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New Rules to Govern Illinois Foreclosures
Chicago Tribune (02/22/13) Podmolik, Mary Ellen

New rules announced by the Illinois Supreme Court on Feb.22 require that lenders show they have exhausted all possible avenues and options for borrowers before attempting foreclosure action on a home. The new regulations, which will take effect on June 1, are designed to protect homeowners who are still struggling as a result of the housing bubble and who may not be aware of programs available to them. Some initiatives included in the rules overlap with ones promulgated by the Consumer Financial Protection Bureau.

According to the new Illinois rules, lenders will have to file an affidavit with the court detailing the steps that were taken to provide a borrower with relief from foreclosure. The documents must also detail communication with the borrower and the status of any ongoing communication. Illinois already has one of the longest foreclosure timetables in the nation; it is unlikely that the new rules will drastically shorten the time it takes for new, qualified homeowners to move into homes. According to RealtyTrac, it takes an average of 697 days to process a foreclosure in the state.

The process is also stalled by detailed documents that must be provided to the court and the homeowner regarding when the property will be sold and who actually performs the auction. In some counties, the sheriff’s office, instead of a private company, must perform foreclosure auctions. In addition, lengthy notification requirements require lenders to make borrowers aware of each step of the foreclosure process.

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Credit Card Surcharging Focus of Latest AFSA White Paper

On Feb. 25, AFSA’s State Government Affairs Committee published a white paper on credit card surcharging – a topic that has become prevalent in state legislatures since the January 26, 2013 effective date of a provision in the July 2012 settlement between retailers and several major credit card issuers allowing merchants to “surcharge” or charge “checkout fees” to consumers who elect to use their credit cards in lieu of cash, check or other similar means.

The paper provides an extensive overview of legislation that would add 19 states to the list of 10 – CA, CO, CT, FL, KS, ME, MA, NY, OK, TX – that already prohibit retailers from assessing these credit card surcharging fees on cardholders. The paper also highlights state legislation relating to surcharging or pricing discounts for gasoline purchases, surcharging by private government entities and the disclosure of interchange fees to consumers. The white paper can be viewed by AFSA members here.

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Inside the Beltway
U.S. Senate Approves Lew as Treasury Chief
Reuters (02/27/13) Yukhananov, Anna and Rachelle Younglai

Jack Lew was confirmed on Feb. 27 by a 71-26 vote as the country’s next Treasury Secretary. He inherits a government teetering on the edge of $85 billion in spending cuts; his first job will be to find what to cut and where to begin to reduce the $16 trillion national deficit. Two other critical deadlines follow quickly after the March 1 sequester date: the expiration of funding for nearly every government agency on March 27 and surpassing the U.S. government’s legal borrowing limit on May 19.

Lew will quickly become the lead negotiator on the administration’s behalf during what will quickly become tense negotiations to control the nation’s spending. Lew listed revamping the U.S. tax code as a top priority. Other challenges for him include getting China – which has the world's second-largest economy – to loosen currency restrictions that hurt American manufacturers, implementing new financial regulations, and winding down the government sponsored entities Fannie Mae and Freddie Mac.

Previously, Lew worked for President Obama as his chief of staff and as President Bill Clinton’s budget director.

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Bipartisan Group Embraces FDIC-Like System for Mortgages
American Banker (02/25/13) Finkle, Victoria

The Bipartisan Policy Center (BPC) has proposed a Federal Deposit Insurance Corporation (FDIC)-like entity to guarantee mortgages in the case of catastrophic loss. The fund would replace Fannie Mae and Freddie Mac, which the group stated spectacularly failed during the housing crisis. The Treasury Department previously suggested a similar solution, but the plan was nixed by conservatives as having too much government intervention.

The proposed government guarantee would "cover losses from an account pre-funded by payments of a separate catastrophic guarantee fee, but only after private credit enhancers have exhausted their own capital and reserves.” Senator Bob Corker (R-TN) said the plan moves in the right direction by removing government intervention in the mortgage market and placing private capital first.

The group argued that the fine line between regulation and accessible credit has been blurred considerably since the financial crisis began and the mortgage industry has suffered under an onslaught of excessive regulation. “The commission cautions against well-meaning regulations that may go too far and end up reducing credit to consumers. Going forward, a combination of proper regulation, adequate liquidity, and the right incentives in the private market can help ensure that homeownership remains a vital housing and wealth-building option," the BPC report stated.

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National and State News
Young Adults Are too Broke to Get Loans
CNN Money (02/27/13) Luhby, Tami

Adults under the age of 35 have less debt than the same age group did ten years ago, but the trend is not good, according to a new Pew research study. "It's a sign of economic struggle, not economic success," said Richard Fry, senior economist at the Pew Research Center. "They don't have the mortgage, but they don't have the house."

The study showed that young adults would like to finance a car or purchase a home via a mortgage, but are unable to do so because of the economic downturn, fear of a lackluster job market and an inability to obtain credit in the first place. Young adults easily can see the stresses of financial downturn all around them and adapt appropriately. Credit card debt dropped by 34 percent from 2008 to 2012.

The credit level of young adults fell by 14 percent from 2001 to 2010 and rose by 63 percent for those aged 35 and older. The only sector where debt increased for Generation Y was in student loan debt, which sky rocketed by 40 percent in the study period.

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St. Louis Passes Law Requiring Mediation Prior to Foreclosure
KMOV.com (02/27/13) KMOV Staff

St. Louis Mayor Francis Slay signed a bill into law on Feb. 27 that would require lenders to seek mediation with borrowers who are delinquent on their mortgages before seeking a foreclosure action. “Home foreclosures present dangers to the health, safety and welfare of the public, thereby creating a public nuisance. They hurt property values and interfere with the collection of real property taxes. It’s a serious concern, which municipal government cannot ignore,” said the mayor. Last year, 1,116 residential foreclosures occurred in St. Louis.

The mediation costs will be passed on to the lender in the form of a $100 filing fee. Additionally, lenders will be required to issue a “notice of mediation” prior to initiating foreclosure procedures. The United States Arbitration & Mediation Inc. will attempt to reach the homeowner three times in a 15-day period, and if the homeowner wishes to proceed to mediation, the lender will be required to pay $350 for the cost of the service.

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Auto Loan Market Viewed as Healthy despite Delinquency Creep
Automotive News (02/27/13) Henry, Jim

Despite an uptick in 60-day delinquency of auto loans in the fourth quarter of 2012, a report by Experian Automotive said that the automotive finance sector remains strong. Auto loans that were late by 60-days or more – those considered to be “bad loans” by industry – rose from 0.72 to 0.74 percent from the same period in 2011.

If the higher figures are sustained, it could result in lenders tightening approval standards, especially for subprime borrowers, as they did in 2009 during the height of the recession, but analysts do not anticipate an imminent tightening. In 2009, the auto industry experienced the highest percentage of delinquent accounts at 0.94 percent and the most vehicle repossessions. Consumers have done their part by placing a higher premium on paying their auto loans in a timely fashion. The Experian report cites that without paying their auto loan, borrowers would be unable to get to work. In previous recessions, borrowers were more likely to pay their mortgages than their auto loans.

The economy and vehicle sales are improving overall, making it less likely that borrowers will default on their auto loans. "Of course, you never want to see an increase in delinquencies," said Melinda Zabritski, director of automotive credit for Experian. “When you take a step back and look at the market compared to where it was three years ago, we still have remarkable stability.”

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Car Tax Remedy in Danger of Stalling
The Atlanta Journal-Constitution (02/28/13) Sheinin, Aaron Gould and Torres, Kristina

Legislation to fix the double taxation of leased vehicles in Georgia has hit a roadblock in the legislature, despite the fact that it was expected to pass easily. Last year, the Georgia legislature made drastic changes to the way vehicles and vehicle purchases are taxed. In doing so, they eliminated the much maligned “birthday tax” paid by car owners for annual registration and instead created a new system of vehicle taxes. In doing so, they created a tax when an individual first leases a vehicle as well as each time they make a payment, making it far more costly to lease than purchase a vehicle.
HB 80 was intended to fix the double tax issue, but senators argued that the bill would cost more than lawmakers originally thought. The Georgia Senate views the estimated $141 million tax increase as a deal-breaker. House leaders, however, say that the bill is not a tax increase at all, because it should be scored with the 2012 budget, which included revenue cuts. In order to get the issue resolved, lawmakers inserted revenue neutral language into an unrelated bill, HB 266, and sent it to the senate, which angered many in the chamber, as state senators continue to see revenue increases as unfeasible.
Some state senators, however, have turned to HB 266 as a solution to avoiding the tax increases. They have proposed increasing the state rental car tax while also giving buy here, pay here dealers a break by lowering the normal title tax by two percentage points each time they sell a car. Beginning Feb. 28, the title tax for car sales will be 6.5 percent. But if the new HB 266 passes as amended, buy here, pay here dealers would only pay 4.5 percent. The change is supposed to make the bill revenue-neutral or even a net tax cut, although senators have not received a fiscal note and do not know the exact value of the tax savings they propose.

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Chase Auto Finance Taps New CEO
SubPrime Auto Finance News (02/25/13)

Thasunda Brown Duckett is assuming the CEO role at Chase Auto Finance after Marc Sheinbaum elected to seek other opportunities. "Thasunda has an outstanding record of success in Mortgage Banking, and has many strengths as a leader," said Gordon Smith, CEO of Chase's community and consumer banking. "Her strategic thinking and her business discipline make her uniquely qualified for this new role." Duckett’s new role will also involve overseeing Chase’s student loan business.

Duckett joined Chase from Fannie Mae in 2004 and led the company's East Region mortgage sales team for three years. She previously was channel executive of bank branch integration and director of affordable lending and emerging markets.

Duckett comes into the job as Chase Auto Finance finished 2012 with a double-digit climb in originations.

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February 28, 2013

Forward To A Colleague

Life of the South
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Carleton, Inc.
Counselor Library
Black Book
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AFSA Newsbriefs

AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. AFSA Newsbriefs is free for members. Send an email to newsbriefs@afsamail.org to subscribe.

AFSA's mission is to protect and improve the consumer credit business, maintain a positive public image, and create a legislative climate in which reasonable credit regulation can and will be enacted. The association operates in the public interest, encourages and maintains ethical business practices, supports financial education for consumers of all ages, and provides other assistance in related fields on an as-needed basis.

The American Financial Services Association has provided services to its members for over ninety years. The association's officers, board, and staff are dedicated to continuing this impressive legacy of commitment through the addition of new members and programs, and increasing the quality of existing services.