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FHFA forgiveness plan could spill to private lenders CUNA

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WASHINGTON (4/13/12)--If the Federal Home Finance Administration (FHFA) proposes a mortgage principal forgiveness program, it should take into account any potential spillover effects such a program could have on private sector mortgage modifications, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a letter to Edward DeMarco, acting FHFA director.

The letter follows remarks that De Marco made earlier this week before the Washington, D.C.-based think tank The Brookings Institution. In his speech, De Marco addressed a potential FHFA principal forgiveness program. Such a program would be limited to borrowers with GSE-backed mortgages, and the program would likely impact a fraction of the estimated 11 million underwater borrowers in the country today, De Marco said.

The acting FHFA head outlined his objections to allowing the GSEs to pursue a broad principal forgiveness program for troubled homeowners. "This is not about some huge difference-making program that will rescue the housing market," DeMarco said, adding that the debate over this type of relief is "about which tools, at the margin, better balance two goals: maximizing assistance to several hundred thousand homeowners while minimizing further cost to all other homeowners and taxpayers."

The anticipated benefit of principal forgiveness is that by reducing foreclosures relative to other modification types, losses would be lowered and housing prices would stabilize faster, producing broad market benefits, DeMarco said. However a larger group of underwater borrowers who have remained faithful to paying their mortgage obligations are a greater risk to housing markets and taxpayers, he added. Encouraging their continued success could have a greater positive impact on the recovery of housing markets, he said.

Cheney said CUNA agrees it is important for the FHFA to conduct a thorough up-front analysis of the possible effects of implementing any principal forgiveness program aimed at GSE-backed mortgages. However, he warned, such a program, if implemented, could lead to some of the underwater borrowers without GSE-backed mortgages to seek similar principal forgiveness packages from their lenders or servicers.

"CUNA shares FHFA's concerns regarding the possibility that such a program would incentivize borrowers to strategically default in order to obtain principal forgiveness," Cheney said, adding that an FHFA program may have a domino effect leading to strategic defaults outside of the body of mortgages backed by the GSEs.

In the letter, Cheney said credit unions have traditionally originated high quality mortgage loans with stringent underwriting standards, have had lower default rates than most banks during the recent economic crisis, and have been at the forefront of efforts to provide reasonable mortgage modifications to their members who are in distress. Many credit unions have also sold mortgages to government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, but holding mortgages in portfolio is still a more common practice among credit unions than in other parts of the financial services sector, he added.

Even though an FHFA-sponsored principal forgiveness program would not directly affect credit unions' balance sheets, if such a program spills over into the private sector, CUNA is concerned that it could have a significant negative impact on credit unions with regard to the loans held in their portfolios, Cheney said.

CUs iNational Journali help launch Tampa hospital project

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ST. PETERSBURG, Fla. (4/13/12)--All Children's Hospital in St. Petersburg, Fla., will soon boast a freshly renovated playground for its patients and their families through funds raised with the help of credit unions. Groundbreaking took place Wednesday on the "leave behind" project, which will retrofit an existing playground with special play equipment for ill and injured children and  will honor the 2012 Republican National Convention taking place in nearby Tampa.

Click for slide showCredit union representatives helped kick off a renovation project to benefit All Children's Hospital in St. Petersburg, Fla. at a groundbreaking event this week. CUNA, state credit union leagues, credit unions nationwide and the National Journal are working together on the "leave-behind" project to honor the Republican National Convention to be held in Tampa in August. Shown here breaking ground (L to R): Brendan Garrison; Beth Reinhard of National Journal; Patrick La Pine, president/CEO, League of Southeastern Credit Unions; Cynthia Scott-Butler; Rep. C.W. Bill Young (R-Fla.); Riley Christian; Mike Mercer, CUNA chair and president /CEO, Georgia Credit Union League & Affiliates; Dr. Jonathan Ellen, Interim president/CEO of All Children's; St. Petersburg Mayor Bill Foster; and Caden Riley. (CUNA Photo)
Credit Union National Association (CUNA) Chair Mike Mercer, League of Southeastern Credit Unions President/CEO Patrick La Pine, the National Journal Group's Political Correspondent and event emcee Beth Reinhard, All Children's Hospital's Physician-in-Chief and Interim President Dr. Jonathan Ellen, St. Petersburg Mayor Bill Foster and Rep. Bill Young (R-Fla.) broke ground for the playground project.

Foster said he is "grateful to everyone who is helping to make this playground a lasting legacy for the families of St. Pete."  Young said "seeing all these groups come together to provide a safe place where children can rehabilitate while at the same time play and have fun is a way in which they can give back to our area and demonstrate what the spirit of the upcoming convention is all about."

La Pine noted that Florida credit unions have a long history of supporting All Children's Hospital, with $1.5 million in donations and supporting the development of a 28-bed Pediatric Intensive Care Unit, a state-of-the art dialysis wing, and a new autism center. The playground project gives the league and others a chance "to demonstrate that credit unions are local and give more to their communities than just financial services," he said.

On behalf of the hospital, Ellen thanked the group for making the vision of a therapeutic playground a reality for All Children's patients and their families.

The Republican National Convention is scheduled to begin on Aug. 27 and end on Aug.  30 in Tampa.

A similar project to build a rooftop playground was kicked off last week at Levine Children's Hospital in Charlotte, N.C. Charlotte is the location of the 2012 Democratic National Convention. (See related April 6 News Now story: "CUs help kick off hospital project for conventions.")

Since 2000, credit unions have honored the host cities for each national convention with a "leave behind" project that benefits local communities.

The two 2012 projects will cost a combined $600,000, and credit unions nationwide, the Carolinas Credit Union Foundation, the Southeastern Credit Union Foundation, CO-OP Financial Services, and CUNA Mutual Group are raising funds for the projects.

Credit unions really see this as an opportunity to leave something positive behind that will continue to benefit the Charlotte and Tampa communities long after the balloons have dropped and the convention ended," CUNA President/CEO Bill Cheney said.

NCUA opens registration for Orlando listening session

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ALEXANDRIA, Va. (4/3/12)--Registration for the Orlando, Fla. edition of the National Credit Union Administration's credit union "listening sessions" has opened, the agency said Thursday.

"Stakeholders can now register for any of our first four Listening Sessions, and we expect to open registration for our final two sessions next week," NCUA Chairman Debbie Matz said. "Credit union officials and volunteers are welcome to take this opportunity to tell us how we can improve our exam process, regulations, and any other initiatives to protect credit union safety and soundness," she added.

The NCUA listening sessions will begin on May 2 in Boston, Mass., and are also scheduled for:

  • May 9 in Alexandria, Va.
  • June 5 in St. Louis, Mo.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
For more on the sessions, use the resource link.

NCUA Director of Examinations and Insurance Larry Fazio in the latest NCUA Report said he is interested in hearing opinions on how examiners and credit unions can better "understand and recognize the challenges and demands of their corresponding roles, and the associated points of view," and looks forward to discussing how agency examiners and credit unions can build "a constructive working relationship and trust." (See April 12 News Now story: NCUA suggests CU, agency steps to improve exams)

CUNA talks MBLs in iMarketplace American Bankeri

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WASHINGTON (4/13/12)--Credit unions continue to advocate for increasing the member business lending cap in a number of media outlets, and two notable media appearances were Credit Union National Association (CUNA) comments on American Public Media's Marketplace radio and in the pages of the American Banker.

Marketplace is broadcast across the nation on National Public Radio affiliates. In the Marketplace story, CUNA Executive Vice President John Magill emphasized the benefits of an MBL cap increase, noting that raising the MBL cap "would put $13 billion into the coffers of small businesses that aren't otherwise getting loans--and at no cost to taxpayers."

Sen. Mark Udall's (D-Colo.) MBL cap lift legislation, S. 2231, would increase the MBL cap from 12.25% of assets to 27.5% of assets. Senate Majority Leader Harry Reid (D-NV) has pledged to bring the bill to the floor for a vote following the Senate's return to Washington.

The American Banker story quoted comments CUNA CEO Bill Cheney made in a video message to credit unions on CUNA's home page. The current battle over the MBL bill "isn't about banks and credit unions," but about "small businesses that desperately need access to capital," Cheney said.

In the same story, Ryan Donovan, CUNA senior vice president of legislative affairs, stressed that credit unions' grassroots push in the Senate is going strong and will continue right up until the floor vote. "Our interest right now is making sure that when it happens, that we have the votes. And we're going to get there," Donovan said.

CUNA has also made efforts to refute banker claims ahead of the vote, warning lawmakers to not be fooled by the misinformation being circulated by bankers in a fact sheet sent to all members of Congress. (See May 12 News Now story: CUNA takes on banks for MBL claims)

In a letter to the editor published in The Daily News of Newburyport, Tom Stites, a citizen of Newburyport, Mass., urged Massachusetts Sens. John Kerry (D) and Scott Brown (R), who have voiced support for the state's small businesses, to follow through and vote for the Senate MBL bill.

"Massachusetts' small businesses are a driving force of employment and economic improvement," Stites wrote. "In a recent national survey, 90% of small businesses identified availability of credit as a problem, and 61% of them said it's harder to get loans today than it was a few years ago.

"One of the advantages of credit unions is that they are legally set up as financial service cooperatives, owned by their depositors and governed by elected, volunteer boards of directors," he added. "This is why they don't waste money on elaborate lobbies, have hidden costs or back bad loans."

To read the letter and listen to the radio spot, use the links.

Inside Washington (04/12/2012)

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  • WASHINGTON (4/13/12)--Thomas Hoenig and Jeremiah Norton will begin their terms on the five-member Federal Deposit Insurance Corp. (FDIC) board Monday. Hoenig, who is the former head of Federal Reserve Bank of Kansas City, and Norton, who worked within the Treasury Department and at JPMorgan Chase & Co., will be sworn in for their terms in a private ceremony (American Banker April 12). Hoenig and Norton were nominated by President Barack Obama, but were recommended by Republican lawmakers under rules limiting the number of FDIC board members from the president's party to three. The board will be at its full capacity for the first time since July 2011, but its composition is not complete. Last month, when the Senate confirmed Hoenig and Norton for their terms, it also extended the term for Martin Gruenberg as chairman. However, lawmakers delayed voting on President Obama's nominations for Gruenberg to become the permanent chairman, and for Hoenig to become vice chairman …