Feds, States to Share Broker Data

Speaking before the House Financial Services Committee today, John C. Dugan said OCC has launched a cooperative initiative with the Conference of State Bank Supervisors involving parallel examinations of OCC-regulated banks and mortgage brokers who originate loans for them, according to testimonial records released by the agency. The federal banking supervisor and several states will look for evidence of practices that are inconsistent with recent nontraditional mortgage guidance or the pending subprime guidance.

“We hope to develop a baseline of useful compliance information resulting from this unique congruence of state and federal jurisdictional interests,” he said.

Violations will be shared between the federal and state governments, noted Dugan — who was sworn in as the 29th Comptroller in August 2005 and also serves as a director of the Federal Deposit Insurance Corp., the Federal Financial Institutions Examination Council and NeighborWorks America.

Commenting on the recent Supreme Court decision in Watters vs. Wachovia to give federal regulatory agencies precedence over state banking agencies in determining which rules apply to federally-chartered banks, Dugan said, “It makes clear that federal and state regulators both have important jobs to do, but they are different.

“Ours is to regulate and supervise national banks, for which we should be held accountable. Theirs is to regulate state-chartered entities, for which they should be held accountable.”

Dugan noted the inefficiency of states trying to regulate banks that are already extensively supervised by OCC. He highlighted how the national banking system has been immune to abusive subprime practices, while hard data indicate most subprime lending is done by state-regulated non-banks.

“The abuses in the subprime lending business — loan flipping, equity stripping, and making subprime loans that borrowers have no realistic prospect of repaying — simply have not seeped into the national banking system,” he said. “Hard data show that the quality of the subprime loans that are made by national banks is markedly better than those of other lenders — the delinquency rate has run about half the national average. This is not an accident — it is a reflection of the quality of our supervision and our supervisory standards.”

Touting the agency’s mortgage-related actions, the comptroller said OCC issued a consent order in 2003 requiring a bank to pay borrowers who were abused from tax lien mortgage loans and settled with another bank in 2005 for $14 million in payments to affected borrowers abused by a mortgage operating subsidiary.