ADVOCATE

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ADVOCATE

• FFIEC
• State Role in Financial Regulation
• Risk Based Capital
• Mortgage Policy Regulation
• Farm Credit System

• Executive Education
• Bank Exam Training
• Non-Depository Training
• BSA Boot Camp
• Department Accreditation
• Examiner Certification

• CSBS Examiner
• News Bytes
• www.csbs.org
• Press Relations

COMMUNICATE
EDUCATE

• Mortgage Supervision
• Mortgage Licensing
• Bank Secrecy
• Disaster Planning
• Examination Tools

COORDINATE
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CONFERENCE OF STATE BANK SUPERVISORSChampions of
the State Banking SystemStatement of Principles

• State System of Banking
• Our overriding goal is to maintain the state
  system as the charter of choice for community,
  multi-state, international and de novo financial
  institutions.
• The states must retain their role as the
  front-line, grass-roots regulator for the
  financial services industry.
• As state bank supervisors, we work at both the
  state and federal level for focused and efficient
  bank supervision.
• Federal regulatory preemption of state laws
  endangers the dual banking system and consumer
  protection.
• Through CSBS, the collective states have a single
  voice with Congress and federal policy makers and
  an organization for maintaining a pool of
  well-trained, focused banking regulation
  professionals.

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CONFERENCE OF STATE BANK SUPERVISORSChampions of
the State Banking SystemStatement of Principles

• Safety Soundness of Financial Institutions
• and the Banking System
• We believe that a significant goal of bank
  supervision and examination is to assure the
  safety and soundness of individual financial
  institutions and the overall banking system.
• Cooperation between state and federal regulators
  strengthens bank supervision, the financial
  services industry, and the economy.
• We support financial independence and budget
  autonomy for state banking departments as they
  pursue excellence in supervision.

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CONFERENCE OF STATE BANK SUPERVISORSChampions of
the State Banking SystemStatement of Principles

• Compliance with Banking and Consumer Laws
• We believe that bank supervision at the state
  level provides regulators that are accessible,
  who understand state laws, are in tune with the
  local economy, and knowledgeable about the
  consumer.
• We agree that for the supervision of interstate
  banks, the home state banking supervisor should
  be the primary regulator.

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CONFERENCE OF STATE BANK SUPERVISORSChampions of
the State Banking SystemStatement of Principles

• Promoting Economic Development
• We recognize that community banks, most of which
  are state-chartered, drive the economic success
  of Main Street America.
• We support the authority of our states to empower
  banks to develop new services that serve the best
  interests of our citizens.

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CONFERENCE OF STATE BANK SUPERVISORSChampions of
the State Banking SystemStatement of Principles

• Improving Mortgage Industry Supervision through
  Collaboration and Technology
• Given the impact of housing on our local
  communities and economies, we believe that states
  must continue to play a major regulatory and
  enforcement role in the supervision of the
  mortgage industry.
• We believe that the modern evolution of the
  mortgage industry and the increased importance of
  protecting consumers and neighborhoods demands
  new tools and authorities for state regulators.

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CONFERENCE OF STATE BANK SUPERVISORSChampions of
the State Banking SystemStatement of Principles

• Improving Mortgage Industry Supervision through
  Collaboration and Technology
• We support a coordinated federal and state
  supervisory framework that will provide maximum
  transparency and accountability in the mortgage
  lending process.
• Working with the American Association of
  Residential Mortgage Regulators (AARMR), we are
  committed to the development of an automated,
  internet-based nationwide mortgage licensing
  system that will provide sate regulators, the
  mortgage industry and the general public with a
  centralized source of information about
  state-licensed mortgage providers.
• Approved by the CSBS Board of Directors, December
  2007

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CHARTER TYPE
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Short-Term Recommendations

• Expand Presidents Working Group
• Mortgage Origination Commission
• State enforcement of Federal laws
• Regulatory issues of Discount Window access for
  non-depositories

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Intermediate-Term Recommendations

• Phase-out OTS Charter merge with OCC
• Rationalize the direct federal supervision of
  state-chartered banks.
• Place all examinations with FRB or FDIC.

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Optimal Regulatory StructureCharters

• Federal insured depository institution
• Federal insurance institution
• Federal financial services provider

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Optimal Regulatory StructureAny Survivors?

• Federal Reserve
• Prudential Financial Regulatory Agency
• Conduct of Business Regulatory Agency
• Federal Insurance Guarantee Corporation

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CSBS Position on the Blueprint

• Shifts financial regulation to the Treasury
• Regulatory relief for Wall Street firms
• More preemption of state laws, rather than
  empowerment of those who provided the early
  warning.
• Undermines the progress we have made for
  regulation of the mortgage industry.
• Kills the structure that has supported community
  banking.

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Efforts to Improve Mortgage Regulation

• Regulatory Guidance
• Nontraditional Mortgage
• Subprime Mortgage Lending
• Examiner Education
• Residential Mortgage Examiners School I II
• Mortgage Examination Guidelines Training
• Federal Regulations School
• Reverse Mortgage Forum

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Efforts to Improve Mortgage Regulation

• Pilot program with FRB, FTC, OTS for subsidiary
  supervision
• Cooperative Agreement for Mortgage Supervision
• Nationwide Mortgage Licensing System

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Nationwide Mortgage Licensing System

• Successfully launched on January 2, 2008
• 18 states to participate in 2008
• 42 state agencies have signed the Statement of
  Intent to use NMLS

• Key Initiatives
• Assisting States to develop and implement system
  launch plans
• Building system enhancements for quarterly
  releases in 2008
• System funding raised 6.3 of 10.0 million
  needed to develop NMLS
• Briefing and policy discussions with state and
  federal regulators and legislatures, industry,
  GSEs, service providers, etc.

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Congress

• Public Law 110-289The Housing and Economic
  Recovery Act
• Title Vthe SAFE Mortgage Licensing Act
• Other issues of interest
• GSE regulation
• Foreclosure prevention
• Wall Street regulation Bear Stearns, Discount
  Window access

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Quotable Quotes

• A level playing field did not exist when the
  mortgage crisis began a few years ago and in that
  environment, even well-regulated banks and
  thrifts felt pressure to compete with the
  products offered by their less regulated mortgage
  competitors. A level playing field still does not
  exist today.
• As part of this initiative, we will propose that
  the OTS be given additional authority to
  supervise mortgage brokers and mortgage companies
  currently subject to a less stringent regulatory
  and supervisory framework than the one applying
  to insured depository institutions.
• The OTS proposal will draw on the expertise
  developed by our agency over the years in
  regulating and supervising entities that are
  primarily mortgage lenders.
• Selecting a strong regulator to monitor this new
  level playing field is critical for protecting
  consumers and restoring market confidence. I
  wont pretend to be a disinterested party, but I
  know that the OTS has the most extensive
  expertise of any regulatory agency in the
  oversight and supervision of mortgage banking
  operations and I believe the OTS is in the best
  position to assume federal authority to regulate
  the currently unregulated players in mortgage
  banking.
• OTS Director John Reich JULY 21, 2008

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Quotable Quotes

• The rapid expansion of the housing market had
  attracted new mortgage lenders and brokers, many
  of whom had only limited business experience or
  financial strength and operated with little
  regulatory oversight. Nonbanks were particularly
  active in subprime lending
• Indeed, national banks and their subsidiaries
  originated only about 10 percent of all subprime
  mortgages in 2006 (when underwriting standards
  were weakest).
• Nonbanks expanded their market share in part by
  extending credit on considerably less stringent
  terms. They also popularized more risky types of
  mortgage instruments, which had the effect of
  expanding the pool of qualifying home buyers, but
  also reflected an abandonment of more traditional
  underwriting criteria.
• Loans originated by national banks tended to be
  more conservatively underwritten and structured,
  and their delinquency rates tend to be well below
  the national average.
• John Dugan, Comptroller of the Currency February
  2008

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The Housing and Economic Recover Act

• Increase in GSE/FHA Loan Limits
• GSE 625,000
• FHASimilar, but can not exceed the appraised
  value of the property
• FHA Rescue
• Lender Hair Cutloan can not exceed 90 of the
  current appraised value of the home
• Voluntary
• Cap of 550,000

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The Housing and Economic Recover Act

• GSE Stabilization Measures
• Treasury can make equity investment in GSEs
• Allows Treasury to slash executive pay if
  Treasury is forced to make the equity investment
• Authority ends December 2009
• Servicer Liability Protection

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The Housing and Economic Recover Act

• Housing Tax Measures
• GSE Reform
• FHA Modernization
• Mortgage Disclosures
• FHLB under new regulator
• FDIC Bridge Bank Authority for Thrifts
• 4 billion for states for foreclosed properties

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The Housing and Economic Recover ActTITLE V The
SAFE Mortgage Licensing Act

• Timelines are tight for state action
• NO MORTGAGE ORIGINATION WITHOUT A STATE LICENSE
  OR FEDERAL REGISTRATION
• Both State and Federal Loan Originators need a
  UNIQUE IDENTIFIER generated by the NMLS

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The Housing and Economic Recover ActTITLE V The
SAFE Mortgage Licensing Act

• Fingerprints for Criminal History
• Personal History and Credit Check
• Minimum Education requirement
• 20 Hours pre-licensure
• 8 Hours Continuing Education
• Courses must be approved by the NMLS
• Pre-licensure testingNMLS Test

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The Housing and Economic Recover ActTITLE V The
SAFE Mortgage Licensing Act

• HUD WILL DETERMINE IF STATE LAWS
• Provide effective supervision and enforcement
• Ensures that all state licensed loan originators
  are registered with the NMLS
• Regularly reports violations of State and Federal
  laws and enforcement actions to the NMLSR
• Has in place a process for challenging
  information contained in NMLSR
• Civil money penalties for acting without a
  license or registration
• Minimum net worth or surety bond requirements or
  a recovery fund like California (Real Estate)

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ADVOCATE

• FFIEC
• State Role in Financial Regulation
• Risk Based Capital
• Mortgage Policy Regulation
• Farm Credit System

• Executive Education
• Bank Exam Training
• Non-Depository Training
• BSA Boot Camp
• Department Accreditation
• Examiner Certification

• CSBS Examiner
• News Bytes
• www.csbs.org
• Press Relations

COMMUNICATE
EDUCATE

• Mortgage Supervision
• Mortgage Licensing
• Bank Secrecy
• Disaster Planning
• Examination Tools

COORDINATE