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.


IBAT members are encouraged to vote this week before the end of early voting on Friday, October 31.

You can easily access early voting and 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.

The IBAT PAC and IBAT FedPAC have been active this election cycle, thanks to the generous support of you and your community banking colleagues. We have historically followed the "friendly incumbent rule," and have supported candidates with whom we've worked and established relationships. We have compiled a complete list of those candidates to whom our PACs have contributed.

We also frequently get questions regarding judicial races from our members. We have a longstanding relationship with The Texas Civil Justice League (TCJL), one of the leading tort reform groups in Texas. TCJL endorses judicial candidates, and we encourage you to take a look at their recommendations in these races.

Please feel free to call or email if you have any questions or comments, and please vote and encourage those in your circle of influence to do the same.

Seeing Business Differently Award

TexasBank (Brownwood, Texas) received a Seeing Business Differently Award at CSI Customer Conference 2014. Each year, CSI’s Seeing Business Differently Awards highlight the ongoing efforts of those customers that are taking a unique, meaningful approach to maintaining success through a variety of strategies and tactics. Specifically, nominees are evaluated on a series of key areas, including:

  • Adding new products to improve profitability
  • Incorporating new approaches that result in efficiency gains
  • Growing customer base as a result of new techniques

 “As the financial industry continues to shift based on growing competition and changing customer demands, CSI has chosen to showcase what makes us different in order to set our company apart from other technology providers,” said Steve Powless, CSI’s chief executive officer. “Just as we have introduced new products and services to better align with our customers’ needs, the recipients of our second annual Seeing Business Differently Awards have done the same by investing in new strategies and technology offerings, all designed to enhance their overall businesses.”

In order to remain competitive with today’s larger financial institutions, TexasBank leveraged an innovative advertising strategy to position itself as having all the products offered by larger financial institutions, while still offering personal, individualized service. Core products, including its mobile banking services, were highlighted in a multi-level advertising campaign to the bank’s customers and surrounding communities by targeting such outlets as social media, radio and in-branch promotions to gain customer buy-in. By educating consumers on the availability of these products, in conjunction with an aggressive marketing offer, TexasBank acquired more than 3,000 new accounts and nearly $30 million in new deposits in a four-month time period.

“At TexasBank, we recognize that people are on the go and convenience is no longer considered a luxury—it is a must,” says Janet Ogden, vice president of retail services for TexasBank. “We are a competitive player in our market, so we have to meet the demands of our customers. And mobile banking is one of those demands.”

Watch TexasBank receive their award in this YouTube video.

Photo (L to R): Stan Eckenberg (CSI president/COO), Tamara Massey (TexasBank) and Janet Ogden (TexasBank)

Baker Market Update: Oct. 27, 2014

Here we are a week away from Halloween and many are still searching for just the right costume idea. Something novel. Something unusual. Something that’s scary and at the same time scarce. Like, say, inflation for instance. For the generation who trick-or-treated in the era prior to necessitating hermetically sealed treats, inflation is scary. For more recent generations, inflation is scarce. That point was reinforced this week as we learned that the Consumer Price Index on a year-over-year basis was unchanged last month and still stands at 1.7%. At the core level (ex-food & energy) that measure also stands at an unchanged 1.7%. Not very scary. In fact, some ‘fraidy cats in Europe are more fearful of deflation, but that’s another story.

Read more in the Baker Market Update.


Speaking on cybercrime trends at IBAT’s 40th Annual Convention, Jeff Multz, vice president of Dell SecureWorks, cautioned Texas bankers of new, more sophisticated tactics cybercriminals have employed to target bank employees and customers, particularly small business customers. They hack into bank accounts and target comptrollers, bookkeepers or other individuals within organizations with a goal of infecting their computers with malware to intercept online banking sessions. The next step is grabbing customers’ credentials and wiring money out of their accounts before the customer knows what has happened.

“You find that the smaller the business, the more you’ll be targeted because they’re attached to another network,” Multz said. The approach allows access to more potential victims. Multz recommends banks establish a layered security approach, using several tools instead of just one, in protecting data.

“Hackers have gotten really smart in the past several years,” said Elizabeth Clarke, a Dell SecureWorks spokesperson. “These hackers are not breaking into a bank’s network; they’re actually going to your laptop, your desktop and your account. It’s a different world out there.”

Multz’s full comments can be found online via an article published by The Fort Worth Business Press earlier this month. Additionally, IBAT along with TBA and SWACHA will be holding a seminar entitled “Executive Leadership of Cybersecurity” on December 3 in Austin. Click here to learn more about this upcoming educational opportunity.

Texas Economy

Over 100 business and financial executives gathered at the Adolphus Hotel in Dallas last week to address the effects of Fed monetary policy and the current regulatory environment on the Texas economy. Speakers included a host of Texas community bankers and presenters from the Federal Reserve and academia. IBAT President and CEO Chris Williston moderated an afternoon panel of community bankers.

"The Lyceum has long established itself as a thought leader on public policy," said Williston. "It was a pleasure to participate in this conference and provide perspective that overbearing government regulation restricts capital and chokes credit availability."

This year's conference was co-chaired by two IBAT Leadership Division members, Tee Dippel of Brenham National Bank and William Ware of Amarillo National Bank.

The program featured a luncheon keynote address by FDIC Vice Chairman Tom Hoenig, and a fireside chat with House Financial Services Chairman Jeb Hensarling at the Dallas Fed.