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Inside Washington (12/02/2011)

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  • WASHINGTON (12/5/11)--Housing and Urban Development Secretary Shaun Donovan on Thursday offered alternatives for increasing the Federal Housing Administration's reserves before the House Committee on Financial Services (American Banker Dec. 2). Donovan said he expects to release a proposal in the coming months. Donovan's testimony came in the wake of a report that showed the Federal Housing Administrations (FHA) capital reserve ratio to about one-eighth of the 2% minimum standard required by law. Members of Congress expressed concern that the agency may require a bailout by taxpayers. Borrowers with low credit scores are now required to make a 10% down payment to qualify for an FHA mortgage, while borrowers with higher scores must make a 3.5% down payment, Donovan said. The bulk of the FHA losses are from loans originated before 2009, Donovan added. More recent loans are turning a profit, he said …
  • WASHINGTON (12/5/11)--Treasury Secretary Tim Geithner on Thursday said efforts by members of Congress to weaken the Dodd-Frank Act--including blocking key oversight positions, proposing legislation to repeal the law, or using cost-benefit analysis as a roadblock--will not succeed (American Banker Dec. 2).  Dodd-Frank's reforms are "sensible and essential," Geithner said, speaking before a conference hosted by the Financial Oversight Stability Council. The Obama administration and Congress took on the process of financial reform soon after the financial crisis, rather than waiting until the damage had been repaired to maximize the prospects of enduring changes. Efforts to undermine those reforms could limit future available credit to businesses and expose consumers to further abuse, he said …
  • WASHINGTON (12/5/11)--Senate Majority Leader Harry Reid (D-Nev.) will schedule a vote next week on Richard Cordray's nomination as director of the Consumer Financial Protection Bureau (CFPB), a spokesman for Reid said Thursday. Speaking to reporters in Washington, Reid said he would set votes next week to limit debate on four or five nominations (Bloomberg Dec. 2). Cordray is among those to be up for a vote, according to Adam Jentleson, a spokesman for Reid. Cordray, a former Ohio attorney general, is the CFPB's enforcement director. His nomination has drawn opposition from Republicans, who have promised to block any nominee for unless the CFPB's funding and leadership structures are changed. In a May letter, 44 lawmakers called for a board of directors to run the agency. The letter also demanded that the new agency be funded by congressional appropriations. Under the current structure, the CFPB's budget is set from the Federal Reserve. The Republican hold enough votes to block the Cordray nomination …
  • WASHINGTON (12/5/11)--Rep. Barney Frank (D-Mass) said Thursday the deadlock in Congress over the confirmation of a director for Consumer Financial Protection Bureau (CFPB) may not be broken until after the 2012 election. The bureau's full authority's is contingent on the Senate confirmation of a director, a provision which Frank said he regrets as one of the authors of the Dodd-Frank Act (American Banker Dec. 2). The provision was pushed by Senate leaders. The CFPB still has the power to enforce all existing consumer financial laws transferred from other regulators, Frank said. The confirmation of a director for the CFPB in the best interest of banks and credit unions, most of which are subject to the bureau's rules and oversight while their nonbank counterparts are not until a director is confirmed, Frank said …

CUNA leagues continue to press NCUA on TDRs

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WASHINGTON (12/5/11)--The Credit Union National Association (CUNA), credit union officials, and league staff discussed the range of regulatory problems and concerns that credit unions face when they provide troubled debt restructurings (TDR) to their members in a conference call with the National Credit Union Administration (NCUA) late last week.

TDR loans, which have very specific accounting and reporting requirements, occur when a credit union or other lender grants a concession to the borrower and modifies the terms of the loan based on the borrowers financial situation. The financial statement notes and call report data associated with TDRs are also unique.

The credit union representatives and CUNA staff, including Deputy General Counsel Mary Dunn, were joined on the call by NCUA Director of Examinations and Insurance Larry Fazio, General Counsel Mike McKenna, Senior Strategic Communications and External Relations Advisor Buddy Gill, Director of Supervision Matt Biliouris, and Chief Accountant Karen Kelby.

CUNA and others during the call noted that the NCUA's call report requirements are not consistent with U.S. Generally Accepted Accounting Principles, and asked the NCUA for clarifications on the distinctions between a TDR and a loan modification that is not a TDR and the circumstances under which a TDR is required to be reported as delinquent.

The credit union representatives during the call also noted that the NCUA's call report requirements force credit unions to track TDRs manually, and asked how call report requirements can be reconciled with GAAP.

The NCUA representatives said they are planning to release for public comment a proposed Interpretative Ruling and Policy Statement (IRPS) that will provide new guidance on reporting and other issues associated with TDRs. However, Dunn said, "there has been a real concern that the guidance would not address all issues sufficiently and leave some questions unanswered."

The NCUA asked CUNA and the other credit union representatives to provide further detail on what the guidance should address and how key issues should be handled, and CUNA plans to work with its accounting subcommittee to develop recommendations in time for the NCUA's upcoming Dec. 15 open board meeting.

Michigan CU League president/CEO Dave Adams, Northwest CU Association CEO John Annaloro, Missouri CU Association president/CEO Mike Beall, League of Southeastern CUs president/CEO Patrick La Pine, Ohio CU League president/CEO Paul Mercer, Rhode Island/Massachusetts/New Hampshire CU Leagues senior vice president and general counsel Mary Ann Clancy, California/Nevada CU Leagues president/CEO Diana Dykstra, Suncoast Schools FCU executive vice president/CFO Linda Darling, Mid Minnesota FCU CFO Pam Finch, Summit CU CFO Keith Peterson, and Patelco CU senior vice president/CFO Scott Waite took part in the call. CUNA Assistant General Counsel Luke Martone and Counsel for Special Projects Kristina Del Vecchio were also on the call.

New NFIP Q-and-A backed by CUNA

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WASHINGTON (12/5/11)--The Credit Union National Association (CUNA) has backed a proposed interagency National Flood Insurance Program question-and-answer documents that aims to provide clearer guidance about the forced placement of flood insurance, to clarify additional areas, and avoid potential misunderstandings.

The guidance was issued by the National Credit Union Administration (NCUA) and other federal financial regulators, and will serve as an update of guidance on flood insurance requirements for credit unions and other financial institutions, agency personnel, and the public, that was issued in 2009.

In a comment letter, CUNA notes that credit unions and other financial institutions are currently required to force place flood insurance when a borrower has inadequate or lapsed flood insurance during the term of the loan that must have flood insurance.  If a credit union determines the borrower has inadequate or lapsed flood insurance, the credit union must notify the borrower that adequate coverage is required.  If the borrower does not provide evidence of adequate flood insurance coverage within the 45-day notice period, the credit union must arrange for the insurance on the borrower's behalf and may charge the borrower for the cost of the insurance, CUNA said.

Under the guidance, NFIP insurance must be provided if:

  • the lender determines that the property securing the loan is located in an Special Flood Hazard Area;
  • flood insurance is available for the property securing the loan;
  • the lender determines that flood insurance coverage is not adequate or does not exist; and
  • after required notice, the borrower fails to purchase the appropriate coverage within 45 days.
One portion of the new guidance, known as Q&A 62, states that a lender that provides flood insurance during the 45-day notice period may charge a borrower for any part of the 45-day notice period.

Proposed Q&A 60 would require a lender or its servicer to send a force placement notice to a borrower when flood insurance on the collateral has expired or is less than the amount required for the property, and recommends that the lender also advise the borrower when flood insurance is about to expire to maintain continuous coverage, CUNA said. CUNA does not oppose this recommendation, but said lenders should not be required to provide a separate notice that is not required by the statute.

For the full comment letter, use the resource link.

Reg Accountability Act passes House

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WASHINGTON (12/5/11)--The Regulatory Accountability Act of 2011 (H.R. 3010) passed the House on a 263-to-159 vote count Friday and will now move on to the Senate for consideration.

The bill would:

  • Revise the Administrative Procedure Act to require that agencies consider the costs and benefits of new rules and regulatory actions;
  • Set new data-quality standards for agency fact finding in the rulemaking process; and
  • Require federal regulators to conduct public hearings for most rules estimated to have an aggregate impact on industry of over $1 billion.


The bill was introduced by Rep. Lamar Smith (R-Texas).

Amendments that would have shielded regulations tied to workplace safety, food safety, consumer product safety, air quality, water quality, nuclear power, and the Department of Homeland Security were among those that were defeated before the final vote.

President Barack Obama has reportedly said he would veto the bill if it passes.

The Credit Union National Association (CUNA) has backed the legislation, saying that it "would give credit unions and others new tools and procedures that would help protect against arbitrary regulatory burdens" and "would significantly enhance the interaction between industry and federal administrative agencies."

Portions of the bill that add cost benefit analysis and information reporting requirements "would be far more effective than the closest existing parts of the Administrative Procedure Act, the Regulatory Flexibility Act and the Paperwork Reduction Act," CUNA added.

For the full CUNA letter on H.R. 3010, use the resource link.