“If you will just start with the idea that this is a hard world, it will all be much simpler.” – Louis D. Brandeis
The new Congress opened this week with talk of new rules, honesty and transparency, and perhaps even a rollback of the use of filibusters in the Senate. Some perks were cut for Appropriations Committee members, there was a vow to end all earmarks and spending by House members overall saw a five percent shrinkage. In parallel with standard blustering on both sides, there also was talk of bipartisanship. Governance and leadership are not easy, but we continue to hope that our leaders will step up to the task.
CSBS and the CFPB Sign Information Sharing MOU
The Conference of State Bank Supervisors and the Consumer Financial Protection Bureau (CFPB) implementation team signed a memorandum of understanding (MOU) to establish a foundation of state and federal coordination and cooperation for supervision of providers of consumer financial products and services. Specifically, state regulators and the CFPB will endeavor to promote consistent examination procedures and effective enforcement of state and federal consumer laws, to minimize regulatory burden and to efficiently deploy supervisory resources. The MOU also calls for state regulators and the CFPB to consult each other regarding the standards, procedures, and practices for conducting compliance examinations of providers of consumer financial products and services, including non-depository mortgage lenders, mortgage servicers, private student lenders, and payday lenders.
Tom Gronstal, Iowa Superintendent of Banking and Chairman of CSBS, said the partnership “has very real benefits for providers of financial services. The industry will benefit from the coordinated examinations, consistent procedures and guidelines and improved efficiency.”
Elizabeth Warren, assistant to the president and special adviser to the secretary of the Treasury Department, spoke on behalf of the CFPB and indicated the agency can learn from the states on areas such as mortgage servicing. “An interagency task force of the Obama administration is working to get to the bottom of these issues and many of those here today are a part of the multistate committee which is examining actions of servicers across the country,” she said. “I commend them for the work they have done thus far. We can learn from the [Conference of State Bank Supervisors] efforts and what they have seen on the ground.”
The announcement was met with positive responses from a variety of sources, from industry groups to consumer advocates. “We have a generally favorable reaction to it,” said Steven Schlein of the Community Financial Services Association, the leading trade group for payday lenders. Cam Fine, president of the Independent Community Bankers of America, called the MOU a “step in the right direction.”
Jean Ann Fox, director of financial services for the Consumer Federal of America also praised the announcement, saying “It’s important for state regulators to share their expertise with the CFPB, so they don’t have to reinvent the wheel.”
New Commissioners Announced
Peter Bildsten took the reigns as Secretary of Financial Institutions for the Wisconsin Department of Financial Institutions on January 4, 2011.
Stephen Kimbell became Commissioner of the Vermont Department of Banking, Insurance, Securities and Health Care Administration, effective January 7, 2011.
New Kansas Commissioner of the Office of the State Bank Commissioner Ed Splichal will begin work on January 10, 2011.
Finally, Jim Schipper will begin his tenure of Iowa Superintendent of Banking on January 14, 2011.
112th Congress Begins
The 112th session of Congress began this week. On the House side, John Boehner (R-OH) took the gavel of Speaker of the House from outgoing Speaker Nancy Pelosi (D-CA). The Democrats retained 193 seats in the House, where Republicans now enjoy a dominating majority with 242 seats, 82 of which are newly-elected freshmen members of Congress. The Democrats retained a narrow majority in the Senate. The Democrats have 51 seats, while the Republicans have 47 seats. The final two members of the Senate are Independents, who tend to vote with the Democrats. This leaves the Democrats well short of the 60-vote super majority required to break filibusters or end debate on controversial issues.
Because of the split Congress, as well as the multiple landmark bills passed in the last session of Congress, observers speculate at least the first year of the 112th Congress will be characterized by passionate debate, but little legislation will actually reach the Presidents’ desk. Congress, particularly the House, will revisit past legislation, such as health care reform and the Dodd-Frank Act. Republicans in the House have been particularly vocal about their plans to repeal parts of the Dodd-Frank Act, with particularly focus on the Consumer Financial Protection Bureau. In addition, Ron Paul (R-TX) will continue to focus his efforts on the Federal Reserve, and could possibly attempt to strip the Fed of their supervisory responsibilities. Because the Senate and the White House remain in Democratic control, these efforts are unlikely to turn into changes in law.
Other financial services issues the new Congress is likely to take up include mortgage servicing; the resolution authority granted by the Dodd-Frank Act; and GSE reform.
Treasury Outlines Details of Small Business Lending Fund
The Treasury Department provided guidance for community banks on applying for funds to aid them in making small business loans. The Small Business Jobs Act of 2010 created a $30 billion Small Business Lending Fund (SBLF) to encourage lending to small businesses by providing Tier 1 capital to qualified community banks with assets of less than $10 billion. The dividend rate on SBLF funding will be reduced as a participating community bank increases its lending to small businesses. The initial dividend rate will be, at most, 5%. Banks that increase their lending by amounts of less than 10% will have rates set between 2 and 4%. If a bank’s small business lending increases by 10% or more, then the rate will fall to as low as 1%. Read more
Around the States
ID: The Idaho Department of Finance announced a settlement of more than $300,000 with an unlicensed debt and credit counseling firm. In the settlement, Florida-based GHS Solutions, LLC agreed to refund Idaho consumers who contracted with the company while it did not hold an Idaho debt and credit counselor license. The Department’s investigation found the company provided debt settlement services to at least 143 Idaho customers. “That type of business activity requires a license under the Idaho Collection Agency Act,” said Department of Financial Director Gavin Gee. Read more
ME: Home foreclosure activity by state-chartered banks and credit unions in Maine decreased in the third quarter of 2010, according to statistics published by the Maine Bureau of Financial Institutions. Bureau Superintendent Lloyd LaFountain called the reduction promising. However, he noted that an increase in seriously delinquent first mortgages suggested that the foreclosure problem will persist into 2011. Read more
NY: New York Governor Andrew Cuomo announced plans to create a new Department of Financial Regulation that will merge the Insurance Department, Banking Department and the Consumer Protection Board. The change was one of many outlined by the new governor as part of his state of the state speech. A primary mission of the new department will be to “stand up for consumers, protect them from predatory lending and unlawful foreclosure practices, and provide access to good, honest and capable financial services at competitive rates.” Read more
OH: Ohio Attorney General Richard Cordray sent letters to judges requesting that the state courts continue to pay close attention to foreclosure cases that may have affidavits signed by robo-signers. In examining cases around the state, Cordray found that judges are finding different ways to handle them. “I strongly urge other courts to consider options that will work best for them as our office decides how to handle the individual cases,” Cordray said. Read more
PA: The Pennsylvania Department announced its quarterly report of enforcement actions this week. The Department took 114 enforcement actions during the fourth quarter of 2011. Highlights included: 24 orders against companies engaged in unlicensed mortgage loan activity, resulting in fines of $402,000; orders against 29 companies for other violations, such as unlicensed loan modifications and illegal internet payday lending; and the suspension or revocation of 61 mortgage licenses and prohibition of 2 individuals from doing business in the state. A comprehensive list of actions taken by the Department is available online at www.banking.state.pa.us.
Around the Agencies
CFPB: The Treasury Department announced the selection of Holly Petraeus to establish the Office of Service Member Affairs as a part of the new Consumer Financial Protection Bureau. The Dodd-Frank Act required the creation of such an office within CFPB to address unscrupulous lending to service members and their families. Petraeus comes to the position from serving as the director of the Better Business Bureau’s Military Line program, a partnership with the Department of Defense Financial Readiness Campaign to provide consumer education to active and retired service members and their families. Petraeus also has been a military spouse for more than 35 years, as the wife of Army Gen. David Petraeus, who is the current Commander of the International Security Assistance Force in Afghanistan. Read more
FDIC: The FDIC reminded federal residential mortgage loan originators that they will soon have to begin registering with the Nationwide Mortgage Licensing System and Registry (NMLS). The FDIC said the registration system should begin operation on or around January 31. Those originators employed by an insured depository institution will then have 180 days to complete registration within NMLS. Read more
FHA: The Federal Housing Administration released guidance for reverse mortgage homeowners and their lenders on how to handle outstanding property taxes and unpaid hazard insurance premiums. FHA’s guidance is intended to assist elderly borrowers who have neglected to pay these expenses and may face foreclosure. The guidance is designed to “establish a clear framework that protects both the homeowner and the lender who participate in our reverse mortgage program,” said FHA Commissioner David Stevens. The Department of Housing and Urban Development is planning to publish a proposal to add more preventative measures and consumer protections to the existing reverse mortgage regulations. Read more
FHFA: Fannie Mae and Freddie Mac have obtained a total of $3.3 billion in separate agreements with Ally Financial and Bank of America to resolve claims over the poor performance of mortgages sold to the companies. The agreements were approved by the Federal Housing Finance Agency. Bank of America will provide $1.52 billion to Fannie Mae and $1.28 billion to Freddie Mac to resolve repurchase requests for loans sold by Countrywide Home Loans, which was acquired by BofA. Ally Financial’s payment to Fannie Mae totaled $462 million and resolved loan claims serviced by GMAC Mortgage. Read more
OCC and OTS: The credit quality of first-lien mortgages secured by large national banks and thrifts remained steady during the third quarter of 2010, but the pace of foreclosures increased, according to a mortgage report released by the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The number of new foreclosures showed a quarterly increase of 31.2% to more than 382,000. The number of foreclosures in process increased to 1.2 million, 4.5% more than in the previous quarter and 10.1% more than a year ago. The number of completed foreclosures also increased to nearly 187,000, a 14.7% rise from the previous quarter and 57.5% more than a year earlier. Read more
Treasury: The Treasury Department announced that six financial institutions repaid $626 million in Troubled Asset Relief Program (TARP) funds, bringing the total amount of repayments to $235 billion out of the $389 billion provided through the program. In addition to the total repayments, Treasury gained an additional $35 billion in dividends, interest and the purchase of other securities. Read more
Jan. 13: The FDIC is hosting a forum, “Overcoming Obstacles to Small Business Lending," from 1:00 pm to 4:00 pm at the L. William Seidman Center in Arlington, Virginia. The Forum will explore ways in which credit can be made more accessible to the small business sector. Read more
“It has a lot of potential to get credit flowing more easily out there. This is going to be a good tool for filling capital needs at community banks.”
--Paul Merski, Senior Vice President and Chief Economist at the Independent Community Bankers of America, on the new $30 billion small business lending fund from the Treasury Department.
Catherine Woody, Editor
Edward Smith, Contributing Editor
Teresa Dean, Contributing Writer