 TWIA policies renewal eligibility - which no doubt is good news for Texas bankers and a small step in the right direction.

Governor Perry has indicated that TWIA may be added to the list of issues up for consideration in the current special session, but thus far has not taken action to that effect.  Statistics released by TWIA at a recent agents workshop show the organization has over 266,726 policies in force with 50% of their business generated in Galveston and Brazoria Counties. 


As reported in the IBAT Bottom Line two weeks ago, IBAT2GO, the official mobile application of IBAT, was down temporarily as we underwent a migration of the IBAT website.  

Last week, Apple approved the updated version of the app, which is now available for download.  If you have never downloaded the IBAT2GO Mobile Application, click here to do so now.  If you have downloaded a previous version of the app on your iPhone or iPad, click the App Store on your device and download the update.  

IBAT2GO offers Texas community bankers instant access to IBAT's entire Legal Ease Archive, with over 500 searchable state and federal banking Q&As, along with the IBAT Calendar of Events - a searchable listing of upcoming education opportunities, and the latest banking news and original content from the IBAT website.  The app also includes a full IBAT staff directory.

CFPB Mortgage Reforms - Part 6

In order to provide additional clarification on the recently issued CFPB mortgage reforms, IBAT Regulatory Compliance Manager Kelly Goulart is releasing a series of white papers addressing each change contained in the seven major mortgage lending initiatives, six of which have been finalized by the CFPB (more or less).  

The sixth part of the series, focused on mortgage loan servicing requirements, is now online.

Previous documents in the series can be found here:
Expansion of High Cost and High Fee (HOEPA) Mortgages
Equal Credit Opportunity Act (ECOA) and Higher Priced Mortgage Loan (HPML) rules
Ability to Repay (ATR) and Qualified Mortgage Rules
Escrow requirements for HPMLs
Regulation Z - Prohibited Acts or Practices

SB 247 - Tax Lien Lending

Last week Governor Rick Perry signed SB 247, the IBAT-supported bill addressing some of the major issues related to the tax lien lending industry. While not going as far as we would have liked (and no doubt farther than those in the tax lien lending industry would have preferred), SB 247 is a positive improvement for Texas consumers and Texas community banks. Especially important to the industry is an IBAT-prompted initiative to require prompt payoff information to existing lienholders.  Among the provisions included in the final version of SB 247 are:

  • Judicial foreclosure required;
  • Tightening the requirements for sales of tax lien loans;
  • Prohibiting borrowers from waiving statutory protections through contract;
  • Requiring a notice that the taxing entity may offer installment plans;
  • Prohibiting false, misleading or deceptive solicitations, and enhanced enforcement;
  • Truth-in-Lending disclosure requirements;
  • Prohibition on tax loans to seniors;
  • Prompt payoff statements when requested by an existing lien holder;
  • Additional fee information in disclosure statements; and
  • Outlawing "evergreen" clauses, which allow these lenders to fund subsequent years' taxes without specific borrower approval or consent.

Following the Governor's signature, the Office of Consumer Credit Commissioner released a bulletin on the bill, outlining the changes in law which were made effective immediately.

IBAT is appreciative of the efforts of Senator John Carona and Representative Doug Miller (along with their outstanding staffs), who shepherded SB 247 through the process.

CFPB Ability-to-Repay

On Wednesday, May 29, the CFPB finalized amendments to the ability-to-repay mortgage rules that were issued in January. The amendments take effect on January 10, 2014.

For community banks that have less than $2 billion in assets and each year make 500 or fewer first-lien mortgages, the final rule:

  • Extends Qualified Mortgage status to certain loans held in portfolios even if the consumer's debt-to-income ratio exceeds 43 percent.
  • Provides a two-year transition period to make balloon loans under certain conditions and those loans will meet the definition of Qualified Mortgages.
  • Allows a higher annual percentage rate for certain first-lien Qualified Mortgages while maintaining a safe harbor for the Ability-to-Repay requirements.

There are also certain exceptions to the Dodd-Frank requirement that loan originator compensation be included in the total permissible points and fees for both Qualified Mortgages and high-cost loans. In the amended rule, the compensation paid by a mortgage broker to a loan originator employee or paid by a lender to a loan originator employee does not count towards the points and fees threshold. This amendment does not change the January 2013 final rule under which compensation paid by a creditor to a mortgage broker must be included in points and fees, in addition to any origination charges paid by a consumer to a creditor.

Week in Review May 31

While tapering off may be a sensible approach to ending one's smoking habit or reducing one's calorie intake, when it comes to Quantitative Easing; perish the thought. Perish too, any discussion that hints at the possibility of potentially considering even thinking about contemplating any tapering off of the Fed's pedal-to-the-metal $85B per month bond buying program. The Treasury market expressed its displeasure with such heretical notions this week as nervous bond investors took the yield on the Benchmark Ten Year up to a week-high 2.20%... Read more in the Baker Market Update.

Flags at Half Staff

Office of the Governor Rick Perry:

The State of Texas has been deeply affected by the injuries and loss of life that resulted from the recent motel fire in the City of Houston. It seems fitting that flags should be flown at half-staff on the day of the memorial service as a mark of respect for those brave firefighters who perished while serving their community.

Therefore, pursuant to Texas Government Code Chapter 3100 and acting in my capacity as the Governor of the State of Texas, I hereby direct the lowering of State of Texas flags to half-staff on Wednesday, June 5, 2013. Flags should return to full-staff on the next day, Thursday, June 6, 2013.

Please notify personnel within your agency and other state agency and university leaders of this directive. Flags should be flown at half-staff for the same length of time at all State of Texas offices and facilities in other states and abroad. Individuals, businesses, municipalities, counties and other political subdivisions are encouraged to fly their flags at half-staff for the same length of time as a sign of respect.

Anita and I send our deepest condolences and prayers to the families and support personnel touched by this terrible event.

West Relief Donations

AUSTIN, Texas—The Independent Bankers Association of Texas (IBAT) and the Texas Bankers Association (TBA) joined together to establish the Texas Bankers Disaster Relief Fund following the devastating fertilizer plant explosion in West, Texas. The donations collected through this fund will be presented to West’s POINTWEST Bank and The State National Bank on Friday, May 31, at 10 a.m. during a ceremony held at POINTWEST BANK.

Chris Williston, president and chief executive officer of IBAT, and Eric Sandberg, president and chief executive officer of TBA, will present the relief fund check to Charles Nemec, president and chief executive officer of POINTWEST Bank, and Dalbert Thiele, president of The State National Bank. These local banks are playing a key role in helping the community, including their impacted employees, rebuild and recover.

IBAT and TBA kicked off the relief fund by contributing $1,000 each. Thanks to generous donations from bankers throughout Texas, more than $143,500 in relief donations was raised. The fund will be used to provide assistance with “unfunded needs”—anything not covered by insurance or government assistance—in the West community. The purpose of these funds, which will be coordinated and led by the two local banks, is to help the community recover and move past this tragic incident.

The Texas Bankers Foundation coordinated donations, and 100 percent of every dollar collected went directly into the fund to now be used for local relief efforts.

About the Independent Bankers Association of Texas

IBAT is the largest state community banking organization in the nation with a membership of more than 2,000 banks and branches in 700 Texas communities.

About the Texas Bankers Association

TBA represents the Texas banking industry—with members ranging from the smallest bank in the nation to the largest bank in the nation. This includes 85 percent of Texas banks, 5,200 bank branches and 95 percent of Texas deposits.

FNB Hebbronville Anniversary

On Saturday, May 25, 2013, the First National Bank of Hebbronville celebrated "a century of strong and independent community banking."  Curt Nelson of IBAT attended the celebration last weekend and presented the bank with a congratulatory Resolution on behalf of the IBAT Board of Directors.  Israel Hinojosa, President & CEO of FNB Hebbronville, expressed his appreciation by saying: "We really appreciate all IBAT does for us and are proud to be members of IBAT."

The bank's website proudly displays the special 100th anniversary logo.

CFPB Mortgage Rule Clarification: Part Five

In order to provide additional clarification on the recently issued CFPB mortgage reforms, IBAT Regulatory Compliance Manager Kelly Goulart is releasing a series of white papers addressing each change contained in the seven major mortgage lending initiatives, six of which have been finalized by the CFPB (more or less).  

The fifth part of the series, focused on the expansion of HOEPA coverage and additional prohibitions, is now online.

Previous documents in the series can be found here:
Equal Credit Opportunity Act (ECOA) and Higher Priced Mortgage Loan (HPML) rules
Ability to Repay (ATR) and Qualified Mortgage Rules
Escrow requirements for HPMLs
Regulation Z - Prohibited Acts or Practices

Staff contact: Shannon Phillips, sphillips@ibat.org, 512-275-2221