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Washington Archive

Washington

Senate bill would let states set credit rates

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WASHINGTON (11/14/11)--The Empowering States' Rights to Protect Consumers Act, introduced by Sen. Sheldon Whitehouse (D-R.I.) late last week, would allow states to set their own limits on credit card and other consumer loan interest rates.

The bill intends to return a right states had before a key 1978 Supreme Court decision found that national banks were only subject to the lending laws of their home-base state. Whitehouse's legislation is cosponsored by Sens. Carl Levin (D-Mich.), Dick Durbin (D-Ill.), Jack Reed (D-R.I.), Bernie Sanders (D-Vt.), Mark Begich (D-Alaska), Jeff Merkley (D-Ore.) and Al Franken (D-Minn.)

Whitehouse introduced similar legislation in 2009, and the bill was considered in 2010 as a possible amendment to the Dodd-Frank Act but was ultimately defeated.

Credit Union National Association (CUNA) Executive Vice President for Government Affairs John Magill said the chances of Whitehouse's legislation moving forward are slim.

Corker adds new GSE bill to Fannie Freddie discussion

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WASHINGTON (11/14/11)--Sen. Bob Corker (R-Tenn.) became the latest member of Congress to take on the future of the U.S. mortgage market when he introduced the Residential Mortgage Market Privatization and Standardization Act late last week.

Corker in a release said the legislation would responsibly unwind government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and end dependence on the government for housing finance.

The bill would accomplish this by reducing the percentage of newly issued mortgage-backed securities' (MBS) principal that is guaranteed by the GSEs each year, with the goal of completely removing Fannie and Freddie from this practice within 10 years. It would also create an industry-financed, and publicly available, performance and origination database and would force the GSEs transfer technology and home price indices to be sold to private investors.

The bill would also impose 5% minimum down payment and full documentation requirements on new mortgages.

Corker said he introduced the bill "to lay down a marker and get a conversation going that Washington has put off for far too long," and called his legislation "sensible steps that can earn back private capital and ultimately get America's housing market back to fundamentals and away from undue government involvement."

Rep. Scott Garrett (R-N.J.) last month also introduced mortgage market-targeted legislation, known as the Private Mortgage Market Investment Act. Garrett's bill would require the Federal Housing Finance Agency (FHFA) to develop underwriting standards and securitization agreements and abolish the risk retention standards set forth by the Dodd-Frank Act, and would also provide new disclosures for mortgage investors and securities purchasers.

Garrett's bill was discussed at a Nov. 3 House Financial Services subcommittee on capital markets hearing. FHFA Acting Director Edward DeMarco testified during the hearing, saying while there is agreement that the GSE model of the past "did not work," there will likely "always be some portion of the housing or mortgage market that will be assisted by government programs, either through direct funding or through guarantees."

The Credit Union National Association (CUNA) has said that Garrett's bill, if enacted, could create a secondary mortgage market made up exclusively of the largest banks in the country, and could result in credit unions being excluded from that market.

The Obama administration is still considering a range of options for mortgage market reform, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Administration officials have said that each of these proposals would shrink the government's role in the mortgage market.

The Senate is not likely to take up comprehensive housing finance reform legislation before the end of the Congress, CUNA Senior Vice President of Legislative Affairs Ryan Donovan said.

For more on Corker's bill and prior coverage of the letter to the administration, use the resource links.

Inside Washington (11/10/2011)

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  • WASHINGTON (11/14/11)--U.S. Sens. Kay R. Hagan (D-N.C.) and Bob Corker (R-Tenn.) were joined by Senate co-sponsors Chuck Schumer (D-N.Y.) and Mike Crapo (R-Idaho) in introducing legislation Wednesday to support the development of a U.S. covered bond market. The Hagan-Corker "United States Covered Bond Act of 2011" creates a legislative framework that expands funding options for U.S. financial institutions. Covered bonds provide U.S. financial institutions a new tool for obtaining long-term financing from private capital markets. Financial institutions in 30 countries--including Germany, the United Kingdom and Canada--issue covered bonds. This year, foreign banks have issued $32 billion of covered bonds to U.S. dollar investors. The funding that covered bonds provide would allow U.S. financial institutions to provide stable long-term credit to consumers, small businesses, and governments. In June, similar legislation introduced by U.S. Reps. Scott Garrett (R-N.J.) and Carolyn Maloney (D-N.Y.) passed through the House Financial Services Committee with bipartisan support …
  • WASHINGTON (11/14/11)--Three years after the government put Fannie Mae and Freddie Mac into conservatorship, the two government-sponsored enterprises (GSEs) are still reporting billions of dollars of losses every quarter, and receiving aid from Treasury Department. Fannie Mae and Freddie Mac took a combined $14 billion in bailout funds during the third quarter (American Banker Nov. 10). Fannie and Freddie still hold numerous real estate-owned properties valued at par. The properties are expected to force the GSEs to report losses well into the future. Fannie on Tuesday reported a third-quarter loss of $5.1 billion, compared with a loss of $1.3 billion for the third quarter in 2010. This year's loss was created by credit expenses on losses from legacy loans originated before 2009, and losses on risk management derivatives from a decline in swap interest rates, the agency said …

NEW CUNAs Cheney to testify in House bank bill hearing

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WASHINGTON (UPDATED: 5:30 p.m. ET, 11/10/11)-- In an unprecedented twist, a credit union representative will be testifying on a community bank regulatory relief measure when Credit Union National Association (CUNA) President/CEO Bill Cheney appears before a Nov. 16 House financial institutions subcommittee hearing on the Communities First Act (H.R. 1697).

The hearing is set to begin at 2 p.m.

H.R. 1697, which was introduced by Rep. Blaine Luetkemeyer (R-Mo.) this spring, would loosen some community-bank related regulations.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan noted CUNA in recent years has frequently been asked to comment on many issues that impact the larger financial services market, including the Dodd-Frank Act, mortgage market reforms, and internet gambling legislation.

Academics and financial services industry insiders are also expected to testify.

Budget items lead Nov. 17 NCUA meeting

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ALEXANDRIA, Va. (11/14/11)--Remittances, technical corrections to golden parachute and indemnification payment rules, and the 2012 budget, overhead transfer rate, and operating fee scale are among the items on the National Credit Union Administration's (NCUA) packed Nov. 17 agenda.

NCUA Chairman Debbie Matz last week hinted that the 2012 budget would see an increase "in the single digits." The NCUA originally set its 2011 budget at $225 million, but reduced that amount by $2 million earlier this year. Matz during a Town Hall webinar held last week stressed that the agency has "spent a great deal of time scrubbing the [2012] budget to eliminate inefficiencies and redundancies," and argued that recent budgetary increases, which have totaled $48 million in 2010 and 2011, have ultimately avoided $1.5 billion in potential National Credit Union Share Insurance Fund (NCUSIF) losses.

The 2012 premium and assessment ranges for the NCUSIF and the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) will also be set at the meeting. NCUA staff last week said there would be no NCUSIF premium in 2011, the premium range in 2012 would be between zero and seven basis points (bp), and the 2012 TCCUSF assessment would be between eight and 11 bp.

A report on the status of those funds, and the NCUA's 2012 overhead transfer rate and operating fee scales, will also be covered during the meeting. The agency last year approved an overhead transfer rate of 58.9%, and voted to increase the asset level dividing points for the natural person federal credit union operating fee scale by 3.4% and to decrease the natural person federal credit union operating fee rates by 2.86%.

The NCUA will also respond to Indianapolis, Indiana-based Finance Center FCU's request to expand its community charter during the meeting. However, the agency last Thursday said it had removed planned discussion of a proposed rule on loan participations from the open agenda.

The closed board meeting, which typically immediately follows the open board meeting, has been rescheduled to Nov. 16.

For more on the NCUA board meeting, use the resource link.