April 2, 2010 No TENNESSEE LEGISLATURE: IS THE END IN SIGHT?

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1 April 2, 2010 No TENNESSEE LEGISLATURE: IS THE END IN SIGHT? Since the General Assembly convened in mid-january, or perhaps even before that, there was talk of session ending early (April 15 was even a date once mentioned). Well, with April 15 less than two weeks away, it s safe to say that we ll be watching that deadline fly by. Once the legislators and committees began wading through the 2,000 plus bills that were filed, the end date seemed to keep getting pushed back. As of this week, everyone seems to be predicting the last week of May. Although that date is certainly not set in stone, with several committees talking of wrapping up and most of the major controversial legislation (with the exception of the budget, of course) on its way through or otherwise dealt with, the end of May seems like a reasonable date. In fact, in the past two weeks, TBA has seen most of its sponsored or supported legislation making its way through the legislature, and most of what it opposed failing to pass out of committees. Below is a breakdown of what has been going on. In This Issue: TN Legislature: End in Sight? Pg. 1 Regulatory Reform Pg. 3 Corker Meets with Bankers Pg. 3 Credit Union Expansion Pg. 4 Foreclosure Prevention Efforts Pg. 5 Wage and Hour Interpretation Pg. 5 ABA Risk Management Forum Pg. 6 TBA Sponsored Legislation: Trust Bills Federal Estate Tax (SB 3045 / HB 3862) Pub. Ch. 638 Trust Laws Update (SB 3522 / HB 3861) Community Property Trusts (SB 3529 / HB 3863) Pub. Ch. 638 *Status: All passed by the House and Senate, and signed, or ready to be signed, by the Governor. Deficiency Judgments TBA s bill (SB 3039 by Faulk / HB 3057 by Dennis) requires that judgment be for the amount that the total debt exceeds the property s FMV; creates a rebuttable Copyright 2010 Tennessee Bankers Association. The material contained herein is provided for general informational purposes and should not be considered legal advice. Please contact your local counsel for application to any specific matter. Timothy L. Amos, Senior Vice President/General Counsel; Amy Smith, Associate Counsel Colin Barrett, Vice President/Director of Member Services

2 TBA Legislative Update No , Pg. No. 2 presumption that the purchase price at foreclosure sale equals FMV (to overcome such presumption, the debtor must prove the property sold for less than 75% of FMV); and provides for a 2 year statute of limitations. The Homebuilders also have a bill (SB 1589 by Finney / HB 2000 by Curtiss), but all parties have agreed to move forward with TBA s bill. *Status: Both bills are in the House Judiciary Committee; TBA s bill (SB 3039/HB 3057) is on the calendar for Tues., April 6. TBA is trying to work out a compromise with the Homebuilders and should know next week whether one will be reached. TBA Supported: Advance Notice of Foreclosure SB 3519 (Overbey) / HB 3588 (Coleman), brought by the Tennessee Bar Association, requires banks to send a 60-day advance notice to a debtor that he/she is subject to foreclosure. *Status: House Floor on Mon., April 5; Senate Judiciary Committee on Tues., April 6 Payroll Cards SB 2633 (Johnson) / HB 3095 (Fitzhugh), brought by VISA, allows employers to pay employees with pre-paid debit cards. *Status: House Floor on Wed., April 7; referred to Senate Calendar Committee Appraisal Management Companies SB 3155 (Overbey) / HB 3191 (Mumpower), brought by the Appraisers, would require appraisal management companies to register with, and be regulated by, the Real Estate Appraisers Commission of the Department of Commerce and Insurance. TBA worked with the Appraisers to clean-up this legislation. Also, the bill contains a clear exemption for bank appraisal activities that are currently permitted. *Status: House Small Business subcommittee on Wed., April 7; referred to Senate Finance, Ways, and Means Committee TBA Opposed: TBA began this session tracking (and opposing) multiple bills related to foreclosures, mandatory mediation, credit union expansion, checking processing procedures, and predatory lending issues. We are happy to report that of those bills, only the following still remain: Financial Literacy and Counseling Program (Amendment) SB 3197 (Finney/Harper) / HB 3771 (Stewart), as amended, would create a Financial Literacy and Pilot Program for five counties in Tennessee. *Status: Although the bill failed in the House Utilities and Banking Subcommittee, it passed out of the Senate Commerce Committee and was referred to the Finance, Ways and Means Committee. However, TBA does not expect this bill to pass out of committee. Judgments from Foreign State or Country SB 3740 (Bunch) / HB 3768 (Dennis) establishes that contracts based on the law of any foreign state or country that incorporate substantive or procedural law that would

3 TBA Legislative Update No , Pg. No. 3 violate rights and privileges granted under the US or TN constitution are against the public policy of TN and are void and unenforceable. This bill is very broad and undefined. TBA is seeking better clarification. *Status: Senate and House Judiciary Committees on Tues., April 6 Unclean Hands Doctrine SB 744 (Watson) / HB 185 Floyd) would codify Tennessee s common law Unclean Hands Doctrine and would require that it apply to all commercial transactions. TBA is seeking better clarification of this bill. *Status: Senate and House Judiciary Committees on Tues., April 6 U.S. SENATE BANKING COMMITTEE TRIES DIVIDE AND CONQUER STRATEGY ON REG REFORM On Monday, the U.S. Senate Banking Committee in an attempt to increase support for its regulatory reform bill by dividing the banking industry issued a 'fact sheet' suggesting community banks "win" under panel chairman Chris Dodd's (D-Conn.) legislation. The release claims community banks will be minimally impacted by the bill and should support it because it will "impose greater costs and restrictions" on large banks while "leveling the playing field" for community banks. ABA responded by pointing out that the industry is united in its opposition to the committeepassed bill. "The Board of Directors of the [ABA], which is comprised primarily of community banks, recently voted unanimously to oppose the legislation in its current form," ABA's response states. It further notes that representatives of the banking associations from all 50 states agree that reform is necessary, yet all oppose the Senate Banking Committee version of it. SENATOR CORKER OPPOSES REG REFORM BILL AND SPEAKS TO BANKERS THROUGHOUT TENNESSEE Senate Banking Committee Republican Bob Corker (R-Tenn.) told the Wall Street Journal on Wednesday he cannot support the Democrat's regulatory reform bill -- which the committee passed last week in a party-line vote -- unless changes are made. While Corker said he hopes to resume negotiations for a bipartisan measure, White House spokesman Robert Gibbs said yesterday that the White House will not compromise on what it sees as a strong bill. No Republican senator has yet voiced support for the current legislation, which raises questions about the bill's prospects. Senate leaders hope to bring the bill to the Senate floor in April, with final passage by Memorial Day. Senator Corker Speaks Throughout Tennessee. Senator Corker has been taking advantage of the spring recess to speak to groups throughout Tennessee and answer questions on the financial reg reform legislation, as well as other federal issues, including healthcare reform. The Senator spoke to groups this week in Memphis, Humboldt, and Nashville. It is important that TBA s members make every effort to attend the remaining events. Senator Corker has been most accessible to TBA during the important deliberations of the Senate Banking Committee but we have a long way to go to get the kind of legislation our industry can

4 TBA Legislative Update No , Pg. No. 4 support. Be sure and RSVP to the individuals noted below so the Senator will know you will be present. Thursday, April 8 at 9:30 am (Central Time) Robertson County Bankers Forum Hosted by The Farmers Bank The Farmers Bank Springfield Branch 3490 Tom Austin Highway Springfield, TN RSVP to Ann Schneider or Melody DiOrio at Friday, April 9 at 9:00 am (Eastern Time) Discussion on Financial Reg Reform Hosted by the CFA Society of Chattanooga The Chattanoogan Hotel 1201 Broad Street Chattanooga, TN RSVP to Betsy_Ranalli@corker.senate.gov HELP BLOCK CREDIT UNION EXPANSION BID BANKER ACTION NEEDED!! ABA, ICBA, and 55 state bankers associations last week urged all members of Congress to oppose credit union efforts to expand their business lending powers. The groups explained in a joint letter to Treasury Secretary Timothy Geithner that legislation has been introduced in the House (H.R. 3380) and Senate (S.2919) that would raise the cap on the member business loans a credit union can make from to 25 percent of assets, increase the size of loans that are exempt from the cap from $50,000 to $250,000, completely exclude any loan made in an "underserved area," and repeal certain lending restrictions on undercapitalized credit unions. "Eliminating the business lending cap and expanding credit unions' already broad authority would substantially increase the risk exposure of credit unions and result in credit unions straying further from their traditional mission of serving consumers, especially those of modest means," the trade groups wrote. "Most importantly, changes sought by the credit union industry would benefit only a handful of credit unions. In fact, only 37 of the nearly 7,600 credit unions... would directly benefit because they are at or near their congressionally mandated lending cap." ABA and ICBA continue to urge bankers and their employees to contact members of both the House and Senate to voice opposition to legislation that would increase credit unions business lending authority. You can craft letters using an updated and fully editable sample letter online. Click here to send a letter through ABA s website: Click here to send a letter through ICBA s website:

5 TBA Legislative Update No , Pg. No. 5 ADMINISTRATION EXPANDS FORECLOSURE PREVENTION EFFORTS The Obama administration last Friday announced changes to the Home Affordable Modification Program and FHA programs aimed at helping more qualified unemployed and underwater borrowers avoid foreclosure. Under the FHA changes, which will be implemented by the fall, eligible loans could be refinanced into new FHA loans that do not exceed the value of the home, with lenders writing down the principal by at least 10 percent. Under the HAMP modifications, which will be implemented over the next few months, eligible unemployed borrowers can have their payments temporarily reduced to 31 percent of their monthly income for three to six months. HAMP servicers will be required to offer assistance to all unemployed borrowers who meet the eligibility criteria, and they must consider permanent modifications for borrowers who, at the end of the temporary period, still have a mortgage payment that exceeds 31 percent of their monthly income. Additional program changes address communications to borrowers and increase incentives to second lien-holders and servicers to provide foreclosure alternatives. The federal cost of the programs, expected to be around $50 billion, will be covered with Troubled Asset Relief Program funds. NEW WAGE AND HOUR ADMINISTRATOR S INTERPRETATION From: TBA Associate Member R. Eddie Wayland, Partner, King & Ballow, Nashville, TN On March 24th, the U.S. Department of Labor Wage and Hour Division issued Administrative Interpretation No This Administrator s Interpretation concludes that employees who perform the typical job duties of a mortgage loan officer do not qualify as bona fide exempt administrative employees. The Administrator s Interpretation specifically notes the mortgage loan officer analysis would apply to other various related job titles, including mortgage loan representative, mortgage loan consultant, and mortgage loan originator. The Administrator s Interpretation concludes that the mortgage loan officer s primary duty is making sales and, therefore, they perform the production work of their employees as opposed to administrative duties. The Administrator s Interpretation specifically rejects and withdraws two prior Wage and Hour Opinion Letters which were issued in 2006 as being inconsistent with the revised analysis set forth in their March 24th Administrator s Interpretation. One of these Wage and Hour Opinion Letters, FLSA , was specifically referenced and discussed during our session on March 24th. While this Administrator s Interpretation does not have the force of law, the Wage and Hour Division interpretation of the Fair Labor Standards Act and the related Federal Regulations are generally accorded deference by the courts. Consequently, this shift in position by the Wage and Hour Administrator may significantly impact pending and future litigation in this area. Also, this new Administrator s interpretation foretells a shift in the future Wage and Hour enforcement

6 TBA Legislative Update No , Pg. No. 6 approach. For your review and information, here is the link to the Interpretation No : ABA RISK MANAGEMENT FORUM ABA will be hosting a Risk Management Forum April 28-30, 2010 at the Renaissance Vinoy Resort in St. Petersburg, Florida. Designed specifically for financial services professionals, the Forum will feature in-depth sessions across a range of risk areas. The operational risk management track is designed to meet the needs of both large institutions and community banks. Concurrent sessions will cover the needs of every team member and area within risk management, including information security, credit risk, and technology and operations. General Sessions will focus on the new financial services structure, regulatory hot buttons, and behavioral economics. Participants will be able to share insights and ideas with fellow practitioners in a facilitated banker roundtable and see the latest risk products and services demonstrated in the marketplace. To read more or register, click here: