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ICBA Discusses GSE Reform at White House Meeting
ICBA President and CEO Cam Fine met with several administration officials at the White House to discuss proposals to reform the housing-finance system and secondary mortgage market. Fine and the heads of other financial and housing industry groups attended the meeting with HUD Secretary Shaun Donovan, National Economic Council Director Jeffrey Zients and Treasury undersecretary Mary Miller.

At the meeting, Fine addressed several of ICBA’s positions on legislative text released this week by Senate Banking Committee leaders that would reform the housing-finance system. The text released by Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho) would support continued community bank access to the secondary market through a proposed mutual cooperative jointly owned by small lenders. The cooperative would enable small lenders to sell loans on a single-loan basis, be paid in cash and retain the servicing—all of which have been key ICBA principles for secondary market reform. ICBA has been working with Senate Banking Committee staff to make sure they address community banker needs as they move forward with housing-finance reform.

However, ICBA is concerned about several provisions of the text, including a provision allowing financial institutions to be the originator, aggregator and guarantor of mortgage loans, which would allow the largest financial firms to dominate the market. Fine recommended that no insured depository institution be allowed to be a guarantor, which was a key provision of housing-finance-reform legislation introduced by Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.). He also called for greater clarity on a proposed 10 percent capital buffer for private guarantors because the legislative text on this provision is short on details.

Fine also addressed the proposed Federal Mortgage Insurance Corp. (FMIC), which would be charged with overseeing the mortgage-finance industry and coordinating the wind-down of Fannie Mae and Freddie Mac. At the White House meeting, Fine expressed concerns that the FMIC would become another bank safety-and-soundness regulator and that it would regulate the Federal Home Loan Banks.

Additionally, Fine encouraged policymakers to include in the Johnson-Crapo bill compensation for community bank holders of Fannie and Freddie preferred shares, which were wiped out with the conservatorship of the government-sponsored enterprises. ICBA is calling for a policy similar to a provision in the Warner-Corker legislation that would allow GSE profits to flow to shareholders rather than solely to the federal government.

Alternatively, ICBA supports a proposal to provide a credit to preferred shareholders that could be used toward membership fees in the proposed small-lender cooperative. Fine also said GSE-reform legislation should guarantee that the mutual cooperative for small lenders includes at least two community bankers on its board.

Following last week’s announcement of an agreement between Johnson and Crapo on housing-finance reform, ICBA released principles to ensure continued community bank access to the secondary mortgage market. ICBA will continue working with Congress and the administration to ensure housing-finance reforms meet these principles and avoid further concentration of the banking industry.

Read Legislative Text.

Read Section-by-Section Outline.

Read Committee Summary.

Fed Stress Tests Project $366B in Megabank Losses
Loan losses at the nation’s largest banking institutions would total $366 billion over nine quarters under the Federal Reserve’s latest stress test projections. The agency’s extreme stress scenario featured a deep recession with an 11.25 percent unemployment rate, a drop in equity prices of nearly 50 percent, and a decline in house prices to levels last seen in 2001.

The aggregate Tier 1 common capital ratio, which compares high-quality capital to risk-weighted assets, would fall from an actual 11.5 percent in the third quarter of 2013 to the minimum level of 7.6 percent in the hypothetical stress scenario. That is higher than the 30 firms' actual Tier 1 common ratio of 5.5 percent measured in the beginning of 2009.

The Federal Reserve said the results of the tests on the 30 largest bank holding companies show that these institutions are collectively better positioned to withstand severe economic conditions than they were five years ago. The $366 billion loss is down from a projected $462 billion loss under last year’s tests, and 29 of the 30 institutions tested met the stress test’s capital standards.

ICBA Addresses Consumer Groups’ Objections to Reg-Relief Bill
Several consumer groups’ objections to ICBA-advocated regulatory relief legislation are unfounded, ICBA wrote in a letter to U.S. senators this week. The coalition led by the Center for Responsible Lending recently objected to provisions of the CLEAR Relief Act (S. 1349) that would relieve certain community bank loans held in portfolio from new qualified mortgage and escrow requirements.

In its letter to senators, ICBA wrote that portfolio lending is safe and conservative, that $10 billion is a widely accepted community bank threshold and that community bank mortgages have low default rates. ICBA also wrote that current “small creditor” accommodations do not go far enough and that S. 1349 provides a clear test for qualifying mortgage and enjoys broad bipartisan support.

ICBA urged lawmakers to cosponsor the legislation, which it said will help deter further industry consolidation that would leave many rural and small-town communities without access to customized and competitively priced banking services. S. 1349 is inspired by ICBA’s Plan for Prosperity regulatory relief platform.

In the News
Report: Community Bank Closures Continue Hampering Many Areas
Community bank failures during the financial crisis are weighing heavily on many communities and preventing economic growth, according to a new Bloomberg Businessweek report. The article notes that community banks are key to small businesses and that the loss of approximately 500 community banks continues to affect access to credit. While the Treasury Department provided assistance to banks large and small, many banks were too small to save even though they didn’t cause the systemic crisis, according to the report.

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Go Local
Social Media Info Now an Option for ICBA Community Bank Locator
Community banks can now include their social media information in ICBA’s Community Bank Locator. ICBA is encouraging community banks to add their social media outlets to the locator via their company profile.

To update your branch or social media information, go to www.icba.biz and use your username and password or email ICBA with your information. Questions? Email info@icba.org or call 800-422-8439.

The Community Bank Locator, which is available at www.banklocally.org, allows consumers and small-business owners to find their local community bank by simply typing in their ZIP code. The locator also is available via an app for Android, BlackBerry and iPhone devices.

With marketing activities planned for next month’s Community Banking Month and the ICBA Washington Policy Summit, community bankers will want to ensure their Community Bank Locator profile is up to date. Update Your Profile.

Financial Literacy
Deadline for NerdWallet Community Bank Award Entries Is Today
Today is the deadline for community banks to enter the NerdWallet Community Banking Local Project Award. NerdWallet, a financial advice website, is seeking submissions on community bank projects that highlight how community banks work with borrowers through good times and bad.

To be considered for the award, entrants will need to prepare a short description of a local project funded in 2012 or 2013 that is $100,000 in total financing or larger. ICBA Senior Executive Vice President and Chief of Staff Terry Jorde will serve as the expert judge.

The finalists and their financings will be recognized on NerdWallet’s award homepage and in a special feature on the website. The winning bank will be presented with an award, and NerdWallet will donate $1,500 to a charity of the winning bank’s choosing. Enter Today! Watch NerdWallet Video on the Contest.

Meetings with Regulators Slated for Upcoming Washington Policy Summit
Community bankers will be able to dialogue with their regulators at the upcoming ICBA Washington Policy Summit. Scheduled for April 29-May 2 in the nation’s capital, the summit will feature face-to-face meetings with regulators and members of Congress on important policy issues facing the community banking industry.

Registration for the summit is free for community bankers and a spouse or guest. Visit ICBA’s Washington Policy Summit webpage to register today and make sure your voice is being heard in Washington. Learn More and Register.

Take This Week’s Quick Poll
Take this week’s Quick Poll on the 2014 ICBA Washington Policy Summit, and view results from the previous poll on the impact of winter weather on job and economic growth. View the Archive.

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