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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...

CSBS Technology Seminar, November 8-10, 2010, Chicago, FL:  The Technology Seminar addresses the current technological issues affecting the financial industry, the banking departments and the regulatory process.

Advanced Residential Mortgage Examiner School, December 6-10, 2010, Olympia, WA:  The Advanced Residential Mortgage Examiner School is for mortgage regulatory staff that has participated on several mortgage lender examinations and is progressing toward being the Examiner-in-Charge (EIC) of an examination or has been the EIC on exams already.

Supervisors Symposium, December 8-10, 2010, Washington, DC 

Advanced Commercial Credit Analysis, December 13-16, 2010, San Jose, CA:  APPROVED BY NASBA FOR 24 CPE HOURS.  This seminar is designed to provide a high level of skill development for rapidly and effectively evaluating the repayment ability of a commercial business.  It is not about assessing the quality of collateral that supports a loan, but about understanding the borrower's ability to repay a loan.

Advanced Commercial Credit Analysis, January 24-27, 2011, Palm Desert, CA:  APPROVED BY NASBA FOR 24 CPE HOURS.  This seminar is designed to provide a high level of skill development for rapidly and effectively evaluating the repayment ability of a commercial business.  It is not about assessing the quality of collateral that supports a loan, but about understanding the borrower's ability to repay a loan.

“Optimists are nostalgic about the future.” – Chicago Tribune 

Four years ago, before the economic bubble burst, this week’s news stories would have gone unreported: Jobless benefits claims down again, car maker brings 1,000 jobs to South Carolina, airline recalls 1,500 laid-off staff, computer maker increases its FTEs by 30 percent, existing home sales up. This week these stories got a lot of ink, and much of it above the fold, as newspaper folks would say. And that’s good because it balances the polls that continue to find angst, anger and confusion. We may be grasping at straws, but perhaps it’s time in the economic cycle to be a little bit nostalgic about the future.


CSBS Seeks Broader Exemptions 

In a comment letter to the Federal Reserve Board, the Conference of State Bank Supervisors called for broader exemptions from Regulation Z for those institutions that hold the credit risk for residential mortgages.  The Fed’s recently proposed revisions to Regulation Z would raise the escrow account requirement for higher-priced, first lien “jumbo” mortgages.  CSBS acknowledged that the Dodd-Frank Act requires the change, but urged the Fed to go beyond the specific requirement to facilitate more traditional residential mortgage lending.  “Institutions which portfolio mortgage loans have a greater incentive to ensure a borrower’s ability to repay and fund the total cost of homeownership, including property taxes and insurance,” said CSBS President and CEO Neil Milner in the comment letter.  CSBS recommended that the Fed hold field hearings to hear first-hand from community banks and local officials how changes in federal policy are influencing banks’ ability to originate mortgages.  “We fear some traditional community banks are unnecessarily being forced out of the residential mortgage market, to the detriment of the communities and consumers those banks serve,” said CSBS Senior Vice President Michael Stevens.  Read more here.


CSBS/AARMR Multi-State Mortgage Committee Elects New Leadership 

The Multi-State Mortgage Committee (MMC) has elected a new chairman and vice chairman.  Donald DeBastiani, the director of the Bureau of Non-Depository Examination in the Pennsylvania Department of Banking, has been elected chairman of the MMC.  DeBastiani has served as director since 2004 and has oversight over mortgage providers, car dealers, debt management companies, money transmitters, check cashers, and pawn brokers.   

Charlie Fields, the director of the Non-Depository Entities Division of the North Carolina Office of Commissioner of Banks, was elected vice chairman of the MMC.  Fields has been with the commissioner since 2000 and has served as director since 2006.  As director, Fields has oversight of mortgage lenders, brokers and servicers, as well as consumer finance companies, money transmitters, check cashers and refund anticipation loan facilitators. 

The MMC was created in 2008 by state financial regulators—through the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators—to coordinate examination and supervision of those mortgage lenders and brokers operating in more than one state.  The MMC is made up of 10 members elected by the boards of CSBS and AARMR.  The committee reports to both boards.


Treasury Special Inspector General for TARP Issues Quarterly Report to Congress 

In its quarterly report to Congress, the SIGTARP reported on progress made on TARP’s stated objectives: avoid financial collapse; increase lending; maximize overall returns to the taxpayers; provide public accountability; preserve homeownership; and promote jobs and economic growth.  The SIGTARP found that Wall Street institutions were spared from financial collapse and that Main Street banks also benefited from avoiding a complete collapse of the financial system.  But the remaining goals of TARP have largely gone unfulfilled, to the detriment of Main Street banks. 

TARP has failed to increase lending, as small businesses in particular are unable to secure much-needed credit.  Unemployment has risen since the start of the TARP program and is now holding steady around 9.6%, illustrating another failure to meet TARP’s stated goals.  Finally, according to the report, TARP’s goal of preserving homeownership “has so far fallen woefully short,” with the HAMP program yielding only 207,000 ongoing permanent modifications, in contrast to the 5.5 million homes receiving foreclosure filings and more than 1.7 million homes that have been lost since January 2009. 

Further, the SIGTARP reported on the cost TARP has had upon the government’s credibility.  The public largely views TARP with anger, cynicism and mistrust based upon a lack of transparency, program mismanagement and flawed decision-making processes.  The failure of TARP to more effectively negotiate with AIG to secure the best agreement on behalf of the taxpayer and the failure of the HAMP program have contributed to the public response to the TARP program.  Read more here.


Around the States 

Pennsylvania:  The Pennsylvania Supreme Court recently unanimously confirmed the authority of the Department of Banking to protect consumers from payday lenders, including out-of-state operators soliciting business from Pennsylvanians online.  In the case, Cash America Net of Nevada v. Commonwealth of Pennsylvania, the court agreed that the Consumer Discount Company Act and the Loan Interest and Protection Law apply to loans made to Pennsylvania consumers over the internet.  “Payday lending is a scourge that takes advantage of financially strained individuals and traps them in a downward spiral of poverty and debt,” said Secretary of Banking Steven Kaplan.  “We will continue to utilize all of our resources to protect Pennsylvanians from this trap regardless of where the lender may reside.” 

Washington:  The Washington State Department of Financial Institutions recently issued a temporary cease-and-desist order against Cash Advance Now, a company located in Costa Rica that has never been licensed to do business in Washington State.  Further, the DFI urged consumers seeking short-term and/or small loans from companies seen on TV or online to be vigilant, read the small print and make sure any company they do business with is licensed to make loans in Washington.  The DFI said companies that are not licensed by the state may not be adhering to Washington’s laws limiting fees and governing collection practices.  Read more here.


Around the Agencies 

FDIC:  Market participants and regulators both missed warning signs of the current foreclosure controversy, said FDIC Chairman Sheila Bair.  Speaking at a joint symposium on housing sponsored by the FDIC and the Federal Reserve, Bair said there were advance indications of possible problems with the quality of foreclosures.  “For example, servicing fees declined significantly over the past several years.  We should have been asking how servicers were able to achieve such efficiencies without sacrificing quality.  Sadly, those types of questions were not asked,” she said.  Read more here 

Fed:  The Federal Reserve issued a new publication providing information on innovative community-based foreclosure prevention and neighborhood stabilization activities sponsored by the Fed as part of its mortgage outreach and research effort.  Read more here 

Fed:  The Federal Reserve released a report and launched a database of 1,044 agreements between credit card issuers and institutions of higher education or affiliated organizations that provide credit cards to students.  By law, credit card issuers must submit their agreements with educational institutions or their affiliates to the Fed each year.  Read more here 

FHFA:  The Federal Housing Finance Agency announced an agreement with the Board of Directors of the Federal Home Loan Bank of Seattle for a capital restoration plan, which includes compensation restrictions.  The consent order sets forth requirements for capital management, asset composition and other operational and risk management improvements for the Seattle Bank.  Read more here 

FTC:  The Federal Trade Commission alerted consumers that regardless of stories about a freeze or moratorium on mortgage foreclosures, they should always respond immediately to notices from their banks, mortgage servicers or sheriff.  The FTC told consumers that a freeze does not necessarily mean that proceedings on their homes have stopped.  Read more here 

FTC:  The Federal Trade Commission reached a $1.75 million settlement with one of the nation’s largest debt collectors over its collection practices.  The settlement is the second-largest civil money penalty obtained by the FTC in a debt collection case.  The FTC alleged that between 2006 and 2008, Allied Interstate, Inc. of Minnesota continued collection efforts even after consumers told the company they did not owe the debt, without verifying the accuracy of the disputed information.  Read more here.


Upcoming Events 

Nov. 1:  Model Examination Guidelines Web-Based School.  This online school, which has been developed by AARMR and CSBS, is designed to assist mortgage regulators and mortgage industry compliance personnel implement the examination procedures for the Guidance on Nontraditional Mortgage Product Risks and the Statement on Subprime Mortgage Lending.  

Nov. 4:  Credit Reports Webinar for regulators.  With the implementation of the credit-report functionality in NMLS, the system will have satisfied another imperative of the SAFE Act which requires MLOs to authorize NMLS to obtain a credit report. Regulators will now be able to efficiently review credit information through this functionality as one tool in their assessment of an MLO's financial responsibility as mandated under the SAFE Act. NMLS will conduct two training sessions that will familiarize regulators with the credit report functionality in NMLS, as well as a comprehensive walk through of the credit report content and how the Vantage Score© is determined. 

Nov. 4 – Nov. 5:  CSBS District I Fall Meeting.  The CSBS District I fall meeting will be held at the Sheraton Philadelphia University City Hotel, Philadelphia, PA.


Closing Comment 

“Nothing is more fundamental to a local community than property rights.  It goes back to one of the fundamental principles of our country.  Federalizing laws around property rights is a very significant leap.” 

CSBS Executive Vice President John Ryan in an interview with American Banker in response to the suggestion by some to federalize foreclosure laws.

Catherine Woody, Editor
Teresa Dean, Contributing Writer

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