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CBAI Leadership Bankers and Staff Meet with Senator Durbin

July 2, 2013


CBAI leadership bankers and staff met with Illinois Senator Richard Durbin to discuss issues of importance to Illinois community banks. Bank of Springfield hosted this roundtable discussion during the Senate’s July 4th recess.

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The common theme expressed by leadership bankers from CBAI’s first Chairman, Art Murray of Citizens State Bank in Milford (1974-1975), to CBAI’s current Chairman, Rick Jameson of Morton Community Bank (2012-2013), was the stifling impact of over regulation/examinations and unfair competition on the ability of community banks to serve their communities.

CBAI bankers thanked Senator Durbin for co-sponsoring the Terminating Bailouts for Taxpayers Fairness Act (S. 798) and encouraged him to take a strong leadership position in moving this important legislation forward. The Brown-Vitter bill would establish more appropriate capital standards for the nation’s largest financial institutions and provide much needed regulatory relief for community banks. CBAI’s top Federal Policy Priority is addressing the issue of too-big-to-fail. Taxpayer bailouts must never happen again.

CBAI bankers encouraged additional progress by both regulators and legislators on differentiating community banks from too-big-to-fail financial institutions. The group emphasized that the business model and risks of large, complex and interrelated financial institutions is completely different than community banks, and painting the industry with a broad regulatory brush is inappropriate; community banks are nothing like the large financial behemoths and future legislation and regulation should reflect that fact.

CBAI’s past Chairman Robin Loftus (Security Bank, S.B., Springfield) shared her recent experiences as the current Chairman of the Consumer Financial Protection Bureau’s (CFPB) Community Bank Advisory Council. While the CFPB’s examination and enforcement authority is limited to banks in excess of $10 billion in assets (and the shadow financial industry), input from the Advisory Council is vital to the Bureau’s rule writing. Loftus identified several areas where their input has already been beneficial in avoiding inappropriate regulation.

CBAI staff also addressed other opportunities for Senator Durbin to co-sponsor legislation in the Senate which would help reduce the regulatory burden for community banks. David Schroeder, Vice President Federal Governmental Relations, will be discussing these opportunities in greater detail when he visits members of the Illinois Congressional delegation in Washington later this month.

CBAI leadership bankers and staff thanked Senator Durbin and his capable staff for attending the roundtable discussion.

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CFPB Finalizes Amendments to Qualified Mortgage Rule

May 30, 2013

The Consumer Financial Protection Bureau (CFPB) finalized amendments to the Ability-to-Repay/Qualified Mortgage (QM) rule by creating specific exemptions and modifications for small creditors and by also revising the rule on how to calculate loan origination compensation. READ CFPB FINAL RULE.

Under the amendments, the CFPB made several adjustments to the Ability-to-Repay rule to facilitate lending by small creditors, including community banks that have less than $2 billion in assets and make 500 or fewer first-lien mortgage loans.

    The rule extends QM status to loans that small creditors hold in their own portfolio even if the customers’ debt-to-income ratio exceeds 43%.

    The rule provides a two-year transition period during which small creditors can make balloon loans and those loans will meet the definition of QMs. During this transition period the CFPB will study whether the definition of “rural” or “underserved” needs to be changed.

    The rule allows small creditors to charge a higher annual percentage rate for first-lien QMs while maintaining a safe harbor for the Ability-to-Repay requirements.
Under the amendments, the CFPB provides certain exceptions to the Dodd-Frank requirement that loan originator compensation be included in the permissible points and fees. The compensation paid by a mortgage broker to a loan originator employee does not count towards the points and fees threshold.

The amendments take effect with the Ability-to-Repay rule on January 10, 2014.

The Community Bankers Association of Illinois appreciates the CFPB’s willingness to amend the Ability-to-Repay rule. In a February 22, 2013 comment letter, CBAI strongly advocated for the new “small creditor” category, a $5 billion asset and 3,500 mortgage threshold, as well as expanded definitions of “rural” and “underserved’ communities. CBAI and the Independent Community Bankers of America will continue to work with the CFPB to make this rule more favorable for community bank participation in residential mortgage lending.

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CBAI Initiatives Pass Both Houses

House Bill 1335 (Sandack/Mulroe) amends the “good funds” disbursement authorization provisions of the Title Insurance Act to allow financial institutions and title companies that know each other and agree to use cashier’s checks, teller’s checks and certified checks as settlement funds in transactions greater than $50,000. While the bill is permissive in nature, the title insurance industry still opposed the legislation, and at the request of Senator Don Harmon (D-Oak Park), the bill was amended in the Senate. The bill as amended makes it clear the parties will address the issue of delivery of the check to the title company in sufficient time for the check to be deposited to the title company’s account, before any disbursement of funds is made by the title company. As part of the compromise, a January 1, 2015 sunset was also included in the bill. Senator Harmon inserted the sunset, and committed to repeal it next year if there is no proof that that this legislative change negatively impacts the title insurance industry. CBAI plans to continue to work with the General Assembly on this issue and to repeal the sunset. CBAI would like to thank HB 1335’s sponsors State Representative Ron Sandack (R-Downers Grove), and State Senator John Mulroe (D- Chicago) for their hard work and dedication to the passing of this legislation. HB 1335 passed both chambers with only three no votes in both chambers.

CBAI was also successful in passing legislation that removes the requirement for banks to disclose ATM fees with a physical sign on the terminal, when the fee is shown electronically on the terminal screen. House Bill 2432 (Lang/Mulroe) was amended with language that was introduced initially onto HB 183. HB 2432 had to be amended because HB 183 was “hijacked” by the Senate Democratic leadership and ultimately became the vehicle for the concealed carry compromise. Last year, Congress removed this physical signage requirement in federal law, and this bill makes state law consistent with that change. HB 2432 passed both chambers and will be sent to the Governor.

For more information, or if you have any questions or comments, please contact Kraig Lounsberry or Megan Peck at 800/736-2224.

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Senator Durbin Co-Sponsors Terminating Bailouts for Taxpayer Fairness Act

CBAI congratulates Illinois Senator Richard Durbin for co-sponsoring the Terminating Bailouts for Taxpayer Fairness Act of 2013 (S. 798).

The TBTF Act seeks to end federal subsidies and funding advantages for financial firms larger than $500 billion in assets and to end government distortions of the financial markets that foster incentives for risky behavior by Wall Street megabanks while taxpayers bear the brunt of the risk. The TBTF Act also seeks to prohibit U.S. regulators from implementing Basel III capital requirements and offers additional regulatory relief aimed directly at community banks.

CBAI encourages all Illinois community banks to thank Senator Richard Durbin by calling his office at 1-202-224-2152. Simply tell the person who answers the phone, your name, the name and location of your bank, and that you are calling to thank Senator Durbin for co-sponsoring the Brown-Vitter Terminating Bailouts for Taxpayer Fairness Act (S.798).

If you prefer to send an e-mail to his financial service staff member with this message, please send your e-mail to corey_tellez@durbin.senate.gov (NOTE- there is an underscore _ between corey and tellez).

We appreciate your reaching out to Senator Durbin to thank him for co-sponsoring this legislation. Ending too-big-to-fail is CBAI’s #1 Federal Policy Priority.

CBAI Attends OCC Central District Office - Trade Association Executives Meeting

April 4, 2013

CBAI’s David Schroeder, Vice President Federal Governmental Relations, participated in an Office of Comptroller of the Currency’s (OCC) Central District Office - Trade Association Executives Meeting. This day-long meeting was the second in a series where the OCC Central District banking trade association executives had the opportunity to discuss a variety of banking industry issues and concerns.

Representatives from the OCC included –

    Bert Otto – District Deputy Comptroller (Chicago)

    Dan McKee – Associate Deputy Comptroller (Chicago)

    Jennifer Kelly – Senior Deputy Comptroller for Midsize and Community Bank Supervision (Washington D.C.)

    Larry Hattix – Senior Deputy Comptroller for Enterprise Governance and Ombudsman (Washington D.C.)

    Gregg Golembe – Director of Banking Relations (Washington D.C.)

    Cheryl Petty – Acting Senior Thrift Advisor (Chicago)
The OCC addressed the topics of cross certification of examiners (bank/thrift), exam timeliness, consumer complaints, a Central District profile, Matters Requiring Attention (MRAs), problem bank review, their Risk Committee Radar Screen, the OCC’s appeals process, and regulations including the Dodd-Frank (cumulative regulatory burden, mortgage rules (QM and QRM).

Schroeder raised several issues of importance for Illinois’ community banks.

    Our strong opposition to Basel III capital and risk-weight requirement even being applicable to community banks. A discussion ensued regarding tiered regulation, the expected rule release date, and an assessment of the necessary regulatory relief community banks can expect in the final rules.

    The United States Attorney General Eric Holder, in a refreshing but disturbing moment of candor, admitted that Equal Justice Under the Law does not apply when it comes to the largest too-big-to-fail banks and that the U.S. apparently has a two-tier system of justice. CBAI registered strong objection to this preferential treatment of too-big-to-fail banks which is made even more egregious by their steady stream of misdeeds including: massive screw-ups in mortgage origination and servicing, securities fraud, anti-money laundering lapses, manipulation of LIBOR, JPMorgan Chase’s London Whale trading losses, and excessive executive pay packages.

    There is tension between community banks and the intangibles they consider in their lending decisions on the one hand, and regulators considering only documented evidence on the other. A discussion ensued regarding the regulators giving the proper weight these intangibles deserve in the community bank lending process. If this does not happen there will be no difference between the community bank lending model and that of the large banks who put purely quantitative information into one end of the a decision matrix and a decision comes out the other.

    As a result of the closing of 450+ community banks since 2008, industry consolidation, and virtually no new banking charters being approved since then, the number of community banks has been on the decline. This is not a healthy situation. There has been finger pointing at the regulators for not approving new banking charters. CBAI urged that there be a necessary new wave of de novo charters.
Schroeder also discussed several issues of particular importance to CBAI’s thrift members. These issues included the following.

    There are concerns about the level of understanding the OCC has for mutual chartered institutions. Specifically, the OCC needs to better understand that smaller thrifts are much simpler operations than the OCC has been accustomed to.

    The lack of understanding of the mutual charter comes into play particularly at this point in time, when many mutual executives are treading water, or living off healthy capital, which is actually a bona fide strategy given today’s environment. Yet, the OCC has an earnings mantra which may force mutuals to either exit the business or engage in riskier practices to seek yield at this dangerous point in time.

    There is a concern that the imposition of accounting concepts of commercial lending into the residential lending arena is questionable and often without true FASB or GAAP guidance. This exacerbates residential woes without commensurate benefit. Commercial versus residential lending has many distinctions. The commercial template is often not applicable to residential, where time truly does heal matters.
CBAI appreciates these Central District outreach meetings as well as individual association meetings to discuss issues of importance to Illinois community banks and thrifts.