Volume 41 - Issue 3 - January 20, 2022
State of Kansas
Office of the State Bank Commissioner
Notice of Hearing on Proposed Administrative Regulation
A public hearing will be conducted at 9:00 a.m. Tuesday, March 29, 2022, in the Bank Commissioner’s Conference Room A of the Jayhawk Tower Building, 700 SW Jackson, Fourth Floor, Topeka, KS 66603, to consider amending Kansas Administrative Regulation 17-11-18, an administrative regulation promulgated by the Office of the State Bank Commissioner regarding loan documentation.
This 60-day notice of the public hearing shall constitute a public comment period for the purpose of receiving written public comments on the proposed amended regulation. All interested parties may submit written comments prior to the hearing by mailing them to the Office of the State Bank Commissioner, 700 SW Jackson, Suite 300, Topeka, KS 66603-3796 or by email to Melissa.Wangemann@osbckansas.org. All interested parties will be given a reasonable opportunity to present their views orally or in writing regarding the amendments to K.A.R. 17-11-18 during the public hearing. In order to provide all parties an opportunity to present their views, it may be necessary to request that each participant limit any oral presentation.
Copies of the current regulation, proposed amendments, and the economic impact statement may be obtained from the Office of the State Bank Commissioner by contacting Melissa Wangemann at 785-379-3569, Melissa.Wangemann@osbckansas.org or the mailing address given above.
Any individual with a disability may request an accommodation in order to participate in the public hearing and may request the proposed amended regulation and economic impact statement in an accessible format. Requests for accommodation to participate in the hearing should be made at least five working days in advance of the hearing by contacting Melissa Wangemann at the Office of the State Bank Commissioner. The west entrance to the Jayhawk Tower Building is accessible and there is one accessible parking spot at 720 SW Jackson. There is additional accessible parking on the northwest corner of Jackson and 8th Street.
A summary of the proposed amended regulation and economic impact follows. Copies of the proposed amended regulation and the economic impact statement can be viewed at the Office of the State Bank Commissioner’s website, http://www.osbckansas.org.
Summary: K.A.R. 17-11-18 creates requirements for state banks to maintain certain loan documentation that aids the Office of the State Bank Commissioner in examining state banks, and ensures sound and safe banking practices.
Amended K.A.R. 17-11-18 changes the requirements for state banks’ maintenance of loan documents. The main impetus for these changes is to place state banks on a competitive playing field with national banks, who do not have these same requirements. The amendments are as follows:
(a) – The requirement that a state bank maintain credit information for each borrower when the total amount of all loans to the borrower is greater than $100,000 is amended to increase the threshold requirement to $250,000.
(b)(1)(A) – The requirement that a state bank record its protections on purchase-money real estate loans is amended to allow a lien search for those loans up to $250,000. This new threshold of $250,000 replaces the old category of $25,000-$50,000 allowing for a lien search.
(b)(1)(B) – For loans that exceed $250,000, the bank can use either an attorney’s written opinion or title insurance. This replaces the old threshold of real estate loans greater than $50,000 for these protections.
(b)(1)(C) – The requirement that a state bank obtain an insurance policy against loss of the bank’s priority position (“mortgage-priority insurance”) for a non-purchase real estate mortgage is amended. A new threshold of $250,000 is added along with the options of obtaining an attorney’s written opinion or title insurance.
(b)(1)(D) – Two options for non-purchase real estate mortgages over $250,000 are allowed, which are an attorney’s written opinion or title insurance. The mortgage-priority insurance is not allowed, due to the increase in the threshold.
(c) – A technical amendment is added to change the phrase from “in excess of” to “greater than” and make that phrasing standard throughout the amended regulation.
(d) – A technical amendment is added to change the word “retain” to “maintain” to create uniform phrasing throughout the amended regulation.
Economic Impact: The banking industry expects cost savings because the amended regulation will allow state-chartered banks to offer a less costly mortgage. The title insurance industry believes it will lose business and see a marked reduction in profits. It should be noted that mortgages sold on the secondary market generally require title insurance; thus, any bank that sells its mortgages will still purchase title insurance. The number of state banks that would continue to purchase title insurance cannot be estimated. Title insurance prevents additional, higher costs in the future to the borrower and the bank, if the mortgage is determined to be impaired and legal action is necessary to clear the title. As is typical with any type of insurance, title insurance insures against unforeseen losses relating to the mortgage. Thus, the benefit of saving money for banks and bank customers is offset by increased risk for undiscovered liens and other impairments.
The Kansas Bankers Association estimated that the use of mortgage-priority insurance will save customers approximately $400 on a $100,000 non-purchase real estate mortgage loan and approximately $600 on a $250,000 non-purchase real estate mortgage loan. OSBC requested economic impact data from the title insurance industry; however, they were not able to provide detailed costs. They noted that title insurance prevents additional, higher costs in the future, if the mortgage is determined to be impaired and legal action is necessary to clear the title.
Melissa A. Wangemann
Doc. No. 049734