Protecting Local Communities from Overregulation

Congressman Neugebauer, the newest recipient of the IBAT Trailblazer Award, recently wrote a letter about the importance of community banks. He highlights not only the economic impact of these banks but also how they truly support their communities. He discusses his efforts to repeal and revise unnecessarily harsh Dodd-Frank provisions and shares positive news for farmers in Texas’ 19th district.

The Congressman’s full letter can be found here. Our thanks once again to this community bank advocate who we feel lucky to have support us and our industry in Congress.

On a related note and to extend the spirit of Halloween, check out this short video from the House Financial Services Committee that highlights the horror of regulatory crush. We’re shaking in our boots!

Midterm Elections

Chris Williston, IBAT President and CEO, issued the following statement regarding the November 4 elections and community banking:

“Community banking had little if anything to do with the financial meltdown, yet has been disproportionately impacted by the over-reaction to the financial crisis by Congress, the Administration and various regulatory agencies.  We have been stymied in the U.S. Senate, not because of lack of merit in a number of targeted community bank regulatory burden relief initiatives, but rather due to gridlock and political expediency.

We strongly encourage the new Senate Republican Leadership and majority to join with their colleagues in the House, and move expeditiously to pass the numerous provisions already considered in the House in this Congress.  Further, we appreciate the broad bipartisan support for these common sense legislative initiatives, and encourage both sides of the aisle to diligently work to enact meaningful changes.  Prompt action will benefit not only a beleaguered, discouraged and overwhelmed community banking sector, but more importantly, will enhance the economic recovery via additional credit availability to consumers, homeowners and small businesses.

IBAT will continue to vigorously pursue any and all avenues to attain much needed regulatory relief for community banks over the near term, and has as an ultimate goal the establishment of a true bifurcated industry, recognizing the unique business model and risk profile of these small but critically important financial institutions, and providing for a more equitable and proportional regulatory framework.”

Privacy Notices

CFPB finalized a rule to allow financial institutions to use an alternative delivery method to provide annual privacy notices through posting the annual notices on their websites if they meet certain conditions

As IBAT pointed out in its comment letter when this amendment was proposed, the final rule is, in some ways, more cumbersome and actually not as helpful as it could be. For example, many banks don’t use the model form resolutely. This amended method apparently does not create a safe harbor for those banks.

Recent legislation that passed in the U.S. House of Representatives and was introduced in the U.S. Senate - where it died - would've provided an exception to the annual written notice requirement to any financial institution that:

  1. “provides nonpublic personal information in accordance with” Gramm-Leach-Bliley and Regulation P,
  2. has not updated its privacy policy since its last written disclosure, and
  3. provides online access to its most recent disclosure to all customers.

IBAT President and CEO Chris Williston said that IBAT will continue to seek such legislation next year. The rule will become effective upon publication in the Federal Register, which should happen shortly. 

Election Day

If you have not yet made it to the polls, today is your last chance. 

As indicated in the last several editions of the Bottom Line, you can easily access election day polling locations, as well as sample ballots, by going to your County Clerk's website, or find information here for a number of counties in Texas.

Additionally, we have provided a complete list of those candidates supported by the IBAT PACs, for your information.

Finally, we work closely with the Texas Civil Justice League (TCJL), and urge you to review their recommendations in a variety of judicial races. Please note that appeals and district court elections are regional, and not all of these judicial candidates will appear on ballots in some areas of the state.

Thank you for your involvement and engagement in this important process, and for your ongoing support of IBAT and our efforts.

Year-End Checklist

Year-end is a time for reflecting on the successes and challenges of the prior year. For bankers, it is also a time to complete various reports and reviews. As we enter the home stretch of 2014, IBAT General Counsel Karen Neeley has prepared her annual year-end check list. The list includes reporting requirements for the IRS, regulatory agencies and customer notices, among others.

Click here to view the list online or download it from the IBAT website.

Deluxe Webinar

Account screening can be a wonderful thing, helping you balance risk and reward. But there are some challenges related to it. Millions of Americans are rejected for a checking account, hurting banks’ reputations and driving consumers to more costly options.

Deluxe’s free webinar, Four Ways to Fix Account Screening: Small changes = Big results, will help you overcome this challenge. The webinar will be offered on November 12 and November 13, so don’t miss your chance to learn the four things you can do to help fix the problem. Hear it from a true Texas community banker!

Week in Review: Nov. 3, 2014

A quick word to wise trick-or-treaters: don’t bother going by the Fed; their porch light is off and QE III is over. After its pre-holiday meeting earlier this week, we learned, as expected, that the sugar rush of asset purchases has run its course. Now, lest dismay foment among those market participants with a sweet tooth, we were all assured, again, that rates will stay extremely low for a “considerable time”. Perhaps the greatest surprise to come out of Wednesday’s post-meeting statement was that Janet got out-doved by Minneapolis Fed President Narayana Kocherlakota. He was the only voting committee member that did not want to go sugar-free.

Read more in the Baker Market Update

2015 Rural Lists

Last week, the CFPB issued its lists of “rural or underserved” (CSV | XLS | PDF) and “rural” (CSV | XLS | PDF) counties. These lists are released each year and are for use the following year.  The 2015 rural list of Texas counties didn’t change from 2014. Carson County and Lynn County were removed and Zapata was added to the 2015 Texas “rural or underserved” list. Several mortgage rules refer to these lists:

The CFPB is currently in the midst of a 2-year study to determine whether the definitions of “rural” and “underserved” can be refined. (IBAT has communicated its solutions to the CFPB, which involve an exempting in-portfolio loans or alternatively scrapping the use of counties in favor of a definition of “rural” based on urban areas) In 2013, to alleviate concerns and facilitate lending by small creditors while considering whether and how to refine the definitions, the CFPB amended several rules. Until January 10, 2016:

  • Small creditors that do not operate predominately in counties on the CFPB’s list can take advantage of the balloon QM provision if they meet other criteria.
  • Small creditors not operating in rural or underserved counties may take advantage of the exemption from high-cost mortgage balloon restrictions.
  • Creditors that operated predominantly in rural or underserved counties in 2012 (and also meet the other criteria and thus are eligible for the exemption during 2013) did not lose eligibility during 2014 as a result of any differences between the 2013 list and the 2014 list and will not lose eligibility as the result of any differences between the 2014 list and the 2015 list.

Comment Letter

Last week, IBAT filed its comment letter with the Farm Credit Administration on the proposed changes to expand Farm Credit System lending. 

Under the proposed rule, the FCA would have authority to expand the investments it approves without explaining whether the investments exceed the Farm Credit Act’s authority.

If adopted as proposed, it is reasonable to deduce that the rule would allow the FCA to approve just about any financing. In the letter, IBAT President and CEO Chris Williston said, “the FCA needs to withdraw this proposal and, if it decides to repropose it, it must do so with the specificity sufficient to inform those desiring to comment.”

Deluxe Webinar

Account screening isn’t broken. In fact, it does a good job helping you balance risk and reward so you can open profitable accounts. 

However, there are some looming challenges related to screening. Millions of Americans are rejected for a checking account, hurting banks’ reputations and driving consumers to more costly options. We need to work together to address these challenges. 

Please register for Deluxe's FREE webinar:

 Four Ways to Fix Account Screening: Small changes = Big results.

November 12, 2014 - 2:00-2:45 pm CDT or
November 13, 2014 - 10:00-10:45 am CDT

During this 45-minute session, IBAT member Debbie Crump, Vice President & Cashier, Preston National Bank, Dallas and Bob McGuinness, Business Development Executive Fraud & Risk, Deluxe will review the most pressing challenges and share the 4 things you can do to help:

1.     Prove that every account applicant receives a fair, consistently applied evaluation;

2.     Prevent profitable consumers from going to fringe banks or non-bank institutions for deposit accounts;

3.     Preserve your reputation and help the banking industry rebuild trust; and

4.     Get the most from your account screening provider.

Don’t let others miss the opportunity to attend a free webinar. Please forward to those employees who may have an interest.

Compliance Resource

As year-end approaches, your IBAT compliance team has once again prepared an alert to help you steer clear of violations of Regulation Z when computing bonuses for mortgage originators.

You’ll recall that, if your bank’s year-end bonus takes into consideration earnings on mortgage loans, it may violate the anti-steering rules found in Regulation Z. The CFPB maintains a very broad interpretation with regard to Section 1026.36 of Reg Z. That section prohibits mortgage loan originators and brokers from receiving compensation based on the terms of the loans they originate.

Click here to download this featured resource from the IBAT website

CFPB Rule Finalized

The Consumer Financial Protection Bureau (CFPB) finalized a limited “cure” provision for lenders originating a qualified mortgage under the Bureau’s rules but later found that points and fees exceeded the 3% cap. Under the final rule, lenders will have 210 days to issue the excess plus and still maintain the legal protections afforded to QMs. 

The 210 day cure period was extended from the proposed 120 day period, following pressure from community banking associations. Industry pressure also resulted in the removal of a subjective requirement that the loans be made in good faith.

“We are pleased with the final rule issued by the CFPB and appreciate the Bureau’s efforts to help community banks keep loans in compliance with QM when a miscalculation occurs,” said IBAT President and CEO Chris Williston.

Qualified Residential Mortgage Rule

Last week federal regulators jointly approved the qualified residential mortgage (QRM) rule, generally requiring sponsors of asset backed securities to retain five percent of the credit risk of the collateralizing assets and exempting securitized QRMs from the risk retention requirement. 

The final rule aligned the requirements for loans to be considered QRMs with the earlier-approved definition of Qualified Mortgages (QMs), adopted by the Consumer Financial Protection Bureau. It also granted QRM status to mortgages backed by Fannie and Freddie. All loans underwritten to GSEs qualify for QM status.

Scrapped from the final rule was a provision which would have required a 20 percent down payment from the homeowner for the loan to attain QRM status.

Upcoming LD Events

Several Leadership Division regions are hosting events that will cover a variety of important industry topics in the coming weeks. We encourage you to register for an event in your region, or join your peers in other regions for learning and networking opportunities.

Upcoming events include:

Proposed Solutions for Mortgage Woes

In a letter recently sent to the Consumer Financial Protection Bureau (CFPB), ICBA staff outlined a number of concerns facing lenders as a result of the current qualified mortgage and ability to repay rules, enacted in January of this year.

The letter cited the National Community Bank Survey conducted by the Federal Reserve and Conference of Community Bank Supervisors which indicated that, as a result of the rules, 59 percent of the respondents would no longer originate non-QM loans at all or will only do so on an exception basis.

“As a result, consumers, particularly those in rural and underserved locations where many community banks serve, are receiving limited access to mortgage credit,” the letter said.

The letter went on to identify a number of potential solutions to the problems created by the CFPB rules, including the exclusion of all community bank loans held in portfolio for the life of the loan to receive automatic QM safe harbor legal status and exemption for higher-priced mortgage loans.

IBAT has been on the frontlines of this effort presenting creative solutions in comment letters (May 2, 2013 and July 22, 2013) and in face-to-face meetings with CFPB representatives.