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Senators Warn HUD, Treasury about Lingering Eminent Domain Proposals
HousingWire (12/02/13) Panchuk, Kerri Ann

A bipartisan group of U.S.s Senators sent a letter to Treasury Secretary Jack Lew and Department of Housing and Urban Development (HUD) Secretary Shaun Donovan asking that they take firm steps to address the use of eminent domain to seize underwater mortgages. Pat Toomey (R-PA), John Boozman (R-AR), Mark Begich (D-AK) and Heidi Heitkamp (D-ND) wrote the letter urging HUD to use its existing authority to prevent the Federal Housing Agency (FHA) from insuring mortgages on any properties that are affected by an eminent domain proposal.

Richmond, Calif., has taken the farthest steps to use its eminent domain power. Earlier this year, the city issued letters to banks asking for best offer prices on homes. The FHA voiced opposition to the plan, noting that it would “negatively affect the extension of credit to borrowers seeking to become homeowners.” The Obama administration has taken a wait and see approach, but the Senators believe more action is necessary.

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Inside the Beltway
CFPB Puts Student Loan Servicers under Scrutiny
PoliticoPRO (12/03/13) Davidson, Kate

The Consumer Financial Protection Bureau (CFPB) announced on Dec. 3 that it finalized a rule to allow it to regulate and oversee the nonbank student loan servicing market, beginning March 1. The bureau previously had the authority to regulate how banks service loans.

“Given how quickly this market has grown and the recent uptick in delinquency rates, it is important for us to ensure that borrowers receive appropriate attention from their servicers,” said CFPB Director Richard Cordray. In a report released earlier this year, the CFPB noted that outstanding student debt is approximately $1.2 trillion. The report also found that nearly 7 million borrowers have defaulted.

The new rule will bring servicers that manage more than one million accounts under the CFPB’s jurisdiction. The bureau expects that the rule will cover the seven largest participants and nearly 49 million accounts. The CFPB stated that the rule is timely as its complaints database has shown significant issues with poor customer service, how servicers interact with members of the armed services, and borrowers having trouble making partial or prepayments.

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Volcker Rule on Bank Risk Approaches its Final Edits
The New York Times (12/03/13) Protess, Ben

The long awaited Volcker Rule, which would ban banks from trading for their own benefit and limit their ability to invest in hedge funds, is finally nearing passage. The rule was originally due more than a year ago, per congressional mandate, but the rule was far more difficult to write than expected. A final vote by the five agencies responsible for writing the rule is expected next week.

Of the more than 400 regulations in the Dodd-Frank Wall Street Reform and Consumer Protection Act, regulators have struggled over the Volcker Rule the most because it affects such a large swath of the banking industry. Democrats have argued that the new rule will prevent future trading disasters. However, industry and Republicans have noted the extreme volume of the rule – currently at more than 950 pages – and growing tension between agencies implementing the rule. That tension originated from determining how to differentiate between legitimate practices and proprietary trading.

Regulators have come to a tentative deal on language with each of the five regulators inserting more lenient language in certain sections and more strict language in others.

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Treasury's Lew Outlines 2014 Regulatory Roadmap; Talks Volcker Rule
American Banker (12/05/13) Borak, Donna

In remarks to the Pew Charitable Trusts on December 5, Treasury Secretary Jack Lew vowed that federal regulators would issue a strict version of the long-awaited Volcker Rule, which bans proprietary trading and investment in hedge and equity funds by banks. He also outlined other regulatory goals that he believes are critical to achieve in 2014 and beyond.

Lew noted that the financial system is much safer than ever before and regulators have new, powerful tools at their disposal to ensure that a repeat of the financial crisis is avoided. He also acknowledged the tardiness of regulators in finalizing rules required by the 2010 Dodd-Frank Wall Street Reform Act, but stressed the need to strike the correct balance. "While the process of putting these reforms in place has taken longer than we hoped, much has been done, and much is being completed," said Lew, who said that the remainder of the required rules will be completed by the end of the year.

Secretary Lew also called on Congress to ensure that regulators are provided with a constant, reliable source of funding, warning that if they were not, the American consumer could suffer. Lew went on to highlight the 2014 regulatory agenda, noting that steps will be taken to ensure that global banks are meeting new standards, developing a new benchmark rate to replace the LIBOR and addressing risks to shadow banking.

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National and State News
Brisk Demand Lifts U.S. Auto Sales
The Wall Street Journal (12/03/13) Rodgers, Christina and Kell, John

Auto sales in the United States hit a six-year high in November, pushed by Black Friday specials and competitive pressure in the marketplace. More than 1.25 million light vehicles were sold in November, marking a 9 percent increase year over year. The increase in competition is reflected in the average price paid for vehicles; that number dropped by about $200 in November.

The industry has steadily increased its sales and has enjoyed a positive market since 2009, when just 10 million cars and trucks were sold. Industry analysts expect car companies to close 2013 with far more than 15 million cars and light trucks sold. However, some analysts warn that as demand plateaus, auto companies could face increased inventories and the need to slash prices.

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Opinion: Donít Mine Data from License Plates
Boston Globe (11/29/13) Crockford, Kade and Wolfe, Gavi

Outrage over government spying at the federal level has reached a fever pitch in recent months. State and local agencies have begun to maintain large amounts of data about innocent people. Opinion writers Kade Crockford and Gavi Wolfe, both with the ACLU, state that local politicians must take responsibility to protect their constituents’ privacy.

According to the authors, the most important way that the Massachusetts legislature can protect their constituents’ privacy is to pass the License Plate Privacy Act (LPPA), which would restrict the use of Automatic License Plate Reader technology (ALPR). ALPR technology allows police to quickly scan license plates using cameras attached to their vehicles; the plate and GPS information is cataloged and saved. Local Massachusetts authorities are using the technology to track down stolen cars and expired registrations, but the information is also getting to federal and national agencies.

 Editors Note: Kade Crockford directs the Technology for Liberty initiative at the ACLU of Massachusetts. Gavi Wolfe is the organization's legislative counsel. AFSA continues to work with federal, state and local officials to ensure that financial institutions continue to have access to all the tools at their disposal, including ALPR, to effectively service automobile loans.

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Behavioral Data Startup Combines Big Data with Credit 'Traffic School'
American Banker (12/04/13) Wisniewski, Mary

Zaydoon Munir, an ex-Experian executive has started RevolutionCredit, a startup company that takes borrowers financial literacy into account when determining credit worthiness. Launched in April 2012, RevolutionCredit relies on behavior information that the company gathers from interactions with borrowers on its website. A borrower’s willingness to take part in educational financial literacy courses helps determine how prepared they are to take a loan. The courses are broken into 15-minute video segments, followed by a short knowledge assessment. Munir’s theory is that a person who is willing to go through a few extra hurdles is a less risky borrower than their credit score may imply on its own.

"People are big on intentions but not as big on the follow through," says Munir. "If you line up 1,000 consumers who have the same credit score, RevolutionCredit will help you identify those who will perform one to two credit score bands better than what their credit score otherwise indicate." The company’s software works with partner creditors to invite borrowers to take courses at certain points during interactions. The consumer, at the end of the course work, owns their certificate, allowing them to take it to other lenders.

Munir hopes that the technology can be used to prioritize collections, getting borrowers who have thin consumer portfolios better rates and ultimately, giving the lenders it works with the data that they can use to investigate their underwriting practices. Industry analysts view RevolutionCredit’s concept with promise, noting that it measures an important but elusive metric; character.

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Experian Subprime Volume Still Rising but Rate Is Slowing
SubPrime Auto Finance News (12/04/13)

Subprime loans continued to tick upward in the third quarter for both new and used vehicles according to a study by Experian. Non-prime, subprime and deep subprime new vehicle loans rose to 26.04 percent in the third quarter, up just over two points from the same period last year. Used vehicles in the same category also ticked up, but just by .52 percent from 54.95 to 54.43.

Because loan rates are low, consumers were able to get more vehicle for the same down payment in the third quarter and 2013 as a whole; the average monthly payment in Q3 for used vehicles remained flat at $350 and new vehicles rose just $46 to $458. The average amount financed for a new vehicle reached its highest point since 2008, hitting $26,719, while the average interest rate for the same vehicles dropped to 4.27 percent.

Leasing remained strong in the third quarter, accounting for just over 27 percent of new-vehicle financing, representing a 2.82 percent increase year over year.

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Montgomery City Council Extends Payday Loan, Title Pawn Moratorium
The Montgomery Advertiser (12/04/13) Kachmar, Kala

The Montgomery, Alabama city council extended a moratorium on the issuance of new licenses for payday and title loan storefronts during their December 3 meeting. Existing licensees will be able to renew their license or transfer it to someone else, but new licenses will not be issued.

The issue caught the attention of the council in July when Councilman Charles Smith registered concerns over the number of businesses in the area surrounding Atlanta Highway. The council approved a three month moratorium in September. Smith noted that he is not attempting to put people out of business, but is instead, trying to keep available space open for more diverse businesses. Nine other cities in Alabama have passed ordinances that mostly manage the businesses via zoning ordinances, requiring a minimum distance between the storefronts and schools, churches, public parks, and other structures. The city council will consider a zoning ordinance concerning payday and title loan storefronts at their December 17 meeting.

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December 5, 2013

Forward To A Colleague

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