ANDREA F. NUCIFORO JR.
Sponsored banking bill

Shortly after 6:30 p.m. on Dec. 31, 2002, the Massachusetts House and Senate formally adjourned their 2002 session and advanced copies of bills to then-Gov. Jane Swift to act upon. One bill, however, was left stranded.

An Act Relative to Banks and Banking (S. 16), sponsored by Sen. Andrea F. Nuciforo Jr., D-Pittsfield, was introduced in 2001 and enacted by the House on the last day of the 2002 session. The Senate adjourned before the papers were sent back to the Senate for enactment.

At the start of hearings held by the Joint Committee on Banks and Banking last week, the first bill heard was the one left behind last session – Nuciforo’s revised version of the banking re-codification bill that would change the existing mortgage lending and bank investment powers.

S. 16 is an omnibus banking bill that updates outdated banking statutes and contains consumer-friendly provisions and changes that legislators said they believe will enable banks to do business more efficiently.

Publicly and privately owned institutions from across the state testified on behalf of the bill and attached their additions and comments to the proposed banking legislation.

Members of the Massachusetts Credit Union Share Insurance Corp., the Massachusetts Mortgage Association, the Massachusetts Credit Union League, the Massachusetts Bankers Association, the Deposit Insurance Fund, Massachusetts Affordable Housing Alliance and the Massachusetts Division of Banks, as well as representatives from various cooperative and community banks and credit unions across the state, offered their testimony on the proposed bill.

In a statement on behalf of his association, MBA Chairman Kevin Champagne said S. 16 represents “the first comprehensive effort in many years to modernize the state’s banking laws to reflect the current state of the business in the marketplace today.”

Effecting Change

The bill concentrates on several facets of the state’s banking laws, some which have not been addressed in over 20 years. It is intended to effect changes in the laws that “will enhance public convenience, strengthen the competitive ability of state-chartered banks and enhance the operative ability of banking regulators and banking institutions,” according to a report submitted to the committee.

One section of the proposed legislation expands the concept of the Community Reinvestment Act to include “underserved” populations, and gives Massachusetts Commissioner of Banks Thomas J. Curry the power to establish alternative CRA examinations for banks with an outstanding record or high satisfactory rating of performance when considering relocation of a bank’s main office or establishment of a new branch.

James Doherty, president of the MMA, cautioned lawmakers to be careful of “unintended consequences” that might occur if CRA is expanded to cover “underserved” populations not categorized by geographic boundaries.

In addition, the bill rewrites the current branching statute making legislative changes to the opening of branch offices and relocation of a main office of the bank.

“There needs to be a very open and public process in place to make sure citizens in a particular community – particularly older urban communities – have an opportunity to weigh in on the relocating of a main office,” said Nuciforo, chairman of the Joint Committee on Banks and Banking.

The bill proposes to grant banks powers that are “financial in nature,” pursuant to federal Gramm-Leach-Bliley Act stipulations, and relieve the commissioner of banks from that authority.

The bill also recommends consolidating the statutes that create school branch office programs, educational bank training programs and student savings deposit programs.

One of the more debated aspects of the proposed legislation removes existing geographical limitations regarding the establishment of credit union branch offices.

Currently, the law states that a credit union is only allowed to open a branch within 25 miles of its home county. Last year, the bill was written to support a 50-mile radius and this year, it was proposed that credit unions be allowed statewide branching to serve clients.

Mary Ann Clancy, general counsel for the MCUL, said the bill would address the needs of credit union members by authorizing the opening of branch offices and also would allow the approximately 3,300 volunteer members of credit union boards to voice by mail at annual meetings.

As part of the continuing battle of bank vs. credit union, the MBA “strongly opposed” the branch growth of credit unions statewide.

“We believe that granting statewide branching powers to credit unions, this committee would be advocating a policy which would be further detrimental to the vast majority of community banks in Massachusetts,” said Champagne. “The [MBA] does not oppose an increase in the branching authority for credit unions to 50 miles from its home office; however, we will strongly oppose an effort to grant statewide branching authority to credit unions.”

The proposed bill also eliminates several categories of “loan to value ratio” mortgages, uses capital and safety as the principal criteria for mortgage lending and requires that any real estate mortgage must be eligible for sale into the secondary market.

“The key piece of the bill is the complete rewrite of the mortgage lending statute in Massachusetts – it’s been 21 years since there was a re-codification to the bill,” said David Floreen, senior vice president of government affairs at the MBA.

While the MBA supports the overall rewrite of the mortgages and loans section of the bill, industry officials offered a few revisions.

“Today’s mortgage lending market is dramatically different than it was 10 years ago and it is critical that greater flexibility be provided for community banks to continue to be major providers of credit in this vital area of homeownership,” said Champagne during the MBA’s testimony. “One additional suggestion … would be to expand the time frame to add some much needed flexibility for larger construction projects.”

Champagne said in many instances the initial construction on projects is delayed, and expanding the time frame in the mortgage lending law to “either 60 months or 36 months from the actual start of construction” would be beneficial.

At the adjournment of the hearing, committee members thanked those who testified. Nuciforo promised to make amendments available and “have more meetings to address some of these issues, and we’ll do some more fine-tuning.”

With the legislative session still in its early stages, committee members said they hope to see a resolution shortly.

“This will not be moved before the budget [bill], but hopefully in early summer,” said Rep. John Quinn, D-Bristol, House chairman of the committee. “We came so close to getting this passed last session … I’m hopeful that with a little bit of tweaking on the new bill … hopefully we can move this out in short order.”