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Inside Washington (01/11/2011)

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* WASHINGTON (1/12/11)--The Federal Deposit Insurance Corp. is considering a proposal to require big banks that own both servicers and home equity loans to disclose to potential investors—prior to the packaging and sale of the loans--what would happen to the second-lien if the first mortgage comes under distress (Marketwatch Jan 11). Holders of the home equity loans often fail to disclose to investors what their arrangement is on the home equity loans with the corresponding owner of the primary loans. Critics say this lack of transparency is among the reasons why large servicers block modifications to mortgages even when bondholders agree to lower payments for borrowers. Most home equity loans are held by large banks, which also own the large servicers. Observers argue this creates a conflict of interest within the marketplace because banks veto the proposed modifications to primary loans to preserve the home equity loans. Regulators are considering addressing this issue by requiring banks issuing primary mortgages for securitization to disclose what would happen to the second lien if the first mortgage becomes distressed …

New House member Stivers added to GAC lineup

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WASHINGTON (1/12/11)--Rep. Steve Stivers (R-OH) will join fellow House members Rep. Spencer Bachus (R-Ala.), Barney Frank (D-Mass.), and Rep. Debbie Wasserman Schultz (D-Fla.) as a speaker at the Credit Union National Association’s (CUNA) 2011 Governmental Affairs Conference (GAC). Stivers has previously served in the Ohio state senate, and became a first time member of the U.S. Congress when he was sworn in last week. Stivers, who was backed by CUNA, the Ohio Credit Union League, and individual Ohio-based credit unions during his campaign, defeated then-incumbent Mary Jo Kilroy (D) last November. Stivers has extensive finance industry experience, and has, in recent years, told Ohio credit union representatives that he would support legislation that gives credit unions more capacity to serve members. Stivers has also noted the important economic role that credit unions play in the communities they serve. Consumer Financial Protection Bureau architect Elizabeth Warren and co-authors of The New York Times No. 1 best-seller "Game Change" Mark Halperin and John Heilemann are also scheduled to speak during the GAC. The GAC will also feature keynote speeches from actor and Children's Miracle Network Hospitals co-founder John Schneider and "Miracle on the Hudson" pilot Captain Chesley B. "Sully" Sullenberger III. The GAC will open on Sunday Feb. 27 with a performance by classic rockers Three Dog Night. Additional speakers from Capitol Hill and the regulatory agencies will be announced in coming weeks. To register for this year's GAC, use the resource link.

NCBA to testify on co-op model this week

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WASHINGTON (1/12/11)—National Cooperative Business Association (NCBA) CEO Paul Hazen will on Thursday give testimony on the cooperative business model during a U.S. Department of Health and Human Services (HHS)-led hearing. HHS is working to implement health care legislation signed into law in 2010. The NCBA is expected to testify regarding its concern that the new law’s language blurs the definition of co-ops. Specifically, the health care bill provides funding for so-called “Consumer Owned and Oriented Plans”—or “CO-OPs.” The provision allows but does not mandate the creation of cooperatives, despite the name of the plan. An NCBA release said the group “welcomes this opportunity to protect the cooperative brand and ensure that entities organized under CO-OP operate as cooperatives.” The NCBA has frequently worked with the Credit Union National Administration (CUNA) to educate cooperative businesspeople. That association has also advocated on behalf of credit unions by producing an informational video on how credit unions work and why they are different from banks. The video, which was released in 2009, was one of several videos that touted the benefits of cooperatives to consumers. The NCBA has frequently worked with CUNA to educate cooperative businesspeople. That association has also advocated on behalf of credit unions on such issues as member business lending, the CU tax exemption, and the Credit Union Membership Access Act. The NCBA also has produced an informational video on how credit unions work and why they are different from banks. The video, which was released in 2009, was one of several videos that touted the benefits of cooperatives to consumers. CUNA is a member of the NCBA board.

3Q financial crimes at CUs down from 2009 FBI

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WASHINGTON (1/12/11)—A total of 91 financial crimes, or 6.9% of the total of 1325 robberies and incidental crimes reported at financial institutions during the third quarter of 2009, took place at credit unions, the Federal Bureau of Investigation (FBI) has reported. This percentage is slightly below the 7% total reported during the previous quarter, when a total of 85 financial crimes were committed at credit unions. Credit unions were victimized 490 times in 2009, representing 8% of the total number of financial institution robberies. Credit Union National Association (CUNA) figures show that at the end of 2009 credit unions operated a total of 21,336 “outlets,” that is main offices and branch offices, while banks and thrift institutions operated 121,574 outlets; credit unions therefore operated 17.5% of total depository institution outlets. CUNA’s Mike Schenk said that the relatively low crime numbers, as compared to the higher outlet percentage number, makes sense. “We have no hard data on branch accessibility. But we do know that credit union branches are less likely than bank branches to be accessible to the general public because many credit union branches are located inside sponsor organizations. “Because we don’t have data on the specific characteristics of branches it is difficult to say if the 7% “share” of crimes is consistent with the share of accessible outlets but it is certainly not surprising that credit unions account for nearly 18% of outlets but only 7% of crimes,” Schenk said. More details from the FBI report showed commercial banks were hit by 1,195 instances of crimes. Credit unions were second highest with 91 instances, followed by savings and loan associations with 25 robberies, then mutual savings banks, with 13. Just over $9 million in funds were taken during these robberies, and nearly $1.4 million of those funds were eventually recovered. Loot was taken in 90% of the incidents, the FBI said. The majority of the robberies were committed by men, and the largest number of robberies, 482, took place in the southern United States. The most popular day for crimes was Friday, and the most popular time period for them was 9 a.m. to 11 a.m. Nearly all of the financial institutions involved had alarm systems and security cameras, but a mere 72 of them had on-site guards. Some of the top methods used in the crimes were:
* Demand note used--726; * Firearm used--333; * Weapon threatened--568; and * Explosive device used or threatened--30.
Violent acts were committed during 54 of the robberies, resulting in 21 injuries. One perpetrator was injured and three perpetrators died during the robberies. Of the 9 incidents in which hostages were taken, 7 of the hostages were employees and 2 were members/customers. The FBI reported no instances of bank extortion violations at credit unions. However, there were six of these violations at banks. For the full FBI release, use the resource link.