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Consumer Bureau Plans New Rules on Mortgage Fees
Los Angeles Times (05/10/12) Puzzanghera, Jim

The Consumer Financial Protection Bureau (CFPB) will propose rules on mortgage fees this summer that the Bureau’s Director Richard Cordray says will “bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them.” The proposals include a ban on origination charges based on the size of the loan, a prohibition on incentives that steer consumers into more costly loans, a requirement that brokers and loan officers undergo criminal background checks and special training, and a standardized screening process for loan originators. The Bureau is also considering changes to discount points, such as requiring that they come with reduced interest rates and that lenders offer a loan option without discount points to help consumers comparison shop. The Bureau is currently seeking feedback from the public and the mortgage industry.

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New Member Welcome

AFSA welcomes new Active Members Keystone Financial UT LLC, Reliable Auto Finance, Inc. and Ricart Financial Services, Inc.
Keystone Financial UT LLC is an installment loan company and a member of the Keystone Financial group of loan companies. website
Reliable Auto Finance, Inc. is an indirect vehicle finance company based in Grand Rapids, Mich. website
Ricart Financial Services, Inc. DBA Central Credit Corporation is the parent company of Central Ohio Credit Corporation and Central Missouri Credit Corporation, providing indirect subprime automotive financing. website

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Inside the Beltway
GOP Blocks Senate Debate on Dem Student Loan Bill
Associated Press (05/10/12)

On May 8, Senate Republicans blocked a Democratic bill to maintain low interest rates for college student loans. A 2007 law approved by a Democratic Congress gradually lowered the rates for subsidized Stafford loans, but they are set to double for new loans beginning July 1. According to the Education Department, 7.4 million low- and middle-income undergraduates could be affected.
The bill would keep interest rates for these loans at 3.4 percent for another year, and would have no impact on current loans. Republicans oppose the Democratic plan to pay for the bill, which would impose additional Social Security and Medicare payroll taxes on high-earning stockholders in some privately owned corporations and professional practices. And Democrats object to the GOP plan to pay for the bill by eliminating a preventive health program created by Obama's 2010 health care law.
Both parties know that they need bipartisan consensus to pay for maintaining the low student loan interest rate. Because neither party wants to be blamed for increasing students' costs during the presidential and congressional election season, both sides have strong motivations to reach a deal. But for now, they are challenging each other to make the first move.

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Fed Chairman Bernanke Says Many Businesses and Consumers Are Finding it Easier to Borrow
Associated Press (05/10/12)

Businesses and consumers are finding borrowing easier, said Federal Reserve Chairman Ben Bernanke at a conference. “Notwithstanding the various headwinds, credit conditions in the United States have improved significantly in a number of areas,” Bernanke said. According to the chairman, consumers with strong credit have “ready access” to credit card and auto loans, but not necessarily mortgage loans. After adjusting for inflation, loans to U.S. homeowners have fallen 13 percent from their peak, Bernanke said. A slow economic recovery, troubled housing market and cautious lenders will likely delay improvement, he added. Addressing small businesses, he said that while small loans from banks are increasing, they remained 15 percent below their 2008 peak at the end of last year.

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National and State News
Auto Sales Rise Puts U.S. on Pace to Best Year Since 2007
Bloomberg (05/10/12) Green, Jeff and Trudell, Craig

U.S. auto sales increased 10.3 percent through April and are on track to reach 14.3 million cars and light trucks this year – the best showing since 2007 and the third straight year sales have risen by at least 10 percent, according to Bloomberg analysts. Auto sales have surpassed estimates, spurred by pent-up demand, an improving economy and loosening credit. Automakers have increased their forecasts for full-year industry sales, increased worker shifts, and curtailed annual shutdowns to meet demand.
According to Matt Stover, an industry analyst at Guggenheim Partners, the biggest threat to the continued gains in sales this year could be the minimal growth of income because some of the strength of sales is the result of buyers’ willingness to reduce savings. Despite the rise of gas prices, consumers seem to be feeling more stable and are less concerned about losing their jobs – this stability means that they are not as concerned with making purchases, said Fred Diaz, president of Chrysler’s Ram truck brand.

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Oakland Wants Banks to Clean Up Blight
KQED News (05/07/12) Shahani, Aarti

To combat blight, Oakland, Calif., is considering an ordinance that would make banks register, inspect and maintain homes that are in default, but not yet foreclosed on. The city adopted an ordinance in 2010 that required banks to register, inspect and maintain foreclosed homes or face a $5,000 penalty. Councilmember Jane Brunner, the supporter of the new ordinance, said it is time to expand the success with managing blight to properties in default. If adopted, banks and servicers would have to register homes at the beginning of the foreclosure process. Banks would be responsible for keeping the utilities on if the owner walks away, but the property is occupied by tenants. If the property is unoccupied, the lender would be responsible for all maintenance of the property. According to Brunner, because of the issuance of a notice of default, adding the responsibility of defaulted properties upon the lender is “not that difficult for them.” Brunner also affirmed the legality of the ordinance, citing ordinance from other cities.
Concerns regarding these ordinances have been raised, however. The Federal Housing Finance Agency is currently suing Chicago over a similar ordinance, charging that there is no foolproof way to know if a property is vacant and that the owner is responsible until the foreclosure sale is completed.

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Chicago Cracks Down on Vacant Properties
Chicago City Hall Examiner (05/05/12) Hutson, Wendell

Chicago’s vacant property ordinance, which was amended last fall to place more responsibilities on banks, was touted as a success by Mayor Rahm Emanuel in a six-month review of the ordinance provided to Alderman Pat Dowell, who led the effort to update the ordinance last year. “Chicago’s updated vacant properties ordinance is a national example of how cities can protect residents from the devastating impact vacant properties have on the economy and public safety of our communities,” said Mayor Emanuel. “The results are clear: we are able to further ensure that banks do their part by securing these properties and working towards stability in our neighborhoods.”
In the first quarter of 2012, the city issued 2,500 vacant property ordinance violations to more than 150 financial institutions, resulting in total fines of $619,000 – a 123 percent increase from the first quarter of 2011, according to Emanuel. The total of vacant property registrations issued also rose 56 percent period from October 2011 to April 2012 compared to the period of October 2010 to April 2011. Dowell wants even more pressure placed on banks. “We must increase the pressure on banks to come into compliance and work to combat the negative impact foreclosures and vacant properties have in our neighborhoods,” she stated. The city currently has 6,500 outstanding complaints about vacant properties, and plans to hire additional inspectors, Emanuel announced.

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Missouri Payday Loan Petition Sparks Controversy
Columbia Missourian (05/07/12) Kreinberg, Jake

Organizers of a Missouri petition to cap the annual interest rates that payday, title, installment and consumer credit lenders can charge at 36 percent submitted approximately 180,000 signatures to the Secretary of State’s office on May 6 – almost double the number required for its inclusion on the November ballot. However, several obstacles remain. On April 5, Cole Court Circuit Judge Daniel Green ruled that the petition’s summary statement is “insufficient, unfair, (and) likely to deceive petition signers and voters,” as it fails to mention the 36 percent cap. The petition’s fiscal statement was also ruled ineligible because the auditor’s statement failed to calculate the loss of state revenues from installment lenders, who would also be affected by the measure, according to Edward Greim, an attorney for a plaintiff in the case.
The state attorney general’s office has appealed the decision, but if the ruling is upheld and the official ballot title is vacated, the signatures collected could be considered invalid. In addition to opposing the language of the petition, opponents have alleged that the petitioners have “abused the electoral process” by including signatures of non-registered voters and using unregistered and out-of-state petition passers.

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Interest in Prepaid Cards Growing
Middletown Journal (05/04/12) Frolik, Cornelius

The roughly 1.3 million households in Ohio that use little or no traditional banking services are increasingly relying on prepaid debit cards to meet their financial needs. The cards have been around for years, but interest in them is growing, particularly among younger generations. According to a Javelin Strategy & Research study, approximately 13 percent of U.S. consumers used prepaid cards in 2011, up from 11 percent the previous year. In contrast, ownership of more traditional financial products such as credit and debit cards decreased.
Underbanked consumers prefer to pay with cash, but that is not possible in all situations, said Javelin director of payments research Beth Robertson. “Prepaid offers them a lot of flexibility of a credit card — like the ability to make purchases online and not carry cash — but it is not a credit tool,” she said. “Cash-flow control is the biggest advantage.” Prepaid cards allow consumers to pay bills online, receive direct deposit, make online purchase, and protect against theft of personal information without a bank account. Consumer advocates warn that prepaid cards often have large fees for basic transaction such as card activation, balance inquiries and cash withdrawals.

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CFPB Hires Outspoken Critic of MERS and Payday Lending
American Banker (05/09/12) Horwitz, Jeff

University of Utah law professor Chris Peterson has been hired by the Consumer Financial Protection Bureau as an Enforcement Analyst. Peterson has been critical of the Mortgage Electronic Recording System (MERS), specifically its standing to bring foreclosure actions and its “culpability in fostering the mortgage foreclosure crisis,” as he stated in a 2009 paper. Peterson has also argued for more intervention in payday lenders’ alleged predatory practices, recommending that municipalities require payday lenders to mark themselves as “predatory” on storefront signage, in a paper published this year. "This appointment manifests the Bureau's willingness to appoint senior staff members who have staked out strong positions on the merits of highly contentious issues the Bureau will be facing," stated attorney Alan Kaplinksy, BallardSpahr.

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May 10, 2012

Forward To A Colleague

Carleton, Inc.
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