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Inside Washington (05/07/2009)

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* WASHINGTON (5/8/09)--South Carolina credit unions hiked Capitol Hill Wednesday and attended a Credit Union House evening reception. Ten credit union CEOs and several credit union members were at the Hill hike event. The group met with Reps. Joe Wilson (R), John Spratt (D) and J. Gresham Barrett (R). During the hike, credit unions weighed in on the Corporate Stabilization Package--which passed the Senate Wednesday--and briefed their legislators on regulatory and National Credit Union Administration issues.
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Credit unions also noted members’ concerns regarding interchange fees, the Community Reinvestment Act, and member business lending. From left are: David Casey, Family Trust FCU; Garry Parks, president/CEO of the South Carolina Credit Union League; Scott Weaver, Carolina Foothills FCU; Bill Love, MTC FCU; Matt Tebbetts, Greenville FCU; Brandon Pugh, league director of communications and public relations; Steve Fowler, league executive vice president of advocacy; Jim Nunamaker, league director of governmental relations; Beverly Ellis, Family Trust FCU; Paul Hughes, Greenville FCU; and Smokey Childers, Family Trust FCU. (Photo provided by CUNA) ... * WASHINGTON (5/8/09)--The Internal Revenue Service (IRS) recently sent a reminder to tax-exempt organizations with $25,000 or less in total yearly gross receipts to file their Form 990-N, or e-Postcards, by May 15. According to the Credit Union National Association’s economics and statistics department, about 300 small, state-chartered credit unions are likely to need to file the e-Postcards, started last year. Credit unions that are subject to this reporting requirement should already have been notified … * WASHINGTON (5/8/09)--A bill by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) that would triple the Federal Deposit Insurance Corp.’s (FDIC) credit line was approved by the Senate Wednesday. The FDIC also would be restricted from using funds to help a Treasury program to allow investors to buy troubled bank loans (American Banker May 7). The bill would extend the FDIC temporary insurance increase of $250,000 per account to the end of 2013. The same bill includes provisions to create a temporary Corporate Credit Union Stabilization Fund and permit credit unions to spread the cost of National Credit Union Share Insurance Fund replenishment over a longer period of time (News Now May 7). Another provision important to credit unions would extend--for four years--the higher, $250,000 federal share and deposit insurance ceiling due to expire at the end of the year. The bill will be sent back to the House to work out differences between the House and Senate versions ... * WASHINGTON (5/8/09)--Federal Deposit Insurance Corp. (FDIC) Chair Sheila Bair said Wednesday that Congress should create a council to oversee financial institutions deemed “too big to fail.” The council could be made up of the nation’s top financial regulators (The New York Times May 7). Bair also said Congress should give incentives to make “too big to fail” institutions smaller, and those institutions could set aside extra capital or put money into insurance programs in case they have trouble again ... * WASHINGTON (5/8/09)--President Barack Obama Thursday released details of his plan to cut $17 billion from the budget in an effort to save money as government costs for health care, wars and bailouts continue to add up (The New York Times May 7). The $17 billion would be saved by reducing or eliminating 121 federal programs. Some of the cuts include eliminating a $35 million radio navigation system that has been rendered obsolete, absorbing a literacy program into other Education Department programs, and eliminating an education attache position for the United Nations Educational, Scientific and Cultural Organization (UNESCO). The president said the savings would be enough for $2,500 tuition tax credits for millions of students for larger Pell grants ... * WASHINGTON (5/8/09)--Stress test results indicate that the nation’s largest banks will need $75 billion to survive potential losses from the economic recession. The results, released Thursday afternoon, were based on tests conducted at 19 banks (The Washington Post May 7). Nine of the 19 banks do not need new capital, including Goldman Sachs and JPMorgan Chase. Eight can raise the capital they need by private money or common stock conversions. Wells Fargo needs $13.7 billion and Bank of America needs $33.9 billion. GMAC, the financing arm of General Motors, needs $9.1 billion in new capital, and Regions Financial Corp. of Alabama needs $400 million. Wells Fargo announced it would raise $6 billion through stock sales, and Morgan Stanley--which needs $1.8 billion--said it would raise $2 billion by selling stock ...

House mortgage reforms would limit abusive lending

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WASHINGTON (5/8/09)—The U.S. House of Representatives on Thursday voted 300-114 to approve H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act. A goal of the legislation, sponsored by Rep. Brad Miller (D-N.C.), is to persuade lenders to abandon more complex loan structures by returning to mortgages with simple fixed rates and adequate documentation. Creditors would be required to retain at least 5% of the balance of a mortgage loan that isn't a "qualified mortgage," a term defined to exclude loans with negative amortization, that aren't fully amortized and have balloon payments, that exceed certain interest rates, that have monthly payments that exceed a certain percentage of the borrower's monthly income (as determined by regulation), or that exceed 30 years. However, regulators would be able to adjust any of these restrictions if consistent with the intent of the law. Federal credit unions, which have authority to make loans for 40 years, would likely choose to seek relief from the 30-year restriction. The bill also looks to ban yield-spread premiums and other compensation structures that may be abused by loan originators, and, more generally, would force loan originators to disclose how they are compensated to homebuyers. House members also agreed to amendments that would standardize mortgage forms and strengthen rules regarding income verification for potential borrowers. The bill would also suspend revised Real Estate Settlement Procedures Act (RESPA) rules, scheduled to go into effect Jan. 1, 2010. Instead, if the bill is enacted into law, HUD and the Fed must within six months jointly issue proposed rules for providing compatible disclosures for borrowers to receive at the time of mortgage application and at the time of closing. Rep. Barney Frank (D-Mass.) promised to clarify portions of the bill, saying that he and others would work to better “spell out what is permitted” before the bill can be put into law. A number of representatives agreed that work should also be done to clarify any potential jurisdictional misunderstandings between federal and state authorities. The Credit Union National Association (CUNA) has previously said that while it supports the bill's intent, lawmakers should resist pressing for additional laws before assessing the effectiveness of a series of regulatory actions currently underway to address mortgage lending problems and concerns. There is no comparable bill in the Senate at this time. CUNA will be closely monitoring developments in the Senate in order to give credit unions some guidance this summer on the impact on their RESPA compliance programs.

Obama budget seeks big CDFI hike

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WASHINGTON (5/8/09)--The $234.6 million in Community Development Financial Institution (CDFI) funds contained in President Obama’s fiscal 2010 budget should be a boon to Credit Unions that lend to individuals and businesses in economically distressed areas. According to a May 7 release from the U.S. Department of Treasury, the new federal budget represents a 127 percent increase from the $107 million granted to CDFIs by the 2009 budget. Over $113 million of the fiscal 2010 total will be specifically targeted to treating financial issues in underserved communities, the release added. A further $80 million of the CDFI funds will go to the newly-established Capital Magnet Fund, a program aimed at enhancing investments in affordable housing opportunities for the very poorest Americans. The Treasury Department's CDFI Fund is designed to offer affordable sources of credit to small businesses, individual consumers, and potential homebuyers that could otherwise be excluded. CUNA, the National Federation of Community Development Credit Unions, and the Coalition of Community Development Financial Institutions have been steadfast in their efforts to increase CDFIF funding. Treasury currently extends CDFI certification to many non-government based financiers that work in targeted communities. The Treasury is holding a series of conference calls for financial institutions that may be interested in CDFI certification. For information on CDFI certification, see the resource link below.

Senate holds on credit reform bill for now

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WASHINGTON (5/8/09)—Credit Unions can expect a vote on pending credit card reform legislation sometime next week, Credit Union National Association (CUNA) Director of Federal Legislative Affairs Michele Johnson said on May 7. Any further discussion on S. 414, also known as the Credit CARD Act of 2009, has been pushed back for the time being, as the Senate instead began debate on S. 454, the Weapon Systems Acquisition Reform Act of 2009. However, Senate Majority Leader Harry Reid (D-Nev.) on Thursday told Reuters that Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and ranking minority member Richard Shelby (R-Ala.) have reached consensus on the language of the credit card legislation. A house bill (H.R. 627) containing similar credit reform measures passed by a 287 vote margin late last week. Under this legislation, many current business practices, including double-cycle billing, prolonged payment periods, and universal default, would be banned. The legislation would also limit the fees that credit issuers can charge and would enhance protections for younger credit card users. CUNA generally supported the House bill because the legislation largely mirrored regulations promulgated by the Federal Reserve and National Credit Union Administration in December 2008. These rules go into effect in June 2010. During the committee consideration of H.R. 627, CUNA supported an amendment, which was approved, that extended the effective date of the legislation to one year after passage or June 1, 2010.