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Inside Washington (02/03/2009)

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* WASHINGTON (2/4/09)--The Obama administration has proposed guaranteeing modified home loans to stem the foreclosure surge--similar to a plan backed by the Federal Deposit Insurance Corp. (Bloomberg News Feb. 3). The proposal seeks to shield lenders from borrowers who default. Comptroller of the Currency John Dugan said details on the proposal are still in the works. James Lockhart, Federal Housing Finance Agency director, said he supported the effort. The administration is also considering a proposal to help servicers rewrite loans by sharing the modification cost. Companies would cut borrowers’ monthly payments, and the government would cover the cost of cutting the payments more ... * WASHINGTON (2/4/09)--Members of the State Foreclosure Prevention Working Group said a report on loan modifications, by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, is flawed (American Banker Feb. 3). The report lacks methodology information and doesn’t explain if loans re-defaulted because of weak modifications, state officials said. They also noted that nonbank subprime servicers were more successful with modifications than the report indicated. According to the report, 55% of modified loans at national banks and thrifts were more than a month past due during the first six months, while officials say 26% of loans were at the delinquency stage ... * WASHINGTON (2/4/09)--Treasury Secretary Timothy Geithner is expected to unveil the Obama administration’s plans to help solve the financial crisis (Wall Street Journal Feb. 3). Observers expect Obama to ask Congress for more money, as economists do not believe the second half of the $700 billion rescue fund is enough. The administration also is expected to crack down on executive compensation, but isn’t expected to attach new strings to healthy financial institutions that receive money through the $250 billion Capital Purchase Program ... * ALEXANDRIA, Va. (2/4/09)--National Credit Union Administration
Chairman Fryzel (left) and Ken Ross, Commissioner, Michigan Office of Financial and Insurance Regulation. (Photo courtesy of NCUA.)
(NCUA) Chairman Michael Fryzel met last week with Michigan’s Office of Financial and Insurance Regulation Commissioner Ken Ross in St. Joseph. Fryzel said the meeting gave him a chance to underscore the federal commitment to working with state regulators, particularly in times like now when stresses in the market have “real and significant effects” on credit union operations. “Commissioner Ross and I share important safety and soundness and consumer protection responsibilities,” Fryzel said …

New info required in March 2009 call report

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WASHINGTON (2/4/09)--Credit unions will be required to supply more information on delinquencies, foreclosures, and repossessions on the quarterly form 5300 “call report”-- which is no surprise given the current market pressures. In addition, the National Credit Union Administration (NCUA) has added a new page on “miscellaneous information” to collect more information on the services offered by credit unions, which implements one of the agency’s “Outreach Task Force” recommendations approved in May 2008. The quarterly call report is due by April 20. On page 9, the agency requires credit unions to now check whether they offer such services as:
* Transaction programs such as international remittances, low-cost wire transfers, or money orders; * Depository programs such as health savings accounts, individual development accounts, or no-cost share drafts; * Financial education programs such as financial counseling, literacy workshops, homebuyer programs, or in-school branches; * Credit programs such as credit builder plans, micro-business and micro-consumer programs, and payday lending-type programs; and * Member services such as bilingual services, no-cost bill payer, no-cost tax preparation services, and student scholarships.
Starting last month, NCUA examiners also are collecting certain membership data at the end of regular examinations of federal credit unions through AIRES, the agency’s automated examination system, to develop membership profile information. The collection was approved last May to implement NCUA Outreach Task Force recommendations. The March 2009 call report also calls for more detail on the delinquency rates of different types of real estate and construction loans, as well as charge-offs and recoveries. The agency is also requesting more information on loan participations by type, and the credit union’s credit and borrowing arrangements. For more information, use the link.

House considers higher SBA guarantees

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WASHINGTON (2/4/09)—The Credit Union National Association (CUNA) is watching developments with a Small Business Administration (SBA) loan guarantee increase plan, which would take some pressure off the credit union member business lending (MBL) cap. Under the economic stimulus plan passed by the House, the SBA would be permitted to guarantee up to 95 % of qualifying small business loans. This could benefit credit unions engaged in SBA 7(a) and 504 lending because the guaranteed portion of such loans do not count towards the credit union 12.25% if assets MBL cap. The bill would also improve the timeframe within which SBA would be required to approve applications for loan guarantees. A credit union or other lender would submit an application to the SBA with a proposed guarantee level and the SBA would be required to approve or deny such application within 5 business days. CUNA’s Phil Drager, however, advises that there is no SBA loan guarantee language so far in the economic stimulus package currently being debated by the Senate. Drager, senior legislative representative, said the Senate bill would reduce fees associated with 7(a) and 504 loans but does not propose to increase the SBA guarantee.

Changes needed to share insurance laws CUNA

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WASHINGTON (2/4/09)—The U.S. Congress should take an important step to maintain depositor confidence in credit unions and banks and make permanent higher deposit insurance limits, the Credit Union National Association (CUNA) said Tuesday. As the House Financial Services Committee conducted a hearing on three bills, CUNA sent a letter to the panel’s top members, Chairman Barney Frank (D-Mass.) and ranking Republican Rep. Spencer Bachus of Alabama. CUNA strongly supported H.R. 786, which would permanently set federal share and deposit insurance at the higher levels authorized under the 2008 Emergency Economic Stabilization Act (EESA). EESA increased both credit union and bank and thrift insurance coverage from $100,000 to $250,000, effective the moment the president signed the bill into law. However, the increase is temporary and is set to expire Dec. 31 this year. CUNA maintains it would undermine an already shaky financial sector if Congress were to turn back time to the lower insurance levels. Frank reflected this concern in his statement opening the hearing. He said depositors could easily find themselves in a situation where a CD was covered by insurance when it was opened, but not covered as its term progresses. He said it was a “bad idea” to approve higher limits “on a yo-yo basis.” While strongly endorsing H.R. 786, CUNA asked for modifications to the bill that would be of key importance to credit unions. First CUNA recommended a statutory change that would establish a longer time period for the National Credit Union Administration (NCUA) to replenish its share insurance fund. Currently, the Federal Credit Union Act requires NCUA to replenish the National Credit Union Share Insurance Fund within the year that the fund drops below 1.2% of insured deposits. The FDIC is currently permitted five years to replenish it fund, and section 2 of H.R. 786 would extend this period of time to eight years. The NCUA should have the same authority, the CUNA letter said. That change is particularly important, CUNA noted, in light of the NCUA’s current intention to fund a corporate credit union aid plan through a premium on natural person credit unions. CUNA also sought:
* Increasing the NCUA’s borrowing authority to around $10 billion, so the agency can lend effectively to credit unions affected by the financial crisis; and * Similar risk authority for the NCUA that is authorized for the FDIC. Without specific statutory language defining its authority, CUNA wrote, the NCUA has been reluctant to provide unlimited deposit insurance coverage for non-interest bearing transaction accounts an action already taken by the FDIC.
The NCUA, late afternoon, released a similar letter to Frank, also seeking increased borrowing authority from Treasury and expanded authority to use the NCUSIF to address systemic risk “under extreme circumstances.” The agency also sought a broader timeframe for NCUSIF restoration –suggesting a period of up to five years. The financial services committee hearing also addressed H.R. 787, a bill to make improvements in the Hope for Homeowners Program, and H.R. 788, a bills provide a safe harbor for mortgage servicers who engage in specified mortgage loan modifications, and for other purposes. Much of the panel’s questions targeted the Hope for Homeowners Program, which critics have said has failed to produce the kind of foreclosure mitigation help for which it was intended. The House Financial Services Committee is scheduled to mark up all three bills today.