ABA Banking Journal - March 2013 - (Page 6)
By Bill Streeter
Balance or straitjacket?
“Achieving balance by issuing
thousands of pages of regulations is an excess of its own.
There has to be balance
on BoTh sIdes”
| ABA BANKING JOURNAL | March 2013
t’s difficult to argue with the principle of
balance. The conditions of being “out
of balance,” “off balance,” or “unbalanced” clearly are not good, whether you’re
talking about finance, a bowling ball, a golf
swing, planetary orbit, or one’s thinking.
But several things complicate that
simple premise. One is that one man’s
“balanced approach” is another man’s
“overkill.” Another is that achieving
balance and maintaining it can be extraordinarily difficult. Third, people get
bored with balance. It requires control, and
control is perceived by some as inhibiting,
unimaginative, and, in a financial sense,
less rewarding. People want excitement.
They want big results.
Given two seminars to attend, “A
balanced approach to growth” and “10
ways to amp your earnings,” which will
be the draw? The answer depends on
timing. Because once the bill comes due
for too much excitement, as it did five
years ago, balance suddenly looks a lot
smarter. Usually not for long, however.
Far longer-lasting are the reactions to the
“bill” from governing bodies. As we have
been witnessing, the pendulum almost
always swings too far the other way: out of
balance on the side of too much regulation.
There is an interesting take on balance
as it relates to the business of mortgage
lending in this month’s issue. Contributing
Editor Lucy Griffin, writing in Compliance
Clinic (p. 36), says that the “tsunami” of
new mortgage rules issued this year by the
Consumer Financial Protection Bureau in
reality returns the mortgage business to the
1970s, with loans once again based on the
borrower’s ability to repay. “In short,” she
says, “underwriting is back.” Griffin points
out that borrowers also played a part in the
mortgage meltdown, and says there is a
“rebalancing of the lender-borrower relationship, with decisions based on the loan
term, not just making it through closing.”
She summarizes the changes in six points,
which banks operating in the mortgage
business as originators, servicers, or both
should consider. She concludes with this
basic principle of contract law: “Both
parties must benefit from the contract.”
Traditional mortgage lenders, of which
there are many in the banking industry,
may welcome this confirmation of how they
do business—for it likely will make them
competitive once again. Before the wheels
fell off the bus, the traditional approach to
the business had become marginalized for
many banks. On the other hand, achieving
a return to balance by issuing thousands of
pages of regulations is an excess of its own
that will give many smaller players second
thoughts about staying in the business.
(We’ve heard comments on both sides of
that argument and will explore it more
fully in an article in the April issue.) There
has to be balance on both sides for the
business to work again.
But as to the notion that a balanced approach inhibits creativity and growth, we’d
say that the opposite is true. Imbalance
always results in a correction that ends up
tying your hands in some way. Plus, you
can’t be creative if you’re out of business.
Balance is always better.
Table of Contents for the Digital Edition of ABA Banking Journal - March 2013
ABA Banking Journal - March 2013
Don’t let Trojans infiltrate your customers
Pass the Aspirin
Working smarter, harder, and right
Mobile Banking: 7 keys for success
ABA At Your Service
ABA Banking Journal - March 2013