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NEFE to Congress Fin Lit should be part of reg reforms

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WASHINGTON (6/26/09)--Improvements to financial literacy and education could be a part of the larger financial regulatory reform package that is currently up for debate, and the National Endowment for Financial Education (NEFE) gave its input on that issue in Thursday testimony before the House Financial Services Committee’s subcommittee on financial institutions and consumer credit. In prepared remarks, NEFE official Brent Neiser said that his organization supports including financial literacy as part of the coming financial reforms. As a start, Neiser suggested that the concept of being “financially literate” should be well defined, and that definition should be tailored to fit the various stages of one’s life. Setting clear, well-defined standards, as recommended by the President’s Advisory Council on Financial Literacy, would “create a consistent framework for public and private financial education efforts,” Neiser said. Basic concepts that are central to “financial understanding, capability, and literacy” like thrift, investment diversification, and the correct use of credit could be communicated through a “nationwide social marketing campaign,” he added. These marketing campaigns should be “culturally and circumstantially relevant and age-appropriate” and should also consider the needs of “underserved audiences.” Neiser seconded the financial literacy advisory council’s suggestion for a nationwide “financial check-up,” saying that such a check-up would “allow Americans to assess their own financial knowledge and provide links to trustworthy sources of information to fill any gaps.” The Jump$tart Coalition for Personal Financial Literacy also supported financial literacy improvements, with executive director Laura Levine advocating the introduction of personal finance education in “early elementary school years, while students are forming their behaviors and beliefs.” Financial education should be continued in later grades and should follow a number of best practices, including accuracy, availability, accessibility, and “objectivity in content and tone,” Levine added. The Credit Union National Association's Financial Literacy Task Force found that credit union’s have been strong backers of financial literacy efforts, with nearly 80% of credit unions with assets of $10 million or more offering financial education to adults or youth in 2008.

Inside Washington (06/25/2009)

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* WASHINGTON (6/26/09)--Small businesses seeking expansion will be able to refinance existing loans to purchase real estate and other fixed assets as a result of permanent changes to the Small Business Administration’s (SBA) 504 loan program. The 504 loan program can be used to purchase business real estate or fixed assets, such as heavy equipment or machinery, and expand current development projects. Borrowers are eligible for refinancing if: the debt being financed was incurred to acquire land, construct a building or purchase equipment; the debt is collateralized by fixed asset; the debt was incurred for the business’ benefit; the new financing provides a substantial benefit to the borrower; and the borrower has been current on all payments of existing debt for one year prior to the date of refinancing ... * WASHINGTON (6/26/09)--The Securities and Exchange Commission Wednesday met to discuss new regulations to improve the resilience and safety of money market mutual funds (American Banker June 25). The agency is considering possible changes to include imposing new liquidity requirements, strong investment requirements and shortened maturity limits ... * WASHINGTON (6/26/09)--During a hearing Thursday in front of the House Financial Services Committee, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan emphasized the need for preservating affordable housing (RTTNews June 25). There are fewer than three units available for every four very-low income households, and only half the number of units needed is available for those in poverty, he told the committee. HUD is exploring an agreement to enter into longer term Section 8 contracts, Donovan added. The House Financial Services Committee’s Thursday hearing was titled, “Legislative Options for Preserving Federally and State-Assisted Affordable Housing and Preventing the Displacement of Low-Income, Elderly and Disabled Tenants.” Donovan was the only scheduled witness ...

Committee still eyeing FFELP subsidy cut

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WASHINGTON (6/26/09)—A plan to eliminate the Department of Education's Federal Family Education Loans Program (FFELP) by cutting off its federal subsidy has temporarily been placed on the back burner, but the House Education, Labor and Pensions Committee intends soon to vote on a bill to do just that. According to a committee source, the education panel could possibly markup a FFLEP bill sometime during the first two weeks of July. There had been speculation that the committee would take up the bill this week, but a crowded congressional schedule bumped its consideration back. Notably, healthcare reform has been dominating attention. The Obama administration’s fiscal year 2010 budget took aim to reduce certain entitlement spending and estimated that eliminating the subsidies provided under FFELP could save over $4 billion, annually. The administration has said it favors direct student lending by the government and would use some of the $4 billion to provide need-based Pell Grants to low-income students. The FFELP subsidy was cut back under President George W. Bush, but credit unions have continued to offer the loans, with little or no profit, as a service to their members, according to Phil Drager, Credit Union National Association (CUNA) senior legislative representative. CUNA has previously warned that the elimination of FFELP could jeopardize student lending at more than 1,000 credit unions throughout the country, and may end student lending by credit unions altogether. As CUNA noted in a letter to the top members of the House Education Committee, credit unions that specialize in student lending provide a high quality service for their student members, and can provide much needed and individualized assistance if difficulties arise with regard to loan repayments. The elimination of FFELP will remove this valuable option for students. Drager said Thursday that CUNA "continues to meet with key members of Congress to explain the importance of the FFELP and the critical role credit unions play in the program." Both houses of Congress will take a one-week Independence Day District Work Break, and when federal lawmakers return to session, there will be just five, issues-crowded weeks left in the summer session.

May mortgage rates remain steady FHFA says

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WASHINGTON (6/26/09)--In its most recent report, the Federal Housing Finance Agency (FHFA) said that interest rates on conventional 30-year mortgages below the conforming limit of $417,000 increased slightly in May, rising to an average of 4.88 percent. Conventional 15-year mortgages decreased by 4 basis points over the same time period, resulting in an average interest rate of 4.71 percent. Contract rates on all mortgages fell by 1 basis point during May, for a total of 4.87 percent. The effective interest rate fell by a similar margin, dropping to 4.95 percent. The FHFA also recorded a reduced loan-to-price ratio average of 74.2 percent. That average stood at 75.1 percent at the end of the previous month. However, the average amount of mortgage loans increased by just over $4,000, for a total of $221,000 during May, with those loans being purchased for an average term of 28.3 years. Initial fees and charges made up 0.58 percent of the balances of those loans, and 44 percent of so-called “purchase-money mortgage loans” that were originated in May were “no-point” mortgages, the FHFA said.

Subcommittee votes CDFI boost max CLF borrowing

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WASHINGTON (6/26/09)—Under a House Appropriations subcommittee financial services spending bill, no cap would be placed on the National Credit Union Administration’s (NCUA’s) Central Liquidity Facility (CLF) borrowing authority. According to the NCUA, this would mean the CLF would maintain its maximum, approximately $40 billion, borrowing authority through fiscal year 2010. Also approved by the subcommittee on financial services and general government, according to Credit Union National Association Senior Legislative Representative John Hildreth, the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) funds would get a substantial bump up in its funding. The subcommittee voted Thursday to increase the CDFI fund to $243.6 million, up from $107 million appropriated for FY 2009. Hildreth also noted that the U.S. Small Business Administration’s business loan account would be increased to $236 million from $141 million in the subcommittee bill. However, Hildreth warned, it is early days in the appropriation process. Treasury’s CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. CDFIs are financial intermediaries such as certain credit unions, banks, loan funds, venture capital funds, corporation-based lenders and microenterprise development loan funds. Credit unions interested in CDFI certification should note there is one remaining date in the Treasury’s series of free conference calls on the subject. An upcoming session is scheduled for July 16, 2 p.m. EST. To access the conference calls, participants must call (202) 927-2255 and enter in the pin number 315646. No prior registration is necessary.