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Washington Archive

Washington

CUNA continues work to target cramdowns

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WASHINGTON (3/16/09)—The Credit Union National Association (CUNA) continues to work with key senators to modify House-passed changes to bankruptcy laws that would allow courts to force changes in terms of existing loans. Most recently, CUNA President/CEO Dan Mica has met with Sen. Richard Durbin (D-Ill.) to work toward narrowing the legislation. Durbin is Senate Majority Whip and a primary force behind the Senate effort to address the burgeoning problem of mortgage foreclosures through bankruptcy laws. CUNA has made it clear that credit unions acknowledge bankruptcy as a legitimate option for eligible borrowers who have no other way to address their indebtedness. However, CUNA opposed the House bill, H.R. 1106, as overly broad in its application, scope, and duration as it applies to all mortgage loans. CUNA maintains that it unfairly groups loans made with strong underwriting standards – such as those made by credit unions -- with a loan made in an unscrupulous manner. CUNA has also been working with Sen. Evan Bayh (D-Ind.) to more closely target the range of homeowners who could qualify for mortgage rewrites, or “cramdowns.” CUNA’s Mica noted Friday, "We have been opposed to wide-ranging cramdowns, we are opposed, but we have always said that we would be willing to find common ground."

Senate Banking launches reg reform hearings

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WASHINGTON (3/16/09)—The Senate Banking Committee will start a round of hearings this week that will focus on modernizing financial institution supervision and regulation. National Credit Union Administration Chairman Michael Fryzel and National Association of State Credit Union Supervisors (NASCUS) Chairman George Reynolds are scheduled to testify at the opening session Thursday. Reynolds is the Senior Deputy Commissioner of the Georgia Department of Banking & Finance. Also on that panel of regulators will be Comptroller of the Currency John Dugan, Federal Reserve Governor Daniel Tarullo, Federal Deposit Insurance Corp. Chairman Sheila Bair, Acting Director, Office of Thrift Supervision Scott Polakoff, and Commissioner of the Conference of State Bank Supervisors Timothy Karsky, of the North Dakota Department of Financial Institutions. The hearing is scheduled to cover subjects such as prudential and systemic risk regulation, consumer protection, and access to credit and risk management. The committee is next expected to convene financial industry witnesses, perhaps as early as next week.

Oral arguments set in Calif. overdraft case

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WASHINGTON (3/16/09)—The California Supreme Court has scheduled oral arguments in the case of Miller v Bank of America (BofA), a lawsuit with broad implications for California credit unions, credit unions doing business in the state, and for direct deposits. Oral arguments are scheduled to begin April 7. The subject of the case is whether overdraft fees can be assessed in California by federally chartered depository institutions against Social Security (SS) funds in a checking account. The case has been winding its way through the California courts for years, and ended up before the state supreme court under appeal by the plaintiff. BofA has argued that federal law and regulation preempt a California law that prohibits tapping SS money in an account. However, in December 2004 a judge for the Superior Court of San Francisco upheld an over-$1 billion-dollar jury award against BofA for violating state law. The court found that the bank’s practice of using customers’ funds from accounts that may contain SS funds to pay checking account overdrafts and insufficient funds fees violated the California Unfair Business Practices Act. Then, in November 2006, a California Court of Appeals reversed the lower court's ruling and award, and decided in favor of BofA. The plaintiff, Miller, then filed an appeal with the California Supreme Court, which agreed to hear the case. The Credit Union National Association and banking associations joined the case in 2007 through amicus briefs that argued banks and federal credit unions are not subject to the court's ruling because of the prevention provisions in the National Bank Act, Office of the Comptroller of the Currency (OCC) Regulations, and the Federal Credit Union Act.

Student loan program cut would hurt CUs CUNA

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WASHINGTON (3/16/09)—Elimination of the Federal Family Education Loan Program (FFELP), as proposed by the Obama administration, would jeopardize student lending at more than 1,000 credit unions throughout the country, warned the Credit Union National Association (CUNA) last week. In a letter to the top two members of the Senate Budget Committee, Chairman Kent Conrad (D-N.D.) and ranking member Judd Gregg (R-N.H.), CUNA noted that a small number of FFELP-participating credit unions, primarily those with university-based fields of membership, even have significant concentrations in student lending. “Credit unions that specialize in student lending provide a high quality service for their student members, and can provide much needed and individualized assistance if difficulties arise with regard to loan repayments. The elimination of FFELP will remove this valuable option for students,” CUNA President/CEO Dan Mica told the lawmakers. Mica said credit union student lending has already taken a hit because of last year’s amendments to the amendments to the Higher Education Act. While the final bill included changes CUNA sought, its additional layers of requirements posed a burden to some credit unions that forced them out of student lending. For the credit unions that offer student loans, it is an important service that their members value. The elimination of FFELP likely will lead to the end of credit union student lending. The complete CUNA letter can be accessed by the resource link below.

Fed Reg Z plan has clarification for CUs

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WASHINGTON (3/16/09)—The Federal Reserve Board has issued its proposal to implement new disclosure requirements for private education loans, and the plan carries a fix to a provision that could have been problematic for some credit unions. The proposal sets disclosure rules required under the 2008 Higher Education Opportunity Act, which requires lenders and colleges to adopt strict codes of conduct for their student lending programs. It applies to private loans made “expressly for postsecondary educational expenses but would not apply where educational expenses are funded by credit card advances, or real-estate-secured loans.” It doesn’t apply to education loans made, insured, or guaranteed by the federal government—which fall under separate rulemaking authority. The law prohibits lenders from the use of a name or logo of an educational institution in marketing student loans in a way that would imply the institution’s endorsement of the lender. If the institution’s name is used, it would require a disclosure that the institution does not endorse the creditor's loans and that the lender is not affiliated with the institution. This could have presented a problem and additional disclosure requirements for credit unions that use the names of colleges or universities. The Credit Union National Association (CUNA) sought and received statutory language to provide credit unions that are named for a university sufficient latitude to market their student loans. The Fed proposal clarifies that this will not be an issue for these types of credit unions. The public comment period will end 60 days after the proposal is published in the Federal Register, which could be as early as this week. Use the resource link below to read more of the Fed plan.

Inside Washington (03/13/2009)

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* WASHINGTON (3/16/09)—The Financial Accounting Standards Board (FASB) has scheduled discussion of fair value and mark-to-market accounting on its open meeting agenda today. The meeting, which is to start at 8 a.m. (ET) will be webcast and is accessible at www. fasb.org. At a House subcommittee hearing last week, FASB Chairman Bob Herz agreed to provide guidance on mark-to-market accounting on an expedited basis but Bob Herz agreed to provide guidance on mark-to-market accounting on an expedited basis, but it was unclear how far the guidance would go to address current pressures. Also at today’s meeting, the FASB intends to discuss how best to present other-than-temporary impairments in the financial statements… * WASHINGTON (3/16/09)—House Financial Services Committee Chairman Barney Frank (D-Mass.) said last week he intends to strengthen mortgage lending underwriting reform started in last year’s Congress, with bans on 100% securitization and harsher penalties for offering borrowers mortgages they can’t afford. (American Banker March 13) Frank said he also wants to task mortgage servicers with loan modifications to prevent foreclosures. Speaking to the National Community Reinvestment Coalition last week, Frank promised a house bill on subprime mortgages in April… * WASHINGTON (3/16/09)—The treasurers of seven states, along with the American Bankers Association, are asking the Federal Deposit Insurance Corp. (FDIC) to use its “systemic risk” clause when dealing with failing community banks with hefty municipal deposits. The parties argue that the agency should back state programs set up to cover uninsured municipal deposits. However, such a move would be a significant step for the FDIC, according to observers, because that agency is dealing with its own funding issues. The FDIC is already planning a special fee to bolster its Deposit Insurance Fund as reserves have fallen to $18.9 billion. (American Banker March 13)…