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Inside Washington (02/01/2008)

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* WASHINGTON (2/4/08)--Federal Deposit Insurance Corp. Chairman Sheila Bair is worried about the next mortgage problem--1.7 million nontraditional loans with interest rates that will reset next year (American Banker Feb. 1). The loans are worth $600 billion, and 75% of borrowers owe more than what their home is worth, Bair told the Senate Banking Committee Thursday. Committee Chairman Christopher Dodd (D-Conn.) encouraged lawmakers to take action, saying he wants to propose a government entity that would purchase distressed mortgages. But Republicans, such as Sen. Richard Shelby (Ala.), advised lawmakers not to rush. Robert Steel, Treasury undersecretary for domestic finance, said two-thirds of the 1.8 million mortgages ready to reset would be adjusted. He said he was optimistic that borrowers would be helped and that the Treasury is looking after the situation ... * WASHINGTON (2/4/08)--Comptroller of the Currency John Dugan said his office is focusing on the high community bank concentrations in commercial real estate (CRE). The agency plans to tackle the problem by increasing interaction between supervisors and banks with concentrations in CRE loans declining in quality. The OCC, he said, expects banks with CRE concentrations to assess their portfolio based on current market conditions and make adjustments as conditions change. The ratio of commercial real estate loans to capital has nearly doubled in the past six years. Over one-third of the nation’s community banks have CREs exceeding 300% of their capital, and 30% have construction and development loans exceeding 100% of capital, Dugan said ... * WASHINGTON (2/4/08)--Charlie McCreevy, the European commissioner for the Internal Market and Services of the European Union (EU), said a global response is needed to solve the subprime mortgage crisis (CongressDaily PM Feb. 1). He also questioned whether anyone had thought that the U.S.’s subprime problems would cause European banks to nearly collapse. Restoring the market confidence will be a long-term process, he said. McCreevy has met with Securities and Exchange Commission Chairman Christopher Cox about U.S. and EU regulations that affect the insurance industry and securities. EU officials were disappointed to see U.S. states freezing out European companies through protectionist policies, he said ...

Reps. Kanjorski Maloney to address GAC

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WASHINGTON (2/4/08)— Two senior members of the House Financial Services Committee—Reps. Paul Kanjorski (D-PA) and Carolyn Maloney (D-NY)—will address attendees at the Credit union National Association’s upcoming Governmental Affairs Conference. Rep. Kanjorski is the second-ranking Democrat on the House Financial Services Committee--behind Chairman Barney Frank, who is also speaker at this year’s GAC--and chief sponsor of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). He also chairs the HOuse subcommittee on capital markets, insurance and government-sponsored enterprises. Rep. Maloney, also a senior committee member, is chairwoman of the House Financial Services subcommittee on financial institutions, and in recent years has taken an active interest in addressing abusive practices related to credit cards and overdraft protection programs. CUNA’s 2008 Governmental Affairs Conference is March 2–6 at the Washington Convention Center. Use the resource link to register or learn more.

April 1 deadline on Justice credit counseling proposal

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WASHINGTON (2/4/08)—Credit unions and other interested parties have until April 1 to comment on a Justice Department (DOJ) proposal regarding credit counseling for consumers filing for bankruptcy. The proposed rule would set the procedures and criteria U.S. Trustees would use to review applications of those seeking to provide approved nonprofit budget and credit counseling under 2005 statutory revisions to the bankruptcy code. The Bankruptcy Abuse Reform Act was signed into law April 20 of that year. It requires that every individual debtor receives counseling from an approved nonprofit budget and credit counseling agency sometime during the 180 days prior to their filing for bankruptcy relief. It also requires that they receive debtor education training after they file. If approved, the DOJ proposal, published in the Feb. 1 Federal Register, would supersede its earlier interim final rule published in July of 2006. The new plan has contains several changes to the interim proposal, as well as enhanced consumer protections, according to DOJ. The most significant changes to the interim include:
* Adding identification procedures for clients when accessing Internet or telephone counseling sessions; * Establishing a limit for credit counseling fees to be presumed reasonable; * Preserving clients' rights under 11 U.S.C. 502(k); * Requiring agencies to provide additional counseling at no extra cost to clients when a debt repayment plan has been completed or terminated so that clients may file bankruptcy if they so choose; * Providing guidance on agencies' responsibilities to individuals with limited English proficiency; and * Requiring appropriate disclosures be made before providing services to clients, such as an agency's fee policy and the prohibition from receiving referral fees.
The proposed rule clarifies the U.S. Trustees’ previous position that creditors, such as credit unions, that wish to become an approved credit counseling agency may not provide counseling services to any client (member) that has a loan with the creditor. A 2007 Government Accountability Office report questioned the value of the bankruptcy counseling requirement. It said anecdotal evidence suggests that by the time most clients receive the counseling, their financial situations are dire, leaving them with no viable alternative to bankruptcy. However, the Credit Union National Association (CUNA) backs pre-filing counseling for consumers and pre-discharge financial education as a way creditors can work much earlier with borrowers than when they are so overwhelmed as to be on the verge of bankruptcy. Use the resource link below to read the DOJ proposal.