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CUNA CU tax status allows affordable choices

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WASHINGTON (5/17/12)--Recent credit union member growth, resulting in part from last year's "Bank Transfer Day," is an indication that Americans want choices besides banks -- and the credit union tax exemption helps ensure that they will find affordable alternatives, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a letter to House Ways and Means Oversight Subcommittee Chairman Charles Boustany (R-La.).

The letter came in response to a banker request that the subcommittee hold a separate hearing on the tax status of credit unions.

In his letter to Boustany, Cheney stated that reasoning behind the credit union tax exemption remains strongly in place. "Inasmuch as there has been no change in the ownership structure of credit unions and credit unions continue to fulfill their mission, as evidenced by their growth and the substantial positive variance in benefits compared to cost, suggestions that the credit union tax status should be altered in any way should be rejected," Cheney wrote.

Cheney also provided a summary of the history of the credit union tax exemption, and a recounting of more recent events regarding the financial crisis in the nation. "Credit unions did not cause the financial crisis, and did not need a taxpayer-funded TARP bailout to survive," Cheney wrote. "One of the reasons that this has been the case is that the not-for-profit credit union ownership structure is fundamentally different than the for-profit bank ownership structure," he added.

The subcommittee on Wednesday discussed the operations of tax-exempt organizations, but the subcommittee members did not discuss the credit union tax status during that hearing.

For the full CUNA letter, use the resource link.

Vote on month-long NFIP extension delayed

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WASHINGTON (5/17/12)--After debate last night on a bill (H.R. 5740) that would extend the National Flood Insurance Program (NFIP) for 30 days, the U.S. House delayed a vote on that bill until today or tomorrow.

Speaking on the House floor yesterday in favor of the temporary extension, lead sponsor Rep. Judy Biggert (R-Ill.) noted the bill would expand private sector participation in flood insurance and allow private insurance coverage to take the place of government insurance in mortgage applications.

Biggert said this temporary NFIP extension would give the U.S. Senate 'more than enough time' to pass meaningful flood insurance reform. House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and other House members joined Biggert in urging the Senate to pass a five-year extension.

The NFIP is scheduled to lapse on May 31.

Legislation that would extend the NFIP for five years has already been approved in the House and by the Senate Banking Committee, but the full Senate has not acted on the legislation. Biggert said there is no reason the House and Senate cannot reconcile differences between their respective version of NFIP five-year extension legislation (S. 1309 and H.R. 1309) in the coming days.

Senate Majority Leader Harry Reid (D-Nev.) late Tuesday attempted to pass S. 2344, which would extend the NFIP through the end of this year, by unanimous consent, but Sen. Tom Coburn (R-Ok.) did not agree. Coburn is reportedly working on legislation that would extend the NFIP for a longer time period, perhaps as much as five years, and reform elements of the program.

The Credit Union National Association (CUNA) has urged members of the U.S. Congress to extend the NFIP or reform the program, as credit unions and other lenders cannot write certain mortgages without NFIP coverage. CUNA also recently joined a coalition of associations representing homebuilders, the insurance industry, other financial institutions, brokers, and others to ask Congress to act on NFIP issues.

CFPB briefing includes CU reps

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WASHINGTON (5/17/12)--At a briefing at the Consumer Financial Protection Bureau (CFPB) on mortgage servicing proposals, Chris McDonald, Andrews FCU president/CEO, warned regulators that proposed mortgage periodic statement requirements could create unnecessary added costs and burdens for credit unions.

McDonald, who attended the CFPB briefing at the Credit Union National Association's (CUNA) request, urged the bureau to use its statutory authority to exempt credit unions from any new mortgage servicing requirements where appropriate and permissible.

The CFPB asked CUNA to recommend representatives from credit unions with between $175 million and $1 billion in assets to attend this week's briefing and feedback session.

In addition to McDonald, Russ McAtee, Andrew's chief operating officer, and Christina Mihalik, vice president of governmental affairs for the Pennsylvania Credit Union Association, also attended at CUNA's request, as did Cosimo Manzo, vice president of mortgage finance for First Heritage Financial LLC. First Heritage is a credit union service organization that services mortgage loans for 28 credit unions. Jared Ihrig and Kristina Del Vecchio, of CUNA's regulatory affairs department, also attended.

The CFPB is working to implement provisions of the Dodd-Frank Act that mandate several protections for homeowners regarding the servicing of their mortgage loans. These include:

  •  New disclosures for mortgage loan periodic statements, notice prior to reset of adjustable rate mortgage terms, and force-placed insurance notices--all intended to provide consumers with comprehensive and comprehensible information so they can better manage their obligations and avoid unnecessary problems;
  • New requirements for timely response from servicers when a borrower complains about possible errors, and for responses that tell the borrower how the complaint was resolved and why;
  •  Prompt crediting of payments, so consumers are not wrongly penalized with late fees or other fees because a servicer did not credit their payments quickly; and
  •  Timely response to requests for payoff information, so consumers can get their balance information when they need it.
 The CFPB has indicated that it intends to issue a proposed rule to implement these new statutory requirements sometime in July, and the rules must be finalized not later than Jan. 21, 2013.

In addition to the statutory requirements, the CFPB is considering using its authority over mortgage servicers to require:

  • Information management policies and procedures;
  • Policies for early intervention for troubled or delinquent borrowers; and
  • Policies and procedures for servicers to provide continuity of contact for borrowers needing information on their loans.

Inside Washington (05/16/2012)

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  • WASHINGTON (5/17/12)--Uncertainty within the housing market has discouraged both lender and home buyers, Federal Reserve Board Gov. Elizabeth Duke said Monday. Duke said uncertainty has slowed several aspects of the market: the strength of the economic recovery and the trajectory of future house prices; the costs and liabilities of originating and servicing mortgage loans; the regulatory environment; and the future structure of Fannie Mae and Freddie Mac. As long as economic conditions remain tepid and unemployment remains high, lenders will be hesitant to apply for credit, Duke said. Reluctance to make loans because of the higher cost of servicing delinquent loans could stem from uncertainty about future standards for delinquency servicing, she added. Some uncertainty was resolved by state attorneys' general settlement with the five largest servicers and the consent orders that 14 large servicers have entered into with federal regulators. However, only about two-thirds of mortgages are covered by the settlement terms or are subject to consent orders, she said. Regulatory uncertainty has arisen from Dodd-Frank Act requirements to define a "qualified mortgage" and a "qualified residential mortgage," both of which could affect the cost and availability of credit, Duke said. The future role of the government in the mortgage market also remains unclear. Nearly three and a half years after the Fannie Mae and Freddie Mac entered conservatorship, policymakers have not reached consensus about the future structure of the government-sponsored enterprises …
  • WASHINGTON (5/17/12)--Although it has support from both Republicans and Democrats, a bill that would protect privileged information provided to the Consumer Financial Protection Bureau (CFPB) by financial institutions remains mired in the Senate. Industry observers believe Sen. Bob Corker (R-Tenn.) delayed the bill's passage by attempting to attach it to a larger package of changes to the Dodd-Frank Act (American Banker May 16). An identical version of the bill recently passed the House on a voice vote. The bill amends the Federal Deposit Insurance Act, 12 U.S.C. 1811, to specifically state that materials that financial institutions provide to the CFPB remain privileged under both attorney-client and work product privileges …
  • WASHINGTON (5/17/12)--Senate Majority Leader Harry Reid (D-Nev.) Tuesday moved the Senate toward voice votes on President Barack Obama's two nominees for the Federal Reserve Board. A vote could come today on whether to consider the nominations of Jerome Powell and Jeremy Stein. Sixty votes will be needed to move forward with a debate on the nominees (American Banker May 16). Reid cited the $2 billion trading loss at JPMorgan Chase as impetus for moving forward with the votes. Minority Leader Mitch McConnell (R-Ky.) suggested Powell and Stein have bipartisan support. Both were approved in March by the Senate Banking Committee. But Sens. David Vitter (R-La.) and Jim Demint (R-S.C.), registered objections to the committee's approval. Vitter told The Wall Street Journal last week that he has been blocking the nominations because of the Federal Reserve's monetary policies and the two nominees' close relationships with Fed Chairman Ben Bernanke …