Commerce – Week of April 28, 2011

STAFF CONTACT:  Julie T. Simon

HF 328 – Banking omnibus

FLOOR ACTION:

HF 328 is a recommendation by the Commerce Department’s Division of Banking (IDOB) that covers bank lending limits, miscellaneous administrative changes, and SAFE (Secure and Fair Enforcement) Mortgage Licensing Act standards. The proposal:
** Enhances confidentiality of IDOB electronic information and clarifies the Superintendent may take necessary steps to ensure Information Technology systems protect confidential information.
** Strikes interstate banking provisions now obsolete after changes in federal law.
** Prevents mortgage companies from being incorporated or branching in foreign countries.
** Incorporates recommendations by HUD as a result of its informal review of Iowa’s SAFE Act for compliance with federal standards.
** Allows banks to renew or restructure existing loans without violating the lending limit simply by virtue of the renewal or extension of credit, unless new funds are advanced or the Superintendent determines that a renewal or restructuring was undertaken as a means to evade the  bank’s lending limit (this provision takes effect upon enactment).

HF 328 also addresses credit concentrations in corporate groups to improve the safety and soundness of state banks by giving the IDOB greater flexibility in grouping related parties together for the purpose of applying the lending limit to borrowing groups. It outlines what constitutes “interrelated” borrowers for the purpose of applying the lending limit to borrowing groups, and the documentation banks should obtain to demonstrate compliance with the group lending limit. Because this makes it is more likely borrowers will be grouped together, the Superintendent is authorized to permit a bank to lend up to 50 percent of its aggregate capital to a corporate group, the same limit applicable to national banks. Iowa’s current limit is 25 percent. The bill passed the House 98-0. [4/26: 50-0]