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Agencies Exempt Some Higher-Priced Mortgage Loans from Appraisal Rules
Regulators issued a final rule that creates exemptions from certain appraisal requirements for a subset of higher-priced mortgage loans.

Under the Dodd-Frank Act, closed-end mortgage loans are considered to be higher-priced if they are secured by a consumer’s home and have interest rates above a certain threshold. The act requires creditors to obtain a written appraisal based on a physical visit of the home's interior before making these loans.

The final rule issued yesterday provides that loans of $25,000 or less and certain “streamlined” refinancings are exempt from the appraisal requirements, which go into effect on Jan. 18. In a September comment letter, ICBA asked regulators to exempt loans of $100,000 or less from the HPML appraisal requirements.

The rule also delays requirements for manufactured homes for 18 months. In its comment letter, ICBA also wrote that all loans on manufactured homes should be exempt from specific appraisal requirements and that community banks should be allowed to determine their own valuation methods for manufactured homes.

Regulators issued the final rule on higher-priced mortgage loans in January 2013. The agencies said the exemptions announced yesterday are intended to save borrowers time and money while still ensuring that the loans are financially sound.

Read the Final Rule. Read ICBA’s Comment Letter.

Flood Insurance
ICBA Backs Exemptions from Flood Insurance Rule
ICBA expressed strong support for an exemption from proposed flood insurance rules for institutions with less than $1 billion in assets. The proposed rule to implement provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 would establish requirements for the escrow of flood insurance payments, the acceptance of private flood insurance coverage, and the force-placement of flood insurance.

In the comment letter, ICBA noted that the exemption would prevent community banks from having to face excessive costs and burdens in developing the ability to establish and maintain escrow accounts.

ICBA also wrote that when lenders grow above the $1 billion threshold, they should not be forced to implement new escrow requirements on loans that they held on their books when they qualified for the exemption. Rather, escrow requirements would only be required for new loans going forward, the association wrote.

Additionally, ICBA expressed concern about the short implementation timeframe of the proposed rule, which is scheduled to take effect in July 2014, and urged the agencies to delay implementation until after the Federal Emergency Management Agency has completed its affordability study and the results have been reflected in insurance requirements. Read ICBA Comment Letter.

CFPB Finds Few Consumers File Arbitration Cases
The Consumer Financial Protection Bureau released a report on the use of arbitration clauses in connection with consumer financial products and services. The CFPB said the research indicates that arbitration clauses are commonly used by large banks in credit card and checking account agreements and that roughly 90 percent of clauses allow banks to prevent consumers from participating in class actions.

The report found that while tens of millions of consumers are subject to arbitration clauses in the markets the CFPB studied, consumers filed an average of 300 disputes in these markets each year between 2010 and 2012 with the leading arbitration association. The study also found that larger institutions are most likely to use arbitration clauses, that arbitration clauses are often more complex than the rest of the contract, and that consumers do not file arbitrations for small-dollar disputes.

The CFPB reviewed American Arbitration Association filings about credit cards, checking accounts, payday loans and prepaid cards. The Dodd-Frank Act mandated the study and authorizes the bureau to issue regulations on the use of arbitration clauses if it finds that doing so is in the public interest. Read the Study.

Member Spotlight
Mo. Community Banker Spreads Go Local for Holidays Message
ICBA-member community banks are making headlines as part of ICBA’s Go Local for the Holidays campaign encouraging shoppers to shop locally this holiday season. Scott Page, president and CEO of Pony Express Bank in Liberty, Mo., shared the Go Local for the Holidays message in an op-ed in the Liberty Tribune.

“So why are community banks encouraging consumers to ‘go local’ with their spending this holiday season?” Page wrote. “Simple: because community banks, which are small businesses themselves, want main streets in urban, suburban and rural areas to succeed.”

Others can spread the word with ICBA’s customizable news release and op-ed, sample social media posts, marketing ideas and a Go Local holiday badge. All are available on ICBA’s Go Local website.

ICBA also continues taking submissions for its Main Street Holiday Contest. The contest encourages community bankers and their customers to submit photos of their Main Street communities decked out for the holidays.

The five most creative and festive photos will be chosen and displayed in a Facebook album on Monday, Dec. 16. The photo with the most likes will win a $300 donation to a local charity.

To join the Go Local for the Holidays conversation, follow @ICBA on Twitter and the #golocal hashtag. Visit the Go Local Website. Learn More About the Contest.

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Member Spotlight
ICBA Reg Relief Congressional Testimony Makes News
Also making headlines is last week’s ICBA testimony on behalf of legislation to relieve unnecessary regulatory burdens on community banks is making headlines. The Hill reported that ICBA witness B. Doyle Mitchell Jr. warned that new Consumer Financial Protection Bureau mortgage rules threaten to force community banks out of the mortgage market.

Also in his testimony, Mitchell advocated the Community Lending Enhancement and Regulatory (CLEAR) Relief Act (H.R. 1750) to support continued economic growth for often-underserved communities and small businesses. The CLEAR Relief Act provisions are from ICBA’s Plan for Prosperity regulatory relief platform for the 113th Congress.

Fed Proposes Changes to Check-Collection Rules
The Federal Reserve Board requested public comment on proposed amendments to check-collection and -return rules to reflect the evolution of the nation’s check-collection system to one that is virtually all electronic.

The Fed noted the check-collection and -return provisions in Regulation CC (Availability of Funds and Collection of Checks) apply only to paper checks. It is proposing that electronic checks and electronic returned checks that banks exchange by agreement also be subject to these rules unless otherwise agreed by the sending and receiving banks.

The agency also is requesting comments on alternative approaches to modify the current expeditious-return and notice-of-nonpayment requirements to encourage the few remaining banks demanding paper returns to accept electronic returns. It also is proposing a new indemnity for electronic items cleared through the check-collection system that did not originate as paper checks.

Comments are due by May 2, 2014.

ICBA Backs Bill To Defray BSA Compliance Costs for Community Banks
ICBA expressed support for legislation to help defray the costs of Bank Secrecy Act compliance. The Building Community Banks’ Capacity to Combat Money Laundering Act (H.R. 3700) would use a portion of the funds collected by the government through BSA fines to help fund community bank training and technology costs.

In a letter to the bill’s sponsor, Rep. Ruben Hinojosa (D-Texas), ICBA wrote that the legislation would strengthen BSA compliance and allow community banks to direct more of their resources toward serving their communities and creating jobs. Read ICBA Letter.

Credit Unions
Article Raises the Curtain on Trillion-Dollar Credit Union Industry
While credit unions look like mom-and-pop lenders, they make up a trillion-dollar industry regulated by the same lawyers and lobbyists who once served these institutions, according to a new report on Slate.com.

In the article, Daniel Wagner of the Center for Public Integrity reports that current credit union regulators are former industry advocates, that the credit union industry is a massive and growing business, and that the credit union tax exemption is projected to cost the federal government $1.66 billion next year. Much of that extra income is diverted to finance the industry’s advocacy efforts, protect its tax exemption, boost lending and expand, according to the report.

The article also notes that credit unions have strayed from their mission to provide credit for people of modest means, with bank customers more likely to be low-income than credit union customers. It also finds that National Credit Union Administration policy changes on credit union lending and investment contributed to the 2008 financial crisis and multi-billion-dollar taxpayer assistance for the credit union industry. Read the Article.

Retail Sales Up 0.7 Percent in November
Retail sales increased a seasonally adjusted 0.7 percent in November and were up 4.7 percent from a year ago, the Commerce Department reported. Total sales from September through November were up 4.1 percent from the same period a year ago. The October increase was revised from 0.4 percent to 0.6 percent.

Take This Week’s Quick Poll
Take this week’s Quick Poll on new bank charters, and view results from the previous poll on Go Local for the Holidays. View the Archive.

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