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FBI posts photos of threat letter to financials

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WASHINGTON (10/24/08)--The Federal Bureau of Investigation (FBI), yesterday posted online photographs of one of more than 50 threatening letters mailed to financial institutions in 11 states. In addition to a threatening message, most of the letters also contain a powder substance, according to a statement from the FBI. Field and laboratory tests on the powder so far have been negative, said the agency. Financial institutions in New York, New Jersey, Washington, District of Columbia, Ohio, Illinois, Colorado, Oklahoma, Georgia, California and Texas have reported receiving the letters. The Federal Deposit Insurance Corp. and the Office of Thrift Supervision also received letters, according to the FBI. The U.S. Postal Inspection Service is offering a reward of up to $100,000 for information leading to the arrest and conviction of the person(s) who prepared and mailed the letters, which were mailed from Texas and postmarked at Amarillo. "Should your any part of your institution--corporate offices, branches--receive one of theses letters, please contact your local FBI office and ask for the WMD Coordinator," said the FBI. Use the resource link for more information.

Inside Washington (10/23/2008)

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* WASHINGTON (10/24/08)—Alan Greenspan, who headed the Federal Reserve Board for more than 18 years, acknowledged under questioning at a House Oversight Committee hearing Thursday that he had made a “mistake” in his belief that banks operating in their self-interest would be enough to protect their shareholders and the equity in their institutions (The New York Times Oct. 23). Greenspan said he and others who believed that lending institutions would do a good job of protecting their shareholders are in a “state of shocked disbelief.” Current problems were caused by a heavy demand for securities backed by subprime mortgages from investors who were unconcerned that a boom in home prices could crash to a halt, Greenspan testified. The House panel sought to discover if failed regulatory approaches contributed to the current national crisis. Also testifying were former Treasury Secretary John Snow and Securities and Exchange Commission Chairman, Christopher Cox … * WASHINGTON (10/24/08)-- The Treasury should use its authority granted under the recently enacted rescue bill to encourage lenders and servicers to participate in the Hope for Homeowners program offered through the Federal Housing Administration, according to Richard Neiman, the superintendent of the New York State Banking Department (American Banker Oct. 23). The ratio of delinquent borrowers without a modification plan increased to eight out of 10 by May, according to a regulatory report Neiman cited. He also encouraged the Treasury to offer credit enhancements and loan guarantees to lenders who participate in loan modification programs. Hope for Homeowners, effective Oct. 1, helps borrowers whose homes are worth less than their mortgages ... * WASHINGTON (10/24/08)--Observers say that the Treasury Department’s changing goals are undermining the agency’s efforts to restore confidence in the financial markets (American Banker Oct. 23). The Treasury’s capital injection plan originally aimed to encourage lending and the extra money should be used by banks to offer more credit, Treasury Secretary Henry Paulson said Oct. 14. The next day, Comptroller of the Currency John Dugan said the capital could be used to prevent banks’ losses. A few days later, Paulson said the money could allow stronger institutions to acquire weaker ones. The shifts in the plan’s purposes are creating confusion and undermining its mission, according to Don Mullineaux, University of Kentucky banking professor. However, one observer, Laurence Platt, K&L Gates LLP partner, said the Treasury has to change its focus because new problems are surfacing ... * WASHINGTON (10/24/08)--Federal Insurance Deposit Corp. (FDIC) Chairman Sheila Bair said her agency and the Treasury are proposing to encourage servicers to modify loans nearing foreclosure. If the loans meet established modification standards, the government could guarantee them so that they are sustainable, she added (The New York Times Oct. 24) ...

NCUA seeks non-interest account coverage for CUs

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ALEXANDRIA, Va. (10/24/08)—The National Credit Union Administration (NCUA) is actively seeking parity for credit unions by requesting credit union inclusion in U.S. Treasury Department’s recently expanded deposit insurance coverage of non-interest bearing deposit accounts. ‘Based on the belief that the policies of the National Credit Union Share Insurance Fund (NCUSIF) should be generally consistent with those of the (Federal Deposit Insurance Corp.) FDIC, I believe that there should be full share insurance coverage for non-interest-bearing transaction accounts temporarily through 2009,” said Fryzel in an announcement Thursday. He added that he has sent a letter to Treasury Secretary Henry Paulson requesting Treasury to establish a parallel guarantee for credit unions” in order to avoid any unintended impact on the credit union system.” The FDIC program for insured banks and thrifts included the FDIC guarantee for all funds in such a non-interest bearing deposit accounts. Under the program, for the first thirty days all insured banks and thrifts would be covered. After that time, the accounts at institutions that do not opt out and thus agree to a 10-basis point insurance assessment will be covered. NCUA’s Fryzel noted the importance for consumers in “the federal government creating a uniform regime regarding insured deposits.” “Given the uncertainty and turmoil in the markets, it is critical that consumers have confidence in the guarantee that stands behind funds in these non-interest bearing transaction accounts, regardless of what type of insured institution is providing the service,” he added. Last week, Dan Mica, president/CEO of the Credit Union National Association (CUNA) Wednesday, wrote to each member of the NCUA board to warn that federally insured credit unions will be competitively disadvantaged unless federal regulators move quickly to provide full share insurance coverage for non-interest bearing transaction accounts. “Failure by NCUA to address this issue for credit unions could undermine credit unions' hard-won success in serving small businesses and others in their communities,” the CUNA letter said.

NCUA confirms Nov. 1 enforcement of Red Flags rule

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WASHINGTON (10/24/08)—The Credit Union National Association (CUNA) confirmed with the National Credit Union Administration (NCUA) Thursday that it has no plan to delay the effective date for enforcement of the Identity Theft Red Flags rule for federal credit unions. The Federal Trade Commission announced Wednesday (see News Now, Oct. 23) that it is postponing for six months enforcement of the red flag rules for entities under its jurisdiction, which includes state chartered credit unions. CUNA said it recognized the FTC's action was primarily directed at non-financial institution creditors--such as automobile dealers and utility companies--which were unaware of these rules until recently. However, CUNA sought clarity from the NCUA, through a series of discussions, regarding the extent to which that agency might apply this suspension to federal credit unions. The NCUA and the federal banking agencies still expect federal credit unions and banks to be in compliance as scheduled, and have emphasized earlier that an institution's current policies and procedures on information security and fraud prevention can form the foundation of the required identity theft program, which should help to minimize compliance burdens. The FTC’s suspension of its enforcement of the red flag rules does not apply to the new Fair and Accurate Credit Transaction Act (FACTA) requirements that credit unions have procedures in place to handle discrepancies in the addresses on credit reports and credit applications, a rule the FTC issued at the same time as the red flags rule.

FHA chief says RESPA changes coming in two weeks

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WASHINGTON (10/24/08)—Changes to the Real Estate Settlement Practices Act, known as RESPA, will be out within the next two weeks, according to Federal Housing Administration (FHA) Commissioner Brian Montgomery. The FHA, an arm of the U.S. Department of Housing and Urban Development, has been working to revise rules for the 1974 RESPA since the late 1990s. The current proposal supplants one issued in 2002, scrapped by HUD after the Credit Union National Association (CUNA) and others noted that some of the proposed changes could be confusing to consumers and could have the opposite effect of an intended simplification. The current plan, as proposed, would:
* Make significant changes to the Good Faith Estimate (GFE) form, resulting in a new format for the GFE. That change is intended to ensure that the estimates are more accurate and to facilitate consumer comparisons between lenders. These changes will also facilitate comparisons between the GFE and the HUD-1 or HUD-1A settlement statement; * Ensure that borrowers are aware of the final loan terms and costs at settlement by requiring lenders read to each borrower a copy of a "closing script" containing the information; and * Clarify when it is appropriate to provide borrowers with discounts and average price costing of settlement services.
Montgomery made his timing announcement during Thursday’s Senate Banking Committee hearing on “Turmoil in the U.S. Credit Markets: Examining Recent Regulatory Responses.” Even this latest HUD RESPA plan has its share of critics. This summer 240 members of the U.S. House of Representatives signed a letter to HUD Secretary Steven Preston urging him to withdraw his agency's RESPA plan. The lawmakers petitioned Preston to "immediately commence" joint rulemaking with the Federal Reserve Board to produce "more simplified" mortgage and real estate settlement cost disclosure forms. The lawmakers said they are "profoundly concerned" that HUD plan—which involves hundreds of pages of rulemaking-- will "hinder rather than help the recovery of the housing market." The Credit Union National Association (CUNA) strongly supports the concept of amending the RESPA rules in order to simplify and streamline the home purchase and settlement process. CUNA believes that such changes would reduce out-of-pocket costs to consumers and increase quality of services. However, CUNA also has a significant number of concerns with the HUD proposal and has questioned whether the HUD plan makes the disclosure process more confusing for consumers, rather then less so. Use the resource link below to read more CUNA comments on RESPA changes.

NCUSIF sign rule offers flexibility

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WASHINGTON (10/24/08)—What may credit unions do with their standard official share insurance signs that boldly display the temporarily outdated $100,000 insurance maximum? The National Credit Union Administration (NCUA) recently ruled that they can leave them alone, replace them with newer signs available through the agency, or even place a new $250,000 ceiling sticker on the existing sign. In an Oct. 15 Federal Register document, the NCUA noted that this new interim final rule recognizes that requiring credit unions to replace the current sign with a revised sign would be an expensive and burdensome process—particularly in light of the fact that the revision is temporary—effective from Oct. 3, 2008 to Dec. 31, 2009. To balance the burden with the need and desire to inform members that they have increased share insurance protection, the NCUA said it designed its rule to provide insured credit unions with maximum flexibility. The rule became effective Oct. 22. For credit unions choosing not to change or alter the official sign, the NCUA said they would not face a penalty and can inform members about the temporary increase in account insurance through additional signage. For example, the NCUA noted the credit union could post a lobby sign or a notice on its Web sites for the period of the increase. The NCUA seeks comment on the interim rule for 60 days.

New Fed rate on excess reserve balances

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WASHINGTON (10/24/08)—Effective yesterday, the Federal Reserve Board adopted a revised formula to determine the interest rate it will pay on credit unions' and other depository institutions' excess reserve balances. The Fed determined that a narrower spread between the target funds rate and the rate on excess balances would help encourage trading in the funds market at rates closer to the target rate. Therefore, the Fed issued a new formula that sets the rate on excess balances equal to the lowest Federal Open Market Committee (FOMC) target rate in effect during the reserve maintenance period less 35 basis points. Prior to the change, the rate had been set as the lowest federal funds rate target established by the FOMC in effect during the reserve maintenance period minus 75 basis points. The Fed announced just two weeks ago that it would begin to pay interest on depository institutions' required and excess reserve balances effective Oct. 9. The Financial Services Regulatory Relief Act of 2006 gave the Fed authority starting in 2011 to lower reserves to zero and/or to pay interest--not to exceed other short-term rates--on the reserve balances actually maintained. The new Emergency Economic Stabilization Act gave the Fed that authority starting now. The authority is being implemented through changes to the Fed's Regulation D. Reserve balances are balances held to satisfy depository institutions' reserve requirements and excess balances are those held in excess of required reserving balances and clearing balances.