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CFPB codifies info-protections for FIs

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WASHINGTON (6/29/12)--Protections for private information that financial institutions and others submit to the Consumer Financial Protection Bureau (CFPB) are codified under a new CFPB final rule.

The rule seeks to ensure that groups or individuals that supply information to the CFPB do not waive their right to privacy protections, and clarifies that these protections would remain intact when privileged information is transferred from the CFPB to other federal or state agencies.

CFPB Director Richard Cordray said the rule "supports the free flow of information that is essential to an effective supervision program." Cordray said his agency is "committed to safeguarding the confidential information of the institutions we supervise to ensure the Bureau is best equipped to do its job and protect consumers."

For the CFPB release, use the resource link.

CUs get guidance on military mortgage work

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ALEXANDRIA, Va. (6/29/12)--The National Credit Union Administration (NCUA) in a letter to credit unions outlined the steps that credit unions should take when mortgage-holding servicemembers are given Permanent Change of Station (PCS) orders.

The NCUA letter (12-CU-07) referenced a recently released document: Interagency Guidance on Mortgage Servicing Practices Concerning Military Homeowners with Permanent Change of Station Orders. Any credit union responsible for managing a military member's mortgage loan account, including collecting and crediting monthly payments, acts as a mortgage servicer and needs to follow the new guidance, the NCUA said.

Servicemembers that have received PCS orders remain accountable for their financial obligations, including their mortgages, when they move, and may need to continue paying their mortgage if their home goes unsold, the NCUA noted.

The NCUA letter suggested that credit unions and other financial institutions give homeowners facing relocation clear, easily understandable information outlining various homeowner assistance options. Financial institutions should also advise homeowners on how they can track the status of any ongoing assistance efforts, and should provide their own assistance status updates.

Those updates can include a detailed explanation of why a request for homeowner assistance may have been denied, and how borrowers can avoid being denied assistance in the future, the agency said.

Credit unions should not advise or ask homeowners to waive their rights under the Servicemembers Civil Relief Act or other laws as a prerequisite to providing information about other available options or evaluating eligibility for assistance, the NCUA said. Credit unions also should not advise homeowners that have had no previous issues paying their loans to stop making payments in a bid to qualify for assistance, the agency added.

The NCUA said credit union officials should discuss the guidance with agency examiners as they develop or enhance their mortgage lending programs.

Supervisory and/or enforcement actions could be taken against mortgage servicers that engage in any acts or practices that are unfair, deceptive, or abusive, or that otherwise violate federal consumer financial laws and regulations, the guidance warned.

"Every military homeowner with PCS orders deserves appropriate assistance and accurate advice during this period of heightened financial vulnerability," NCUA Chairman Debbie Matz said, noting that "credit unions have an excellent track record providing mortgage financing and servicing to our military personnel."

For the letter to credit unions, use the resource link.

RESPA issues hang as Supreme Court declines to rule

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WASHINGTON (6/29/12)--The U.S. Supreme Court on Thursday refused to rule on a case that asked whether statutory standing was sufficient to sue under the Real Estate Settlement Procedure Act (RESPA).

The case, First American Financial Corp. v. Edwards, centered on whether a consumer, who based a purchase of title insurance on a referral by a real estate settlement agency--under conditions the consumer claims violated RESPA's anti-kickback provisions--can sue in federal court if there is no evidence of actual injury.

Denise P. Edwards claimed First American Financial did not inform her of an exclusive business arrangement with its title insurance agent, First American Title Insurance, when it made the referral.

First American Financial argued that Edwards did not suffer a concrete injury and that she did not allege that the charge for title insurance was higher than it would have been without the exclusivity agreement. First American Financial also noted that Edwards cannot make that allegation, and she therefore suffered no harm as a result of the exclusive business arrangement, because Ohio law mandates that all title insurers charge the same price.

The case made its way up to the ninth circuit appellate court, which concluded that Edwards had the right to sue under RESPA, regardless of whether she was overcharged for services or not.

First American Financial last year filed a writ of certiorari asking the higher court to review the case, which was accepted by the Supreme Court, and oral arguments were heard. But the Supreme Court yesterday said the writ was "improvidently granted." There is no clear reason why the Supreme Court decided not to issue an opinion in the case.

"While it was hoped that the Supreme Court's opinion in First American Financial could help minimize or prevent unjustified lawsuits, such as those involving outside ATM notices where no actual damages have been alleged, the Court's approach today is not likely to have much bearing on that issue," Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said.

A legislative fix for ATM litigation issues that have caused significant issues for many credit unions and other financial institutions is making its way through the U.S. Congress, however, and that bill could see a vote in the full House after the upcoming July 4 district work period.

Use the resource link below to read a June 28 News Now story, "ATM bill vote a step forward for CUs: CUNA."

CFPB could add reverse mortgage scrutiny to to-do list

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WASHINGTON (6/29/12)--Reverse mortgages are the latest financial product to see Consumer Financial Protection Bureau (CFPB) scrutiny, and the agency may create new regulations addressing those products, the Credit Union National Association (CUNA) said.

The CFPB on Thursday asked for public comment on reverse mortgages, which allow homeowners over age 62 to cash out a portion of their home equity. While these products are not widely available at credit unions, CUNA will soon ask credit unions if they have comments or concerns that should be passed on to the CFPB.

Specifically, the agency requested comments from consumers and other financial industry participants on which factors influence reverse mortgage consumers' decisionmaking, and how reverse mortgage loan proceeds are used by consumers. The CFPB also asked for information on how the decision to enter a reverse mortgage transaction can impact consumers' long-term finances, and any differences in market dynamics and business practices among the broker, correspondent, and retail channels for reverse mortgages.

CUNA Senior Assistant General Counsel Jared Ihrig said the agency has the authority to regulate reverse mortgages, and the agency expects to undertake a project to integrate reverse mortgage Truth in Lending (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosure requirements. This project would be separate from the agency's current TILA/RESPA integration project, which addresses the forms that are provided before a home is purchased.

As mandated by the Dodd-Frank Act, the agency this week submitted a 231-page report to the U.S. Congress on reverse mortgage products. In the report, the CFPB called reverse mortgages "inherently complicated products that are not easy for the average consumer to understand."

The rising-balance, falling-equity nature of reverse mortgages and the increased complexity of some reverse mortgage loan products are among the factors that create issues for consumers, the CFPB added. Further, federal disclosures and other tools provided to consumers "are insufficient to ensure that consumers are making good tradeoffs and decisions" when they take out reverse mortgages on their homes, the CFPB said.

Although fewer than 3% of eligible homeowners have reverse mortgages on their homes, and 70,000 new reverse mortgages are originated each year, according to CFPB numbers. However, the increasing age of many Americans could lead to an increase in the number of reverse mortgages in the marketplace, the agency reported.

The CFPB noted that borrowers are taking out reverse mortgage loans at younger ages, and taking out funds from their reverse mortgages sooner, two changes that increase some of the financial risks associated with reverse mortgage products. Some homeowners are also taking out reverse mortgages on their homes as a way to refinance traditional mortgages, and borrowers that take this step "may simply be prolonging an unsustainable financial situation," the CFPB added. Nearly 10% of reverse mortgage borrowers were at risk for foreclosure, according to the CFPB.

For the CFPB report, use the resource link.

Inside Washington (06/28/2012)

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  • WASHINGTON (6/29/12)--Federal Home Loan Banks (FLHB) increased credit exposure to European financial institutions substantially in 2010 and 2011, even as the risks associated with doing so increased, according to a study released Wednesday by the Federal Housing Finance Agency's (FHFA) Office of the Inspector General (OIG). For example, FHFA-OIG found that in 2011 one FHLB extended more than $1 billion in unsecured credit to a European bank although the foreign bank's credit rating was downgraded and later suffered a multibillion dollar loss. Although FHFA identified extensions of unsecured credit by the FHLBs as an increasing risk in early 2010, the agency did not prioritize it in its examination process due to its focus on greater financial risks then facing the FHLB system, the report said. In 2011, FHFA initiated oversight measures that focus on credit extensions, such as prioritizing them in the supervisory process and increasing the frequency with which the FHLBs report on their unsecured credit portfolios …
  • WASHINGTON (6/29/12)--Federal Reserve bank board directors should step down when it appears they have a conflict of interest, Federal Deposit Insurance Corp. (FDIC) board member Thomas Hoenig said in a Bloomberg Radio interview, according to American Banker (June 28). Directors should give up their seat "for the perception of the integrity of the institution," Hoenig said in an interview Tuesday on the program "The Hays Advantage" with Kathleen Hays and Vonnie Quinn. Hoenig was sworn in for a six-year term as a member of the FDIC board in April. Prior to that, Hoenig was the president of the Federal Reserve Bank of Kansas City and a member of the Federal Reserve System's Federal Open Market Committee from 1991 to 2011. Hoenig was with the Federal Reserve for 38 years, beginning as an economist and then as a senior officer in banking supervision during the U.S. banking crisis of the 1980s …
  • WASHINGTON (6/29/12)--The Treasury Thursday launched the MyMoneyAppUp Challenge to help generate new ideas for personal finance mobile applications. The challenge features two components. The IdeaBank is a call for ideas, in 140 characters or less, for app-based solutions from the general public. Visitors to the site can vote on their favorite submissions. A panel of judges will select the final winners from the top 10 that receive the most votes from the public. Winners are eligible to receive cash prizes ranging from $250 to $1,000. The App Design Challenge is a call for comprehensive design proposals for mobile apps from companies, individuals and teams of individuals. Contestants must complete an online submission form detailing their design and how it will improve financial capability and/or access. Contestants are encouraged, but not required, to use ideas from the IdeaBank as inspiration for their proposals. Judges will review and score the proposals with the winners announced at an awards event and eligible for cash prizes ranging from $2,500 to $10,000 …
  • ALEXANDRIA, Va. (6/29/12)--The National Credit Union Administration has pushed back the time of its Monday, July 23 closed meeting to 2:30 p.m. (ET).  Originally, the closed session was slated for Tuesday, July 24 at 2 p.m. (ET) …

CUNA analysis TCCUSF financials show unchanged loss estimates

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WASHINGTON (6/29/12)--The most important implication for credit unions of the new Temporary Corporate Credit Union Stabilization Fund (TCCUSF) financial statements is what they say about the likely remaining assessments for that fund, said Credit Union National Association (CUNA) Chief Economist Bill Hampel in an analysis of the fund's audited statements.

The National Credit Union Administration (NCUA) received a clean audit of its corporate stabilization fund last week (News Now June 25). Although it came four months after the release of financial statements for the other major funds managed by the NCUA, the TCCUSF statements came about six months earlier than last year.

When announcing the clean audit, NCUA Chairman Debbie Matz said agency staff is working to update the corporate system resolution loss projections through year-end 2011, and will post the information on the NCUA's Corporate System resolution Costs webpage by the end of June.

Hampel said that, pending the update, it can be inferred from the financial statements that as of last December the NCUA's estimates of the ultimate costs of the corporate stabilization are essentially unchanged from what they were at the end of 2010. A negative net position of $5.3 billion as of December 2011 represents the latest estimate of the amount to be paid in future stabilization assessments.

"It is encouraging that the loss estimates have not increased over the full year 2011.  However, the fact that they did not fall as previously suggested is disappointing," said Hampel. 

The CUNA analysis suggests that the loss estimate declined about $1.5 billion from December 2010 to August 2011, but then rose by a similar amount by the end of the year, to end the full year unchanged.

Hampel reminded that the loss estimates are just that-- educated predictions.

"The fact that the U.S. housing market has been improving over the past few months suggests the ultimate losses could be lower.  Nevertheless, based on this latest loss estimate, it would require annual assessments of approximately 10 basis points for the next five to six years to pay off the total resolution costs."

The NCUA has told CUNA that this year's assessment will be on the agenda for its board meeting on July 24.