In a recent GBA Bulletin, we encouraged our members to be looking for a letter from the Federal Home Loan Bank of Atlanta (FHLBA) implementing a recent decision to increase the discount on Residential First Mortgage Collateral to 25 percent of unpaid principal balance.  Prior to this decision, the discount was 20 percent.  At the GBA Board of Directors meeting earlier this month, this issue was discussed in depth.  A number of board members expressed concern about both the timing of the announcement and the liquidity loss the new policy created.  GBA Chairman Jim Williams, CEO of Citizens Bank & Trust, Eastman and GBA Chairman-elect Steve Jordan, CEO of the Bank of Monticello, met this week with FHLBA president and CEO Richard Dorfman and his senior staff to discuss the issue.  “We welcomed this meeting as a forum to express our concerns on behalf of the banking industry.  Issues relating to communication, the timeframe for compliance, the impact on liquidity, collateral valuation, the lendable collateral value matrix and the indiscriminate application of the new standards to all member banks were at the forefront of our discussions.  We wanted to hear more from FHLBA leadership in regard to the thought process that prompted these changes.  During these times when our industry is experiencing stress, we need to know the mindset of those institutions that we have come to reply upon,” Jim said.  The FHLBA board member for Georgia, Bill Easterlin, CEO of Queensborough National Bank & Trust Company, Louisville, also participated in the meeting as did GBA President Joe Brannen and Senior Vice President Elizabeth Chandler.  Mr. Dorfman gave those present the background on the issue and related the decision solely to the current market valuations of mortgage-backed securities and the generally deteriorating value of the underlying collateral.  He encouraged the bank’s shareholders and customers to keep in mind the dual nature of the institution as both a lender and as a financial institution that has to protect its capital and defend its ability to pay a return to its shareholders.  When pressed on the arbitrary nature of the proposal as it applies to all banks regardless of their risk profile, chief credit officer, Kirk Malmberg responded saying the bank has other tools in place,

and is using these tools to differentiate among various banks and their risk weighting.  Mr. Malmberg also said the bank looked at other real estate collateral besides first mortgages and made the decision to leave in place the current discounts applied to that collateral.  The bank will monitor the situation carefully, and while no other announcements are expected any time soon, the bank can take other actions it deems necessary to protect the safety and soundness of the institution.  “I am compelled to deliver a very clear message to the GBA membership.  Safety is paramount in the minds of FHLBA officials and we could witness further reductions in the lendable collateral ratios if market conditions deteriorate.  As evidenced by the FHLBA’s recent action, even well-capitalized banks with solid earnings and minimal asset quality issues are not immune to collateral haircuts, although they present virtually no risk to the FHLBA.  Accordingly, I would caution our members, especially those with advances approaching their borrowing limits and those whose financial condition is impaired, to develop contingency plans that address alternative funding sources,” Jim advised.  “I appreciate the opportunity afforded our delegation by President Dorfman and the atmosphere of candor that prevailed as he and his executive staff responded to our concerns.  While we share their sentiment for safety, we encourage FHLBA officials to exercise restraint in actions that impact the liquidity of member banks, unless the need for such action is clearly indicated and a corresponding benefit to the safety and soundness of the FHLBA can be demonstrated.  The GBA has a long and positive relationship with the FHLBA.  We look forward to working closely together in the future as the bank, the industry, the regulators and policymakers seek solutions to what we would all characterize as a tumultuous real estate and mortgage market.  The FHLBA is a vital source of funding for our industry; everyone’s best interest is served by the bank taking prudent steps to ensure that funding is available without interruption,” Jim concluded.

In last week’s e-Bulletin, we told you about the three bills the Georgia General Assembly passed that will change certain procedures related to real estate transactions.  In a meeting with Governor Sonny Perdue’s senior staff this week, we were told the Governor is expected to sign the bills before the May 14 deadline.  The foreclosure and the good funds bills will be effective upon his signature, so we encourage you to immediately incorporate the changes in these bills into your operational procedures.  As certain of your documents will

We encourage you to contact your U.S. Congressman this week to voice your opposition to a credit union bill (H.R. 5519) that could be considered on the House floor as soon as Tuesday, April 29.  This bill is a major expansion of the credit union charter and it was never voted on in the House Financial Services Committee. The bill, known as the Credit Union Regulatory Relief Act, ostensibly would make very minor adjustments to current credit union law.  However, the language of the bill is intentionally broad and extends credit union power well beyond what its proponents say it does. It would allow all credit unions to enter so-called “underserved” cities and make broad areas of other cities eligible for credit union expansion

Chairman Frank Pushes FHA Proposal for Refinancing

House Financial Services Committee chairman Barney Frank (D-Mass.) held a hearing this week about his legislation that would set up a new program within the Federal Housing Administration (FHA) to refinance struggling homeowners into more affordable mortgages.  His bill, H.R. 5830, is designed to be temporary and available to individuals with mortgages on their owner-occupied principal residences.  To participate in the proposal, both the borrower and lender must agree to the stringent terms of the proposal.  For example, a borrower must have originated his or her loan before Dec. 31, 2007, have a debt-to-income ratio of 35 percent or more and have not intentionally defaulted on the existing mortgage.  The borrower would have to agree to a new second lien to pay the federal government a share of any future profits derived from the sale of the home.  Mortgage holders would have to waive fees and penalties and accept the proceeds of the new loan as payment in full of the original loan.  The mortgage holder would also have to agree to write down the value of the loan to no more than 90 percent of the current appraised value of the property, less certain fees for

We’d like to introduce you to GBA’s newest officer, David Oliver. David joins GBA’s staff as Senior Vice President for Communications and Marketing. He’s responsible for making sure the information we provide to all of GBA’s members and constituents about GBA’s services and industry advocacy is effective, clear and consistent. He’ll coordinate media relations, production of our publications, plans for marketing the valuable products and services we offer our members and our GBA brand and look. David has a 16-year background in communications and seven years in the banking industry. He most recently was vice president for Communications for a regional bank in Atlanta. He’s also worked in public relations roles for subsidiaries of Southern Company in Alabama. He has served on the PR advisory committees for the Georgia Research Alliance and the Woodruff Arts Center, and is past president of the Birmingham, Ala., chapter of the International Association of Business Communicators.

Be on the lookout for the latest iteration of the 4-1-9 scam (aka advance fee, Nigerian, or Lottery fraud). We have heard from a member bank that fraudsters have been targeting attorneys and their IOLTA accounts. In short, 4-1-9 fraud is defined as fraud that involves unsolicited e-mails, letters, faxes or notifications from someone you don’t know, usually from outside the country, promising large, risk-free sums of money.

As always, please be aware of unusual or suspicious transaction requests from your clients, and please pay special attention to your clients' IOLTA accounts so you can help them avoid becoming victims and protect you from losses.  Also, if your bank is hit with such a scam, please post a notice on FinCrime to alert others.  See the article below if you are not yet participating in FinCrime.

Here’s how the new version of this scheme is working:

• Attorneys are being solicited by e-mail from someone who claims to be out of the country and needing an attorney to represent them in order to collect funds owed.

• Attorneys receive a check from “Canada” via UPS.  Items have ranged from $150,000 to $298,000 (amounts could vary).  

• They are instructed to wire the funds to one of the following:  China, Korea, Taiwan or Japan for the amount of the item minus an attorney’s retainer fee.

• All checks deposited to date are purported to be an “OFFICIAL CHECK” drawn on Citibank or SunTrust (information can change).

GBA’s Credit Conference Mid-Year Update proved to be of tremendous value to the almost 150 bankers who attended. Our keynote speakers covered the critical credit issues banks are facing throughout Georgia. Such a big turnout for a mid-year update is proof that the current credit environment is top of mind for members.  Attendees got a detailed overview of the market, gained insight into how bank examiners are scrutinizing portfolios, learned techniques to ensure long-term viability in the current environment and shared their own best practices and needs during networking sessions. 

Annual Convention Confirmation Packets to be Mailed Soon

There’s still space available for GBA’s Legal Issues of New Account Documentation and Compliance scheduled for April 29 at Idle Hour Country Club in Macon and April 30 at the Best Western Lanier Centre in Gainesville.  Patrice M. Konarik, CFP with Sunwest Training Corp. in Gilchrist, Texas, is the instructor.  Designed for new accounts representatives, back-up new account personnel, certificate of deposit staff, bookkeeping and accountholder service personnel, and loan secretaries, this one-day seminar teaches new account personnel proper account opening procedures and compliance requirements.  Topics to be covered include:

• Signature card contracts

• CIP Compliance Overview

• TIN Compliance – SSN vs EIN

• Sole proprietorships, General and Limited Partnerships, Corporations, LLPs and LLCs

• Non profit associations

• Individual accounts

• Power of Attorney

• Informal and Formal trust accounts

• Minor Accounts (UTMA)

• Court-ordered Accounts – Estate, Conservator

With questions, please contact GBA’s Courtenay Pope at 404.420.2015.  Please click to register.

GBA will host its Internal Audit seminar on Wednesday, May 14 at the Ramada Plaza in Macon.  The registration fee is $195 for members and Mike Thomas with Crowe Chizek and Company, LLC is the instructor.  Designed for internal auditors, audit committee members, operations officers, compliance officers and internal control personnel, this one day seminar will cover many of the basic concepts regarding community bank internal controls and internal audit techniques.  Topics to be discussed include: 

• Essentials of Risk Based Auditing

• Effectively Managing the Internal   Audit Plan

• Primary Internal Controls/Audit   Techniques

• Building an Anti-Fraud Framework

Just a reminder about the following AIB online classes that begin the week of May 19.  Please register two weeks in advance to secure a seat in the class.  These courses are instructor-facilitated with weekly assignments, and can be taken from the comfort of your home or the convenience of your office.  All you need is a computer, printer and Internet access.  (Classes with an asterisk* require Microsoft Excel Software.)

• ABA Online Review Course for the CTFA Exam (open enrollment), 12 weeks, $795

• Commercial Lending, 16 weeks, $385

• Consumer Lending, 16 weeks, $385

• Economics for Bankers, 16 weeks, $385

• Introduction to Mortgage Lending, 16 weeks, $385

• Law & Banking:  Principles, 16 weeks, $435

• Principles of Banking, 16 weeks, $385

• Today's Teller: Developing Basic Skills* (open enrollment), 8 weeks, $295

There is still availability in the following AIB Online classes that begin May 12.  Please register as soon as possible to secure a seat in the class.

• Analyzing Financial Statements*, 16 weeks, $485

• Banking Today, 5 weeks, $295

• Financial Accounting*, 16 weeks, $485

• General Accounting*, 16 weeks, $485

• Principles of Banking Accelerated, 10 weeks, $315

• Problem Loan Workouts, 6 weeks, $295

• Understanding Your Construction Borrower, 10 weeks, $385

New AIB Classroom Course:  Analyzing Financial Statements

Just a reminder that GBA will offer the following webinars during the weeks of April 28 and May 5:

• Opening Deposit Accounts III: Fiduciary Accounts – April 28

• Checks & Holds for Tellers, Part 1 – April 29

• Debit and Credit Card Fraud Prevention – April 29

• Major Changes in Mortgage Lending – Reg. Z and RESPA Proposals – April 30

• New Accounts: Identifying & Meeting Customer Needs – April 30

• Safe Deposit Compliance & Legal - 2008 Update – May 6

• Safe Deposit Series, Part 1: Policies & Procedures – May 6

• Telephone Skills – May 7

• Analyzing Personal Statements and Tax Returns – May 8

• Fair Lending - Positive Steps to Risk Reduction – May 9

Webinars offer the opportunity and convenience of having a seminar at your bank.  All you need is a computer, Internet access and a telephone.  All webinars are live and allow time for questions and answers.  The $250 registration fee gives you access to one web site “seat,” one telephone site license and all handout materials.  If you can’t attend the webinar but would like the information for training purposes, you may also purchase an audio CD, handout materials and a password to see the information online.  Complete details about the webinar, topics being covered and information about the presenter can be found on GBA’s Calendar of Events.  With questions, please call GBA’s Courtenay Pope at 404.420.2015.

Looking to add new products and services to boost fee revenue and enhance customer value? GBA’s long-time strategic partner, Reliance Trust Company, has a variety of Trust and Investment Management services that you can add to your bank’s product offerings. Reliance Trust is one of the largest independent trust companies in the country with more than $30 billion in assets under management.  Headquartered in Atlanta, Reliance offers a full array of personalized financial services to individuals, corporate and institutional clients worldwide.  Services include:

• Wealth Management and Personal Advisory Services

• Separate Account Management

• Money Manager Consulting

• Trust and Fiduciary Services

• Financial, Estate, and Tax Planning

• Retirement Plans and Investments

• Outsourcing Services to Financial Intermediaries

For more information, please contact Reliance’s Mark Teichner at 404.965.7239 or GBA’s Josh Latina at 404.420.2022

Some of the Services Available Through GBA Services, Inc.

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Georgia Bankers Association • 50 Hurt Plaza, Suite 1050, Atlanta, GA 30303 • Phone 404.522.1501 • Fax 404.522.9848 • www.gabankers.com