The 5th meeting of the Interim Joint Committee on Banking and Insurance was held on Wednesday, November 28, 2007, at 10:00 AM, in Room 149 of the Capitol Annex. Representative Tommy Thompson, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Tom Buford, Co-Chair; Representative Tommy Thompson, Co-Chair; Senators Julie Denton, Daniel Mongiardo, Gerald A. Neal, Dorsey Ridley, Dick Roeding, Dan Seum, and Tim Shaughnessy; Representatives James R. Comer Jr, Ron Crimm, Mike Denham, Ted Edmonds, Tim Firkins, Joseph M. Fischer, Jeff Greer, Mike Harmon, Jimmy Higdon, Adam Koenig, Rick Rand, Frank Rasche, Steve Riggs, Brandon Smith, John Tilley, Ken Upchurch, David Watkins, and Susan Westrom.
Guests: Anne Marie Regan, Office of Kentucky Legal Services Program; Phil Peters, Director, Kentucky AARP; Joseph Pigg, Senior Counsel, American Banker's Association; Cordell Lawrence, Executive Director, Office of Financial Institutions; Ballard Cassady, Executive Director, Kentucky Banker's Association; and, Debra Stamper, General Counsel, Kentucky Banker's Association.
LRC Staff: Greg Freedman, Rhonda Franklin, and Jamie Griffin.
The minutes of the October 23, 2007, meeting were approved.
Phil Peters, Director, Kentucky AARP, stated that his organization is concerned about foreclosures and sub-prime lending in Kentucky and on a national level. He stated that AARP is lobbying for stronger laws regarding predatory lending and are hopeful that the crisis across the country will prompt legislative action.
Ann Marie Regan, Office of Kentucky Legal Services Program, stated that there is a sub-prime lending crisis in the country and that it will get worse before it gets better. She stated that it is their belief that it is a direct result of bad lending practices by mortgage lenders and other related entities. She stated that she has met with Sen. Gerald Neal, Rep. Reginald Meeks and Rep. Darryl Owens about proposed legislation. She gave a brief overview of the draft legislation. She stated that she is willing to meet with the Kentucky Banker's Association, Kentucky Mortgage Lenders Association and the Office of Financial Institutions to discuss the proposed legislation.
Sen. Dick Roeding asked what effect the proposals she suggested would have on the banking industry in Kentucky and if she worked with the banking industry on this proposed legislation.
Ms. Regan stated that the banking industry will probably tell the committee that it would have a negative effect on the industry, but, she doesn't think it will. She stated that she did not work with anyone from the banking industry on the legislation. But, is open to sitting down with the interested parties to discuss the proposed legislation.
Sen. Roeding stated that he feels this should be discussed with the industry and that should be the starting point for this legislation.
Ms. Regan stated that the legislation is necessary to address the bad mortgage lenders and real estate appraisers who are not being held accountable. She stated that she is willing to meet with the industry and would be glad to do so as soon as possible.
Sen. Tom Buford stated that state and federal chartered banks are addressing this issue, and the problem is with mortgage brokers. The state and federal chartered banks do not want foreclosures.
Cordell Lawrence, Executive Director, Office of Financial Institutions, stated that the sub-prime lending problem is associated with the independent mortgage bankers and mortgage brokers. He stated that the Office of Financial Institutions is aware of the problem and is actively pursuing a remedy. He stated that roughly 10 percent of the more than 500,000 mortgage loans current in Kentucky are sub-prime.
Rep. Tommy Thompson stated that one foreclosure is too many and that he feels sure that all sides can work together to protect the citizens of Kentucky.
John Pigg, Senior Counsel, American Banker's Association, presented a power point presentation on the country's economic outlook. He stated that the banking industry is heavily regulated and gets no value from making loans to those who cannot repay the loans. He stated that many people are moving from adjustable rate loans to fixed rate loans.
Ballard Cassady, Executive Director, Kentucky Banker's Association, stated that his organization would be happy to meet with Ms. Regan. He stated that it is very easy to pinpoint where the problem is occurring. He stated that the last thing you want to do is paint the banking industry with a broad stroke. He stated that any legislation that is passed in Kentucky will only affect a state chartered bank, and all a state chartered bank needs to do to become a federally chartered bank is request, by letter, a federal charter. He stated that the common sense way to address the problem and not create a wide net that pulls those in who are not the problem is to specifically address the ones who break the law.
Sen. Buford stated that if the state chartered banks become federal charters, the state of Kentucky would lose a significant income from those banks. He stated he feels the banks are doing a good job and pointed out that the banks don't want the sub-prime lending taking place.
The meeting adjourned.