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NCUA to CUNA: MBLs on regulatory radar

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WASHINGTON (3/25/14)--The National Credit Union Administration assured the Credit Union National Association that member business lending (MBL) is prominently on its radar for this year. Calling a recent CUNA letter on the issue "timely," NCUA Chairman Debbie Matz said the agency intends to carefully review several MBL issues that have come to its attention.
The NCUA has a rolling review of its regulations, each year assessing one-third of its catalogue of rules; the MBL statute is on the 2014 review calendar.
"In preparation, NCUA has been carefully studying the current rule and member business lending data to determine whether policy and rule improvements as permitted by statute are warranted," Matz wrote to CUNA President/CEO Bill Cheney.
She went on to say that if the NCUA board finds consensus that improvements are "indeed warranted by the facts," the agency may make changes at either the rule or supervisory policy level, or both.
Cheney wrote to Matz and board members Michael Fryzel and Richard Metsger earlier this month recounting a number of regulatory actions the NCUA "can and should take" to aid credit unions approaching the MBL cap of 12.25% of assets.
Among changes CUNA advocates:
  • Updating Federal Credit Union Act definitions that provide exemptions from the MBL cap for credit unions that have a history of primarily making MBLs to their members;
  • Expanding provisions addressing MBL loans made for the financing of one to four family dwellings; and,
  • Removing limitations that are not required by the statute.
CUNA also supports legislation that would increase the MBL cap to 27.5% of assets.

DeMarco will leave FHFA next month

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WASHINGTON (3/25/14)--Edward J. DeMarco, who served as acting director of the Federal Housing Finance Agency from 2009 until January 2014, will leave the agency in April.
FHFA Director Mel Watt said DeMarco "has been an invaluable asset to FHFA," and thanked him for his help as Watt transitioned into his new role as agency head. Watt took over as head of the FHFA earlier this year.

In his resignation letter to Watt, DeMarco wrote, "I appreciate your invitation to assist you with the recent leadership transition and I have been pleased to do so. I am also grateful for the thoughtfulness you have shown me during this transition period. With the transition now well along, I believe the time has come for me to seek other opportunities."

DeMarco made no announcements about his future plans.

In Congress: McWatters nomination could see vote before next break

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WASHINGTON (3/25/14)--The Senate Banking Committee is expected to move forward with a vote on National Credit Union Administration nominee Mark McWatters within the next couple of weeks--and probably on short notice. But that is not all that is brewing on Capitol Hill during this work session just before a spring recess.
For this week, the committee schedule includes today's House Financial Services Committee hearing titled "Why Debt Matters" and a House Small Business Committee markup of the views and estimates of the fiscal 2015 budget request of the Small Business Administration, also today.
On Wednesday, the congressional calendar includes:
  • A Senate Banking subcommittee on financial institutions and consumer protection hearing titled "Are Alternative Financial Products Serving Consumers?";
  • A Senate Homeland Security and Governmental Affairs Committee hearing on "Strengthening Public-Private Partnerships to Reduce Cyber Risks to Our Nation's Critical Infrastructure.";
  • A Joint Economic Committee hearing titled "Unwinding Quantitative Easing: How the Fed Should Promote Stable Prices, Economic Growth, and Job Creation."; and,
  • A House Judiciary regulatory reform, commercial and antitrust law subcommittee hearing on potential reforms to Chapter 11.
The Senate Judiciary Committee was scheduled to consider the Patent Transparency and Improvements Act (S. 1720), but discussion of that bill may be delayed by one week or more.
CUNA also expects the House Financial Services Committee to soon announce an April 8 hearing on financial services regulation.
Representatives from the NCUA, Consumer Financial Protection Bureau and other agencies are expected to testify at this hearing. CUNA staff have been briefing committee members regarding current concerns with these regulators, including concerns regarding the NCUA's risk-based capital proposal.
The House and Senate are scheduled to remain in session until the Easter holiday district work period, which is set to begin on April 11.

Housing finance reform markup on the horizon

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WASHINGTON (3/25/14)--The Senate version of housing finance reform legislation could be marked up in the coming weeks, and the Credit Union National Association is preparing a comprehensive list of suggested changes and improvements for the Senate Banking Committee. That list will be forwarded to committee members later this week.
For now, CUNA's main concerns regarding the proposal include changes made to the Federal Mortgage Insurance Corp. and the establishment of the securitization platform. CUNA also has concerns regarding the governance of the securitization platform and the small lender mutual, as well as the 10% first loss coverage requirement.
"We were pleased to see that the legislative proposal incorporates our suggestion to increase the cap on the size of institutions which could be members of the small lender mutual from $15 billion to $500 billion in assets," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said.
CUNA has had several meetings and conversations with Senate staff, the White House, credit union mortgage lenders and other financial services trade groups regarding the bill. While CUNA expects the Senate Banking Committee markup to happen before the Easter break, the timeline for consideration by the full Senate is uncertain.
The 425-page draft bill, released earlier this month, addresses how to overhaul the housing finance market, as well as on what to do with government-owned Fannie Mae and Freddie Mac.

CUNA continues to review the proposal to ensure the legislation will help maintain a functioning secondary mortgage market that provides credit unions equitable access and the ability to continue to offer mortgage products with predictable payments, like the 30-year fixed-rate mortgage.
"We also want to ensure that the transition to the new system is smooth," Donovan said.
For more on the proposal, use the resource links.


RBC webinar detailing CU concerns available online

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WASHINGTON (3/25/14)--The Credit Union National Association's (CUNA) free web session on the controversial risk-based capital proposal is now available online.
In the hour-long session, two credit union CEOs warned a capacity audience of 500 last week that the National Credit Union Administration's proposed rule on risk-based capital will change how credit unions manage their operations and may require some to ration services to their members.
Maurice Smith, CEO of Local Government FCU, Raleigh, N.C., noted three potential tactics credit unions would have to resort to in preserving a capital "cushion" from being eroded by the proposal:
  • Rebalance assets,
  • Ration services to members--which he called "repugnant" to the credit union philosophy, or
  • Ask members to pay more through lower returns on savings, higher rates on loans and higher fees.
Smith is a CUNA Executive Committee member.
Ron Burniske of Chartway FCU, Virginia Beach, Va., strategically analyzed the risk-weighting provisions within the NCUA proposal.
He pointed out during the webinar that they do not "significantly reflect the reasons credit unions failed" during the Great Recession of 2008-11.
Senior CUNA staff also addressed the webinar participants.
Chief Economist Bill Hampel explained that the proposal would create strong incentives for credit unions to throttle back on mortgage and member business loans, as well as retention of long-term assets.
Deputy General Counsel Mary Dunn scrutinized the NCUA's authority to regulate. She noted that the Federal Credit Union Act requires NCUA to develop a system of prompt corrective action that is "comparable" to bank PCA--but that also takes into account the unique nature of credit unions. The proposal, Dunn emphasized, does not do that sufficiently.
General Counsel Eric Richard outlined CUNA's comprehensive strategy aimed at major improvements in the proposal--including thorough analysis, member activation (especially through comment letters) and with the U.S. Congress. And he said a challenge in court of a final rule, if warranted, is not off the table.
All urged credit union stakeholders to review the proposal, determine its impact on their operations, and file a comment letter by May 28 with the NCUA, copying their members of Congress.

Joint-agency appraisal management proposal ready for comment

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ALEXANDRIA, Va. (3/25/14)--The National Credit Union Administration and other federal financial regulators on Monday approved a joint proposal to impose minimum requirements for appraisal management companies (AMC). The NCUA discussed the proposal at its open board meeting last week.

The proposal soon will be published in the Federal Register and will be open for public comment for 60 days. Federal regulators have asked for comments on all aspects of the proposal.

The six federal financial regulatory agencies that comprise the Federal Financial Institutions Examination Council, including the NCUA, are proposing the rule to implement Dodd-Frank Act requirements meant to better ensure the quality of appraisals and assure compliance with the Truth-in-Lending Act.

NCUA staff last week said the AMC proposal should not have a measurable impact on credit unions ( News Now March 21).  It would set minimum requirements for registration and supervision of AMCs--the intermediaries for appraisers and lenders that provide appraisal services.

These requirements would apply to states that elect to establish an agency with authority to register and supervise appraisal management companies.

Under the joint-agency plan, an appraisal management company that is a subsidiary of a financial institution and regulated by a federal financial services regulatory agency would not be required to register with a state, but would otherwise be required to meet the same minimum requirements as other appraisal management companies.

The Credit Union National Association will be evaluating the impact of the proposal and will provide a summary in its Regulatory Comment Call.

Ways & Means tax hearings to start in April re: 'extenders'

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WASHINGTON (3/25/14)--House Ways and Means Chairman Dave Camp (R-Mich.) notified colleagues Monday that the committee will move forward with hearings on his tax reform draft in April--first taking on the amorphous area of tax "extenders."
On Feb. 26, Camp released a much-anticipated tax reform plan. The specific credit union tax status was left untouched in the plan, an outcome for which the Credit Union National Association strongly advocated.  CUNA, the state credit union associations and credit unions together amassed 1.3 million contacts with lawmakers urging them "don't tax my credit union."
The "extenders" referred to by Camp on Monday are dozens of temporary tax provisions that are renewed--often at the last minute Camp notes--over and over again. In sum, they can represent many billions of dollars annually.
Camp suggested that certain tax extenders should be "considered, and treated, as permanent parts of the baseline off of which tax reform is enacted."
"One important goal of tax reform is to provide certainty to American taxpayers. I think we can all agree that a short extension of tax policies is no way to legislate and is even worse for the families and businesses who utilize those tax benefits," he wrote to his tax-policywriting colleagues.
Camp maintained that the extenders confuse debate regarding what is the real tax revenue baseline.
Starting in April, Camp pledged, the committee will go policy-by-policy and through hearings and markup session determine what extenders should become permanent to the tax code. Specific dates and topics will be forthcoming.
CUNA will continue to monitor the tax reform process as it unfolds.
"While credit unions were untouched in the original tax draft, CUNA will continue to advocate for and educate about the credit union tax status as long as the tax reform process is alive," CUNA Executive Vice President of Government Affairs John Magill vowed.