ABA Banking Journal - March 2013 - (Page 6)

editor’s column By Bill Streeter Balance or straitjacket? I “Achieving balance by issuing thousands of pages of regulations is an excess of its own. There has to be balance on BoTh sIdes” Bill Streeter bstreeter@sbpub.com 6 | 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
Contents
Chairman’s View
Editor’s Column
The Economy
Bank Notes
Picture This
Don’t let Trojans infiltrate your customers
Pass the Aspirin
Tech Topics
Working smarter, harder, and right
Mobile Banking: 7 keys for success
Compliance Clinic
Compliance Inbox
ABA At Your Service
First Person

ABA Banking Journal - March 2013

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