March 9, 2012

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Georgia Capitol After the Dust Settles: Crossover Day
The state Legislature worked only two days this week, but they were long days, and the second one was Day 30 of the session, also known as Crossover Day, after which any bill that has not been passed by its originating chamber cannot become law this year.

  Tax Reform Still in the Mix for Georgia
Comprehensive tax reform has not been enacted, but the Speaker of the House says some recommendations by a panel set up to study the issue may yet become law.

  State Senate Joins Credit Unions in Celebrating Year of the Co-Op!
A resolution introduced in the state Senate celebrates the International Year of the Co-op and honors cooperative groups worldwide, including credit unions.

  Opportunity to Push for MBLs in Congress
CUNA uses a U.S. Senate Banking Committee hearing on job creation to push for an increase in the cap on member business lending to 27.5 percent of assets, saying it would boost the U.S. economy at no cost to taxpayers.

  Examination Relief Bill Introduced in Senate
U.S. senators from Kansas and West Virginia introduce a bill to provide more balance and transparency in the financial regulatory agencies' examination process. Two Georgia representatives are co-sponsors of a corresponding House bill.

  Battle Between Two Goliaths
Bank of America plans to fight Fannie Mae's demand that the bank repurchase mortgage loans that have soured – loans Fannie Mae says the bank should never have sold it to begin with.

  Opportunity for Credit Unions?
A financial blog suggests that a growing trend toward refinancing of car loans represents an opportunity for credit unions interested in boosting their loan portfolios, a market niche now being served largely by banks.

  Retailers Continue to Fight Interchange Rule
A group of retailers and merchant organizations has filed a motion in federal court, seeking to have interchange-fee regulations mandated by the Dodd-Frank Act declared invalid.

  Administration Unveils FHA Refinance Program
The Obama administration launches a program that will let borrowers with Federal Housing Administration-backed mortgages refinance their loans at lower rates and with lower fees.

  And the Bank Fees Keep Coming...
Bank of America and Wells Fargo renew their push to increase fees on many of their customers, unless those customers keep specified minimum balances in their accounts or meet various other requirements.

Georgia Rep.
Sam Teasley
After the Dust Settles: Crossover Day

The state Legislature was in session this week for day 29 and 30, and while this was only two physical legislative days, the hours equated to that of many regular weeks of the session as these days went well into the evenings. The 30th day, known as “Crossover Day,” is the deadline in which any bill must pass its originating chamber (Senate or House) if it is to successfully become law. Tensions run high, and it is not uncommon for issues that may be innocuous to take on new significance depending upon what happened earlier in the day on other bills. For credit unions, activity of interest this week was not scarce:

  • The Department of Banking and Finance’s Housekeeping Bills by Rep. Sam Teasley (R-Marietta) both passed the House prior the conclusion of Day 30, with HB 945 passing on Monday, March 5th and the companion bill HB 946 on Wednesday, March 7th. While there are no provisions contained in the bills that would impact credit unions, the bills are monitored as they move through the process, and the Government Influence Team continues to field questions from legislators on the bills.
  • The House Industrial Relations Committee met to debate the Unlawful Employer Credit Review Bill HB 780 by Rep. Dar’shun Kendrick (D-Lithonia) on Tuesday, March 6th. This bill was not eligible to be considered for Crossover Day (as it had not made it past the committee process prior). However, if passed, it would have negative implications for credit unions as it would limit how one could use a credit report in hiring practices. The Government Influence Team addressed concerns on the bill with Rep. Kendrick, and she shared that she does intend to pursue this issue again in 2013. However, she is amenable to exempting all financial institutions from the bill when she reintroduces it.
  • The Residential Real Property Rights Bill SB 365 by Sen. Bill Hamrick (R-Carrollton), which is “carried” by Sen. Jesse Stone (R-Waynesboro), has been lobbied heavily by the Government Influence Team and others. Readers of Creating Influence will recall this bill was amended earlier in the session to remove the original language that would require additional disclosures in loan agreements, with the possibility of voiding a mortgage or creating the opportunity for judicial foreclosure. Presently the bill seeks to outline penalties for the unauthorized practice of law, and states that only attorneys may have the ability to close a real estate loan or initiate a foreclosure.

    The Government Influence Team continues to work with Sen. Stone to make it abundantly clear that home equities, HELOCs, refinances where there is no change in the existing deed, and open-ended lending programs would not be inadvertently wrapped up into the legislation. While Sen. Stone has been open to these concerns raised, we are pleased to share that we were instrumental in securing that the bill was assigned to the House Judiciary subcommittee chaired by Rep. Mike Jacobs (R-Atlanta), who has been instrumental in correcting other bills of industry interest. Rep. Jacobs has ensured that the concerns we have expressed are addressed.
  • The Small Business Borrower Protection Act SB 448 by Sen. Don Balfour (R-Snellville) had no official action this week; however, this issue generated much discussion in the halls of the Capitol by legislators and lobbyists alike. This bill is intended to rein in negative practices by some large management companies in the marketplace who are buying up large distressed asset pools of foreclosed properties with the intent of “only going after the debtors,” and not maintaining the properties. Due to concerns raised by the Government Influence Team and others, the bill was amended to exempt financial institutions and any subsidiaries from the bill. However, many legislators are concerned about how the bill modifies contract law, are questioning what it would do to the ease of selling portfolios on the secondary market, and are questioning whether the bill is constitutional in nature. The bill has been assigned to the House Banks and Banking Committee for further consideration; however, no meeting is scheduled as of press time.
  • WeldonOne bill that did not receive action, but had closure (or for the state Legislature, as close to closure as one can get prior to day 40) was The Debt and Creditor Adjustment Bill HB 901 by Rep. Tom Weldon (R-Ringgold)(right). This bill seeks to alter how debt adjustment companies operate in Georgia, and would impact consumers negatively if passed. This bill was rumored to be one that would be attached to already-moving legislation. However, Rep. Weldon shared with the Government Influence Team that he is not pursuing the bill.

  • JacobsLast but not least is the Foreclosed Property Registry Bill HB 110 by Rep. Mike Jacobs (R-Atlanta)(right). This bill is one step closer to passing as it was selected in Senate Rules on Wednesday, March 7th and will be on the agenda for the full Senate for a vote on Monday, March 12th. This bill seeks to set uniform standards on how cities and counties could design foreclosure and/or vacant property registries, and retains an exemption for financial institutions as owners of a property through foreclosure from registering (and paying fees) , provided they file the deed within 60 days with required contact information sent to the city and/or county.

    However, it will not be an easy process as the balance of the bill between the multiple interests is quite delicate. Adding another layer of difficulty to this are efforts by other industries: lobbyists for the realtors are seeking amendments, lobbyists for the cities and counties are all but guaranteed to fight those amendments. Making the situation more difficult is the inside politics of the Legislature itself, as several key leadership individuals have shared that the bill must pass unchanged. If the bill is amended in the Senate, even if it passes its ability to move forward in the process to become law will be in jeopardy. The Government Influence Team continues work to move this issue forward safely; stay tuned!

There are 10 days remaining in the state legislative session, and ANYTHING can happen in the remaining time. To see the status of all the bills that are being monitored on behalf of credit unions please access the Georgia credit union legislative tracking site. And don’t forget you can follow key activity as it happens via Twitter @GCUAGov – follow us on Twitter if you haven’t already.

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Speaker of the House David Ralston
Tax Reform Still in the Mix for Georgia

In a March 1st article in the Atlanta Business Chronicle the status of Georgia’s tax reform plans for 2012 was highlighted as a subject that is still being considered by the Georgia General Assembly. Speaker of the House David Ralston (R-Blue Ridge) is still quite focused on what has been a multi-year project. What has been completed thus far on tax reform:

  • In 2010, Ralston helped establish a Tax Reform council of business leaders and economists to look at how Georgia “could become the most competitive state in the nation in terms of jobs.”
  • The council traveled the state in 2010 to collect public input to shape their proposal, and
  • The council presented a set of recommendations that were presented to the state legislature for the 2011 session – which did not pass that year, but is still in play for 2012.

Although the tax reform recommendations did not advance last year, Ralston said that progress was being made on several of the recommendations. Most notably, he said there was an emerging consensus to repeal the sales tax on energy for manufacturing — a tax that hurts Georgia’s ability to compete with other states. Ralson points to the recent Caterpillar plant opening in Athens as a glimmer of what the future could hold if the tax on energy was repealed.

On whether other portions of the tax reform package would ever be passed, Ralston shared that leadership takes patience and persistence. “I hope that whatever we get done this year in tax reform — that it’s not the end of reform,” Ralston said. “I’d like to push very hard in getting the individual (tax) rates down. I don’t expect that now.” But he added that he believes “those will be on the table in a very serious way” in future years. To read more please click here.

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State Senate Joins Credit Unions in Celebrating Year of the Co-Op!

IYC logoMajority Leader Senator Chip Rogers (R-Woodstock) introduced a resolution (SR 1102) celebrating the International Year of the Co-Op with Georgia credit unions. Our thanks to Sen. Rogers for honoring credit unions and co-operatives with the resolution; Sen. Rogers understands the value of co-operatives firsthand as he has been a credit union member since youth.

This resolution honors cooperative groups worldwide, including credit unions, and commemorates the impact that cooperatives make on millions of people. The International Year of Cooperatives (IYC) celebration is designed to bring light to the efforts of cooperatives representing practically every business sector, including agriculture, banking and credit, consumers, fisheries, health, housing, insurance, industry and services, tourism, utilities and social cooperatives.

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Capitol dome interiorOpportunity to Push for MBLs in Congress

The U.S. Senate Banking Committee discussed initiatives that could create job growth during a hearing on March 6th, at which CUNA utilized the opportunity to urge Congress to increase the member business lending cap from 12.25% to 27.5% of assets as a good, immediate way to spur the economy and create new jobs – all at no cost to the U.S. taxpayer.

Increasing the MBL cap to 27.5% of total assets could inject $13 billion of credit for small businesses into the economy in the first year after enactment, and help small businesses create 140,000 new jobs, CUNA has estimated. Separate bills in the U.S. House and Senate that would increase the MBL cap have bipartisan support. The Senate version of MBL cap increase legislation (S. 509) had 22 cosponsors and the House version (H.R. 1418) has 122 cosponsors, including four from Georgia. The Georgia cosponsors are Reps. Sanford Bishop (D-2), Hank Johnson (D-4), John Lewis (D-5) and Rob Woodall (R-7).

The Senate will remain in session next week, but the House will be on recess until March 19th.

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PaperworkExamination Relief Bill Introduced in Senate

On March 6th, Senate Banking Committee member Jerry Moran (R-Kan.) and Sen. Joe Minchin (D-W.Va.) introduced the Financial Institutions Examination Fairness and Reform Act (S. 2160), that would provide critical balance and additional transparency to decisions the regulatory agencies make in the examination process.

S. 2160 -- like its counterpart in the House (H.R. 3461) -- would, among other things, require more timely examination reports; more information about the facts the agency relied upon to make its exam decisions; and more precise, consistent and understandable classification standards for commercial loans. Georgia co-sponsors of this issue are Rep. David Scott (D-13) and Rep. Lynn Westmoreland (R-3).

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Battle Between Two Goliaths

The February 29th edition of The Wall Street Journal reported on Bank of America’s fight with Fannie Mae, as Bank of America recently signaled it was going to fight Fannie Mae’s demands that it should repurchase mortgage loans that have soured. Bank of America said that it is no longer selling new mortgages to Fannie. In response, Fannie is saying that Bank of America’s objections could lead it to seek more taxpayer funds.

BattleFannie Mae, which buys and guarantees mortgages from originators and then securitizes them into bonds for investors, has found itself “on the hook” for billions in mortgages that defaulted, including many that were originated by Countrywide before Bank of America acquired the home-lender. Fannie claims that many of these defaulting loans should never have been sold to the government agency, which has strict rules on what it can buy. It says the loans are defaulting primarily because of bad underwriting standards.

Bank of America says it will repurchase loans that legitimately should not have been sold to Fannie, and reached a $1.3 billion pact with Fannie last January to settle many of the claims. But Bank of America says Fannie has started demanding repurchases on loans that have no underwriting issues. The bank argues, for instance, that many of the loans are in default because of rising unemployment, not because of underwriting standards.

How will this impact credit unions? Fannie said if Bank of America stops repurchasing loans the way Fannie expects, it will essentially lose a key source of revenue which can impact the ability of others to sell their loans at a reasonable rate. Adding to the issue is the point that Bank of America represented more than half of Fannie’s outstanding requests for loans to be repurchased. Stay tuned.

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Light bulbOpportunity for Credit Unions?

A Wall Street Journal SmartMoney blog on March 1st homed in on a topic that may be an ideal opportunity for credit unions seeking a boost in their loan portfolios: refinancing car loans. The article cited that a number of borrowers are reworking the terms of their car loans:

  • Consumer applications to refinance car loans increased nearly 30% in January, to roughly 2,500, compared to a year ago, according to’s latest data.
  • The growth in refinancing is outpacing loan applications to purchase cars, which rose 10% in January and 15% in the fourth quarter.

Much of this refinancing demand is being filled by banks, according to the article. And, the data shows that car sales continue to rise: Chrysler reported a 40% increase in U.S. car sales for February, while Ford’s rose 14% and General Motors’ sales went up by about 1%.

For existing car owners, refinancing is becoming more appealing, says Alec Gutierrez, senior market analyst at Kelley Blue Book. Car-loan interest rates continue to drop, and by refinancing borrowers can lower their rate and in turn their monthly payment. The average refinancing rate offered to borrowers is about 6.1%, down from 7.2% last year, according to And refinancing isn’t just an opportunity to get a lower rate for regular borrowers; it is also an opportunity for borrowers whose credit might have improved over the past few years to get a lower rate.

How can refis impact regular auto lending? The article shared that if car refis continue to rise they could stymie future car sales growth, and that consumers who refinance their car loan will likely hold onto that vehicle for at least the next two to three years. This would lessen the number of people in the market for a new car. To read more, please click here.

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Retailers Continue to Fight Interchange Rule

CardA group of retailer and merchant organizations have filed a motion for summary judgment in a Washington, D.C., federal court against the Federal Reserve Board's interchange transaction fee regulation and network non-exclusivity regulation mandated by the Dodd-Frank Act. NACS, National Retail Federation, Food Marketing Institute, Miller Oil Co. Inc., Boscov's Department Store LLC, and the National Restaurant Association – a group of merchants and trade associations that represent them – filed the motion on March 2nd in the U.S. District Court for the District of Columbia, seeking a summary judgment declaring the interchange rule and a network non-exclusivity regulation invalid. The motion for summary judgment claims the rules exceed the authority granted to the Fed by Congress, and that the final rule is "arbitrary, capricious, an abuse of process and otherwise not in accordance with the law in violation of the Administrative Procedure Act."
The merchants' motion for summary judgment argues that the statute directs the [Federal Reserve] Board to adopt regulations limiting interchange transaction fees, and the specific amendment required "that debit card interchange fees be reasonable and proportional to the cost incurred by the issuing bank (the 'issuer') with respect to the debit card transaction. The merchants claim that after the Fed received significant pushback from the banking community in the comment process, the board reversed course and adopted a final rule that greatly expanded the costs allowed in the interchange fee standard" and "invented a third category of costs over which it claimed unbridled discretion to consider in its standard," the document alleged. The rule "doubled or even tripled the interchange fees allowable," which resulted in "shifting billions of dollars in additional costs from the issuing banks to merchants that accept debit cards."

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Percent signAdministration Unveils FHA Refinance Program

On March 6th, President Obama’s administration unveiled a program that will allow borrowers with Federal Housing Administration-backed mortgages to refinance their loans at a lower cost. The new program, which doesn’t require congressional or regulatory approval, is open to borrowers who are current on FHA-backed mortgages funded before June 1, 2009. Administration officials estimate that 3.4 million people with such mortgages are paying an interest rate of more than 5 percent. Under the program, the FHA upfront mortgage insurance premium will be reduced from the current 1 percent to .01 percent for the refinancing of loans originated before the June 1, 2009, cutoff date. The program also will cut the annual fee for such refinancing in half, to .55 percent of the loan balance.

Lenders who originate the refinanced loans won’t have to be concerned about how they affect their FHA performance, administration officials said. That’s because the FHA won’t count such loans toward the lender’s “compare ratio,” which judges a lender’s performance against other agency lenders. Some lenders have avoided refinancing FHA borrowers because they tend to be from years with high default rates, housing analysts said.

Meanwhile, the administration also outlined steps to provide relief to military personnel and veterans by compensating families who were wrongfully foreclosed upon, were incorrectly charged higher interest rates, or forced to sell their homes at a loss. Any relief would be in addition to the $25 billion promised under the settlement deal reached between the five largest servicers and 49 state attorneys general. Housing and Urban Development Secretary Shaun Donovan said he expects a final settlement document to be filed within the next few days. Read more on this issue.

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FeesAnd the Bank Fees Keep Coming...

Recently both Wells Fargo and Bank of America seem to think that consumers are just fine with increasing fees on their accounts. Bank of America is reportedly working on sweeping changes that would require many customers of basic checking accounts to pay a monthly fee unless they agree to bank online, buy more products or maintain certain balances. The plan by the nation's second-largest bank by assets is the latest sign of stresses in the banking industry at a time of low interest rates, slow economic growth and new rules limiting many types of service charges. To read more about the Bank of America plan click here.

And if that isn’t enough to get Dick Durbin mad with Bank of America’s new fee plan, Wells Fargo seems to have its own plan to expand fees. On March 7th, CNN Money reported that Wells Fargo was about to add customers in six more states to the list of those who are charged a monthly fee. On March 7th, WSB TV in Atlanta ran a story about the new bank fees, and included the credit union perspective. Click here to see the story.

In 2010, Wells Fargo stopped offering free checking accounts to new customer, but allowed existing customers to hold onto their free accounts. However, in 2011 Wells Fargo transitioned a group of existing customers – mainly in Western states – to the same $7-a-month accounts that it provides new customers. And now existing customers in six more states are about to be hit with the fee. The $7 monthly service fee will be assessed on the bank's Essential Checking account. Caveats include that customers have the ability to waive the fee if they maintain a $1,500 minimum daily balance or make direct deposits in excess of $500 each month. They can also get a $2 discount on the fee by opting to only receive online statements. Read more about the Wells Fargo fee.

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