COUNCIL ON BANKING
MINUTES OF MAY 21, 2009 MEETING
In attendance: Robert V.A. Harra, Jr., Council Chairman; Edward A. Reznick, Council Member; Clinton W. Walker, Council Member; Christina M. Favila, Council Member; Robert A. Glen, State Bank Commissioner; and Francis S. Babiarz, Deputy Bank Commissioner.
Public notice of the meeting was published in the News Journal and the Delaware State News prior to the meeting. The meeting was held at Buena Vista State Conference Center.
1. The meeting was called to order by Chairman Harra at approximately noon.
2. Minutes of the February 5th meeting were approved.
3. Commissioner Glen reported on the status of various legislation, first noting that most legislation was moving very slowly because of budget and sports betting issues.
a. The Mortgage Loan Originator Bill had been introduced as Senate Bill 73. The Bill had been assigned to the Senate Banking Committee, but no further action had yet been taken on it. Some opposition to this Bill had arisen based on a desire to exempt mortgage loan servicers. The Bill, however, had to conform to the Federal SAFE Act and the United States Department of Housing and Urban Development had not granted any such exemption. Nevertheless, since the effective date of licensing under the Bill would be next July, the next General Assembly would have time to enact legislation that could recognize any exemption that HUD might establish. Some mortgage brokers and lenders had also voiced opposition to the licensing exemption for bank employees. Again, this exemption was required by the Federal Statute. The fees that the Bill required also produced some opposition. These were an annual licensing fee, the supervisory assessment, examination fees, and the surety bond cost. Commissioner Glen reviewed the operating costs and revenue of the Office and commented that the fees from the Bill enhanced the diversity of revenue sources for Office operations, and offset the added operating costs of the Bill.
b. The mortgage loan modification Bill had been introduced as House Bill 149. This Bill was also only in its early stages. It had been assigned to a committee with no further action as yet. The Bill would limit “up-front” fees for mortgage loan modification services performed by Title 5 licensees to $250. The Bill also required that overall fees charged by such licensees had to be reasonable.
c. Senate Bills 40 and 51 were initiatives from last year’s Lieutenant Governor’s Mortgage Foreclosure Task Force. Senate Bill 40 required notices of interest rate changes, and Senate Bill 51 required notices of loan delinquencies before foreclosure actions could be filed. The Bank Commissioner’s Office was not directly involved with these Bills, and banks were exempted, although some legislators were questioning that exemption.
d. Senate Bill 108 involved new regulation of title and payday loans. They were part of the Governor’s agenda and included a high-cost loan license surcharge of $1,500 that would be paid to a special education fund.
e. Commissioner Glen reported that Senate Bills 19 and 61 had some small effect on the Bank Commissioner’s Office. These Bills moved monies from special funds to the State General Fund. One Bill moved approximately $16,000 and the other approximately $1,800 from the Office’s special fund. These funds represented interest on that account.
4. The Commissioner next discussed the funding sources for the Office. These sources were primarily the supervisory assessment, examination fees, and $150,000 from the General Fund for administration of the bank franchise tax. He reviewed specific numbers and noted that these sources had become increasingly narrow, including a reduction in the number of licensees. The Mortgage Loan Originator Bill, however, broadened that last source somewhat with the addition of approximately 1,700 new licensees, 90% of whom were from out-of-state. The Commissioner also indicated that he had received approval to fill vacant bank examiner and license investigator positions.
5. Commissioner Glen next reported that the amount of bank franchise tax collections had been declining rapidly. In FY08, $129.7 million was collected. This matched the trend from previous years, which had been averaging in the low $130 million range. For FY09, however, the projected amount is only $90 million, and for FY10 the amounted projected is only $51.6 million. By contrast, the State lottery in FY08 had collected $252 million, and in FY09 the lottery was projected to collect $243 million. As a result, the bank franchise tax has become as unstable as the corporate income tax. With fewer taxpayers, the tax had more volatility and was thereby susceptible to one institution’s bad year. This meant there was less opportunity to generate significant income from that tax.
6. The Commissioner next noted that there had been very little consumer education activity because of the focus on the budget problems. Moreover, the Lieutenant Governor’s Task Force on mortgage foreclosures currently was in abeyance. Nevertheless, because of funds received from a nationwide settlement, the Attorney General’s Office would be holding a foreclosure conference some time in June.
7. a. As to other business, the Commissioner indicated that Chevy Chase Federal Savings Bank was being acquired by Capital One National Bank, and because of the transaction’s structure, the existing Chevy Chase branch in Rehoboth Beach would become a branch of the newly merged Capital One Bank.
b. The Commissioner indicated that a memorandum regarding the calculation of the supervisory assessment and examination fee would be circulated as usual.
8. The sense of the Council was that the next meeting should be held in early February next year. The meeting adjourned at 1:10 p.m.
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