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Inside Washington (01/14/2009)

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* WASHINGTON (1/15/09)--If he is confirmed by the Senate, Shaun Donovan, secretary-designate of the Department of Housing and Urban Development (HUD), said he will ensure the agency returns to its role in easing the housing crisis. Donovan made the statement at a confirmation hearing before the Senate Banking Committee (American Banker Jan. 14). He said he supports using Troubled Asset Relief Program money for loan modifications and noted some possible changes for the Federal Housing Administration's Hope for Homeowners (H4H) program, which was implemented in October. Though H4H was slated to help up to 400,000 homeowners, fewer than 500 have applied for the program. Reforming Hope’s fee structure and writing down troubled loans to 96.5% of the current appraised value--compared with 90%--could spark participation, he said ... * WASHINGTON (1/15/09)--The Department of Housing and Urban Development is launching a financial literacy effort over the next six months in six cities to prevent foreclosures. “Keep Your Home. Know Your Loan” will kick off in Chicago, Detroit, Los Angeles, Miami, New York and Phoenix, and target homeowners who are three to six months from defaulting, facing a reset, or experiencing a family crisis. Campaign materials include print, radio, television public service announcements and a toolkit for non-profits to join the effort. The agency is seeking homeowner associations, real estate brokers and other members of the financial services industry to participate ...

CUs should weigh in on Fed overdraft plan says CUNA

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WASHINGTON (1/15/09)—A Federal Reserve Board proposal to amend its Regulation E to afford consumers more protections regarding overdraft fees would apply to all credit unions and the Credit Union National Association (CUNA) is seeking credit union comment on the plan. The Fed proposal would change rules implementing the Electronic Fund Transfer (EFT) Act. The bank regulator scrapped earlier proposals that would have tried to address overdraft fee programs through rules under the Unfair and Deceptive Acts or Practices (UDAP) Act and the Truth in Savings Act. Those rules, if implemented, would not have covered state-chartered credit unions. The Fed’s current proposal outlines two approaches for providing consumers a choice regarding the payment of ATM and one-time debit card overdrafts by their financial institution and seeks comments on which approach should be adopted in the final rule:
* Opt-out: Under this approach, an institution would be prohibited from imposing an overdraft fee unless the consumer is given an initial notice and a reasonable opportunity to opt-out of the institution’s overdraft service, and the consumer does not opt-out; or * Opt-in: This second approach would prohibit an institution from imposing an overdraft fee for paying such overdrafts unless the consumer affirmatively consents to the institution’s overdraft service.
The Fed’s proposal would also prohibit credit unions and other financial institutions from imposing an overdraft fee when an account is overdrawn because of a hold placed on funds in the consumer’s account that exceeds the actual transaction amount. The prohibition would be limited to debit card transactions in which the actual transaction amount can be determined within a short period of time after the transaction is authorized. Examples include transactions at gas stations and restaurants. In a CUNA Comment Call, CUNA asks credit unions to remark on those and other provisions within the Fed plan by Feb. 25. Comments are due to the agency within 60 days after it is published in the Federal Register, which should occur within the next several days. Use the resource link below to read more CUNA analysis of the Fed proposal and to access the extensive lists of questions CUNA seeks to have addressed by credit unions.

Regulators release guidance on remote capture

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WASHINGTON (1/15/09)—The Federal Financial Institutions Examination Council (FFIEC) issued guidance Wednesday for examiners, financial institutions, and technology service providers to identify risks, evaluate controls, and assess risk management practices related to remote deposit capture (RDC) systems. The FFEIC is comprised of the National Credit Union Administration and the federal bank and thrift regulators. Remote capture is a service that lets credit union members or bank and thrift customers to make deposits from their homes or businesses—removing the need for a trip to the financial institution. The service, used mostly by businesses, obviously saves time and travel expenses, but also can accelerate funds availability while reducing processing costs. However, the NCUA and other federal regulators warn that RDC systems introduce an added element of risk to processing deposits. In a recent Letter to CUs on risk management of remote capture, which was accompanied by the FFIEC guidance, the NCUA wrote that this service can add risk in legal, compliance, and operational areas. Performing effective risk management, the letter said, is the key to mitigate and control associated risks. It added that the risk management process should include:
*Risk Assessment: Management should perform a comprehensive risk assessment to identify and assess legal, compliance, and operational risks. * Risk Mitigation and Controls: Management should establish policies addressing risk tolerance levels, internal procedures and risk controls, risk transfer mechanisms, and contracts and agreements. * Risk Measuring and Monitoring: Management should establish operational performance metrics, benchmarks and standards, and develop management reports to support management oversight of RDC operations.
The letter also noted that too ensure sound implementation and ongoing operations, a credit unions’ board of directors should approve and oversee RDC plans and policies, and review performance and risk management reports. The NCUA suggested that questions should be directed to NCUA Regional Office or State Supervisory Authority.

SAR half-year mark at six million

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WASHINGTON (1/15/08)—The Financial Crimes Enforcement Network (FinCEN) Wednesday released its twice-annual data on Suspicious Activity Report (SAR) filings, which showed more than 6 million SARs had been filed in 2008 by June 30. Of that amount, FinCEN said 62%--or 3.7 million—were filed by credit unions and all other depository institutions. The FinCEN report, called “The SAR Activity Review – By the Numbers,” said that the Bank Secrecy Act-structuring-money laundering continued to be the leading characterization of suspicious activity by depository institutions. It noted that the first two quarters of 2008 reiterated a continued upward trend of mortgage loan fraud and identity theft. Mortgage loan fraud SARs, FinCEN reported, increased by approximately 40%, consumer loan fraud filings increased 35%, and wire transfers fraud SARs increased 87% compared to the corresponding six-month reporting period in 2007. The SAR Activity Review By the Numbers is published twice annually covering two filing periods: January 1 to June 30, and July 1 to December 31. It is a companion report to “The SAR Activity Review – Trends, Tips & Issues.” Use the resource link below to read report details.

CUNA CU TARP language sends strong signal

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WASHINGTON (1/15/09)—As House members tussle over the release of the remaining $350 billion in Troubled Asset Relief Program (TARP) funds to the incoming Obama administration, some lawmakers are taking the opportunity to make an important statement about credit unions, noted Ryan Donovan of the Credit Union National Association (CUNA) Wednesday. “For instance, Rep. Joe Baca’s recent question about credit unions’ inability to access TARP funds, and his introduction of an amendment to address the inequality, send important signals to the new administration,” Donovan said. He is CUNA’s vice president of legislative affairs. Donovan was referring to remarks made by Baca, a Democrat from California, during a Tuesday House Financial Services Committee hearing on "Priorities for the Next Administration: Use of TARP Funds under EESA (Emergency Economic Stabilization Act)." The hearing also focused on H.R. 384, a new bill introduced by the committee’s chairman, Rep. Barney Frank (D-Mass.), intended to modify rules governing TARP. Baca offered an amendment that would provide a limited form of alternative capital to help credit unions participate in government assistance programs. Currently, credit unions have been unable to access TARP funding—which has focused on capital injections-- because of statutory prohibitions that generally bar credit unions from obtaining capital from outside sources. Frank included the Baca amendment in his “manager’s amendment,” which will become the base text of the bill when it is considered by the House. The California CU League met with Baca on this and other credit union issues just last week. And CUNA also kept the heat on for credit union inclusion in any new program developed by Treasury under TARP with a letter to key committee members. Frank himself has said he does not expect his TARP modification bill to complete the legislative process and becomes law. (American Banker Jan. 14). While a vote is expected in the House, there is no comparable on the Senate side. “What is important here to credit unions, however, is whether the House passes a TARP bill with language specifically addressing the needs of credit unions—something CUNA has been pushing hard for on all levels of the government,” Donovan said. “Through passage of this bill the House would be making a statement that they want credit unions to have access and they are willing to change the law if the Treasury Department doesn’t facilitate such changes in its TARP plan,” he added.