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Cramdown provisions in Obamas foreclosure plan

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WASHINGTON (2/19/09)--The Credit Union National Association (CUNA) is reviewing President Barack Obama’s Homeowner Affordability and Stability plan, which was released Wednesday and includes a provision for mortgage cramdowns. Under the president’s proposed plan, bankruptcy courts would be allowed to modify terms of existing mortgages so borrowers can continue making payments--commonly referred to as a mortgage cramdown. Homeowners also would be required to ask their loan servicers for a modification and certify that they have complied with reasonable requests from the servicer to provide essential information. The provision would apply only to existing mortgages under Fannie Mae and Freddie Mac conforming loan limits. CUNA is opposed to mortgage cramdowns and is working with policymakers on a more targeted approach to cramdown proposals and the housing crisis. If cramdown legislation is enacted, it must be specifically limited to loans that are subprime, have negative amortization, are fraudulent or abusive, and have large interest rate resets, according to CUNA. CUNA has said mortgage cramdowns could encourage borrowers’ gaming of the mortgage lending system by allowing a dissatisfied borrower to stop payments on a home and possibly be able to keep the home (News Now Feb. 10).

CUNA updates CUs on NCUA corporate plan

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WASHINGTON (2/19/09)—Credit union feelings run deep about whether to pursue access to the U.S. Treasury’s TARP funds, yet early results of a Credit Union National Association (CUNA) survey this week show there is an almost equal divide between those voting ‘yea’ and ‘nay.’ CUNA President/CEO Dan Mica revealed the early survey results during a 75-minute CUNA conference call Wednesday on the latest developments on the National Credit Union Administration’s (NCUA’s) corporate credit union stabilization plan. The CUNA poll ended Wednesday. TARP is a highly controversial issue among credit unions, Mica noted on the call. The legislation that set up TARP last year included credit unions as eligible institutions, but as implemented by the U.S. Treasury Department to date, credit unions have not been included. Mica noted he and other CUNA representatives would be meeting with Treasury officials for further discussions Wednesday afternoon. Under the NCUA corporate liquidity plan, approved at a special closed meeting late last month, the NCUA guarantees uninsured shares at all corporate credit unions through February 2009, and established a voluntary guarantee program for uninsured shares of all corporate credit unions through Dec. 31, 2010. Additionally, the agency has agreed to provide a $1 billion capital note to U.S. Central Corporate FCU. The NCUA declared a premium assessment to restore the National Credit Union Share Insurance Fund (NCUSIF) equity ratio to 1.3%. The premium will be collected later in 2009. Mica said on the CUNA conference call, “If there is one area of agreement in the credit union system, it is that we would like to mitigate the cost of this program to credit unions.” Among alternatives to do just that, CUNA is investigating:
*Allowing credit unions to tap Treasury’s funds as soon as possible to deal with the corporate credit union liquidity emergency. This may require a statutory change and CUNA will sound out federal lawmakers to assess support: and * Use the NCUA’s Central Liquidity Facility (CLF) to provide the funding. CUNA is currently analyzing CLF's legal obligations and whether there may be opportunities for additional approaches or flexibility.
Mica underscored for participants that the complexities around the NCUA plan are extensive—especially in investigating accounting and statutory issues, as CUNA continues to do. He pledged that despite disagreement regarding approach, CUNA will continue to pursue funding alternatives for the NCUA program. CUNA’s efforts will include exploring access to TARP funds to back up the National Credit Union Share Insurance Fund (NCUSIF), as needed. “This is a train leaving the station,” Mica warned. “If we don’t get agreement (among credit unions) to get use of TARP funds for credit unions now, whether we need those funds or not, the opportunity will close for us.” See News Now Friday for final survey results.

Inside Washington (02/18/2009)

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* WASHINGTON (2/19/09)--Strict limits on financial executives’ pay could harm credit unions, small and regional banks, and savings and loans, White House press secretary Robert Gibbs said Sunday (The Washington Times Feb. 16). The Obama administration is seeking to revise a provision in a $787 billion economic stimulus package signed Tuesday that would further limit executive compensation. Under the proposal, financial institutions that receive bailout money from the Troubled Asset Relief Program (TARP) would not be able to pay top executives more than $500,000 until TARP funds are repaid ... * WASHINGTON (2/19/09)--Provisions in an $787 billion economic stimulus package signed into law Tuesday aim to increase Small Business Administration (SBA) lending, but guidance that is set to take place on March 1--a $250,000 limit on the goodwill value--could squash those intentions. Industry observers worry that the goodwill limit could actually discourage SBA lending. The agency is re-evaluating the guidance and could issue a revised version before next month, said Jim Hammersley, SBA loan division director (American Banker Feb. 18). Other provisions in the stimulus affecting the SBA include $69 million to expand staff and marketing, and improve lender oversight, and an increase on SBA loan guarantees to 90% from 85% ... * WASHINGTON (2/19/09)--The National Association of State Credit Union Supervisors (NASCUS) leadership will travel to Washington, D.C., next week for business and credit union system group meetings during the Credit Union National Association’s (CUNA) Government Affairs Conference (GAC). The NASCUS board of directors and Credit Union Executive Council will meet Monday and Tuesday. NASCUS committees will meet Tuesday. NASCUS leadership also is scheduled to meet with congressional leaders and credit union system groups during the GAC. Meetings are also planned for the NASCUS regulator leadership and the National Credit Union Administration ...

Fair value is subject of new FASB projects

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WASHINGTON (2/19/09)—In what appears to be at least a step in the right direction for credit unions, the Financial Accounting Standards Board (FASB) announced Wednesday the addition of four new FASB agenda projects addressing fair value accounting. FASB Chairman Robert Herz said the projects are intended to improve the application guidance used to determine fair value and disclosure of fair value estimates. Credit Union National Association Accounting Task Force Chairman Scott Waite greeted the FASB announcement enthusiastically. CUNA that requested FASB provide additional guidance on fair value accounting. “During my last meeting with the FASB board and in subsequent conversions, I have strongly urged addressing these issues before June. Addressing Fair Value Measurement and (other-than-temporarily impaired assets) OTTI in illiquid and inactive markets is imperative to address very quickly,” Waite said. He is senior vice president and chief financial office of Patelco CU in San Francisco. He added, “I’m ecstatic to see that both areas have been added to the agenda and will be addressed near term. CUNA and I will continue to advocate with the FASB the urgency and positions important to credit unions.” CUNA is currently analyzing the FASB announcement and will provide guidance for credit unions. Some credit unions have experienced serious reductions in capital as a result of the application of fair-value accounting to certain assets and CUNA continues to seek relief. CUNA President/CEO Dan Mica recently expressed CUNA's "strongest support" for efforts to address accounting rules on fair value and other-than-temporarily impaired (OTTI) assets in a letter to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) The FASB fair value projects address four main topics:
* Application guidance on determining when a market for an asset or a liability is active or inactive; * Application guidance on determining when a transaction is distressed; * Applying fair value to interests in alternative investments, such as hedge funds and private equity funds; and * Improving disclosures about fair value measurements.
FASB anticipates completing the first three topics by the end of the second quarter of 2009, and the fourth topic in time for year-end disclosures. The FASB release reminded that it is also working with the International Accounting Standards Board (IASB) on a comprehensive project to improve, simplify, and converge the accounting for financial instruments.