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Washington

House approves flood insurance extension

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WASHINGTON (7/13/11)--The U.S. House Tuesday voted overwhelmingly in favor of a continuation of the National Flood Insurance Program (NFIP) for an additional five years. The legislation (H.R. 1309) preserves the rights of credit unions and others to protect their collateral from flood hazards and would clarify that flood insurance purchases "would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period." The Credit Union National Association has backed these changes. The NFIP was set to expire on Sept. 30. Legislators from both bodies of Congress and both sides of the aisle have called for reforms to the NFIP, which provides more than $1.2 trillion in coverage to Americans in flood-prone areas. Sens. Tim Johnson (D-S.D.) and Richard Shelby (R-Ala.) have both cited the need for reforms in recent weeks, with Shelby saying that every part of the NFIP "must undergo significant revision for it to survive and continue on a sustainable path." The U.S. Government Accountability Office (GAO) late last month said that Congress should act to increase the financial stability of NFIP and limit taxpayer exposure.

Vensure FCU closed by NCUA

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ALEXANDRIA, Va. (7/13/11)--The National Credit Union Administration (NCUA) this week closed Mesa, Ariz.'s Vensure FCU, the 12th credit union to be liquidated this year. The NCUA in a release said the 140 member, $8.1 million in assets credit union “was insolvent and has no prospects for restoring viable operations.” Vensure FCU was taken into conservatorship by the NCUA on April 15, with the agency claiming that it failed to properly diversify its business. The agency had recommended that the credit union build a loan program, but the NCUA in its examinations found that the credit union relied solely on income from processing online gambling transactions to survive. The credit union was one of 16 financial institutions that allegedly held funds tied to online gambling sites under investigation by the Federal Bureau of Investigation. The credit union challenged the NCUA’s conservatorship in court, stating that the agency action "was arbitrary and capricious” and threatened “to significantly damage or destroy" the credit union. The credit union also alleged that the NCUA’s conservatorship order "contained only cursory and incomplete facts to support the grounds for conservancy,” and noted that the NCUA during its conservatorship action took possession of financial records that the credit union needed to show that the NCUA conservatorship was improper. A federal court in late June rejected Vensure’s conservatorship challenge. For the full NCUA release, use the resource link.

House subcommittee votes to cut Freddie and Fannie roles

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WASHINGTON (7/13/11)—H.R. 2440, which would require government-sponsored mortgage enterprises Fannie Mae and Freddie Mac to “dispose of all non-mission critical assets,” was approved via voice vote by the House Financial Services subcommittee on capital markets and government-sponsored enterprises on Tuesday. The legislation, which is also known as the Market Transparency and Taxpayer Protection Act, was introduced by Rep. Robert Hurt (R-Va.). Under the proposal, the director of the Federal Housing Finance Agency would require Fannie Mae and Freddie Mac to identify all valuable assets and describe the functions, characteristics, and estimated values of the assets. The FHFA director would then determine which are and which are not critical to the GSEs’ mission and will create a plan to sell or dispose of non-critical assets. Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) said that “selling assets that have nothing to do with the mission of these two companies is critical to protecting taxpayers from wasteful spending, and ensuring that Fannie and Freddie engage only in activities related to their mission.” The subcommittee during the Tuesday hearing also voted to approve the Fannie Mae and Freddie Mac Transparency Act (H.R. 463); The Fannie Mae and Freddie Mac Taxpayer Payback Act (H.R. 2436); The Housing Trust Fund Elimination Act (H.R. 2441); Cap the GSE Bailout Act (H.R. 2462); Eliminate the GSE Charter During Receivership (H.R. 2439); and The GSE Legal Fee Reduction Act (H.R. 2428). Use the resource link for more information on the bills.

CUNA seeks comment on CDRLF rule reorganization

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WASHINGTON (7/13/11)--The Credit Union National Association (CUNA) is seeking comments from credit unions regarding the National Credit Union Administration's (NCUA) proposed Community Development Revolving Loan Fund (CDRLF) application changes. The NCUA’s CDRLF changes, which were offered during the agency’s May open board meeting, aim to improve transparency and ease credit union use of the fund. The changes also improve the process through which credit unions may apply for loans and technical assistance grants from the CDRLF, clarify the application process, and add reporting and monitoring requirements. CUNA in the comment call asks credit unions if they generally support the CDRLF amendments. Credit unions can also comment on whether the NCUA should be given greater flexibility to make changes and on each specific loan application outside of the regulations, and can suggest any other terms that they believe should be given greater flexibility. CUNA is accepting comments until July 18. For more information, use the resource link.

Inside Washington (07/12/2011)

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* WASHINGTON (7/13/11)--Although his overall assessment of the law bearing his name was positive a year after its implementation, U.S. Rep. Barney Frank (D-Mass.) assailed critics of the Dodd-Frank Act during a National Press Club luncheon Monday. Frank targeted those seeking to ease risk retention rules, saying he favored a broad exemption from risk-retention proposed by regulators in March, but was against making the exception a rule. Dodd-Frank requires financial institutions to retain 5% of the credit risk of securitized mortgages, but allows regulators to exempt qualified residential mortgages (QRM) (American Banker July 12). Regulators have been criticized for their definition of a QRM, which would be limited to loans with a 20% down payment and low debt-to-income ratio. Critics say that standard would be out of reach for lower-income borrowers. CUNA and others, including a bipartisan group of lawmakers, have criticized a proposal to require a 20% down payment for a loan to be defined as a QRM, saying that this change would shut out responsible homebuyers and further cripple the housing market. Frank indicated he was frustrated with the failure of Senate Republicans to confirm qualified nominees for key regulatory posts. On a positive note, the U.S. has led the world in regulating financial markets, including the new system mandated by Dodd-Frank to put large financial firms that fail into receivership, he said … * WASHINGTON (7/13/11)--Longtime credit union backer Rep. Ron Paul (R-Texas) on Tuesday announced that he will not contest his House seat in 2012, instead electing to focus on his campaign for the 2012 Republican presidential nomination. Paul currently chairs the House Financial Services domestic monetary policy subcommittee and was a cosponsor of legislation that would have delayed implementation of the Federal Reserve’s rule to implement a statutory cap on debit interchange fees. He has also supported the Credit Union Regulatory Improvements Act and maintaining the credit union tax exemption… * WASHINGTON (7/13/11)--While the Consumer Financial Protection Bureau (CFPB) will be limited without a director when it officially opens for business July 21, the agency will be free to examine and take action against banks with more than $10 billion of assets, while their nonbank competitors will not be subject to oversight (American Banker July 12). The Obama administration appointed Elizabeth Warren as a special advisor to the Treasury secretary to help organize the new bureau. But the White House has not nominated a permanent director. The Dodd-Frank Act allows the bureau to perform certain functions without a director after July 21, according to a report from the inspectors general of the Treasury Department and Federal Reserve. The bureau has the authority to prescribe rules, issue orders and produce guidance on consumer financial laws previously enforced by other bank regulators. It also can carry out functions and enforce laws previously enforced by the Federal Trade Commission and the Department of Housing and Urban Development. While those powers grant the CFPB scrutiny over banks, the inspectors general said the CFPB could not take on newly established bureau authorities until a director is appointed …

Fed issues interchange exemptnot exempt lists

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WASHINGTON (7/13/11)—In its first step to facilitate a two-tiered debit card interchange fee structure since adoption of its final rule, the Federal Reserve Tuesday issued two lists—one with the names of each institution considered to be covered by the new cap on debit interchange fees and another with the names of those that are exempt. The Dodd-Frank Wall Street Reform Act, which required the Fed to set standards to determine whether debit interchange fees for larger issuers are reasonable and proportionate to their costs, also specifically exempts card issuers with less than $10 billion in assets from the direct reach of the cap. The exemption would apply to all but three credit union issuers. However, many parties—the Credit Union National Association among them—have voiced concerns that the interchange law lacks an enforcement mechanism for the small issuers' exemption, and have said that there is no guarantee the payment card networks will operate a two-tiered system the exemption necessitates for small issuers. A resolution adopted by the Fed as part of its interchange rule requires agency staff to report by April 2012 on whether there is a two-tiered system and the impact of the rule on small issuers' interchange fee income. Staff will also bring a more comprehensive report to the board by April 2013, which will include such information as whether there is a change in debit interchange fee income for smaller issuers, whether merchants are discriminating against small issuers, and the impact of exclusivity provisions. The Fed release notes that, based on information as of Dec. 31, 2010, institutions have been grouped into two categories: “Exempt” and “Not Exempt.” However, a small number of debit card issuers may not appear on either of these lists, such as:
* Institutions for which the Fed has incomplete affiliate data; * De novo institutions for which the Fed did not have financial data as of the December date; and * Issuers without federal deposit insurance.
The Fed added that if an issuer does not appear on either list and is exempt from the interchange fee standards, it should “so certify to its participating payment card networks.” If an institution believes its placement on a list is not accurate, the Fed said it may submit a request for a correction of the information using this email address: IssuerExemptionListsRegII@frb.gov. It was just two weeks ago that the Fed adopted its final rule, which, in part:
* Caps large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring; and * Allows an additional five basis points per transaction to be charged to cover fraud losses
A separate interim final rule would allow an additional penny to be charged if financial institutions are in compliance with Fed established fraud prevention standards. Comments on this interim final rule, which is effective Oct. 1, will be accepted until Sept. 30. The debit interchange cap is also effective Oct. 1. The Fed plans to update its exempt/not exempt lists annually.