A group of West Coast banks have banded together to save community development bank Pan American Bank in Los Angeles (not to be confused with Illinois-based CDBA member Pan American Bank). Pan American was facing a potential failure after the collapse of a capital raise in May. The $41 million-asset bank has now been recapitalized after raising $6.3 million from 16 banks. None of the banks will hold more than a 4.9% stake in Pan American, and the Hispanic-focused bank is expected to maintain its MDI status. Pan American also named Robb Evans as interim chairman and chief executive, filling the vacancy left by Jesse Torres, who left the bank earlier this year.
One PacificCoast Bank has rebranded, changing its name to Beneficial State Bank. The new title reflects the bank's commitment to "beneficial banking," which they define as environmentally-friendly banking that supports the local economy. The bank's new acorn logo both symbolizes the growth potential of beneficial banking and evokes the bank's hometown, Oakland, Calif. "Beneficial State Bank offers our customers a new kind of bank and the tools they need to build something beautiful. Beneficial Banking was made to serve those who are creating a better world," the bank said via press release.
The Senate has passed legislation requiring the Federal Reserve to include at least one community banker on its seven member board. Federal Reserve Chairwoman Janet Yellen had pushed back on the bill, questioning the wisdom of reserving spots at the central bank for specific industries. But senators pressed ahead, adding the amendment to a terrorism insurance bill. The Federal Reserve board was left without a community bank voice after Elizabeth Duke resigned from the Fed in 2013 and President Obama took Sarah Bloom Raskin away for a job as Deputy Secretary of the Treasury. The president has reportedly been mulling another community banker to fill one of the two open spots.
Auto loans to subprime borrowers have risen more than 130 percent in the past five years, driven by the same dynamics at work in subprime mortgages during the financial crisis. High rates and steady profits on the loans are attracting investors including some of the nation’s biggest banks and private equity firms. They are then bundled into complex bonds and sold as securities by banks. The loans are typically at least twice the size of the value of the used cars purchased and can come with interest rates above 23 percent. Many of the loans include battered vehicles with mechanical defects hidden from borrowers and recorded incorrect income about the borrowers' income and employment.
Nonbank mortgage lenders pose a risk to Fannie Mae and Freddie Mac because of limited government oversight and weak finances according to a report by the Federal Housing Finance Agency's Office of Inspector General. Small lenders and nonbank mortgage firms often lack the systems or expertise to manage high volumes of mortgage sales, increasing the risk that the GSEs will suffer losses. In recent years, GSEs have purchased more loans from the nonbank lenders as large banks pull back from selling to Fannie and Freddie after getting clobbered with repurchase requests. Last year, 47% of Fannie's mortgage purchases came from nonbank mortgage companies, up from 33% in 2011.
The CFPB has proposed publishing on its website individuals' stories about bad experiences with credit cards and other financial services, prompting quick pushback from banks. The CFPB already posts basic details of consumer complaints but now, the agency wants to include customers' full explanations of what happened. The CFPB said including the narrative would provide more information and help users spot trends with companies or in regions. Companies featured in the complaints would have an opportunity to respond. Banks and other financial service providers have criticized the complaint database, which they say unfairly hurts firms' reputations.
Lawmakers, financial groups and U.S. Postal Service employees met this week to discuss a proposal by the postal agency's inspector general to introduce lending and other services at post offices nationwide. Speakers at the conference included Sen. Elizabeth Warren (D-Mass.), who lauded the idea as a way to provide affordable financial products to the underbanked, and Rep. Darrell Issa (R-Calif.), who raised doubts about the viability of the plan in what he sees as a troubled industry. According to USPS inspector general David Williams, the agency has already started to hear from institutions interested in participating in the potential program.
Southern Bancorp has announced that Helena, Arkansas-based boutique Bella is runner-up in their Helena Start-Up Challenge business plan competition. The Helena Start-Up Challenge awards entrepreneurs seed capital to turn their business concepts into start-ups. “Bella was started out of a desire to provide area women with stylish, appealing and affordable clothing," said Jordan Yancey, Bella co-owner. "We also wanted to give back to the Delta community, and starting a business downtown that fills the retail clothing gap is one of the best ways we could think of to do that.” Bella’s owners plan to use the $15,000 in matching funds from Southern to expand their clothing line.
At a hearing earlier this week, the House Financial Services subcommittee on Financial Institutions and Consumer Credit examined nearly a dozen bills that Republicans say would provide regulatory relief to community banks. At the hearing, community bankers told lawmakers they are being pushed out of business by new rules written in the wake of the financial crisis that are better suited for big banks. Democrats on the panel warned against giving banks a “get out of jail free card.” Republican members also took the opportunity to express concerns with the Justice Department's Operation Choke Point, which they say requires banks to target customers that operate businesses which federal regulators do not like, even if they are not illegal.
Housing finance experts Ellen Seidman, Laurie Goodman and Jim Parrott discuss the history of the stalled Johnson-Crapo GSE-reform bill and the likelihood of further action. Although Johnson-Crapo contained an incentive intended to ensure that the system would serve low income borrowers, progressive members of the Senate Banking Committee were uneasy with the impact of increased risk-based pricing and higher capital requirements on the cost of borrowing. Although consensus emerged on many issues, addressing the concerns of the progressives became incompatible with retaining the bill’s bipartisan support. The experts agreed it was unlikely the bill would make any short-term progress, but consider it possible that administrative action could enact some of the bill's provisions.