Has anyone looked at the new predatory lending law for Arkansas? I'm wondering how others are going to document/monitor for "comparable fees charged by a non-affiliate" so as to calculate points & fees.

Is this section you're talking about? If so it is confusing.

"All charges for items listed under section 226.4(c)(7), but only if the lender receives direct or indirect compensation in connection with the charge or the charge is paid to an affiliate of the lender, but only by the amount the charge exceeds the charge for comparable items provided by a non affiliate of the lender at the time the loan is made."

226.4(c)(7) is real estate related fees. Do you think the Arkansas law stated above could be referring to up-charging for those fees?

Am I reading correctly that the law applies to loans secured by a first lien on the structure? I did not see anything about second liens. It also requires the borrower talk to a loan counselor before taking out a high cost loan and bans the financing of credit insurance policies such as credit life.

Yes, that is the section I was referring to. We have affiliates who do our flood cert, tax service fee, appraisals, and credit reports (not always but in many cases.) Looks to me like we can exclude those affiliate fees if they are not more than the norm for a non-affiliate charge for those items, or if they are more, then only include the amount that is more than the norm. But what I don't know is how we'll establish the norm. Will it be by city/town? By MSA? By state?

It does appear to only apply to first. It also excludes any loans that will be sold to any of the gov't insuring agencies, so that helps some. Plus any loans over $150M. So it's not as bad as it could be, I guess.

I would think it would be by city/town (local market) or maybe even county as fees can very from town to town. I think by MSA or State would be too broad. We only have a handful of MSAs and the rest of the state is pretty rural.

ExGovtBabe, I am glad you asked these questions. A few weeks ago I asked if anyone else on this board was from Arkansas and did not receive any responses. I thought I was going to have to try to interpret the new law myself. Thanks for bringing this to my attention.

Well, I'm not technically FROM Arkansas, although my daddy is a N. Little Rock boy, born & bred, but as we operate nationally, I try to stay abreast of the local laws. This one is not as bad as some out there, thank goodness. Just these few tricky questions we'll have to figure out how to resolve. Maybe between us we can come up with some ideas; I'll let you know what I find out from our Legal counsel in Memphis, too.

Hey Lewis, is there maybe a state or local compliance organization that would be willing to put together a list of standardized charges? I think our argument is going to be that our affiliate fees ARE the norm, but I'd feel more comfortable running them against someone else's fees just to double check.... even if that's an average or a range.

Also just realized purchase money mortgages are excluded from coverage, yay. This is getting better and better.

Don't know of one. There is the Arkansas Bankers Association, but I don't think this is something they would deal with. I think our argument would be the same, customer is charged what the local market charges, no up-charging from us. You might have to get someone in your bank to call the different servicing companies to determine how fees are charged, for example, is the fee a certain percentage of the loan?

Another question. How do you determine when a state law applies to a national bank? Do you ask your regulator to make a determination? We are a national bank.

We're OCC-regulated and we're pretty much going with the interpretation that EVERYTHING applies to us, unless it's specifically exempted in the law or the OCC tells us specifically we're not subject. I know management is hoping the OCC will come out and say we're not subject to all these state laws, but until then, better safe than sorry......

Yes, I agree. However, as you stated before, this law could have been a lot worse.