Print

CBAI Leadership Bankers Attend Housing Finance Roundtable

CBAI Chairman Bill Wubben (Apple River State Bank), First Vice Chairman Todd Grayson (South Central Bank, N.A., Chicago), and Past Chairman and FHLB-Chicago Board member Roger Lehmann (The Harvard State Bank) attended a Housing Finance Roundtable with Illinois Senator Mark Kirk hosted by the Federal Home Loan Bank of Chicago. The Roundtable was held on August 7 in Chicago. CBAI urged the following principals be adhered to in the reform of the housing Government Sponsored Entities (GSEs):

1. There must be no further consolidation of the housing finance system that would result in several mega banks and financial firms dominating the market. A further consolidation would increase systemic risks, reduce competition, increase costs for consumers, reduce community bank participation in residential housing finance, and increase the likelihood of the consumer abuse that we saw during the recent mortgage meltdown and financial crisis.

2. There must be equal and direct access to the secondary market for community banks regardless of loan volume. Selling loans to the secondary market must remain a relatively simple process. Community banks should not be required to sell their mortgage loans through large banks or financial firms, or be required to securitize or provide other complex credit enhancements to their mortgages.

3. Community banks must retain the right to service the loans they originate. Mortgage servicing is important in the community bank business model and it is important for consumers to have local individuals to speak with in the event of questions or problems.

4. There must be no appropriation of consumer data by any intermediary for the purpose of cross selling financial products or services.

5. The government footprint in residential housing finance must be reduced and private capital must be encouraged to responsibly reenter this market. However, when the next crisis strikes, the government must remain involved in residential housing finance with catastrophic loss protection. During periods of extreme finance stress private capital exits the market and the government must be prepared to assist in maintaining liquidity and to prevent a housing market failure. The government guarantee must be explicit and it must be priced into the guarantee fee.

6. The Federal Home Loan Bank System must be preserved as an access point (but not the only one) to the secondary market for community bank residential mortgages.

CBAI thanks the FHLB-Chicago for providing this forum for the discussion of the challenges and opportunities in the reform of the housing GSEs.

Print

Supreme Court Issues New Foreclosure Rules

Illinois Supreme Court Weighs in on Mortgage Foreclosures and Notices to Grain Elevators

March 4, 2013 - - - On February 22nd, the Illinois Supreme Court adopted new Rules affecting mortgage foreclosure practices in Illinois. A summary of the Court’s rules appears below.

Circuit court mediation programs (New Rule 99.1): For those counties in Illinois with circuit (i.e., county) courts that already have adopted mediation programs, new Supreme Court Rule 99.1 authorizes such county courts to expand those mediation programs to cover mortgage foreclosure cases. Similarly, the Rule authorizes county courts that have not yet adopted mediation programs to adopt programs addressing mortgage foreclosure mediation.

New Rule 99.1 specifies components that must be included within mortgage foreclosure mediation programs, including resources directing homeowners to HUD-certified counseling services; resources to provide homeowners with access to pro bono legal representation; specification of the costs that may be charged to a participant in mortgage foreclosure mediation; a plan for long-term funding of the county court’s mediation program; and details regarding the training of judges and other personnel who may be involved in a mortgage foreclosure mediation. A county court’s proposed mediation program for mortgage foreclosure cases must be submitted to and approved by the Administrative Office of the Illinois Courts.

New requirements for judicial foreclosure cases (New Rule 113): In addition to the existing legal procedural requirements for bringing a foreclosure action against a mortgagor under Article XV of Illinois’ Code of Civil Procedure, new Supreme Court Rule 113 will require that a foreclosure complaint be accompanied at the time the complaint is filed by a copy of the note (including all indorsements, whether on the promissory note or unambiguously affixed thereto).

New Rule 113 establishes the following mandatory components to be included within “prove-up” affidavits (affidavits submitted on behalf of the mortgagee-lender in support of the foreclosure case): (1) identity of the affiant and explanation of whether (s)he is custodian of the mortgagee-lender’s records or otherwise how (s)he is familiar with the mortgagee-lender’s business and its mode of operation; (2) identification of all books, records, and other documents that the affiant reviewed and/or relied upon in drafting the affidavit, “specifically including records transferred from any previous lender or servicer.” Also, in cases where the mortgagor-defendant has filed an appearance or responsive pleading to the foreclosure complaint, the loan’s payment history must be attached to the affidavit; (3) identification of any computer program or software relied upon to record and track mortgage payments, including the source of the information, the method and time of preparation to establish that the computer program accurately tracks and reveals payment history; and an explanation as to why the records should legally qualify as “business records.”

The prove-up affidavit should also describe or contain any additional evidence in support of the mortgagee-lender’s right to enforce the note.

The affidavit shall not have a stand-alone signature page when the affiant’s signature could begin on the last page of text of the affidavit.

New Rule 113 includes a sample form of a legally sufficient prove-up affidavit, which CBAI member banks can obtain upon request from CBAI General Counsel Jerry Cavanaugh [phone (800 736-2224 or e-mail jerryc@cbai.com] or CBAI Paralegal Levette Shade [e-mail levettes@cbai.com].

New Rule 113 also requires that in a foreclosure action in which the mortgagor-borrower is defaulted by court order, a Notice of Default and Entry of Judgment of Foreclosure must be prepared by mortgagee-lender’s attorney within two business days after entry of the default to be mailed by the Clerk of the Circuit Court. Again, the Rule includes a sample Notice of Default and Entry of Judgment of Foreclosure form that can be obtained from CBAI General Counsel Jerry Cavanaugh or Paralegal Levette Shade at the phone number or respective e-mail addresses mentioned previously upon request by a CBAI member bank or the bank’s attorney.

With respect to judicial sales of foreclosed properties, the Rule requires that the attorney for mortgagee-lender must send written notice of the sale to all defendants (including any who have defaulted). The notice shall disclose the date, time and location of the foreclosure sale, and must be mailed at least ten business days in advance of the scheduled sale date. Under New Rule 113, if there are any surplus funds from a judicial foreclosure sale that exceed the amount owing as established in the foreclosure judgment, the mortgagee-lender’s attorney must send written notice to all mortgagors-defendants advising them of the surplus and enclosing a form for a motion to petition the court for the surplus funds. Sample forms for the notice of surplus to be sent to mortgagor-defendants and for the mortgagor’s-defendant’s motion to petition the court for turnover of the surplus funds are set forth in the Rules and again available to CBAI members upon request.

Finally, New Rule 113 specifies that in foreclosure cases where the mortgagor-defendant is deceased and no estate has been opened, the circuit court shall, on motion of a party to the foreclosure action, appoint a legal representative to act in the deceased mortgagor’s-defendant’s stead.

Loss Mitigation Efforts (New Rule 114): New Rule 114 will apply in any case in which the mortgagor-defendant has entered an appearance or filed an answer or some other responsive pleading. This Rule requires the filing of an affidavit by the mortgagee-lender prior to moving for a judgment of foreclosure. The purpose of the affidavit is to document that any applicable State, federal, or in-house mortgage loan loss mitigation programs for which the loan subject to foreclosure was eligible (i.e., the standard for applicability of New Rule 114 is whether the loan in question met the minimum threshold requirements for eligibility in a loss mitigation program, not whether the access to such a loss mitigation program has been granted or is guaranteed) have been complied with by the mortgagee-lender. Once again, New Rule 114 includes a sample Loss Mitigation Affidavit that is available to CBAI members upon request.

New Rules 113 and 114 were originally scheduled to go into effect on March 1, 2013, but the Supreme Court has now delayed the effective date until May 1.

In other Supreme Court news…. Coincidental to the February 22nd adoption of the Rules described above, on February 22nd the Illinois Supreme Court also published its opinion resolving the case of State Bank of Cherry vs. CGB Enterprises. This case involved a grain elevator that paid a farmer for crops without honoring the bank’s security interest in the crops by at least naming the secured bank as a dual payee on the check from the grain elevator. There was no doubt that the grain elevator had received timely notice from the bank of the bank’s secured interest in the growing crops, but the question was whether the bank’s notice was legally defective, and therefore not binding on the grain elevator, because the bank’s notice of its secured interest did not specify the counties in which the crops were growing. Illinois’ Third District Appellate Court had ruled in January of 2012 that the federal Food Security Act of 1985 was the controlling law and that law’s instruction that a notice of a security interest in growing crops must identify the county or counties in which the crops were growing required strict compliance. Because State Bank of Cherry had relied on language such as “all crops wherever growing” instead of specifying precisely the counties where the bank’s borrower had crops, the Appellate Court found that the grain elevator was not liable to the bank for paying the farmer-borrower without honoring the bank’s secured interest. On February 22nd, the Illinois Supreme Court upheld the Appellate Court’s decision and reasoning, thereby conclusively putting Illinois lenders with secured interests in growing crops on notice that it is mandatory to list specifically the county or counties in which the crops are growing when delivering your notice of secured interest to the buyer(s) of the customer’s crops (E.g., grain elevators).

Print

Scams Continue To Target Seniors

January 14, 2013 - - The Community Bankers Association of Illinois (“CBAI”) has learned that the Illinois Department on Aging (“Agency”) and Springfield Police have reported a scam aimed at older citizens. In recent cases, the scammer telephones older accountholders (“Senior” or “Seniors”), claiming to be an employee of the Seniors’s bank who is calling to rectify a situation in which a bank employee is supposedly stealing money from the Senior’s account(s).  The scammer convinces the Senior that in order to help build a case against the phony thief, the Senior should cooperate with the investigation by withdrawing money from the affected account and delivering it to a person who is, in fact, the scammer.  In two recent cases in Springfield, the scammer successfully took $7,000 from two Seniors.

CBAI has consistently encouraged community banks to inform customers, particularly Seniors who are often more susceptible to scammers, to be cautious about unsolicited offers or about solicitations for confidential bank account information.  Recently, CBAI reminded community banks that cashiers’ checks often negotiated by vulnerable Seniors to pay for fraudulent goods, services or investment opportunities are not subject to any stop payment process or protection.

CBAI is taking this opportunity to advise banks about this recent scam in Springfield, affording banks once again the opportunity to consider appropriate communications, signage, or other means of conveying a warning to accountholders, particularly Seniors.  Although such measures are optional and within the discretion of Illinois banks at this time, CBAI believes that Illinois banks informed of these scams might choose to take reasonable measures to notify and alert Seniors.

Click here to read the Agency’s Press Release issued on Friday, January 11, 2013.

Print

Regulators Extend Basel III Comment Period

August 8, 2012

The federal banking regulators announced on August 8, 2012, that they have extended the comment period on the Basel III regulatory capital proposals from September 7, 2012 to October 12, 2012. CBAI and ICBA advocated for an extension of the comment period to allow community banks the time needed to study and fully determine the impact of the proposed rules on community banks. Read FDIC Announcement. Read CBAI’s Comment Letter

Print

Director Cordray Meets with CBAI to Discuss CFPB's Activities

September 18, 2012

CBAI's Bob Wingert, President; Jerry Cavanaugh, General Counsel; David Schroeder, VP of Federal Governmental Relations; and Mike Kelley, President of the CommunityBanc Service Corporation recently discussed CBAI's observations, concerns, and recommendations regarding the Consumer Financial Protection Bureau (CFPB) with Director Richard Cordray. Director Cordray called on September 14th as part of the Bureau's outreach efforts to community bank trade associations.

Wingert encouraged the CFPB to focus its efforts on the largest financial institutions and the shadow financial industry to help level the playing field for community banks. Tiered regulation, which was expanded under the Dodd Frank Wall Street Reform Act, could also help accomplish this leveling. Wingert urged all of the banking regulators (including the CFPB) to aggressively continue the trend of expanded tiered regulation. Director Cordray expressed an appreciation for tiered regulation and the need to tailor regulation for community banks where possible. The most recent CFPB example is its small volume exemptions for remittance transfers.

Schroeder emphasized that consumers (as well as financial institutions) have responsibilities in their financial relationships. Financial products are rich with features, there are regulatory disclosure requirements, and banks incorporate lessons learned into their documents and disclosures. Consumers have the responsibility to read and understand what they are signing, but many are not. This is a significant and a widespread problem. It is impossible to distill all of the relevant information of a feature-rich financial service onto a single page, and there is a very real risk of reducing consumer options which is not in the best interests of consumers, community banks, and our communities. Director Cordray frankly agreed that consumers also have responsibilities in their financial dealings. His goal for the Bureau is, in part, to assist consumers in making informed financial decisions and to not "dumb down" products or services.

CBAI recommended that, when seeking consumer feedback, the CFPB should be looking for examples of exemplary behavior in addition to looking for examples of abusive practices. Besides tempering the perception that the CFPB is purely looking for "gotcha" moments the Bureau will be better informed about bank best practices. CBAI urged the Director to give these two objectives more equal weight. Director Cordray agreed with the recommendation and will implement them in the future.

CBAI also recommended that the CFPB make it very clear in its rule making precisely which institutions are subject to its rules, examination and enforcement. There is still confusion as to the role of the CFPB as it relates to community banks (rule writing for all, but examination and enforcement only for those over $10B). References in the Bureau's publications to "institutions we supervise" is insufficient to remove this confusion. Director Cordray stated that the unique responsibilities of the Bureau have created some confusion, particularly as to how the CFPB impacts community banks, and he appreciated the suggestion to help eliminate future confusion.

Prior to Director Cordray's outreach, the Bureau released details regarding its new Community Bank Advisory Council. The Council will provide the CFPB with feedback and recommendations to develop and influence policy, research, rulemaking, and engagement functions. CBAI is pleased that its former Chairman, Robin Loftus, was named to the Council and will serve as its first Chairman.

CBAI appreciated the opportunity to discuss the operations of the Bureau and its impact on community banks.