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Johnson to testify on CU Fin. Ed. efforts

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WASHINGTON (4/10/08)--National Credit Union Administration Chairman JoAnn Johnson, along with other financial services regulators and private sector representatives, is slated to testify next Tuesday on financial literacy initiatives. The House Financial Services Committee scheduled the April 15 hearing to look at the effectiveness of both public and provide efforts to better educate the American public regarding financial options and decisions. “Learning to manage one’s spending is the most important thing an individual can do to ensure their family’s financial future. Unfortunately, too many Americans right now are struggling with unmanageable mortgage payments, credit card debt, and out-of-control spending habits,” said panel member Rep. Reuben Hinojosa in a committee release announcing the hearing. Hinojosa noted that the hearing is part of an on-going effort to discover what financial literacy programs work and to find ways to incorporate financial education into the classroom and into the day-to-day lives of consumers. “It will be a detriment to our nation’s economic future if so many Americans continue to mismanage their money, credit, and debt,” the Texas Democrat said. A full list of witnesses was not yet available.

Inside Washington (04/09/2008)

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* WASHINGTON (4/10/08)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair supports some parts of the Treasury Department’s blueprint to revise the U.S. financial system (American Banker April 9). Bair said that the almost-collapse of Bear Stearns Co. brings oversight problems to light. She noted that investment firms need prompt corrective action. The blueprint does not account for prompt corrective action, but a measure is included in the Federal Reserve Board’s new powers--allowing it to place corrective action on institutions when the market is unstable. Though Bair said she supported competition, she also noted that it’s “problematic” to have uneven regulation ... * WASHINGTON (4/10/08)--The Federal Reserve Board Tuesday met with representatives from the credit card industry to define unfair and deceptive practices. The Fed did not identify the companies that participated (American Banker April 9). Fed Gov. Randall Kroszner cited the gathering as a discussion of current issues that will help the Fed improve disclosures and protect cardholders ... * WASHINGTON (4/10/08)--The new Term Securities Lending Facility may not be enough to help the troubled market, Federal Reserve Board fficials said at a March 11 meeting. According to minutes released by the bank, “during the discussion, participants expressed concerns that establishment of the facility could be viewed as setting a precedent and thus raise expectations of other actions in the future, and they also noted some uncertainty about how effective the facility would be in practice.” ...

CUs warned of cell phone scam

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ALEXANDRIA, Va. (4/10/08)—A new fraud alert from the National Credit Union Administration (NCUA) warns of a scam that involves unsolicited text messages sent to cell phones. The message urges the recipient to call a number provided for information about account discrepancies and then seeks individual account information and pin numbers. “Cell phone users should be (wary) of unsolicited text messages. Such messages should be deleted and all deleted text messages should be removed, if possible, as the perpetrators have been known to use Spyware in conjunction with their text message solicitation,” the alert warns. In February, News Now reported that a cell phone text-message scam was targeted against Keesler FCU, of Biloxi, Mo. Text messages and faxes were broadcast to members and nonmembers in an attempt to get credit, debit or ATM card information. The messages appeared to come from the $1.5 billion credit union and requested that the recipient respond to the communication with the card number, personal identification number or other personal information.

CUNA questions Fed high-priced threshold

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WASHINGTON (4/10/08)—The current Federal Reserve Board proposal to revise its Regulation Z would make significant changes to current mortgage loans rules, and that is particularly true in regard to the threshold for “high-priced” loans, the Credit Union National Association (CUNA) wrote in its comment letter. CUNA questioned the proposed threshold for determining whether a loan is "high-priced" and, therefore, subject to additional restrictions, and argued that under the current language the Fed could capture “significantly more loans than the Board intended.” “We also believe that the Treasury securities to be used should mirror the requirements under the Home Mortgage Disclosure Act,” wrote CUNA Senior Assistant General Counsel Jeffrey Bloch. CUNA endorsed other parts of the Fed plan and wrote in support of such provisions requiring:
* Lenders to consider a borrower’s ability to repay a loan’ * Escrow accounts, which CUNA noted are the “most appropriate means” in which to ensure that tax and insurance payments are made on a timely basis, and are “essential” for subprime loans. These accounts should not be canceled after a short period, such as twelve months as contemplated in the proposal, CUNA recommended; and * Restrictions on prepayment penalties, even ones that are more stringent than those currently proposed by the Board.
In its letter, CUNA also suggested that the required compliance date for the proposal be the same as the required compliance date for the final version of the additional closed-end lending changes that the Fed expects to propose later this year.

Mica Treasury plan lacks understanding of CU role

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WASHINGTON (4/10/08)—The U.S. Treasury Department’s recently unveiled “Blueprint for a Modernized Financial Regulatory Structure” disregards the Bush administration’s longstanding support for credit unions and shows a “complete misunderstanding and misrepresentation of our mission, purpose and function,” wrote Credit Union National Association (CUNA) President/CEO Dan Mica in a April 10 letter. In his letter to Treasury Secretary Henry Paulson, Mica said, “When I asked you during last week’s press conference if there was something credit unions had done to be treated in this manner – essentially put on track to be put out of business – your response was, ‘that is not our intent and that would not be the effect.’ “However, our review of the actual recommendations clearly reveals that the report does not support that comment.” Mica then outlined the ways in which the “blueprint” represents a change in posture toward credit unions by Treasury from positive to negative. Mica cited:
* A significant percentage of the nation’s larger credit unions would no longer be tax exempt and have little incentive to operate as cooperatives owned by their members; * Under the “Blueprint,” a mere 6% of the assets under supervision of the proposed Prudential Financial Regulator would be in not-for-profit, cooperative federally insured depository institutions (FIDIs), i.e., former credit unions. The types of regulation and supervision that a for-profit institution requires are very different from those that best apply to not-for-profit cooperatives; *Nothing in the report calls for the single regulator to have employees who specialize in regulating institutions other than banks; *Given the distribution of assets under supervision, almost all banks, it appears unlikely that the Prudential Financial Regulator would not expect all institutions to act like for-profit banks, and design its regulations and supervision to deal with for-profit institutions; and *A number of descriptions in the report regarding credit unions are very similar to the mischaracterizations that the banking industry routinely uses. Some of the most biased statements in the report are found on page 160, reflecting banker rhetoric that credit unions must only serve those of modest means and must remain small institutions.
“Given the Treasury’s lack of understanding about credit unions, it is no surprise that the 'Blueprint' would set in motion a plan that will result in their demise,” Mica wrote. “In the process, consumers would not be protected and an important alternative to for-profit banks would be eliminated from the financial marketplace in the name of efficiency." Use the resource link below for the full text of the CUNA letter to Treasury.

Bush administration offers new housing plan

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WASHINGTON (4/10/08)—The Bush administration Wednesday announced a new plan to help troubled subprime mortgage borrowers by easing rules for new mortgages that could be insured by the federal government. Under the effort, the Federal Housing Administration (FHA), a branch of the U.S. Department of Housing and Urban Development (HUD), would new flexibility to insure mortgages for borrowers who were late on a few payments and those who have received a voluntary mortgage principal write-down from their lender. FHA Commissioner Brian Montgomery announced the new proposal at a hearing of the House Financial Services Committee, convened to discuss the economic, mortgage and housing rescue plan its chairman, Rep. Barney Frank (D-Mass.), unveiled last week with Senate Banking Committee Chairman Christopher Dodd (D-Conn.) Montgomery said of the administration’s proposal, "Our plan will help hundreds of thousands of desperate families who have no place else to turn for safer, lower cost ways to keep their homes. We want to be able to help families who are in the right house, but the wrong mortgage." He estimated that the proposed expansion of the FHASecure program could help about 500,000 families, struggling with high-cost subprime loans, to refinance into prime-rate FHA-insured mortgages in total by the end of this year. While both the FHA plan and Frank’s plan seek to shore up the floundering housing market by shifting over-burdened subprime borrowers into the stability and affordability of more traditional 30-year, government-backed loans, The New York Times estimated Wednesday that Frank’s more expansive plan could help 1.5 million borrowers.

New bill takes tax approach to foreclosure assistance

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WASHINGTON (4/10/08)—The leader of the House tax-writing panel has introduced another in the growing line of foreclosure assistance measures. The legislation drafted by House Ways and Means Chairman Charles Rangel (D-N.Y.) would provide tax credit for first-time homebuyers and work to improve access to low-income housing. Rangel’s committee voted 35 to 5 in favor of the bill Wednesday, and the chairman said he expects The Housing Assistance Tax Act of 2008 to reach the House floor for consideration in the coming weeks. "We need to provide relief to the buyers and families themselves, not just the banks and builders," said Rangel of his bill, which he said, “puts families first - offering a refundable tax credit to first-time homebuyers, essentially a zero-interest loan to help defray the cost of purchasing a house.” The bill will also expand a low-income housing tax credit, a move intended to put builders to work and to create affordable alternatives for families seeking new housing. The main provisions of the Rangel bill include:
* The first-time homebuyer tax credit to assist in making a down payment on a home, which would provide individuals and families with a refundable of 10% of the purchase price of their home, up to $7,500. Taxpayers would be required to repay any amount received under this provision to the government over 15 years in equal installments, making it in essence an interest-free loan. The credit would be phased out for taxpayers with adjusted gross income in excess of $70,000, or $110,000 in the case of a joint return; * An additional standard deduction for real property taxes to help homeowners who claim the standard deduction by allowing them to claim an additional standard deduction of up to $350 ($700 for joint filers) for State and local real property taxes. This provision applies for 2008; * A temporary increase in low-income housing tax credit and simplification of the credit. The bill would increase a current limit of the credit from $2.00 for each person residing in a state by an additional 20 cents per resident. The credit would also be simplified to improve its effectiveness; and * A temporary increase in mortgage revenue bonds to allow for the issuance of an additional $10 billion of tax-exempt bonds to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.