CSBS Examiner

A weekly report of events affecting the state banking system from the Conference of State Bank Supervisors

August 22, 2008

“Everybody wants to eat at the government's table, but nobody wants to do the dishes.” - Werner Finck

We owe, we owe, so off to work we go. Folks, it’s not just a bumper sticker. As much as we like being oblivious to it, the national debt is in the news again. In fact, there’s a new movie – well, actually a documentary – that just opened called “I.O.U.S.A.” The film stars former Comptroller General David Walker, who’s now heading up the Peter G. Peterson Foundation’s effort to focus the nation’s attention on the ever-mounting public debt. According to the U.S. national debt clock, the current public debt as of this morning was over $9.6 trillion, give or take a few dollars, or $31,500+ for each man, woman and child in the country. Moreover, Congress just raised the debt ceiling to $10.6 trillion, which brings to mind a headline we saw on a news story two years: “At least it’s not a zillion.” So we hope everyone will find a movie theater showing “I.O.U.S.A.” – and don’t put the ticket on your credit card. On second thought, maybe we’d rather see the new Batman movie.

CSBS, AARMR Join ComplianceEase On Automated Mortgage Examination Product

Two products to help state regulators automate their examination process were released on Wednesday at the American Association of Residential Mortgage Regulators Annual Regulatory Conference. ComplianceEase unveiled RegulatorConnect and RegulatorDirect solutions, which will enable state-regulated mortgage lenders and banking institutions to automate the regulatory examination process. RegulatorConnect links institutions with state regulators through electronic data transfer, while RegulatorDirect enables lenders to deliver electronically compliance audit reports to their state regulators.

At the heart of the new process is ComplianceAnalyzer, which was selected by the Conference of State Bank Supervisors as the automated component of its Model Examination Guidelines (MEGs) initiative, which has been under way since mid-2007 under the leadership of Chuck Cross, CSBS vice president of Mortgage Regulatory Policy. Cross said the MEGs effort includes a component on ways states can use technology to more thoroughly address safety and soundness and consumer protection issues, review more loans in greater depth, better identify problems, and share information across state lines. A team of 14 state regulators began testing compliance software, choosing LogicEase Solutions, Inc. which developed the ComplianceAnalyzer software program.

“Technology and automated solutions have become essential elements for CSBS to leverage as we seek new ways to standardize and improve regulatory supervision while streamlining the examination process,” Cross said. ComplianceAnalyzer will be enhanced with additional state-specific rules and new tests based on requirements from the regulators, he added. The use of this software is free to CSBS and AARMR members. More Information

FDIC Unveils Loan Modification Plan For 4,000+ IndyMac Borrowers

FDIC Chairman Sheila C. Bair on Wednesday announced that IndyMac Federal Bank, FSB, under FDIC conservatorship, will start a new program to modify troubled mortgages. The program is designed to achieve affordable and sustainable mortgage payments for borrowers primarily in the so-called 'Alt-A' market. "I have long supported a systematic and streamlined approach to loan modifications to put borrowers into long-term, sustainable mortgages — achieving an improved return for bankers and investors compared to foreclosure," Bair said. IndyMac Federal is focusing first on helping those borrowers with mortgages that are seriously delinquent or in default, but will seek to work with others who are unable to pay their mortgages due to payment resets or changes in the borrowers' repayment capacities. IndyMac Federal will send an estimated 4,000 modification proposals to borrowers this week and thousands of additional proposals in the coming weeks. Under the IndyMac Federal program, eligible mortgages would be modified into sustainable mortgages permanently capped at the current Freddie Mac survey rate for conforming mortgages. Modifications would be designed to achieve sustainable payments at a 38 percent debt to income ratio of principal, interest, taxes and insurance. Modifications could encompass a combination of interest rate reductions, extended amortization and principal forbearance. FDIC said IndyMac Federal will only make modification offers to borrowers where doing so will achieve an improved value for IndyMac Federal or for investors in securitized or whole loans. More Information

Around The States

Florida: Don Saxon, Commissioner of the Florida Office of Financial Regulation, issued a proclamation on Monday authorizing state, national and federally-chartered financial institutions in areas adversely affected by Tropical Storm/Hurricane Fay to close and remain closed until emergency conditions no longer exist.

Kentucky: Kentucky Governor Steve Beshear recently announced the creation of the Kentucky Homeownership Protection Center to address the foreclosure crisis in the state. The Protection Center will help Kentuckians in financial trouble become more proactive in keeping their homes. Under the program, homeowners who contact the Protection Center through the Web site at www.ProtectMyKYHome.org or through the toll-free number at (866) 830-7868 will be referred to a counseling agency serving their area. The counselors will provide free assistance to homeowners who are in default or in danger of defaulting on their mortgages. The Protection Center is a joint effort of the Department of Financial Institutions, Kentucky Housing Corporation and many other organizations across the state. Counselors will be available to help homeowners understand the foreclosure process; address the root cause of default; locate available resources to help address their needs; provide financial management guidance; determine options for preventing foreclosure; help homeowners avoid predatory lending practices; and help find alternative housing solutions if foreclosure is unavoidable. The center also has formed a partnership with Legal Aid to help qualifying individuals who are unable to recover from their circumstances through counseling. Beginning Jan. 1, 2009, or before, all mortgagees shall provide a notification document to borrowers at the time of closing. More Information

North Carolina: Gov. Mike Easley signed into law legislation to reduce home foreclosure filings due to the subprime mortgage crisis during the next two years. The law also prohibits lenders from paying yield spread premiums to brokers on subprime mortgages. The governor said the Emergency Foreclosure Reduction Program could keep more than 25,000 families in their homes and paying their mortgages. The law requires that a notice be sent to the homeowner and the Commissioner of Banks at least 45 days before a foreclosure is filed. During that time, banking commission staff will work with the homeowner and lender to come up with an acceptable interest rate that the borrower can afford and the bank can accept. The law gives the Bank Commissioner authority to extend any foreclosure filing notice by 30 days, while the state works with a homeowner and mortgage holder to come to agreement on a loan interest rate and payments. Another new law requires individuals and companies serving loans in North Carolina to register and make reports to the Commissioner of Banks. More Information

Virginia: Gov. Timothy M. Kaine announced the appointment of James C. Dimitri to the State Corporation Commission, which oversees the Bureau of Financial Institutions and other regulatory divisions. Dimitri is a partner at the McGuire Woods LLP law firm in Richmond, where he represents clients before the State Corporation Commission and other regulatory agencies. From 1994 to 1996, he was senior counsel at SCC, and from 1996 to 2000, he was general counsel. He received his undergraduate degree in economics from the University of Virginia and his J.D. from the Boston University School of Law in 1976.

Around The Agencies

SBA: Sandy K. Baruah has been named acting administrator of the Small Business Administration. Baruah, whose nomination is pending before the Senate, comes to the position from serving as assistant secretary for economic development in the Commerce Department. President George W. Bush nominated him for the Administrator position on June 16, 2008. He comes to the post with experience in promoting local business growth, managing organizational change and responding to federal disasters. More Information

Nebraska’s Lammers Named Chairman of CSBS Technology Committee

CSBS Senior Vice President Mary Beth Quist announced this that Kelly Lammers, review examiner with the Nebraska Department of Banking and Finance, will serve as chairman of the CSBS Technology Committee. Lammers has been with the banking department for 24 years starting his career as an examiner trainee and moving up through the ranks. He also served a two-year chairmanship of the CSBS Best Practices Taskforce - from fall 2004 to fall 2006. Under his chairmanship the group published Best Practices in several areas to include Disaster Planning.

Upcoming Events

August 24-28: The Conference of State Bank Supervisors will hold its quarterly Bankers Advisory Board and Board of Directors meetings in Bismarck, N.D.

September 3-5: The Money Transmitter Regulators Association will hold its annual conference at Snow King Resort, Jackson, Wyo.

September 17: The House Financial Services Committee will hold a hearing on mortgage industry compliance to delay home foreclosures. - 10 a.m., 2128 Rayburn House Office Building.

Closing Comments

“At Least the Airsickness Bags Are Free”- headline on a story about airlines charging for water, luggage, etc. in last Saturday's New York Times.

Mary White, Editor
Teresa Dean, Contributing Writer

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