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NEW: FHFA adopts CUNA view, won't reduce Fannie, Freddie loan limits

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WASHINGTON (5/13/14 UPDATED 12:45 P.M. ET)--The Federal Housing Finance Agency (FHFA) will not reduce loan limits and will continue allowing Fannie Mae and Freddie Mac to purchase loans when the borrower has a debt-to-income (DTI) ratio of higher than 43% but also has other compensating strengths,  Director Mel Watt said in a speech today. The FHFA also released a strategic plan today for the future of the government-sponsored enterprises (GSEs)--one in which the agency will not involve itself in policy decisions on housing reform.

"The announcement about loan and DTI limits is welcome news for borrowers and credit unions alike. CUNA has repeatedly urged that loan limits not be reduced and we are gratified that this position has been accepted," noted Eric Richard, Credit Union National Association general counsel, who added, "The health of the housing finance market requires that the current system be kept viable as long as possible until Congress acts on reforms and we are pleased that the agency is taking steps to help ensure that outcome."

CUNA has also urged that the FHFA make it clear that creditors will be able to continue selling to the GSEs mortgage loans involving a borrower's DTI that is higher than 43%, the threshold for a "qualified mortgage" under the Consumer Financial Protection Bureau's "Ability to Repay" rule, when the borrower has the capacity to repay the loan.
CUNA President/CEO Bill Cheney and senior CUNA staff met with Watt and members of his team in April.
"Our task is to continue to fulfill our statutory mandates, to execute our Strategic Plan and to manage the present status of Fannie Mae and Freddie Mac," Watt said in prepared remarks at the Brookings Institution.

"This means, first and foremost, that we must ensure that Fannie Mae and Freddie Mac operate in a safe and sound manner.  It means that we'll work to preserve and conserve Fannie Mae and Freddie Mac's assets," he said, adding, "It means that we'll work to ensure a liquid and efficient national housing finance market."

Because it is not part of the agency's statutory mandate, the FHFA will not take on housing finance reform legislation. "My guess is that there were many people who expected that I would start talking about reform legislation the minute I got to FHFA," Watt said.

"I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary.  However, Congress and the Administration have the important job of deciding on housing finance reform legislation, not FHFA."

He also announced:
  • The agency will be working to stabilize communities hardest hit by foreclosures with a Neighborhood Stabilization Initiative with Fannie Mae, Freddie Mac and the National Community Stabilization Trust; and
  • Eligibility parameters for the Home Affordable Refinance Program will not be extended, but the agency is retargeting its outreach efforts.

Housing reform markup expected to resume Thursday

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WASHINGTON (5/13/14)--While the U.S. House is out of session this week, the Senate side of the U.S. Congress will remain busy, with that body's banking committee set to resume consideration of housing finance market reform legislation at 10 a.m. (ET) Thursday.

The committee continues its work on the 425-page Housing Finance Reform and Taxpayer Protection Act of 2014 (S. 1217), which would overhaul the housing finance market and address the issues created by the current government ownership of Fannie Mae and Freddie Mac.

Committee Chairman Tim Johnson (D-S.D.) delayed a scheduled April 29 markup of the bill to gain support. However, Democratic Sens. Charles Schumer (N.Y.), Sherrod Brown (Ohio), Jeff Merkley (Ore.), Robert Menendez (N.J.), Elizabeth Warren (Mass.) and Jack Reed (R.I.) last week reportedly said the proposed structure of a new mortgage reinsurance body was unworkable. They also said the proposed bill did not do enough to address affordable housing issues, Bloomberg reported.

The Credit Union National Association is working to analyze new legislative language added to the proposal.

Legislation of interest to credit unions will also likely be front and center next week, when the House Financial Services Committee may resume a markup it delayed last week. Bills which CUNA supports include:
  • The Portfolio Lending and Mortgage Access Act (H.R. 2673);
  • The Financial Regulatory Clarity Act (H.R. 4466); and
  • The Community Institution Mortgage Relief Act (H.R. 4521).
CUNA will continue to monitor the progress of these bills as they make their way through that committee.

NEW: Concerned about RBC proposal, 75% of U.S. Reps. sign letter to NCUA

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WASHINGTON (5/13/14 UPDATED 9:30 A.M. ET)--A bipartisan collection of more than 320 U.S. House members have joined Reps. Peter King (R-N.Y.) and Gregory Meeks  (D-N.Y.) to express their concern over the National Credit Union Administration's proposed risk-based capital regulation.
In particular, the lawmakers urge the federal agency to ensure the proposal does not adversely affect small businesses and credit union members.
"An overwhelming majority of the House--three in every four members--have come together in a bipartisan effort by Representatives King and Meeks to express concern over NCUA's proposed rule," said CUNA President/CEO Bill Cheney. "CUNA supports risk-based capital--but not the way that NCUA has proposed it. The fact that so many members of Congress have added their voices of concern bolsters credit unions' views that this proposal must be changed significantly.
"CUNA and the state leagues and associations thank the members of the House for speaking out on this key issue for credit unions--and we pledge to work with lawmakers to see that their concerns are addressed," Cheney said.
At issue is a proposal by the NCUA to impose on credit unions with greater than $50 million in assets new standards that would restructure the agency's current "prompt corrective action" regulation to involve calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks--although the risk weights would be substantially different for credit unions.
The NCUA proposal would change risk-based capital ratios and require higher minimum levels for credit unions with concentrations of assets in real estate loans, member business loans, or high levels of delinquent loans.
The letter encourages the NCUA to:
  • Take into account the cost and burden of implementing new risk-based capital requirements beyond the current leverage ratio;
  • Provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions; and
  • Give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.
"During the financial crisis, natural person credit unions served as an important source of liquidity in local communities and the overwhelming majority of them successfully weathered the downturn. These cooperatives did not engage in the risky lending practices that led up to the crisis and nearly all maintained their well-capitalized status," the letter notes.
"It is almost unprecedented for a letter to generate this much bipartisan support in such a short period of time," said Ryan Donovan, CUNA's senior vice president of legislative affairs. "At time when it is difficult to get Congress to agree on much of anything, more than 320 members speaking in one voice sends a message to NCUA that should be loud and clear."
The congressional co-signers include several traditional credit union supporters and members of the House Financial Services Committee, as well as a healthy number of members who have never publicly supported credit unions. The partisan breakdown on the letter, 173 Republicans and 151 Democrats, very closely aligns the partisan breakdown in the House of Representatives.
"Credit unions should be really pleased to see such balanced support for the letter. One might expect members who have co-sponsored supplemental capital or member business lending legislation to support the letter," Donovan said, adding, "But the letter is also supported by almost everyone on the House Financial Services Committee--the committee that provides oversight to the NCUA--and there are several dozen members on the letter who have not previously co-sponsored credit union legislation, and who did not write banking regulators during the BASEL III process.
"It really speaks to members of the House of Representatives understanding the concerns credit unions have regarding the proposed rule," he noted.
Comments on the RBC plan are due to the agency by May 28.

FSOC clarifies transparency policy

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WASHINGTON (5/13/14)--The Financial Services Oversight Committee (FSOC) released an updated transparency policy last week, after critics in Congress and across the financial world accused the group of keeping its decision-making processes under wraps.

The new policy opens up all FSOC meetings to the public through a live stream online, except in certain circumstances listed below. Minutes will be released for each meeting after it has concluded, but are subject to redaction at the discretion of the chair.
The new policy also states that meetings will be open to the public whenever possible, but notes "the central mission of the FSOC is to monitor systemic and emerging threats. This will require discussion of supervisory and other market-sensitive data, including information about individual firms, transactions, and markets that may only be obtained if maintained on a confidential basis. Protection of this information will be necessary in order to prevent destabilizing market speculation that could occur if that information were to be disclosed."
Determination of whether or not a meeting is closed will be made by the chair, or through an affirmative vote of the majority of committee members.

Examples of a meeting that would be closed include instanced where an open meeting could:
  • Result in the disclosure of trade secrets and commercial or financial information obtained from a person and privileged or confidential;
  • Result in the disclosure of information of a personal nature that would constitute an unwarranted invasion of personal privacy or be inconsistent with Federal privacy laws, or of information that relates solely to internal personnel rules or practices;
  • Result in the disclosure of investigatory records compiled for law enforcement or supervisory purposes; and
  • Necessarily and significantly compromise the mission or purposes of the FSOC, as determined by the chairman with the concurrence of a majority of the voting member agencies or by a majority of the voting member agencies.

CUs turned a corner in 2013: NCUA annual report

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ALEXANDRIA, Va. (5/13/14)--America's credit unions turned a corner in 2013, as federally insured credit unions experienced one of the best years on record, National Credit Union Administration Chairman Debbie Matz wrote in the 2013 annual report.

Highlights of 2013 touched on in the report include:
  • Credit union membership of 96.3 million;
  • Total assets of $1.06 trillion; and
  • An aggregate net worth ratio of 10.78%, the highest level reported since the first quarter of 2009.
In 2013, "a strengthening economy led to increased loan demand and fewer delinquencies," Matz added. Loans expanded by 8% from 2012's total, with loans growing in all categories.

Credit unions' combined delinquency ratio totaled 1.01%, a 15 basis-point (bp) decline from 2012's total, the NCUA reported. Charge-offs also declined to 0.57%, a 16 bp reduction from 2012's total.

The report also detailed its four strategic goals of:
  • Ensuring a safe, sound and healthy credit union system;
  • Promoting credit union access to all eligible persons;
  • Further developing a regulatory environment that is transparent and effective, with clearly articulated and easily understood regulations; and
  • Cultivating an environment that fosters a diverse, well-trained and motivated staff.
Of its 11 targets for ensuring a safe and healthy credit union system, NCUA missed only one--maintaining an aggregate net long-term asset ratio of less than 35%.
Under promoting credit union access, NCUA met seven of its eight targets, which included addressing consumer complaints within 45 business days, amassing a greater social media audience on Twitter, Facebook and YouTube and increasing exposure to its financial literacy website.
It met all five of its targets for its regulatory environment goal. It completed 26 fair lending examinations in 2013--above its target of 18 annually. The number of webinars more than tripled to 17. The publishing of information on the NCUA Guarantee Notes Program and the annual review of one-third of credit union regulations also were achieved.
For its work environment, NCUA met four of 10 targets--falling short in staff diversity and enhancing communications within the agency vertically and horizontally.
The NCUA expended just over 97% of its $248.8 million operating budget after returning $2.6 million of excess cash in the mid-session budget review, thereby reducing operating fees, according to a statement by NCUA Chief Financial Officer Mary Ann Woodson.

Increasing complexity, greater concentration of assets, rising interest rates, increasing liquidity needs and emerging cybersecurity threats were some of the threats facing credit unions in 2013, the NCUA added.

The report serves as the agency's official report to the president and Congress, and covers NCUA and credit union operations. The report also tabulates 10 years of financial trends for credit unions and the NCUSIF.

For the full NCUA report, use the resource link.

CDFI Fund opens application period for bond guarantee program

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WASHINGTON (5/13/14)--The U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund) opened the fiscal year 2014 application period for the CDFI Bond Guarantee Program.
The Notice of Guarantee Authority makes up to $750 million in bond guarantee authority available to eligible Community Development Financial Institutions (CDFIs) in fiscal year 2014.
Through the CDFI Bond Guarantee Program, certified CDFIs can issue federally guaranteed bonds and use bond proceeds to extend capital within the CDFI industry for community development financing and long-term community investments.
The Secretary of the Treasury may guarantee bond issues having a minimum size of $100 million each, up to an aggregate total of $750 million.  Multiple CDFIs may pool together in a single $100 million bond issuance provided that each eligible CDFI participates at a minimum of $10 million.
Authorized uses of the loans financed through bond proceeds include supporting commercial facilities that promote revitalization, community stability and job creation or retention; housing that is principally affordable to low-income people; businesses that provide jobs for low-income people or are owned by low-income people; and community or economic development in low-income and underserved rural areas.
Qualified Issuer Applications must be submitted through myCDFIFund by 11:59 p.m. (ET) June 23. Guarantee Applications must be submitted through myCDFIFund by 11:59 p.m. (ET) June 30.
Use the resource link for more information.

Moore Capito has CU support in W.Va. primary

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WASHINGTON (5/13/14)--Today's primary elections in West Virginia feature two candidates supported by the Credit Union National Association and the West Virginia Credit Union League (WVCUL).
Current Rep. Shelley Moore Capito (R-W.Va.) is running for the state's Senate seat, which is up for grabs in November due to the retirement of current Sen. Jay Rockefeller (D).
Capito has represented West Virginia's 2nd District since 2000, and serves as chair on the U.S. House Financial Services subcommittee on financial institutions and consumer credit. She is a well-known proponent of credit unions, and was one of several members of Congress who addressed the Credit Union National Association's Governmental Affairs Conference in February.
Her comments were captured by The Washington Post on March 3. "Credit unions need a great deal of regulatory flexibility to meet the needs of their members," she told the audience. "One-size-fits-all Washington regulations simply don't work."
WVCUL President Ken Watts praised Capito for her work on many important credit union issues.
"In her position as chairman of the Financial Services subcommittee on financial institutions and consumer credit, Rep. Capito has brought to the forefront any number of key credit union issues, such as regulatory relief and examination fairness," Watts told News Now.
"She has been keenly interested in hearing the credit union perspective on these matters and remains in close contact to ensure she has the most current information available to her," he added. "The league has maintained a close working relationship with her during her time in the House and look forward to a similar relationship in the Senate."
Two other Republicans will face off against Capito in today's primary. The Democrats also have three candidates in their own primary.
Capito's campaign for Senate leaves her 2nd District seat open, and CUNA has backed candidate Charlotte Lane, who is running against seven other candidates today for the nomination. Lane is a former commissioner of the U.S. International Trade Commission.
"We've met with Charlotte Lane and found her to be very interested in the important work credit unions do in their respective communities by providing affordable credit to members," Watts said. "She also expressed her support for maintaining the credit union tax exemption."

Cordray: Accountability improves consumer experience

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WASHINGTON (5/13/14)--Consumer Finance Protection Bureau Director Richard Cordray spoke to the Federal Reserve Bank of Chicago Friday, saying the CFPB seeks accountability from financial institutions when it comes to the costs and risks of their products in order to create a better marketplace for consumers.
The CFPB's authority extends to all consumer finance markets, and they have regulatory oversight over all financial institutions with assets over $10 billion and their affiliates, institutions which comprise nearly three-quarters of U.S. banking market.
"We have been charged by Congress to assure that the markets for all of these consumer financial products are fair, transparent, and competitive. We expect a marketplace where companies are honest and clear so that consumers know the key terms and conditions of financial products up front, including pricing," Cordray said. "When consumers have the ability to compare between two financial products with knowledge of the true costs, actual benefits, and real risks, they will generally be better able to make decisions they can live with over time. And informed decision-making allows American consumers to drive the market toward products and services that meet genuine consumer preferences."
This primarily includes using supervisory and enforcement authority to push for compliance with the law in all instances. So far, these efforts have resulted in more than $3.5 billion in relief to consumers.
"In each of these instances, the monetary relief provided to past and current consumers was supplemented by prospective injunctive-style relief," Cordray said. "This relief is aimed at protecting future consumers, who should never have to suffer the same treatment because the company is being compelled to change its practices."
The CFPB has been publishing periodic documents, called "Supervisory Highlights," which describe problems and actions taken to remediate them, without identifying the specific institutions. In addition, the organization has solicited feedback from consumers themselves, and has received more than 350,000 complaints, which Cordray said have given it the ability to work with companies to address a specific complaint.
"The Consumer Bureau has organized itself around a central precept of paying close attention to what consumers themselves tell us," he said. "Ultimately, for every sound business it is the customers who provide the essential information about what to fix, when to fix it, and how to fix it."

OFAC, FinCEN topics of NCUA May 21 webinar

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WASHINGTON (5/13/14)--The National Credit Union Administration will host a free webinar May 21 at 2 p.m. (ET) to educate institutions on how to better comply with federal anti-money laundering requirements.
The webinar will cover Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) programs, enforcement authorities and their relationships with other financial services regulators.
Participants may receive a certificate of attendance, if they individually participate in the polls offered during the webcast and take a short quiz at the end of the webcast.
Online registration for the May 21 webinar is now open. Use the resource link.