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
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