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Washington

Fed approves new Reg C threshold

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WASHINGTON (10/21/08)—The Federal Reserved Board announced Monday it has approved amendments to its Regulation C, the Home Mortgage Disclosure Act (HMDA) rules, by revising the threshold for reporting price information on higher-priced loans. The Credit Union National Association (CUNA) supports the Fed’s changes, in part, because they help bring that regulation in line with recent Regulation Z mortgage lending final rules. Regulation C required lenders to report to regulators annually the spread between the annual percentage rate (APR) on a loan and the yield on comparable Treasury securities if the spread was at least three percentage points for first-lien loans or five percentage points for subordinate-lien loans. Under the new rule, a lender would report the spread if the loan APR exceeds an average of comparable prime mortgage rates by at least 1.5 percentage points for first-lien loans or 3.5 percentage points for subordinate lien loans. By making the threshold identical in both regulations, it will help ease the compliance burden of credit unions and other lenders that must follow the regulations, according to CUNA. However, CUNA was concerned with a proposed Jan. 1, 2009 implementation date and argued in a comment letter to the Fed that date would not provide sufficient time for lenders to make necessary programming changes. The Fed revised its effective date in the final rule to October 1, 2009.

NCUA Insurance Estimator now reflects higher coverage

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ALEXANDRIA, Va., (10/21/08)—The National Credit Union Administration (NCUA) has updated the share insurance estimator and placed it on its website to provide members of insured credit unions an opportunity to estimate the amount of coverage the National Credit Union Share Insurance Fund now provides. The estimator, developed by the Federal Deposit Insurance Corp. and adapted for credit union members by the NCUA, now bases computations on the new insurance rules in effect as of Oct. 3, 2008, reflecting the temporary higher $250,000 coverage. E-SIC reflects both the NCUA Board’s recent simplification of the rules for revocable trusts and the passage of the “Emergency Economic Stabilization Act.” If subsequent statutory or regulatory changes should occur, NCUA said it will update the E-SIC as quickly as possible. For the E-SIC and other online share insurance resources, use the resource links below.

Inside Washington (10/20/2008)

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* WASHINGTON (10/21/08)--The Treasury announced a third program last week that would provide direct assistance to systemically significant failing institutions. The terms would be negotiated on a case-by-case basis, the agency said in a release regarding executive compensation standards. “In situations where the Treasury provides assistance under the systemically significant failing institutions programs, golden parachutes will be defined more strictly to prohibit any payments to departing senior executives.” The Treasury also announced Monday new details regarding the capital purchase program ... * WASHINGTON (10/21/08)--Accounting and securities regulators are ready to clarify that banks participating in the recapitalization plan can record their efforts as equity. A letter sent to David Nason, Treasury assistant secretary for financial institutions, top officials from the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) said they would not object if the warrants were classified as permanent equity (American Banker Oct. 19). The letter was signed by Russell Golden, FASB technical director, and James Kroecker, SEC deputy chief accountant. Technical problems arose Friday when bank executives realized warrants could be treated as liabilities, which could have hurt capital levels ...

SBA encourages loan deferment relief

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WASHINGTON (10/21/08)—The U.S. Small Business Administration Monday announced it is strongly encouraging its participating 7(a) lenders and Certified Development companies to work with business borrowers to provide needed flexibility to “keep businesses running during these difficult economic times.” “As access to credit and capital has tightened, many businesses face increased challenges in meeting their financial obligations. This is especially true of small businesses hit hard by the recent economic slowdown that are now unable to make payroll, or purchase essential inventory,” the SBA noted in a release. In April of this year, there were 386 credit unions that participate in SBA's 7a program. Credit unions and other 7(a) lenders were reminded they have authority, on a case-by- case basis, to extend temporary payment relief for qualifying borrowers with 7 (a) and 504 guaranteed loans who are struggling to make their payments. The SBA encouraged its lending partners to extend three-month payment deferments on their SBA guaranteed loans to qualified borrowers who need relief. If a deferment longer than three consecutive monthly payments is needed for a loan, the SBA said, borrowers can work directly with their lenders who, in turn, will work closely with the SBA to “identify the best solution.” The agency also asked its lenders not to broadly call borrower loans due to changing financial variables, such as fluctuations in personal credit scores, declining collateral values, and reduced home equity, which are currently affected by the disruption in the financial markets. The SBA has issued a notice that will be distributed widely to its lenders and 120 field offices encouraging them to look at these cases individually and to work with individual borrowers in order to facilitate the longer term success of these small businesses. The Credit Union National Association (CUNA) supports the kind of flexibility SBA has reminded lenders they have, but will work to ensure that SBA has coordinated with the National Credit Union Administration on the use of such latitude by CUs. Use the resource link below for more on SBA’s programs.

JEC to look at faltering economic growth

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WASHINGTON (10/21/08)—Sen. Charles Schumer (D-N.Y.), chairman, and Rep. Carolyn Maloney (D-N.Y.), vice chairman, announced that their Joint Economic Committee (JEC) will conduct a hearing next week on “faltering economic growth and the need for economic stimulus.” On Oct. 30, the committee will examine the Bureau of Economic Analysis’ release of the Gross Domestic Product (GDP) numbers for the third quarter. According to a JEC release, preliminary data show that export growth has stalled while real consumer spending declined in July, and did not grow in August, and retail sales have fallen sharply over the past few months. These data indicate that the third quarter GDP will likely will show faltering overall economic performance. The committee investigation is intended to determine whether the new government data points to a need for more economic stimulus and what that stimulus should entail. Scheduled witnesses are: Nouriel Roubini, professor, Economics and International Business, New York University, and Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship, MIT. Additional witnesses may be added. The Credit Union National Association will be following hearing developments closely.

Reg restructuring is House panel focus today

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WASHINGTON (10/21/08)--The House Financial Services Committee opens part three of its series of hearings on financial regulatory oversight today. The hearing intends to address the need for "broad regulatory restructuring and reform for the financial markets, including financial institution oversight and regulation, systemic risk, and housing finance," according to a committee release. Specifically the hearing will examine:
* The current state of the financial regulatory system, both in the United States and abroad, and ways to measure and limit risk without stifling innovations while improving market liquidity and breadth; * Implications of current governmental lending and support facilities for the regulatory structure; * Proposals to improve the regulatory structure to restore confidence in financial markets and institutions through a stronger system of regulation and oversight; * The need for enhanced capital and reserve requirements for financial firms; and * Adequacy of current powers and coverage of the existing regulatory structure.
The hearing is a continuation of two hearings held by the committee in July focused on regulatory restructuring and systemic risk, during which the committee heard from regulators. For today’s hearing, there are a total of eight witnesses scheduled to appear on two panels. They include: Alice Rivlin, economic studies director at the Brookings Institution, Joseph Stiglitz, professor, Columbia University, Joel Seligman, president, University of Rochester, Manuel Johnson, chief executive of the financial market advisory firm JohnsonSmick International. Also: Steve Bartlett, president/CEO, The Financial Services Roundtable; Edward Yingling, president/CEO, American Bankers Association, T.Timothy Ryan, Jr., president/CEO, Securities Industry and Financial Markets Association, and Mike Washburn, president/CEO, Red Mountain Bank on behalf of the Independent Community Bankers of America. The Credit Union National Association will be following the hearing developments closely.

CLF is liquidity resource NCUA reminds

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ALEXANDRIA, Va. (10/21/08)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel issued a Letter to Credit Unions on Friday to remind credit unions that the Central Liquidity Facility (CLF) is an available resource for contingent liquidity during the current market turbulence. “The CLF has a total of approximately $41.5 billion available to meet back-up liquidity demands, appropriated by Congress and administered by NCUA. Credit unions should carefully monitor liquidity and if necessary, utilize the CLF on an as-needed basis,” Fryzel stated in the letter, which is also posted on the NCUA website. The CLF lends to credit unions that are creditworthy and demonstrate liquidity needs. A credit union generally is deemed creditworthy if it is a viable operation. Three forms of loans available through the CLF are:
* Short-term adjustment credits; * Seasonal credits; and *Protracted adjustment credits.
Credit unions can apply for a CLF loan either through a corporate credit union or as a regular member, the NCUA said in a release. Use the resource links below to access the NCUA website and to obtain details on the CLF loan process.