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CUNA Outlines CU Principles For Housing Market Reforms

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WASHINGTON (7/24/13)--Credit Union National Association Chief Economist Bill Hampel, testifying at the Senate's first hearing this year on housing finance reform, noted credit unions appreciate the need to reform the current housing finance system, but any reforms must not hinder the ability of credit unions to meet their members' housing finance needs in a member-friendly cooperative way.

Click to view larger image CUNA Chief Economist Bill Hampel testifies before a Tuesday Senate Banking subcommittee hearing on housing finance reforms. (CUNA Photo)
Hampel, the credit union witness for the Senate Banking subcommittee on securities, insurance and investment members hearing entitled "Creating a Housing Finance System Built to Last: Ensuring Access for Community Institutions," in part discussed S. 1217, a secondary mortgage market reform bill recently introduced by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.). Other co-sponsors include Sens. Mike Johanns (R-Neb.), Jon Tester (D-Mont.), Dean Heller (R-Nev.), Heidi Heitkamp (D-N.D.), Jerry Moran (R-Kan.) and Kay Hagan (D-N.C.).

"CUNA believes that S. 1217 is a positive step towards creating a sustainable and affordable housing market," Hampel emphasized in his remarks.

Hampel told subcommittee chairman Sen. Jon Tester (D-Mont.) and committee member Heidi Heitkamp (D-N.D.) that the thirty year fixed rate mortgage as we know it would not exist without a government guarantee.

Without a government guarantee, credit unions would still be able to make some of these loans, but not nearly as many as their members would want, he said. Further, he added, credit unions would only be able to make as many thirty-year fixed rate loans as they could hold on their books. "Once we had a significant portion of those, we would have to sell them to someone else," he added. Thirty-year loans are likely to be held on an institution's books for a long time, and need some form of credit enhancement for an investor to buy them, he explained.

Thirty year mortgages, if taken on in a normal market, can be a very good thing for first-time homebuyers "because they are freezing in their housing costs for several years," he emphasized. 

Hampel also noted that credit unions need equal and fair access to a secondary market for lenders of all sizes that will ensure affordable mortgage products for their members. Outsourcing mortgage securitization to private entities could raise significant concerns regarding fair and equal access for credit unions, Hampel said in response to a question from Tester.
The CUNA economist also outlined a number of principles that CUNA hopes a new housing market finance system will accommodate. Those principles include:
  • Maintaining a strong regulator with rigorous market oversight to ensure safety and soundness, system standardization and equal access;
  • The ability to retain servicing rights when mortgages are sold on the secondary market;
  • Ensuring that even in troubled economic times, mortgage loans will continue to be made to qualified borrowers;
  • Emphasizing consumer education and counseling as a means to ensure that borrowers receive appropriate mortgage loans;
  • Maintaining consumer access to products that provide predictable, affordable mortgage payments to qualified borrowers, such as the 30-year fixed rate mortgage; and
  • Setting reasonable conforming loan size limits that adequately take into consideration variations in local real estate costs.
Overall, Hampel said, the transition from the current system to any new housing finance system must be reasonable and orderly, and the transition deadline needs to be flexible.

The hearing was held as the House Financial Services Committee marked up its own housing finance reform bill, the Protecting American Taxpayers and Homeowners (PATH) Act (H.R. 2767).

Cheney Meets With NCUA's Matz On Key CU Issues

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WASHINGTON (7/24/13)--Credit Union National Association President/CEO Bill Cheney and National Credit Union Administration Chair Debbie Matz met Tuesday to discuss a number of timely issues, including the agency's operating budget.  
 
The operating budget, and perhaps refinements to the agency's 2013 spending plan, is an agenda time on the NCUIA's open board meeting agenda for Thursday.
 
Cheney said that the meeting was "productive." Credit unions remain concerned that they work hard to contain costs and they feel their agency should do so as well, Cheney noted. He added that it is a point CUNA consistently emphasizes.
 
In the past, the NCUA board has voted to cut its budget during mid-year adjustments. The board will review the NCUA budget at its July 25 meeting and CUNA has encouraged the agency to do all it can to minimize costs.

NEW: CUNA Seeks Key Changes in NCUA Derivatives Proposal

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WASHINGTON (UPDATED: 7/24/13, 12:10 P.M. ET)--The Credit Union National Association supports the National Credit Union Administration's efforts to solicit comments on a proposal to authorize derivatives to manage interest rate risk (IRR), but "does not support a number of the key provisions in the proposal," CUNA's Deputy General Counsel Mary Dunn said in a comment letter to the agency filed yesterday.

Comments on the proposal are due by July 29. CUNA's letter was developed under the auspices of the CUNA Examination and Supervision Subcommittee, with broad input from the credit union system.

CUNA's board earlier this month specifically reviewed this issue and all members of the board agreed one aspect under consideration in particular is of deep concern: Whether application and supervision fees should be imposed in order for credit unions to gain derivatives authority.

CUNA adamantly opposed this approach. "If derivatives reduce IRR, then NCUA should be encouraging credit unions to make appropriate use of permissible derivative options instead of retiring barriers to their use, such as fees to apply or for supervision," Dunn said.

"An à la carte fee structure sets a precedent that, if applied to other products and services, could stifle innovation for credit unions by imposing additional burdens and costs that are simply not justified," the CUNA letter emphasizes. "We feel that it is incumbent upon NCUA to develop the expertise necessary to enable it to properly regulate the evolving business model of a credit union without imposing extra changes," Dunn stated.

Other issues of concern addressed by Dunn in the comment letter include:
  • CUNA strongly opposes the imposition of application and/or supervision fees paid to the agency in order for credit unions to apply for or maintain derivatives programs or for any other financial activity that is directly authorized by statute or incidental to such authority;
  • CUNA does not support an asset eligibility threshold for derivatives participation;
  • CUNA is concerned that the investment limitations are too restrictive and urges the agency to provide for waivers and/or permit additional derivatives authority that would permit more flexibility for qualified credit unions;
  • Credit unions should be able to rely on external service providers to a greater extent than the proposal would permit to meet expertise and experience requirements;
  • An internal controls audit will be extremely costly for applicants and redundant since other audit requirements will provide NCUA with the information it needs to be assured a credit union will conduct its derivatives program in a safe and sound manner;
  • While all eligible credit unions should be permitted to engage in derivatives to hedge against interest rate risk, state chartered credit unions should not be subject to this rule. Rather, they should be permitted to engage in derivatives activities as authorized by state law implemented by state regulators; and
  • Credit unions that have participated in the pilot program on derivatives should be allowed to continue to do so, without having to reapply for derivatives authority.
Ultimately the comment letter states that the requirements in the rule will prove so costly to meet that most credit unions will choose not to seek derivatives authority because their benefits will not out weight the costs.

"This is a very important proposal, for many reasons. CUNA strongly supports the agency's efforts to move forward with a derivatives rule" but "at the same time we urge the agency to make the key revisions we are advocating in order to ensure the program will be as accessible as possible to mitigate IRR as broadly as possible," Dunn said.

Lawmakers Start PATH Act Approval Process

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WASHINGTON (7/24/13)--House Financial Services Committee members on Tuesday began consideration of the "Protecting American Taxpayers and Homeowner (PATH) Act of 2013," (H.R. 2767), a housing-finance reform bill that its chief sponsor, committee chairman Rep. Jeb Hensarling (R-Texas), has said would create a sustainable housing finance system.

The committee first approved a substitute version of the PATH Act; for the most part the substitute added just technical amendments to the original bill. Importantly for credit unions, the substitute version still contains the regulatory relief provisions strongly supported by the Credit Union National Association, including a provision to delay the mandatory implementation of all Dodd-Frank Act mortgage rules for an additional year.

The PATH Act also would: 
  • Phase out government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac within five years;
  • End the federal government guarantee and reduce government involvement in the housing finance system; and
  • Give consumers more choices in determining which mortgage product best suits their needs.
It could take multiple days to complete the mark up of this bill.

Some committee Democrats said they are concerned that the PATH Act may not preserve the 30-year fixed rate mortgage. Republicans counter that those fixed-rate mortgages would still be available through a variety of government avenues.

Also on GSE reform Tuesday, CUNA Chief Economist Bill Hampel discussed Senate reform efforts, and the impact that housing finance reforms could have on the 30-year mortgage. He testified at a  Senate Banking subcommittee hearing entitled "Creating a Housing Finance System Built to Last: Ensuring Access for Community Institutions." (See related News Now story: CUNA Outlines CU Principles For Housing Market Reforms.)

NEW: PATH Act Approved By Committee, Moves On To U.S. House

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WASHINGTON (UPDATED: 7/24/13, 10:15 A.M. ET)--House Financial Services Committee members this morning approved the "Protecting American Taxpayers and Homeowner (PATH) Act of 2013" (H.R. 2767) on a mainly party line vote. The bill may now be considered by the full U.S. House.

Technical amendments were added to the original bill during the markup process, which began on Tuesday. Importantly for credit unions, the approved bill contains regulatory relief provisions strongly supported by the Credit Union National Association, including a provision to delay the mandatory implementation of all Dodd-Frank Act mortgage rules for an additional year.

The PATH Act also would: 
  • Phase out government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac within five years;
  • End the federal government guarantee and reduce government involvement in the housing finance system; and
  • Give consumers more choices in determining which mortgage product best suits their needs.

NCUA Earns 'Energy Star' Rating

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ALEXANDRIA, Va. (7/24/13)--The National Credit Union Administration on Tuesday announced it has received ENERGY STAR certification from the U.S. Environmental Protection Agency for its Alexandria headquarters.

ENERGY STAR is a voluntary program that helps businesses and individuals save money and protect the environment through improved energy efficiency.

"NCUA strives to be a leader in the area of environmental responsibility, efficiency and cost savings," NCUA Chairman Debbie Matz said. "Being a model corporate citizen is one of my priorities for NCUA, and receiving the ENERGY STAR certification is a most satisfying accomplishment.

Agency headquarters met all four criteria necessary for ENERGY STAR certification: energy performance, thermal comfort, indoor air quality, and illumination levels. The NCUA surpassed the General Services Administration standard requiring an ENERGY STAR rating of 75 for federal agencies leasing space outside a GSA-owned property. The NCUA rating is 86 on the scale of one to 100.