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IRS pushes back FATCA compliance date (11/01/2012)

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WASHINGTON (11/01/12)--The U.S. Internal Revenue Service (IRS) and the U.S. Treasury have pushed back the compliance date for key aspects of the Foreign Account Tax Compliance Act (FATCA) until 2014 and, in some cases, as far as 2017.

FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities.

The IRS's proposed regulations to implement FATCA would require FFIs, including credit unions, to register with the IRS and detect taxable account activity by U.S. citizens in foreign countries. The FATCA rules would also require U.S.-based credit unions and financial institutions to file Forms 1042-S for payments of deposit interest or dividends in amounts of $10 or more that are made to nonresident alien members and customers. These financial institutions must also conduct due diligence regarding whether credit union members' payments to overseas FFIs are to an FFI that is not FATCA compliant.

The rules were scheduled to apply to payments made on and after Jan. 1, 2013. However, the IRS and Treasury in a release noted that many commenters said they would have issues following that implementation timeline. The Credit Union National Association earlier this year also noted that the compliance burdens and overhead costs credit unions would face as a result of these proposed changes would far exceed any benefit to the IRS.

As a result of these comments, the IRS and Treasury announced they are:

  • delaying the compliance date for FATCA due diligence procedures until January 1, 2014; and
  • delaying the date by which withholding agents which are not participating FFIs must document payees that do not comply with FACTA until July 1, 2014.
The compliance date for portions of FATCA that would require U.S. credit unions and other financial institutions to withhold 30% of any funds that are transferred to non-FATCA compliant FFIs will be pushed back until Jan. 1, 2017, the agencies added. Withholding on other types of payments is still expected to commence Jan. 1, 2014.

The delayed compliance dates will apply to U.S. and foreign credit unions, as well as other financial institutions.

Portions of the rule that impact Form 1042-S filings will still become effective on Jan. 1, 2013.

For the IRS/Treasury release on the FATCA changes, use the resource link.

NCUA reduces TCCUSF high estimate by 400M

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ALEXANDRIA, Va. (11/2/12)--The National Credit Union Administration (NCUA) on Thursday revised projections for the total cost of corporate credit union stabilization assessments to between $6 billion and $8.9 billion, a $400 million reduction from the previous maximum cost of $9.3 billion.

The NCUA in a release said the $400 million reduction in estimated costs reflects the performance of legacy assets held by the agency, and the NCUA's updated assessment of the macroeconomic factors used in projecting the future performance of NCUA Guaranteed Notes (NGNs). Funds that the agency has recovered through recent lawsuits against Wall Street firms are also added in to the $400 million total.

Credit unions have already paid $4.1 billion in assessments to the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), including a 2012 TCCUSF assessment of 9.5 basis points (bp) of their insured shares as of June 30. With the new estimates, they will need to pay between $1.9 billion and $4.8 billion in additional assessments before the stabilization fund expires in 2021.

Credit Union National Association (CUNA) Chief Economist Bill Hampel said the 2013 TCCUSF assessment is likely to be in the range of 5 bp to 10 bp. A 2013 TCCUSF assessment of no more than 5 bp "would be sufficient to responsibly make headway on paying down the fund, pending further information on what the ultimate losses will actually be," he said.

Hampel noted the $400 million cost cut slightly reduces the expected amount of remaining corporate stabilization assessments to be paid by credit unions. "Just how much depends on the length of time over which the NCUA board decides to extend the remaining assessments," he added.

The $400 million reduction lowers the projected mid-point of the remaining assessments to be paid by $200 million, from $3.55 billion to $3.35 billion, Hampel said. "If the NCUA were to collect this midpoint assessment amount over a nine-year period, the annual assessments would need to be 3.5 bp of insured shares. At the previous loss estimates, the annual required assessment would have been 3.8 bp."

If NCUA officials chose to pay down the TCCUSF in five years instead of nine, annual assessments would be 7 bp under the new, lower loss projections. The bp projection under the previous loss estimates would have been 7.5 bp, according to Hampel.

All of these CUNA estimates assume 5% annual growth in insured shares, he said.

Keeping the next few years' assessments on the low-end will reduce the chance that assessments might actually overfund the actual losses, requiring a rebate at some point in the future, Hampel noted.

Market values of the remaining securities in the NCUA's legacy asset portfolios are rising, and continued recovery in the housing market could reduce the agency's projected corporate credit union loss estimates even further, he added. However, credit unions should not count on this reduction until it happens, Hampel said.

For the full NCUA release, use the resource link.

Cheney notes BTD anniversary in iHuffPosti column

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WASHINGTON (11/2/12)--Did last year's Bank Transfer Day have a lasting impact? "When you look at the numbers, it's hard to conclude otherwise," Credit Union National Association (CUNA) President/CEO Bill Cheney said in a Thursday column in The Huffington Post.

Last year's Bank Transfer Day on Nov. 5  gained significant social and traditional media attention, and spurred the greatest period of credit union membership growth in more than a decade, Cheney said. Credit unions added nearly 2.2 million new members in the 12-month period ended June 30, 2012, a total that is almost double the 1.2 million average growth credit unions have seen in similar 12-month periods over the past decade, he added.

The number of new checking accounts opened at credit unions also increased rapidly during this time period, totaling nearly 2.9 million. Further, hits on CUNA's consumer web site, aSmarterChoice.org, totaled 70,000 the day before Bank Transfer Day, and 40,000 on Bank Transfer Day itself. In the months that followed, the traffic has leveled off, but at a higher level than before--about 5,000 to 6,000 visits a week, Cheney wrote.

"Many of the people who have opened these new accounts at credit unions are younger, fee-conscious, and discovering most credit unions still offer free checking and lower fees generally," the CUNA CEO said. Consumers also found that many credit unions offer the services, access and convenience of large banks, "but in a decidedly consumer-friendly way, and with the kind of roots in their local communities that comes from being member-owned cooperatives," Cheney added.

And these new members are talking about their great credit union experiences in person and in social media outlets, "perpetuating [the] long stretch of new-member growth."

"All this suggests Bank Transfer Day and consumers' negative reaction to high bank fees was not a short-lived affair, but something more sustained," Cheney said. The one-year anniversary of Bank Transfer Day is this Monday.

For the full HuffPost story, use the resource link.

CFPB exams find card mortgage credit bureau issues

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WASHINGTON (11/2/12)--Consumer Financial Protection Bureau (CFPB) examinations over the past year have uncovered issues tied to consumer credit card approvals, credit reporting, and mortgage disclosures, the agency said in a recent report.

The CFPB report, released this week, addresses examinations undertaken July 21, 2011 and September 30, 2012.

In a release, the CFPB its examiners found mortgage providers in some cases did not provide their borrowers with clear and timely disclosures regarding the nature and costs of the real estate settlement process, such as through inaccurate Good Faith Estimates or HUD-1 forms. Some lenders also failed to accurately disclose interest rates, payment amounts, and payment schedules to their borrowers, the CFPB added.

Examiners also found that some financial institution employees lacked the training needed to fully comply with fair credit reporting requirements. This lack of training at times resulted in inaccurate information being forwarded on to credit reporting bureaus. Inaccurate information in a consumer's credit record may cause a consumer to pay more for credit than would otherwise be the case or be unjustifiably denied credit altogether, the CFPB noted.

The agency also released an appeals policy for the institutions it supervises, and an updated version of its own examination and supervision manual.

For the CFPB release, use the resource link.

Inside Washington (11/01/2012)

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  • WASHINGTON (11/2/12)--The Ohio Supreme Court on Wednesday ruled that lenders must have proper documentation in place before filing a foreclosure. In a unanimous ruling, the high court dismissed a lawsuit filed by Freddie Mac against Ohio homeowners Duane and Julie Schwartzwald. Freddie charged that the Schwartzwalds owed $245,000 after defaulting on a mortgage they received from Legacy Mortgage in 2005 (American Banker Nov. 1). Freddie attached a copy of the mortgage identifying the Schwartzwalds as borrowers and Legacy as lender to its complaint, but did not include a copy of a promissory note the Schwartzwalds had also signed. Freddie claimed it could not obtain the note. In the dismissing the suit, the high court ruled that parties initiating foreclosure actions cannot do so before obtaining an assignment of the promissory note and mortgage securing the borrower's loan
  • WASHINGTON (11/2/12)--Backers of the interchange fee law are criticizing a Washington, D.C. mobile payments company after the firm sent an e-mail informing customers that a fee increase was the result of the provision in the Dodd-Frank Act. Parkmobile USA, a mobile payments company with an exclusive contract for Washington, D.C. municipal parking areas, said in the e-mail that parking transaction fees would increase to 45 cents from 32 cents and were "triggered" by Dodd-Frank (American Banker Nov. 1). In response Sen. Dick Durbin, (D-Ill.) who authored the interchange fee law provision asked the company to retract the statement. A $7.5 settlement in retailers' class antitrust lawsuit against Visa and MasterCard over credit card interchange fees was filed Oct.  23 by class counsel for the plaintiffs in U.S. District Court for the Eastern District of New York (News Now Oct. 23). The settlement calls for Visa, MasterCard and the banks to create a $6.05 billion fund (which would be a record amount for a class action settlement) to repay retailers for past fees charged. It also stipulates that retailers would be permitted to assess "check out" fees or surcharges on credit card purchases, which has previously been prohibited by Visa and Mastercard rules. Several retail organizations and retailers oppose the settlement. Credit Union National Association President/CEO Bill Cheney has said that the surcharging aspect of the settlement--as well as the provision that consumer-owned credit unions would see a reduction in interchange revenue--are signs that the settlement does nothing for consumers …
  • WASHINGTON (11/2/12)--Borrowers with poor credit scores are subject to tighter lending standards for government-issued loans since the financial crisis, but those with high scores face largely the same standards as before the recession, according to the Federal Reserve's October Senior Loan Officer Opinion Survey. Responding to a special question on Federal Housing Administration (FHA) lending, a majority of domestic banks indicated that their lending standards for approving an application for an FHA-insured purchase mortgage were about the same as in 2006 for a borrower with a credit score of 660, but that standards had tightened for borrowers with lower FICO scores. Regarding residential real estate lending the past three months, banks reported that standards for both prime and nontraditional mortgages had remained unchanged on balance.  Respondents said in both the July and October surveys that demand for prime and nontraditional residential mortgage loans had increased …

CFPB should collaborate on financial ed efforts CUNA

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WASHINGTON (11/2/12)--The Consumer Financial Protection Bureau should work closely with other federal agencies that are currently pursuing financial literacy efforts in order to reduce government redundancies as well as to make it easier for consumers to access reputable sources of information on financial issues.

Those are key recommendations made by Credit Union National Association (CUNA) in a comment letter sent to the CFPB on Oct. 31.

CUNA, in a letter by Assistant General Counsel Luke Martone, noted that emotions and outside influences are among the common challenges that often prevent consumers from making effective financial decisions.

"Specifically, the ability to exhibit proper self-control is a major challenge for many consumers. Similarly, we believe many consumers struggle to accurately understand how today's financial decisions will impact tomorrow's financial position,'' CUNA wrote.

In addition, a major challenge is that "those with the greatest need for financial education are the ones with the least amount of available time to pursue such efforts.''

NCUA blocks former Mass. CU employee from FI work

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ALEXANDRIA, Va. (11/2/12)--Jessica L. St. Amand, a former employee of Somerville Municipal FCU in Somerville, Mass., is prohibited from any future participation in the affairs of federally insured financial institutions.

The National Credit Union Administration (NCUA) issued a prohibition order after, the agency says, St. Amand was convicted of four counts of identity fraud and sentenced to probation.

NCUA enforcement orders are available online at http://go.usa.gov/yiJ and for inspection at NCUA's Office of General Counsel between 9 a.m. and 4 p.m. Monday through Friday.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

FHFA CFPB building comprehensive mortgage database

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WASHINGTON (11/2/12)--The Federal Housing Finance Agency (FHFA) and Consumer Financial Protection Bureau (CFPB) announced Tuesday they have formed a partnership to create a National Mortgage Database—saying it will be the first comprehensive repository of detailed mortgage loan information.

The FHFA regulates Fannie Mae and Freddie Mac, as well as the 12 Federal Home Loan Banks. The agency reports that these government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.

The new database will primarily be used to support the two agencies' policymaking and research efforts and to help regulators "better understand emerging mortgage and housing market trends." The designers said it will include information spanning the life of a mortgage loan from origination through servicing and include a variety of borrower characteristics.

Specifically, the database will include loan-level data about the mortgage including:

  • A borrower's financial and credit profile;
  • The mortgage product and terms;
  • The property purchased or refinanced; and,
  • The ongoing payment history of the loan.
 

Data will be updated on a monthly basis and track as far back as 1998.

The agencies assure that the database will not contain personally identifiable information and that precautions will be taken to ensure that individual consumers cannot be identified through the database or through any datasets that may be made available to researchers or the public.

Development of the database currently is underway and early versions could be completed in 2013.  The partner agencies said they are exploring ways to share the database information with other federal agencies, academics, and the public once the database is complete.

Use the resource link to read more about the coming database.