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Credit unions back mortgage bankruptcy compromise

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WASHINGTON (2/27/08)—After months of negotiations with Senate lawmakers, the Credit Union National Association (CUNA) has thrown its support behind an economic stimulus bill with modified language on allowing mortgage modifications in bankruptcy proceedings. The bill, introduced by Senate Majority Leader Harry Reid (D-Nev.) earlier this month, would provide $200 million for housing counselors to help families about to lose their homes to foreclosure. It would also raise the cap on mortgage revenue bonds, permit Community Development Block Grants to be used on foreclosed properties, and require improved disclosures to mortgage borrowers. The bankruptcy provisions in the legislation are modeled on a bill drafted by Senate Majority Whip Richard Durbin (D-Ill.) called the Helping Families Save Their Homes in Bankruptcy Act (S. 2136). In a letter to Reid and Senate Minority Leader Mitch McConnell (R-Ky.) Tuesday, CUNA reiterated its concern with “any legislation that would open the Bankruptcy Code” so soon after major revisions were enacted, referring to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. However, said the letter from CUNA President/CEO Dan Mica, credit unions recognize the need to be responsive to the current crisis in the subprime mortgage market. “We appreciate the effort that Sen. Durbin and his staff have made over the last several weeks to address many of our concerns,” Mica wrote. One important improvement noted in the letter concerns Durbin’s new definition of non-subprime loan. Mica said the change showed the senator’s recognition that some lenders, credit unions in particular, made suitable interest-only loans that legitimately factored in a borrower’s ability to repay the loan. The Senate is expected to act this week on the Reid stimulus package, with the Durbin amendment allowing bankruptcy judges to adjust the terms of certain loans made before the enactment of the law which are secured by the debtor’s principal residence, or secured by subprime mortgages, as well as some nontraditional mortgages. Under the plan, if a loan is secured by a first mortgage, a subprime loan would be one that has an annual percentage rate greater than 3% over the yield on a comparable security issued by the Treasury Department. If it is subordinate loan, subprime would be defined as a loan greater than 5% plus the equivalent Treasury security. The amendment also includes a “means test” to qualify for the special relief and a bankruptcy judge would have the authority to reduce the “allowed secured claim” to an amount no lower than the current value of the house. Last December, the House Judiciary Committee passed a similar although not identical, bill that would allow judges to cram down mortgage debt in bankruptcy, and also allow restructuring. Minority Leader McConnell is scheduled to address a record crowd of about 4,500 credit union representatives at CUNA Governmental Affairs Conference next week in Washington.

Mica Bank profits high despite mortgage crisis

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WASHINGTON (2/27/08)--Credit Union National Association (CUNA) President/CEO Dan Mica noted Tuesday that as the impact of mortgage-related losses continues and grows—and millions of homeowners are threatened with foreclosures on their homes--banks continue to post considerable profits. “Even in today's mortgage market, the bankers manage to post significant profits. It shows once again their cries of unfair competition from credit unions are nothing but hype and rhetoric," Mica said. "It makes it all the more objectionable that bankers are working to obstruct credit union efforts to help ease the country’s current credit crunch through modernizing the cap on member business lending (MBL),” Mica said. CUNA has recommended that provisions to increase the MBL cap to 20%, up from the current 12.25%, could be broken out of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537) and passed independently to help increase credit availability in communities. The Federal Deposit Insurance Corporation (FDIC) Tuesday reported net income of $105.5 billion for banks in 2007, a decline of 27.4% and yet marking the sixth consecutive year income was still above the $100 billion mark. Higher provisions for loan losses, mostly due to weakness in residential mortgage and construction loans , and sharply lower trading revenue were primarily responsible for the drop in full-year earnings, according to the FDIC. The bulk of the earnings decline was attributed by the agency to a few large institutions, but fewer than half of all insured institutions were reported to have increased net income in 2007. "Weakness in the housing sector and the credit squeeze in financial markets made it a very challenging time for many institutions. And we can expect these problems to continue in 2008," said FDIC Chairman Sheila Bair in the release. She also said that "most institutions are so far successfully coping with the challenges they face. Perhaps, said CUNA’s Mica, it is these drops in profit predictions that bankers are most worried about when they seek to restrict credit union lending. “Certainly, their obstructionist efforts against credit unions show no concern with good public policy and what is best for the American consumer,” Mica added.

Inside Washington (02/26/2008)

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* WASHINGTON (2/27/08)--Sen. Ron Wyden (D-Ore.) yesterday proposed legislation to rate credit cards on a five-star scale based on the cards’ consumer protections (CongressDailyPM Feb. 25). His rating system is based on a National Highway Traffic Safety Administration crash ratings system. The system would provide a one-star rating to card issuers who change terms without notice. Issuers who give 90 days notice could earn more stars. Sen. Barack Obama (D-Ill.) is co-sponsoring the bill. There could be difficulty in determining the card ratings, asserted Leonard Chanin, associate director of consumer affairs at the Federal Reserve... * WASHINGTON (2/27/08)--Peer average ratios for December 2007 are available for single charter Financial Performance Reports (FPRs) on the National Credit Union Administration (NCUA) website. Users can receive FPRs for a single credit union or aggregate data for multiple credit unions. They also can request a two-page FPR summary for one credit union online. The ratios on aggregate FPRs are consolidated ratios for the group of credit unions and do not represent peer averages for that group, the NCUA said ... * ARLINGTON, Va. (2/27/08)--Expanded regulation on consumer lending to the military could affect the availability of credit to military members and their families, said the National Association of State Credit Union Supervisors (NASCUS) in a response letter to the Department of Defense (DoD) filed Feb. 25. The DoD requested comments for a report to Congress on the treatment of additional financial products and guidance on enforcing the consumer lending regulations to the military. NASCUS said it encourages financial education and a “robust complaint process” to curb abuses. Potential problems can be controlled by working with regulators, the association said ...

12 recommendations from NCUA Outreach Task Force

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ALEXANDRIA, Va. (2/27/08)—-The National Credit Union Administration’s (NCUA) Outreach Task Force provided to the NCUA board twelve recommendations yesterday: Membership Profile and Financial Services
* Collect membership profile data through the AIRES examination process; * Collect financial services data on the 5300 Call Report; * Publish aggregate data on membership profile and financial services in the NCUA Annual Report or other publication(s); and * Develop a means for each FCU to obtain its proprietary membership profile data from NCUA.
Senior Executive Officer Compensation
* Collect FCU and federal corporate credit union senior executive officer compensation during the examination, and then use AIRES and the Corporate Examination Database to capture the information; * Publish aggregate data on senior executive officer compensation in the Annual Report or other NCUA publication(s); and * Promulgate a regulation requiring federal credit unions and federal corporate credit unions to annually disclose individual senior executive officer compensation to their members.
Low-Income Definition
* Revise NCUA Rules and Regulations to replace MHI with MFI as one of the standards for qualifying a credit union as low income; and * Include a grandfather provision of five years to allow adequate transition time for any low-income credit union failing to qualify under the MFI standard.
Outreach
* Expand its outreach program(s) to include a broader spectrum of credit unions serving, or having the ability to serve, members of low or moderate income; * Emphasize increased regional involvement in the implementation of outreach policies; and * Improve its oversight of Community Development Revolving Loan Fund programs.

NCUA report wants data on membership compensation

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ALEXANDRIA, Va. (2/27/08)--Credit unions would be required to collect and report membership profile data under recommendations released yesterday by the National Credit Union Administration’s (NCUA) Outreach Task Force. The group also recommended increased disclosure of senior management compensation at federal and corporate credit unions. The proposals were among the 12 allocated to four areas:
* Membership profile and financial services; * Senior executive officer compensation; * Low-income definition; and * NCUA outreach.
(Click here to see the complete list of 12 recommendations.) NCUA Board Member Gigi Hyland chairs the task force, which was created in November 2006 to review recommendations from the Member Service Assessment Pilot Program (MSAP) on credit unions’ mission. NCUA staff members comprise the task force. During 2007, the task force conducted six town meetings across the United States to collect credit union input. The 85-page report concludes that membership profile information should be collected via NCUA’s Automated Integrated Regulatory Examination Software (AIRES) and reported aggregately. Federal credit unions could access their own reports, said the task force. The group also concluded that financial services data should be collected through the 5300 Call Report and should be published aggregately. The task force did not advocate that the agency monitor members’ use of any services. The task force also highlighted federal credit union executive management compensation. It pointed out that increased transparency of executive compensation would improve “accountability and be more consistent with the prevailing public policy.” The NCUA report did not recommend that individual senior executive compensation information should be provided to the public, although it did recommend that individual compensation information be disclosed to members annually. The task force also recommended that NCUA broaden its efforts to include all federally insured credit unions and to encourage greater involvement by the regional agency offices in implementing outreach policies. For any of the recommendations to be adopted, the NCUA board must first consider public comments before it takes action. The board indicated no timeline to begin the process, according to Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn, who was briefed by the agency early Tuesday. CUNA President/CEO Dan Mica expressed concern about any new regulatory burdens being imposed on credit unions, "given that credit unions are the most regulated of all financial institutions." "Our Governmental Affairs Committee is meeting in town at week’s end, and the Outreach Task Force report will be a major point of consideration," said Mica. "In fact, Board Member Hyland will be on hand to discuss the report’s recommendations with our group. Further, as our Governmental Affairs Conference gets underway next week, we are certain that the task force’s report will be discussed widely among the delegates." "Over the course of the GAC, and likely for the next several months, we look forward to the discussion--and debate--over the report, and the merits of the recommendations," said the CUNA leader. NCUA also will share the report’s findings with key offices on Capitol Hill, according to Dunn. Use the resource links below for a complete CUNA summary of the report and additional details from NCUA.