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April 30 is deadline for CDCI applications

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WASHINGTON (4/26/10)—For credit unions and other Community Development Financial Institutions (CDFIs) interested in the U.S. Treasury Department’s Community Development Capital Initiative (CDCI), there is an April 30 deadline for applications. The CDCI program, announced Feb. 3, is designed to increase lending in low-income communities. It gives Treasury a means to invest low-cost capital in specific financial institutions, including certain certified CDFI credit unions. Qualified CDFIs can obtain up to 3.5% of their assets as secondary capital, which will count toward their regulatory net worth. (CDCI), expected to provide another $200 million to CDFI credit unions and banks. The April 30 deadline is an extension from the original April 2 date set for Low-income credit unions and April 16 cut-off for uncertified low-income credit unions (LICUs). Eligibility for the CDCI program will be determined by the National Credit Union Administration (NCUA) along with Treasury. CDCI funds are only available to CDFI-certified credit unions that are also low-income designated by NCUA. Credit unions without low-income designation are not permitted to accept Secondary Capital. Well-capitalized credit unions are expected to qualify readily, in the absence of material negative trends. Credit unions that fall below that standard may still qualify for funds if they can obtain matching secondary capital from non-governmental sources. For instance, the National Federation of Community Development Credit Unions (Federation) announced in March it would make $1 million in secondary capital available as matching funds for member CDCUs that might not be immediately eligible for CDCI investments. Also of note, the federation has developed a fact sheet covering nine frequently asked questions about the CDCI. The Federation document notes that while the program falls under the government's TARP authority, it is "very different from TARP for banks," which is often referred to as bailout money. CDCI is "not to bail out failing institutions," the Federation underscores. "It is a highly targeted program to enhance lending to low-income communities." Currently, an estimated 100 credit unions have applied for CDCI funds, and the federation estimates that awards will total around $200 million. Use the resource links below for more information.

Fed slates series of summer HMDA hearings

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WASHINGTON (4/26/10)—Starting in July, the Federal Reserve Board will conduct a series of four hearings on possible changes to its rules implementing the Home Mortgage Disclosure Act (HMDA), Regulation C. Mortgage lenders, consumers, and community and consumer organizations, as well as other interested parties, are invited to participate in the hearings involving the law that, in part, requires mortgage lenders to provide detailed annual reports of their mortgage lending activity to regulators and the public. In an announcement Friday, the Fed said the hearings will serve three objectives. First, the Fed board will gather information to evaluate whether the 2002 revisions to Regulation C, which required lenders to report mortgage pricing data, helped provide useful and accurate information about the mortgage market. Second, the hearings will provide information that will help the agency assess the need for additional data and other improvements. Finally, the Fed hopes the hearings will help identify emerging issues in the mortgage market that may warrant additional research. The Credit Union National Association, working with its Consumer Protection Subcommittee, will request to participate and will provide credit union information and recommendations to the Fed. The hearings will take place at:
* The Federal Reserve Bank of Atlanta on July 15; * The Federal Reserve Bank of San Francisco on Aug. 5; * The Federal Reserve Bank of Chicago on Sept. 16, and; * The Federal Reserve Board in Washington, D.C. on Sept. 24.
For more information, use the resource link below periodically as more information about the agenda becomes available.

CUNA New health care extends tax incentives to small CUs

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WASHINGTON (4/26/10)--Thanks to recent changes to national healthcare policy, many small credit unions should be eligible for the “Employee Health Insurance Expenses of Small Employers” tax credit for small, tax-exempt employers provided by the recently passed legislation. In a letter to credit union leagues and other representatives, Credit Union National Association (CUNA) President/CEO Dan Mica said that even though the U.S. Congress’s original bill would not have made tax-exempt employers eligible for any form of healthcare tax credit, the Congress did extend “a portion of the small employer tax incentive to not-for-profit employers, including qualifying credit unions and credit union leagues.” CUNA had advocated changing the legislation, as this provision, as originally written, “would have put credit unions and credit union leagues at a specific disadvantage compared to other similar sized employers.” The Internal Revenue Service last week reminded small business owners of this tax policy change through a series of mailings. To qualify for the tax credit, employers must cover a minimum of 50% of employee healthcare costs, based on the single rate. Those employers “must have less than the equivalent of 25 full-time workers,” and must “pay average annual wages below $50,000,” the IRS added. However, “businesses that use part-time help may qualify even if they employ more than 25 individuals,” the IRS said. Both for-profit and tax-exempt entities that qualify for the credit may claim up to 35% and 25%, respectively, of their 2010 premium costs under most circumstances, and that rate will increase to 50% of premium costs for for-profit entities and 35% of premium costs for non-profit entities in 2014. “The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers,” the IRS added. For more on the tax credit, use the resource link.

Inside Washington (04/23/2010)

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* WASHINGTON (4/23/10)--Credit ratings agencies suspected as early as 2006 that the top ratings given to mortgage-backed securities were flawed, but they failed to take action, according to Sen. Carl Levin (D-Mich.), the chairman of the Senate Permanent Subcommittee on Investigations. Levin told reporters that Standard & Poor’s Rating Services, Moody’s and Fitch Ratings downplayed the riskiness of toxic securities because they failed to reevaluate their ratings--which later worsened the financial crisis (American Banker April 23). Levin was slated to hold a hearing Friday on the topic. He also released a report with e-mails and other documents from the three credit agencies. His report indicates that the agencies suspected as early as 2004 that mortgage fraud, rising housing prices and loose underwriting was undermining their credit models. By 2006, Moody’s and Standard and Poor’s revised their rating models to more accurately account for risk, but didn’t apply those models to existing securities until mid-2007, when thousands were downgraded. The downgrade was likely an “immediate trigger” of the 2008 financial crisis, Levin said ... * WASHINGTON (4/23/10)--The Treasury Department is threatening to cut back incentive payments--or in some cases, deny them--to mortgage servicers who are not modifying loans according to the administration’s guidelines for the Home Affordable Modification Program (HAMP). The department said it has documented cases where servicers wrongly foreclosed on properties or denied modifications before reviewing a borrowers for HAMP (American Banker April 23). HAMP is voluntary, and pays $1,000 for each completed permanent modification for a delinquent borrower and $500 for each modification given to a current borrower. Servicer payments have totaled $68.4 million so far, and 109 servicers are participating. The violations Treasury has found seem to do with communications with borrowers about their rights regarding foreclosure, said Meg Reilly, Treasury spokesperson. By March 31 of this year, about 230,801 borrowers had received permanent modifications, and more than one million were in trial modifications. When HAMP was introduced in 2009, Treasury said it would help three to four million borrowers avoid foreclosure by reducing monthly payments ... * WASHINGTON (4/26/10)--The Supreme Court ruled Wednesday in a 7-2 opinion that makes it easier for consumers to sue collectors who send collection notices in error. The High Court ruled that collectors can’t protect themselves from such lawsuits by simply stating they made an error when issuing the notice. AT issue were the actions of a law firm, Carlisle, McNellie, Rini, Kramer & Ulrich Co. that sent foreclosure proceedings on behalf of Countrywide Home Loans Inc. by mistake. A homeowner sued the firm, saying it violated the Fair Debt Collection Practices Act (American Banker April 23). The case will return to a lower court ...