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Inside Washington (11/11/2008)

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* WASHINGTON (11/12/08)--Office of Thrift Supervision (OTS) Director John Reich said that he plans to leave his position “sooner rather than later” (The Wall Street Journal Nov. 11). An exact date of his departure has not been set. Treasury Secretary Henry Paulson suggested in March that the OTS and the Office of the Comptroller of the Currency combine, which Reich rejected. The OTS is a division of the Treasury that oversees thrifts ... * WASHINGTON (11/12/08)--The Bush administration Monday purchased American International Group (AIG)’s troubled assets--the last time this type of authority will be used, according to observers (American Banker Nov. 11). Congress five weeks ago authorized the Troubled Asset Relief Program (TARP). The Treasury has not explained how the assets will be priced or if managers will be hired to oversee them. Observers say TARP’s lack of progress will hurt the market. At a speech Monday, Treasury Assistant Secretary Neel Kashkari was pressed for more details by audience members, but Kashkari said Treasury Secretary Henry Paulson will determine the next steps. Robert Clark, former comptroller of the currency, pointed out the Treasury is overstretched, and it’s hard to implement an unfamiliar program. Joe Mason, Louisiana State University professor, said it’s unlikely the asset-buying program will materialize ... * WASHINGTON (11/12/08)--No significant changes are expected at this weekend’s Group of Twenty (G-20) meeting, but observers say they hope the meetings will encourage collaboration with the Financial Stability Forum and international supervisory bodies. Forum representatives and International Monetary Fund (IMF) and World Bank presidents plan to attend the meeting. Both the bank and fund say they want to gain stronger international voices (American Banker Nov. 11). The forum announced recommendations in April for financial institutions to strengthen their liquidity and capital standards, and released an update of the recommendations last month to address specific issues regarding the nation’s financial crisis. Regulators need to avoid amplifying cycles that produced damage in the economy, said Svein Andersen, forum secretary general. Dominique Strauss-Kahn, IMF managing director, also plans to put out a five-point plan for regulatory restructuring at the meeting ... * WASHINGTON (11/12/08)--The National Association of State Credit Union Supervisors (NASCUS) provided comments Friday on the National Credit Union Administration’s (NCUA) proposed budget for 2009. NASCUS urged NCUA to consider the effect of changes to the federal examination program on state resources. It also asked for clarification on interpretations of NCUA’s proposed exam cycle changes and on questions about the authority, purpose and organization of the proposed National Examination Team. NASCUS also complimented NCUA on its proposal to centralize chartering functions and said the NCUA could improve the budget briefing public comment process by providing more information in additional formats ...

FHFA announces streamlined loan mods

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WASHINGTON (11/12/08)—The Federal Housing Finance Administration (FHFA) Tuesday announced a streamlined mortgage loan modification plan the agency said is intended to complement existing loss mitigation programs. According to the FHFA, which regulates Fannie Mae and Freddie Mac and the Federal Home Loan Banks, the program targets highest risk borrowers who have missed three payments or more, own and occupy the property as a primary residence, and have not filed for bankruptcy. “Fannie Mae and Freddie Mac own or guarantee almost 31 million mortgages, about 58% of all single family mortgages. Although these mortgages only represent 20% of serious delinquencies, I believe their leadership role combined with the many partners of HOPE NOW should spread this approach throughout the whole mortgage loan servicing business,” said FHFA Director James Lockhart. Homeowners who are spending up to 38% of their income on their mortgage payment and are threatened with foreclosure could have their monthly payments reduced by Fannie and Freddie under the program. Lockhart said the new program is the result of a unified effort involving Fannie and Freddie, the administration’s HOPE NOW program and its twenty-seven servicer partners, the U.S. Department of the Treasury, the Federal Housing Administration and FHFA. He said the group also drew on the expertise of the Federal Deposit Insurance Corp. The FHFA director said Fannie Mae and Freddie Mac soon will issue specific guidance to their servicers, and added that implementation will be required by Dec. 15. To encourage participation, servicers will receive a fixed payment of $800 for each loan modified through this program. Use the resource link below for more information.

CUs reap 334250 in grants to help tax prep

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WASHINGTON (11/12/08)—Credit unions were again included in the matching funds granted recently by the Internal Revenue Service (IRS) to support its Volunteer Income Tax Assistance (VITA) program. Three credit union organizations received a total of $334,250 of the $8 million IRS gave out in matching VITA grants. State Employees CU, a $15 billion-asset, Raleigh, N.C., credit union, received a $122,850 grant. El Paso (Tex.) Credit Union HOAP, Inc., described by the Texas Department of Housing and Community Affairs as a nonprofit corporation formed by eight area credit unions promoting homeownership and homebuyer education, received $86,400. The National Federation of Community Development Credit Unions was awarded $125,000. VITA is an IRS program that helps low- and moderate-income taxpayers complete their annual tax returns at no cost. Credit unions and community organizations awarded grants receive IRS-provided training in the preparation of basic tax returns and establishment of tax preparation sites. Questions about the program may be addressed to the Grant Program at 404-338-7894 (not toll-free) or by e-mail at The National Credit Union Administration (NCUA) has been working with the IRS to prepare a video to be used to encourage credit unions to offer VITA services to their membership and communities.

Compliance What to do about expired flood form

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WASHINGTON (11/12/08)—The Federal Emergency Management Agency (FEMA) flood hazard determination form carried an Oct. 31 expiration date, but FEMA has not yet issued a new form. What’s a credit union to do? The Credit Union National Association (CUNA) November Compliance Challenge advises credit unions that they are to continue using the old Form 81-93 Standard Flood Hazard Determination until FEMA issues its new one. What’s more, CUNA’s compliance team points out, FEMA is providing time for credit unions and other users of the form to update their systems to the new version. The effective date for mandatory use of the new document will be six months from the date of its approval by the agency. And which credit unions use this form? CUNA explains that a credit union must perform a flood hazard determination whenever it makes, increases, extends, or renews a loan secured by a “building,” defined as a home on a permanent foundation or a mobile home that is located in a special flood hazard area (SFHA). The credit union or service provider acting on the credit union’s behalf must document the determination on the FEMA’s Standard Flood Hazard Determination Form. This form must be retained, either in hard copy or electronic form, for the period of time that the credit union owns the loan. To read this month’s Compliance Challenge, or for access to more information on flood insurance and the FEMA flood form, use the resource links below.
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