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April 1 deadline for higher-priced mortgage loans

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WASHINGTON (3/17/10)--New escrow requirements related to recent Federal Reserve amendments to Regulation Z will become effective on April 1 for site-built homes and October 1 for manufactured homes. The amendments, which were issued in 2008, establish new protections for consumers from unfair or deceptive home mortgage lending and advertising practices and were issued under the authority provided by the Home Ownership Equity Protection Act (HOEPA). While the majority of the provisions of the final rule became effective in October 2009, portions of the rule were delayed until 2010. Specifically, portions addressing the escrow requirements under “higher priced mortgages” were delayed. The "higher-priced mortgage" subset was established by these rules, and, under the new requirements, lenders that offer so-called “higher priced” mortgages are required to consider the borrower's ability to repay the loan and to verify a borrower’s income and assets. The rules also impose limits on prepayment penalties and require escrow accounts for taxes and insurance, prohibit certain servicing practices, and prevent certain misleading and deceptive advertisements. Additionally, lenders are required to provide Truth in Lending Act (TILA) disclosures within three business days after a mortgage application was received and before fees are charged. These escrow provisions require lenders making higher-price mortgage loans that are secured by a first-lien to set up an escrow account for property taxes and homeowners insurance. However, this escrow requirement does not apply to subordinate lien loans or to cooperatives, as long as the association pays for property taxes and insurance. Escrow accounts are required for condominium property taxes, but not for insurance if it is paid by the association under a master policy.

NCUA approves first new CU of 2010

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WASHINGTON (3/17/10)--The National Credit Union Administration (NCUA) on Tuesday approved the charter of Battle Creek, Mich.-based Inspire Community Development FCU, the first federal credit union to be chartered in 2010. Inspire, which is a community development credit union, will be available to 50,000 potential members that live, work, worship, volunteer, attend school and transact business within Battle Creek once it opens this May. The credit union is backed by Guardian Finance and Advocacy Services, a community organization that provides “financial stewardship and advocacy services” in 11 counties within southwestern Michigan, the NCUA said. According to the NCUA, Inspire will offer share accounts, club accounts, money market accounts, share certificates, and both conventional and payday loan alternatives at first. The credit union expects to offer “share draft accounts, youth savings accounts, vehicle loans, and line-of-credit loans” by 2013, the NCUA release added. The establishment of this new credit union is “an encouraging development for consumers in Michigan, and is the latest manifestation of the commitment of credit union leaders across the nation who are working to extend service to those in disadvantaged communities,” NCUA Chairman Debbie Matz said.

Compliance Answers to overdraft questions

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WASHINGTON (3/17/10)--The Credit Union National Association (CUNA) has added five questions to its “frequently asked questions” (FAQ) on Regulation E’s new overdraft rules requiring members to consent before being assessed fees on overdraft services for ATM and one-time debit card transactions. The Reg E amendments become effective on July 1, 2010. CUNA will address the new Reg E overdraft requirements, as well as related Truth in Savings changes that became effective at the beginning of 2010, during a March 18 audio conference call. The program will not only review the rules, but will look at some practical issues in developing a compliance program. Meanwhile, in the FAQs, CUNA answers whether credit unions are still authorized to charge a fee for transferring funds from another account or a line of credit to cover an overdraft created by ATM or debit card usage. The answer is “yes,” according to CUNA, but credit unions must comply with Truth in Savings and Truth in Lending rules, CUNA explains. The new FAQs also address questions about how the new overdraft restrictions affect nonsufficient fund fees and negative balance fees that are currently being charged by credit unions. In another answer, CUNA alerts credit unions that if they want all the opt-in decisions for existing accounts to become effective on the same date, then they should state clearly on the opt-in/consent form that the member’s decision will be effective on August 15 or whatever earlier date that the credit union may select. August 15 is the date by which existing accountholders can no longer be charged overdraft fees for ATM and one-time debit transactions unless they have consented to the service. To read the FAQs and register for the audio conference, use the resource links.

Inside Washington (03/16/2010)

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* WASHINGTON (3/17/10)--The Federal Deposit Insurance Corp. (FDIC) has made available a list of depository institutions in which the agency has been appointed receiver, liquidator or manager. The list, as updated in The Federal Register, may be relied upon as of record notice, the agency said. The list was updated Wednesday ...