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Washington Archive

Washington

FHFAs monitoring plan unneeded for CUs CUNA

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WASHINGTON (3/30/11)--Credit union commitment to long-term mortgage lending is unquestioned, and a Federal Housing Finance Administration (FHFA) does not need to impose ongoing mortgage lending monitoring requirements on credit unions who use the Federal Home Loan Bank (FHLB) System, the Credit Union National Association (CUNA) said in a recent comment letter. The FHFA has issued an advance notice of proposed rulemaking (ANPR) seeking comments regarding a plan to require FHLB-member institutions to periodically file reports in order to confirm that they remain committed to long-term mortgage lending. The ANPR noted the FHFA could at a future date also propose establishing a minimum dollar amount for volume of mortgage originations, and could propose requiring credit unions and other FHLB-members to continuously monitor their balance sheets to ensure that 10% of their total assets are residential mortgage-related assets. If FHFA chooses to move forward on the issues outlined in the ANPR, it would issue a proposed rule at a later date for an additional comment period. The Federal Home Loan Bank Act requires FHLB members to have at least 10% of their assets in long-term residential mortgages and also imposes other requirements related to residential mortgage lending activities on FHLB members; current FHLB policy, however, only requires institutions prove that they meet the act’s requirements at the time they apply to be an FHLB member. CUNA noted in its letter that credit unions already are subject to significant mortgage lending reporting requirements under the Home Mortgage Disclosure Act (HMDA), and said the FHFA plan would be duplicative and unnecessarily burdensome on “already over-burdened” credit unions. FHLB-member credit unions, CUNA wrote, meet or exceed the FHLB membership requirements, such as the requirement to hold 10% of assets in “residential mortgage assets” such as first and second residential mortgages and/or related products like residential mortgage-backed securities. “In the aggregate, credit unions held 38.9% of their assets in residential first mortgages and 15.6 % of their assets in second-lien residential mortgage products as of November 2010, far exceeding (the 10% requirement) without even considering credit union holdings in residential mortgage-backed Securities,” the letter said. CUNA added, “Credit unions—by their very nature as member-owned, not-for-profit cooperatives dedicated to promoting thrift and making loans to members at reasonable rates” meet the act’s requirements regarding members’ “character of management” and having a home-financing policy that is consistent with sound and economical home financing. If FHFA chooses to move forward with the ANPR, credit unions should not be subject to ongoing compliance reporting, but rather only be required to make a report to its FHLB if and when the credit union has fallen out of compliance, CUNA recommended. Also, any FHLB member which has fallen out of compliance should have at least 90 days to make such a report to its FHLB, and should be given at least a one year grace period to come back into compliance so long as the institution agrees to make a good faith effort to comply, CUNA said.

Composite 30-year mortgage rates rise in February

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WASHINGTON (3/30/11)--The national average interest rate for 30-year fixed-rate mortgages increased to 4.97% in February, a 12 basis point increase over the previous month’s total, the Federal Housing Finance Agency (FHFA) reported on Tuesday. The FHFA reported that the contract rate on the composite of all fixed- and adjustable-rate mortgages was 4.80% percent in February, up 10 basis points from 4.70 percent in January. The FHFA did not include separate information on adjustable rate mortgages. Mortgage totals average $216,900 during February, a $14,500 increase from January’s total of $202,400. One-time fees and other mortgage origination charges accounted for an average of 0.8% of the balance of all mortgage loans, and the average term of these mortgages was 27.2 years. The average loan-to-price ratio was 74.7%, the FHFA added. The FHFA rate survey reflects loans that closed between Feb. 22 and Feb. 28.

Udall touts MBL bill in blog post

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WASHINGTON (3/30/11)--Sen. Mark Udall (D-Colo.) continues to promote his recently introduced member business lending legislation, this time turning to his own blog to answer Facebook users questions about lifting the MBL cap for credit unions.
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S. 509, The Small Business Lending Enhancement Act of 2011, would increase the MBL cap to 27.5% of a credit union's assets, up from the current 12.25%. The Credit Union National Association (CUNA) has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. Udall in his blog post added that he would continue to fight for his common-sense and bipartisan legislation. In his blog post, Udall noted that the biggest opponent of his legislation, large banks, want the small-business lending market all to themselves, and dont want the extra credit union competition that the legislation would create. Udall also explained the history of the credit union MBL cap to an inquisitive Facebook user. He noted that credit unions had made business loans to their members as a standard practice until the late 1990s, when the current 12.25% of assets cap was slipped in to the Credit Union Membership Access Act. There was no safety and soundness basis for limiting credit unions' ability to offer loans to their business-owning members at that time, he said. Udall also tried to allay another Facebook users fear that legislators could be recklessly increasing risk by promoting increased business lending. The senator noted that his bill includes statutory criteria that ensures only prudent, experienced, well-managed, and well-capitalized credit unions can apply to increase their small-business lending portfolios beyond the current cap. If a credit union meets these specific criteria, the NCUA has the discretion to approve or deny a credit union's application to raise its business lending cap, Udall added. For the full blog post, use the resource link.

Bernanke Fed wont hit April interchange deadline

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WASHINGTON (3/30/11)--The final version of the Federal Reserve’s interchange fee cap proposal will not be released on April 21 as planned, but the Fed is still aiming for the rules to come into effect on July 21, Fed Chairman Ben Bernanke said in a Tuesday letter to members of Congress. The letter was sent to Senate Banking Chairman Tim Johnson (D-S.D.), Senate Committee Ranking Member Richard Shelby (R-Ala.), House Financial Services Chairman Spencer Bachus (R-Ala.), and House Committee Ranking Member Barney Frank (D-Mass.). Credit Union National Association (CUNA) President/CEO Bill Cheney said in response to the Fed’s admission that if the agency cannot meet the deadline imposed on it by Congress, then it is further proof that Congress must take action now to postpone this entire matter. “We remain deeply troubled overall by the impact of the statute itself, and will continue to urge Congress to adopt legislation to delay the overall implementation date of July 21 and carefully study the impact of the debit interchange provision, particularly on credit unions and their members,” Cheney said. Cheney also expressed concern that if the Fed adheres to the July 21 implementation date, a final rule will be issued without sufficient time to prepare for compliance. Bernanke said that the delay is partly due to the complexity of the issues raised by comments on the Fed’s proposal. The Fed has received more than 11,000 comments on the proposal, and Bernanke said that the sheer number of comments has also contributed to the delay. The Fed Chairman said that the “extraordinary volume of comments reflects the importance of debit cards” to consumers, and added that “the information provided in these comments is important for assessing fully the effect of the proposed rule on the U.S. payments system and its users and providers.” The Credit Union National Association (CUNA) estimates that 5,600 of these comment letters came from credit unions. The Fed's proposal would cap debit card interchange fees that are paid by merchants to large debit card issuers at no more than twelve cents per transaction. Issuers with under $10 billion in assets are entitled to be exempted from the interchange fee rate setting provisions. Bernanke last week said the Fed would ensure that this planned carveout would be effective. Legislation that would delay the implementation of the interchange fee cap was introduced in the Senate and House this month. The two bills would also order regulators to study the impact that the proposed interchange rules would have on credit unions, small issuers, consumers and merchants.

Housing reform spotlighted in Senate House

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WASHINGTON (3/30/11)—The Senate Banking Committee “needs to do its homework” and should “thoroughly examine federal housing policy” and identify problems within the current system “before Congress can consider legislation,” committee ranking minority member Richard Shelby said. Shelby made his remarks before a Tuesday Senate Banking Committee hearing titled, Public Proposals for the Future of the Housing Finance System,” one of a series on that topic scheduled by the banking panel. The Republican from Alabama said that without proper examination, the committee could “yield to the temptation of picking a solution before it has accurately described the problem. “Legislation should be driven by facts, not by pre-determined outcomes,” he added. Shelby suggested that the committee “establish a formal process for considering housing finance reform,” a process that could include investigative hearings, hearings on various reform proposals, and, finally, the act of crafting legislation. Shelby said that following this approach would help committee members make informed decisions and could ensure that any legislation is bipartisan, effective, and “has the fewest unintended consequences.” The committee chairman, Sen. Tim Johnson (D-S.D), said at an earlier hearing on housing finance reform, “We must find workable solutions that protect current homeowners and preserve the option of responsible homeownership for future buyers.” Witnesses at the hearing included Michael Berman, chairman of the Mortgage Bankers Association, Dr. Arnold Kling, member, Mercatus Center Financial Markets Working Group, George Mason University; Dr. Mark Zandi, chief economist, Moody's Analytics, and Janneke Ratcliff, senior fellow, Center for American Progress. The testimony overall, very generally speaking, called upon Congress for tough reforms in the country's housing policy, but the reforms recommended were divergent. On the House side, the Financial Services Committee Tuesday moved ahead with its own housing-related legislation, introducing eight separate bills aimed at reforming government-sponsored mortgage entities Fannie Mae and Freddie Mac. One bill introduced by Rep. Ed Royce (R-Calif.) would, according to Royce, “remove the congressional mandate placed on the GSEs requiring them to dedicate a portion of their business to affordable housing” to “scale back the disproportionate level of government intervention in the housing market." A markup session on GSE-related legislation will be held in the House Financial Services Committee next Tuesday, Politico has reported.

Inside Washington (03/29/2011)

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* WASHINGTON (3/30/11)--Efforts to reform government-sponsored enterprises could spell the end of the traditional 30-year mortgage (American Banker March 29). Observers are still in the process of evaluating the pros and cons of such a radical change to the mortgage market. The 30-year fixed mortgage has long-been the standard product, and the best option for most home buyers, in the housing market. But Bert Ely, an independent consultant based in Alexandria, Va., said the possible elimination of Freddie Mac and Fannie Mae are causing some in the industry to rethink the 30-year mortgage. Although the 30-year fixed-rate mortgage is the traditional home loan in the U.S., its long term requires that it be purchased by a securitization entity. A private buyer would not be guaranteed if Fannie Mae and Freddy Mac were eliminated and the government role in the housing market were reduced. Under the options proposed by the Treasury Department for reforming the housing sector, the government would provide less support, potentially making the cost of the 30-year mortgage more expensive. Under that scenario, adjustable rate mortgages could be more attractive to borrowers … * WASHINGTON (3/30/11)--When CNBC asked him about the proposed interchange rule, Rep. Barney Frank (D-Mass.) on Friday said he would urge bank customers to shop around and find community banks and credit unions that offer free services (Pennsylvania Credit Union Association’s Life is a Highway March 29). “America has one of the most competitive banking systems, if not the most competitive banking system, in the world,” said Frank, who is a ranking member of the House Financial Services Committee and a co-author of the Dodd-Frank Act. Big banks have lobbied against the proposed interchange rules, which they say would result in an estimated $12 billion in lost fees. As a result, bankers are looking to increase fees for their customers. The Credit Union National Association (CUNA) opposes the cap on interchange fees and has told federal lawmakers that such action would harm consumers by driving up costs of debit cards, limiting consumer options, competition and technological innovation. Interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants, CUNA says …