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Statement on regulatory conversions issued by FFIEC

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ARLINGTON, Va. (7/2/09)--The Federal Financial Institutions Examination Council (FFIEC) Wednesday issued a Statement on Regulatory Conversions to reaffirm that supervisors are unified in their approach to regulatory conversions and will not entertain applications that undermine the supervisory process. It is expected, said FFIEC, that prospective supervisors will follow existing supervisors' work on examination and enforcement actions, including consumer protection and safety and soundness issues. The statement's purpose is to ensure that charter conversions or changes in an institution's regulatory agencies support current or prospective supervisory actions. Conversion requests submitted while serious or material enforcement actions are pending with a current chartering authority or primary federal regulator should not be entertained because the requests could delay or undermine supervisory actions, said FFIEC. The statement also addresses institutions with a rating of 3, 4 or 5--or "Needs to Improve" or "Substantial Noncompliance" regarding Community Reinvestment Act (CRA) performance--or with a serious or material corrective program in place or being contemplated. In those cases, the prospective chartering authority will consult with the National Credit Union Administration, the Federal Reserve Board or the Federal Deposit Insurance Corp., as appropriate. FFIEC also said it expects that rating assigned under uniform rating systems and outstanding corrective programs will remain in place after a charter conversion and/or a supervisory agency change. To review the statement, use the link.

FHFA raises loan-to-value ratio for home refinancers

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WASHINGTON (7/2/09)--Homeowners whose mortgages are backed by Fannie Mae or Freddie Mac will now be given greater opportunities to refinance their homes under the Home Affordable Refinance Program (HARP). The Federal Housing Finance Agency (FHFA) Wednesday authorized those government-sponsored entities to increase their loan-to-value ratio ceiling to 125% from the current 105%. In a press release, FHFA Director James Lockhart said that the higher loan-to-value ceiling will “allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates.” Fannie Mae and Freddie Mac may also allow eligible homeowners to “get ‘above water’ on their mortgages more quickly” by combining their reduced mortgage rate with a quicker amortization schedule. Such a program “could assist many homeowners who otherwise would have difficulty refinancing due to declining house prices,” Lockhart added. This change in terms could ultimately result in lower monthly mortgage payments for those who refinance under the plan, according to the FHFA release. Borrowers also mays shorten the length of their mortgage, allowing them to reduce long-term interest payments by paying down their principal. For a copy of the full FHFA release, use the resource link.

FASB codification of accounting principles now official

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WASHINGTON (7/2/09)--The Financial Accounting Standards Board (FASB) on Wednesday released its complete codification of U.S. generally accepted accounting principles (GAAP) after several years in production. The codification, which divides U.S. GAAP pronouncements into 90 separate accounting topics, “represents a milestone in U.S. accounting standards” and should make the process of accessing the standards more efficient, FASB Chair Robert Herz said. The codified standards are effective for reporting periods ending after Sept. 15, and will serve as the “single source of authoritative nongovernmental U.S. GAAP, " FASB said in a Wednesday release. According to the release, the codification “does not change GAAP” but “introduces a new structure” that “is organized in an easily accessible, user friendly online research system.” FASB has claimed that this new system of organization will reduce the time and effort needed for both general users and FASB officials to research accounting issues and will mitigate noncompliance risks. The online organization system will also allow FASB to provide producers of financial statements with real-time updates of accounting standards as they are changed or as new standards are released. The codification is available for use in either the Professional or Basic View. The Professional View--which costs $850 annually--offers fully functional access to the codification and is designed for accounting and reporting professionals. At no charge, the Basic View provides access to the entire codification but lacks certain functions of the Professional View such as advanced text searching capability. For more information, use the link.

NCUA working with agencies on Credit CARD Act UDAP

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ALEXANDRIA, Va. (7/2/09)—The National Credit Union Administration (NCUA) said Wednesday it has begun to work with the Federal Reserve to implement the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, portions of which supersede interagency rules addressing unfair and deceptive acts and practices (UDAP). Portions of the CARD Act will become effective on Aug. 20 of this year, with the remainder of the bill becoming effective on Feb. 22, 2010. UDAP rules that address credit cards currently have an effective date of July 1, 2010. The CARD Act limits many of the same credit card practices that the NCUA, the Fed, and the Office of Thrift Supervision targeted via UDAP, including card issuers’ ability to increase interest rates and the fees that lenders charge for use of subprime credit cards. The NCUA said it also believes that the Fed will soon “begin issuing implementing regulations” for Regulation Z. The agency said it is “considering whether there is a need” for separate NCUA rules once Regulation Z becomes effective. While credit unions should not be overly concerned about dealing with dueling regulatory structures, they should recognize that the UDAP rules, the CARD Act, and Regulation Z all contain similar requirements and restrictions regarding credit card practices. According to the Credit Union National Association (CUNA), the problematic issue for credit unions in the new credit card law is the new requirement to send periodic statements at least 21 days before payment is due. This 21-day requirement has been particularly problematic because, as the law is written, it would apply to all open-ended credit, not just credit cards. CUNA is working on this issue, discussing these operational problems with the Fed and raising credit union concerns with key staff on Capitol Hill. CUNA also plans to meet early next week with credit union lending experts to gather additional feedback on the operational compliance problems with applying the 21-day requirement to all open-end loans, and these additional concerns will be conveyed to the Fed. For CUNA’s analysis of the new credit card law, use the resource link.

Kanjorski Congress should take time with reg reforms

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WASHINGTON (7/2/09)--Congress should “step back” and take time to “analyze the implications and the effects” of the laws and regulations that are being debated before it begins the process of legislating financial regulatory reforms, Rep. Paul Kanjorski (D-Pa.) said in a Wednesday appearance on CNBC. Commenting on the apparent rush to regulation that is currently being led by some members of Congress, Kanjorski, who chairs the House subcommittee on capital markets, insurance, and government-sponsored enterprises, said that acting in a more deliberate fashion should ultimately “create better standards and a better performance rate. “If it takes six more months, what does it matter?" Kanjorski asked. Both Congress and the Obama administration have moved swiftly to begin the regulatory reform process, with the Treasury delivering on Tuesday draft legislation for the creation of the Consumer Financial Protection Agency. Rep. Barney Frank (D-Mass.), who serves as chair of the House Financial Services Committee, has held several hearings on financial regulatory reforms in recent days, and his committee will continue to discuss this issue once Congress has returned from the Independence Day district work period on Monday. Frank recently suggested that his committee could begin marking up financial regulatory reform legislation late this month, and a full House vote could take place as soon as August. Overall, Kanjorski said, Congress “will craft the best legislation,” but the quality of that legislation does not matter if those tasked with enforcing that regulation are not “properly stimulated to implement good practices.”

Credit reporting changes to take effect in 2010

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WASHINGTON (7/2/09)--The Federal Trade Commission, the National Credit Union Administration (NCUA) and other associated federal regulators have published final rules that will change portions of the Fair and Accurate Credit Transactions Act to allow consumers to directly dispute potentially inaccurate credit history data with the lender that provided that information to the credit reporting agency. The new rules -- which an interagency release said were designed to “promote the accuracy and integrity of information” that can be used to determine an individual's suitability for a job, a consumer loan, insurance coverage and some housing -- also will require consumer information furnished to consumer reporting agencies to include information about the borrower’s credit limit. The rule change will become effective on July 1, 2010. The NCUA board unanimously approved this rule at its May 22 meeting. The agency said that the rule would be re-examined every three years, and reassessments and possible reforms of the rule will be ongoing. The same group of federal regulators also have published in the Federal Register an Advanced Notice of Proposed Rulemaking (ANPR) “to identify possible additions to the information that furnishers must provide to consumer reporting agencies,” the release added. For the final rule and the ANPR, use the resource links.

Inside Washington (07/01/2009)

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* WASHINGTON (7/2/09)--Federal credit union, bank and thrift agencies have released for public comment proposed interagency guidance on funding and liquidity risk management. According to a release, the guidance seeks to “communicate consistent expectations on sound practices for the management and funding of liquidity risks, and to strengthen liquidity risk management practices.” The guidance also “emphasizes the importance of cash flow projections, diversified funding sources,” and stress testing, among other items. The agencies will accept public comment on the guidance for 60 days following its publication in the Federal Register… * WASHINGTON (7/2/09)--In a Wednesday conference call, the Treasury’s Deputy Assistant Secretary for Consumer Protection Eric Stein said that the Obama administration’s proposed Consumer Financial Protection Agency, if created, would monitor the financial markets for harmful business practices and seek to head off any potential problems before they grow into larger issues. The agency, which would hold sole supervisory authority over consumer financial protections, would take a “balanced but not heavy-handed” approach to its enforcement, supervisory, and rule writing responsibilities. The agency would also need to detail the benefits and costs of any new regulations before they could be enacted, Stein added... * WASHINGTON (7/2/09)--The Treasury has added Pasadena, Calif.-based Wescom Central CU and San Jose, Calif.-based Technology CU to its list of approved lenders under the Obama administration’s Making Home Affordable Program. The Treasury program aims to stabilize the housing market and offer assistance to millions of homeowners by reducing house payments to affordable levels and preventing avoidable foreclosures. The two credit unions will be able to service qualifying loans to refinance troubled mortgages until Dec.31, 2012, and could be approved for further participation in the program following that initial period … * WASHINGTON (7/2/09)--Bankers are ready to push against President Barack Obama’s financial regulatory revamp plan--specifically, plans to create a Consumer Financial Protection Agency (CFPA). The agency, funded by bank fees and assessments, would write, supervise and enforce consumer protection regulations on financial products (American Banker July 1). On Tuesday, the Treasury provided lawmakers a proposal on how the agency would be run. Some financial industry observers said Monday’s Supreme Court decision--which said federal banking regulations do not pre-empt the rights of state attorneys general to enforce otherwise non-preempted state consumer protection laws using the court system harmed bankers’ ability to fight the new agency. The consumer protection agency proposal does not have the full support of some moderate Democrats, but John Irons, research and policy director at the Economic Policy Institute, said some version of the agency would be inevitable. On the credit union side, National Credit Union Administration (NCUA) Chairman Michael E. Fryzel plans to propose the creation of an NCUA Consumer Protection Office in the 2010 Agency Budget. The new office would consolidate existing consumer protection functions already administered by NCUA and would create a liaison relationship with relevant external parties, such as the CFPA (News Now July 1). ...