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Mortgage payday loan plans introd by Senator

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WASHINGTON (7/27/12)--Two plans of potential interest to credit unions, one that would create a new home refinancing program and another that would limit some online payday lending practices, were introduced by Sen. Jeff Merkley (D-Ore.) this week.

The mortgage plan would allow homeowners that owe more than their home is worth to refinance at reduced interest rates. Under the plan, the Federal Housing Administration, Federal Home Loan Banks or the Federal Reserve would establish a temporary trust that would purchase underwater mortgages that meet certain criteria. The temporary housing trust could be funded with money that has already been allocated to state or federal financial regulators, Merkley said.

Homeowners whose mortgages are held under the trust would then be given three years to refinance their loan. A white paper describing the plan outlines three refinancing options for homeowners:
  • A 15-year, 4% mortgage that would aim to rebuild home equity;
  • A 30-year, 5% mortgage that would aim to reduce monthly payments; or
  • A two-part mortgage, consisting of a first mortgage for 95% of a home's current value and a "soft second" mortgage on the remaining 5%. The second mortgage would not accrue interest or require payment for five years.
Loans held in the portfolio could be sold to private investors, or paid off by homeowners, the paper said.

Merkley said the plan could be developed into a pilot program without the need for legislative action.

In addition releasing the refinancing plan outlined in the white paper, Merkley also this week proposed a bill that would restrict some online payday lending practices. The legislation, known as the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act, would close federal loopholes that allow some online lenders to use practices that are banned in many states, Merkley said in a release.

The bill would:
  • Require all lenders to abide by state rules governing short-term small-amount lending practices;
  • Stop payday lending by offshore websites;
  • Give the Consumer Financial Protection Bureau the authority to shut down payment processing for online lenders that are violating state and other consumer lending laws, but avoiding enforcement;
  • Ensure that third parties cannot gain control of consumer bank accounts through remotely created checks;
  • Prevent online payday lenders from removing funds from consumer checking accounts without authorization; and
  • Ban so-called "lead generator" websites that portray themselves as payday lenders, but actually collect consumer information on applications that are sold on to payday lenders.
Merkley said it is unacceptable that financial predators are "using the 'Wild West' of the Internet" to strip wealth from families.

"We must close the loopholes that have allowed companies to utilize practices already banned in many states," he added.

Compliance CUNA clears confusion on SAFE Act deadline

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WASHINGTON (7/26/12)—Credit unions and mortgage loan originators (MLOs) that registered with the Nationwide Mortgage Licensing System & Registry (NMLS) last year must complete their annual Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) independent testing by the end of this year, the Credit Union National Association (CUNA) said in a recent Comp Blog post.

According to Comp Blog, some credit unions noted that Federal Reserve Board-supervised institutions were required to complete their annual SAFE Act testing by July 29, 2012. Credit unions have questioned whether this deadline also applied to them.

However, CUNA Director of Compliance Information Valerie Moss noted in her Comp Blog post, the National Credit Union Administration's position is that "annual" means within a calendar year; similar to the agency's requirement for an annual Supervisory Committee audit. In other words, testing may be performed any time in the calendar year and does not have to be completed by July 29.

Financial institutions and their residential MLOs were required to complete initial NMLS registration by July 29, 2011. MLOs that are not registered on the NMLS are prohibited from originating residential mortgage loans.

The SAFE Act requires independent testing of a credit union's policies and procedures for complying with the act, and related implementing regulations, "at least annually." Testing may be conducted by credit union personnel or outside parties.

NCUA to shift exam focus to largest CUs

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ALEXANDRIA, Va. (7/27/12)—Noting that one-size-fits-all supervision is "no longer appropriate in a credit union industry with nearly 100 million members and more than $1 trillion in assets," National Credit Union Administration (NCUA) Chairman Debbie Matz on Thursday announced a new office that will focus on regulating corporate and high-asset credit unions.

The NCUA said the new Office of National Examinations and Supervision, which is scheduled to be up and running by Jan. 1, 2013, will allow the agency to concentrate more hours and more attention where more of the industry's risk is held. Oversight and examination of corporate credit unions and credit unions with more than $10 billion in assets will be the main priorities for the new office.

The office will begin examination and oversight of corporates on Jan. 1, 2013, and will take on oversight of large credit unions on Jan. 1, 2014, the agency said.

Credit Union National Association (CUNA) President/CEO Bill Cheney said the announcement is in line with recent NCUA indications that it would devote a greater amount of resources to the oversight of larger credit unions.

"However, if the intent of this action is to place undue supervisory attention on well-managed, larger credit unions, that would be cause for concern at CUNA," he said. CUNA's Examination and Supervision Subcommittee will be scrutinizing this plan closely and will have further discussions with the NCUA board and agency staff, he added.

Nearly half of all NCUA examination hours are spent on credit unions that hold less than $50 million in assets, while credit unions with more than $1 billion in assets receive only 10% of NCUA examination hours, the agency noted in a release. The NCUA will spend less time examining well-performing small credit unions once the new office is established, the release added.

The new office will strengthen exam consistency and leverage national and regional expertise to promote high quality evaluations of risk and risk management practices, Matz said. "This is not about keeping credit unions from getting too big to fail; it's about keeping them from failing," she added. The new examination office was one of many NCUA initiatives announced at the National Association of Federal Credit Unions Annual Conference in Nashville, Tenn. (See related News Now story:  Short-term loan, teller changes among items on NCUA short-list)

The agency also announced a new Small Credit Union Examination Program (SCUEP), directed toward credit unions with less than $10 million in assets, last week. The SCUEP program is intended to streamline the examination process for small credit unions that have a solid record of performance, meaning, in part, a CAMEL rating of 1, 2 or 3.

"Small credit unions that are financially and operationally sound and present lower risk will typically have shorter examinations and more concise examination reports," the NCUA said in a letter to credit unions. (See related July 23 News Now story: Small CU examinations addressed by NCUA)

Examinations have been a top topic at recent NCUA listening sessions, with many credit unions criticizing NCUA examiners for their overuse of Documents of Resolution. Others have called for greater communication between examiners and credit union staff, and noted that receiving two separate lists of regulatory requests, from NCUA and state examiners, can create issues for credit unions.

Short-term loan teller changes on NCUA short-list

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ALEXANDRIA, Va. (7/27/12)—Potential changes to the National Credit Union Administration's (NCUA) definitions of "small credit unions" and "rural fields of membership" are welcome, and reflect policy changes advocated by the Credit Union National Association (CUNA), President/CEO Bill Cheney said on Thursday.

NCUA Chairman Debbie Matz on Thursday said the agency in the coming months plans to broaden its definition of small credit unions to allow more credit unions to receive technical assistance and regulatory relief from the agency. The agency also intends to expand rural field of membership districts.

CUNA recently discussed field of membership issues with the agency, including recommendations to facilitate greater service to rural districts and other communities.

Other regulatory initiatives the NCUA is considering include:

  • Allowing credit unions to buy Treasury Inflation Protected Securities;
  • Approving the use of video teller machines in order to comply with field of membership rules for serving underserved areas; and
  • Increasing the maximum application fee for short-term small-amount loans.           
Matz said the NCUA is considering these actions due to credit union comments, and added that the agency would continue to listen to credit unions.

The NCUA chairman announced the potential regulatory changes at the National Association of Federal Credit Unions Annual Conference in Nashville, Tenn. Matz also unveiled plans to establish a new Office of National Examinations and Supervision during the conference. (See related News Now story: NCUA to shift exam focus to largest CUs)

Inside Washington (07/26/2012)

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  •  WASHINGTON (7/27/12)--The Office of the Comptroller of the Currency (OCC) Thursday announced enforcement actions against Capital One, N.A., and Capital One Bank (USA), N.A., for violations and compliance deficiencies related to the Servicemembers Civil Relief Act (SCRA)., the law that provides servicemembers relief from certain obligations and temporarily suspends judicial and administrative proceedings and transactions involving civil liabilities when military service affects the servicemember's ability to meet or attend to civil matters. The OCC enforcement actions first requires the banks to improve their policies and procedures for determining whether servicemembers who request certain benefits provided by the SCRA are eligible for such benefits, ensuring that the SCRA benefits are calculated correctly, and verifying the military status of servicemembers prior to seeking or obtaining a default judgment. It also requires the banks to ensure the retention of accurate and complete records that document the basis for decisions regarding servicemembers' eligibility for SCRA benefits or protections, and to develop and implement a comprehensive SCRA training program for employees. Finally, the enforcement actions require the banks to establish" robust oversight "of and controls over their third-party vendors that provide marketing, sales, delivery, servicing, and fulfillment of services for the banks' financial products, such as credit card accounts, mortgage loans, motor vehicle finance loans, and consumer loans and lines of credit ...
  • WASHINGTON (7/27/12)--By a 327-to-98 vote, the House on Wednesday passed a bill that increases Congress' authority to audit the Federal Reserve's monetary policy. The bill, sponsored by Rep. Ron Paul (R-Texas), in effect gives Congress permission to ask the Government Accountability Office (GAO) to review decisions by the Fed about interest rates and examine discussions and policy actions undertaken by the Federal Open Market Committee (Associated Press July 27). Last week in testimony before the Housing Financial Service Committee, Federal Reserve Board Chairman Ben Bernanke stated his opposition to the bill. Bernanke said expanded authority would create a political influence on the Fed's monetary policy decisions (News Now July 21) …
  • WASHINGTON (7/27/12)--In news that should come as a relief to bankers and loan investors, loan participation agreements will not be defined as swaps in Dodd-Frank Act-related rules issued by the Securities and Exchange Commission and the Commodity Futures Trading Commission (American Banker July 26). Defining the agreements as swaps would have required buyers to gain more information about borrowers and stagnated cash trading in loans. Under loan participation agreements, the original lender sells the rights and risks associated with a loan, but remains the lender of record. Interest paid by the borrower comes to the new investor through the original lender …


  • WASHINGTON (7/27/12)--Former Citigroup CEO Sandy Weill's call for the breakup of big banks attracted widespread response in Washington on Wednesday. In an interview on CNBC's "Squawk Box," Weill suggested commercial banks and investment banks should be separated, which would essentially reinstate the Glass-Steagall Act (American Banker July 27).  Rep. Carolyn Maloney (D-N.Y.), who voted for the repeal of Glass-Steagall in 1999, called Weill's comments "absolutely huge." Rep. Walter Jones (R-N.C.) said voting for the Glass-Steagall's repeal was among the worst votes he has made in his 18 years in Congress. Although he had not yet heard Weill's comments, Treasury Secretary Timothy Geithner said that the Dodd-Frank Act provides strong disincentives against banks growing larger--primarily through tough capital requirements---and should be give longer to provide results …


  • WASHINGTON (7/27/12)--In anticipation of this November's elections, former Senate Banking Committee chair and current ranking minority member Richard Shelby (R-Ala.) this week announced his intention to chip away at financial regulations imposed by the Dodd-Frank Wall Street Reform Act. In a speech before the U.S. Chamber of Commerce, Shelby highlighted several actions he would take if the Senate returns to Republican control next year. He would work to replace the Consumer Financial Protection Bureau's single director with a five-member board, and make that agency's funding subject to the appropriations process. He also said the U.S. housing finance system, and the government's role in housing finance, would be examined. Shelby would also work to repeal portions of Dodd-Frank that "had nothing to do with the financial crisis" ...


  • WASHINGTON (7/27/12)--The Federal Deposit Insurance Corp. (FDIC), as part of its ongoing Community Bank Initiatives, announced in a Financial Institutions Letter made public Thursday that it is developing a regulatory calendar to help community banks stay up-to-date on changes in federal banking laws, regulations and supervisory guidance. The calendar highlights notices of proposed, interim and final rulemakings,  as well as supervisory guidance to financial institutions issued by the FDIC and the Federal Financial Institutions Examination Council, other joint issuances with other regulators, and independent issuances by other regulators relevant to the FDIC's supervisory examination programs …