A reader recently emailed that she was surprised by how brazenly Elizabeth Warren speaks out of both sides of her mouth. The specific event that caused her incredulity was Warren's initial public support of regulatory relief for community banks and her subsequent assertion that community banks didn't need regulatory relief because they were doing just fine financially. After telling her that speaking out of two sides of a mouth is a gift commonly demonstrated by those born with a forked tongue, I pointed out that Ms. Warren's been stretching the boundaries between lies and damned lies for, literally, years.
Back in 2008, she went on the warpath (this was in the days before anyone called her questionable claim of Native American ancestry) over what she claimed on her blog (yes, Liz was a blogger) was a proposal by national banks to claim preemption from all state foreclosure laws. The fact that those banks were claiming preemption only over extended foreclosure moratorium and similar laws, not the general binding nature of each state's foreclosure process law requirements, didn't enter her discussion. Instead, she made this spurious allegation as to the position of the banks:
State laws are pre-empted whenever a national bank holds the mortgage, so the states can't make them follow the local rules. Pre-emption has been used successfully by the credit card companies to fight off state regulation, so now the banks want to escape local restrictions on foreclosure as well.
That was not the position of the banks regarding foreclosure laws at the time. It was also not the position on national bank preemption of either the OCC (which issued preemption regulations and opinions) or of the federal courts. In fact, the then-applicable OCC regulation specifically stated that state debt-collection and foreclosure laws were not preempted. Warren's characterization that the banks were arguing that they were preempted from all state foreclosure laws and, therefore, could, apparently, seize homes at will, was false. Of course, as a practical matter, some national banks did, in fact, seize homes without due process (even those on which they did not hold a mortgage), and even the owner's pet parrots, but that was through incompetence, not intent.
While intellectual dishonesty has served her, and will continue to serve her, well as a US Senator, Ms. Warren's ability to let no fact stand in the way of a populist narrative should come as no surprise to anyone who's been paying attention to her public pronouncements for any length of time. I mean last year, she blamed the 2008 financial meltdown on Ronald Regan. Next up: ISIS was created by Billy Graham.
I guess Jamie Dimon just got tired of taking shots from people he considers to be, intellectually speaking, a few fries short of a Happy Meal. While sometimes criticized for being an apple polisher for the left, he recently made it clear to an audience in Columbus, Ohio, that he's an equal opportunity "disparager" of politicians from both sides of the aisle.
He earned applause for comments on the importance of improving urban public schools, and the political ineptitude in Washington, D.C., hammering policy-makers on several occasions for "reams of bad policy."
"I don't blame Republicans or Democrats," he said. "I blame them all."
I guess Jamie's still bent about being kicked around in a House hearing a few years ago. He's usually treated with kid gloves by most pols, so it's understandable that he was shocked when someone actually threw a high hard one at his head in public. Still, his blame game has a lot of players.
He also had blunt advice about building a strong company.
"Fire the a--holes," he said to laughs. "They will destroy your companies."
OK, so if you fired all the a--holes in Congress, you'd have a barren wasteland. Come to think of it, that sounds pretty much like what we have with all the a--holes still in place. I guess that also applies to most big banks, as well, though, doesn't it?
A--holes: We're what made America great.
While Dimon's remarks didn't come as a shock, recent remarks by another character who made her bones during the last banking meltdown did stun this observer, because they actually made sense (paid subscription required).
[Sheila Bair] [t]he former chairman of the Federal Deposit Insurance Corp. is calling for a legislative solution she argues could significantly diminish regulatory burden on community banks: giving regulators the power to exempt institutions with less than $10 billion of assets from existing and new regulations.
Community bankers are lobbying for specific exemptions from specific provisions of law. Bair thinks that approach is too narrow.
Bair said bankers should push for a broader solution, one that could fix many of those problems and future ones that arise. She said too often regulators feel like they have to start applying regulations geared for larger institutions to smaller ones.
"There is this fear that if you don't do something you are going to look weak if you aren't dealing with the small banks the same way as big banks," she said.
But if Congress provided an explicit directive to regulators to consider granting small banks an exemption from rules they implement, that trend could begin to turn around. It would allow regulators to craft streamlined rules for small banks, effectively giving a stamp of approval to a two-tiered regulatory system, a concept that many lawmakers already endorse.
"This might inform more of a two-tiered approach," Bair said. "It's clean, simple, easy to write… I don't know why anyone would object to it."
It would also empower regulators to act rather than having them return to Congress asking for an exemption. That is currently the case with the Volcker Rule, a Dodd-Frank provision that places limits on bank investment in private equity and hedge funds. Fed officials have asked Congress to exempt small banks from the rule.
As Bair also points out, her suggested approach seems to take the subject of community bank regulatory relief out of bitter partisan arguments over "rolling back" the "reforms" of Franken-Dodd. Even Princess Fauxcahontas might support such an approach, especially if she's on her meds when it comes up for a vote.
Critics raise legitimate concerns, including whether $10 billion is too low a threshold, and whether exempting broad swaths of regulations from such legislative coverage could gut the effectiveness of the "relief" intended to be granted to smaller institutions. Other commentators raised my major concern: regulatory discretion means that regulators can decide not to act or to act ineffectively. They could also use their discretion to act in ways that promote something other than what objective observers would consider a proper goal (such as punishing gun dealers, online dating services, porn stars, payday lenders, or that annoying guy in the back of the bus who won't give up his seat to an obviously expectant mother).
Even with those concerns, her proposal is worth considering. Since, in the past, we've dumped on her like a DFW public works dump-truck with a load of sand-and-salt barreling down an icy freeway in February when she acts in ways we think may be "unwise" (Can you say "industrial bank moratorium"? I knew that you could!), we'll give her her props when she casts a pearl before this swine.
First up is an email I received from a gentleman who referred to himself as the Director of Public Relations for Citi. Without hurling a single epithet, he informed me that the dispute with a lawyer/house renovator whose home was broken into by contractors for CitiMortage was "resolved" on December 10, 2014. He did not indicate what that "resolution" might have entailed, but we assume, based upon the nature of the dispute ("Show Me The Money!"), it involved coin of the realm passing from Citi and/or its contractor to the homeowner/attorney. While Toni Braxton may yearn for her heart to be unbroken, we aren't aware of any way in which you can unbreak into a house.
Another recent blog post on a scholarly article written by University of Alabama Law Professor Julie Anderson Hill on the legal cunundrum for banks trying to bank state legal - federal illegal marijuana-related businesses in Colorado, I received an email from Professor Hill. She corrected me on the nature of the "Mary Jane" credit union formed in Colorado, Fourth Corner Credit Union. I thought that it was the first special purpose "Cannabis Cooperative" authorized under Colorado law. Instead, Fourth Corner is a state chartered credit union. Because of quirk's in Colorado law, it may open its doors prior to receiving deposit insurance from the NCUA (a processes that could take years), although its still needs approval by the Federal Reserve System of a master account. The organizers think that this approval process by the Fed is a sure thing, but neither Professor Hill or I are as confident. On the other hand, it's not that there is any precedent on which to base an opinion, so we're just going to have to wait and see. The organizers had, according to press reports, hoped to be up and running by January 1, 2015, but that hasn't occurred. Stay tuned.
Finally, a financial institution trade official asked if I thought that Maxine Waters had personally drafted the press release that contained the following words, allegedly spoken by her:
“The disparate impact standard is absolutely essential to providing for fair housing throughout our nation. I sincerely hope that the Supreme Court will make the right decision in this case by affirming that the Fair Housing Act unequivocally prohibits actions that have the effect of disproportionately denying housing to marginalized communities,” Waters said Friday.
“Failure to do so would be contrary to congressional intent; it would overturn decades of major progress in fair housing; and would be particularly devastating for minority individuals and communities,” she added.
Waters said unchecked discriminatory housing practices, such as subprime lending to minority communities, in the time leading up to the mortgage crisis continue to prevent working class families from joining the middle class.
“The disparate impact standard under the Fair Housing Act has been effectively used for decades to weed out practices that create barriers to housing for people on the basis of factors like race, color, religion and gender,” she said.
Given her previous problems in the socialization/nationalize arena, we are both doubtful that Rep. Waters wasn't acting as a mere sock puppet for the guiding hand of a professional PR hack. Then again, we could be wrong. Either way, we're rooting for the visiting team in the disparate impact game being played before the SCOTUS.
Surprisingly, there were no anonymous emails threatening my life or worse, regulatory retaliation. Perhaps with the spring thaw, the wombats and trolls will again be out in force.
While there is plenty of blog-fodder to bleat about, including the latest overreach by The Adjustment Bureau, whose rationale for exercising control over American businesses has broad implications for industries well beyond banking, I've decided to take off the next two weeks.
March 1, 2015 will mark eleven years of offending various attorneys, bankers, bureaucrats, cockroaches, 1/32 Native American wannabes and the bank-haters who love them, and other assorted fruits and (wing)nuts, both foreign and dometic. That's a long run of non-stop snark for someone who, notwithstanding the occasional angry email accusation, actually practices law for a living. Also, I have a nephew who's a New York City police detective, and this weekend's assassination of two NYPD police officers and the public response to it from both sides of the political spectrum makes me want to take a break during the season of Advent (and Chanukah), to decompress and reassess, and to refocus on what is actually important in life.
In the spirit of Christmas, here's a story about another heartless bank in the heartland and the unsuspecting public that it abuses.
Have a wonderful holiday season.
Being hooked up with a Colorado-based firm, I've given a lot of thought (and blog space) to the intersection of law (particularly banking law) and marijuana. As a result of these deep thoughts I'd like to say...uh...ummm..yeah...
It turns out I'm not the only one hanging out at corner of Bank and Bong Streets. So has professor Sam Kamin of my former place of abasement, The University of Denver's Sturm College of Law. According to a recent article by the editor of the The Denver Post's "The Cannabist" column, Professor Kamin will teach a course entitled "Representing the Marijuana Client." The description of the course does not describe whether the emphasis will be on representing clients who are under the influence of marijuana, are engaged in the state-lawful, federal-unlawful marijuana-related business, or are, themselves, marijuana. Taken literally, a "marijuana client" could be a joint, a roach, an edible, or merely a pipe bowl of stems and seeds.
Among the topics addressed in the course description will be "banking," and we assume that does not refer to a type of turn performed by an airplane, but, rather, the legal issues surrounding a commercial bank providing services to a marijuana-related business. As we recently pointed out, that aspect of the course can summed up rather quickly: it's illegal under federal law.
See, we saved potential students some time and money. We here at bank lawyers blog are all about mentoring.
On the other hand, as Kamin rightly points out, the issues involved are many and complex.
When I was on the Amendment 64 task force and just thinking about an edible — what can be in it, who’s determining what’s in it, what the dosage is, how you indicate the dosage, how you make sure it’s safely packaged, how it can be advertised,” he said. “Every small piece of it has so many regulatory issues, so if you’re working in that area, running a MIP (marijuana-infused product manufacturer) or something, the state, local, federal regulations of that are mind-boggling.”
As they are if you're trying to bank one of those businesses.
We wish Professor Kamin and his students well, because, this is an issue that is not going to simply disappear in a cloud of smoke. Moreover, it's not an issue confined to Colorado, but one that affects a growing number of states. Therefore, Kamin's closing statement is very cogent.
“It’s an expertise our students will have and others won’t,” he said. “There’s a lot of demand for this — and we’re trying to position our students well to fit in there.”
Yes, when it comes to marijuana, there has always been a lot of demand. As long as the students who take the course do not (even casually) partake of the subject matter, they might actually be able to render some useful advice to those in need of it.
When credit union consultant Marvin Umholtz gets worked up, it makes my blogging life a breeze. All I have to do is cut and paste. While a number of bankers would rather drink Drano rather than follow a newsletter dedicated to credit unions, I assure all of you bankers who bleed red rather than blue that you will love Marvin, especially when he goes after one of this blog's bête noire, the Adjustment Bureau, as he did in his latest email newsletter:
This correspondent knew that the self-righteous and meddlesome Consumer Financial Protection Bureau’s (CFPB) www.consumerfinance.gov zealous crusaders had targeted overdraft protection programs for the agency’s peculiar brand of “reforms,” yet the arrival of that CFPB intervention still came in a surprising way. In an 870-page proposed rule http://files.consumerfinance.gov/f/201411_cfpb_regulations_prepaid-nprm.pdf ostensibly regulating prepaid products, the CFPB reclassified overdraft services as an extension of credit and overdraft fees as the cost of credit. The agency has set its precedent in this prepaid products rule for all future treatment of overdraft services. If the CFPB extends the credit definition to all overdraft services in every circumstance as it is expected to do based on this prepaid products proposal, then it will effectively ban overdraft services – period. As a result of the loss of overdraft services many credit unions’ fee income would drop precipitously. The only conclusion that a rational person could come to would be that the CFPB has become the biggest threat to safety and soundness that credit unions now face. And since this proposed prepaid products rule also covers mobile and other electronic prepaid accounts, PayPal, Google Wallet, and scores of other innovators should also watch their backs. The CFPB’s proposed prepaid accounts rule was loaded with intended and unintended consequences.
The CFPB’s proposed rule amends Regulations Z and E to regulate prepaid cards, codes, or other devices capable of being loaded with funds and usable at unaffiliated merchants or for person-to-person transfers, and that are not gift cards, with overdraft services or credit features. The agency’s action effectively bans overdraft services use with prepaid cards since the CFPB proposal also requires the prepaid card provider determine the customer’s “ability to repay” prior to linking overdraft services to the product. With the added underwriting costs, the overdraft services would likely be uneconomical to the provider. The ramifications from the CFPB reclassifying overdraft services as credit would be widespread. For example, the Department of Defense’s proposed Military Lending Act rule that imposes a 36% federal usury limit on loans to military service members and their families for all consumer loans (other than those secured by real estate or a vehicle) is still pending. Should it be finalized as is expected, it would make the overdraft fee on all CFPB re-defined credit extensions via overdraft coverage have excessive and illegal annual percentage rates (APRs) due to the hefty fee charged for the overdraft. Operationally a credit union could not then allow any service member or member of their family to have overdraft services on their deposit accounts. Such a distorted approach to the marketplace would be problematic at best. It would certainly be inefficient; and it could generate ill will. It might also generate class action lawsuits. And that is just one illustration of the potential fallout from the CFPB’s reclassification of all overdraft services as credit extensions.
According to the CFPB, “Among other things, prepaid cards that access overdraft services or credit features for a fee would generally be credit cards subject to Regulation Z and its credit card rules. Moreover, the proposal would require that consumers consent to overdraft services or credit features and give them at least 21 days to repay the debt incurred in connection with using such services or features. Further, Regulation E would be amended to include disclosures about overdraft services or credit features that could be linked to prepaid accounts. The compulsory use provision under Regulation E would also be amended so that prepaid account issuers would be prohibited from requiring consumers to set up preauthorized electronic fund transfers to repay credit extended through an overdraft service or credit feature.” The CFPB’s lengthy rule included 89 pages of summary and background before it even began to discuss the proposal on a section-by-section basis. The legal language of the rule followed that analysis. Once the rule is published in the Federal Register, there would be a 90-day comment period.
The agency announced the proposed prepaid products rule in a November 13th press release www.consumerfinance.gov/newsroom/cfpb-proposes-strong-federal-protections-for-prepaid-products and in conjunction held a prepaid accounts field hearing in Wilmington, Delaware. The field hearing included opening remarks by CFPB Director Richard Cordray www.consumerfinance.gov/newsroom/prepared-remarks-of-cfpb-director-richard-cordray-at-the-prepaid-products-field-hearing and a panel presentation featuring prepaid products industry representatives and consumer activists. In his remarks Director Cordray once again made it abundantly clear that the CFPB’s intent was to socially re-engineer the financial services marketplace to meet a decidedly left-leaning partisan agenda. At the close of his speech he said, “Just because consumers may not be able to afford or qualify for a bank account, or just because they do not want to be part of the brick-and-mortar banking system, this does not mean they deserve to be treated as second-class citizens. Like anyone else, they deserve to have a safe place to store their money and a practical means of carrying out financial transactions. And though many prepaid companies already have opted to offer some of these basic, common-sense protections, it is important to ensure that they are not simply optional but instead are cemented as the standard for the industry and enshrined in law.” Apparently, the CFPB knows what is best for all. It seems like the agency routinely uses the “protecting the most vulnerable” as the excuse for big government intervention and the imposition of innovation-crushing regulations.
Every time the in loco parentis CFPB acts purportedly in this correspondent’s best interests it seems more like the agency is trampling on his individual liberties. As a colleague once speculated during a conversation with this correspondent, the next thing the CFPB is likely to do is a full takeover of checking accounts. It’s only a matter of time. The CFPB will tell financial services providers what services people can have, how much service they can have, what they will pay for the service, and when the financial service provider is permitted to stop providing the service. There was also some discussion about the timing of the controversial “overdraft as credit aspect” of this prepaid products rule coming after the midterms rather than before. Was it deliberate or just a coincidence? There certainly were a lot of Democratic members of the House and Senate running for re-election November 4th who had sponsored legislation that restricted overdraft programs that were probably drafted by the consumer activists. These members of Congress, at least those who were re-elected, and the activists now have the CFPB to do their dirty work.
If you'd like to subscribe to the newsletter, email Marvin at firstname.lastname@example.org. Tell him the Texas curmudgeon referred you. I mean, you simply have to love a guy who uses "in loco parentis" when referring to the Death Star.
CFPB Delenda Est!
A federal judge forced the Consumer Financial Protection Bureau to obey the same rules of discovery in civil litigation that apply to everybody else even if government officials are annoyed by them.
Judge John E. McDermott rejected a motion by CFPB. As a result, the bureau's officials were required to submit to depositions — cross-examinations of witnesses conducted under oath but outside the courtroom — in a case filed by the bureau.
The Adjustment Bureau had sued, in federal district court, a document storage firm that holds attorney-client privileged information for bankruptcy lawyers. The defendant wanted to conduct normal discovery procedures, including depositions of CFPB officials. The CFPB balked, as did the OCC in a case discussed on this blog several years ago (a discussion that brought this blogger anonymous threats of regulatory retaliation). In this case, the judge was no more sympathetic to the government's fear of the spotlight than was the judge who ruled against the OCC.
But CFPB balked, telling the court that the bureau has an inherent right to “nondisclosure” and that “even the disclosure of purely factual material may be protected by deliberative process privilege.”
The CFPB added that “requiring the bureau to designate any individual to appear at deposition would only serve to annoy, oppress, and cause undue burden on the bureau.”
McDermott's Sept. 15, 2014, order forced CFPB to provide a witness for an October deposition. Samuel Gilford, a CFPB spokesman, told the Washington Examiner that the Morgan Drexen case was the only time a bureau official has submitted to a deposition.
As the reporter notes, that's likely because the CFPB usually pursues defendants through administrative enforcement actions and extracts settlements from them prior to things getting nasty. In only a relatively few cases has the CFPB filed civil litigation. Apparently, the crack trial attorneys at the bureau weren't aware that the federal rules of discovery apply to the oppressor as well as the oppressed. A level playing field is apparently a novel concept to them.
This is somewhat surprising because it's not a novel concept.
“I do not think that there is legal support for the conclusion that there is a blanket prohibition on taking depositions of federal agency employees,” said Jonice Gray Tucker, a partner with BuckleySandler LLP, a Chicago-based law firm that provides legal counsel to financial service companies.
James Copland, director of the Center for Legal Policy at the Manhattan Institute in New York, said all plaintiffs, including federal agencies, should be treated identically. “I don’t think that civil enforcement action should be treated any differently due to a federal agency,” he said.
Moreover, it's not as if legal commentators hadn't been telling the CFPB that it had to comply with federal rules of discovery.
A March 14, 2013, securities enforcement and litigation update published by the WilmerHale law firm in Boston also said that once an agency goes into court, it must abide by federal discovery rules, including submitting to depositions.
The ability of both sides to depose each other, WilmerHale argued, levels the playing field. “Several recent court decisions strongly suggest that the playing field levels once the agency ends up in litigation,” the law firm wrote.
WilmerHale cited five cases since 2012 that affirmed federal agency officials aren't exempted from depositions.
Among the five was a 2012 case involving another federal agency, the U.S. Securities & Exchange Commission, titled SEC v. Merkin. Of that case, the WilmerHale update said “the court determined that 'like any party litigating in federal court, Merkin has the right to take a ... deposition from the SEC.'”
So, what gives? Why did the CFPB try to pull something that seems over-the-top, even for an agency that pushes the envelope of unaccountability? According to Ms. Tucker, it may be a case of "inexperience."
Tucker suggested that CFPB’s aggressiveness may be a result of having “more junior staff attorneys [who] may be less experienced. In addition, some staffers are relative newcomers to consumer financial services issues.”
In addition, she said, “this can present challenges because, in making day-to-day decisions, some of the enforcement staff may not yet fully understand the businesses they are regulating or how much effort goes into responding to their requests.”
That can “result in situations where the staff take positions that are not completely reasonable, or take actions that are perceived as more aggressive than they may have intended,” she said.
Oh, I think the positions taken were just as aggressive as they were intended. When you truly believe that you're doing God's work, it's always a shock when the heathens don't see things your way. In addition, many of the regulators apparently believe that if the public understands that the way in which they "reason" their way to a decision to screw with a member of the regulated is just as dysfunctional as they sausage-making manner in which Congress makes legislation, they might decide to take up arms and burn the house down. Or worse, adversely affect their government pensions.
Then again, Ms. Tucker's speculation regarding inexperience is consistent with the fact that the Adjustment Bureau's lawyers have also found it very valuable to take basic bank regulatory courses in order to learn what experienced bank lawyers learned decades ago. Perhaps basic courses in civil procedure should be added to the curriculum, along with a few lectures on the principles of due process. It couldn't hurt.
Here's another guest post from my friend, former community banker Pat Dalrymple, that, while not technically about bank law, is definitely about banks. Plus, I'm on the road, so Pat is taking a load off.
The demise of community banking has been predicted for the last five years or so. Despite certain significant advantages enjoyed by this group, primarily their market position, and advertising muscle, the prophecy is become more likely, especially for the smallest institutions struggling for profitability.
The challenge to many $200 million asset and under banks is, quite simply, putting on acceptable loan assets: the post meltdown regulatory environment precludes many loans that made up much of the portfolios of small community banks.
Profits are anemic, or non-existent, in a plethora of institutions across the country, compelling management and directors to reassess the very viability of the traditional banking business model.
Many industry practitioners, particularly i small market operations, have lost sight of what banking really is, simply stated: making a profit on the movement of money. It matters not whether it’s Chase or the 2nd National Bank of River City, or how the money moves or, indeed, who moves it. The business of banking is raking in revenue as the commodity circulates.
Unfortunately, a lot of community banks, especially the smaller ones, aren’t doing this well at all. Business customers, turned down for loans, are flocking to so-called “Shadow Lenders”, non-bank
Corporations that are rapidly stepping in where banks fear to tread, often as a result of regulatory mandates. Many commercial customers can qualify for SBA financing, but too few small banks facilitate these programs.
Senior depositors make up a disproportionately larger share of community bank customers, as compared to the big league institutions, but small depositories are doing nothing at all in the area of reverse mortgages.
And then there’s the most egregious failing of all: few banks under, say, $100 million are making residential mortgages available in their markets. On all of these activities, banks aren’t earning a nickel, when nickels are sorely needed, what with loan to deposit ratios at 50 or 60%. But somebody is counting up those nickels, and it comes to lots of nickels.
What should they do? Here are some thoughts:
This is a category that sees the majority of rejections at insured financial institutions. Many would have qualified pre-recession, some would not have. All are bank customers, in one way or another, most are viable borrowers for some capital source, somewhere, and all represent an opportunity for revenue.
Large non-institutional lenders, those specializing in loans for operating capital, lines of credit, and financing for short term emergencies, to name just a few, pay well for referrals. If a bank can’t make a requested loan, the customer is shown the door, and ends up at a shadow bank anyway, often paying an additional fee to a loan broker. Why not guide this borrower, preserve the customer relationship, and get paid for it at the same time?
Too few small banks use this resource. It’s another ignored profit center. If a bank doesn’t want to put any portion of the deal into portfolio, there are plenty of capital sources that will take the loans off its hands. And, if the bank doesn’t want the processing hassle, then there are SBA lenders that pay for a simple referral.
Reverse mortgages are one of those product categories that community banks haven’t even thought about. This is a bit odd, considering that there are a lot of senior customers at small banks. There’s a pervasive lack of knowledge and a body of misconceptions about this lending product, with banks probably being even more ignorant than their customers.
The HECM concept can be an exceptional program for certain senior borrowers, and bankers need to know more about it. Reverse mortgage wholesale lenders have partnership models that can take all of the risk, compliance and otherwise, out of originating these loans, and most of the work. A robust reverse mortgage origination campaign could be mounted by a bank with virtually no additional expense except that for marketing.
RESIDENTIAL MORTGAGE LENDING:
The refusal to ramp up mortgage lending is a glaring abdication of community responsibility by small banks, and an incomprehensible rejection of a profit opportunity.
Every community bank should be the pre-eminent mortgage originator in its market, but virtually none are. Rather, small institution customers get their home loans through mortgage brokers, correspondent mortgage companies, and the mortgage divisions of larger banks.
Banks can profitably originate mortgages with almost no risk if they use the large wholesale lenders that are eager to sign banks up as production partners. The bank needn’t use its own money to fund the loans, and most, if not all of the compliance risk is taken on by the wholesale partner.
There’s a simple way to determine the amount of revenue that a community bank might be leaving on the take: take a given 12 month period, and determine how many bank customers secured a mortgage, either to purchase refinance, through another source. Since small bank customers are among the most loyal consumers on earth, assume that a healthy percentage of those loans would have been initiated and facilitated by the bank, and then multiply the aggregate dollar amount by the “Lender Paid Compensation” offered by the wholesale lender. The amount of foregone revenue is often shocking.
One final suggestion:
Market these services! Someone once looked at the rapidly changing face of banking, especially as it relates to the little guys, and opined, “Bankers are like dinosaurs, standing in the swamp, waiting for the weather to change”.
Don’t wait. Don’t let everybody else make that profit on money movement to your bank customers.
Our never-ending quest to bring bankers the most current bank-related news often goes under-appreciated by many in the intended audience. Disgruntled compliance drones who desire this blog's author to throw them a bone they can gnaw on until they crack it and suck down the sweet marrow; white-belted, white-shoed retail banking salesmen who desire that I open the door on the path to riches beyond all dreams of Croesus; a Gen Y young dope on punk (or was that a young punk on dope?) whose daddy made him CEO of his very own (actually, Dad's very own) home building company who wants me to serve him a free lunch and give him money for nothing and his chicks for free: all these, and many, many more current, former, and soon-to-be-former readers daily flip me the bird in their rear-view mirror as they "unsubscribe" with extreme prejudice because I either offend their refined sensibilities or--much, much worse--my content "is no longer relevant."
Inasmuch as I spend, literally, several nanoseconds each evening blowing blog posts out of my nether regions carefully crafting each and ever syllable you read on these pristine pages, these criticisms hit home in a way that, for example, a client refusing to pay a monthly invoice would never do. Therefor, in an attempt to reach even my most demanding readers, I offer this evening a story that will resonate with each and every human being, whether bound tightly or only loosely tethered to the world of commercial banking. This is a story as old as the internet and as timeless as Instacam. This is the story of the egg-sucking selfie.
A woman from West Frankfort, Ill. made police work easy when she allegedly stole a colorful, leopard-pattern dress from a small boutique, then posted a picture of herself wearing it on Facebook, police said on Monday.
Danielle Saxton, 27, allegedly took a dress and other items from Morties Boutique on July 11, and was spotted walking away from the store by the owner's son, said owner Gay Williams Morton and police.
The store described the stolen items on Facebook. News travels fast in the small southern Illinois town, and within about two hours, someone sent a link to Saxton's Facebook post, where she'd posted a "selfie" with the message "Love my dress," Morton said.
Saxton was charged with theft and with failure to appear in court on a warrant in another case, according to West Frankfort Police Dispatch Supervisor John Hampton. He did not know the charge in the earlier case.
The article also reports that Saxton has an unlisted phone number. I guess she was trying to lay low and fly under the radar screen.
There's a valuable lesson for every banker and those who covet their goods and wives: "Stupid is as stupid does" and no matter how dumb you think bank robbers are, they are apparently comparative Einstein's in comparison to dress shop thieves.
Don't ever tell me again that the content of this blog is no longer relevant. Hear me now and believe me later: it has NEVER been relevant.
With luck, it never will be.
From now on, the only leopard-pattern dress we want to see on these pages is one that encases Sofia Vegara.