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CUNA Frames CU Housing Finance Reform Priorities For Senate Panel Today

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WASHINGTON (11/5/13)--Credit Union National Association Chief Economist Bill Hampel today will drive home the credit union position on housing financial reform at a Senate Banking Committee hearing entitled "Housing Finance Reform: Protecting Small Lender Access to the Secondary Mortgage Market."  It is scheduled to begin at 10 a.m. (ET).

"As long as credit unions produce one or more eligible mortgages, they should be able to sell them to an issuer of government-backed securities, directly or through an aggregator, at market prices, for cash, without volume penalties, and with the option to retain servicing," Hampel says in his testimony.

Hampel will also call on the U.S. Congress to ensure that credit unions "continue to be afforded the opportunity to provide mortgage servicing services to their members in a cost-effective and member-service oriented manner, in order to ensure a completely integrated mortgage experience for credit union members/borrowers."

The CUNA testimony also outlines principles that should be followed as the U.S. Congress revamps the housing finance system, discusses in detail the need for small lender access to the secondary mortgage market, assesses a Senate bill (S. 1217) that would wind down Fannie Mae and Freddie Mac and replace the Federal Housing Finance Agency with an new entity, and more.

Watch News Now today for more on the hearing, as it happens.

Hampel also testified on housing issues before a July Senate subcommittee hearing, and participated in a June housing finance market reform policy discussion session hosted by Rep. Maxine Waters' (D-Calif.).

Interagency TDR Guidance Featured In This Week's Reg Report

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WASHINGTON (11/5/13)--In this week's Regulatory Advocacy Report, the Credit Union National Association follows up on recent interagency guidance addressing accounting treatment and regulatory credit risk grading or classification of commercial and residential real estate loans that have undergone troubled debt restructurings (TDRs).

The guidance notes that financial institutions are expected to develop and apply an internal loan grading system consistent with supervisory guidance. Banks and savings associations are to maintain documentation that translates their system, if different, into the uniform regulatory classifications of substandard, doubtful, and loss. The National Credit Union Administration does not require credit unions to adopt a uniform regulatory credit grading system. A credit union should apply an internal loan grade based on its evaluation of credit risk.

The new guidance, Interagency Supervisory Guidance Addressing Certain Issues Related to Troubled Debt Restructurings, reiterates key aspects of previously issued regulatory guidance and discusses the definition of collateral-dependent loans and the circumstances under which a charge-off is required for TDRs. It was released jointly by the NCUA, the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency.

"The agencies encourage financial institutions to work constructively with borrowers and view prudent modifications as positive actions when they mitigate credit risk. The agencies generally will not criticize financial institutions for engaging in prudent workout arrangements, even if the modified loans result in adverse credit classifications or constitute TDRs," according to the guidance.

This week's edition of the Report also features:
  • CUNA concerns regarding qualified mortgages (QM) and disparate impact;
  • Details on the NCUA's final rule on emergency liquidity and contingency funding plans;
  • The NCUA Office of Inspector General's report on that agency's process for documenting credit union failures;
  • CUNA's comment letter on the U.S. Department of Housing and Urban Development's proposed QM rule;
  • Projections on how far mortgage originations could decline in 2014; and
  • Details from a PEW report on payday lending.
A resource chart with information on current CUNA comment calls is also provided in the Report.

For this week's Regulatory Advocacy Report, CUNA members can use the resource link.

NEW: CUNA's Hampel Presents CU, Member Housing Reform Views

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WASHINGTON (11/5/13, UPDATED: 11:10 A.M. ET)--Qualifying credit union members need to be able to buy or finance their homes in a stable mortgage market, Credit Union National Association Chief Economist Bill Hampel emphasized as he delivered credit union views and their members' needs in his in just-delivered Senate testimony on housing finance reform.

Hampel was testifying before the Senate Banking Committee hearing entitled "Housing Finance Reform: Protecting Small Lender Access to the Secondary Mortgage Market,"  which started around 10 a.m. (ET).

"As long as credit unions produce one or more eligible mortgages, they should be able to sell them to an issuer of government-backed securities, directly or through an aggregator, at market prices, for cash, without volume penalties, and with the option to retain servicing," Hampel told the Senate panel.

Hampel called on the U.S. Congress to ensure that credit unions "continue to be afforded the opportunity to provide mortgage servicing services to their members in a cost-effective and member-service oriented manner, in order to ensure a completely integrated mortgage experience for credit union members/borrowers."

Standardization at all steps in the mortgage process is important to credit unions, he emphasized.

One topic of today's hearing is the development of a mutual organization to protect access. In his testimony, Hampel shared some CUNA suggested improvements for this platform, including:
  • Making the mutual securitization platform accessible to lenders of all sizes;
  • Governing the mutual organization cooperatively, with a board elected by members; and
  • Granting the mutual platform a small but limited balance sheet to pool mortgages before sale and to hold some mortgages.
Credit unions may need additional investment authority in order to capitalize their share of the mutual, Hampel said. He also encouraged the committee to amend the federal credit union act to consider all loans made on 1 to 4 residential properties as residential loans, as is currently the case for banks.

He also suggested that Congress grant a one-year extension of compliance deadlines for pending Consumer Financial Protection Bureau mortgage rules. If such a delay cannot be created, Congress should provide credit unions with a buffer of at least six months as they work to come into compliance with qualified mortgage standards. A similar six-month delay should also be applied to legal liability provisions of mortgage regulations, Hampel said.

Today's hearing is ongoing. Watch News Now for more coverage.

CUNA To CFPB: Delay CU Compliance Deadline For QM Rule

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WASHINGTON (11/5/13)--Continuous communication with the Consumer Financial Protection Bureau is one way the Credit Union National Association is working to minimize the regulatory burdens faced by credit unions, and CUNA in recent meetings has suggested steps that could ease qualified mortgage (QM) regulation compliance issues, CUNA Deputy General Counsel Mary Dunn said Monday.

The CFPB cannot, by statute, delay the compliance date of pending QM regulations. However, CUNA has called on regulators to give credit unions a buffer of at least six months as they work to come into compliance with the QM standards once the rule goes into effect. CUNA has also urged a similar six-month delay be applied to legal liability provisions of the regulation.

The QM regulations go into effect in January. The rule amends Regulation Z, which implements the Truth in Lending Act, to require creditors to make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling--excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan. They also establish certain protections from liability under this requirement for "qualified mortgages."

The NCUA and other federal financial regulators late last month said offering only QMs "would not, absent other factors, elevate a supervised institution's fair lending risk." The statement came in response to creditor questions to the agencies.

Creditors, the regulators said, "should continue to evaluate fair lending risk as they would for other types of product selections, including by carefully monitoring policies and practices and implementing effective compliance management systems." (News Now, Oct. 23.)

House In Recess: Senate Hearings On Tap This Week

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WASHINGTON (11/5/13)--Members of the U.S. House are working in their home districts until Nov. 12, but the Senate is in session.

One item on the Senate agenda is today's Senate Banking Committee hearing entitled "Housing Finance Reform: Protecting Small Lender Access to the Secondary Mortgage Market." Credit Union National Association Chief Economist Bill Hampel is set to testify at the hearing, which is scheduled to begin at 10 a.m. (ET). (See related story: CUNA Frames CU Housing Finance Reform Priorities For Senate Panel Today.)  The committee has set another housing hearing for Thursday: "Housing Finance Reform: Essential Elements to Provide Affordable Options for Housing."

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said CUNA expects committee leaders to introduce a new housing finance reform bill in the coming weeks, with a mark up possible as soon as December.

The Senate Commerce, Science and Transportation subcommittee on consumer protection will also hold a Thursday hearing entitled "Demand Letters and Consumer Protection: Examining Deceptive Practices by Patent Assertion Entities."

Consideration of the Privacy Notice Modernization Act (S. 635), which would provide relief to credit unions who are currently expected to send annual privacy notifications to members, could also happen soon, Donovan said.

In other House news, Majority Leader Eric Cantor (R-Va.) last week released the 2014 calendar for that body.

The second session of the 113th U.S. Congress will begin on Jan. 7, and House members will remain in Washington until Jan. 16. No House votes are scheduled on Jan 17, and members are scheduled to remain in their districts through the following Martin Luther King Jr. Federal Holiday. They are set to return on Jan. 27, and the three-day House Republican Issues Conference is scheduled to begin on Wednesday, Jan. 29.

For the full calendar, use the resource link.

CFPB Answers Lawmakers' Auto Lending Queries

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WASHINGTON (11/5/13)--The Consumer Financial Protection Bureau detailed how it screens for potential fair lending violations by indirect auto lenders in a Monday blog post and separate letter to members of the U.S. Congress.

To examine fair lending compliance by auto lenders, the CFPB said it uses a proxy method which "integrates two common approaches by combining the respective probabilities generated by the last name and geographical proxies." This method can be more accurate than relying only on the borrower's last name or geographic location, the CFPB blog post said.

"Statistical methods are often refined over time. We are committed to staying in dialogue with our sister agencies, lenders and researchers to refine our proxy methods over time, so that we can stop the silent pickpocket of discrimination in various consumer finance markets," the bureau blog post added.

The CFPB releases follow information requests sent by House and Senate members last week. In those letters, the legislators urged the CFPB to explain the principles behind policy guidance it issued for indirect auto lending earlier this year.

The CFPB in a March 21 release said it has the authority to pursue auto lenders whose policies can, at times, be used to harm consumers through unlawful discrimination. The CFPB also recommended that indirect auto lenders impose dealer markup controls or revise dealer markup policies to ensure they are in compliance with fair lending regulations. Indirect lenders should also eliminate dealer discretion to markup buy rates, and fairly compensating dealers using a different mechanism that does not result in discrimination, such as flat fees per transaction, the CFPB said.

Sens. Rob Portman (R-Ohio), Jeanne Shaheen (D-N.H.) and a coalition of 20 senators wrote on Oct. 30, "Although the CFPB has alleged that 'disparate impact' discrimination is present in the indirect auto financing market, the bureau has yet to explain its basis for this assertion.

"Nor has the bureau released the complete statistical methodology it employs for determining whether disparate impact is present in an auto lender's portfolio and the extent to which it has considered how the practical effect of its guidance will affect competition in the auto loan marketplace."