Iowa Banking Law Blog

State Bank Acquistion of Interest in Wind Energy

On May 1, 2008, the Governor signed Senate File 2405 into law.  SF 2405 provides for state bank acquisition of an equity interest in wind energy production facilities and eligibility for production tax credits.  It also permits manufacturing facilities to acquire such credtis for on-site consumption of wind energy.  The new Act will amend Chapter 476B and 476C of the Iowa Code.

A bank's ability to take a financial position in a wind facility is subject to some conditions: 1) creditworthiness review; 2) the bank may not participate in the operation of the facility or the production or sale of energy; 3) if the facility does not perform as projected the bank may sell its interest or liquidate; 4) the bank may not share in any appreciation in value of its interest or in the customer's assets; 5) at the end of the maximum 10 year holding period, the bank must sell at book value. 

In Interpretive Letters 1048 and 1048a the OCC approved a bank's acquisition of an equity interest with similar conditions.  The OCC concluded that a bank's acquisition of such interests was an integral part of an authorized banking activity.

For a copy of S.F. 2405, click here (redirect to Iowa Legislature site).

If you have any questions regarding this law, contact Paul Horvath at Dickinson Mackaman Tyler & Hagen, P.C.

Iowa Ranks 4th in Nation in Subprime Foreclosures, 9th in Overall Foreclosures

According to a report by the Mortgage Bankers Association, Iowa ranks fourth in the nation in subprime foreclosure rate, with a rate of 8.63% (of Iowa loans).  Iowa ranks ninth in total foreclosure rate with 1.65% (of Iowa loans).  In an article on ABC's Ottumwa affiliate website the president of the Iowa Bankers Mortgage Corporation said that most of these subprime loans were given out by brokers and national institutions. 

In response to this growing problem, Attorney General Tom Miller announced an ititiative to assist borrowers facing foreclosure and to encourage loan modification between lender and borrower.  The project will feature a Foreclosure Hotline borrowers can call for assitance.  Miller stated that 50% of people foreclosed upon never contact their lender to attempt to avoid foreclosure.  It is his hope that this initiative will increase communication between lenders and borrowers and decrease the rate of foreclosures by guiding borrowers through the maze that can be created when the originating party transfers the loan to another party, who may then sell the loan further down the line or have another company service the loan. 

This effort meshes very well with the guidance issued by the federal regulators (discussed here).  The Attorney General and the regulators seem to understand that it is not community banks causing this problem, but brokers and other less regulated entities.  Hopefully, Congress will see this as well.

Employers Now Liable for Overdraft Charges Under Iowa Law

Beginning July 1, 2007, employers are liable for overdraft charges incurred by employees when direct deposits are not transferred to the employees’ accounts on or by the regular payday. The overdraft charges may be the basis of a claim under Iowa Code section 91A.10 and for damages under section 91A.8. There is the potential for "liquidated damages" and the employee may also recover attorney fees.  This change will not take a bank off the hook for any errors or delays in its role in receiving a direct deposit.  It is likely that if an employee makes a claim against an employer for failure to deposit funds, the employer may turn to the bank for indemnification if the error was attributable to the bank.  Therefore, banks should be sure their direct deposit process adequately protects against any delays or errors that could be attributable to the bank.