SDBA eNews: May 25, 2017

In This Issue

ABA Resources Available as Fiduciary Rule Effective Date Looms

With the Department of Labor’s decision not to extend the effective date of its fiduciary rule, bankers must prepare to comply by June 9. Bankers may note that compliance begins at the end of the calendar day, at 11:59 p.m. local time on Friday, June 9.

At that time, only the fiduciary rule itself and impartial conduct standards take effect; the best interest contract exemption and other exemptions do not apply until Jan. 1, 2018. During that intervening time, DoL has said it will not pursue claims against fiduciaries making good-faith efforts to comply with the rule.

ABA has working groups and resources to help bankers understand and implement the fiduciary rule, including a members-only white paper on bank IRA deposit programs prepared for ABA by the Morgan Lewis law firm. ABA staff will continue to work with DoL to revise the fiduciary rule to achieve full functionality and to facilitate compliance. Access fiduciary rule resources. For more information, contact ABA's Tim Keehan.

2017 Graduate School of Banking Enrollment Deadline is June 15

Thanks to strong incoming enrollment, bankers planning to begin the 25-month Graduate School of Banking at the University of Wisconsin – Madison in 2017 are urged to apply now, ahead of the published application deadline of June 15. 

“We’re on track to welcome another large incoming class when the 2017 session begins on July 30,” says Kirby Davidson, president and CEO of the Graduate School of Banking. “There’s a lot of buzz about talent management and succession in the industry as many bankers in senior positions are approaching retirement.

"Many of those very leaders are GSB graduates; our alumni understand that GSB will deepen their bench and prepare the next generation of leaders for their banks. That’s one reason more than half of our students enroll through alumni referrals,” added Davidson. 

Learn more and register.


Question of the Week

When an appraised value comes in lower than estimated, oftentimes this results in an increased rate; however there are no fees (that are tied to tolerance levels) changing, the loan amount is remaining the same, and the expiration date is the same, is there a need to issue a revised loan estimate?

Answer: In this example there is no need to issue a revised loan estimate, unless you choose to do so as a courtesy. The only time a revised loan estimate is required is if the rate was unlocked and is being locked--otherwise, the updated charges can simply be reflected on the closing disclosure. The revised loan estimate is, in most cases, simply a tool lenders may use in order to reset fee tolerances.

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Contact Alisa DeMers, SDBA, at 800. 726.7322 or via email.

Bankers from Four States to Convene in Rapid City on June 4

Banking Beyond Borders LogoWe will be Banking Beyond Borders at the 2017 Quad States Convention June 4-6 at the Rushmore Plaza Civic Center in Rapid City. This year's event includes bankers from South Dakota, North Dakota, Montana and Wyoming--we're not in Kansas anymore!

Topics to be explored at this year's annual convention include leadership and communication, managing technology, the future of changing customers and service models, accelerating teamwork and bank tax planning.

This year's event will kick off Sunday, June 4, with an opening party in the exhibit hall and an Emerald City-theme party on Monday night in the exhibit hall. The event concludes Tuesday evening with a banquet and entertainment by Deuces Wild Dueling Pianos.

If you haven't yet registered for the SDBA's largest event to the year, there is still time to do so. Learn more.

House Leaders Expected to Pull Durbin Repeal from Choice Act

House Republican leadership is expected to remove a provision repealing the Durbin Amendment from House Financial Services Committee Chairman Jeb Hensarling's Financial Choice Act before it receives a vote on the House floor, according to news reports last night. The decision came after a number of Republicans had expressed concerns about including the Durbin repeal in the financial reform bill.

ABA President and CEO Rob Nichols thanked the thousands of bankers and state associations who have contacted their representatives in recent days to urge support for the Durbin repeal. He added that the debate on Durbin's price caps on debit interchange fees is not over.

"We will continue to let members of Congress know that a vote to keep the Durbin Amendment on the books is a vote for government price controls and against consumers," he said. "Until it’s repealed, big box retailers will continue to reap the billions in profits they promised to pass along to their customers. That’s wrong and Congress should fix it."

ABA: Farm Banks Well Positioned to Meet Customers' Credit Needs

In testimony submitted for a Senate Agriculture Committee hearing on the state of the farm economy today, ABA noted that the nation’s 1,912 farm banks are strong and well-positioned to continue supporting farmers and ranchers despite projected declines in farm income.

“In 2016, farm banks...increased lending by 5.3 percent to meet the rising needs of farmers and ranchers, and now provide over $103 billion in total farm loans,” ABA said. “Farm banks are healthy, well-capitalized and stand ready to meet the credit demands of our nation’s farmers large and small.”

As Congress prepares to renegotiate the Farm Bill in 2018, ABA called for several changes to the bill that would expand access to credit in the agricultural sector. Specifically, ABA urged lawmakers to increase the current loan limit of $1.399 million on Farm Service Agency guaranteed loans, noting that the formula for indexing the programs has not kept pace with the rising cost of agriculture. Increasing the loan caps would allow lenders to continue meeting the needs of their agricultural borrowers, particularly those who are young, beginning or small farmers or ranchers, ABA said.

The association also urged lawmakers to modernize technology and increase staffing at FSA, consider bringing back FSA’s interest assistance programs and examine regulations that have been put in place surrounding confined animal feeding operations for FSA loan programs. Read ABA's testimony.

ABA Submits Recommendations for House Finance Reform

As part of the banking industry’s continuing response to President Trump’s executive order outlining “core principles” for financial regulation, ABA submitted two white papers to the Treasury Department on Tuesday with recommendations for reforming current mortgage lending rules and regulations and the government-sponsored enterprises Fannie Mae and Freddie Mac.

ABA called for a full-scale review of current mortgage lending and servicing regulations, advocating for “careful fixes … to [ensure] that the laws are necessary, protective, effective, balanced and certain in their application.” Among the recommended changes were reforms to disclosure requirements, including the TILA-RESPA Integrated disclosure rules and the CFPB’s complex servicing rule.

In addition, the association made several recommendations that would expand responsible lending while maintaining consumer protections, such as allowing loans held in portfolio to qualify as Qualified Mortgages and raising the 43 percent debt-to-income standard for QM loans. Finally, ABA pointed out that many of the rules have caused confusion or uncertainties, particularly in regards to liability, and called on regulators to clarify existing rules and expand the availability of cure provisions across all mortgage-related regulations.

ABA also laid out nine principles for GSE reform, noting that “[t]he endpoint should be a reduced direct role of the federal government in mortgage finance.” As Congress considers the best way forward, ABA emphasized the importance of limiting the GSEs’ activities to a secondary market role of providing stability and liquidity to the primary mortgage market and limiting taxpayer exposure to risk. At the same time, GSE reform should ensure equitable access to the secondary market for all lenders and the continuation of the To Be Announced market, allowing the sale of individual loans to the GSEs.

“A more robust private market for housing finance should be fostered and encouraged with an ultimate goal of a much smaller direct governmental role, and with that role focused on ensuring market stability, access to the capital markets for all originators, and as a safety valve in the event of market failure,” ABA said.

Acosta: No Additional Delay for Fiduciary Rule

Labor Secretary Alexander Acosta on Monday announced that the Department of Labor will not delay the June 9 effective date for the fiduciary rule, which greatly expanded the definition of who counts as a “fiduciary” under the Employee Retirement Income Security Act and the Internal Revenue Code. Acosta wrote in a Wall Street Journal op-ed that the Administrative Procedures Act, which governs federal rulemaking, would not allow a further delay.

"We...have found no principled legal basis to change the June 9 date while we seek public input," he wrote. "Respect for the rule of law leads us to the conclusion that this date cannot be postponed." While the new definition takes effect June 9, additional conditions--such as specific disclosures and representations--are not required until Jan. 1, 2018.

DoL issued a bulletin on its “temporary enforcement policy” of phased implementation. “The department has repeatedly said that its general approach to implementation will be marked by an emphasis on assisting (rather than citing violations and imposing penalties on) plans, plan fiduciaries, financial institutions, and others who are working diligently and in good faith to understand and come into compliance with the fiduciary duty rule and exemptions,” DoL said. “Accordingly, during the phased implementation period ending on Jan. 1, 2018, the department will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary duty rule and exemptions.”

Although Acosta declined to authorize a further delay, he said that DoL will continue its review of the final rule pursuant to an executive action by President Trump. "The Labor Department has concluded that it is necessary to seek additional public input on the entire fiduciary rule, and we will do so," he wrote. "Trust in Americans' ability to decide what is best for them and their families leads us to the conclusion that we should seek public comment on how to revise this rule."

ABA has strongly advocated for an additional delay and revisions to the rule to facilitate compliance and ensure it does not negatively affect the services available to bank customers. The association expressed disappointment that DoL decided to pursue implementation of a rule that it has said remains “fundamentally flawed and unworkable in critical areas.”

Supreme Court Limits Ability of Patent Assertion Entities to Cherry-Pick Courts

The Supreme Court on Monday reversed a lower court finding and dealt a blow to the ability of patent assertion entities to bring cases against companies in friendly federal courts. In the case of TC Heartland v. Kraft, the court unanimously affirmed prior precedents that patent infringement lawsuits can be brought only where defendants are incorporated or doing business.

ABA has been closely following the case and filed a friend-of-the-court brief urging the Supreme Court to hear the case and overturn the appellate court ruling. The appellate court upheld a much broader understanding of corporate residence that would allow patent assertion entities--often called “patent trolls”--to continue cherry-picking friendly courts for patent cases against faraway defendants, further increasing pressure to settle cases.

In 2015, 40 percent of patent suits were filed in just one of 94 federal judicial districts: the Eastern District of Texas. That court is known for its friendliness to patent assertion entities, which hold unused patents, often of dubious quality, and employ them primarily as the basis for collecting licensing fees and threatening of litigation.