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NMTC program honored by Treasury

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WASHINGTON (4/16/08)—The Treasury Department cited as one of the top 50 government projects a program favored by credit unions that provides tax credits for investment in low-income communities. The citation recognized the innovation and effectiveness of the tax incentive option--formally known as the New Markets Tax Credit Program. Making the top 50 means the NMTC is eligible to advance to the final stage of competition for the prestigious 2008 Innovations in American Government Award. The NMTC program was chosen from approximately 1,000 government programs across the nation that had applied for the award. The NMTC Program permits taxpayers to receive a credit against federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs). Substantially all of the qualified equity investment must in turn be used by the CDE to provide investments in low-income communities.

Johnson cites financial literacy gains says more needed

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WASHINGTON (4/16/08)—National Credit Union Administration (NCUA) Chairman JoAnn Johnson yesterday told Congress that her agency and credit unions have made great strides in promoting financial literacy. But Johnson said the consumer needs more than just education to get ahead in the marketplace. She said even great strides in financial awareness do not mitigate the need for solid consumer protection laws. “We do not have any illusions about financial literacy being a panacea,” she said in testimony before the House Financial Services Committee. “While there are benefits to greater levels of financial awareness, NCUA does not view financial literacy as a substitute for strong and comprehensive consumer protection.” She praised President George W. Bush, Congress, and credit unions for their contributions and dedication to the education that the consumer needs to make intelligent financial decisions. “For credit unions,” she said, “equipping members with the knowledge and information to make sound decisions has always been a priority.” The NCUA chairman said credit unions have always viewed financial education “as a natural outgrowth of their service-oriented philosophy.” Additional data on credit union efforts in this field also was submitted to Congress by Chairman John Faries of the National Youth Involvement Board. He said the NYIB tracking system reveals that since July 1, 2000, 1,511 credit union professionals have made 47,729 financial education presentations, reaching a total of 1,437,510 young people. Faries forwarded the material to Rep. Ruben Hinojosa (D-Texas), a committee member. CUNA also submitted a statement on credit union financial education efforts (see April 15 News Now), “CU fin lit efforts spotlighted in CUNA statement”) which was included in the hearing record. Joining Johnson on the first panel of witnesses were:
* Anna Escobedo Cabral, Treasurer of the United States; * Dean Martin, Treasurer, State of Arizona; * Sandra Braunstein, director of the division of consumer and community affairs, Federal Reserve Board; * Robert Mooney, deputy director for consumer protection and community affairs, Federal Deposit Insurance Corp.; * Cassansra McConnell, director, consumer and community affairs, Office of Thrift Supervision; and * Barry Wides deputy comtroller for community affairs, Office of the Comptroller of the Currency.
The committee also heard from representatives of community and consumer groups.

Court clarifies RESPA role on excessive fees

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WASHINGTON (4/16/08)—The Eleventh Circuit Court of Appeals has ruled that the Real Estate Settlement Procedures Act” (RESPA’s) Section 8 (b) does not govern excessive fees because it is not a price control provision, according to the Credit Union National Association (CUNA). The relevant section bans fees “other than for services actually performed.” The ruling was in Friedman v. Market Street Mortgage Corp. Plaintiffs in the case had accused the defendant lender of charging a fee that was excessive in relation to services actually rendered. Plaintiffs argued their position was supported by a statement of policy issued by the Department of Housing and Urban Development (HUD) in 2001. But the court rejected the plaintiff’s argument and the HUD policy statement. It ruled that Section 8 (b) prohibits only charges for services that are not performed, and does not allow courts or others to divide permissible charges into what may deemed reasonable and unreasonable. The court cited previous cases, and the statutory language in RESPA. It said the law was clear and not ambiguous, and that it does not allow The Department of Housing and Urban Development to impose its own interpretation. The court also said the section was aimed at banning abusive practices, not as a means of creating broad price controls.

House passes tax measure with HSA burden

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WASHINGTON (4/16/08)—The House voted late Tuesday to approve H.R. 5719, the Taxpayer Assistance and Simplification Act, which included a provision that the Credit Union National Association (CUNA) has said could threaten credit union participation in Health Savings Accounts (HSAs). The House voted 238 to 179 to include language in the bill that would require HSA providers to take on the role of verifying that each distribution is used for a qualified medical expense. John Hildreth, CUNA senior legislative representative, termed the policing provision “very detrimental to HSAs” explaining that it would drive many credit unions out of the HSA market. He said the bill would ultimately be bad for consumers because it would likely restrict the general availability of HSAs. Last week, the House Ways and Means Committee passed the tax package, including the HSA provision, 24 to 17. Rep. Paul Ryan (R-Wisc.) had offered an amendment to strike the substantiation clause, but lost that effort in a 25 to 15 vote. CUNA launched a significant lobbying effort against the HSA substantiation provisions prior to the committee's vote and won a two-year delay in the implementation of the provision.

Inside Washington (04/15/2008)

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* WASHINGTON (4/16/08)--The Federal Deposit Insurance Corp. (FDIC) board of directors was set to meet yesterday on capital reforms for community banks. Basel II, which implements international capital reform, was adopted in December but none of the 12 Federal Home Loan banks have yet adopted it (American Banker April 15). The board also was expected to increase the use of covered bonds, which some say could help the credit crisis. Currently, the bonds require a 90-day delay on reclaiming assets from a failed institution ... * WASHINGTON (4/16/08)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) yesterday asked the Federal Reserve and the Treasury Department to help prevent the student loan aid market from collapsing (CNNMoney.com April 15). Dodd said he would write the Fed and the Treasury with his request soon. Dodd said he would like them to provide liquidity to the industry or tap the Federal Financing Bank. If the two do not succeed in helping the market, the senator said he would prepare for legislation. A number of student lenders have said they may not lend to students given the credit crunch, which depletes the number of loans available to those enrolling at colleges and universities in the fall ... * WASHINGTON (4/16/08)--Several free policy forums will be webcast for small business owners nationwide next week during National Small Business Week. The webcasts begin Tuesday with an address by former Speaker of the House of Representatives Newt Gingrich at 10:30 a.m. EST. Following his remarks, discussions on “Cost and Coverage: Healthcare Chicken and Egg” will begin, followed by “Going Global: Accessing New Markets” ... * WASHINGTON (4/16/08)--The witness list for Wednesday’s hearing of the House Subcommittee on the Foreclosure Prevention and Sound Mortgage Servicing Act has been announced. Witnesses include Faith Schwartz, executive director, HOPE NOW Alliance; Julia Gordon, policy counsel, Center for Responsible Lending; Laura Maggiano, deputy director of the Office of Single Family Asset Management, Department of Housing and Urban Development; David Kittle, chairman-elect of the Mortgage Bankers Association; Tom Deutsch, American Securitization Forum; and Steve Bailey, senior managing director, Countrywide Financial ...