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Richard Cordray to be Renominated for Consumer Financial Job He Holds
The Cleveland Plain Dealer (01/24/13) Koff, Stephen

Director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, will be nominated by President Obama to keep his position, as the second term of the administration begins. Cordray was appointed on a temporary basis last year as a recess appointment to avoid a tough confirmation process in the Senate. That appointment is set to expire at the end of the year.

The White House defined the move as necessary to avoid a minority of Republican senators in the Senate Banking Committee from holding up the confirmation in the full Senate. The senators cited Cordray as an acceptable candidate, but were concerned about the incredible power he would wield heading the CFPB.

Cordray will now face another confirmation battle, as the Senate considers filibuster reform, the tool that was used to hold up his confirmation in 2011. The president will also nominate former New York U.S. Attorney Mary Jo White to lead the Securities and Exchange Commission (SEC).

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Registration Opens for 2013 Professional Development Programs

Every summer, the AFSA offers two professional development programs for aspiring leaders at its member companies. Registration for the two programs is now open.

The inaugural session of THE EDGE: Education, Development, Growth and Enrichment Tools for Consumer Finance Industry Professionals will be heldJune 2-7, 2013, at Mercer University in Atlanta. This new partnership will build upon the former NICCM program’s history of providing high-quality training. Led by professors from Mercer University and the industry’s top executives, Management I courses provide a sound basic knowledge for financial managers, while Management II courses delve deeper into financial issues with real-life applications.

AFSA’s long-established Leadership Development Program at the University of North Carolina – Chapel Hill provides six fast-paced intensive days of study for employees who are on the fast track. Professors from one of the nation’s best schools lead sessions on leadership, communications, negotiations, ethics, team-building exercise and the Experience Change Simulation that allows participants to create a plan for strategic change and receive immediate feedback on employee buy-in. The program is scheduled for July 17-24, 2013.

Download THE EDGE program brochure or register online.

Download the 2013 AFSA/UNC Leadership Development Program brochure or register online.

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Inside the Beltway
The Push to Align Key Safe Mortgage Rules
POLITICO Pro (01/23/13) By Prior, Jon and Davidson, Kate

Lenders and some members of Congress are pushing the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) to match their definition of a Qualified Residential Mortgage to the one put forth for a Qualified Mortgage by the Consumer Financial Protection Bureau (CFPB) earlier this month.

Senator Bob Corker (R-TN) stated that it makes no sense for the two definitions not to be the same. "Matching CFPB's version of a safe loan for any borrower with your definition of what constitutes a loan that is safe for securitization makes sense for our system, and it would be wholly consistent with the statute," he wrote. Sen. David Vitter (R-La.) is considering introducing legislation to force the two statutes to match.

The QRM rule, as originally introduced in 2011, required a 20 percent down payment and was considered by industry to be too restrictive and potentially cutting off opportunities to eligible borrowers. Regulators have been quiet about what they expect to be in the forthcoming rule, although analysts believe the 20 percent requirement will be reduced to more closely match the QM rule. The new QRM rule is expected in the next few months.

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National and State News
Syracuse Mayor Proposes Crackdown on Vacant Homes
The Post-Standard (01/24/13) Knauss, Tim

Syracuse Mayor Stephanie Miner will announce that city hall will be taking a tougher stance on the city’s more than 1,800 vacant homes in her state of the city address. “We’ve had so many people who have not met their obligations as property owners, and there has been no accountability,” she said. “The second you introduce accountability, you start to see people change their behavior.”

The new ordinance is similar to others in cities and towns across the nation and would require the owner of a home that has become vacant to register the property with the city and pay a registration fee of $250. The fee increases by $250 each year to a maximum of $1,000 until the property is either sold or demolished. Vacant property registries in other New York towns have forced many property owners, most of them financial institutions pursuing extended foreclosure actions, to maintain the property and ensure its security.

The city council will vote on the ordinance after it is proposed by the mayor. It is expected to pass.

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Kentucky Sues MERS over Mortgage Recording Fees
American Banker (01/24/13) Wack, Kevin

Kentucky became the latest state to sue MERSCORP Holdings, Inc. for improperly documenting mortgage assignments and thereby cheating the state government out of hundreds of thousands of dollars in recording fees. "MERS directly violated that law," said Attorney General Jack Conway. "The Commonwealth is ripped off when it comes to recording fees." Kentucky collects a $12 fee each time a loan is sold, and the state estimates that nearly 300,000 mortgages reside within the MERS system, none of which have had the appropriate fees paid. Conway estimated that each loan is sold on average three times, pushing the missed fees just above $1 million.

MERS has claimed the lawsuit as meritless, saying that all mortgage assignments are rooted in local land records and that all fees have been appropriately paid.

The state will receive assistance in its case against MERS from the New York Attorney General Eric Schneiderman and Housing and Urban Development Secretary Shaun Donovan, who co-chair a federal-investigative committee focusing on mortgage fraud.

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Peer-to-Peer Lending No Longer Just a Curiosity
Bloomberg BusinessWeek (01/20/13) Farzad, Roben

Since its inception, peer-to-peer lending has not had a large scale effect on the lending power of large banks. However, a previously unnoticed trend is beginning to develop. The loans that firms like Prosper and Lending Club offer have, for the last six years, provided solid returns and very low default rates.

Companies like Lending Club have huge advantages to larger banks. They have far lower overhead costs since they do not have to maintain brick and mortar banks. Additionally, since the financial crisis, large banks have been required to carry more capital in reserve, limiting the amount they can lend. Peer-to-peer companies have neither of these issues. Lenders are able to spread their investment out over several different notes, allowing them to mitigate risk. Lending Club, which serves prime borrowers, turns down 90 percent of its loan applications. The company reports that lenders with 800 or more notes in their portfolio have not lost any of their principal investment.

Peer-to-peer lending has exploded in Europe and especially in China, where the government closely monitors bank laws and trends. The lending system allows small businesses and individuals to easily and quickly borrow money without jumping through the regulatory hoops of the Chinese banking system.

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Young People Paying Off Credit Card Debt More Slowly
New York Times (01/17/13) Carrns, Ann

Two long-term studies from the Ohio State University show that young people are  borrowing on credit cards far heavier than their predecessors and paying off the balances much slower. The report, which combined a common study of spending data with a less common look at payoff trends among young people, was combined with data from previous generations to show that someone born between 1980 and 1984 has considerably higher debt than someone born before the date range. The study suggests that third generation borrowers are paying off their credit cards 24 percent slower than their parents and 77 percent slower than their grandparents.

The study did not identify what may be causing the trend, but Professor Lucia Dunn, an economics professor with Ohio State, said that higher student loan balances could be a contributing factor to the smaller credit card payments. Dunn also said the study showed that slightly raising the minimum payment requirement of credit card payments could spur younger generations to pay off their debt faster.

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In Protecting Defaulters, New York Stalling Housing Rebound
Bloomberg (01/23/13) Gopal, Prashant

The state of New York is dealing with a foreclosure crisis. More than 72,000 foreclosure cases are pending in the New York civil court, accounting for nearly one quarter of the state’s civil cases. Each foreclosure proceeding in the state takes nearly 1,000 days to complete, which has caused home values to drop in recent years. New York home values are ten percent below peak levels and have recovered just 6.9 percent, compared to a hard hit area like Arizona, , where home values dropped 40 percent below peak, but have recovered more than 20 percent.

"New York suffers from what appears to be altruism, in that it postpones foreclosures as long as possible — the problem is that altruism can be expensive," said Anthony B. Sanders, an economics professor at George Mason University. "It slows down the housing market and it results in lenders being almost unwilling to lend. New buyers will pay the price for this."

The state is one of five that requires a court to review the foreclosure proceedings before a bank may repossess a house. The Federal Housing and Finance Agency (FHFA) is considering levying a fee against the state in order to force regulators to work faster. Opponents argue that the fee will cause states to stop fighting against mortgage fraud and roll back consumer protections or face the consequences of higher mortgage rates for consumers.

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Ally Working with Students through Education Day at 2013 North American International Auto Show
SubPrime Auto Finance News (01/23/13)

At this year’s North American Auto Show Education Day, Ally Financial is offering free sessions to educate high school students about responsible borrowing and budgeting. The company’s Ally Wallet Wise financial literacy program is helping to provide local students with goal setting strategies and a savings plan so that they can buy their own car in the coming years.

"Learning about personal finance topics early on can help consumers make sound decisions about their finances throughout their adult lives," said Gina Proia, Ally chief communications officer and head of community relations. The one-hour sessions will cover subjects such as maintaining a good credit score and highlighting the differences between leasing and purchasing a vehicle.

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January 24, 2013

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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.