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American Auto Sales Seen at Annual 16 Million with Profit
Bloomberg (09/16/13) Trudell, Craig

U.S. auto sales are set to hit their fifth straight year of growth, closely approaching the 2007 pre-recession mark of 16.1 million. According to Morgan Stanley, auto companies are in in the midst of the fastest expansion since the 1950’s.

Industry analysts fully expect auto sales to return to the pre-recession mark of 2007 as demand continues to grow, but to get there, lenders will have to begin issuing auto loans to less-than-qualified customers. Many analysts are saying that the auto marketplace has not seen its biggest influx of new customers yet. Americans traditionally replace their vehicles at an enormously high rate as they approach 13 years old, and the American national average age of vehicles now stands at 11.5 years. Analysts argue that by 2015, automakers will see a rush of consumers looking to trade in their old vehicles for new models.

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Executives Join AFSA Board of Directors

Five financial services executives have been elected to the AFSA Board of Directors. The new board members are Angela Chattin, President, CarMax Auto Finance; James Cho, President & CEO, Hyundai Capital America; Thasunda Duckett, CEO, Auto & Student Loans, Chase Auto Finance; Tim Russi, President, Auto Finance, Ally Financial Inc.; and Grover E. Todd, Jr., CEO, Credit Central, Inc.

Chattin leads all aspects of the auto finance business at Carmax Auto Finance. Since 1997, she has led the growth and development of CarMax Auto Finance and its associates, receiving several promotions throughout her career. Chattin also serves on AFSA’s Vehicle Finance Advisory Board.

Cho recently joined Hyundai Capital America to lead its growth and development in the Americas. Previously, he was Division Head of Corporate Strategy and Finance at Hyundai Capital Services, Inc. in Korea. Prior to joining the Hyundai Motor Group, Cho served as the President of Oliver Wyman’s Seoul office for five years.

Duckett was named CEO of Chase Auto Finance in 2013. She oversees both the auto finance and student loan spaces for Chase. Before joining the division, she worked as the National Retail Sales Executive in Chase’s Mortgage Banking division, where she managed 4,000 mortgage bankers who provided home financing to customers across the nation.

Russi is responsible for developing the strategy and driving the performance of the auto business for Ally. He has been in the auto finance industry for more than 25 years and has led the operations of several large companies. He is also a member of the AFSA Vehicle Finance Advisory Board. Russi will be replacing Greg Merryman, Ally Associate General Counsel, on the Board.

Todd is the Founder and CEO of Credit Central, LLC. He has more than 28 years of experience in the consumer finance business and has served on the Boards of the Independent Consumer Finance Association of South Carolina, the Georgia Industrial Loan Association of Georgia, National Christian College Athletic Association, and is Chairman of Trustees of Blue Ridge Ministries. Todd is also a member of the AFSA Independents Sections Advisory Board.

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New Member Welcome

AFSA welcomes new Active Member Franklin Financial Corporation and Business Partners CoBar LLC, Jericho Information Technology, Jeffries LLC and Liberty Motor Club.

Based in Milwaukee and serving all of Wisconsin, Franklin Financial specializes in helping consumers get the subprime credit for automobile loans. Franklin  provides end-to-end customer support from loan origination to servicing.

Dallas-based CoBar, LLC specializes in the purchase of debt.

Jericho Information Technology provides software that helps financial institutions improve profitability, predict and respond to market changes and center risk appetite and strategies. They are based north of Dallas.

For more than 50 years, Jeffries LLC has been providing insight, expertise and execution to investors, companies and government entities, offering a full range of investment banking products and services. The firm operates worldwide and is headquartered in New York City.

Liberty Motor Club is an automobile club providing services to Tennessee-area consumers. The company is headquartered in Dayton, Tenn.

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Inside the Beltway
CFPB Alters QM, Resists Deadline Change
American Banker (09/13/13) Witkowski, Rachel

In nearly 4,000 pages of additional regulations, the Consumer Financial Protection Bureau (CFPB) made additional changes to the mortgage rules it first issued in January 2013. One aspect that did not change was the deadline for banks to be compliant with the rules; the CFPB noted that banks should be prepared to comply with the rules by the January 10, 2014, effective date.

The changes follow complaints from both industry players and legislators that the overly restrictive mortgage rules could push smaller lenders out of the market. Still, any change that is made, even those that are seen as a benefit to the mortgage industry, come at a cost to lenders, requiring more compliance systems, more training and additional staff.

In the Sept. 13 amendments, the CFPB revised its definition for “rural” and “underserved” communities. Additionally, the CFPB made it much easier for servicers to issue short-term forbearance plans for consumers who may be having temporary issues making payments. The previous regulations required a lengthy loss-mitigation process, even if the borrower required only a few weeks or months of assistance.

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CFPB Issues Warning on Payroll Card Accounts
American Banker (09/12/13) Witkowski, Rachel

The Consumer Financial Protection Bureau (CFPB) issued a statement on Sept. 12 warning companies that it will pursue regulatory and enforcement action against any entity that forces its employees to receive their wages via pre-paid payroll card en lieu of other methods. The bulletin made clear that pre-paid cards can be offered as an option, but cannot be required. In addition, fee disclosures and error resolution must comply with both state and federal consumer protection laws.

Employers “cannot mandate that their employees receive wages on a payroll card," said CFPB Director Richard Cordray. "And for those employees who choose to receive wages on a payroll card, they are entitled to certain federal protections." The agency noted that it had been receiving reports from workers complaining that their employers required them to sign paperwork issuing their pay to a pre-paid card, as well as from uninformed consumers who are hit with big fees when withdrawing cash from their pre-paid accounts.

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Fed Supervision of Nonbanks Still Up in Air
American Banker (09/18/13) Borak, Donna

The Federal Reserve Board of Governors is still determining how best to oversee non-bank financial institutions that are considered “systematically risky,” according to  Chairman Ben Bernanke after the two-day meeting of the Federal Open Market Committee (FOMC). American International Group and GE Capital have been deemed systematically important by the Fed, but the central bank has yet to name other players.

Prudential Financial and MetLife have been highlighted as possible additions to the list of firms that will come under the purview of the Fed, which Bernanke notes is intended to ensure that companies continue to do business, but do not endanger the broad stability of the financial system. Prudential has appealed the Fed’s decision to designate it as systematically important and regulators have until Sept. 23 to respond.

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National and State News
Mortgage Lending Reaches 5-Year High
The Wall Street Journal (09/18/13) Timiraos, Nick

Consumers rushed to lock in the lowest mortgages rates in nearly 60 years, causing mortgage lending to jump to a five-year high last year. Lenders originated close to 9.8 million mortgages in 2012, an increase of 38 percent from 2011’s 16-year low of 7.1 million. The jump was caused by a large uptick in refinancing. Nearly 6.6 million loans in 2012 refinanced existing mortgages, which represents a 54 percent increase from just two years ago.

The data is from a new report from the Federal Reserve, which also showed that borrowers tended to rely on low down payment lending options that are backed by federal agencies like the Federal Housing Administration and the Department of Veterans Affairs. Delinquency rates have also fallen off sharply. Of conventional home purchase loans made in 2010, just 0.5 percent had two or more missed payments.

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N.Y. Seeks Ban on Force-Placed Insurance Kickbacks to Banks
American Banker (09/19/13) Cumming, Chris

A new set of proposed rules that strive to reform the creditor-placed insurance industry was announced by Gov. Andrew Cuomo Sept. 19. The rules would prevent insurers from paying commissions to banks or servicers, issuing policies on properties serviced by a bank or servicer they are affiliated with, and reinsuring policies with an entity affiliated with the bank or servicer, among other requirements.

According to Gov. Cuomo, the new regulations will help ensure the reforms included in agreements with the major New York creditor-placed insurers earlier this year apply to the industry moving ahead and new insurers that enter the market.

"We are taking a major step in righting this injustice and reforming the industry by proposing tough new regulations to protect homeowners. Insurers should be on notice that New York State is going to continue rooting out abuse in the industry and protecting taxpayers," Cuomo said.

Creditor-placed insurance is a policy taken out by a lender or servicer when the consumer fails to maintain required coverage of their own. According to N.Y. Superintendent Benjamin Lawsky, the investigation found that premiums were inflated.

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Racial Disparities Found in Home Lending Data
American Banker (09/18/13) Witkowski, Rachel

According to a new paper by the Federal Reserve Board, Black and Hispanic mortgage borrowers had far higher default rates and lower credit scores in 2012 than non-Hispanic white and Asian borrowers. Additionally, the report found that minorities were more likely to have higher interest rates. The report stated that "delinquency is highly correlated with credit score, local area house price declines, and higher-priced loan status, but substantive differences in delinquency rates across racial and ethnic groups remain after accounting for these variables."

The paper found that more than 20 percent of Black and Hispanic borrowers who purchased a mortgage loan in 2006 were delinquent by 60 days or more. The rate for Asians and non-Hispanic whites was just 7 percent. However, the paper noted that since 2010, credit scores for home mortgages have risen across the board and delinquency rates have dropped considerably. The Fed’s report was an added supplement to raw HMDA data that was released by all banking regulators on Sept. 18.

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Cincinnati's Foreclosed Property Registration Program Could Expand
WVXU Cincinnati (09/17/13) Hanselman, Jay

A pilot foreclosure registration program in Cincinnati, Ohio, has been successful and needs to be extended according to city council member P.G. Sittenfeld. “The pilot has really been a success in its primary goal of fighting blight and increasing safety” Sittenfeld said. “It’s also allowing us to contact more citizens in foreclosure and connect them with resources to help them through the process."

A news release touted that the Cincinnati foreclosure registration pilot has logged more than 600 properties and at least half are registered with the city. Sittenfeld argues that the pilot plan is working and the program is self-sustaining. Banks have been taking much better care of the vacant properties and the fees are generating revenue for the city. The council will have to approve the full implementation of the registration during its meeting on September 25.

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September 19, 2013

Forward To A Colleague

Counselor Library
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Carleton, Inc.
GoldPoint Systems
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ParaData Financial
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.