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Inside Washington (04/14/2009)

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* WASHINGTON (4/15/09)--Many homeowners are missing their mortgage payments because they are unemployed, according to a Boston Federal Reserve study (Reuters April 14). Job loss is more likely to cause borrowers to default than tough mortgage terms, the study indicated. Loan modifications may not help investors, either, according to Christopher Foote and Paul Willen, Boston Fed economists; Kristopher Gerardi, Atlanta Fed economist; and Lorenz Goette, University of Geneva professor ... * WASHINGTON (4/15/09)--Suspicious activity reports (SARs) have increased, and the spike may mean an increase in financial crime, according to some financial industry experts. Reports filed by depository institutions in 2008 jumped 13% compared with reports a year earlier (American Banker April 14). Financial institutions are reporting fraud and attempted fraud, said Peter Djinis, former Financial Crimes Enforcement Network (FinCEN) official. A Federal Bureau of Investigation report found that 63,173 SARs involving mortgage fraud were filed in the fiscal year ending Sept. 30. About 28,873 more were filed from October 2008 to February also. As more banks make modifications and work out loans, the more they are checking for fraud. They also fear regulatory criticism, observers said. Last week, the Federal Trade Commission, Treasury, Justice Department, FinCEN and the Department of Housing and Urban Development created a program to stop loan modification fraud ... * WASHINGTON (4/15/09)--The Federal Deposit Insurance Corp. (FDIC) has received about 400 comments from institutions and investors on its Legacy Loan program. Comments ranged from taxpayers’ letters saying they do not support the program, to banking industry representatives who suggested ways to make the program effective. Lawyers at Orrick, Herrington and Sutcliffe LLP suggested broadening the program to include all types of loans, including credit and corporate. Dr. Linus Wilson, a professor at the University of Louisiana at Lafayette, said his research indicates that “it is much better to buy toxic assets from troubled banks after troubled banks have entered a regime similar to receivership than before those bad assets are written down.” Under the current proposal, Wilson said he fears that only banks that sell the assets will be well-capitalized. “Only banks that are insolvent or are experiencing financial distress will see improved operating decisions and better lending incentives if they reduce the volatility of their assets. If this is the case, then U.S. taxpayers will bear the risk of huge losses without improving the incentives in troubled banks.” ... * WASHINGTON (4/15/09)--The Federal Deposit Insurance Corp. (FDIC’s) temporary debt guarantee coverage program has experienced an increase in participation by more than one-third in March. About 97 issuers were participating at the end of last month, compared with 73 in February. Outstanding debt guaranteed by the FDIC also increased 25% to $336 billion (American Banker April 14). The biggest jump in participation was in the category of institutions with assets of less than $10 billion ...

CDFI awards include three credit unions

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WASHINGTON (4/15/09)--Three credit unions have been awarded technical assistance grants from the Community Development Financial Institutions (CDFI) Fund. Express CU, Seattle, Wash., received $99,963; and Union CU, Spokane, Wash., and Kunia FCU, Waipahu, Hawaii, each received $100,000. Twenty-seven organizations received money from the program. A total of $2.3 million will be distributed. The CDFI Fund announced the 2009 Technical Assistance awards in advance of the 2009 Financial Assistance awards, and five months earlier than the award announcement in 2008. “We recognize the economic challenges facing CDFIs, and the growing demand from low-income Americans for the financial services and products they provide,” said Donna J. Gambrell, CDFI director. “In order to expedite the flow of critically needed resources into low-income communities, the CDFI Fund has implemented new operating procedures that have enabled us to expeditiously administer this vital program.” The CDFI Fund intends to make two additional award announcements related to the 2009 round of the CDFI Program--Financial Assistance Component. The first announcement will be made in June, when all $90 million of funding received through the American Recovery and Reinvestment Act of 2009 will be awarded. The second announcement will be made by September, when over $50 million of 2009 annual appropriations will be awarded. Through the Technical Assistance Component of the CDFI Program, the CDFI Fund provides grants to start-up and existing CDFIs, helping them build their organizational capacity to serve their target markets. For a full list of award winners, use the link.

New Market Tax Credit gets innovation award

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WASHINGTON (4/15/09)—The U.S. Treasury Department’s New Market Tax Credit (NMTC) Program is one of the top 50 programs named in the Innovations in American Government Awards Competition by the Ash Institute for Democratic Governance and Innovation at John F. Kennedy School of Government at Harvard University. Credit unions are among those eligible to participate in the NMTC program designed in 2002 to spur the investment of new private sector capital into low-income communities. The program permits individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs). Those investments must be made in designated Community Development Entities (CDEs). The Treasury’s Community Development Financial Institutions (CDFI) Fund allocates the tax credits annually through a competitive application process. Through the first six rounds of the NMTC Program, the CDFI Fund has made 364 awards totaling $19.5 billion in tax credit allocation authority. The CDFI Fund anticipates awarding another $5 billion of allocation authority to CDEs in the fall of 2009, including the additional $1.5 billion in allocation authority authorized through the Economic Recovery Act. The Harvard school of government award, initiated in 1985, is intended to restore “public trust in government by promoting public sector creativity and excellence,” according to the Kennedy School. Competing programs must demonstrate innovative solutions, but may come from within a host of policy areas including health and social services; management and governance; community and economic development; education and training; criminal justice; transportation and infrastructure; and the environment. Use the resource links below for more NMTC information.

NCUA agenda includes Fair Credit items

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ALEXANDRIA, Va. (4/15/09)—The National Credit Union Administration (NCUA) released its seven-item open board meeting agenda for next week, which includes two Fair Credit Reporting Act (FCRA) actions. The agency is expected to issue a final rule and guidelines regarding the accuracy and integrity of information furnished to consumer reporting agencies, the so-called “accuracy regulations.” The final reg also will address consumers' direct disputes with furnishers of credit report information. The proposal was first issued jointly by the NCUA and the Federal Trade Commission (FTC) in 2007, and other agencies were required to develop rules under provisions of the Fair and Accurate Credit Transactions (FACT) Act. The NCUA will also vote whether to issue an Advance Notice of Proposed Rulemaking, seeking further comment on the definition of "integrity" under this provision of the FCRA, and what standards would make a credit report have integrity. Also on the April 21 agenda, the NCUA will propose clarifications and staff interpretations to Part 706 of the Unfair and Deceptive Practices rules. No major changes are anticipated; the NCUA will be renumbering some sections, providing clarification on deferred interest rate programs, and examples in the staff interpretation. The proposed rule will also clarify that the regulation does not preempt the federal Servicemembers Civil Relief Act. A 30-day comment period is likely. Also on the agenda:
* Delegations of Authority, Office of Small Credit Union Initiatives; * Creditor Claim Appeal; * Budget, Office of Capital Markets and Planning and Central Liquidity Facility; and * The monthly National Credit Union Share Insurance Fund report.

Bernanke cites tentative signs that decline is slowing

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WASHINGTON (4/15/09)—In a speech that primarily addressed aspects of the country’s current financial struggles, Federal Reserve Board Chairman Ben Bernanke also declared that he is “fundamentally optimistic” about the economy. Bernanke, addressing students and faculty at Morehouse College, Atlanta, acknowledged that the current crisis has been “one of the most difficult financial and economic episodes in modern history.” However, in his conclusion he noted recent, “tentative” signs that the sharp drop in economic activity may be slowing. He cited recent data on home sales, homebuilding, and consumer spending, as indicative of a leveling out of economic activity marking “the first step toward recovery.” “To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets. We are making progress on that front as well, and the Federal Reserve is committed to working to restore financial stability as a necessary step toward full economic recovery,” he stated. He added, “I am fundamentally optimistic about our economy.” Use the resource link below to access the Fed chairman’s speech.