View from CBA October 18, 2013

October 18, 2013

Shutdown Ends, Debt Default Averted

This week, Congress finally came to its senses and funded the government and raised the debt ceiling. This has done untold damage to consumer borrowing and confidence. October’s numbers will tell the whole story. This all may be a repeat come January when government funding runs out again, and February when the debt limit is reached.

Banks Step Up During the Shutdown

Many of CBA’s members reached out to their customers affected by the government shutdown to eliminate fees and provide other assistance. Banks know the shutdown was a period of hardship for many of their customers, and letting customers know we are there for them during the tough times makes a difference. 

CFPB Releases Skewed Report on Private Student Lending

On October 16, 2013, the CFPB Student Loan Ombudsman released his annual report which skews the reality of today’s private loan market. The report relies on a sweeping characterization of the market based on 3,800 unverified complaints from 0.002 percent of customers. What remains a continued disappointment is the CFPB has ignored that over 86 percent of student loan borrowers have federal student loans. The Bureau should help all consumers especially when federal loan portfolios carry a 14.7 percent, three-year default rate. It appears these borrowers are under great duress since federal loans, unlike private loans, are funded without determining the borrower’s ability to repay. This is something the CFPB has indicated is the most important consumer protection. A fair, transparent and accurate analysis of the market is what all borrowers deserve. 

Joint Non-QM Guidance

We expect a joint guidance memo any moment from the FDIC, OCC, and CFPB on non-QM mortgages as it relates to disparate impact (DI). The CFPB has stated several times DI should have no effect on this market and banks should not shy away from this product. While our banks are more comfortable today than in June, many still have heartburn given the new liability. 

Roundtable Meetings

We have two groups of CBA member bank executives coming to Washington, D.C. for round table discussions next week, October 22-24, 2013. Those meetings will be sponsored by Lender Processing Services and Equifax with a number of guest speakers, including Congressman Blaine Luetkemeyer (R-MO).

News and Notes

Bertha Garza, who has used her role at CBA member IBC Bank in Brownsville, TX, to help spread financial literacy, was recognized with the American Banker's Community Impact Award. The award was presented for the first time at the publication’s annual gala celebrating the industry's most powerful women. CBA was a proud sponsor of that event.