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CUNA backs housing stabilization plan

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WASHINGTON (3/25/08)—A homeownership retention plan being drafted by Rep. Barney Frank (D-Mass.) could benefit many consumers facing mortgage foreclosures and credit unions stand ready to help, the Credit Union National Association (CUNA) said in a letter to the plan’s designer Monday. Addressing Frank, CUNA President/CEO Dan Mica reminded the House Financial Services Committee chairman that credit unions have not made the types of mortgages that provided the impetus of the current economic downturn. However, Mica stressed, credit unions stand willing and able to assist homeowners facing foreclosure. Under Frank’s FHA Housing Stabilization and Homeownership Retention Act proposal, the Federal Housing Administration (FHA) would be allowed to guarantee written-down mortgages. CUNA said this provision would be an appropriate tool to help struggling homeowners given the current economic situation and would act as incentive for more lenders to accept mortgage write-downs. “In general, credit unions are doing whatever they can to help borrowers trapped in mortgages they cannot afford, but cannot responsibly make loans to members in excess of the value of the borrower’s home,” Mica wrote, explaining CUNA’s support of Frank’s plan that could enable credit unions to do more for their members. Mica encouraged Frank to consider another action that would “greatly enhance” the ability of credit unions to provide assistance to troubled mortgage borrowers: subject credit unions to a risk-based capital system. “A risk-based system, like the one proposed in H.R. 1537 (the Credit Union Regulatory Improvements Act, known as CURIA), would more accurately reflect the capital needed for a credit union to be considered well capitalized and free additional capital to help borrowers refinance mortgages they received from other lenders. “Risk-based capital for credit unions would be a safe and sound tool for credit unions to use to provide even more assistance to homeowners facing foreclosure,” Mica noted. The CUNA letter also recommended that a consumer counseling component to the program could only enhance its benefit to consumers. Use the resource below to read the CUNA letter.

Court upholds FCRA prescreening process

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WASHINGTON (3/25/08)—An appeals court recently upheld a lower court ruling that Greenwood FCU, of Warwick, R.I., behaved properly under the Fair Credit Reporting Act (FCRA) in its “prescreened” offer of credit to members. The First Circuit Court of Appeals dismissed a class action lawsuit against Greenwood that claimed a certain credit offer for a mortgage loan was not permissible under the FCRA. The class action charged that the offer did not contain sufficient information regarding the loan terms to be considered a “firm offer” and therefore the credit union should not have been allowed even limited access to the members’ credit report information without the person’s consent. If the plaintiff had prevailed the credit union would have had to pay either actual damages or a penalty of between $100 and $1,000 per person solicited with a prescreened offer. The issue in the case was whether the plaintiff was entitled to the penalty as there was no claim that he was wrongfully denied credit, according to Jeff Bloch, senior assistant general counsel for the Credit Union National Association (CUNA). The Court reviewed the term “firm offer of credit” in the relevant provisions of the FCRA and concluded there is no requirement that these types of offers must provide the specific terms for credit, such as the interest rate and duration of the loan. Under the FCRA, the term only means that the creditor will not deny the loan if the consumer meets the creditor’s pre-selection criteria. “Although this ruling will not reduce the number of prescreened offers that consumers receive, the FCRA does permit consumer’s to opt-out of these offers,” Bloch said noting 2005 rules issued under the Fair and Accurate Credit Transactions Act that enhanced the disclosure of these opt-out rights.

CUs and the economy Webinars by CUNA

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WASHINGTON (3/25/08)—The Credit Union National Association (CUNA) is developing a series of webinars to help credit unions understand the impact to their operations from the current turn in the nation’s economy. CUNA will launch its series of live informational sessions in April. The first webinar will present an overview of current and prospective economic factors. Subsequent sessions, likely to be offered on a weekly basis, will address more specific topics, such as the effects of economic conditions on consumer lending, mortgage lending, and examination issues. CUNA Chief Economist Bill Hampel, announcing the webinar plan Monday, noted that the current turn in the economy is having “a significant impact” on credit union operations. CUNA Deputy General Counsel Mary Dunn added that CUNA is also meeting with National Credit Union Administration (NCUA) board members and senior staff encouraging the agency to provide more guidance to credit unions. Specifically, CUNA is seeking clarification on the parameters of what a credit union can do to help with troubled mortgages. Hampel noted a 2006 NCUA letter assuring federal credit unions that it is not necessary to reach a 1% return on assets (ROA) just to achieve the highest CAMEL 1 rating. He added, “In turbulent times like this, the NCUA does have a role to be concerned regarding the share insurance fund. Our job is to remind them that we have members to worry about.” Further details on the webinars will be reported in News Now as available.

Inside Washington (03/24/2008)

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* WASHINGTON (3/25/08)—The Supreme Court Monday refused a plea by the California Public Employees' Retirement System (Calpers) to reinstate a rejected part of its lawsuit against the New York Stock Exchange. Calpers is the lead plaintiff in a class-action lawsuit against the NYSE over the "specialist" stock-trading scandal. The seven specialists firms that operate on the NYSE floor were fine $245 million by the Securities and Exchange Commission as part of a trading scandal and the exchange itself was censured by the SEC. (Wall Street Journal March 24)…