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Inside Washington (01/27/2010)

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* WASHINGTON (1/28/10)--Senate Majority Leader Harry Reid (D-Nev.) has called a cloture vote for today for the re-appointment of Federal Reserve Board Chairman Ben Bernanke to a second term. The cloture vote is used to overcome filibuster threats. After the cloture passes, a simply majority is needed to confirm Bernanke (American Banker Jan. 27). On Friday, Sens. Russ Feingold (D-Wis.) and Barbara Boxer (D-Calif.) said they would not support the re-nomination ... * WASHINGTON (1/28/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is considering whether to continue negotiating with Republicans on regulatory reform or pursue a partisan approach. Dodd plans to meet with Democratic members of his committee this week. Last week, Sen. Mitch McConnell (R-Ky.) told Republicans on the banking panel not to support a bill unless they were certain it would be “a good deal” (American Banker Jan. 27). Sen. Richard Shelby (R-Ala.) is working with Dodd on regulatory reform and hopes for a bipartisan agreement, a Shelby aide told American Banker ... * WASHINGTON (1/28/10)--The Federal Reserve Board is weighing a new benchmark interest rate with interest paid on extra fund reserves. Deposits held with the Fed above required amounts totaled $1 trillion in the two weeks ended Jan. 13, compared with $2.2 billion in January 2007 (American Banker Jan. 27). The reserves were created by the Fed with emergency loans and purchases of $1.7 trillion in mortgage-backed securities. If the deposit rate of 0.25% were raised, banks would keep their money with the Fed and refrain from lending too much until the economy turns around ... * WASHINGTON (1/28/10)--President Barack Obama’s proposal to limit growth at big banks by banning proprietary trading and curb risk-taking echoes some core components of the Glass-Steagall Act, a Depression-era bill that banned proprietary trading. Glass-Steagall became largely ineffective in 1999 when the Gramm-Leach-Bliley Act was implemented (American Banker Jan. 27). After Gramm-Leach-Bliley, big banks earned large profits because the act allowed them to buy and sell stocks within their own accounts. However, Obama’s proposal would not fully reinstate Glass-Steagall because banks would still be allowed to underwrite securities. Paul Volcker, former Fed chairman who championed Obama’s proposal to ban proprietary trading, will provide more details on the proposal Feb. 2 at a Senate Banking Committee hearing ... * WASHINGTON (1/28/10)--A panel created by the Federal Deposit Insurance Corp. (FDIC) to tackle issues affecting community banks will meet Thursday to discuss the financial sector’s attempts to increase lending. Other issues to be discussed include interest rate risk, failed-bank resolution processes, and examinations. The meeting will begin at 8:30 a.m. ET at the FDIC’s headquarters in Washington, D.C. ...

GAO wants improvements in flood insurance programs

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WASHINGTON (1/28/10)--The Government Accountability Office (GAO) has called for improvements to the National Flood Insurance Program. The GAO “reviewed and analyzed Federal Emergency Management Administration (FEMA) / National Flood Insurance Program (NFIP) guidance, data, and financial reports,” as well as prior audit reports, and also interviewed “FEMA officials and contractors.” Citing its recently completed study of the effectiveness of “controls in place during the 2005 to 2007 time frame,” the GAO said that “three key structures” that are used by FEMA to oversee the NFIP and related “financial activity” could be improved. Specifically, FEMA’s reviews of “the results of state insurance department audits related to flood insurance activity,” its “triennial operational reviews” of Write Your Own (WYO) insurance companies, and its claims reinspection program sampling procedures still need improvement. The GAO previously identified all three areas as needing improvement. The GAO suggested that FEMA streamline some of its own procedures and bring in outside independent sources to improve some of its auditing processes. The Credit Union National Association has repeatedly said that adequate funding for the NFIP is important to ensure that people living in flood plains are able to secure protection, obtain mandatory coverage, for their homes and mortgages. Flood insurance is often required by law in certain areas and thus becomes a necessary purchase by prospective homeowners before credit unions can offer mortgages and other related products to homebuyers in flood prone areas. For the full GAO release, use the resource link.

Compliance Good faith estimate round up

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WASHINGTON (1/28/10)--In examples drawn from this month's Compliance Challenge, the Credit Union National Association (CUNA) addresses issues surrounding Good Faith Estimates (GFEs). In one example, a member who received a mortgage loan GFE from a credit union notices that the address of the property to be purchased is missing from the GFE. Would adding the missing address constitute the type of “changed circumstances” that would require the credit union to issue a revised GFE? According to the Real Estate Settlement Procedures Act (RESPA) FAQs, the later identification of a missing property address would not be considered a “changed circumstance” to justify the need to issue a revised GFE. However, an incorrect address on the GFE, and the subsequent correction, would be considered a “changed circumstance” that would require issuance of a revised GFE. Another Compliance Challenge question asks if a mortgage representative should provide a member with a written list of providers if the credit union does not allow its members to shop for settlement services. According to the RESPA FAQs, the mortgage rep is not required to provide a written list of providers to the member, as the member is not permitted to shop for settlement services providers under the terms of the mortgage contract. The credit union would complete item #3 on page 2 of the GFE with all third party settlement services, other than title services, that the credit union requires and select the provider of those services, which can include appraisal services, credit reports, tax services, flood certifications and up-front mortgage insurance premiums. In another example, a mortgage representative from a separate FCU is unsure whether or not items that are to be paid outside of closing in relation to a member’s loan should be documented on the GFE. According to CUNA, RESPA does not provide a place to document paid outside of closing (POC) items. However, POC items that are paid by the borrower, seller, loan originator, real estate agent, or any other person must be included on the HUD-1, and appropriately marked POC. These items must also be excluded from the computing totals, and whether the buyer or seller paid these charges should also be marked on the settlement statement. For more of the compliance challenge, use the resource link.

NCUA underscores CUs offer better rates

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ALEXANDRIA, Va. (1/28/10)-- The National Credit Union Administration (NCUA) yesterday posted a press release highlighting the latest results from DATATRAC, Inc., which showed credit unions posted more favorable rates for consumers than banks in 21 of 23 loan and savings categories. DATATRAC, Inc., whose information is featured daily on the Credit Union National Association website, is a company that tracks rates charged and paid by credit unions, banks, and credit unions that converted to or merged with banks. DATATRAC revealed that at year-end 2009, credit unions on average provided significantly lower rates on all consumer loan types and provided higher yields on all savings products. Credit unions also posted lower average adjustable rate mortgage rates. In the two fixed-rate mortgage product categories (15- and 30-year loans), bank averages were minimally lower by two to three basis points. The NCUA also pointed out that credit unions also posted better results in 22 of 23 categories than the 28 banks that converted from credit unions, merged with credit unions, or merged with former credit unions. Average rates at these converted institutions generally fell between credit union averages and the other bank averages. The converted institution rates on fixed rate mortgages, however, were higher than both credit union and all-bank averages. Use the link below to see more DATATRAC, Inc. results.