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Inside Washington (04/30/2009)

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* WASHINGTON (5/1/09)--As federal regulators prepare to release the results of stress tests conducted at 19 national banks, financial observers wonder if the results could lead to Camel rating disclosures as well (American Banker April 30). Camel ratings assign an institution a score between 1 to 5--with 5 being the weakest. In the past, regulators have argued that releasing Camel ratings would cause a bank panic. Karen Shaw Petrou, managing director, Federal Financial Analytics, said releasing Camel ratings could encourage banks to do better. She likened the rating to a gradepoint average--a standard which students often share with each other. If a bank were downgraded, it might try to raise its rating again. Joseph Mason, financial professor at Louisiana State University, said disclosure on the ratings could help lawmakers direct where public funds should go. It also could improve supervision of institutions, he said ... * WASHINGTON (5/1/09)--The majority of financial institutions that underwent stress test are expected to pass, according to financial observers (American Banker April 30). Institutions that need more capital will convert preferred government shares to common stock, though it is unclear which institutions may need help. Bloomberg News reported Tuesday that Bank of America, Citi, KeyCorp, Regions Financial Corp., and SunTrust Banks Inc. may need more capital ... * WASHINGTON (5/1/09)--Ana Recio Harvey, recent president of the Greater Washington Hispanic Chamber of Commerce, has been named as the head of the Small Business Administration’s (SBA) Office of Women’s Business Ownership, SBA Administrator Karen Mills announced Thursday. Harvey will manage SBA’s efforts to promote the growth of women-oriented businesses through programs that address business training and technical assistance, and provide access to credit and capital, federal contracts and international trade opportunities. Harvey also will direct the SBA’s network of Women’s Business Centers ...

Credit card reforms pass House

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WASHINGTON (5/1/09)—The Credit Cardholders' Bill of Rights Act (H.R. 627) was approved by a 357-70 in the House Thursday, and a Senate vote on a similar bill (S. 414) is expected as early as next week. The House and Senate bills, for the most part, track credit card best practices that were adopted by federal regulators and go into effect next July. Both the regulators' rules and the legislation would ban double-cycle billing, universal default and prolonged payment periods, among other consumer-averse practices. However, the bills go a bit further in what they address. For instance, the lawmakers' plans would provide greater protections for underage consumers and would limit some fees. The Credit Union National Association (CUNA) generally supported the version of the bill that was approved by the House Financial Services Committee earlier in April because credit unions largely do not engage in the types of practices outlined in the legislative prohibitions, and the bill mirrored regulations credit unions will have follow beginning in July 2010. CUNA did express concerns about the legislation’s original effective date, and supported a successful amendment to the bill that extended the legislation's effective date from three months to one year after enactment or June 1, 2010--whichever comes first. "The House did approve several amendments," said Ryan Donovan, CUNA vice president of legislative affairs. "We've been reviewing the amendments and preparing for Senate consideration of the (Sen. Christopher) Dodd credit card bill next week." Donovan noted that ultimately a House-Senate conference committee may have to resolve differences between the two bills.

CUNA writes letter in support of NCUSIF amendment

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WASHINGTON (5/1/09)--Credit Union National Association (CUNA) President/CEO Dan Mica sent a letter of support Thursday to senators regarding an amendment to a housing bill that would extend the increase in federal share and deposit insurance. The amendment was added to S. 896, “Helping Families Save Their Homes Act of 2009” as the Senate debated the bill yesterday. It would extend for four years the increase in deposit insurance coverage, to $250,000, for the National Credit Union Share Insurance Fund and the Federal Deposit Insurance Corp. Congress enacted the coverage on a temporary basis as part of the Emergency Economic Stabilization Act of 2008, to underscore the safety of funds deposited in the nation’s credit unions and banks. The amendment would help credit unions “continue to help their members weather the financial crisis and maintain member confidence in credit unions,” Mica said. In addition to the insurance coverage, the amendment contains other provisions of key importance to credit unions. It would:
* Increase the National Credit Union Administration’s (NCUA) borrowing authority from Treasury from $100 million to $6 billion, with the ability to borrow as much as $30 billion in exigent circumstances through December 2010; and * Establish a Temporary Corporate Stabilization Fund that would also help NCUA spread out credit unions’ insurance costs over seven years.
CUNA strongly supports each of these provisions, and appreciates the Senate’s timely consideration of the amendment, Mica added. (See related story: CU action urged on NCUSIF provisions)

Seven cited in NCUA prohibition orders

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ALEXANDRIA, Va. (5/1/09)--The National Credit Union Administration (NCUA) Board has cited seven individuals in prohibition orders for offenses including bank fraud and larceny. According to NCUA, these former credit union personnel are prohibited from participating in the affairs of any federally insured institution:
* Robin E. Anderson, former branch manager of Advantage One CU, Morrison, Ill., who was convicted of bank fraud and sentenced to 27 months in prison, 3 years of supervised probation and ordered to pay $337,216 in restitution; * Hong Kyu Chun, former employee at Korean American Chamber of Commerce FCU, Bronx, N.Y., who was convicted of bank fraud and sentenced to 6 months house arrest, 3 years of supervised probation and ordered to pay $70,000 in restitution to the credit union; * Nora Costlow, former manager of BMA CU, Mesquite, Texas, who consented to entry of a prohibition order to avoid the time and cost of litigation; * Renee Gooden, former temporary employee of Empower FCU, Syracuse, N.Y., who was convicted of grand larceny and sentenced to 4 concurrent weekends in jail, 5 years of supervised release and ordered to pay $4,550 in restitution; * Leah Louise Krueger, former employee of Reliant FCU, Casper, Wyo., who pleaded guilty to larceny and received a suspended sentence of 6 to 8 years, which will be vacated provided 10 years of supervised probation is successfully completed. Krueger was order to pay $90,000 in restitution; * Nicola Graham-Perkins, former employee of North Broward Hospital District FCU, Ft. Lauderdale, Fla., who consented to entry of a prohibition order to avoid the time and cost of litigation; and * Kim Streibich, former employee of Silverado CU, Mountain View, Calif., who was convicted of grand theft and taking, damaging or destruction of property, and she was sentenced to 9 months in jail and 5 years of supervised probation.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For more information, use the link.

Predatory mortgage bill moves to House floor

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WASHINGTON (5/1/09)--A bill to curb abusive and predatory lending could be on its way to the House as early as next week. On Wednesday, the House Financial Services Committee approved H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. The legislation was sponsored by Reps. Brad Miller (D-N.C.), Mel Watt (D-N.C.), and Barney Frank (D-Mass.). The bill would:
* Ensure that mortgage lenders make loans that are beneficial for a borrower by banning yield spread premiums and other abusive compensation structures that reward originators for “steering” borrowers toward higher cost loans; * Require originators to disclose to consumers the compensation they receive from the transaction; * For mortgage refinancings, require that all loans provide a net tangible benefit to the consumer. Also, it would make the secondary mortgage market responsible for complying with these standards when it buys loans and turn them into securities; and * Require new federal rules to be written to require creditors to retain an economic interest in a material portion--at least 5%--of the credit risk of each loan that the creditor transfers, sells, or conveys to a third party. Federal banking agencies would have the authority to make exceptions to the bill’s risk retention provisions, including form and amount.
H.R. 1728 also encourages the market to move back toward fixed-rate, fully documented loans. During the housing boom, some mortgage lenders moved away from traditional underwriting practices in favor of more exotic loans. The Credit Union National Association (CUNA) supports the bill’s intent, although it has warned lawmakers that the legislation could conflict with regulatory actions already in place to curb abusive lending. Prior to the panel's approval of the bill, CUNA President/CEO Dan Mica sent a letter to Frank and Rep. Spencer Bachus (R-Ala.), encouraging the committee to consider "only those statutory changes which are absolutely essential." CUNA also has advised federal lawmakers that some provisions in the bill may be more appropriate for the mortgage brokerage industry. Credit unions have a long history of favorable lending practices, CUNA has said.

Helping Families debate to wrap up today

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WASHINGTON (5/1/09)—The Senate is expected to complete debate today on S. 896, the Helping Families Save Their Homes Act, and vote on the legislation that is primarily intended to help more homeowners stave off foreclosure. During yesterday’s consideration of the bill, the Senate spent hours deliberating over a judicial mortgage modification amendment offered by Sen. Richard Durbin (D-Ill.). The language, similar to that contained in a comparable House-approved bill that would allow bankruptcy judges to change terms of existing mortgage, was rejected 51-45 by the Senate. (See related story: Senate rejects ‘cramdown’ amendment.) Still being debated today are provisions, offered as an amendment by Sens. Christopher Dodd (D-Conn.) and Richard Shelby (R-Ala.), that would execute important changes for credit unions. The amendment, expected to succeed in some form, would:
* Create a Temporary Corporate Credit Union Stabilization Fund; * Allow credit unions to spread out the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. It would reduce from 1% of a credit union's insured shares to 0.15% of insured shares this year's cost of the National Credit Union Administration's corporate stabilization plan. * Increase National Credit Union Administration (NCUA) borrowing authority; and * Extend the higher share and deposit insurance coverage levels, first set as a temporary measure in October 2008 as part of the Emergency Economic Stabilization Act.
The Credit Union National Association (CUNA) strongly supports each of these provisions. CUNA President/CEO Dan Mica has contacted Senate lawmakers noting that CUNA appreciates the Senate’s timely consideration of the credit union provisions. Regarding the mortgage bankruptcy language, the issue could come up again, perhaps during a House-Senate conference convened to work out the differences between the two bodies’ legislation.

Senate rejects cramdown amendment

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WASHINGTON (5/1/09)—As the Senate Thursday moved toward final action on S. 896, the Helping Families Save Their Homes Act, it voted down by a six-vote margin an amendment that would have allowed judicial mortgage modifications. However, the provision’s chief sponsor—Senate Majority Whip Richard Durbin (D-Ill.)—put the Senate on notice that this defeat, with a 51-45 vote, is not the end of his battle to enact the mortgage bankruptcy provisions. Durbin declared on the Senate floor that if the language is not added to a House-Senate conference version of the bill at a later date, he will be back to the Senate with another bill. The Credit Union National Association (CUNA) was strongly opposed to the House-approved mortgage bankruptcy provisions. However, CUNA remained steadfast at the negotiating table in the Senate to help craft a bill that would represent good public policy while mitigating impact on credit unions. This week, when those negotiations stalled, CUNA President/CEO Dan Mica said CUNA is “gratified that we influenced a number of improvements to the legislation by our commitment." He also noted, “We have the utmost respect for Sen. Durbin; we look forward to working with him on many more important policy issues."