Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive

Washington

CLARIFICATION: NCUA Adds Loan Participation Rule to Thursday Agenda

 Permanent link
ALEXANDRIA, Va. (6/18/13, UPDATED 7:10 p.m. ET)--A final rule on loan participations has been added to the National Credit Union Administration's June open board meeting agenda.

While the details of the final rule will not be available until the board meeting, the Credit Union National Association has raised serious concerns about the proposal as it was issued December 2011 and is hopeful important changes will be included in the final rule.

In its comment letter and subsequent advocacy efforts on the proposal, the CUNA urged the agency to withdraw it, as the net worth limitations on loan originations from one originator and one borrower in particular would be very problematic. CUNA also urged the agency to provide a waiver process.

CUNA also raised concerns about the impact of the proposal, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.

A proposed Illinois Member Business Loan rule is the other item on the open board meeting agenda. Supervisory activity considerations will be considered during the closed board meeting.

The open meeting is scheduled to being at 10 a.m. (ET) on Thursday. The closed meeting will follow shortly thereafter.

For more on the NCUA agenda, use the resource link.

QM Concerns Are Focus of CUNA Hill Testimony Today

 Permanent link
WASHINGTON (6/18/13)--Credit Union National Association witness Jerry Reed will detail credit union concerns with the Consumer Financial Protection Bureau's qualified mortgage regulations when he testifies before the House Financial Services financial institutions and consumer credit subcommittee hearing today entitled "Examining How the Dodd-Frank Act Hampers Home Ownership," scheduled to start at 10 a.m. (ET). Reed is chief lending officer at Alaska USA FCU.

While America's credit unions appreciate the improvements that the CFPB has made to the QM rule, credit unions "continue to have significant concerns with respect to how other regulators will use the bureau's regulation to impact credit union mortgage lending, and we question whether the rule should apply to credit unions in the first place," Reed wrote in prepared testimony.

Reed also said the CFPB "has not done enough to address credit unions' concerns that being subjected to the rule will actually reduce credit availability."

The prepared testimony also includes comments on language in the QM rule that addresses:

  • Debt-to-income ratios;
  • Points and fees limitations; and
  • The CFPB's ongoing examination of rural and underserved area definitions.
Representatives from the Conference of Bank Supervisors, the American Bankers Association, the Mortgage Bankers Association, the Center for Responsible Lending and the National Association of Realtors are also scheduled to testify today.

For more on the hearing, use the resource link.

NEW: CUNA Urges Full CU Exemption To Ability-to-Repay

 Permanent link
WASHINGTON (6/18/13, UPDATED 10:55 a.m. ET)--Credit Union National Association witness Jerry Reed this morning detailed credit union concerns with the Consumer Financial Protection Bureau's ability-to-repay and qualified mortgage (QM) rules.  Reed, who is chief lending officer at Alaska USA FCU, said credit unions commend the CFPB for listening to their concerns and for incorporating many of their concerns into amendments to the mortgage rules, but he underscored that credit unions continue to have serious apprehensions about how the QM rule will be implemented and believe that it could have the unintended effect of reducing credit union members' access to credit.

"Credit unions were created to promote thrift and provide access to credit for provident purposes to their members. The credit union structure and historical performance of credit union mortgage loan portfolios strongly support a full credit union exemption from the QM rule," Reed said as he testified at the House Financial Services subcommittee on financial institutions and consumer credit hearing on "Examining How the Dodd-Frank Act Hampers Home Ownership."

As not-for-profit financial cooperatives, Reed reminded, credit unions are owned by the members that they serve. This fundamental difference between the for-profit and not-for-profit sector of the financial services industry provides a significantly different incentive structure for those managing the institutions, Reed noted.

In addition, credit unions are primarily portfolio lenders, typically selling less than a third of their new originations. The fact that most of the loans they make will be held in their own portfolios is further incentive for them to be particularly attentive to the applicant's potential ability to repay.

"While we appreciate the fact that the bureau has provided a modest exemption for small volume originators, we question the need to apply this rule to credit unions in the first place, and urge the Bureau to consider exempting credit unions from the rule entirely," Reed said. (See related story: Rep. Capito Questions 'Rigid' CFPB Mortgage Rule.)

The QM rule is scheduled to go into effect January 2014.

Watch CUNA's News Now Wednesday for more.

CUs', Members' Action Strong As Tax Reform Enters Next Phase

 Permanent link
WASHINGTON (6/18/13)--Tax advocacy efforts by credit unions and their members have remained strong as the U.S. Congress prepares to draft comprehensive reform legislation in the coming weeks, with more than 100,000 separate congressional contacts being made to tell their legislators, "Don't Tax My Credit Union!"

"Tax reform is alive and well on Capitol Hill. The credit union tax status is in the mix, and credit unions need to remain aware and active to protect their tax status," Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said.

The last in a series of tax reform options papers is expected to be released later this week. A tax options paper on exempt organizations and charitable giving released last week included two options of particular interest to credit unions: The paper mentioned that one option for tax reform could be to "disallow tax-exempt status for certain organizations engaged in business activities, such as credit unions, nonprofit hospitals or certain types of insurance." The report also includes a discussion of options to expand Unrelated Business Income Tax.

With these and other papers having been released and discussed by the Senate Finance Committee, the process can move on to the next phase of writing new tax laws. Chairman Max Baucus (D-Mont.), chair of the Senate's powerful tax-policy committee and leader of the Joint Committee on Taxation, is calling for the tax reforms to be finalized and introduced before the August recess, Donovan noted.

The groundbreaking CUNA/state credit union league advocacy effort, which combines elements of traditional letter writing campaigns with new media methods to leverage the power of credit unions' 96 million members, continues to gain traction on social media: The Don't Tax My Credit Union! Facebook page has been viewed more than 265,000 times since mid-May. Pro-credit union messages have been widely shared through CUNA's Twitter handle @CUNAadvocacy, and hashtag, #DontTaxMyCU, and social media micro-video site Vine.

CUNA has also developed a reformatted version of its tax advocacy toolkit to help credit unions and their members spread this message. For more CUNA/league advocacy resources, use the resource links.

This week, the House is scheduled to consider the Federal Agriculture Reform and Risk Management Act of 2013 (H.R. 1947). The Senate is expected to consider judicial nominations and immigration reform.

Hearings on today's schedule include:

  • A House Financial Services financial institutions and consumer credit subcommittee hearing entitled "Examining How the Dodd-Frank Act Hampers Home Ownership." Alaska USA FCU Chief Lending Officer Jerry Reed will testify on CUNA's behalf at this hearing (For more, see today's story: QM Concerns Are Focus of CUNA Hill Testimony Today);
  • A House Financial Services oversight and investigations subcommittee hearing on the Consumer Financial Protection Bureau budget; and
  • A Senate Banking, Housing and Urban Affairs housing, transportation and community development subcommittee hearing on reverse mortgages and their impact on the Mutual Mortgage Insurance Fund.
The House Financial Services Committee has also set a Wednesday markup session for the Small Business Capital Access and Job Preservation Act (H.R. 1105), the Burdensome Data Collection Relief Act (H.R. 1135), the Audit Integrity and Job Protection Act (H.R. 1564) and H.R. 2374, to amend Section 913 of the Dodd-Frank Act.

NEW: Rep. Capito Questions 'Rigid' CFPB Mortgage Rule

 Permanent link
WASHINGTON (6/18/13, UPDATED 10:24 a.m. ET)--Opening today's House subcommittee hearing on "Examining How the Dodd-Frank Act Hampers Home Ownership," Rep. Shelly Moore Capito (R-W.Va.) said it could be the very consumers that are meant to be protected by the Consumer Financial Protection Bureau's Abilty-to-Repay mortgage rule that could be harmed by unintended consequences of the rule.

Capito, chairman of the House Financial Services subcommittee on financial institutions and consumer credit conducting today's hearing, said low-income consumers, and those in rural areas with low property values, could find the ability-to-repay rule eliminates mortgage lenders' ability to engage in "relationship lending." She said "case-by-case, local lending" could disappear because of "rigid mortgage lending rules" proposed by the CFPB.

Today's hearing, at which Credit Union National Association witness Jerry Reed will detail credit union concerns with the CFPB qualified mortgage (QM) regulations when he testifies, is the second in the subcommittee's on this issue.  The ability-to-repay rule was issued in conjunction with the QM rule. Reed is chief lending officer at Alaska USA FCU.

Rep. Sean Duffy (R-Wis.) said there appears to be a bipartisan agreement on the need to fix some parts of  the Dodd-Frank Act, though other members spoke in favor of that law's provisions. For instance, Rep. Carolyn Maloney (D-N.Y.) said Dodd-Frank is intended to show "we learn from our mistakes."

Watch CUNA's News Now for more.

NCUA Board Member Says Time For MBL Increase Is Now

 Permanent link
ALEXANDRIA, Va. (6/18/13)--"It's time for Congress to act" and pass legislation that would increase the credit union member business lending (MBL) cap, and give credit unions greater authority to access secondary capital sources, National Credit Union Administration Board Member Michael Fryzel wrote in the June edition of The NCUA Report.

"For the almost five years that I have sat on the NCUA board, national trade organizations, credit unions across the country and NCUA have tried to convince Congress to pass enabling legislation to increase the [MBL] cap and provide all credit unions with access to supplemental capital," Fryzel wrote. While the aftermath of the financial crisis meant less time to address these credit union priorities, "things are better now," he added.

"It's time Congress got serious" and reached a consensus on these two issues. Doing so, Fryzel said, "would enable credit unions to become stronger financial institutions, spur small business formation and growth, and help thousands of people across this country to get a job as a result of a credit union [MBL], or to join a credit union."

The Capital Access for Small Businesses and Jobs Act (H.R. 719) would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings--which currently is the only type of capital that counts toward capital ratio. It was introduced in February by Rep. Pete King (R-N.Y.) and has 31 co-sponsors, including Rep. Spencer Bachus (R-Ala.), the immediate past chair of the House Financial Services Committee.

Separate House (H.R. 688) and Senate (S. 968) MBL bills were also introduced earlier this year. Both bills would increase the MBL cap from 12.25% of assets to 27.5%. The Credit Union National Association has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

Each year that passes without passage of these bills "is another year of disappointment," Fryzel said. "Congress must provide the tools that can help create new jobs, build new businesses, improve the financial futures of our citizens and make credit unions stronger," he added.

For more of The NCUA Report, use the resource link.

Supreme Court Will Hear Fair Housing Case

 Permanent link
WASHINGTON (6/18/13)--The U.S. Supreme Court Monday announced it will hear a case that could decide the fate of the application of disparate impact theory under the Fair Housing Act. Disparate impact focuses on discrimination based on effects and not intent.  The case, known asMount Holly v. Mount Holly Citizens In Action Inc. (No.11-1507), is detailed in the June 17 issue of the Credit Union National Association's Regulatory Advocacy Report.

The case concerns a New Jersey township's plan to redevelop a blighted residential area occupied predominantly by low- and moderate-income minority households. The suit alleged that a disproportionate number of minorities would be affected by the relocation required by the plan and would be unable to afford the new housing proposed under the plan.

The current issue of the RAR notes that the Fair Housing Act makes it unlawful to "refuse to sell or rent after the making of a bona fide offer … or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin."  Despite the lack of textual support for disparate impact claims in the Fair Housing Act, the federal appeals courts have permitted the claims to proceed.

CUNA's regulatory experts explain that the case is important because the Consumer Financial Protection Bureau has also insisted that disparate impact claims are viable under the Fair Housing Act and the Equal Credit Opportunity Act even though they are not supported by the text of the statutes.

"The CFPB has discussed the use of disparate impact analysis in a letter discussing indirect lending. A decision in Mount Holly could very well determine the extent the CFPB can use disparate impact moving forward," says the RAR.

The Regulatory Advocacy Report is an important resource for CUNA members that compiles the hottest regulatory issues and information weekly.  CUNA members can access it and subscribe by using the resource link below.

NEW: NCUA Plan Would Limit Loan Participations To 25% Of Net Worth

 Permanent link
ALEXANDRIA, Va. (6/18/13, UPDATED: 4:30 P.M. ET)--A final rule on loan participations has been added to the National Credit Union Administration's June open board meeting agenda.

Under loan participation revisions that were proposed at the agency's December 2011 board meeting, all federally insured credit unions that are originators would need to retain a 10% interest in the loan or pool of loans participated. Federal credit unions are currently required to comply with this requirement, but the NCUA proposal would extend this requirement to state chartered federally insured credit unions as well.

All federally insured credit unions that purchase loan participations would be limited to 25% of their net worth for participations involving one originator. There would be no waiver allowed from this provision.

In addition, the proposal would set a 15% of net worth limit on purchasing credit unions on loans involving one borrower. The rule would allow this requirement to be waived in certain cases, but state chartered credit unions would have to apply to their NCUA Regional Director for approval.

The Credit Union National Association has urged the agency to withdraw the proposal, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.