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CSBS Examiner

A weekly report of events affecting the state banking system from the Conference of State Bank Supervisors


 In This Issue...

 Upcoming Events...

Online Courses Beginning September 6Fraud Identification Training, Money Service Business Examiner Course, Real Estate Appraisal Review. 

Certified Operations Examiner School, September 19-23, New Orleans, LA:  The full program is delivered over a 7 to 9 month period utilizing all of the EFSBS delivery channels.  Over this period the examiner will receive all of the required training and experience necessary to be in charge of an operations examination. APPROVED BY NASBA FOR 40.5 CPE HOURS. 

Bank Directors Seminar, September 25-27, Coeur d’Alene, ID:  The Graduate School of Banking at Colorado and the Conference of State Bank Supervisors join forces to deliver the best and most effective bank director training. 

CSBS Banker Briefing, September 28, Coeur d’Alene, ID:  Your State Banking Commissioner and the Conference of State Bank Supervisors cordially invite you to a roundtable briefing and open discussion of financial regulatory reform and other timely issues.  Complimentary registration; lunch will be served. 

Examiner-in-Charge School, October 3-7, La Quinta, CA:  Designed to train participants to evaluate management and to recognize practices that increase a bank’s exposure to risk. Participants also receive guidance and practice conducting board meetings. 

Problem Bank School, October 3-7, La Quinta, CA:  This new program takes an examiner from the “routine” to the complex and challenging world of problem banks.  In this course, examiners will learn how to:  identify red flags; risk focus the exam; identify and prevent fraud; draft enforcement actions; document to prevent or prepare for litigation. APPROVED BY NASBA FOR 40.5 CPE HOURS.

"It’s a reminder that we don’t always get to pick the next disaster."

– FEMA Administrator Craig Fugate, quoted in the Washington Post on Hurricane Irene.

At CSBS, as at many other organizations, we have a disaster-recovery plan. We run through a drill every year or so and update the plan regularly. But when an earthquake came rumbling through recently, we learned that there’s always something that hadn’t been anticipated. Our plan called for the staff to assemble across the street, which we dutifully did, only to learn from our West Coast colleagues that in earthquakes one is safer taking cover under a desk and holding on to immovable objects. So now we’ll be updating our plan with yet another lesson learned: one can never know exactly what to expect.


NMLS Data Reveals Mortgage Industry Remains Small Business Oriented   

The Conference of State Bank Supervisors (CSBS) has released its first and second quarter data for state-licensed mortgage companies, branches, and individuals in the Nationwide Mortgage Licensing System & Registry (NMLS)—a mortgage licensing system owned and operated by state regulators.

While there are multi-state companies that operate on a regional and nationwide basis, first and second quarter 2011 data revealed, by-and-large, that most state-licensed mortgage entities are local, small business-oriented companies. Approximately 83 percent of companies licensed through NMLS operate in only one state and employ one to five mortgage loan originators. Additionally, 87 percent of these companies have only a single location. Data for individual mortgage loan originators reflected similar trends, with 80 percent of state-licensed individuals operating in a single state.

"Thanks to NMLS, state regulators have access, for the first time, to comprehensive data that provide a better understanding of the industry from a nationwide and state-by-state vantage point," said Gavin Gee, Idaho Director of Finance and Chairman of the State Regulatory Registry LLC, the subsidiary of CSBS that operates NMLS on behalf of state regulators. "Access to this data provides the industry, regulators, and policymakers with an unprecedented level of detail about the state-licensed residential mortgage industry."

The NMLS Q1 and Q2 report is available here.


Cordray Nomination Hearing Faces Resistance

As soon as Congress returns to Capitol Hill next week, members of the Senate Banking Committee will hold a hearing to consider the nomination of Richard Cordray to be director of the Consumer Financial Protection Bureau (CFPB).

Cordray currently serves as the CFPB's director of enforcement and is the former Ohio Attorney General, where he quickly earned a reputation as a defender of consumers’ rights. As Ohio’s attorney general during the years following the financial crisis, Cordray filed several lawsuits against banks accused of "robo-signing" foreclosure documents without reading them. This resulted in more than $2.5 billion dollars in settlements.

But Cordray’s nomination as head of the CFPB is expected to face strong resistance from Senate Republicans who have threatened to block the nomination of any CFPB director until President Obama agrees to make changes to the structure of the agency.

"The nomination is dead on arrival," Sen. Jerry Moran, R-Kan., said during a Senate hearing on the one-year anniversary of the Dodd-Frank and Consumer Protection Act. Moran is one of 44 GOP senators who vowed to filibuster Cordray’s nomination.

In addition to Cordray, Senate Banking Committee Members will also consider Patricia M. Loui, of Hawaii, and Larry W. Walther, of Arkansas, to be members of the Board of Directors of the Export-Import Bank of the United States. The hearing will take place 2:30pm EST in the Senate Dirksen Building. Read more


President Obama to Unveil Jobs Plan During Joint Session

President Obama will address a joint session of Congress next week where he will lay out his plan for creating jobs and boosting the economy. More specifically, Obama’s jobs package is expected to include spending programs for roads, bridges, school repair and training for the long-term unemployed.

In the letter formally requesting the joint session, Obama said the nation faces "unprecedented economic challenges" demanding more action from the federal government to promote growth and job creation.

Obama’s speech will come one week after reports of a stalled unemployment rate for the month of August, remaining at 9.1 percent.

During the president’s jobs speech next week, he is expected to call for an extension of unemployment benefits, prolonging the payroll tax holiday, instituting a tax credit for businesses that hire, and infrastructure spending. Some reports suggest Obama may advocate for the creation of a national infrastructure bank, an idea the president has pushed recently.

The joint address to Congress was originally requested for Sept. 7. It will now take place Sept. 8 at 7pm (EST). Read more


Around the States

ID: Idaho Department of Finance Director Gavin Gee issued an alert to Idaho homeowners this week warning that a company calling itself Freedom Companies Marketing, Inc., Freedom Companies, Inc., Freedom Companies Lending, and Freedom Financial Mortgage (Freedom) has been targeting Spanish speaking Idaho homeowners with false promises of a government-guaranteed mortgage loan modification for a large upfront fee. The company promises homeowners lower monthly mortgage payments, but Gee says Idaho homeowners who succumbed to the up-front payment scam received nothing but empty promises for an unlawful upfront fee of $1,995. "This company, using the term ‘Freedom’ in its name, asks homeowners for private financial information, charges an unlawful upfront fee, and then leaves already distressed homeowners worse off than they were before. That’s not ‘Freedom;’ that’s a scam," Gee warned. Read more

IN: The Indiana Department of Finance (DFI) released its 2010 annual report. The report provides financial information on Indiana’s state-chartered commercial banks, trust companies, private banks, savings banks, credit unions, and finance companies. DFI received approximately $8.5 million in revenues in 2010, an increase from the previous year. As of Dec. 31, 2010, Indiana had a total of 85 FDIC-insured state-chartered commercial banks, six FDIC-insured state chartered savings banks, one FDIC-insured state chartered savings association, one FDIC-insured industrial loan and investment company and one non-depository industrial loan and investment company. Read more 


Around the Agencies

FDIC: The Federal Deposit Insurance Corporation (FDIC) has issued the public list of institutions that it has scheduled for a Community Reinvestment Act (CRA) examination during the fourth quarter of 2011. This list is published pursuant to revised CRA regulations published in May 1995 that require each federal bank and thrift regulator to publish a quarterly CRA examination schedule at least 30 days before the beginning of each quarter. The examination schedule reflects the effects of an institution's size and CRA rating on examination frequency. Absent reasonable cause, an institution with $250 million or less in assets and a CRA rating of Satisfactory can be subject to a CRA examination no more frequently than once every 48 months. Absent reasonable cause, an institution with $250 million or less in assets and a CRA rating of Outstanding can be subject to a CRA examination no more frequently than once every 60 months. Read more

FHFA: The Federal Housing Finance Agency reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some ARM contracts, was 4.57 percent based on loans closed in July. This is a decrease of 0.05 percent from the previous month. Read more

SEC: The Securities and Exchange Commission announced that Kathleen Weiss Hanley has been named Deputy Director and Deputy Chief Economist for the SEC’s Division of Risk, Strategy, and Financial Innovation (RiskFin). RiskFin was created in September 2009 to provide interdisciplinary analysis to help inform the Commission’s policymaking, rulemaking, enforcement and examinations. The division encompasses the former Office of Economic Analysis, Office of Risk Assessment, and Office of Interactive Disclosure. Its staff has expertise in disciplines including economics, risk analysis, finance, law, mathematics and statistics. Read more

FRB: The Federal Reserve Board is seeking comment on a proposed rule outlining the procedures for securities holding companies (SHCs) to elect to be supervised by the Federal Reserve. An SHC is a nonbank company that owns at least one registered broker or dealer. The Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated the previous securities holding company supervision framework under the Securities and Exchange Commission and permitted SHCs to be supervised by the Federal Reserve. An SHC may seek supervision by the Federal Reserve to meet requirements by a regulator in another country that the firm be subject to comprehensive, consolidated supervision in the United States in order to operate in the country.  Read more

FTC: The Federal Trade Commission is mailing more than 110,000 refund checks to consumers defrauded by an online operation that tricked payday loan applicants into paying for an unrelated debit card. The FTC alleged that payday loan marketers Matthew Patterson, Mark Benning, Jason Strober, and Swish Marketing, Inc., worked with debit card marketers Jerry Klein, Joshua Finer, and VirtualWorks, LLC, to design the deceptive payday loan application form that triggered a charge of up to $54.95 for a prepaid debit card with a zero balance. Approximately $1.9 million is being returned to consumers; the average payment will be between $10 and $15. Read more

SEC: The Securities and Exchange Commission (SEC) announced that in fiscal year 2012 the fees that public companies and other issuers pay to register their securities with the SEC will be set at $114.60 per million dollars. The SEC determined this new rate in accordance with procedures required under the securities laws that require the Commission to set rates for the fees paid under Section 6(b) to levels that the Commission projects will generate collections equal to annual statutory target amounts. The statutory target amount for fiscal year 2012 is $425 million. Under changes made by the Dodd-Frank Act, the annual rate changes for fees paid must take effect on the first day of each fiscal year. Therefore, the fee rate change will become effective Oct. 1, 2011. Read more

SEC: The Securities and Exchange Commission (SEC) voted unanimously to request public comment on the treatment of asset-backed issuers as well as real estate investment trusts (REITs) and other mortgage-related pools under the Investment Company Act. Through an advance notice of proposed rulemaking, the SEC is seeking public input on possible amendments the agency might consider proposing to Rule 3a-7, which excludes certain issuers of asset-backed securities from having to comply with the requirements of the Investment Company Act. An advance notice of proposed rulemaking provides the public the opportunity to weigh in even before the SEC develops a formal rule proposal. Read more


Around D.C.

GINNEMAE: The Government National Mortgage Association (Ginnie Mae) announced that it is expanding the parameters regarding loans eligible for repurchase from Ginnie Mae Mortgage-Backed Securities (MBS). Under the new policy, any modified loan may be repurchased after successfully completing a three-month trial payment period, if a trial period is required. This change aligns Ginnie Mae’s repurchase policy for the Federal Housing Administration (FHA) non-Home Affordable Modification Program (HAMP) high-risk loans with the current policy for FHA-HAMP loans. Read more

MBA: Independent mortgage banks and subsidiaries made an average profit of $575 on each loan they originated in the second quarter of 2011, up from $346 per loan in the first quarter of 2011, according to the Mortgage Bankers Association’s (MBA) Second Quarter 2011 Mortgage Bankers Performance Report released today. "Contrary to overall MBA industry data in which estimated production volume declined, the average firm in our study of independents and subsidiaries experienced volume growth. The firms in our study were able to more quickly adjust to a purchase-focused mortgage market environment after a significantly refi-heavy fourth quarter of 2010," said Marina Walsh, MBA's Associate Vice President of Industry Analysis. Read more


Upcoming Events

Sep. 6 – Oct. 7: CSBS is conducting a Fraud Identification Training program. This interactive, on-line course is facilitated by a seasoned state bank regulator. The five-week course consists of many activities to help bankers and bank regulators further their education and careers. Read more

Sep. 6 – Oct. 14: CSBS is hosting a Money Service Business Examiner Course. The class is designed for inexperienced examiners or those seeking formal training in MSB examination procedures and techniques. Read more

Sep. 19–23: CSBS is hosting a Certified Operations Examiner School in New Orleans, LA. Examiners will receive all of the required training and experience necessary to be in charge of an operations examination. Read more

Sep. 25-27: CSBS and the Graduate School of Banking at Colorado will host a Bank Directors Seminar in Coeur d’Alene, ID. This will be the best and most effective bank director training.  Read more


Closing Comment

"…our supervisory policies and approaches should encourage capital investment in our banks."

-- North Carolina Commissioner Joe Smith, in an Op-ed advising that while reports from federal financial regulators indicate the banking industry is showing signs of recovery from the financial crisis; regulators must do more to ensure a stable and productive banking system.


Catherine Woody, Editor

Edward Smith, Contributing Editor

Rockhelle Johnson, Contributing Writer

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