ABA Banking Journal - August 2007 - (Page 47)

back some of that business. One related ad is quite pointed, showing a church steeple and the headline, “Is Your Church Practicing What It’s Preaching?” It says, in part: “Many African-American churches teach tithing, economic empowerment, and the importance of investing in our own communities. However, many of the same churches bypass Commonwealth National Bank, Mobile’s only AfricanAmerican owned and operated national bank, to make their Sunday deposits in the ‘big’ banks. We’re not the biggest bank in town, nor do we have a branch on every corner, but our rates are competitive, our accounts are flexible, and our customer service is far better than the ‘big’ banks.” King believes more capital, through retained earnings and other sources, will be the key to enabling the bank to support more of its work to reach unbanked customers by growing to a size that will allow it to make larger, more-profitable business loans. In general, King wants to hold onto business from folks that the bank “helped to get rolling.” Sometimes, he explains, they leave “banks like us that get them started, because they become prime pickings for bigger institutions.” Rehabilitation loans Beyond the challenge of the unbanked is the “once-banked,” people who had credit, and either abused it or fell on hard times. Either way, they can’t qualify for mainstream credit anymore because they’ve ruined their credit ratings. For such customers, Commonwealth offers credit repair loans. These are small loans that the bank makes at terms that enable borrowers to reestablish their credit. The loans, for, say, $1,000, are tailored to a level borrowers can handle at their income, making regular monthly payments and getting back on track. The bank prices these loans at three percentage points above the appropriate CD rate. King says the rationale for the three-point margin runs this way: “One point for the work, one point for the government [taxes], and one point for the shareholders.” Regarding the latter, King says that while the bank has not, to date, produced stellar earnings numbers, it has improved them in recent years and made them steady enough to allow management to reward investors with some dividends. All of the bank’s efforts go towards making serving the community a profitable enterprise. King points out that the bank’s moderate approach, “dating before marrying,” and remembrance of its roots work together. “Our chargeoffs are half of our peers’,” he says. “This is a niche that is viable and you can be successful at it. There are good loans to be made.”BJ The September edition’s “Compliance Clinic” will feature additional coverage from the ABA’s Regulatory Compliance Conference, as will www.ababj.com MIB X AL O Must a Loan Production Office plaster its walls with compliance paper? My bank is establishing a Loan Production Office (LPO). This office will accept mortgage applications and other loan applications (primarily for commercial loans). What disclosure-oriented signage is required? We thought the Home Mortgage Disclosure Act poster, the Equal Housing Lender poster, and the Community Reinvestment Act poster would be required. Is that correct? The Equal Housing Lender poster is the only “required” lobby notice for an LPO. As is stated in 24 CFR §110.15: “All fair housing posters shall be prominently displayed so as to be readily apparent to all persons seeking housing accommodations or seeking to engage in residential real estate-related transactions ” The HMDA poster and CRA poster are only required for “branch” offices or a bank’s main lobby. Indeed, an LPO is generally not considered to be a branch, so you should be cautious about posting any signage that would lead an individual or your regulator to believe that it is. You also may need to check state requirements regarding this issue. Q. A. $5,000. Would the $15,000 be “new money” subject to the right of rescission? Or would it not be considered as such because we previously approved this borrower for $50,000, even though the entire $50,000 was not used? The $5,000 advanced is new money subject to rescission because once the closed-end credit transaction is consummated, the HELOC no longer exists and funds are advanced as part of the closed-end transaction, subject to 226.23, and not 226.5b. Had the $5,000 been advanced under the HELOC, before the closed-end transaction was created the entire $15,000 would be exempt from rescission, as any outstanding balance (i.e., the HELOC) that is refinanced would not be rescindable. Because you are the original creditor, you can rely on Comment 4 of the Reg Z Commentary at 226.23(f)4. • Editor’s Note: The question and answer in May’s ABA Banking Journal Mailbox, regarding the provision of an adverse action notice when a particular product is not offered by the bank, has prompted additional questions from our readers. An upcoming Mailbox will be devoted to clarifying the May Q&A and to answering those additional questions. Stay tuned…. A. Is refi’d line of credit new money or old? My bank has established a $50,000 home equity line of credit (HELOC) for a customer. The customer currently owes $10,000, and wants to refinance the line into a closedend loan for $15,000. He plans to use the proceeds of the new loan to pay off what he owes on the line, and close it. He then intends to use the new loan to purchase a car for Q. Leslie Callaway, CRCM, contributing editor, works with ABA staff experts to provide answers to ABA member bank questions. Submit your questions to Leslie at lcallawa@aba.com ABA BANKING JOURNAL/AUGUST 2007 47 http://www.ababj.com

Table of Contents Feed for the Digital Edition of ABA Banking Journal - August 2007

Contents Editor's Column The Unbankers Snapshot: Do Share Repurchases Signal More M&A Activity Sleight of Mind Goals Behind Proposed ABA/ACB Merger ABA Resources ABA Chairman's Position Should You Sell Those Nonperformers Pass the Aspirin Branch Design - Evoking a Sense of Place Two Banks Take the LEED Move Over, Buddy Service Feature: Bankers' Banks Directory Websites: What's State of the Art for Banks? Citi Mobile to Go Strong with iPhone? Date First, Marry Later Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - August 2007

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