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Inside Washington (12/03/2007)

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* WASHINGTON (12/4/07)--Efforts to redefine Freddie Mac and Fannie Mae’s role in helping the mortgage crisis have drawn more criticism, further dividing lawmakers and regulators on the issue. Office of Federal Housing Enterprise Oversight (OFHEO) Director James Lockhart stated last week that the two enterprises should stay out of the crisis due to their lack of experience in the jumbo market (American Banker Dec. 2). Conversely, Ben Bernanke, Federal Reserve Board chairman, stated last month that the enterprises, under control of the federal government, could take on the jumbo loans and sell them to the secondary market. But some industry representatives, such as Judy Kennedy, president/CEO of the National Association of Affordable Housing Lenders, are skeptical. Kennedy said it would be a “mistake” to allow the enterprises into the market without reform legislation. Kurt Pfotenhauer, Mortgage Bankers Association lobbyist, recognized that letting the enterprises into the market could bring equal amounts of risk and promise. On Monday, Angelo Mozilo, CEO of Countrywide, said he supported efforts to allow Fannie and Freddie to securitize loans, stating that the two should take action to increase liquidity in the market ( Dec. 3) … * WASHINGTON (12/4/07)--The discussion draft of Sen. Christopher Dodd’s (D-Conn.) industrial loan company (ILC) bill has been released. If passed, the legislation would prevent ILCs from establishing loan offices or placing ATMs in states outside of those that the ILCs operate. The draft also states that ILCs may only be grandfathered in if they are approved by the Federal Deposit Insurance Corp. (FDIC). The draft has been released just one month before the FDIC’s moratorium on ILCs is set to expire …

NCUA schools examiners on bylaw rule focus

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ALEXANDRIA, Va. (12/4/07)—Federal credit union examiners have received direction from the top about how to view the National Credit Union Administration’s (NCUA’s) recent action re-incorporating federal bylaws into regulations. In a supervisory letter sent both to NCUA examiners and federal credit unions, the agency reiterated its position that reincorporating the bylaws into NCUA’s rules and regulations imposes” no new regulatory burden, as all FCUs are already required to have NCUA-approved bylaws.” “Under the risk-based examination system in use for FCUs, examiners do not currently, nor will they with the reincorporation of the Bylaws, inquire into an FCU’s bylaw disputes unless the FCU’s management raises the issue,” the NCUA letter, signed by David. Marquis, director of the Office of Examination and Insurance, said. The Credit Union National Association (CUNA) in October asked the NCUA to send a clarifying letter – communicating directly with federal examiners—that spells out the agency’s intent that bylaw enforcement will not be part of routine examinations. CUNA President/CEO Dan Mica urged the regulator also to instruct examiners that bylaw disputes should be addressed internally by credit unions before the appropriate NCUA regional director becomes involved. Such a letter, CUNA said, would “go a long way toward helping examiners understand how the rule is to be implemented and assisting federal credit union appreciate the Board meant what it said. In its supervisory letter, the NCUA explains that the bylaws were reincorporated to provide clear authority to act if a bylaw violation threatened a fundamental, material credit union member right. It also reminded that the agency will limit its involvement to bylaw disputes to six areas of members’ rights, which are:
* Maintain a share account; * Maintain credit union membership; * Have access to credit union facilities; * Participate in the director election process; * Attend annual and special meetings; and * Petition for removal of directors and committee members.
Use the resource link below to read the NCUA letter.

Congress back Subprime woes credit cards in sights

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WASHINGTON (12/4/07)—Subprime mortgage woes and credit card practices are just two of the issues that appear to be slated for attention by the recently returned House and Senate as lawmakers barrel toward the close of the first session of the 110th Congress. In the Senate this week, a Senate Homeland Security and Government Affairs subcommittee is scheduled to shine a spotlight on credit card practices today—and specifically on the circumstances under which credit card issuers may increase the interest rates of cardholders who are in compliance with the terms of their credit cards. In March, the subcommittee examined credit card grace periods, interest charges assessed against debt paid on time, and excessive fees. Today’s follow-up hearing, entitled “Credit Card Practices: Unfair Interest Rate Increases,” will feature a panel of three consumers identified by a subcommittee release as having experienced interest rate increases. A second panel of witness will be comprised of representatives from credit card companies. Also in the Senate, on Wednesday an oversight subcommittee is expected to look into the country’s subprime mortgage woes and whether the country’s bankruptcy code could provide some relief to beleaguered homeowners. The Credit Union National Association (CUNA) has urged lawmakers to use extreme care in making any changes to bankruptcy laws and will continue to weigh in on the subject. The subprime issue is also scheduled for attention on the House side this week. As reported earlier, the House Financial Services Committee Thursday intends to take an overall look at recent proposals to improve the pace and volume of subprime mortgage loan modifications that are meant to help troubled borrowers hang onto to their homes purchased with hybrid ARMs and other nontraditional loans. The committee is expected to zero in on the subject of whether mortgage lenders could suffer from liability issues if they alter mortgage loan terms to help borrowers stay in their homes. Also possible for this week or later: The House Judiciary Committee in November set aside a mark up on its bill seeking to revise sections of the bankruptcy code to give judges power to modify certain terms in existing mortgages. CUNA’s Legislative Affairs Vice President Ryan Donovan said Monday that the committee has identified action on the bill before yearend as a priority, although nothing has yet been scheduled.