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Witness CUs are ally in Native American communities

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WASHINGTON (6/6/08)--Credit unions are a natural ally in the effort to reduce predatory lending because their purpose is to promote the economic well being of all people, and that role is particularly important among Native American communities, a Credit Union National Association (CUNA) witness told federal lawmakers Thursday. Darwin Brokke, president/ CEO of Citizens Community CU in Devils
Click for slide show Darwin Brokke, president/CEO of Citizens Community CU in Devils Lake, N.D., testified on behalf of CUNA. CLICK TO VIEW SLIDESHOW
Lake, N. D., testified before the Senate Committee on Indian Affairs during its hearing on “Predatory Lending in Indian Country.” Brokke said that lack of access to financial institutions plays a key role in poverty in any community, but there are additional challenges associated with serving Native American communities that make it even more the case in those areas. “Those without access to financial institutions do not have the opportunity to build assets and accumulate wealth. And, in many cases, they are forced to use informal lending structures, including borrowing from family or friends, or turning to payday lenders,” Brokke noted. Home Mortgage Disclosure Act (HMDA) data from 2006, Brokke said in his written statement , makes it clear that credit unions are more likely than other lenders to grant loans to Native Americans. He added that the HMDA data also shows that credit unions generally lend to Native Americans on more favorable terms. “That's not surprising - as member-owned, not-for-profit financial cooperatives, credit unions care deeply about their member-borrowers, “ he noted in his testimony. Specifically, the most recent HMDA data shows that credit unions approved 66% of the applications they received from Native Americans. In comparison, other lenders approved just 52% of applications they received from this group. In addition, credit union pricing is more consumer-friendly to Native Americans, Brokke said. Just five percent of single family mortgage loans originated by credit unions were high-rate loans while 28% of such loans originated by other lenders were high-rate loans. High-rate loans are defined as those with interest rates 3 percentage points or more above the rate on comparable-maturity U.S. Treasury Department securities. Regarding specific credit union initiatives created to support Indian communities, Brokke noted Credit unions’ commitment to financial education for all members. But, he added, even the best education efforts are not enough to reach all members. Other credit union efforts include:
* The National Credit Union Foundation’s (NCUF’s)establishment in 2006 of the Native American Credit Union Initiative, an effort to study credit union service to Native American communities; and * Programs such as Citizens Community’s own Open-End Lending Program and Reward Line of Credit Program.
Credit unions participating in the NCUF initiative identified several opportunities for credit unions to serve Native American communities, including: membership expansion; financial education; increased lending opportunities; accounts for tribal governments; and minimal competition from other financial institutions.

Johnson testifies to CU strength

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WASHINGTON (6/6/08)—At a state of banking hearing Thursday at which the Federal Deposit Insurance Corp. noted preparations for expected bank failures while the federal credit union regulator depicted credit unions as systemically robust, the contrast between banks’ and thrifts’ current experience and that of credit unions was apparent. At a Senate Banking Committee hearing, the second this year on the state of the industry, National Credit Union Administration (NCUA) Chairman JoAnn Johnson said her agency, its National Credit Union Share Insurance Fund (NCUSIF), and the credit union movement have an overall strength, with a few, isolated problems. Johnson testified that as of the first quarter of the year, aggregate assets of federally insured credit unions increased $39 billion, or an annualized 20.57%, reaching a new high of $792.16 billion. She noted that loans comprised 67% of assets, down slightly since December 2007 due to asset growth strongly outpacing loan growth. However, also down—slightly—is the loan delinquency rate which Johnson reported at 2.4%, or down 0.2%, although delinquent real estate loans increased 0.3% from January through March of this year. Johnson attributed the general strength of credit unions, in part, to their having “effectively implemented” guidance by the NCUA related to real estate lending positioning them to withstand the current economic downturn. Also testifying before the panel were FDIC Chairman Sheila Bair, Comptroller of the Currency John Dugan, Director John Reich of the Office of Thrift Supervision, Vice Chairman Donald Kohn of the Federal Reserve Board, and Timothy Karsky, Commissioner/Chairman, North Dakota Department of Financial Institutions/ Conference of State Bank Supervisors. As part of her formal testimony and during questioning, FDIC’s Bair noted her agency’s careful preparations for any bank failures that may result in the coming year and beyond. Bair said she anticipated that there would be such failures and that they would not be confined to only the smallest institutions. However, she also said she would be greatly surprised by the failure of any large institution. Bair took and opportunity to state her support of the U.S. Treasury Department’s blueprint for financial regulatory reform, which she said would consolidate all the financial regulators. NCUA’s Johnson later returned to that point and told the panel of lawmakers that separate regulation for credit unions as distinct institutions is necessary and justified, as the current health of the credit union system demonstrates, despite problems elsewhere in the financial sector. The Credit Union National Association strongly opposes any Treasury plan that would consolidate financial institution regulation and oversight.

CUNA calls Preston effective fair

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WASHINGTON (6/6/08)—Credit Union National Association (CUNA) President/CEO Dan Mica Thursday called Steven Preston an “effective and fair administrator” and welcomed news of his confirmation as head of the U.S. Department of Housing and Urban Development (HUD). Preston was confirmed late Wednesday by the Senate to serve as HUD secretary. He has served for two years at the head of the U.S. Small Business Administration (SBA). “Administrator Preston listened carefully to credit unions about their hopes for better serving their members while he was at the Small Business Administration,” said Mica. “Having proven himself as an effective and fair administrator in that role, we look forward to working with him in his new position of secretary of the Department of Housing and Urban Development,” the CUNA leader added. President George W. Bush said in a statement, “Steve is a strong leader whose understanding of our financial markets and strong management skills make him highly qualified to serve in this important position. “He will aggressively work to ensure that the department remains focused on its mission of making housing more affordable and helping Americans keep their homes. “Steve is also a consensus builder who will build on our efforts to work with Congress on responsible legislation addressing our Nation’s housing policies.” Former HUD chief Alphonso Jackson', who resigned earlier this year, is under criminal investigation because of allegations that he favored friends with contracts at public housing authorities controlled by HUD.

Inside Washington (06/05/2008)

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*WASHINGTON (6/6/08)--The Federal Reserve Board on Thursday announced its approval of the notice of Bank of America Corporation, Charlotte, N.C., to acquire Countrywide Financial Corporation ("Countrywide"), Calabasas, Calif., and thereby indirectly acquire Countrywide Bank, FSB, Alexandria, Va., and certain other nonbanking subsidiaries of Countrywide… * WASHINGTON (6/6/08)--Presidential candidate John McCain (R-Ariz). is in favor of waiting until the market improves before using government resources to correct it, said Douglas Holtz-Eakin, chief economic adviser to the senator(American Banker June 5). McCain prefers to monitor the situation before taking action, he said. Compared with Sen. Barack Obama (D-Ill.), McCain’s likely competition in the presidential race, McCain’s financial plans for the nation are much less detailed. However, he has said he would be interested in creating a Justice Department task force to look at potential mortgage abuses, and increasing the government’s ability to back student loans ... * WASHINGTON (6/6/08)--A popular Small Business Administration (SBA) pilot program, Community Express, which encourages lending to minorities, veterans and women, is being scaled back. Since Oct. 1, the number of Community Express loans increased 55% from two years ago and was 12% of all 7(a) loans created (American Banker June 5). Community Express is supposed to cap loans at 10% of the 7(a) total. Some of the program’s lenders, like U.S. Bancorp, are cutting back because of the heavy use of the program. Erik Daniels, U.S. Bancorp’s SBA division national sales manager, suggested Community Express increase its caps. Eric Zarnikow, Capital Access associate administrator, said Capital Express is not planning to increase its limits ...

Bankruptcy filings rose in March

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WASHINGTON (6/6/08)--Bankruptcy filings in the federal courts for the 12-month period ending March 31 exceeded 900,000, according to statistics released Monday by the Administrative Office of the U.S. Courts. The 901,927 bankruptcy cases filed represent a 30% increase over the 695,575 cases filed in the 12-month period ending March 31, 2007. The majority of filings involve non-business debts. Non-business filings, also called personal or consumer filings, for the 12-month period ending March 31 totaled 871,186, up 29% compared with the same time period the year before. Filings involving predominantly business debts also rose. They totaled 30,741, up 40% compared with the same time period the year before. For the 12-month period ending March 31, filings rose for all bankruptcy chapters, except for Chapter 12:
* Chapter 7 (liquidations) filings rose 36% to 560,015, compared to the 413,294 Chapter 7 filings in the 12-month period ending March 31, 2007; * Chapter 13 (reorganization for individuals with regular income) filings rose 21% to 334,551, from the 276,649 bankruptcies filed in the 12-month period ending March 31, 2007; * Chapter 11 (business reorganizations) filings rose 34%, to 6,971 compared to the 5,199 Chapter 11 filings in the same time period in 2007; and * Chapter 12 (farmers) filings fell 8% to 343, from the 372 filings for the 12-month period ending March 2007.