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FDIC Federal Register Citations



Lake Elmo Bank


FDIC
FDIC Public Information Center
801 17th Street NW
Room 100
Washington, DC 20434

RE: Reduction of Regulatory Burden

Dear Madams and Sirs:

This letter is in response to the FDIC's request regarding reducing the regulatory requirements for banks.

I recently attended the National Conference of Independent Community Banks of America (ICBA). At this conference the regulatory agencies explained to us that reducing regulatory burden would be more difficult if it means changing law. For this reason, I believe the regulatory agencies need to change their vision for interpretation of these laws. These interpretations should be based on developing an effective and efficient regulatory environment for the banking industry. Some interpretations appear to be developed with the intent of satisfying every individual concern.

I believe very strongly that regulations are needed. I believe consumers' need advocates protecting them in areas where poor decisions are often made (with the "help" of a commission paid professional). Unfortunately, the average consumer, can't or will not take the time to understand the over-abundance of confusing documentation associated with their loan. At the same time, we continually hear stories of predatory lending, disparate treatment, and deception not detected by these regulations.

I believe banks should be the leaders in the lending industry, regulation should affect competitors outside of the banking industry, and regulations should improve consumer understanding of products. My response is not a list of the regulations that I believe need to be changed, but rather, examples of statutory interpretations, or regulatory policy making our systems less efficient:

REG B:

Recent changes in Reg. B commentary now require consumers to indicate whether or not an applicant intends to borrow money jointly or individually. The regulation and commentary refer to "personal financial statements" not showing proof of intent to borrow. Unfortunately, it has been communicated and suggested that "applications" now include a section for the customer to indicate their intent, over and above signing the application as "co-applicant".

It is my understanding that there is no change excepted for the Uniform Residential Loan Application (Fannie Mae 1003), and the FDIC does not agree that this application will be sufficient. If this is the case, we will need to develop a new form.

In many cases, lenders are filling out these applications to help their customers without violating any rules, but deliberate violations would not be detected.

HMDA:

Although there have been some changes, recently, the regulation and its requirements place a lot of burden on banks. I believe it is worthwhile to use banks, and other institutions to collect this information. I believe some basic principles could simplify the process, reducing insignificant compliance exceptions, and no longer confusing lenders.

If we were to collect and report data on all 1-4 family mortgage loans, confusion would be decreased. We spend more time and effort training when to collect, and not collect, HMDA information than we do collecting and reporting.

Instead of requesting Ethnicity, Race, and Sex information sometimes, not all the time, over the phone, having customers fill out the information, allow lending institutions to collect all data on a "best estimate" scenario.

If we reported on all 1-4 family mortgages, our best estimate as to Ethnicity, Race, and Sex information, we would remove confusion and training effort substantially.

RESPA and Req. Z:

The Real Estate Settlement Procedures Act of 1974 was put into law to encourage home ownership and reduce unnecessary costs.

The detail of settlement statements has become confusing to the borrower, reflects disparate treatment to banks vs. brokers, and ongoing changes are only added to existing rules. The proposed legislation for blocking fees may be a step in the right direction, depending on the final result. Consumers would prefer all the fees blocked together and included in the APR. Then the APR would be a true "apples to apples" comparison.

Itemization of fees helps the lending institution show how most of the fees are third party fees. Itemization does not prevent padding of fees, multiple fees for the lender with different names, and outright overcharging. With the introduction of HOEPA and disclosing blocks of fees (lender fees and third party fees), there would be sufficient protection for the consumer. Appendix A to part 3500 is not regulation, but rather detailed instruction.

As for the P.O.C. interpretation, it is one of the most common exceptions in compliance exams because the fees being quoted have nothing to do with the transaction. Consumers do not pay attention to fees not charged or listed in columns, and regulators continue to add what they believe should be listed.

With new predatory lending regulations coming in to effect, please amend old regulations that are becoming outdated.

Thank you for requesting ideas from the bankers. We appreciate that consideration. By easing regulation, bankers will become leaders in the lending arena, while doing what is right for consumers. I may be contacted at (651) 773-4750.

Sincerely,
Daniel D. Raleigh
Vice President

 
Last Updated 05/11/2004 regs@fdic.gov

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