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Regulatory Relief on Another Level

Jeff Schmid

By Jeff Schmid, CRCM

Want to know the best phrase I’ve heard in my 40-year banking career?

“Be careful of what you ask for, because you just might get it.”

Well, on November 7, 2025, we got it — banks of all sizes got relief from regulatory exams. It came in the form of the FDIC Financial Institution Letter (FIL)-52-2025 that extended the period of compliance exams and Community Reinvestment Act (CRA) evaluations from three years to a five-year cadence. While that may sound like relief, only time will tell.

Over the last decade, community banks have been gravitating toward risk-based management concepts, and this new pattern by the FDIC follows suit with a risk-focused supervisory approach. Smaller banks with lower compliance risk profiles will now see combined compliance and CRA examinations between 66-78 months from the previous exam, while larger banks will benefit from 54-66 months. Lower risk is defined in the FIL as banks with a Consumer Compliance Rating of “1” or “2” and a CRA rating of “Outstanding” or “Satisfactory”. For approximately 116 state-chartered banks in Wisconsin, this change may sound like relief, but when we analyze the overall impact, we start to see a much different picture.

Prior to this modernization, banks of all sizes benefited from the most knowledgeable professionals in the banking industry. While we may not have always agreed with the examiner’s findings, they left our banks stronger and more reputable. Inherently, professional relationships were forged with experienced examiners that guided us through the maze of complex, and often confusing, regulations. With the extension of examination cycles, those relationships will certainly change, if not fade.

For banks with a current Compliance Management System (CMS) rating of “2” or a CRA rating of “Satisfactory”, the chance to demonstrate improved efforts to the Board, or enhance the
community image is now significantly delayed. Report cards that were once timely will now have to wait. Nothing is more frustrating to a compliance officer than not knowing how well the compliance program is working. And think about those systemic issues or patterns of non-compliance that magically appear during an exam. Before this cycle change, a look back period for significant violations went all the way back to the prior exam. What sort of ramifications will now exist if a bank must look back for more than five years? The consequences could be significant.

Finally, there is increased cost and quality assurance to consider — one of the pillars of compliance management is the function of audit. Bank management should expect the cycle of audits to be
more frequent, and most likely will come with increased costs. Due to the delayed time between exams, there will be greater reliance by examiners on independent compliance audits, so the thoroughness by audit professionals will be extremely important. Management will need to determine who will serve them best.

The list of things to consider with the new exam approach doesn’t end here. How we navigate through the change will not necessarily be easy, as we will not know for years if we have been successful in carrying out our CMS program. While we asked for relief, we got more than we bargained for.

To learn how these changes impact your bank, or how our ShareFI services can help you through the next compliance exam, contact Jeff Schmid by email jschmid@fipco.com or call 608-441-1220.

Schmid is the FIPCO senior vice president of compliance and management consulting services.

For more information about FIPCO forms, software, or other products, visit fipco.com, call 800-723-3498, or email fipcosales@fipco.com.

FIPCO is a WBA Gold Associate Member.

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Making a Case for Third-Party Loan Origination

By Jeff Schmid, CRCM

Jeff Schmid

Not long after FIPCO created a business model for shared compliance and risk management in 2019, the demand for shared loan processing and origination spiked. It only made sense as in the years that followed, we saw the lowest mortgage loan rates in nearly a decade. Unfortunately, our ShareFI services were not equipped to offer this assistance back then, even though our ShareFI team had more than twenty years of experience managing loan processing and origination departments in both large and small institutions.

Fast forward to 2025, and I think we will see the next cycle of low rates with high refinances, especially as a recession is possibly on the horizon. Think back to 2020 when loan processing departments across the country were swamped with loan
applications. It was very dynamic too because loan processors were mostly working remotely and the concept of PPP loans created quite a stir within our commercial departments. For the first time, we had to prioritize customers in both loan products. I am not sure if we have all recovered, but more importantly, I am not sure banks are ready for the next low-rate cycle. In this article, we explore the case of outsourcing third-party origination (TPO) to help you prepare.

The case for compliance: while most Loan Origination Software (LOS) vendors tout their systems as the most compliant with federal regulations, we all know it really comes down to knowledgeable staff making the right decisions. When you have an inexperienced staff who process less than five mortgages a month, will they be able to keep up loan demand next year while at the same time, keep your bank from regulatory scrutiny? TPO services can keep you compliant and so can ShareFI.

The case for staffing: look around and ask yourself, “do we have the same level of staffing as we did in 2020, even though loan demand has declined sharply?” If this is true in your bank, I offer you the concept of TPO services and saving your capital. After all, the next cycle will not last long and then you are back to overstaffed departments again. Or conversely, did you find a void in loan processing and now wondering where you are going to find talent to help you through the next cycle?

The case of backup: maybe you are part of the lucky few who are currently right sized with your loan processing department. But what happens when one or two processors, especially those who survived 2020, decide that being retired is much less stressful. We know it can take weeks, if not months, to find a replacement who is just as talented. And do not forget how expensive training can be. There is no additional staff training necessary when you deploy TPO.

The case for profitability: instead of purchasing all software origination modules, with extraordinarily high annual costs, consider a TPO partner who has made the capital investment and ride their wave into the next refinance craze. The costs associated with outsourced processing and origination do not have to rest with you as the lender. Consider passing on this cost to the borrower as compensation for speed and delivery.

The case for efficiency: well, readers get my point. Sharing professional services, whether its compliance, risk management, or loan processing, bank management teams across the country will find value in low cost, high yielding solutions. Whether it is today, tomorrow, or even next year, planning for TPO services now will give you the competitive advantage as demand begins to soar. You just simply need to make the case.

Whether you are a small bank with minimal origination or a large bank with high loan volumes, our ShareFI team is ready to partner you with the right TPO vendor. While this can be as simple as loan documentation preparation (which FIPCO has done for customers for years) or full-scale processing, we are ready to help you make the right decision.

To learn more about TPO or shared professional services, please contact Jeff Schmid at jschmid@fipco.com or 608-
441-1220. There is value in ShareFI.

Schmid is director of compliance and management services at ShareFI. FIPCO is a subsidiary of WBA and a WBA Gold Associate Member.

 

 

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FIPCO Board of Directors Announcement

Dan De Jager

FIPCO would like to extend our deepest gratitude to Dan De Jager, Vice-President of Farmers & Merchants Union Bank in Columbus, WI, who has retired from the FIPCO Board of Directors as of August 21, 2024. De Jager has been an invaluable member of the board, serving with dedication and expertise from 2018 to 2024. FIPCO sincerely thanks him for his six years of outstanding service and commitment to FIPCO.

At the same time, FIPCO is excited to introduce our newest member of the FIPCO Board of Directors, Shelly Bucholtz. Shelly is the Loan Operations Officer at First Citizens State Bank in Whitewater, Wisconsin. FIPCO looks forward to the insights and contributions she will bring to the board.

Shelly Bucholtz

Please join FIPCO in wishing Dan all the best and in welcoming Shelly to the FIPCO Board.

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Executive Letter: WBA Municipal Borrowing Form Sets Accommodate New 20-Year Term

By Rose Oswald Poels

During the past 2023–2024 Wisconsin legislative session, 2023 Wisconsin Act 128 was signed into law which revised several banking-related areas of Wisconsin law, including a revision which extends the maximum maturity date of a promissory note issued by a municipality, county, or school district.

In particular, Act 128 revised Wis. Stat. Sec. 67.12 (12) as follows:

During the past 2023–2024 Wisconsin legislative session, 2023 Wisconsin Act 128 was signed into law which revised several banking-related areas of Wisconsin law, including a revision which extends the maximum maturity date of a promissory note issued by a municipality, county, or school district.

As a result of Act 128, the maximum maturity date of a promissory note issued to a municipality, county, or school district is now 20 years. In recent bank visits, I have fielded questions about whether this law has changed to allow banks to compete better with state programs and whether the current forms will work. The question related to whether the WBA municipal borrowing form sets offered through FIPCO accommodate the 20-year term now available under Wisconsin law is because an instructional page within the form sets references 10-years within its language.

Indeed, the current WBA municipal borrowing form sets will accommodate a 20-year loan term. These forms include the WBA 200-205 form sets and the WBA 220-225 form sets. The reference to “10-years” is only in the instructional cover page to each series and is not in the contents of the forms themselves which are executed with a municipal borrowing customer.

Each of the WBA municipal form sets listed above reference Wis. Stat. 67.12(12) within the forms’ language. Since Section 67.12(12) was the section revised by Act 128 to allow for a 20-year term, the WBA municipal borrowing form sets will accommodate a 20-year loan term.

Nonetheless, FIPCO is currently working on revisions to the WBA municipal borrowing form sets which include a revision to strike the reference of the “10 years” from the instructional cover page and change it to 20 years, changing any reference of “bank” within the forms to “financial institutions,” and adding other clarifying language. The revised forms are planned for release in the next month or two. Until such release, the current WBA municipal borrowing forms, WBA 200-205 form sets and the WBA 220-225 form sets, will accommodate a 20-year loan term.

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Committee Chair Spotlight: Shannon Grunewald

The following is a brief interview with Shannon Grunewald, loan operations officer at Waldo State Bank. Grunewald is chair of the 2023–2024 FIPCO Software Users’ Committee.

How did you first get into the banking industry?

I had just graduated from high school, working a part time job, trying to decide what I wanted to be when I grew up and an opportunity came up to work for a large bank in their post-closing department. After 14 years working in large banks, I decided that taking on a position at a small community bank was more my style. Who knew someday I would find Waldo.

Why did you decide to join a WBA committee? Why should others consider lending their time and expertise to shaping Wisconsin’s banking industry?

My supervisor at the time was ending his term on the committee and continuously expressed how important the connections he made were and how much fun he had. I loved the idea of being a part of suggesting enhancements to make all our lives easier. I now have a network of peers (I now consider friends) that I can bounce ideas off of or get suggestions for new products.

How has WBA facilitated the growth you have seen in your career and as a leader?

Ahead of the 2023 FIPCO Compliance Concierge Software & Compliance Forum this past October, FIPCO contacted me, as this year’s chair of the user committee, asking if I would be willing to do an opening speech and committee member introduction. I couldn’t say no, but as someone that has a fear of public speaking this was one of the hardest things I did this year. But the encouragement that FIPCO staff, my fellow committee members, and my coworkers showed me, made it in the end one of the easier things I’ve done.

As a banker, and as a leader, what is the most important lesson that you have learned?

That with the right people around you, anything can be accomplished. Regulations and HMDA will always be the death of me, but as long as I have a great team surrounding me, I will go on. Choose a job you love, and you will never have to work a day in your life. –Confucius.

Who (or what) motivates you to succeed?

Seeing my team learn and grow. If I have shared knowledge with someone and later see them share it with another, it’s the best feeling around.

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Wisconsin Bankers Association logo

questions@wisbank.com

608-441-1200

4721 S Biltmore Ln.
Madison, WI 53718

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