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Inside Washington (12/17/2007)

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* WASHINGTON (12/18/07)--Financial services providers are hoping that the Home Ownership and Equity Protection Act (HOEPA), which is scheduled for release today, could eliminate the need for tougher mortgage reform legislation while ensuring that all lenders follow the same rules (American Banker Dec. 17). Federal Reserve Chairman Ben Bernanke wrote a letter to Rep. Brad Miller (D-N.C.) last week stating that the HOEPA proposal would eliminate most abusive lending, and that the central bank is working to improve disclosures. Fed officials have stated that the proposal will target low-documentation loans, lenders who don’t assess a borrower’s ability to pay, lenders who don’t offer escrow accounts for insurance and taxes, and pre-payment penalties. The Fed has been criticized for not doing enough to stop abusive lending, and industry observers expect that HOEPA will be similar to the subprime guidance that federal regulators released in June … * WASHINGTON (12/18/07)--Rep. Julia Carson (D-7), right, the first African-American and the first woman to represent Indianapolis in Congress, died Saturday after battling lung cancer. She was first elected to Congress in 1996 and was a member of the House Financial Services Committee. “She was generous with her time on behalf of Indiana’s credit unions,” said Indiana League President John McKenzie (left). Carson served as the keynote speaker at the Indiana Credit Union League’s Legislative Affairs Forum in 2004. (Photo provided by the Indiana Credit Union League) …

Members gain back control of their Omaha CU

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ALEXANDRIA, Va. (12/18/07)—Control of an Omaha, Neb. federal credit union, whose board of directors and CEO were removed after a 2005 loss of $416,203--$391,000 of which was in the fourth quarter—has been placed back in the hands of its members, according to the National Credit Union Administration (NCUA). During a 22 months in conservatorship, “all material concerns” of $28 million-asset Union Pacific Streamline FCU were resolved, according to federal regulators. The credit union was placed into conservatorship Feb. 16, 2006, with the goal of returning the credit union operation to its approximately 7,000 members. At that time, Steven R. Slater, president/CEO, and Trudi Stastny, executive vice president, were placed on administrative leave. The NCUA also removed the credit union's board of directors after its examiners found problems with the $38 million asset credit union's performance.

Senate GOP leader to address CUNA GAC

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WASHINGTON (12/18/07)—Senate Minority Leader Mitch McConnell (R-Ky.) joined the growing lineup of lawmakers scheduled to speak during the 2008 CUNA Governmental Affairs Conference (GAC). The 2008 GAC is March 2–6, and CUNA's first at the landmark Washington Convention Center. McConnell will speak to the GAC on Wednesday morning, March 5. McConnell was first elected to the U.S. Senate in 1984. He became Senate Minority Leader in 2006. He currently serves as a senior member of the Appropriations, Agriculture and Rules Committees. Also featured on the 2008 GAC program are Gen. Colin Powell and political commentator Chris Matthews, host of MSNBC's "Hardball" and NBC's "The Chris Matthews Show." Other lawmakers on the program include Senate Finance Committee Chairman Max Baucus (D-Mont.); Sen. Joe Lieberman (I-Conn.); House Minority Whip Roy Blunt (R-Mo.); and House Ways and Means Committee Chairman Charles Rangel (D-N.Y.). New to the GAC this year is an opening kickoff concert Sunday evening, March 2, featuring the band "America" and sponsored by the CUNA Councils. Use the resource link below for more information or to register.

GAO studies new reaffirmation agreements

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WASHINGTON (12/18/07)--A Government Accountability Office (GAO) report recently stated that a survey of bankruptcy filings in five districts shows that new rules for reaffirmation agreements are being used in a significant majority of bankruptcy dealings. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act required lenders to better inform individuals filing for personal bankruptcy about their options for reaffirming debt by requiring extensive disclosures and possible court review. The “reaffirmation agreements” are voluntary and enable borrowers to pay certain creditors in order to keep an asset, such as an automobile. The 2005 law required the GAO to study the new reaffirmation process, and in its recent report Congress’ investigative arm looked at: the extent to which the required bankruptcy reform act disclosures have been incorporated into reaffirmation agreements; the types of debts generally reaffirmed and what percent of a debtor’s overall debt it represents; and how reaffirmed and original interest rates compare. The GAO said it reviewed a representative sample of over 1,000 reaffirmation agreements in bankruptcy courts in five state: Alabama, California, Illinois, Texas and West Virginia. The report noted the sample “cannot be generalized to all bankruptcy courts, but can be generalized to each of the selected bankruptcy courts.” The GAO found:
*For the five districts, the required disclosure statement for the “Annual Percentage Rate” was included in an estimated 86% to 97% of agreements and the disclosure statement for the “Amount Reaffirmed,” and the amount was included in an estimated 87% to 98% percent of agreements (the California court filings were consistently the highest in compliance); * For the five districts, debts secured by assets, such as an automobile, were the most frequently reaffirmed type of debt—comprising an estimated 90% or more of all reaffirmations. Unsecured debt—such as credit card debt—was reaffirmed infrequently in reaffirmation agreements, occurring in an estimated 2% to 10% of agreements. * In an estimated two-thirds (75%) of the bankruptcy cases in the five districts, the reaffirmed debt burden comprised 25% or less of the debtors’ total debts; and * In cases where an original interest rate was provided, rates on reaffirmed debt were generally less than or equal to the original rate. Credit union lending and collections staff may be particularly interested in pages 28-31 of the report addressing interest rates in reaffirmation agreements;
The report highlighted the different reaffirmation rules that apply to credit unions under the 2005 law, since the presumption of undue hardship when a debtor’s expenses exceed income are not applicable to credit unions if the debtor is represented by an attorney. Reaffirmation agreements with credit unions comprised an estimated 6% to 20% of all reaffirmations in each of the five districts. The GAO report indicated that the bankruptcy courts have under consideration a May 2007 recommendation by a federal judiciary advisory committee to require a reaffirmation agreement coversheet in order to simplify judges’ review of whether a hardship possibly exists with the debtor’s reaffirmation agreement. The Credit Union National Association is discussing with the courts’ administrative office under what conditions a credit union reaffirmation agreement would have to provide such a coversheet., but any change in paperwork requirements is not expected before late 2009. Last week, the various reports indicated that consumer bankruptcy filings across the country increased more than 28% in November from a year ago, but were down 5.5% from October. For more details of the GAO report, use the resource link below.

CUNA nominates two to BSA advisory group

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WASHINGTON (12/18/07)—The Texas CU League and the Association of Corporate CUs would make significant contributions as members of the Bank Secrecy Act Advisory Group (BSAAG), said the Credit Union National Association (CUNA) in letters nominating the groups for membership. BSAGG was established in 1992 to enable the financial services industry and law enforcement to advise the Treasury Secretary on ways to enhance the usefulness of Bank Secrecy Act (BSA) reports. CUNA has been a member of BSAAG since 2003 with a term that has been extended to 2009. In nomination the Texas league, CUNA wrote of that group’s “unique position” of being a state credit union trade association that is very knowledgeable about Bank Secrecy Act (BSA) issues. The league regularly provides assistance to its members with regard to these issues. “This perspective will provide a substantial contribution to the BSAAG while its credit union membership will provide diversity among the trade associations that are members of the BSAAG,” CUNA said. The letter added that the state league last year produced a BSA training video that is used not only by Texas credit unions, but other state credit union trade associations and credit unions across the country. In support of a membership position for the Association of Corporate CUS (ACCU), CUNA wrote that group “provides awareness to corporate credit unions about applicable laws and regulations, including (BSA issues), submits input on proposed regulations, assists with regulatory and compliance issues, and creates industry specific best practices.” “In essence, corporate CUs are banker’s banks and are responsible for adhering to every aspect of monitoring and reporting as required by the BSA. We believe the ACCU would be in an excellent position to make a significant contribution to the activities of the BSAAG, as it is in the unique position of being a trade association that is very knowledgeable about BSA issues and provides assistance to its members with regard to these issues,” CUNA said. Earlier this year, Navy Federal CU was selected to serve a three-year BSAAG term. CUNA had nominated the credit union. BSAAG is part of the Treasury Department's Financial Crimes Enforcement Network (FinCEN).