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CFPB begins mortgage rule discussions

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WASHINGTON (4/11/12)--The Consumer Financial Protection Bureau (CFPB) this week said it is considering a series of new mortgage rules that aim to increase transparency and accountability in the market.

"The mortgage servicing rules we are considering reflect two basic, common-sense principles – no surprises and no runarounds," CFPB Director Richard Cordray said. "For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It's time to put the 'service' back in mortgage servicing," he added.

The CFPB said it would release an advanced notice of proposed rulemaking this summer, and release the rules for public comment before finalizing them in January of 2013. The agency said it could provide an implementation period of up to one year, but has not decided how long of a transition period is necessary yet.

According to the CFPB, some of the rules under consideration would require:

  • Mortgage servicers to provide regular mortgage statements covering the mortgage loan's principal, interest, fees, and escrow, the amount of and due date of the next payment, and, in some cases, information on financial and foreclosure avoidance counseling;
  • Servicers to warn mortgage holders before interest rate changes are made to their adjustable-rate mortgages; and
  • Increased contact with mortgage holders before foreclosure proceedings can be initiated.
Lenders could also be required to provide greater information on help that is available to homeowners facing foreclosure.

Some of the rules would also address force-placed insurance, which can be purchased by mortgage servicers when mortgage borrowers do not maintain hazard insurance on their properties. Force-placed insurance can often be far more expensive than privately purchased insurance. Under one of the proposals, alternatives to force-placed insurance could be offered to consumers, and warnings and disclosures would need to be provided before force-placed insurance is purchased.

Other proposed rules could require servicers to post mortgage payments promptly after they have been received, to increase mortgageholder ease of access to their own account information, and to quickly correct account errors.

The agency said it may also work with other regulators to collaboratively address mortgage servicing issues. The CFPB said it would meet with a Small Business Review Panel to discuss the proposal and "will also be conducting other outreach to gather feedback from consumer groups, industry, and other agencies."

The CFPB also continues to work on revised mortgage applications and mortgage loan closing documents, and proposed forms of these disclosures are scheduled to be released in July.

For more on the CFPB's potential mortgage servicing rules, use the resource link.

NCUAs Myers outlines CU benefits in iMarketWatchi

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WASHINGTON (4/11/12)--Bill Myers, director of the National Credit Union Administration's (NCUA) Office of Small Credit Union Initiatives, discussed credit unions' benefits to consumers, and more complex issues facing small credit unions in a recent MarketWatch interview.

In a question-and-answer format, Myers said "the cool thing about most credit unions" is their service to small communities, including churches and employees of certain businesses that need tailored financial service offerings. "Depending on what little niche you fit into, there's a credit union for you," he said.

The NCUA official highlighted the fact that credit unions serve individual communities, and as such, "did not get caught up in some of the complex financial practices of the recent bank bust."

Most credit unions don't have the complex financial products a bank has to offer; that is a strength in terms of safety, even if they don't earn as much income as a result, he said.

When asked if lower income levels were a concern, Myers responded, "Well, first, credit unions are member-owned, and don't have to produce profits or please anxious shareholders. But second, and more to the point, not having complex products does hurt the funding, and also causes some customers to drift away. 

"It's especially hard on small credit unions, which are closing or merging at a significant pace: in 1979 there were 22,000, and now there are 7,100 credit unions in the U.S."

However, Myers also noted during the interview that many credit unions are finding their membership increasing as new members that do not trust big banks move to the safety of credit unions.

Call report site enhancements coming NCUA says

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ALEXANDRIA, Va. (4/11/12)--An enhanced version of the National Credit Union Administration's (NCUA) Credit Union Online system will be unveiled in May, the NCUA said in the April edition of its NCUA Report.

The Credit Union Online system allows credit unions to file 5300 call reports and to post profile information on their credit union, submit data to the agency, and receive key bits of information from the NCUA.

The changes, according to the NCUA, will include an enhanced user interface, the ability to convert call report and profile information into .pdf files, and other basic interface changes that will help users make their call report calculations and avoid leaving information out of their profiles.

The agency said it would provide more information on these and other changes to the system in an upcoming webinar. The webinar has not been scheduled at this time.

For the full NCUA report, use the resource link.

Hyland Fin Lit month good for aiding members employees

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ALEXANDRIA, Va. (4/11/12)--As credit unions celebrate April's Financial Literacy Month, credit union leadership should ask what they can do to empower their employees and members financially, National Credit Union Administration (NCUA) Board Member Gigi Hyland said in this month's NCUA Report.

Hyland said "the terminology of financial literacy is shifting to a more holistic and robust view of financial empowerment," a view that goes beyond simple financial literacy. "Financial empowerment is the process of increasing capacity of members to make financial choices and to transform those choices into desired financial goals.

In her column, Hyland noted that credit unions, "because of their philosophy and structure, are uniquely poised to serve as financial empowerment agents."

"How can you meet your members where they are in life to help them achieve their financial dreams? How can you offer an array of products and services that accomplish the dual goals of making good business sense and financially empowering your members," Hyland asked.

The NCUA this month is using Twitter and other social media outlets to help increase financial literacy, and will focus its outreach on issues such as taxes, money management for youth, savings, investing, retirement, and homeownership. (See related April 3 News Now story: CFPB, NCUA promote financial literacy month.)

The Credit Union National Association (CUNA) is also celebrating Financial Literacy Month by again sponsoring its annual National Youth Saving Challenge, and credit unions across the country are also encouraging their members to budget, save, manage credit, and pay down debt. (See related March 30 News Now story: April is National Financial Literacy Month.)

For more of this month's NCUA Report, use the resource link.

Inside Washington (04/10/2012)

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  • WASHINGTON (4/11/12)--Two years after the federal government eliminated its Federal Family Education Loan Program in 2010--ending subsidies for student loans originated by private lenders--the student lending market faces more changes. Starting on July 21, lenders must report their practices, including the underwriting standards they use and the pricing and terms of their loans, to the Consumer Finance Protection Bureau (American Banker April 10). Sen. Richard Durbin (D-Ill.) is pushing a measure that would allow private student loans to be discharged in bankruptcy. President Barack Obama in January announced a plan to expand the Federal Perkins Loans Program to $8 billion from $1 billion, which could cut the market share of financial institutions by expanding the availability of lower-cost federal loans to students. Concerns have surfaced about rising default rates on student loans. Americans now owe more than $1 trillion in student debt …
  • WASHINGTON (4/11/12)--In the aftermath of the financial crisis, financial stability policy is considered to stand on equal footing with monetary policy as critical responsibilities of the central bank, Federal Reserve Board Chairman Ben Bernanke said Monday. But predicting the next crisis remains a greater challenge when compared with the Fed's ability to impact economic policy, Bernanke said at the 2012 Federal Reserve Bank of Atlanta Financial Markets Conference in Stone Mountain, Ga. "We have spent decades building and refining the infrastructure for conducting monetary policy," Bernanke said. "And although we have done much in a short time to improve our understanding of systemic risk and to incorporate a macroprudential perspective into supervision, our framework for conducting financial stability policy is not yet at the same level." Since the crisis, the Fed has instituted reforms related to securitizations and structured finance vehicles, money market funds and repurchase agreements to minimize market vulnerabilities, Bernanke said …
  • WASHINGTON (4/11/12)--Financial institutions will be dramatically affected by any reforms to the U.S. Postal Service, which has endured a sharp drop in revenue as a result of the recession and rapid technological change, said the American Bankers Association. More than half of all statements and bills sent through the mail come from financial institutions, including credit unions, according to the U.S. Postal Service (American Banker April 10). Three bills related to U.S. Postal reform are making their way through Congress. One bill would make it easier to raise postage rates above the rate of inflation. Another measure calls for a five-day delivery schedule and closures of postal facilities. Also on the table is a bill that would allow the U.S. Postal Service to provide non-postal services such as check cashing …