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Retailers charge interchange rule ignores cap intent

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WASHINGTON (11/23/11)— Retailers have filed suit against the Federal Reserve, alleging that its final debit interchange rule ignores the direction of the statute that requires a cap and fails to set standards to assess that a fee is "reasonable and proportional" to costs incurred to the issuer.

The lawsuit said the Fed's early proposal to set a cap closer to 12 cents per transaction "largely followed" the intent of the law. The suit has been brought against the Fed in U.S. District Court for the District of Columbia by the National Association of Convenience Stores, the National Retail Federation, the Food Marketing Institute, Miller Oil Co., Inc., and Boscov's Department Store, LLC.

In the complaint, the merchants claim the Fed's final rule, which was released after the agency received input from both merchants and financial services groups, represents "an unreasonable construction' of Durbin's legislation.

The Fed's initial interchange proposal, which was prompted by legislation authored by Sen. Richard Durbin (D-Ill.), would have set a cap of 12 cents per transaction. However, the Federal Reserve's final debit interchange rule, which became effective last month, caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents. The regulation also allows card issuers to charge an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may also be charged by financial institutions that are in compliance with the Fed's fraud-prevention standards. 

The complaint also takes issue with the Fed's decision to consider many costs related to debit card use, such as network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring, in the calculation of the final debit card interchange cap. The merchants in the complaint claimed the Fed "vastly expanded the categories of recoverable costs" when it developed the final rule.

The Credit Union National Association (CUNA) fought to ensure that these costs were included in the final debit interchange fee cap determination.

CUNA General Counsel Eric Richard said CUNA is carefully watching this suit and will do whatever is necessary to protect the interests of credit unions in this litigation.

"Given the merchants' reaction to the final rule, this litigation is not surprising. However, while we can't predict the outcome of the litigation, it is clear that the Federal Reserve did not focus on the desires of the merchants, as the retailers urged it to do, but took into account factors identified by Congress in setting the cap on interchange fees," CUNA Deputy General Counsel Mary Dunn added.

For more on the merchant interchange action, use the resource link.

FHFA Most maximum loan limits will remain at 2011 levels in 2012

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WASHINGTON (11/23/11)—The maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2012 will remain at 2011 levels in all counties but one, the Federal Housing Finance Agency (FHFA) announced on Tuesday.

The lone loan limit exception for 2012 will be Fairfield County, Conn., where the maximum loan limit for single-family properties will increase to $601,450. The maximum loan limit for single-unit properties in that county was $575,000 in 2011, the FHFA said.

The Housing and Economic Recovery Act (HERA) of 2008 requires that Congress set maximum conforming loan limits each year. The maximum conforming loan limits are generally $417,000 but can be as much as $729,750 in certain high cost areas in the contiguous United States. The $729,750 maximum limit fell to $625,500 on Oct. 1 when a loan limit extension could not be agreed to by Congress. However, legislation that would return the maximum limit to $729,750, or 125% of local median prices for single family homes, through Dec. 31, 2013 was signed into law late last week.

For the FHFA release, use the resource link.

Average October mortgage rate is 4.17 FHFA reports

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WASHINGTON (11/23/11)--The average combined rate of both fixed- and adjustable-rate mortgages stood at 4.17% in October, a drop from the 4.36% average reported last month, the Federal Housing Finance Agency (FHFA) reported on Tuesday.

The agency said that initial fees and charges pushed this average to an effective rate of 4.29% for October. That rate represents a 20 basis point drop from September's total of 4.49%.
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The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders was 4.19% last month, a 0.19% drop from September's total, and conventional, 30-year, fixed-rate mortgage loans of $417,000 or less averaged an interest rate of 4.36% in October, a 20 bp drop from the previous month's total, the FHFA said.

October's average loan-to-price ratio 78.4%, and the average loan amount was $218,500 during that month. Both of these numbers were consistent with the previous month's results.

The FHFA also reported the following:

  • Initial fees and charges accounted for 0.83% of loan balances in October; and
  • 28% of purchase-money mortgage loans originated in October were "no-point" mortgages.
For the full FHFA release, use the resource link.

Bipartisan backing for MBL increase grows

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WASHINGTON (11/23/11)--Legislation that would increase the member business lending (MBL) cap for credit unions continues to have broad bipartisan appeal, with Rep. Maxine Waters (D-Calif.) and Sen. Rand Paul (R-Ky.), two legislators on distant ends of the ideological spectrum, signing on as cosponsors in recent weeks.

Waters became one of 104 cosponsors of H.R. 1418, the Small Business Lending Enhancement Act of 2011, when she signed on to support the bill on Nov. 18. The legislator in a House Financial Services subcommittee on financial institutions hearing on community banking said she is "very much involved" in the MBL issue, and added that she wants to work with Republicans "to do something" for credit unions and other small institutions. Waters also urged credit unions and community banks to work out their differences during the hearing.

Credit Union National Association (CUNA) President/CEO Bill Cheney testified during the hearing, suggesting that legislators add MBL cap increase language to a separate community bank regulatory relief measure, creating a bill that could "be embraced by all who serve businesses on Main Street." Rep. Ed Royce (R-Calif.), who is a main sponsor of H.R. 1418, also supported combining portions of the two bills. (See related Nov. 17 story: Cheney urges less CU reg burden at bank hearing)

Paul recently became the 21st cosponsor of Sen. Mark Udall's (D-Colo.) own MBL legislation, S. 509. Paul, who was supported by the Credit Union Legislative Action Council (CULAC) and the Kentucky Credit Union League, and also touted the support of over 700,000 Kentucky credit union members on his website, during his 2010 Senate campaign, is halfway through his first Congress.

Both the House and Senate bills would increase the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets. CUNA has estimated that increasing the MBL cap would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

CUNA continues to fight to increase these cosponsor totals, and move MBL legislation on to President Barack Obama's desk, and 23,000 separate contacts have been made since late spring as credit union advocates have reached out to members of the House and Senate, as well as the Obama administration, to seek their support for the MBL legislation.

Credit union supporters have also reached out to members of Congress and their Capitol Hill staffers during CUNA's 2011 Hike the Hill efforts, with the New Jersey Credit Union League, the Credit Union Association of the Dakotas, and the New Hampshire, Massachusetts, and Rhode Island leagues making the most recent trips to Washington. A total of 32 Hike the Hill visits have been made this year.

Inside Washington (11/22/2011)

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  • WASHINGTON (11/23/11)--The financial services industry must learn new ways to work and communicate with seniors, Hubert "Skip" Humphrey, the head of the Consumer Financial Protection Bureau's Office for Older Americans said in an interview with American Banker (Nov. 22). Financial institutions have the capacity to know about and see the patterns of abuse and fraud, Humphrey said. In his first three weeks in office, Humphrey has traveled to San Diego, Los Angeles, Florida and Massachusetts. The former Minnesota attorney general spoke with seniors, local leaders and experts about elder abuse and exploitation, and the need for improved coordination among federal and state agencies, and other nonprofit groups. The CFPC's role is to bring together the numerous public and private organizations that work with seniors to create a coordinated federal presence, Humphrey said. The CFPB has begun work on a study about reverse mortgages and is focusing on issues such as identity theft, online scams and certification requirements for people who hold themselves out as financial experts or advisers …
  • WASHINGTON (11/23/11)--The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) has shut down online mortgage modification scams that prey on homeowners through Web banners and other Web advertisements on Yahoo! and Bing. Last week, SIGTARP announced it had shut down similar online mortgage modification scams advertised on Google. Among the areas SIGTARP investigates are mortgage modification schemes in which companies charge struggling homeowners a fee in exchange for false promises of lowering their mortgage through TARP's housing program, the Home Affordable Modification Program. In the past week, SIGTARP has shut down 125 of the alleged scams advertised on Yahoo!, Bing, and Google. Microsoft, which founded Bing and whose technology powers Yahoo! Search, has suspended advertising relationships with more than 400 Internet advertisers and agents associated with the schemes and related deceptive advertising and has blocked all future advertising associated with the 125 scams identified by SIGTARP. Google has also suspended advertising relationships with more than 500 Internet advertisers and agents associated with 85 of the alleged online mortgage fraud schemes and related deceptive advertising …