VBA LEGISLATIVE MEETINGS Bankers Visit with Elected Officials
“Winter in Southwest Virginia,” Patsy Phillips, TruPoint Bank First Place, VBA Photo Contest
IN THIS ISSUE
GET SMART ABOUT CREDIT DAY | THE ELECTION IS OVER: NOW WHAT?
Are the hundreds of new and changing rules and regulations forcing you to hire additional staff to keep your bank in compliance? Compliance officers receive an average salary of $62,000 plus benefits. Bank attorneys are paid upwards of $100,000. The risk of noncompliance is too great to not get help.
HELP IS AVAILABLE! CALL TODAY 888-353-3933 OR VISIT www.compliancealliance.com
2012-2013 OFFICERS AND DIRECTORS OF THE VIRGINIA BANKERS ASSOCIATION Jeffrey M. Szyperski, Chairman, Chesapeake Bank Gary R. Shook, Chairman-Elect, Middleburg Bank William Couper, Immediate Past Chairman O. R. Barham, Jr., StellarOne Corporation Christopher W. Bergstrom, Cardinal Bank Katherine E. Busser, Capital One Financial Corporation Tim Butturini, Wells Fargo Bank, N.A. Larry G. Dillon, C&F Bank Randy K. Ferrell, The Fauquier Bank Larry A. Heaton, Franklin Community Bank, NA T. Gaylon Layfield, III, Xenith Bankshares, Inc. John R. Milleson, Bank of Clarke County Susan Ralston, Bank @Lantec John G. Stallings, SunTrust Bank David P. Summers, Virginia Heritage Bank Daniel G. Waetjen, BB&T Michael O. Walker, Benchmark Community Bank
Congratulations to Patsy Phillips from TruPoint Bank, the winner of our 2012 Photo Contest with her photo “Winter in Southwest Virginia.” To see all of the winners and winning photos, please visit us at www.vabankers.org under the Communications tab.
AT-LARGE MEMBERS Benefits Corporation Chair Richard M. Liles, Bank of McKenney Management Services Inc. Chair Frank Bell, III, Chesapeake Bank Government Relations Committee Chair Monte L. Layman, Blue Ridge Bank VBA Education Foundation Chair H. Watts Steger, III, Botetourt Bankshares, Inc. EDITORIAL & EXECUTIVE OFFICES 4490 Cox Road Glen Allen, VA 23060 804-643-7469 Fax 804-643-6308 www.vabankers.org
SUBSCRIPTIONS If you would like to subscribe to Virginia Banking, contact Chandler Dewey at email@example.com.
Bruce T. Whitehurst President and CEO Virginia Bankers Association
Virginia Banking is published bi-monthly. Copyright 2012.
Chandler Dewey Manager, Communications & Government Relations Virginia Bankers Association
Statements of fact and opinion are made on the responsibility of the authors alone and do not imply an opinion or endorsement on the part of the officers or members of VBA.
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VBA Legislative Meetings Bankers Visit with Elected Officials
Get Smart About Credit Day 2012 Virginia Bankers Teach Children the Basics of Credit
in every issue 4 Calendar of Events 5 Insights 6 Worth Noting 7 Welcome New Associate Members
8 9 10 11 14
Legislative Update Washington Update Legal Line Compliance Corner Bankers on the Move
Send us your thoughts or ideas on Virginia Banking! Please email Chandler Dewey at email@example.com. Has your information changed? Please email Kellee Edelin at firstname.lastname@example.org with your new contact information. November/December 2012 | Virginia Banking 3
COMPLIANCE WITH FEDERAL LENDING REGULATIONS SEMINAR, SANDSTON DECEMBER 18
IMPLEMENTING THE NEW CTR AND SAR, VIENNA OCTOBER 17
ONLINE SEMINARS /INSTRUCTOR-LED SEMINARS
WEBINARS AIB ANALYZING FINANCIAL STATEMENTS NOVEMBER 5
2013 Financial Forecast
Richmond Convention Center January 4, 2013
Bank Directors Symposium
AIB PRINCIPLES OF BANKING DECEMBER 10
AIB GENERAL ACCOUNTING DECEMBER 10 AIB ECONOMICS FOR BANKERS JANUARY 3
Retail Banking & Marketing Conference
AIB GENERAL ACCOUNTING JANUARY 7
Compliance School and Compliance Hot Topics
AIB ANALYZING FINANCIAL STATEMENTS JANUARY 7
AIB PRINCIPLES OF BANKING JANUARY 7
AIB CONSUMER LENDING JANUARY 15
The Westin Richmond February 26, 2013
The Inn at Virginia Tech February 27, 2013 Fairview Park Marriott March 6, 2013 Omni Charlottesville Hotel March 12-13, 2013 Omni Charlottesville Hotel April 8-12, 2013
Omni Charlottesville Hotel April 24-25, 2013
HR & Benefits Conference
Omni Charlottesville Hotel May 5-7, 2013
Operations & Technology Conference
Stonewall Jackson Hotel & Conference Center May 14-15, 2013
Trust & Wealth Management Conference VBA Training Center May 31, 2013
AIB LAW AND BANKING: APPLICATIONS JANUARY 15
AIB PRINCIPLES OF BANKING ACCELERATED JANUARY 15
AIB PRINCIPLES OF BANKING JANUARY 21
Annual Convention The Homestead June 16-19, 2013
Omni Charlottesville Hotel August 26-28, 2013
Credit Management Conference Omni Charlottesville Hotel October 7-8, 2013
ABA ONLINE REVIEW COURSE FOR THE CRCM EXAMINATION JANUARY 22
Leadership Conference October 10-11, 2013 TBD
2 0 1 3
Compliance Hot Topics VBA Training Center October 23-24, 2013
Information and online registration is available at the VBA website. Please either go to www.vabankers.org or use this form to check the box next to the program you want information about, then fax the form to the VBA office at 804-643-6308. The VBA will send you information about the program as soon as it is available, usually eight weeks before the program.
Name___________________________________________________ Bank/Firm______________________________________________ Address_____________________________________________________________________________________________________________________ City________________________________________________________________ State/Zip____________________________________ Phone___________________________ Fax_________________________ Email____________________________________________________ For more information go to www.vabankers.org.
4 Virginia Banking | November/December 2012
The Warrior Dash
Bruce Whitehurst President and CEO, Virginia Bankers Association
his may surprise those of you who know me well, but this fall I competed in the Warrior Dash, a 3.5 mile race that includes about a dozen obstacles. On a Saturday in September, my wife Genise, daughter Cameron and I were among the 10,000 or so half-crazy individuals who converged on Berkeley Plantation east of Richmond for this festive and challenging event. We climbed walls, crawled through mud and under barbed wire, went into the James River three times with various obstacles included, climbed up and down a cargo net, jumped over fire and crawled through mud and under barbed wire again just before the finish line. Six months ago I never would have dreamed that I would compete in an event such as this one; fortunately, Genise has had all five Whitehursts on a fitness quest this year and we are much better off for it. I actually enjoyed the Warrior Dash, which I found to be fun and exhilarating.
Why am I writing about this in my column for Virginia Banking? I must confess that even as I ran in the race, I was thinking, “Wow, what a great metaphor this event is for the challenges our banking industry has faced over the last several years.” (Yes, I’m
that much of a nerd.) We have certainly faced a number of obstacles. The economic and housing collapse of 2008 affected us deeply, not only with credit losses, but also as we were broadly blamed for the crisis, even though 94 percent of subprime mortgages were originated outside the FDIC-insured banking industry. We have climbed steep walls of credit losses, as good people – developers, small business owners and individuals – simply could not ride out the deep recession and very slow recovery. We have climbed through the mud that has been slung at us and under the barbed wire of new regulatory proposals that will have far reaching impacts on our industry. We wish we could take on these obstacles and challenges without our customers and communities bearing the brunt, but we know that is just not possible. We have been frustrated at the overreaction that was bound to occur, but that nonetheless makes it harder for us to serve our customers and more expensive for them to bank with us. Elections have consequences. That’s what many folks have said over the years, including President Obama, around the time he was inaugurated in 2009. Dodd-Frank is certainly a clear example that there is much truth in this statement. As I write this, the November election is looming and I wish I had a crystal ball; as you read it, we know the outcome. But hear this, warriors: either way, we clearly have more obstacles ahead, but we now have more experience with which to face them and the calluses on our hands to prove that this is so. We have emerged stronger from the Warrior Dash that we have all run over the past few years. I am proud to be a warrior for Virginia banking, as are all my teammates on the VBA staff. As we make plans for what we must accomplish in 2013, we are blessed with an army of strong and wise bankers who will make a difference for banking that allows us to serve our customers and communities and to fuel a more robust economic recovery for the benefit of all. We charge ahead.
VBA President and CEO Bruce Whitehurst is willing to speak to your bank’s employees about critical issues facing the industry and why it’s important for you to get involved in grassroots efforts. If you would like Bruce to speak at one of your meetings, contact Bobbi Weimer at email@example.com. Bruce Whitehurst can be reached by email at firstname.lastname@example.org. www.vabankers.org
November/December 2012 | Virginia Banking 5
VIRGINIA BANK SCHOOL STUDENTS RAISE OVER $13,000 FOR THE VIRGINIA WOUNDED WARRIOR PROGRAM
The 2012 graduating class of the Virginia Bankers School of Bank Management raised $13,589.55 for the Virginia Wounded Warrior Program by organizing a fundraising event during their last summer session in August. The class not only put on a great bowling event to raise money for the program, but they also went the extra mile, fundraising at their respective banks throughout the year leading up to Bank School. Pictured here are (from left): Holly Blackwell, 2012 Bank School graduate; Chip Jones, 2012 Bank School graduate; Paul Galanti, commander, U.S. Navy (retired) and former POW in the Vietnam War; Katherine Wilson, executive director, Virginia Wounded Warrior Program, and captain, U.S. Navy (retired); and Camilla Schwoebel, region 1 director, Virginia Wounded Warrior Program. Holly and Chip presented the check to Paul at the Virginia War Memorial, and Paul could not have been more thrilled with the bankers’
efforts. Congratulations to the 2012 class on your amazing achievement!
BEALE AND WHITEHURST AMONG ABA ELECTED OFFICERS AND BOARD MEMBERS FOR 2012-2013 Members attending the American Bankers Association’s annual convention in San Diego in October elected new officers and directors to serve on ABA’s board for the 2012-2013 association year, and recognized those continuing to serve. Virginia’s own Billy Beale, CEO, Union First Market Bank, Richmond, will continue to serve on the ABA board and will also serve as vice chairman of the Government Relations Council. The VBA’s Bruce Whitehurst will also serve on the board and as chairman of the Alliance of State Bankers Associations. Kudos to Billy and Bruce.
WE WILL MISS Bruce Reginald Hazelgrove Jr. passed away on Sept. 6, 2012. Bruce worked at the State Planters Bank of Commerce and Trust and served 31 years, retiring from Crestar Bank. While at the bank, he completed the Virginia Bankers School of Bank Management at the University of Virginia. Bruce also worked for the Virginia Bankers Association for seven years. Our thoughts are with Bruce’s family. He will be missed.
VBA EDUCATION FOUNDATION SPONSORED PROGRAM NOMINATED FOR AWARD For 15 years, the prestigious Governor’s Technology Awards (GTA) program has recognized the success of public sector information technology projects (IT) which have improved government service delivery and efficiency. The Virginia Department of Education was nominated for an award in the category “Innovative Use of Technology in Education” based on their work on the VBA Education Foundation sponsored Virtual Virginia online course on Economics and Personal Finance. This category recognizes the innovative use of IT to support the unique missions of Virginia’s schools, colleges and universities. Cooperative projects between institutions and other governmental entities, including research and development programs, also fall into this category.
VBA MSI Welcomes New Endorsed Vendors PWCAMPBELL PWCampbell is a design/build firm that offers a full range of services including strategic facility planning, market demographic research, retail branding, merchandising, site selection, space planning, green (LEED) building design, architecture and engineering, construction management, and total furniture coordination. For over 100 years, PWCampbell has been serving the banking industry in the mid-Atlantic region with quality design and construction. The benefits of working with PWCampbell have been enjoyed by numerous Virginia banks and extend well beyond facility planning. PWCampbell has increased their Virginia bank clients’ profitability and market share, and enhanced their operational efficiencies through their many
6 Virginia Banking | November/December 2012
services and the banking experts employed by PWCampbell. For more information, call Erin Campbell, vice president of marketing and planning, at (800) 253-7430 or email her at Erin.Campbell@PWCampbell.com. REODEEDWAGON.COM REOdeedwagon.com exists to allow banks to showcase their real estate for sale in front of an audience of potential buyers that extends well beyond local markets. Created by bankers for bankers and their clients, REOdeedwagon. com provides buyers and sellers a simple, easy-to-use resource for identifying, acquiring or disposing of real estate owned (REO) properties. These properties are in possession of the banks as a result of foreclosure or forfeiture.
Member banks register as users of REOdeedwagon.com, a site where they can list any REO properties they have for sale. Each property listing contains detailed information about the property, plus contact information provided by the bank for either the bank itself or whoever the appropriate point of contact might be. This feature allows multiple properties all over the country to be listed together on one site, thus making it simple for users to search for properties without having to visit the REO sections of every bank’s own individual site. This is one-stop-shopping for property buying at its most efficient. For more information, contact John Bowers, director of member services at the VBA, at jbowers@ vabankers.org or (804) 819-4732. www.vabankers.org
New Associate Members
CHERRY, BEKAERT & HOLLAND, L.L.P. 2626 Glenwood Ave. Raleigh, NC 27608 Phone: (919) 782-1040 Fax: (919) 783-0976 Website: www.cgh.com CONTACT: CID HICKMAN, PARTNER Email: email@example.com Cherry, Bekaert & Holland, L.L.P.’s Financial Services Group has a reputation as a leading provider of financial and consulting services in the Southeast. With relationships focused and built on trust, Cherry, Bekaert & Holland provides professional services from a banker’s perspective to a diverse and successful group of financial clients. Through all stages of development – start-up to growth, public offering to owner transition – the CB&H Financial Services Group is there to provide traditional accounting solutions and valueadded benefits to their client base.
CONSULTING & TRAINING
PROPERTY ENVIRONMENTAL SERVICES, INC. 9615 Blake Lane Fairfax, VA 22031 Phone: (703) 938-5050 Fax: (877) 970-2970 Website: PESEnvironmental.com CONTACT: GORDON CRUICKSHANK, PRESIDENT Email: firstname.lastname@example.org PES, Inc. specializes in conducting due diligence studies for secure lending in commercial real estate. For 16 years, they have helped commercial bankers in providing the environmental consulting needed for sound decision-making.
FINANCIAL INSTITUTIONS, MORTGAGE & REAL ESTATE SERVICES
ALVAREZ & MARSAL 555 Thirteenth St., NW 5th Floor West Washington, DC 20004 Phone: (202) 729-2123 Fax: (202) 729-2101
Website: www.alvarezandmarsal.com CONTACT: SANDY DUNLEAVY, MANAGING DIRECTOR Email: email@example.com Alvarez & Marsal assists financial institutions to address industry challenges, including regulatory directives.
THE BAKER GROUP 1601 NW Expressway, 20 FL Oklahoma City, OK 73118 Phone: (405) 415-7200 Fax: (405) 715-7366 Website: www.gobaker.com CONTACT: SKOSHI HERON, VICE PRESIDENT Email: firstname.lastname@example.org The Baker Group is a leader in the development of innovative asset/liability and investment portfolio management services for community financial institutions. They specialize in investment portfolio analysis, security selection and interest rate risk management.
November/December 2012 | Virginia Banking 7
The Election is Over: Now What?
W Matt Bruning Vice President, Government Relations, Virginia Bankers Association
riting this article prior to the Nov. 6 election, I wish I could gaze into the crystal ball that would reveal the by-now-decided outcome of the presidential campaign. Assuming there were no last-minute October surprises and the narrow overall margin held, there are roughly an equal amount of people pleased with the outcome as there are those who wish for a do-over. No matter which side you are on, hopefully you took the time and participated in the democratic process of a free election so many have sacrificed to preserve. Now that the incessant campaign ads have been mercifully purged from our television screens and the debates, rallies, polls and – alas, likely – the campaign pledges recede into a fading memory, the attention now justifiably turns to how the election influences the governing direction of our nation. No matter the ultimate choice of who will reside in the White House for the next four years, there are several critical policy decisions that the current “lame duck” Congress could – and should – address before the inauguration on Jan. 20. There are issues that impact the banking industry specifically, as well as matters that have much broader consequences. While the 112th Congress will surely not be looked upon favorably for their performance and lack of meaningful accomplishment, time remains between their return on Nov. 13 through the end of the year to achieve agreement on several serious policy fronts. Let’s all hope that is not wishful thinking on my part, but rather a necessary prelude to a more solutions-oriented year in 2013. On the forefront of the policy agenda to be tackled during the lame duck congressional session is how to avert driving over the looming fiscal cliff. More than $700 billion in automatic tax increases and spending cuts will occur after Dec. 31 if an accord is not reached. Set in motion as a consequence of the failure of last year’s Super Committee, the automatic across-the-board reductions in spending would – including to national defense – set off harrowing repercussions across the country, and in the commonwealth.
Analysis estimates that over 207,000 Virginia jobs are at risk of being lost due to the cuts. Coupled with the expiration of the Bush tax cuts (“Taxmaggedon”), inaction has the potential to produce a significant drag on our national economic recovery and send us in the wrong direction. There are several potential outcomes the lame duck Congress may choose. The first is the reckless path of inaction. Another is the characteristically Washington alternative of kicking the can down the road, extending the status quo and dealing with the problem later. Many policy prognosticators envision agreement on temporary fixes that lay the groundwork for a more comprehensive tax reform deal in 2013. Some hold out hope for that as-yet elusive grand bargain that brings all sides into a compromise. Beyond the critical decisions related to the fiscal cliff, there are other pending legislative issues that could be resolved prior to year end, including in the financial services arena. The farm bill authorization expired on Sept. 30 and could be addressed. Similarly, the Mortgage Forgiveness Debt Relief Act expires at year end. Without an extension, borrowers who receive reductions in principal next year would be hit with federal income taxes at their regular marginal rates on the amounts forgiven. Finally, the Transaction Account Guarantee (TAG) program runs out at the end of the year. The VBA continues to advocate for a two-year extension of the program in the midst of the current economic uncertainty. Whether or not you are pleased with the results of the election, it is important to remember that Nov. 6 was not a conclusion. Yes, the yard signs have come down and the campaign mailers have ceased, but hard work remains on a multitude of vital issues. Be it advocating for much-needed regulatory relief, encouraging a grand bargain on tax reform or pushing back on the latest assault from credit unions, it is important for our industry to remain engaged in the legislative process. As we enter 2013, please commit or reaffirm to being an active participant in the VBA’s advocacy efforts.
Matt Bruning can be reached by email at email@example.com.
8 Virginia Banking | November/December 2012
Connecting the Dots hat happens when a candle is deprived of oxygen? The flame goes out, of course. What happens when Frank Keating banks are faced President and CEO, with more than American Bankers 10,000 pages of proposed and Association final rules in just two years? Their ability to effectively support their customers, communities and local economy begins to sputter. This is counterproductive, and our job is to continue to explain why. In his book, “The Coming Jobs War,” Gallup Chairman Jim Clifton writes about the important relationship between small businesses and job growth. Clifton’s view: “Very few Americans are aware that small- and medium-sized businesses are responsible for most of the jobs in America. “During the past two decades in the U.S., small- and medium-sized enterprises have accounted for virtually all new jobs created,” Clifton said. “Jumbo-sized American businesses are very important to the economic ecosystem because they employ a lot of people, but mostly because they’re the key customers of small- to medium-sized companies.” If few Americans understand small business’ contributions to the economy, even fewer appreciate banks’ role in supporting and growing those businesses. That’s where you come in. Bankers need to continue to connect the dots – for policymakers and the public. We need to demonstrate the nexus between a healthy regulation of the banking industry and a vibrant economy that supports small businesses and jobs growth. Some banks have driven that message home by inviting their lawmakers to the bank and showing them – literally – the volume www.vabankers.org
want to make sure we are able to continue serving our communities in the way we have in the past. A strong economy is dependent on job growth and job growth is dependent on availability of capital to fund the small businesses of our communities that produce most of the jobs. We want to ensure that the new rules do not reduce the ability of our community banks to provide this capital.” That’s a simple, straightforward message that explains how a decision in Washington could reverberate in communities across the country. The more bankers bring that point home for lawmakers and regulators – in letters, calls and visits – the closer we will come to smart bank regulation that supports, rather than extinguishes, economic growth.
Gov. Frank Keating can be reached by email at firstname.lastname@example.org.
Jason Caskey, CPA Financial Services Practice Chair
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of rules and paperwork that the bank’s employees must navigate daily. A show-and-tell meeting like this is not only memorable, it also helps build relationships with your elected representatives. It also can engage your frontline and back-room staff in the most critical policy issue facing banking today. Others have made the more-is-less point about regulation in their comment letters on the Basel III capital proposals. “Even though our current capital would only be marginally affected at the present, these proposed rules will hamper flexibility for customer service and growth in the future,” wrote the CEO of one $85 million bank. The CEO of a $650 million bank serving primarily business customers wrote: “We like most other community banks in our country
3900 Westerre Parkway • Richmond, VA 23233 • www.elliottdavis.com November/December 2012 | Virginia Banking 9
Freeman v. Quicken Loans
U.S. Supreme Court Rejects HUD Interpretation, Rules that RESPA Fee Splitting Violations Must Involve Fees that are Actually Split
I Mel Tull General Counsel, Virginia Bankers Association
n Freeman v. Quicken Loans, Inc., the U.S. Supreme Court recently confirmed that the Real Estate Settlement Procedures Act (RESPA) prohibition on splitting unearned settlement service fees cannot be violated unless an unearned fee is, in fact, “split” among two or more parties. Accordingly, a bank that alone receives all of an allegedly unearned fee would not be in violation of the prohibition on splitting an unearned fee. The main issue in Freeman arose from two differing interpretations of Section 8(b) of RESPA, 27 U.S.C. § 2607(b). The section states: No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. The borrowers in the case claimed that Quicken Loans violated Section 8(b) by charging loan discount fees without actually lowering the interest rates on the loans in return. The borrowers urged the court to adopt HUD’s interpretation of the statute, which held a lender liable for fee splitting even without the presence of a third party. Under HUD’s reading of the statute, a lender could violate the statute by taking any portion or percentage of an unearned fee, including a 100 percent portion. The court unanimously rejected the interpretation promoted by HUD and the borrowers. In an opinion authored by Justice Antonin Scalia, the court repeatedly showed disfavor for a reading of the statute that did not incorporate a plain meaning of the word “split” when interpreting the statute’s text. The court stated that, “In our view, § 2607(b) unambiguously covers only a settlement-service provider’s splitting of a fee with one or more other persons; it cannot be understood to reach a single provider’s retention of an unearned fee.” The court also was concerned that the statute assigns liability to the party that gives a portion or percentage of an unearned fee. The court noted that under HUD’s interpretation, in a transaction involving only
a borrower and a lender, a defrauded borrower would be liable as the giver of an unearned fee. The court rejected this interpretation as going beyond the reach of the plain language of the statute. The decision is a good one for lenders who can take comfort that RESPA Section 8(b) will not be used by regulators as a price fixing statute to dictate the fees banks charge for originating loans. However, this was a very narrow ruling and RESPA still has teeth and regulators have other means to reign in fees they don’t like. In the Freeman opinion, the court reminds us of RESPA Section 8(a), 27 U.S.C. § 2607(a), which provides that: No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person. Of Section 8(a), the court says, “[t]hat prohibition is at once broader than § 2607(b) (because it applies to the transfer of any ‘thing of value,’ rather than to the dividing of a ‘charge’ paid by a consumer) and narrower (because it requires an ‘agreement or understanding’ to refer business).” The court goes on to say, “[t]hus, a settlement-service provider who agrees to exchange valuable tickets to a sporting event in return for a referral of business would violate §2607(a) but not § 2607(b). So too a provider who agrees to pay a monetary referral fee that is not tied in any respect to a charge paid by a particular consumer – for instance, a ‘retainer’ agreement pursuant to which the provider pays a monthly lump sum in exchange for the recipient’s agreement to refer any business that comes his way.” “By contrast,” the court continues, “a settlement-service provider who gives a portion of a charge to another person who has not rendered any services in return would violate § 2607(b), even if an express referral arrangement does not exist or cannot be shown. In short, each subsection reaches conduct that the other does not.”
Mel Tull can be reached by email at email@example.com. 10 Virginia Banking | November/December 2012
How to Manage HMDA’s ‘Reasonable Standards’ Document Your Process, Have Multiple Approvals By Bill Deligiannis Director of Client Services, Thomas Compliance Associates, Inc.
ortgage lenders too often come across transactions that have us scratching our heads when we contemplate HMDA re-
porting. The Fed has indicated it is acceptable to establish “reasonable standards” when guidance does not specifically address the particular details of a transaction. Unfortunately, “reasonable standards” have not been defined and are open to interpretation. Establishing a reasonable standard does allow lenders to report similar transactions on a consistent basis. The key is to establish the reasonableness of the standard. We need to justify the thought behind the standard. • What guidance is there that is relevant to the standard? • How did we interpret the available guidance applicable to our transaction’s situation? REFINANCING
The purpose of the loan being refinanced is not relevant to determining whether the new loan is a refinancing for HMDA purposes. Neither is the borrower’s intended use of any additional cash borrowed relevant to determining if the loan is a refinance, though the borrower’s intended use of the funds could make the transaction a home improvement loan or a home purchase loan. Guidance indicates an institution may rely on the oral or written statement of an applicant regarding the proposed use of loan proceeds. Lenders can rely on the borrower’s stated purpose to determine the reported purpose. The phrase “intended use” implies a future action (e.g., the borrower will buy or will improve a dwelling). An action which has already taken place would not qualify. If the transaction is a cash-out refinance (secured by a dwelling) for the purpose of compensating a borrower for a previous expenditure, it would be reported as a refinance. What about the timing of the intended use? If the intended action is to happen shortly after the transaction, all is well. But if a subject property is not identified, is it reasonable to rely on the stated intended use where there is a possibility that a subject property may not be found? The FDIC responded this way to a similar question: Question. For a mortgage loan secured by a dwelling the proceeds of which are to be “parked
away” pending realty investment opportunities (undecided yet as to whether it’ll be residential or commercial realty or both), should the loan be reported? Answer. Without knowing the purpose of loan, it remains uncertain how to report this loan. If it is a closed end loan (and not a HELOC) and is a refinance of a home purchase loan (existing lien), it would be reportable. It would be reported as a refinance if there is no indication that it will be used for home improvement or the purchase of a dwelling. Be cautious of relying too heavily on information from webinar Q&As and similar sources, but the FDIC response reaffirms the reliance on intended use. It appears the stated intended use, if clearly indicated, would still be applicable even if a subject property had not been identified yet. That said, and to be a bit more conservative, bankers may want to exclude these situations on the thought that it is not reasonable to accept a stated intent where a subject property has not been identified. With regard to cash-out refinances for the purpose of purchasing land and constructing a dwelling, we look to the guidance on construction and permanent financing: Home purchase loans include both a combined construction/permanent loan and the permanent financing that replaces a construction-only loan. It does not include a construction-only loan, which is considered “temporary financing” under Regulation C and is not reported. If it doesn’t meet the definition of a “home purchase,” a cash-out refinance would be reported as a refinance if the loan satisfies and replaces a dwelling secured loan to the same borrower. Remember the primary consideration for determining if a loan is temporary financing is whether it will be replaced by permanent financing of a longer term. Once your standard is established, you may want to gather the blessings of your federal regulator. You may be left without an opinion, at least until your next exam. But by documenting the standard, you will be able to refer to the reasons behind it, when the decision was made, and who made it. VBA members seeking information about HMDA reporting issues should call TCA’s toll-free number, 800-934-7347. TCA is the VBA’s endorsed provider of compliance consulting and support. November/December 2012 | Virginia Banking 11
VBA Legislative Meetings Bankers Visit with Their Elected Officials By Chandler Dewey Manager, Communications & Government Relations, VBA
s part of the VBA’s grassroots advocacy efforts, the VBA hosted a number of meetings with members of the Virginia congressional delegation and the Virginia General Assembly across the commonwealth. Meetings were held at the Hospitality House in Fredericksburg with Congressman Rob Wittman and area state legislators on Aug. 20; at The Martha Washington Inn with Congressman Morgan Griffith
Bankers gather in Abingdon.
Bankers in Fredericksburg meet with Congressman Rob Wittman.
and area state legislators on Aug. 22; at the Omni Hotel in Charlottesville with Congressman Robert Hurt and area state legislators on Sept. 7; at the Capital One Headquarters in McLean with Congressman Frank Wolf, Congressman Jim Moran and area state legislators on Sept. 24; at the Downtown Richmond Marriott in Richmond with Congressman J. Randy Forbes and area state legislators on Sept. 28; and at the Hotel Roanoke with Congressman Bob Goodlatte and area state legislators on Oct. 22. Another meeting will take place on Monday, Dec. 10, in Norfolk with Congressman Scott Rigell and area state legislators. This will be the seventh meeting of this kind. Since the 2013 General Assembly session is quickly approaching, it is critical that bankers are actively engaged in the legislative process. These meetings provided a great opportunity for bankers to interact with elected officials at both levels of government. At the Richmond meeting, Sen. John Watkins said, “It’s been a tough go the last couple of years, but the horizon is out there. The banking industry is part of what is going to bring the economy back for the rest of the state.” Legislators were also able to hear directly from bankers on issues. Peter Clements, president and CEO of The Bank of Southside Virginia, told officials, “I’m proud of the labor and volunteerism bankers provide to our communities. I’m proud to be a banker and of all we do in the community.” So far, 141 bankers have met with 48 elected officials, seven of whom were Congressmen. Thanks to everyone who attended these meetings and please consider attending future meetings with legislators. Please contact Matt Bruning, vice president of government relations, at firstname.lastname@example.org with questions.
Thank you to the 48 state legislators who have attended our meetings so far! Senator A. Donald McEachin Senator Adam P. Ebbin Delegate Alfonso Lopez Delegate Anne B. Crockett-Stark Senator Barbara Favola Delegate Barbara J. Comstock Senator Bryce E. Reeves Delegate Charles D. Poindexter Delegate Chris Head Delegate Christopher K. Peace Delegate David B. Albo Delegate David J. Toscano
Delegate Delores McQuinn Delegate Edward T. Scott Delegate Eileen Filler-Corn Delegate G. Manoli Loupassi Senator George L. Barker Delegate Gregory Habeeb Senator Henry L. Marsh, III Delegate Israel O’Quinn Delegate Jackson H. Miller Delegate James P. Massie, III Senator Jill Holtzman Vogel Senator John C. Watkins
12 Virginia Banking | November/December 2012
Delegate John M. O’Bannon, III Delegate Joseph R. Yost Delegate Keith Hodges Delegate Kenneth R. Plum Delegate Margaret Ransone Delegate Mark D. Sickles Delegate Mark L. Cole Delegate Mark L. Keam Delegate Matt Fariss Delegate Mike Watson Delegate Nick Rush Delegate Onzlee Ware
Senator Phillip P. Puckett Delegate Richard L. Anderson Delegate Rick Morris Delegate Riley E. Ingram Delegate Robert H. Brink Delegate Robert Krupicka, Jr Delegate Scott A. Surovell Delegate Scott Garrett Delegate Terry G. Kilgore Senator Thomas A. Garrett, Jr. Delegate Timothy D. Hugo
Get Smart About Credit Day 2012 Virginia Bankers Teach Students the Basics of Credit By Chandler Dewey Manager, Communications & Government Relations, Virginia Bankers Association
n its effort to teach the community how to effectively use credit, banks across Virginia teamed up with the Virginia Bankers Association Education Foundation and the American Bankers Association Education Foundation for the Get Smart About Credit program. The program, now in its 10th year, is a national campaign of volunteer bankers who help young people develop responsible credit habits. Virginia volunteer bankers utilized the program’s awareness day – Get Smart About Credit Day – which was held Thursday, Oct. 18, as an opportunity to leave the bank for the classroom. In 2011, an estimated 257 Virginia bankers from 24 banks reached 19,804 people through 394 presentations. This year, bankers at 16 Virginia banks participated, and final numbers of students reached are still being collected. Event highlights include: Bank of Lancaster: Ward Currin and Joe Biddlecomb presented at Northumberland High School on Oct. 16, bringing the presentation to every senior. Cindy West visited Rappahannock High School in Warsaw on Nov. 6. Lastly, Bank of Lancaster team members will be visiting Lancaster High School in January. Chesapeake Bank: Johanna Northstein and her team presented on Oct. 15 and again on Oct. 24 at Gloucester High School. There were nine presentations altogether. Sonabank: Kevin Persinger conducted two classes at Jackson River Technical Center in Covington. The first class consisted of sophomores and juniors of JROTC and Alleghany High School and consisted
of about 30 students and one educator. The second class consisted of 20 seniors and two educators. Also from Sonabank, Dylan Butler was at Cedar Lee Middle School in Bealeton presenting to eighth graders. TowneBank: Terry Parker (pictured below) went back to his alma mater, Ocean Lakes High School,
and helped educate Virginia’s youth on the importance of good credit. Terry said, “It feels good to be able to give back the knowledge I have learned to the youth of today. The classes I spoke with were excellent. Thanks to Mrs. Beth Hubbard, for allowing me to spend time with her classes and instruct them on credit and the significance of good personal finances.” From TowneBank, Eileen Ertel also participated at Green Run High School in Virginia Beach. Lastly, Marcia Hodsden taught three classes at Western Branch High School. Marcia reported that the students were very involved, animated and participated a lot. For more information on the program, and how to get involved with the VBA’s financial literacy efforts, please contact Chandler Dewey at email@example.com.
Thank you to the 16 banks that participated in 2012! Bank of Botetourt Bank of Lancaster C&F Bank Carter Bank & Trust Chesapeake Bank First Bank www.vabankers.org
HomeTown Bank National Bank Old Point National Bank Pioneer Bank Sonabank StellarOne Bank
The Farmers Bank of Appomattox TowneBank TruPoint Bank Union First Market Bank
November/December 2012 | Virginia Banking 13
Bankers on the
Benchmark Community Bank
Virginia Commonwealth Bank
Cheryl Gee, AVP/Branch Manager
Joel Nieves, Branch Operations Manager
Cardinal Bank Robert R. Giraldi, Senior Vice President and Market Executive David O. Williams,Vice President, Corporate Real Estate Manager
Carter Bank & Trust Robin T. Gambill, Branch Manager Christina W. Oliver, Branch Manager Karen T. White, Branch Manager
Community Bankers’ Bank Jonathan C. Manson, Vice President/Auditor J. Adam Wells, Staff Auditor
National Bank Patrick Lamm, Senior Vice President of Credit Administration
TD Bank Autumn Celeste Edwards, Store Manager Fatima Rahyab, Vice President, Middle Market Relationship Manager in the Middle Market Group
The Business Bank Alan Drewer, Senior Vice President, Commercial Lending and Business Development Doug McAlpine, Senior Vice President, Commercial Lending and Business Development Larry Shufelt, Senior Vice President, Commercial Lending
Union First Market Bank Jay DeVoe, Senior Vice President, Construction Lending Department Manager Robert B. Eastep, President of Union Mortgage Group, Inc. Rachael R. Lape, Senior Vice President and General Counsel Ernest “Bud” Yerly Jr., Senior Vice President, Tri-Cities Market Executive
Virginia Commerce Bank Kimberly Bradford, Branch Manager Steve Pattison, Assistant Vice President of Virginia Commerce Wealth Management Services and Financial Advisor for Infinex Investments, Inc.
It’s only a sampling, but look what’s in the compliance services package TCA provides VBA member banks: • • • • •
Hands-on help, with scheduled on-site audits. Timely, accurate information about compliance issues and trends. Advice about how to meet federal compliance requirements. An e-newsletter heads-up when the rules change. Access to the TCA compliance professionals, the people who make TCA the most respected source of compliance information and assistance in banking.
Whether your need is BSA/AML, IT vulnerability scans and web site security reviews, or training that keeps your staff — and directors — up-to-date, TCA is your Compliance Advantage. Call us . . . today . . . to learn more. 1-800-934-7347.
Thomas Compliance Associates, Inc. 2846 N. Mildred Avenue, Suite 150 Chicago, Illinois 60657 1-800-934-7347
www.tcaregs.com 14 Virginia Banking | November/December 2012
Bringing It All Back Home ABA National Conference for Community Bankers February 17–20, 2013
JW Marriott Orlando, Grande Lakes
Our 2013 conference is an exploration of the best ways community bankers can apply on-the-ground experience and new technologies to compete more effectively. Join us next February in Orlando for a program focused on payment system trends, branch futures, gamification, new lines of business and more.
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Register at aba.com/Community
A.J. Jacobs New York Times Bestselling Author and Editor at Large, Esquire magazine Drop Dead Healthy: One Man’s Humble Quest for Bodily Perfection
November/December 2012 | Virginia Banking 15
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