SDBA Seeks Officer Candidates
Are you interested in becoming an officer of the SDBA?
SDBA officers include the chairman, chairman-elect, vice chairman and immediate past chairman. The SDBA is currently seeking people who are interested in running for the vice chairman position, which will be elected at the SDBA Annual Convention on June 9, 2015, in Sioux Falls.
The current chairman-elect, Rick Rylance (Dacotah Bank, Rapid City), will automatically assume the chairman position on June 9, 2015. The current vice chairman, Paul Domke (Heartland State Bank, Redfield), will be eligible to run for chairman-elect. The position of vice chairman will be up for election. Current Chairman George Kenzy (First Fidelity Bank, Burke) will automatically become the immediate past chairman.
If you are an executive officer of any SDBA member bank, you are eligible to run for vice chairman. If you are interested in running for the position, contact a member of the nominating committee for more information and submit a letter of intent to SDBA President Curt Everson at [email protected] or by mail prior to the SDBA Annual Convention.
ABA, Farm Groups Oppose Cuts to Crop Insurance
The White House’s proposed budget goes too far in cutting funds for crop insurance, ABA and several farming industry groups told Congress yesterday. “Attacking farmers’ most important risk management tool only weakens the farm safety net in the bipartisan farm bill that Congress carefully crafted after years of deliberation,” they explained.
In fact, the groups said, the federal crop insurance program helps reduce government spending by more than $1.2 billion per year by avoiding taxpayer-funded farm relief after disaster declarations.
“Budget levels currently in place for crop insurance ensure the affordability and availability of risk protection, while maintaining the viability of private-sector delivery,” the groups added. “Arbitrary funding reductions only weaken the system and ultimately shift risk exposure back to taxpayers.” Read the letter.
ABA Welcomes Same-Day ACH Settlement Plan
ABA on Wednesday hailed a proposal from NACHA, the electronic payments association, to accelerate ACH settlements. The association called the change “a large step forward toward improving the U.S. payment system” that would help U.S. financial institutions keep pace with global trends in payments.
NACHA’s proposal addressed many concerns that the financial industry had about a prior plan and included more detailed research on customer demand for same-day ACH. Under the current system, settlement occurs overnight in batches. NACHA’s proposal would introduce two extra windows during weekdays -- morning and afternoon -- for credit and, eventually, debit transactions.
ABA welcomed the fact that same-day ACH would be a choice for the payment originator. “Regularly occurring transactions such as mortgage payments or salary received through direct deposit work well using the cheap, safe and established overnight batch process,” ABA said. And those who choose same-day settlement “will be aware of the benefits of a speedier transaction and balance those against the increased cost of the transaction.”
Depository institutions would receive an 8.2 cent fee per transaction from the originating institution to fund the cost of the quicker settlements. Same-day credit transactions would begin phasing in during September 2016, with debits following a year after. ABA made a few recommendations about the timing of credits and transaction ID codes. Read the comment letter. For more information, contact ABA’s Steve Kenneally.
ABA Calls on Oversight Hearings on Farm Credit System
Noting that the Farm Credit System has not been subject to congressional committee scrutiny for more than a decade, ABA Monday called on the Senate and House Agriculture Committees to hold oversight hearing on the FCS.
“The FCS has dramatically expanded its assets over the last decade, adding $127 billion in assets and nearly doubling its size over such a short period,” ABA said. “In addition to raising safety and soundness concerns, such growth merely amplifies its negative effect on local market competitors.”
ABA specifically asked the committees to examine the FCS’ “similar entity” lending authority, which the FCS has stretched to provide more than $1.4 billion in recent financing to telecommunications giants with no clear farming connection. The association also urged Congress to examine the FCS’ indirect lending, retained mineral rights, questionable crop insurance sales practices and shadow banking activities.
“We believe that such a review of the FCS will disclose compelling evidence that the FCS’ tax subsidy has outlived its usefulness, skewing markets in ways that waste government resources, raise safety and soundness concerns, and greatly harm the ability of local banks to help their communities grow and prosper,” ABA said. Read the letter.
FHFA Proposes New Seller, Servicer Eligibility Requirements
The Federal Housing Finance Agency on last Friday proposed new standards that mortgage institutions would have to meet in order to sell loans to or service loans on behalf of Fannie Mae and Freddie Mac. The new standards include net worth, capital and liquidity requirements both for depository institutions and for nonbanks.
Six months after the requirements are finalized -- which FHFA expects to be no later than July 2015 -- sellers and servicers would be required to maintain a base net worth of $2.5 million plus 25 basis points of the unpaid principal balance for the total loans serviced.
Depository institutions may continue to rely on their prudential regulatory standards to meet the GSEs’ new capital and liquidity requirements. Nonbanks must maintain a capital ratio -- tangible net worth divided by total assets -- of at least 6 percent. For nonbanks, minimum liquidity is 3.5 basis points of their total agency servicing, with additional liquidity for non-performing GSE servicing assets.
ABA expected this action from FHFA in its role as Fannie and Freddie’s conservator. The association will closely review the proposed requirements and discuss them in further detail with FHFA, Fannie and Freddie in the coming weeks. Read the proposed standards. For more information, contact ABA’s Joe Pigg.
CFPB Expands Relief for Small, Rural Mortgage Lenders
The Consumer Financial Protection Bureau last week proposed several changes -- advocated by ABA -- that will increase the number of banks able to benefit from the bureau’s small creditor and rural or underserved area exemptions in its mortgage rules.
“We applaud the bureau for listening to community bankers who struggle to serve rural and underserved areas,” said ABA EVP Bob Davis. “These proposed changes are sensible measures that will make it easier for certain hometown bankers to meet the mortgage credit needs in their communities.”
As ABA urged in a comment letter last summer, as well as in frequent, informal advocacy with CFPB officials, the proposal would lift the origination limit to qualify for “small creditor” status from 500 loans annually to 2,000 loans annually -- a limit that would also exclude loans retained in portfolio, further increasing the relief provided. Under the mortgage rules, small creditors’ portfolio loans would have lower burdens in obtaining Qualified Mortgage status.
Small creditors operating in rural and underserved areas may also originate QMs with balloon payments, which is not otherwise permitted. The proposal would clarify and expand the definition of rural areas to include any county or census block not designated as “urban” by the U.S. Census Bureau and provide a safe harbor for lenders who use the Census Bureau or CFPB websites to validate a locale’s rural or underserved status.
The proposal includes additional provisions making it easier for lenders whose small creditor or rural or underserved status changes to obtain the benefits of the exemption. It also provides a brief extension for the transition period in which small creditors can make QMs with balloon payments regardless of location. The rules would take effect on Jan. 1, 2016. Comments are due by March 30. Read the proposed rule. For more information, contact ABA’s Rod Alba.
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