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CUNA: Lawmakers' RBC letter effort had 'outstanding' CU, league support

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WASHINGTON (5/14/14)--Credit Union National Association President/CEO Bill Cheney said Tuesday that the hundreds of House members' signatures collected on a letter of concern over the National Credit Union Administration's proposed risk-based capital (RBC) regulation--and the short timeframe in which they were collected--could never have been accomplished without the outstanding efforts of credit unions and their state leagues.

As reported Tuesday in News Now, a bipartisan collection of more than 320 House lawmakers joined Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.) to urge the NCUA to ensure its RBC proposal does not adversely affect small businesses and credit union members.

"Reps. King and Meeks did an outstanding job of reaching out to their colleagues regarding the letter, but a number of members contacted them directly about the letter because of the concerns they heard from the credit unions in their district and their state league," Cheney said of the process behind credit union support of Meeks' and King's letter-writing effort.

"CUNA, our member credit unions and their 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 Tuesday when announcing the lawmakers' success.

At issue is the NCUA proposal that would 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.
For more on the RBC proposal and on the lawmakers' letter, use the resource links.

"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 said of the massive two-week effort.

"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."

Comments on the RBC plan are due to the agency by May 28. The agency has received about 350 comment letters to date.

NEW: Fryzel also assures of RBC plan changes

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WASHINGTON (5/14/14, UPDATED 9:40 a.m. ET)--National Credit Union Administration board member Michael Fryzel, responding to a letter from the Credit Union National Association, said that he is confident that significant changes will be made to the agency's current risk-based capital proposal for credit unions before it is finalized, reflecting a message that the agency chair and other board member have also stated.

However, Fryzel parted ways with his fellow regulators in his letter to CUNA when he said that if the question of extending the comment deadline on the proposal--as CUNA has recommended--came before the board for a vote, he would vote for an extension.  That opinion, however, puts him in a two-to-one minority as the others on the three-person board have told CUNA that they believe the current May 28 deadline is sufficient for comment gathering.

Fryzel was responding to a joint request by CUNA and the National Association of Federal Credit Unions for the comment extensions.

He wrote, " I am confident that, when the NCUA finalizes the risk-based capital rule, it will include significant changes from what has been proposed, and will incorporate the suggestions of your trade associations and credit unions across the country.
"I am a firm believer in taking the time to get a rule right. During the corporate crisis, quick decisions were necessary. We did not have the luxury of time. Fortunately, we are not in a crisis mode and should take this opportunity to proceed with all appropriate care and precision. The NCUA board can afford to take the time to get it right. "
The NCUA proposal would make changes to Prompt Corrective Action (PCA) rules, that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
CUNA supports risk-based capital, but strongly opposes the proposal the NCUA has issued for comment. Working with its Examination and Supervision Subcommittee, CUNA is developing its comment letter, and is encouraging all credit union with assets above $40 million to consider how the proposal will affect their operations and to file a comment letter.

Workshops set for CDFI Fund applications in 3 locations

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WASHINGTON (5/14/14)--The U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund) will host a series of application workshops to prepare the CDFI industry for the fiscal year 2014 round of the CDFI Bond Guarantee Program.
The workshops will include an in-depth discussion of the financial structure of the program, including: roles of the qualified issuer, program administrator and servicer; Capital Distribution Plan requirements; eligible CDFI and secondary loan requirements; costs of the CDFI Bond Guarantee Program and review processes for the qualified issuer and guarantee applications.
The fund announced earlier this week that it has opened the 2014 application period for the bond guarantee program  (News Now May 13). It will make up to $750 million in bond guarantee authority available to eligible CDFIs this year.
The CDFI Fund specifically encourages the participation of certified CDFIs, community development trade groups and associations, and others interested in community economic development finance who may be interested in submitting either a Qualified Issuer or Guarantee Application this fiscal year.
Workshops will be held June 2-3 in Detroit; June 10-11 in Washington, D.C.; and June 17-18 in San Francisco.

Use the resource link for more information.

FHFA aligns with CUNA view, won't reduce Fannie, Freddie loan limits

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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 Tuesday.

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.

Settlement between FDIC, Sallie Mae announced for UDAP, SCRA

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WASHINGTON (5/14/14)--The Federal Deposit Insurance Corp. announced a settlement with subsidiaries of SLM Corp. and Navient Corp. for alleged unfair and deceptive practices as well as violations of the Servicemembers Civil Relief Act (SCRA) related to student loans.

The settlement involved Sallie Mae Bank, Salt Lake City, and Navient Solutions Inc. (formerly known as Sallie Mae, Inc.), Olney, Md., subsidiaries of SLM Corp. and Navient Corp., respectively, according to an FDIC release.

The FDIC said that the parties (referred to as Sallie Mae in the FDIC order) violated federal law prohibiting unfair and deceptive practices by:
  • Inadequately disclosing its payment allocation methodologies to borrowers;
  • Allocating payments across multiple loans in a way that maximizes late fees; and
  • Inadequately disclosing how to avoid late fees in billing statements.
The FDIC also said it determined that Sallie Mae violated the SCRA by unfairly conditioning receipt of benefits upon requirements not in the act, improperly advising servicemembers they must be deployed to receive SCRA benefits, and failing to provide SCRA relief after having been put on notice of borrowers' active duty status.

Sallie Mae and Navient have been ordered to pay $6.6 million in penalties, $30 million in restitution to harmed borrowers, and fund a $60 million settlement fund with the U.S. Department of Justice. This is a result of an examination of Sallie Mae conducted by the FDIC.

A separate action has been taken by the Department of Justice with regard to violation of the SCRA.

In addition to the restitution payments and civil monetary penalty, the FDIC has ordered Sallie Mae to take affirmative steps to see that late fee and avoidance payment allocation are clear and conspicuous, that servicemembers receive proper treatment under the SCRA and that all residual violations are remedied in accordance with applicable laws.

Holly Petraeus, Consumer Financial Protection Bureau assistant director, Office of Servicemember Affairs, commended the actions by Justice and the FDIC. "The men and women serving this country should receive quality customer service and the legal protections afforded to them. Instead, Sallie Mae gave servicemembers the runaround and denied them the interest-rate reduction required by law," she said, adding, "This behavior is unacceptable. And it's particularly troubling from a company that benefits so generously from federal contracts."

She noted a 2012 CFPB report that found that servicemembers faced serious hurdles in accessing their student loan benefits, including the provisions of the SCRA which caps the interest rate on pre-existing student loans and other consumer credit products at 6% while the servicemember is on active duty. (See resource link.)

Remittance rule comment deadline extended by 10 days

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WASHINGTON (5/14/14)--The Consumer Financial Protection Bureau has extended the comment period for the modifications to its international remittance transfers rule. The comment period will now close June 6.

The new rule would extend a temporary provision, which is set to expire July 21, 2015, by an additional five years. The provision permits federally insured credit unions and other depository institutions to estimate certain remittance pricing disclosures.
The Credit Union National Association encourages credit unions to comment as the trade association works for improvements to the proposal, including an exemption level well over the 100 transfers per year that the CFPB currently provides.
Also, the proposal would make several clarifications and technical corrections, including to:
  • Consider whether U.S. military installations abroad should be considered being located in a U.S. state or a foreign country for purposes of the remittance rule;
  • Clarify that transfers from accounts primarily used for personal, family or household purposes would be subject to the remittance rule, but transfers from non-consumer accounts would not be subject to the rule;
  • Clarify that faxes are considered writings and would not be subject to additional requirements for electronic disclosures; and, separately, in certain circumstances, a remittance transfer provider may conduct the transaction orally and entirely by telephone after receiving a remittance inquiry from a consumer in writing (e.g., if a sender physically abroad a U.S. branch of a sender's institution attempts to initiate a transfer by first sending a mailed letter, and further communication by letter may be impractical.); and
  • Clarify that a provider's failure to deliver a transfer by the disclosed date of availability is not an error if such failure was caused by a delay related to a necessary investigation or other action to address Bank Secrecy Act, Office of Foreign Assets Control, or similar requirements; and, separately, to clarify remedies for certain errors.
CUNA continues to advocate to the CFPB to improve the international remittance transfer rule for credit unions, and is interested in how these proposed changes would affect the processing of international funds transfers at credit unions, corporate credit unions and other payment providers.
Use the resource link to access CUNA's Comment Call. CUNA's comment deadline has been extended to May 30.

CFPB designs 'easier' electronic format for Reg Z

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WASHINGTON (5/14/14)--The Consumer Financial Protection Bureau has launched an electronic version of Regulation Z, the flagship federal regulation protecting consumers in matters involving credit products.
Regulation Z implements the Truth in Lending Act (TILA) and has undergone several recent changes, including new rights and disclosures for mortgages.
The new format for Regulation Z uses CFPB's eRegulations tool, which was launched last year as a way to combine important information that is hard to navigate or spread over multiple pages throughout a regulation.
"By adding Regulation Z, one of the most complex and heavily consulted consumer financial regulations, we can help mortgage stakeholders better understand and comply with the recent amendments implementing the Ability to Repay rules, the new federal mortgage integrated disclosures, and other changes," reads the CFPB blog.

"Stakeholders who deal with credit cards, auto loans, student loans, and other consumer credit will also benefit, because Regulation Z covers virtually all forms of consumer credit."
The new eRegulations format allows consumers to view the current version of Regulation Z, previous versions beginning Dec. 30, 2011, as well as two amendments that will become effective on July 18, 2015, and Aug. 1, 2015.