“I share your concern for promoting consistent regulation and minimizing implementation burdens.”
-- Elizabeth Warren in a letter to Rep. Randy Neugebauer (R-TX)
Consumer Financial Protection Bureau founder Elizabeth Warren struck a positive chord in her recent reassurances to conservative members of Congress. She understands that the least red tape possible -- and the most consistency possible -- are necessary as her bureau charts its path. Community banks, most of which are state-chartered, would certainly echo her concerns. As do we at CSBS – one of several reasons why we’re working closely with CFPB as it makes its start.
Registration of Mortgage Loan Originators Begins
Monday marked the much-anticipated unveiling of the federal registration of mortgage loan originators employed by insured depository institutions and their subsidiaries with the Nationwide Mortgage Licensing System and Registry (NMLS). On July 28, 2010, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Farm Credit Administration (the federal agencies) published a final rule announcing the use of NMLS to fulfill the federal registration of mortgage loan originators requirement under the S.A.F.E. Act. Developed and launched by state regulators through CSBS and the American Association of Residential Mortgage Regulators, NMLS will serve as the system of record for mortgage licensing and registration across the United States and its territories. The S.A.F.E. Act mandates that all mortgage loan originators be registered by the federal agencies or licensed by the states through NMLS and assigned an NMLS unique identification number. The federal banking agencies and the Farm Credit Administration announced NMLS will begin accepting registrations on Monday. Read the Press Release
“The development of NMLS and the passage of the SAFE Act provide a model for effective state-federal supervision of the residential mortgage industry,” said Neil Milner, president and CEO of CSBS. “Today’s action represents the culmination of unprecedented coordination amongst state and federal regulators and policymakers.” Registration affects those mortgage loan originators operating in insured depository institutions such as banks and credit unions and requires the registrant to undergo a criminal background check and credit check.
“The registration of mortgage loan originators is yet another in a long line of significant milestones for NMLS,” said Bill Matthews, president and CEO of the State Regulatory Registry LLC, the wholly owned subsidiary of CSBS which operates NMLS on behalf of state regulators. “The Registry not only greatly enhances consumer protection, but also improves state and federal regulation and increases the uniformity of mortgage standards.”
Within a few short years of the system’s launch, all states are now using NMLS to license individual mortgage loan originators and companies. Approximately 16,000 mortgage companies and over 121,000 individuals are currently licensed through NMLS. Read more
CSBS Calls for Fresh Approach to Deposit Funding
As the FDIC prepares its required study of core and brokered deposits, CSBS preemptively submitted its views to FDIC Chairman Sheila Bair. CSBS supports an initial threshold for determining core deposits to be set at the limit for insured deposits, currently $250,000. However, “core deposits” may be an antiquated term given technology and structural changes in the market place. A bank which can benefit from a more analytical framework for measuring its deposit base should be allowed to define its true level of core deposits.
In the letter, CSBS acknowledged that some institutions used brokered deposits to fuel additional risk taking at the cost to the deposit insurance fund. Brokered deposits should not be a bank’s principal source of growth, nor should they cause the institution to grow at a rate higher than the bank’s market. Therefore, CSBS is urging the FDIC to develop regulatory solutions which can, and should, address the elevated risk of brokered deposits, while still permitting the prudent use of this funding channel.
Ultimately, it is our hope that regulatory policy can reduce overall risk to the banking system while ensuring prudent access to diversified sources of funding by insured depository institutions. A balanced approach to regulatory policy in this area is critical to the future of community banking and local economic development.
The FDIC’s study of core and brokered deposits as required by the Dodd-Frank Act is due one year after enactment on July 21, 2011. Read the full letter
Ten Questions with Jeff Vogel
The CSBS Questionnaire, based upon the 19th century parlor game made famous by French novelist Marcel Proust, reveals another side of Jeff Vogel, Wyoming State Banking Commissioner. Vogel was first appointed Commissioner in February 2002 and brings over 25 years of regulatory experience to his position. Vogel served as the Chairman of CSBS in 2007-2008. He and his wife Kathy have two sons, Sam and Chase.
Examiner: What are you currently reading?
I have a couple of books that I am trying to finish: The Big Short by Michael Lewis, which is very interesting; and The Obama Diaries by Laura Ingraham. I always like political humor as long as it is clever and not too mean-spirited.
Examiner: What are the current themes of your speeches or public statements?
Over the last year it has been Risk Management, Credit Risk Management and Commercial Real Estate concentrations. The credit culture of a bank usually starts with the Board’s appetite for risk. A bank with a board comprised of experienced risk managers has a more pessimistic view of the world and positions the bank for many different economic scenarios in order to weather most storms. I have also mentioned Dodd-Frank a time or two.
Examiner: Which words or phrases do you most overuse?
There are two that I can think of. The first one is “You can do anything if you put your mind to it.” I used to say this to my kids all the time so they wouldn’t be afraid of taking chances and exploring new things. The other one is “Don’t get it right – get it written!” It is a subtle reminder when I am procrastinating. I’ve had a tendency to over-think issues before creating a draft outline that can be refined into a finished product. This keeps me moving forward.
Examiner: What is your greatest fear?
Not fulfilling a commitment. If I say I will take care of something and find out I can’t because of changing circumstances, it really bothers me because I feel as though I am letting someone down who is relying on me for something important. I feel as though I have failed and my credibility will be called into question. I am always the first one to let others know if I can’t finish a job as planned. The worst thing is to have them find out from someone else.
Examiner: Which talent would you most like to have?
I would like to be able to play the piano. I wish I were musically inclined.
Examiner: Which living person do you most admire?
No one in particular, just people of character and integrity that can solve problems without withering under pressure. They aren’t perfect but will step up when you need them the most.
Examiner: What do you consider your greatest achievement?
Being compatible with someone for 25 years and raising two successful kids together.
Examiner: What is your most treasured possession?
Examiner: What other state regulator do you look to for perspective?
I like to listen to differing views because not one person has all the answers. So if I have to go on record, I would pick one man and one woman: Mick Thompson (OK) and Carol Chesbrough (CA). Karsky [former ND Commissioner] retired so I had to go with Mick.
Examiner: What is your motto?
Treat others how they would like to be treated.
Around the States
NY: Governor Andrew Cuomo released his proposed budget for fiscal year 2011-2012 this week, which would consolidate the state’s banking, insurance, and consumer protection agencies into a single agency, to be known as the Department of Financial Regulation. If passed, the consolidation would take effect April 1, and the new superintendent of financial regulation would assume the current responsibilities of the Banking and Insurance Superintendents. Read more in Part A of the Governor’s bill
Around the Agencies
FHA: Federal Housing Administration Commissioner David Stevens announced an extension of FHA’s temporary waiver of the “anti-flipping rule” last week. The extension is intended to accelerate the resale of foreclosed homes in neighborhoods fighting to overcome possible property abandonment and damage. The notice will extend the waiver through the end of 2011. Read more
FRB: The Federal Reserve Board announced it will not complete three pending mortgage rules under the Truth in Lending Act (TILA) before authority for those rules is transferred to the new Consumer Financial Protection Bureau (CFPB) in July. The Fed will not finalize two proposed rules issued in August 2009, which would address disclosures for closed-end mortgage loans and home equity lines of credit. The Fed also announced it will not finalize a rule proposed in September 2010, which amended disclosures explaining a consumer’s right to rescind certain mortgage loans. Read more
FTC: The Federal Trade Commission released its annual report to the Federal Reserve Board on enforcement actions related to the Equal Credit Opportunity Act, Electronic Fund Transfer Act, Consumer Leasing Act, and the Truth in Lending Act. Read more
IASB & FASB: The International Accounting Standards Board and the U.S. Financial Accounting Standards Board published proposals for accounting for impairment of financial assets, such as loans managed in an open portfolio. Currently, International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) account for credit losses using an incurred loss model, which requires evidence of a loss before the asset can be recorded. The agencies have proposed replacing the existing model with an expected loss model which will provide a more-forward looking approach to how credit losses are accounted for. The deadline for comment is April 1, 2011.
SEC: The Securities and Exchange Commission has published a staff study recommending steps to help investors better access information about investment professionals. As required by the Dodd-Frank Act, the recommendations of the study must be applied within 18 months of the study’s completion. The primary recommendation proposes enabling investors with a system that allows a simultaneous search of the two databases for information about broker-dealers and investment advisors—FINRA’s BrokerCheck and the Investment Adviser Public Disclosure (IAPD) website. Read more
Treasury: This week Fifth Bancorp of Cincinnati, OH repaid $3.4 billion in Troubled Asset Relief Program (TARP) funds in full to the Treasury Department. With this transaction, Treasury announced total repayments and other income from programs within TARP have nearly exceeded total disbursements. Read more
Feb. 7-10: The Nationwide Mortgage Licensing System (NMLS) is conducting the third annual NMLS User Conference & Training for regulatory and industry system users, education providers, consultants, and other interested parties. Designed for both new and experienced users, the Conference provides an invaluable exchange of information among system users on issues that affect their organization's use of NMLS. Read more
Feb. 7: The FDIC Board of Directors will meet in open session at 1:00 pm EST. Read more
Feb. 9: The TARP and Financial Services Subcommittee of the U.S. House of Representatives Committee on Oversight and Government Reform is holding a hearing titled “State and Municipal Debt: The Coming Crisis?” at 9:30 am EST. Witnesses have not yet been invited.
Feb. 9: The U.S. House of Representatives Committee on the Budget will hold a full committee hearing entitled “The State of the U.S. Economy” at 10:00 am in Room 210 of the Cannon House Office Building. Federal Reserve Chairman Ben Bernanke will testify.
Feb. 9: The Capital Markets and Government Sponsored Enterprises Subcommittee of the House Financial Services Committee is holding a hearing on Fannie Mae and Freddie Mac reform at 2:00 pm EST in Room 2128 of the Rayburn House Office Building.
“Next up for the United States economic outlook is not necessarily another too-big-to-fail boom-bust-bailout cycle. It may well move on to too big to save, which is what Ireland is now experiencing. When reckless banks get big enough, their self-destruction ruins the fiscal balance sheet of an entire country.”
-- Simon Johnson, former chief economist at the International Monetary Fund and author, in a column published in The New York Times.
Catherine Woody, Editor
Edward Smith, Contributing Editor
Andrea Corson, Contributing Writer