February 22, 2013
The Community Bankers Association of Illinois (CBAI) urged the Consumer Financial Protection Bureau (CFPB) to expand the Qualified Mortgage (QM) exemptions by creating a new category of QMs for community banks which would benefit from a conclusive safe harbor presumption with the ability-to-repay rules. CBAI supports the exemption thresholds being set higher than the proposed levels (to $5 billion in assets and 3,500 transactions) so that some community banks do not confront the loss of the safe harbor. CBAI also supports giving community banks a reasonable amount of time to either fall back below the thresholds or be given a reasonable period of time to prepare for the change. In addition, the definitions of “rural” and “underserved” should be expanded to level the competitive playing field for community banks and to encourage them to better serve low-to-moderate income borrowers and communities. Read Comment Letter
On February 22nd, the Illinois Supreme Court published its opinion resolving the case of State Bank of Cherry vs. CGB Enterprises. The 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 bank as a dual payee on the check from the grain elevator. There was no doubt that the grain elevator had received timely notice 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 explicitly identify the county or 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 required strict compliance with its mandate that notice to prospective buyers of crops of a secured interest in crops must identify the county or counties in which the crops were growing.
Because State Bank of Cherry had relied on language such as “all crops wherever growing” instead of explicitly naming the counties in which its borrower had crops, the Appellate Court had ruled that the grain elevator was not liable to the bank for paying the farmer-borrower without honoring the bank’s secured interest. The bank appealed that decision to the Illinois Supreme Court, but on February 22nd the Supreme Court upheld the Appellate Court’s decision and reasoning, thereby conclusively putting Illinois lenders with secured interests in growing crops on notice that they must specifically name the county or counties in which crops are growing when delivering a notice of secured interest to a prospective buyer (e.g., a grain elevator) of the borrower’s crops.
The Illinois Supreme Court has upheld an Appellate Court’s decision that a bank’s notice of secured interest in growing crops must explicitly name the county or counties in which the crops are growing in order for the bank’s notice to be binding on a purchaser of the crops (e.g., a grain elevator), even though the purchaser had received timely notice from the secured bank in advance of the purchase of the crops. For more information, please click here.
If you have any questions pertaining to the Court’s decision or if you would like to receive a copy of the Supreme Court’s opinion, please feel free to contact CBAI General Counsel Jerry Cavanaugh at (800)736-2224 or via e-mail at firstname.lastname@example.org.