Volume 11, Number 1

Subprime Mortgage Lending

The Department of Financial Institutions expects all licensees to comply with the federal financial
regulatory agencies’ “Statement on Subprime Mortgage Lending” issued June 29, 2007, to address
issues relating to certain adjustable-rate mortgage (“ARM”) products that can cause payment shock.
The statement describes the prudent safety and soundness and consumer protection standards that
institutions should follow to ensure borrowers obtain loans they can afford to repay. These standards
include a fully indexed, fully amortized qualification for borrowers and cautions on risk-layering
features, including an expectation that stated income and reduced documentation should be accepted
only if there are documented mitigating factors that clearly minimize the need for verification of a
borrower’s repayment capacity.
Consumer protection standards include clear and balanced product disclosures to customers and limits
on prepayment penalties that allow for a reasonable period of time, typically at least 60 days, for
customers to refinance prior to the expiration of the initial fixed interest rate period without penalty. As
noted in the statement, regulatory agencies will continue to carefully review risk management and
consumer compliance processes, policies, and procedures, and take action against institutions that
exhibit predatory lending practices, violate consumer protection or fair lending laws, engage in unfair or
deceptive acts or practices, or otherwise engage in unsafe or unsound lending practices.
The statement reinforces the April 17, 2007 interagency “Statement on Working with Borrowers,” in
which the agencies encouraged institutions to work constructively with residential borrowers who are
financially unable or reasonably expected to be unable to meet their contractual payment obligations on
their home loans. Workout arrangements that are consistent with safe and sound lending practices are
generally in the long-term best interest of both the financial institution and the borrower.
Deputy Commissioner Peter A. Van Hoecke
Retires
Peter A. Van Hoecke, Deputy Commissioner of Legislation and Policy retired on July 31, 2007 after
over 35 years with the Department. Pete joined the State Banking Department, the predecessor agency to
the Department of Financial Institutions in 1972 as a junior examiner and held a variety of positions in
the Department during his career. He served as the Legislative Liaison from 1983 to 1985, was
appointed Deputy Superintendent of Banks – Sacramento in 1991, and Deputy Superintendent of Banks
– Office of Policy, Planning & Research from 1992 -1996. He was appointed Deputy Commissioner of
Legislation and Policy in March 2005.
2 Monthly Bulletin July 2007
In November 2005 Pete was acknowledged for his contributions to the leadership and management of
the department and for his commitment to the Department’s mission to ensure the integrity and stability
of California’s financial services system through the regulation and supervision of state-licensed
financial institutions. Pete was again recognized in 2007 with the Commissioner’s Award for taking on
additional duties, including Acting Chief Administrative Officer and Acting Performance Measures
Manager in addition to his legislative and policy work.
Commissioner Attends Consumer Home
Mortgage Town Hall Events
Department of Financial Institutions (DFI) Commissioner Michael A. Kelley attended Consumer Home
Mortgage Town Hall events on Saturday, July 14, 2007 at the California Baptist University – Yeager
Center in Riverside and on Saturday, July 21 at Our Lady of Holy Rosary Church in Sun Valley.
The Riverside and Sun Valley events are part of a series of community events coordinated by the
Department of Consumer Affairs, State and Consumer Services Agency, and the Business,
Transportation and Housing Agency in partnership with local legislators, to help educate the public
about homeownership. The Riverside Town Hall was hosted by Senator Bob Dutton and Assembly
Members John Benoit, Paul Cook, Bill Emmerson, and Kevin Jeffries. The Sun Valley event was hosted
by Senator Padilla and Assembly Member Felipe Fuentes.
State officials and experts provide presentations and information on mortgages and making the most of
homeownership. Efforts also include consumer education, enforcement against unscrupulous licensees,
and new regulations to ensure consumers better understand the loan products that are available.
“Together, we can assist borrowers by helping them obtain information on financial transactions
including mortgages and refinancing, tips on working with lenders, and filing a complaint with the
appropriate regulatory agency if a borrower believes a violation of the law has occurred,” said
Commissioner Kelley. “We are encouraging consumers to bring their loan documents and/or all
financial-related questions and get straight answers from state regulators,” Kelley added.
In addition to the Town Hall events, a Consumer Home Mortgage Web site was launched in May,
www.yourhome.ca.gov, which is also available in Spanish at www.sucasa.ca.gov and provides
consumers with links to an array of helpful mortgage resources. The online information allows
consumers to address their unique situations, with links for consumers who are looking to purchase a
home and for those who need help with an existing mortgage. The Web site also posts scheduled town
hall event information.
DFI Terminates Consent Agreement with
Western Union
The California Department of Financial Institutions (DFI) announced today that the Department has
terminated the Consent Agreement entered into with Western Union dated August 14, 2003. The
termination of the Consent Agreement followed an examination by the DFI and numerous meetings with
Western Union management and compliance officials.
3 Monthly Bulletin July 2007
The Consent Agreement required that Western Union take steps to strengthen its compliance with
California law and federal anti-money laundering and Bank Secrecy Act (BSA) requirements, as well as
strengthen the supervision of its agents. California law requires that all persons authorized to transmit
money abroad comply with all applicable state and federal laws.
Western Union also was obligated to spend at least $5 million on its BSA compliance program, and its
program for the training and supervision of its agents in California over the course of the Consent
Agreement.
2007-08 Assessment
Commercial Banks, Foreign Banks and Trust Companies
Assessment invoices were mailed to commercial banks, foreign banks and trust companies on July 10,
2007.
For the purposes of the 2007-08 assessment, the base rate is set at $1.41, a five-cent increase ($0.05)
over the $1.36 rate charged in the 2006-07 assessment. Invoices were mailed to each licensee on July
10, 2007 and became delinquent if not paid by July 30, 2007. The statutory maximum rate is $2.20 per
thousand dollars of total assets.
While the assessment rate has remained the same over the prior two years, a nominal increase is
necessary this year to fund a $4.4 million increase in the Department’s bank examination program. The
increased expenses are due to the recent employee compensation increases approved by the Legislature
which increased the personal services costs for the banking program by $2.7 million, in addition to an
augmentation of $1.7 million to provide additional examination resources to enhance the Department’s
oversight of e-banking activities. The Department has been able to mitigate the need for a substantially
larger assessment rate increase due to growth in its licensees’ asset base, as well as through careful
management of its existing budgetary resources, enabling it to minimize the extent of the assessment
rate increase.
Industrial Banks
The assessment rate for industrial banks this year at $0.80231 per thousand dollars of total assets has
remained unchanged since 2003. The statutory maximum rate is $2.20 per thousand dollars of total
assets. Invoices were mailed to each licensee on July 12, 2007 and became delinquent if not paid by
August 1, 2007. Insurance premium finance companies will be assessed on November 30, 2007.
Credit Unions
The 2007-08 assessment rate is $0.447282343, per thousand dollars of total assets, unchanged from last
year’s rate. Invoices were mailed to each licensee on July 12, 2007 and became delinquent if not paid by
August 1, 2007. The statutory maximum rate is $2.20 per thousand dollars of total assets.
4 Monthly Bulletin July 2007
Commercial Bank Activity
New Bank
Bank of Feather River
Gateway Business Park, 950 Tharp Road, Building 1200, Yuba City, Sutter County
Correspondent: Joseph D. Reid III
Capitol Bancorp Limited
200 Washington Square North
Lansing, MI 48933
(517) 487-6555
Name changed: on 7/2/07 from Feather River Bank
Approved: 7/13/07
California Bank of Commerce
270 Lafayette Circle, Lafayette, Contra Costa County
(925) 283-2265
(925) 283-2269 (fax)
Officers: John Rossell, President and Chief Executive Officer
John Thomas Byron, Chief Financial Officer
John Lindstedt, Chief Credit Officer
Capitalization: $27,500,000.00
Opened: 7/17/07
California Republic Bank
1400 Newport Center Drive, Newport Beach, Orange County
Correspondent: Russell W. Bushore
Carpenter & Company
Five Park Plaza, Suite 950
Irvine, CA 92614
(949) 261-8888
Approved: 7/10/07
Suncrest Bank
400 W. Center Avenue, Visalia, Tulare County
Correspondent: Michael T. Wilson
814 W. Center Avenue, Suite F
Visalia, CA 93291
(559) 622-8841
Filed: 7/10/07
Merger
Landmark National Bank, Solana Beach, to merge with and into 1st Pacific Bank of California, La Jolla
Effected: 7/1/07
5 Monthly Bulletin July 2007
Acquisition of Control
WCB Holdings, Inc. to acquire control of Western Commercial Bank
Filed: 6/14/07
Approved: 7/20/07
Sale of Partial Business Unit
Wilshire State Bank, Los Angeles, California, to sell the Flushing Branch to Royal Asian Bank,
Philadelphia, Pennsylvania
Effected: 7/6/07
Purchase of Partial Business Unit
Wilshire State Bank, Los Angeles, California, to acquire the Fort Lee Branch of Royal Bank America,
Narbeth, Pennsylvania
Effected: 7/6/07
Conversion to State Charter
Pacific Commerce Bank, N.A., Los Angeles, to convert from national charter under the name of Pacific
Commerce Bank
Approved: 7/13/07
Premium Finance Company Activity
New Premium Finance Company
AMGRO Premium Financing, Inc.
1410 Rocky Ridge Road, Roseville, Placer County
Opened: 7/1/07
Acquisition of Control
AIG Capital Corp., to acquire control of AICCO, Inc.
Filed: 6/8/07
Approved: 6/26/07
AIG Capital Corp., to acquire control of Imperial Premium Finance, Inc.
Filed: 6/8/07
Approved: 6/26/07
Voluntary Surrender of License
GD Financial Corporation
2424 Hoover Avenue, National City, San Diego County
Effected: 7/26/07
6 Monthly Bulletin July 2007
Industrial Bank Activity
Acquisition of Control
Gerald J. Ford, Diamond A Financial, L.P., and Ford Diamond III Corporation, to acquire control of
Fremont Investment & Loan
Filed: 6/14/07
Foreign (Other State) Bank Activity
New Facility
Allegiance Direct Bank, Inc. (Facility – Insured Bank)
2616 Bungalow Place, Corona del Mar, Orange County
Opened: 7/16/07
Choice Bank (Facility – Insured Bank)
441 Marketview, Irvine, Orange County
Notified: 7/2/07
Credit Union Activity
Field of Membership
Three credit unions received approvals to add four new field of membership during June 2007.
Bylaw Amendment
Three credit unions received approval for three bylaw amendments during June 2007.
Merger
California’s First Federal Credit Union, Garden Grove, to merge with and into California Agribusiness
Credit Union, Buena Park
Approved: 6/5/07
Effected: 7/2/07
Capital Power Credit Union, Sacramento, to merge with and into SAFE Credit Union, North Highlands
Effected: 7/26/07
Knudsen Federal Credit Union, City of Industry, to merge with and into California Agribusiness Credit
Union, Buena Park
Approved: 6/5/07
Effected: 7/2/07
Merriam Federal Credit Union, Chatsworth, to merge with and into Matadors Community Credit Union,
Chatsworth
Filed: 6/5/07
Approved: 6/13/07
7 Monthly Bulletin July 2007
Transmitter of Money Abroad Activity
New Transmitter of Money Abroad
Coinstar E-Payment Services, Inc.
Opened: 7/31/07
Metro Remittance Center (California), Inc.
Opened: 7/31/07
Voluntary Surrender of License
Integrated Payment Systems, Inc.
Effected: 7/3/07
International Remittance (USA) Corporation
Effected: 7/3/07
Money Express Financial Corp.
Effected: 7/3/07
MICHAEL A. KELLEY
Commissioner of Financial Institutions
Bulletin for Month ended
July 2007, issued pursuant
to Financial Code section 258
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