TILA-RESPA Integrated Disclosure

CFPB Director Cordray announced through a letter to Congress that the Bureau would be “sensitive” to those making good-faith efforts to come into compliance with the TILA-RESPA Integrated Disclosure (TRID) rule, effective August 1, 2015. 

It is not a “hold harmless” period that many industry leaders, including IBAT President and CEO Chris Williston, have called for time and time again. Adding to the woes, the CFPB did not clarify the meaning of “sensitive” nor elaborate on what constitutes a “good-faith effort.” This leaves many banks across Texas with the daunting task of finalizing loan processing software installation and training with less than two months before the effective date without any meaningful reprieve.

In the same announcement on its web page, the CFPB sought to “clarify misunderstandings” regarding the limited circumstances in which the TRID rule requires a revised Closing Disclosure and triggers a new waiting period. In a fact sheet, the CFPB stated that if one of three specific conditions are met, the lender would have to provide the borrower with a revised Closing Statement and reset the three-day review period mandated by the TILA-RESPA Integrated Disclosure rule. Other issues addressed up until closing, including the correction of errors or most changes to a payment amount, would not trigger a revised Closing Statement. Read the CFPB announcements here.

Call to Action - Data Security Act

Just days after IBAT members met with Chairman Randy Neugebauer as part of IBAT’s 23rd Congressional Visit, the Congressman filed the Data Security Act of 2015.

The bill contains key provisions of the IBAT-endorsed Plan for Prosperity, including creating a national uniform standard for timely notification when a retail data breach occurs and applying consistent Gramm-Leach-Bliley data security standards to all businesses that handle secure customer data. This legislation would get everyone on the same page, increase consumer confidence and most importantly, reduce future instances of data breaches.

Unfortunately, Chairman Neugebauer’s move to apply consistent and common sense standards across the board has raised the ire of the National Retail Federation and its membership. In response, we’re asking IBAT members throughout the 19th Congressional District to write a letter of support for the Chairman. We’ve created a form letter to use as a guide in this process.

Thank you for your consideration and support of Chairman Neugebauer.

Reg Relief Roundup

Another week into 2015 and new developments emerge in the ongoing efforts to achieve substantial regulatory relief for community banks. Below is your reg relief roundup from last week:

  • Senate Banking Committee Chairman Richard Shelby told POLITICO that his regulatory relief bill “is resting.” He went on to say that he’ll begin negotiations with Senate Democrats “at the proper time.”
  • Meanwhile, House and Senate Democrats jointly filed their own regulatory relief legislation. The bill provides QM status for loans held in portfolio for banks under $10 billion, eliminates the requirement for annual written privacy notices and extends the examination cycle to 18 months for banks under $1 billion in assets. A full bill analysis is online here.
  • Former Governor Rick Perry threw his hat into the ring for the Republican Presidential nomination. In his announcement, Perry provided a shout-out to community bankers, saying, “For small businesses on Main Street, those that are struggling to just get by, those that are smothered by regulation, they’re targeted by Dodd-Frank…I hear you. You are not forgotten. Your time is coming!” Perry went on to ask, “Since when did capitalism involve the elimination of risk for the biggest banks while regulations strangle our community banks?”
  • The House passed an amendment to a 2016 appropriations bill to prohibit the use of funds to implement, administer or enforce the disparate impact theory of liability by Federal agencies. Disparate impact theory has been at the heart of numerous Fair Housing and Fair Lending prosecutions by the U.S. Department of Justice.

Flood Insurance Alert

Special thanks to Tom Alleman with Dykema Cox Smith for providing this flood alert that lenders with mortgaged property in the flooded areas can use to address big picture issues associated with the recent catastrophic events. Specific topics covered in the alert include the following:

  • NFIP Flood Insurance proof of loss filing deadline;
  • Proof of loss content requirements;
  • How are you listed on the policy?;
  • How are payments made?;
  • Private flood coverage – primary or excess; and
  • Chapter 557 of the Insurance Code.

Leadership Conference

The IBAT Leadership Division meets this week for its annual flagship event in San Antonio. This marks the 30th year of the Leadership Conference, an annual opportunity for IBAT members to receive education and leadership development while strengthening the industry through personal connections. There are many reasons for celebration at this great event, held at the favorite Hyatt Regency Hill Country, including:

  • The expansion of the Leadership Division into 13 distinct regions, each hosting educational and networking events throughout the year;
  • A record-high membership of more than 640 members of the IBAT Leadership Division; and
  • Outstanding support of the division to strengthen IBAT’s legislative involvement and the development of IBAT Political Action Committees. 

We hope to see you in San Antonio later this week to celebrate with us! If you can’t be there, join the Leadership Division today and get involved in your local region.

Lender Alert

Thomas B. Alleman
Member, Dykema Cox Smith
Dallas, Texas

Texans wanted the drought to end . . . but not this way.  For lenders with mortgaged property – real or personal – in the flooded area, the recent floods impose immediate and ongoing responsibilities.  This alert serves as a reminder of those responsibilities.

  1. NFIP Flood Insurance proof of loss filing deadline.  Affected borrowers generally will have NFIP flood insurance, and you should contact all affected borrowers promptly to ensure that they have started the NFIP claim process.  On May 28, 2015, FEMA issued a formal memorandum extending the deadline for filing a proof of loss from the May 2015 flooding to January 11, 2016.  This is good news but borrowers and lenders should be aware that failure to file a proof of loss before the deadline will result in denial of a claim.  If this were a non-NFIP claim, the insurer would have to show prejudice from the late filing.  Not so for an NFIP policy.  Failure to file a complete proof of loss within the deadline established by FEMA results in a loss of coverage.  Period. 
  2. Proof of loss content requirements.  Proof of loss requirements under the NFIP policy are highly specific and there must be exact compliance.  Among the more difficult are the following conditions:

    Prepare an inventory of damaged property showing the quantity, description, actual cash value, and amount of loss. Attach all bills, receipts, and related documents; and Specifications of damaged buildings and detailed repair estimates.

    Again, the requirements are exacting, and while they are not enforced with quite the stringency of the deadline for filing a proof of claim, failure to comply can result in claim denial.  Your borrower likely will not be paying attention to these requirements; if you want to protect your collateral, you must intervene.

  3. How are you listed on the policy?  The FEMA standard NFIP contains a generous standard union mortgage clause, but to obtain its benefits, the lender must be specifically named on the policy.  If you are not named, you will have to show the NFIP insurer that you are “legally entitled to receive payment.”  This means getting proof of your mortgage interest (or rights as servicer) to the insurer.  This should be done even if you are not clear on the borrower’s progress in filing a claim. 
  4. How are payments made?  Even if you are named as a mortgagee or lienholder in the policy, the standard NFIP policy states that the NFIP insurer will adjust all losses with the insured, who may not be interested in maximizing a recovery.  You will need to pay attention to and possibly participate in the claim process to ensure that there is a full settlement.
  5. To whom are payments made?  Even if you are listed as a mortgagee on the policy, the standard FEMA policy states:

    Any loss payable under Coverage A—Building Property will be paid to any mortgagee of whom we have actual notice, as well as any other mortgagee or loss payee determined to exist at the time of loss, and you, as interests appear.

    “You” is the borrower/insured and what this means is that the NFIP insurer will issue one check to the borrower and any mortgagees.  Such a situation can generate all kinds of problems, ranging from getting everyone to endorse the check to an insured taking the check and absconding with it.  (It happens.  See ViewPoint Bank v. Allied Prop. & Cas. Co., 439 S.W.3d 626 (Tex. App. – Dallas 2014, pet. denied).)  Some commercial loan documents allow lenders to adjust claims; these should be checked promptly.

  6. Private flood coverage – primary or excess.  Some borrowers may have non-NFIP primary flood insurance or excess policies covering flood losses from non-NFIP insurers.  Care should be taken to comply with conditions in these policies.
  7. Do not forget Chapter 557 of the Insurance Code.  That section requires a lender holding funds from an insurance claim to give the borrower notice within ten (10) days after receipt of the funds of “each requirement with which the insured must comply for the lender to release the insurance proceeds.”  Failure to give notice or failure to release funds after compliance requires the lender to pay interest at the rate of 10% per year until the lender complies with the Chapter. 

    The bottom line is that compliance with the NFIP claim process is a sad but necessary task in the aftermath of a disaster.  Borrowers may not want to do it; you must be prepared to firmly but diplomatically ensure compliance.  If you have questions, contact professionals immediately for assistance.  The claim clock is ticking. 

Baker Market Update: June 8, 2015

So, even though the Chinese may have just pulled off one of the biggest heists of U.S. Government data in the history of heists, they didn’t get everything. If you want to get the latest scoop on the jobs market, you’ve still got to go to the BLS. At least until the Chinese figure out how to hack into their computers. The keepers of all things job-related reported this morning that Non-farm Payrolls grew by 280k last May and not even the Chinese saw that coming; nor did market experts whose consensus estimate anticipated an increase of just 226k.

Read more in the Baker Market Update.

IBAT Member Book

International business consultant and best-selling author Sam Silverstein published his newest book, Non-Negotiable - The Story of Happy State Bank and The Power of Accountability. The book tells the story of how Happy State Bank’s values have led to the organization’s continued success.

“Businesses all over the world are searching for ways to get better,” Silverstein said in a press release announcing the release of the book. “Non-Negotiable gives organizations an area of focus that will help inspire and prioritize accountability in the organization.”

“I believe Sam has told our “Happy” story quite well,” said J. Pat Hickman, Happy State Bank CEO. “We are honored that he chose to use examples from our bank’s values and philosophies to further his work – and hopefully assist other individuals and companies along the road of accountability.”

Congratulations to Happy State Bank on this honor. Non-Negotiable can be found at Amazon, Hastings, Wal-Mart, 800-CEO Read, Books-A-Million, Sam’s Club, Barnes and Noble, Mardel and Family Christian.

J.W. Holt DOB Retirement

Congratulations to Texas Department of Banking (DOB) examiner J.W. Holt, who retired after serving 27 years with the DOB, most recently as Regional Director, West Texas. Prior to his work at the DOB, Holt served as an examiner with the Office of the Comptroller of the Currency (OCC). In between his roles at the DOB and OCC, Holt was a banker. 

“We need more examiners like him,” said IBAT President and CEO Chris Williston at Holt’s retirement celebration. More than 50 bankers and banking industry representatives gathered to honor Holt. His successor is yet to be named.

Photo (l. to r.) - John Jay, Roscoe State Bank; J.W. Holt, DOB (Lubbock); Chris Williston, IBAT (Austin); and David Williams, Centennial Bank (Kerrville) at Frazier Alumni Pavilion celebrating Holt’s retirement. 

CFPB At It Again

Late last week, IBAT received a number of calls from irate community bankers relative to notice by their core processor of bulk overdraft data request by the CFPB. Although no specific information of any financial institution's data was requested, the collection and remittance of the data will require thousands of man hours by the processors, the cost of which will be passed along to bank customers.

IBAT and ICBA are outraged by this apparent abuse of power. Early yesterday, IBAT President and CEO Chris Williston contacted ICBA President and CEO Cam Fine to offer assistance in curbing this request, including Congressional intervention and legal options that may be available to the affected parties.

"We are clearly concerned about this request and the cost implications to community banks at a time when our members are already suffocating under mounting compliance costs," Williston said. "We have made it clear to the ICBA that we will gladly support, financially or otherwise, any efforts mounted to challenge the CFPB on this request."

If you receive email communication regarding this matter from your core processor, click here for a template response that all members are welcome to use. Please contact your Member of Congress and express your concerns by copying them on your core processor's correspondence.

E. Glenn Biggs

The IBAT family mourns the loss of E. Glenn Biggs, former Chairman of Texas Heritage Bank and Texas community banking advocate. Biggs played an important role in community banking in Texas, having served as Chairman and CEO of First National Bank of San Antonio in the 1970s and Gill Savings in the 1980s.

He also served on the boards of Southwestern Bancorp, Inc., Texas Heritage Bank and First State Bank of Abernathy in addition to his role on several Fortune 500 corporate boards such as Valero Energy, Diamond Shamrock and Kansas Gas & Electric. Biggs was also Chairman of CPS Energy in San Antonio.

In addition to his banking work, he was instrumental in the procurement and establishment of the Guadalupe Mountains National Park by the federal government in the 1960s. He is survived by his loving wife, two sons and grandchildren. Our thoughts and prayers are with his family.

Digital Banking Summit

Next week, IBAT brings the American Banker Digital Banking Summit directly to you with the help of Linqto. IBAT members and their guests are invited to join a live discussion with industry experts: ask questions, get answers and interact with participants of the American Banker Digital Banking Summit.

The free, virtual session will run on Tuesday, June 9, 3:00-6:00 p.m. and will cover a number of topics, including:

  • How to use technology to improve customer relationships, not erode them?
  • What are strategies for hiring, engaging and retaining a millennial workforce?
  • Non-interest income options: what works and why?

This isn’t a "sit and watch" event! It is a unique online format that allows everyone to get involved. Take a live walk through the exhibit hall and talk with vendors about the latest fintech products. The full broadcast can be accessed via our Linqto community room on your desktop, or from your Apple and Android devices. For full information, click here.

Baker Market Update: June 1, 2015

News this week of massive corruption at the highest levels of the world’s most popular sport probably surprised some people. It shouldn’t have. More news this week of corruption at the highest levels of American politics probably surprised a few others. It shouldn’t have. Likewise, an announcement just this morning that the domestic economy actually shrank in the first quarter of this year should not have been a bombshell revelation. We’ve seen this movie before. While the paltry growth rate of .2% that was previously reported was bad enough, at least it was positive. Today’s revision to minus .7% was better than the survey estimate of minus .9%, but still marked the third time that quarterly growth has come in negative since the current expansion began in mid-2009.  Not to worry; Janet gave a speech to a bunch of Rhode Islanders just last week and told them this: “The U.S. economy seems well-positioned for continued growth”. There ya’ have it.

Read more in the Baker Market Update.