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Inside Washington (07/31/2009)

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* WASHINGTON (8/3/09)--Savings accounts that offer prizes could boost savings in low-income households, according to a Federal Deposit Insurance Corp. (FDIC) panel. FDIC Chairman Sheila Bair said prizes linked to savings accounts would match her goal of devising innovations to spark savings. However, she said the innovations should not lure current savers away from their traditional, interest-earning deposits (Dow Jones July 31). Prize-linked savings accounts would allow depositors to become eligible for winning prizes instead of earning interest when they deposit their money. At the panel’s meeting Thursday, Harvard professor Peter Tufano said a “no-lose” lottery ticket could be used to spur savings. An individual could buy the ticket and turn it in at any time to reclaim its full value. The lottery product could be framed as a savings product, he said ... * WASHINGTON (8/3/09)--Federal Housing Finance Agency (FHFA) Director James Lockhart does not recommend permitting the Federal Home Loan Banks (FHLB) to securitize mortgages. The banks can continue to use MPF Xtra and other programs for mortgage purchases instead, he said in a report to Congress. Securitization could be permitted after the future of Fannie Mae, Freddie Mac and the FHLB System is determined by FHFA, Treasury and the Department of Housing and Urban Development (American Banker July 31). The process should be completed in February, Lockhart said. Representatives from the 12 Home Loan banks said Lockhart’s decision, would restrain the program and limit what they can do with mortgage programs. Mortgages were once viewed as key to the FHLB system, but without being able to securitize, some banks--such as the Chicago FHLB--have stopped making purchases ... * WASHINGTON (8/3/09)--A House panel is planning to look into pay practices at banks receiving government bailout money. The House Oversight and Government Reform Committee will have a hearing in August with New York Attorney General Andrew Cuomo, attorney Kenneth Feinberg and Rep. Edolphus Towns (D-N.Y.), who chairs the panel. The hearing comes as Cuomo investigates the pay practices at banks that received money from the Troubled Asset Relief Program. Cuomo has found that compensation for bank employees has not correlated with their financial performance (American Banker July 31). Employees were paid well, even when the banks were bailed out, Cuomo said ...

CU comment sought on NCUSIF premium 1 deposit

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WASHINGTON (8/03/09)--The Credit Union National Association (CUNA) is seeking comments from credit unions regarding the National Credit Union Administration's (NCUA) proposed rule to clarify how credit unions that begin or cease participation in the National Credit Union Share Insurance Fund (NCUSIF) during a calendar year are impacted by deposits or assessments for replenishment of the fund. The proposed rule would fill gaps in current NCUSIF regulations for credit unions that convert to or terminate federal insurance of their deposits, as well as credit unions that merge with non-federally insured credit unions but wish to continue federal deposit insurance. The proposal would add specific language stating that the NCUSIF has the authority to use the 1% deposit if necessary to meet its expenses. The plan also distinguishes between premium assessments and assessments needed to replenish the 1% NCUSIF deposit. The proposed rule would not apply to Temporary Corporate Credit Union Stabilization Fund payments. "In the comment call, CUNA asks member credit unions to voice any concerns with the proposed treatment regarding the NCUSIF for credit unions entering and exiting the federal insurance system." Comments are due to CUNA by August 17. CUNA's examination and supervision subcommittee will review these comments, and will communicate these comments to the NCUA. For more information, use the link.

NCUA transfers 1.8B CLF funds to Treasury

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ALEXANDRIA, Va. (8/03/09)--The National Credit Union Administration has announced the transfer of the accounts holding $1.8 billion of the Central Liquidity Facility's (CLF’s) funds, which are currently held by U.S. Central Federal Credit Union, to the U.S. Treasury. The NCUA also announced that it is exploring "alternatives regarding the transfer of primary ownership of CLF stock from [U.S. Central] to other credit unions or groups of credit unions through the anticipated reforms to the corporate network." U.S. Central currently owns approximately 96 % of the CLF's stock and, eventually, natural-person credit unions may need to directly invest in CLF stock in order to have continued CLF access, which would effectively buy out U.S. Central's CLF stake. According to the NCUA, this change, which will invest the CLF funds in U.S. Treasury securities on behalf of the CLF, will not impact the CLF's ability to provide liquidity to credit unions. In a statement, the NCUA said that this move was “not based on a concern of diminished confidence in NCUA’s conservatorship efforts to restore U.S. Central to a financially strong operational status.” NCUA explained that this transfer resulted from the CLF's consultations with its auditor. Sources also indicated that the Treasury was in favor of this change. But for this transfer of the CLF's funds, the CLF and its auditors had determined that "GAAP accounting rules may require the funds invested in U.S. Central to be presented on CLF's financial statement as a contra equity account rather than an asset. This contra equity treatment would effectively result in CLF total member equity of zero….because CLF's borrowing authority is determined based on a multiple of its equity, this treatment would effectively reduce CLF's borrowing amount to zero." In other words, U.S. Central acting as both an investor in the CLF and as the agent holding the CLF's funds (including the cash resulting from its own investments in CLF stock) may have led to double counting assets. The Senate in September is scheduled to vote on allowing the CLF to extend until 2010 its full borrowing authority of around $40 billion. The Credit Union National Association (CUNA) is evaluating NCUA's analysis of the current situation involving the CLF. Senior CUNA staff were briefed by NCUA representatives on Friday morning about this transaction, and CUNA will be pursuing further dialogue on this issue with the agency. CUNA's Government Affairs Committee and its subcommittees are also expected to assess the implications of these changes to the CLF in the very near future. For the full NCUA release, use the link.

CUNA Exemption needed in House-passed exec comp bill

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WASHINGTON (8/3/09)--In a joint letter sent Friday to House Speaker Nancy Pelosi (D-Calif.), the Credit Union National Association (CUNA) and the National Association of Federal Credit Unions (NAFCU) said that while they “applaud” efforts to ensure that compensation structures do not encourage excessive risk-taking that can create systemic risk, credit unions should not be included in H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act of 2009. Portions of H.R. 3629, which passed the House with a 237-185 vote, would grant regulatory powers over compensation structures or incentive-based payment arrangements that are determined to encourage inappropriate risks by financial institutions that could threaten the safety and soundness of a given institution or, more broadly, harm the economy as a whole. The legislation also exempts financial institutions that do not have incentive-based payment arrangements from some compensation disclosures, and does not require the disclosure of salaries of individuals who work for a financial institution. Rep. Jeb Hensarling (R-Texas) in a Tuesday House Financial Services markup session added an amendment that would exempt financial institutions with under $1 billion in total assets from the terms of the bill. In the letter, CUNA and NAFCU stated that while this amendment “was a step in the right direction,” the trade associations “continue to believe” that “the structure,” rather than the size of credit unions, “is the reason why they should be exempted.” The NCUA also has rules aimed discouraging excessive risk taking in place. According to the letter, “including credit unions as covered institutions under Section 4 of the legislation” and forcing the National Credit Union Administration to regulate alongside “other regulators who supervise for-profit, stock-issuing entities does not seem to make for good policy.” “We believe it is critical that not-for-profit institutions be treated differently than for-profit entities in this legislation,” the letter added, saying that it is the “different motives” of for-profit entities that “can open the door for abuse.”

Matz confirmation swearing-in on the horizon

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WASHINGTON (8/3/09)—Deborah Matz's nomination to the National Credit Union Administration (NCUA) board was approved by unanimous consent last week by the Senate Banking Committee. The next step in the confirmation process requires the full Senate to vote its approval. Then the confirmed Matz is expected to be sworn in and designated by the Obama administration to fill the chairman's position. The House adjourned Friday for an August District Work Session, but the Senate remains in session this week.

NEW Matz nomination ready for confirmation

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WASHINGTON (7/31/09 UPDATED 9:10 a.m. ET)—Deborah Matz’s nomination to the National Credit Union Administration (NCUA) board was approved by unanimous consent last night by the Senate Banking Committee. The next step in the confirmation process requires the full Senate to vote its approval. Then the confirmed Matz is expected to be sworn in and designated by the Obama administration to fill the chairman’s position. The House adjourns for an August District Work Session this evening, but the Senate remains in session next week.

CUNA urges Fed Address 21-day compliance issue

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WASHINGTON (7/31/09)--The Credit Union National Association (CUNA) in a Thursday letter urged Federal Reserve Board Chairman Ben Bernanke to delay the Aug. 20th compliance date of the 21-day rule as it applies to open end credit other than credit cards under the Fed's interim final rule to implement the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act). Under the rule, credit unions and other creditors must mail or deliver a periodic statement to borrowers for open end credit 21 days before the payment is due. Otherwise, the creditor may not treat payments as late for any purpose, including filing a credit report even if the payment is late. CUNA noted that many credit unions will need to make dramatic changes to their systems to comply and it is impossible for them to make such changes by the August compliance date. CUNA called on the Fed to exercise its authority under the Truth in Lending Act to give credit unions more time to comply with the rule change, which takes effect on August 20. CUNA also urged the Fed to allow credit unions to continue to use consolidated statements by providing the payment due dates for the current month and the next month on each member’s monthly statement, thus providing the necessary 21-day notice. Credit unions would still need time to implement these changes, CUNA said. In the letter, CUNA President/CEO Dan Mica said that “credit unions are facing horrendous problems” as they work to comply with the 21-day notice provisions of the CARD Act, which affect general lines of credit, credit lines associated with share draft and checking accounts, signature loans, home equity lines of credit, and other loans that are permitted under open-ended lending. Credit unions, “including those with multi-featured plans,” would be forced to “dismantle consolidated statement systems” and other procedures that “have been in place for decades” to comply with the 21-day rule by providing separate account statements, Mica added. This process will be expensive for both credit unions and their membership, who would ultimately pay for these modifications, Mica said. Mica has also asked National Credit Union Administration chairman Michael Fryzel to communicate the concerns of credit unions to the Fed.

Inside Washington (07/30/2009)

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* WASHINGTON (7/31/09)--The District of Columbia and 46 states have complied with legislation Congress passed last year requiring states to create a national registry for mortgage originators. Three other states also could comply soon (American Banker July 30). The Nationwide Mortgage Licensing System established a standard process for all state-license originators to increase accountability and transparency. Twenty-six states are active in the registry. Seven more will participate this year and 13 will come online by January. California, Massachusetts and Pennsylvania have bills pending ... * WASHINGTON (7/31/09)--Legislation to allow cramdown--in which bankruptcy court judges are allowed to rework mortgages--could be revived if lenders don’t increase their mortgage modifications, House Financial Services Committee Chairman Barney Frank (D-Mass.) said in a statement. “People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different.” Sen. Dick Durbin (D-Ill.) earlier this year proposed legislation that would allow judges to modify mortgages. The legislation failed, but Durbin has said he would be ready to bring a similar measure to the Senate floor. The Credit Union National Association (CUNA) opposes cramdown, saying that it could lead to borrowers’ gaming of the system ... * WASHINGTON (7/31/09)--The Small Business Administration (SBA) should look at its preferred lenders to see if they are fulfilling SBA’s mission, said William Shear, director of the Government Accountability Office (GAO), at a House Small Business Committee hearing this week. He pointed to a February GAO report indicating that SBA lenders may not be detailing their examinations regarding potential borrowers’ credit. Also at the hearing, SBA Administrator Karen Mills said the agency had streamlined the 7(a) loan application process in response to criticisms that the 7(a) program’s paperwork burdened lenders. She also faced questions about the SBA’s disaster loan program--which has not been improved to handle another Hurricane Katrina, Shear said ... * WASHINGTON (7/31/09)--A recently released Government Accountability (GAO) report indicates that even the federal government is a bit behind in planning for a possible pandemic influenza occurrence. The July 29 report notes that the current H1N1 outbreak is a “powerful reminder” underscores that an influenza pandemic remains a real threat to the nation. GAO says a number of actions have been taken over the past three years to better prepare the country and its federal workforce for such and event, but there are still many gaps. Specifically, the GAO said, while federal agencies have taken action on 13 of GAO's 24 recommendations, 11 of the recommendations that GAO has made over the past three years have not been fully implemented …

Bill OKd by House would ease pressure on NCUA IG

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WASHINGTON (7/31/09)--The House on Wednesday approved H.R. 3330, the “Improved Oversight by Financial Inspectors General Act,” which raises the trigger for financial institution investigations by federal regulators, including the National Credit Union Administration (NCUA). Specifically, NCUA Inspector General William DeSarno told News Now that the legislation would “amend the Federal Credit Union Act to raise the threshold” for material loss reviews (MLRs) to $25 million, up from the current $10 million threshold. The new threshold would apply to situations in which there were recorded losses equal to at least 10 percent of the total assets of the credit union at the time that the NCUA initiated assistance or was appointed as the liquidating agent of the credit union. DeSarno said that the bill would “alleviate some of the pressure” on the NCUA’s limited resources, as all of the agency’s audit resources are devoted to material loss reviews at this time. The legislation, introduced by Rep. Steve Driehaus (D-Ohio), would, according to a release, “help ensure that financial Inspectors General have the resources and flexibility they need to get to the bottom of the most significant failures in the financial sector.“ Current regulations require that Inspectors General to conduct MLRs of failed banks with material losses of at least $25 million, but the legislation would increase this threshold to $200 million for banks. However, inspectors would still be able to review banks that have reported smaller losses if they find that the bank has failed “due to unusual circumstances, such as fraud,” the release said.

CU comment on CARD Act rules is urgent CUNA

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WASHINGTON (7/31/09)—As the Credit Union National Association (CUNA) continues to seek a regulatory or legislative remedy to a compliance problem associated with new Federal Reserve Board Credit CARD Act rules, CUNA also seeks credit union comment on the plan. CUNA President/CEO Dan Mica took the unusual step of personally encouraging credit unions to weigh in with the Fed on the issues surrounding the agency’s new interim final rule. (See related story: CUNA urges Fed: Address 21-day compliance issue.) The Fed recently issued that rule amending Regulation Z, the Truth in Lending Act, to implement the first stage of the Credit CARD Act, the full title of which is Credit Card Accountability, Responsibility and Disclosures Act of 2009. The new law is intended to establish fair practices for credit cards and other open-end credit plans. The Fed interim final rule requires creditors to adopt reasonable policies and procedures to ensure that periodic statements for any open-end consumer credit accounts are mailed or delivered at least 21 days before a payment is due. Failing that, a creditor is prohibited from charging a late fee or to otherwise consider the payment as late. The rule will also require creditors to provide a 45-day notice of a change in the interest rate or other significant changes to the terms of the credit card agreement. These provisions carry an Aug. 20 effective date and CUNA has sounded the alarm that such a short compliance timeframe for a complicated and entailed compliance process presents perhaps insurmountable problems for credit unions. About 2,500 credit union representatives tuned earlier this week for CUNA's audio conference on the requirements of the Credit CARD Act," which featured a Fed senior attorney and other experts to explore compliance issues. An archived version of the 90-minute session is available on the cuna.org website. In its Comment Call, CUNA asks credit unions to outline operational problems associated with providing periodic statements at least 21 days before the due date. Specifically CUNA asks:
* How are these problems different for credit cards, as opposed to other open-end credit? * How much time will you need to comply with the new rule with regard to the 21-day requirement for credit cards and how much time will be needed for other types of open-end credit?
CUNA also asks credit unions to describe the operational problems associated with providing the 45-day change-in-terms notice: Will you be able to comply with these provisions by Aug. 20? If not, how much more time will you need? Also on Reg Z issues, CUNA is offering four upcoming “Regulation Z eBoot Camp eSchool” session.
* Aug. 27 session will take a look at the basics of Regulation Z; * Sept. 3 session will feature a discussion of changes to disclosures at account opening and with credit card applications and solicitations; * Sept. 10 session will provide a review of changes to the information required on periodic statements; and * Sept. 17 session will look at the required changes for advertising, change in terms notices, the Credit CARD Act, and the Unfair & Deceptive Credit Card Practices Act.
Use the resource links below to access registration for the CUNA Credit Card Act audio conference, the CUNA eBoot Camp, and the Comment Call.

House votes yes to flood insurance extension

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WASHINGTON (7/31/09)—The House agreed by voice vote to extend the National Flood Insurance Program (NFIP) through March 31, 2010. The program was set to expire on Sept. 30. The House bill (H.R. 3139), introduced earlier this month by Reps. Maxine Waters (D-Calif.) and Barney Frank (D-Mass.), also would give permanent authority to the director of the Federal Emergency Management Agency (FEMA) to provide assistance to any state or community. That power was first granted on a temporary basis. Waters is chairwoman of the House Financial Services subcommittee on housing and Frank is chairman of the parent committee. Frank and Waters have said they also plan to engage the Obama administration and FEMA officials in a reform process, to update the flood insurance program that was created in 1968. Currently, the NFIP provides over one trillion dollars of flood insurance to more than five and a half million American homes and businesses.

Red flags Another reprieve for state-chartereds

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WASHINGTON (7/31/09)—The Federal Trade Commission (FTC) announced it will launch a new educational program and further delay enforcement of its identity theft "red flags" rule--to Nov. 1. This is the third time the compliance date has been pushed backed by the FTC, an action which affects state-chartered credits unions. Federally chartered credit unions under a similar National Credit Union Administration identity theft rule had to comply by Nov. 1, 2008. The red flags rule was developed to implement parts of the Fair and Accurate Credit Transactions (FACT) Act of 2003. FACTA directed financial regulatory agencies, including the FTC, to promulgate rules requiring those under its supervision that have covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft. The FTC announced this week that in an attempt to help small businesses and “other entities” with compliance, it will “redouble” its education efforts and provide additional resources and guidance to clarify what businesses are covered by the rule and what must be done to comply. “Although many covered entities have already developed and implemented appropriate, risk-based programs, some – particularly small businesses and entities with a low risk of identity theft – remain uncertain about their obligations,” the FTC noted, explaining its latest delay. The FTC’s additional compliance guidance will include a special link for small and low-risk entities on commission’s “Red Flags Rule Website.” The agency already has posted FAQs that address how the FTC intends to enforce the Rule and other topics. The FTC release highlighted that the enforcement FAQ states that commission staff” would be unlikely to recommend bringing a law enforcement action if entities know their customers or clients individually, or if they perform services in or around their customers’ homes, or if they operate in sectors where identity theft is rare and they have not themselves been the target of identity theft.” Use the resource links below for more information.

CUs could help ease credit crunch under new bill CUNA

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WASHINGTON (7/31/09)—Proposed legislation that would lift the current member business lending (MBL) cap to 25% would allow credit unions to “help address a real need in a difficult economic time” and “provide economic stimulus without increasing the size of government or costing taxpayers a dime,” the Credit Union National Association (CUNA) said on Thursday. H.R. 3380, the “Promoting Lending for America’s Small Business Act,” which was introduced on Thursday by co-sponsors Rep. Paul Kanjorski (D-Pa.) and Rep. Ed Royce (R-Calif.), would double the current statutory MBL cap of 12.25%, and would exclude from the new 25% statutory cap loans of less than $250,000, business loans in underserved areas, and loans to non-profit religious institutions. The “bipartisan legislation,” if passed, “would enable credit unions to make more small business loans and create jobs at a time when our country needs a financial boost,” Kanjorski said in a release announcing the bill. Kanjorski said that the bill will use credit unions “as a resource to boost lending to small businesses” and to fill the void created by “commercial banks and other entities” that “have unfortunately pulled back their lending activities” as the economic crisis wears on. CUNA has consistently argued in support of raising the MBL cap, saying that lifting the cap would allow credit unions to aid the ongoing economic recovery by increasing the loan opportunities available to small businesses. National Credit Union Administration Chairman Michael Fryzel in a Thursday release said that the board “looks forward to working with Congress as the legislative process progresses to produce a bill that enhances safe, well-supervised and beneficial member business lending,” Federal Reserve Chairman Ben Bernanke recently said that legislation that would lift the MBL cap would be "worth looking at," and a CUNA representative in recent Senate testimony told legislators that lifting the MBL cap above 20% of assets would "safely and soundly" result in $10 billion in new small business loans within one year. Rep. Ron Kind (D-Wis.) indicated that there is a "growing sentiment" among members of Congress that the MBL cap should be lifted, and Sen. Charles Schumer (D-NY) earlier this year announced plans to develop legislation to address the MBL cap.

Payday lending program guidance from NCUA

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ALEXANDRIA, Va. (7/30/09)--The National Credit Union Administration (NCUA) in guidance released on Wednesday said that while a number of credit unions are interested in offering short-term loans to their members, credit unions should use these programs to provide their members with a bridge from short-term loans to “more mainstream products and services.” According to the NCUA release, credit unions can avoid the negative perception of payday loan products by “clearly” disclosing “the costs and risks associated with loans” and providing transparent application processes and advertisements to their members. Credit unions should also ensure that their loan products “comply with applicable consumer protection laws, including the Equal Credit Opportunity Act, Regulation B, the Truth in Lending Act and Regulation Z, and other related regulations. Credit unions should also control credit concentration risks through setting “borrower and program limits,” the NCUA said. The NCUA also suggested that credit unions provide terms that encourage their members to take part in more traditional financial programs by limiting the number of payday loans and roll-overs a member may take part in, “imposing substantial waiting periods between loans,” providing financial counseling to members that take out short-term loans, and allowing their members to rescind a loan within 24 hours, free of charge. In instances where an FCU refers its members to a third-party vendor that services payday loans, that FCU would be “in violation” of NCUA rules if the terms of those loans are misleading to consumers. Referring credit union members to a third-party vendor in exchange for finder’s fees would also create a “significant reputation risk” and would run “contrary to the FCU’s central mission to serve its members,” the NCUA release added. To see the NCUA’s full guidance on payday loans, use the resource link.

Inside Washington (07/29/2009)

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* WASHINGTON (7/30/09)--The financial industry expects a push for legislation forcing lenders to rework mortgages because the Treasury’s Home Affordable Modification Program may not yield desired results (American Banker July 29). To make the modifications more permanent, some observers expect that a bill by Sen. Dick Durbin (D-Ill.) addressing the modification issue may resurface. Durbin proposed legislation that would allow bankruptcy judges to rework mortgages--a move that was defeated about three months ago. Durbin, however, said he planned to return to the Senate with similar legislation. The Credit Union National Association (CUNA) opposes allowing bankruptcy judges to rework loan terms because it could lead to borrowers’ gaming of the system. Other financial observers say Congress will have to consider mandatory modification measures. The Obama administration needs to require servicers to rework mortgages, said Bruce Marks, CEO of Neighborhood Assistance Corp. of America. The administration’s plan has yielded 200,000 trial modifications, and 55,000 refinancings. But the figures are below the administration’s goal to help up to nine million borrowers ... * WASHINGTON (7/30/09)--The Federal Deposit Insurance Corp. (FDIC) has scheduled a meeting for today of the Advisory Committee on Economic Inclusion. The committee was formed to provide advice and recommendations on initiatives to expand access to banking services to underserved populations. The meeting will focus on prize-linked savings, and issues and challenges related to reaching out to the underserved and low- and moderate-income consumers, the FDIC said in a release. Witnesses at the hearing include Peter Tufano, Harvard professor, and Ellen Lazar, senior adviser to FDIC Chairman Sheila Bair for consumer policy ... * WASHINGTON (7/30/09)--When planning for the future, financial institutions should “hope for the best” while planning for the worst, according to the president/CEO of the Federal Reserve Bank of San Francisco. During a meeting Tuesday with an Indiana banking group, Janet Yellen said stress tests can be helpful to assess potential effects on capital and earnings, and to develop contingency plans. Institutions also should have back-up plans and procedures for using the Fed’s discount window, she added (American Banker July 29). Yellen, a former Fed governor, has been mentioned as a candidate to lead the Fed if President Barack Obama does not nominate current Fed Chair Ben Bernanke. Bernanke’s term expires in January. Also during the meeting, Yellen said consumer protection and systemic risk oversight need to be strengthened, but did not indicate which agency should have systemic risk oversight powers ... * ALEXANDRIA, Va. (7/30/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel presented NCUA Vice Chairman Rodney Hood with an NCUA gold medal Wednesday to congratulate him for successfully completing his tenure as vice chair. Hood’s term expired in April, but he will continue to serve in his position until a successor is found. While at NCUA, Hood served on the board of the Neighborhood Reinvestment Corp. (NeighborWorks), which was created by Congress to assist in the revitalization of urban residential neighborhoods. “Vice Chairman Rodney Hood’s legacy will be a strong one: his foresight and diligence on risk mitigation came at a time when much of the financial world was devoting its energies elsewhere; his commitment to credit union professional development, embodied in his ’Blueprint 20/20’ initiative, was impressive,” Fryzel said. “And in countless other ways he encouraged the agency to think ahead, to innovate, and to always apply the best, most forward-looking approach to the challenges confronting us. Hood’s service was an essential part of NCUA’s success in recent years, and his contributions will be missed.” From left are Fryzel, Hood, and NCUA Board Member Gigi Hyland. (Photo provided by the National Credit Union Administration) ...

Donovan tells iThe Hilli CUNAs willing to talk on CFPA

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WASHINGTON (7/30/09)—The Credit Union National Association (CUNA) believes that it is preferable to remain open to discussing the Obama administration’s plan for a Consumer Financial Protection Agency (CFPA) and other ongoing financial reform efforts with lawmakers, CUNA vice president of legislative affairs Ryan Donovan told The Hill newspaper. In comments posted in The Hill on Wednesday, Donovan said that “there is an advantage to being at the table and willing to talk," adding that those who simply refuse to discuss these issues are likely missing a chance to affect legislative decisions as the process moves forward. While the banking industry and other groups have discussed joining forces to oppose the CFPA and other regulatory reforms and have held finance-industry strategy sessions aimed at fomenting total opposition to the Obama administration’s plans, CUNA has not participated in those meetings or in the coalition. CUNA has been approached by democratic lawmakers, however, and Donovan indicated that CUNA is communicating the concerns of credit unions to legislators. CUNA has communicated with key legislators, including House Financial Services Committee chairman Barney Frank (D-Mass.), in recent months. In a recent letter to Frank, CUNA said it could support the creation of the CFPA if seven key parameters are incorporated into the proposal. These parameters include allowing the CFPA to write the rules but leaving "examination, supervision and enforcement" of the consumer protection rules "to each credit union's prudential regulator." CUNA has also urged legislators to complete the regulatory streamlining and modernization that is promised in the CFPA proposal and has advocated for the inclusion of credit union industry representatives and state or federal credit union regulators in the CFPA’s proposed governance board. Debate on financial regulatory reform continues to be a hot topic in Washington, and the CFPA, along with other reform measures, will return to prominence once the Congress returns from August recess in early September.

CUNA pursues CARD Act compliance solutions

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WASHINGTON (7/30/09)—The Credit Union National Association (CUNA) continues its efforts to address what is for credit unions a troublingly short compliance framework for new Federal Reserve Board rules implementing the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. CUNA is pursuing both regulatory and legislative fixes to the compliance date problem. Illustrating the level of concern, approximately 2,500 credit union representatives tuned in this week for CUNA’s audio conference, "Requirements of the New Credit CARD Act," which featured a Fed senior attorney and other experts to explore compliance issues. The CARD Act aims to prevent lenders from making arbitrary changes to interest rates and terms associated with credit cards that have an existing balance. However, CUNA has been working with the Fed to convey credit union concerns regarding a specific requirement in Section 106. That section prohibits creditors from claiming a payment is late unless that creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date. The section, says CUNA, is very problematic both because it is one of the very few provisions that apply to all open-end credit, not just credit cards, and because of the upcoming Aug. 20 effective date. CUNA Senior Assistant General Counsel Jeff Bloch said audio conference discussion focused exclusively on the huge compliance problems associated with the 21-day disclosure requirement. “One suggestion for compliance that was discussed, and seemed the most viable, was an idea of putting due dates on the statements for both the current month and the next month to ensure that members receive the 21-day notice for all payments, without requiring the dismantling of consolidated statements or altering due dates, many of which are chosen by the members themselves,” Bloch said “Unfortunately, the Fed attorney said that approach would violate the ‘spirit’ of the rule,” Bloch said, but assured that CUNA will continue to pursue the "multiple due dates" approach with the Fed because it seems to be “the most viable, and maybe the only realistic, means in which to comply with these provisions.” There is an archived version of the CUNA audio call available through the cuna.org website. Use the resource link below to access registration.

House exec comp bill would exempt some CUs

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WASHINGTON (7/29/09)--The House Financial Services Committee on Tuesday added an amendment that would take most credit unions out from under part of its executive compensation bill by exempting financial institutions with less than $1 billion in total assets from portions aimed at curbing some incentive-based compensation structures. This amendment, which was offered by Rep. Jeb Hensarling (R-Texas) early on Tuesday, was added to H.R. 3629, the Corporate and Financial Institution Compensation Fairness Act of 2009, which passed into the full House via a 40-28 committee vote. Sections of the bill which addressed incentive-based compensation would require financial institutions to disclose compensation structures that include any incentive-based elements. Portions of the legislation grant regulatory powers over any compensation structure or incentive-based payment arrangement that is determined to encourage inappropriate risks by financial institutions that could threaten the safety and soundness of a given institution or, more broadly, harm the economy as a whole. The National Credit Union Administration (NCUA) already has compensation regulations in place that are designed to prevent many risky compensation structures, and the Credit Union National Association (CUNA) has recently communicated this message to legislators. While an anticpated amendment that specifically would have exempted credit unions from portions of H.R. 3629 was not offered, credit unions would be shielded from the executive compensation legislation by the aforementioned exemption. Rep. Joe Baca (D-Calif.) did not offer his amendment because other amendments with similar protections for credit unions were added to the bill. After the committee vote, Baca said in a release that his amendment would have exempted credit unions because "I was concerned the legislation would force an unfair burden on innocent parties that had nothing to do with our current financial crisis." He added that he withdrew his amendment believing the Hensarling language was a "responsible compromise that would exempt smaller credit unions and financial institutions.” However, CUNA continues to work with legislators to try to secure a credit union-specific exemption added to the bill. Rep. Barney Frank (D-Mass.), who chairs the committee, offered a manager's amendment that excluded both entities that do not pay their employees through incentive-based compensation and so-called “smaller” financial institutions from some of the regulatory scrutiny proposed under the bill. According to Frank’s amendment, the Securities and Exchange Commission would have the freedom to determine what constitutes a small financial institution. The bill will now be considered by the full House, and it could be brought up for discussion as soon as this Friday.

Inside Washington (07/28/2009)

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* WASHINGTON (7/29/09)--The Federal Deposit Insurance Corp. (FDIC) has demonstrated that it is using some alternatives to resolve bank failures. Last week, the FDIC let a Georgia bank use the $300 million it raised from non-private investors to acquire six subsidies of Security Bank Corp. in Macon, Ga. All six subsidies had failed Friday. Over the weekend, a management team took control of 86% of Security’s assets and began operating all of the branches of the banks. The FDIC deserves credit for being innovative in a tough environment, according to Robert Hartheimer, a former FDIC director of resolutions (American Banker July 28). Private equity remains important for acquiring failed institutions, but FDIC officials appear hesitant to allow wealthy investors with little banking experience take over institutions. The FDIC has proposed restrictions on private-equity buyers, but the restrictions were criticized for being too tough. However, in the case of Security, financial observers anticipate that the bank may not be required to face the restrictions ... * WASHINGTON (7/29/09)--As the Treasury Department secures details for a plan to use Troubled Asset Relief Program (TARP) funds to buy Small Business Administration (SBA) loans, SBA lenders are trying to determine the best way to spend the $15 billion in funds (American Banker July 28). The money could be used to extend fee reductions, increase the guarantee limit, or guarantee increases in SBA’s 7(a) and 504 lending program, some lenders said. Another industry representative has proposed using the funds in a new program that could aid small businesses. The program would act as a “credit restart” and offer new loans to businesses behind on their payments. The loans could help the businesses become profitable again. The loans would carry a higher interest rate, and the Treasury could divide interest payments with the lender ... * WASHINGTON (7/29/09)--The Securities and Exchange Commission (SEC) Monday announced several actions to prevent abusive short sales. First, the SEC finalized an interim temporary rule that would reduce the potential for abusive, “naked” short-selling in the securities market by requiring broker-dealers to purchase or borrow securities to deliver on a short sale. Second, the SEC is working to make short sale volume and transaction data available through self-regulatory organizations’ website. Third, the SEC is planning a roundtable Sept. 30 to discuss securities lending, pre-borrowing and additional short-sale disclosures. The roundtable will consider the impact of a program requiring short-sellers to pre-borrower their securities, and adding a short sale indicator to the tapes to which transactions are reported for exchange-list securities. Naked short sales occur when an investor sells shares “short” without first having borrowed them. The sales are permitted because there is no legal requirements that a short seller borrow the shares before effecting a short sale, but such sales can be used to manipulate the market, SEC said ...

Aug. 24 comment deadline for premium 1 deposit rule

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WASHINGTON (7/29/09)—Comments must be submitted to the National Credit Union Administration (NCUA) by August 24 on a proposed clarification addressing the National Credit Union Share Insurance Fund (NCUSIF) premium and a one percent deposit. At its July 16 open board meeting, the NCUA proposed a rule to define how insurance premiums and deposit recapitalizations are calculated for only a portion of a year when a credit union either enters or departs the NCUSIF. The rule would cover such instances as when a credit union converts to or from private insurance in a year there is an NCUSIF assessment. It includes specific calculations for the assessments. The proposal amends the definition of insured shares to include shares that would have been insured by the NCUSIF if the institution had been federally insured on the date of measurement. There are also additional clarifications to distinguish premium assessments and assessments to replenish the one percent deposit. The Credit Union National Association (CUNA) will be seeking credit union comment on the NCUA plan. CUNA will issue a Comment Call later this week, with comments due August 16. Use the resource link below to read more about the NCUA plan in the Federal Register.

GAO Nonprime foreclosure pipeline still congested

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WASHINGTON (7/29/09)— About 1.6 million of the 14.4 million nonprime loans written from 2000 to 2007 completed the foreclosure process by March 31 of this year, according to a Government Accountability Office (GAO) study released Tuesday. The study, titled “Home Mortgages: Recent Performance of Nonprime Loans
Click to view larger image Source: GAO
Highlights the Potential for Additional Foreclosures,” also disclosed that of the 5.2 million of those 14.4 million nonprime loans that are still “active,” meaning they have not been prepaid or foreclosed, nearly 25% are seriously delinquent. The GAO defined “seriously delinquent” as either 90 or more days behind in payments or already in the foreclosure process. “As a result, hundreds of thousands of additional nonprime borrowers are at risk of losing their homes in the near future,” the report noted. The study reported that, within the subprime market segment, close to 28% of active loans were seriously delinquent, and within the active Alt-A segment, the serious delinquency rate was about 17%. GAO used the following general definitions: Subprime loans feature higher interest rates and fees and are generally made to borrowers who have tarnished credit histories; Alt-A loans are generally for borrowers whose credit histories are close to prime, but the loans have one or more high-risk features such as limited documentation of income or assets. In both those categories, those with adjustable rates were in the worst shape, the GAO reported, and acknowledged that California, Florida, Illinois, Massachusetts, Nevada, and New Jersey had the highest problem rates as of March 31. Use the resource link below to access the full GAO report.

Matz vote postponed for now

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WASHINGTON (7/29/09)--The confirmation of presumptive National Credit Union Administration (NCUA) agency head Deborah Matz on Tuesday was temporarily postponed after the Senate Banking Committee could not assemble the number of members needed to form a quorum. The committee had scheduled a discussion of Matz’s nomination to the NCUA board for Tuesday morning’s executive session, but the committee chairman, Sen. Chris Dodd (D-Conn.), put off the discussion after his committee did not have the number of senators needed to begin a vote. Sources close to the issue have told News Now that the delay is related to scheduling conflicts and that her expected confirmation is still on track. If confirmed, Matz will serve on the NCUA board for a second time. Matz gave an indication of how the board would function under her leadership in a nomination hearing held last week, telling legislators that she would maintain the "critical arms-length relationship" between a regulator and the regulated while ensuring that credit unions remained conscious of their commitment to consumer protection, member outreach, and financial education. It is not known when the committee will next discuss the nomination. However, while members of the House will likely leave for summer recess at the end of this week, the Senate is scheduled to remain in Washington through next week. Senate Banking Committee members could also vote on the Matz nomination if the chairman calls for a quorum and vote while the members are gathered in the Senate chambers for other official business. Matz's nomination, if approved by the committee, would move on to the full Senate for confirmation.

Inside Washington (07/27/2009)

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* WASHINGTON (7/28/09)--Federal Reserve Board Chairman Ben Bernanke defended the central bank’s actions during the economic crisis at a town hall meeting Sunday at the Federal Reserve Bank of Kansas City. Bernanke also expressed support for Congress to pass legislation that would create a bankruptcy process for big financial firms (American Banker July 27). He criticized the proposed consumer protection agency under President Barack Obama’s regulatory reform plan, saying that the Fed and other agencies would have their oversight powers taken away. Jim Lehrer of PBS, who moderated the town hall, asked Bernanke if he supported the agency. Bernanke said he neither favored nor opposed it. Bernanke’s term as Fed chief is set to expire in January, and it is not known if Obama will nominate him for a second term ... * WASHINGTON (7/28/09)--Treasury Secretary Timothy Geithner told the House Financial Services Committee Friday that he thinks the Obama administration “got it right” in creating the proposed regulatory reform plan. Under the plan, the Federal Reserve Board would receive systemic risk oversight, and banking regulators would be stripped of their consumer protection oversight in favor of a new agency. Those ideas have been heavily criticized by the financial industry. Several hearing participants, including Reps. Mel Watt (D-N.C.) and Carolyn Maloney (D-N.Y.) raised concerns about consumer protection examinations and stripping bank regulators of consumer protection powers, but Geither did not back down. Geithner said he understood the consumers that had been raised, but was confident that the plan had struck “the right balance” (American Banker July 27) ... * WASHINGTON (7/28/09)--The Federal Reserve Board has begun a study of household finances to update data collected at the outset of the economic downturn in late 2007. The 2009 Survey of Consumer Finances will attempt to re-interview 4,422 participants from the 2007 study. It aims to gather a detailed picture of the financial and economic problems of the past two years on households and their finances. The study will be conducted by the National Opinion Research Center. Data collection started Saturday and will continue through Dec. 31 ...

Frank is confident of reg reform in 2009

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WASHINGTON (7/28/09)—Rep. Barney Frank (D-Mass.) reiterated Monday
House Financial Services Committee Chairman Barney Frank (D-Mass), shown here addressing CUNA's 2009 Governmental Affairs Conference, says the goal of financial regulatory reform is to support innovation but curb abuses. (CUNA photo)
that he is confident the House will approve a financial regulatory reform bill and pass it on for Senate consideration by October, and President Obama will sign it by yearend. He said the goal of the reform package is to provide an environment in which financial innovations flourish, while eliminating excessive risk and consumer abuses. Frank was addressing a luncheon gathering at the National Press Club here. The Credit Union National Association was in attendance. He denied there is any validity to the arguments of those who question his projected time frame that other huge issues facing the U.S. Congress—such as health care reform, carbon emissions legislation and more—make it unlikely, if not impossible, to successfully tackle financial regulatory reform in 2009. “These are not in conflict,” Frank said both in his prepared remarks and in response to a later question. He is chairman of the House Financial Services Committee. Frank added that “nothing is retarding our efforts” to address the financial industry and he called the effort by legislators “essential.” Frank opined that the nation is experiencing now a cycle that has repeated in the country’s history where innovation outstripped regulatory structure and adjustment became necessary to restore a balance. “Rules provide a framework so this wonderful capitalist system can move forward,” Frank said. He said the goal of the congress’ current effort is to allow innovation yet curb abuses. Among his goals, Frank said a new regulatory regime should:
* Re-introduce a structure in which regulators cannot deflect their responsibilities as overseers; * Place limits on securitizations by requiring some retention of risk; * Set leveraging maximum; * Contain derivatives; and * Protect consumers.

CUNA shows real-world interchange impact to Hill staff

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WASHINGTON (7/28/09)--Cynthia Prestandrea of Prince George's Community FCU told representatives of congressional conservative “blue dog” Democrats that income from interchange fees is pivotal to the “survival” of her credit union. She was representing the Credit Union National Association at the briefing. Prestandrea, who currently serves as CEO, said that interchange fees represent 21% of the income collected by her $100-million-in-assets, Maryland-based credit union. Interchange income helps her credit union handle routine business expenses and allows her credit union to compete with the largest financial institutions, which have far greater resources, “on a daily basis,” Prestandrea added.
Click to view larger image Prince George's Community FCU CEO Cynthia Prestandrea (shown here with attorney Mike McEneny of the Electronic Payments Coalition) makes her case for continuing to allow the free market to set interchange fees. She told "Blue Dog" Democrats that interchange fees provide 21% of the income to Prestandrea's credit union, which holds $100 million in assets. (CUNA photo)
Eliminating or significantly reducing interchange fees, as discussed in some recent proposed legislation, would result in higher member fees for financial services and “would have a significant impact” on her credit union’s ability to offer members a debit card attached to their checking account. An inability to offer debit cards attached to checking accounts would essentially render her credit union obsolete, Prestandrea said. Attorney Mike McEneny, who spoke on behalf of the Electronic Payment Coalition, said that altering the structure of interchange fees could ultimately result in reduced credit availability and higher costs, two outcomes that would adversely impact both individual consumers and the economy at large. 7-Eleven is one merchandiser involved in the interchange fee debate, and it is looking to send a message about government limits on interchange fees to the credit card industry and legislators by using its 6,300 stores to attempt to collect 1 million customer signatures by August 10. Though the House and Senate legislation that would allow merchants to renegotiate interchange fees with financial institutions has not seen much action recently, the legislation has not been abandoned. H.R. 2695, the "Credit Card Fair Fee Act of 2009," offered by Reps. John Conyers, Jr. (D-Mich.) and Bill Shuster (R-Pa.), would permit merchants to negotiate interchange fees with financial institutions via an antitrust exemption. Sen. Richard Durbin (D-Ill.) in early June introduced S. 1212, The Credit Card Fair Fee Act, which would establish a panel of three Electronic Payment System Judges to intervene in disputes between card service providers and merchants regarding fees set for use of the electronic payments system. There was speculation that Durbin would attach the bill to the Financial Services Appropriations Act for fiscal year 2010, which was approved earlier this month, but that legislation was not included in the final appropriations bill. However, Durbin has consistently stated his intent to take action on the interchange issue. CUNA has recommended that legislators wait for the results of a Government Accountability Office review of interchange fees before they act.

Congress NCUA confirmation exec comp vote on calendar

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WASHINGTON (7/28/09)--The dominant issue on the Hill this week for credit unions is the ongoing confirmation of Deborah Matz as National Credit Union Administration (NCUA) board member and, perhaps, as Chair. Debate on the Matz nomination will begin again this morning, with the Senate Banking Committee meeting in executive session. Matz's nomination should move on to the full Senate for confirmation following this executive session. The first round of Matz’s nomination hearings took place last Wednesday. H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act of 2009, is one of many items on the House agenda for what is expected to be its final week before its summer recess. House Financial Services Committee chair Rep. Barney Frank (D-Mass.) has scheduled a committee markup of that legislation for today at 10 a.m., and the bill could be discussed by the full House on Friday. The Credit Union National Association (CUNA) recently communicated its desire for credit unions to be excluded from this legislation, which would seek to curb some compensation structures that promote risk-taking by financial executives, by touting the non-profit, cooperative operational motives of credit unions in a letter sent to Frank and Rep. Spencer Bachus (R-Ala.). The House later today is also expected to consider under suspension of the rules H.R. 3330, which was introduced late last week by Rep. Steve Dreihaus (D-Ohio). This legislation would provide for "more effective" reviews of losses in the Deposit Insurance Fund and the National Credit Union Share Insurance Fund by the Inspectors General of the several banking agencies and the NCUA Board. CUNA is evaluating this legislation.

Senate committee to take up Matz nomination Tues.

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WASHINGTON (7/27/09)--The Senate banking committee during a Tuesday executive session will discuss the nomination of Deborah Matz to the board of the National Credit Union Administration. The discussion of Matz’s nomination, which will coincide with debate on portions of the Obama administration’s financial system reform plan that address insurance, follows a Senate committee nomination hearing that took place last Wednesday. Matz, who, if confirmed, is expected to be named to the role of NCUA chair, on Wednesday told the assembled legislators that she would work to "make certain" that the NCUA would "thoroughly" apply relevant consumer protections, promote "improved financial education," and encourage member credit unions to "reach out to serve all eligible consumers."

CUNA Exclude CUs from exec comp bill

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WASHINGTON (7/27/09)--The Credit Union National Association (CUNA) in a letter sent Friday to House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) and ranking member Rep. Spencer Bachus (R-Ala.) argued that the not-for-profit, cooperative operational motive of credit unions should exclude them from recently proposed executive compensation legislation that seeks to curb abuses. In the letter, CUNA President/CEO Dan Mica said that including credit unions under the purview of H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act of 2009, is “unwarranted.” While CUNA understands public and congressional concerns regarding the role that some “compensation structures that encourage excessive risk-taking” can play in “the safety of financial institutions and the economy,” the structure of credit unions as well as the “strong compensation regulations” that are already in effect have helped credit unions avoid the financial and the public relations damage that “excessive and unsafe risk-taking” has wrought on some for-profit financial services providers, the letter said. According to Mica, CUNA could not support the legislation as it is currently written, but would be open to working with the committee to amend the legislation to exclude credit unions. “Credit unions are unique, member-owned, not-for-profit, financial cooperatives, and they simply do not have the same operational motives as for-profit depository institutions,” the CUNA leader pointed out. “As a result, credit unions are risk-averse institutions operating in the best interest of their members.” He added that National Credit Union Administration (NCUA) already has compensation regulations in place that are designed “to prevent the types of dangerous compensation structures that exist in other sectors.” For a copy of CUNA’s letter, use the resource link.

Inside Washington (07/24/2009)

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* WASHINGTON (7/27/09)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair proposed an alternative strategy Thursday for President Barack Obama’s regulatory restructuring plan, arguing that a regulatory council should oversee systemic risk. Senate Banking Committee members largely supported her approach (American Banker July 24). The administration’s proposed risk council is too weak, she said. Bair also supports creating a new agency for consumer protection, but she said banking regulators should retain their enforcement powers over banks. Handing those powers over to the new agency would disrupt the FDIC, she added. However, the agency could enforce powers over nonbanks, she said. There would be better coordination between the agency and regulators if regulations were on its board. The consumer protection supervisor could sit on the FDIC board, she added ... * WASHINGTON (7/27/09)--The Federal Reserve Board would receive the fifth seat on the Federal Deposit Insurance Corp.’s (FDIC) board, according to new legislative language in the Obama administration’s regulatory restructuring proposal. The Fed would receive more power under the Treasury’s regulatory restructuring plan and would partially control the FDIC (American Banker July 24). Having the central bank on the FDIC board is a bad idea because it is a conflict of interest, according to one banking trade group. Former FDIC chairman Ricki Tigert Helfer said having the Fed sit on the board could be helpful because the FDIC has been called to address the problems of the financial crisis. The Treasury said it is just trying to fill a seat left open by the Office of Thrift Supervision, which the administration has proposed to eliminate ... * WASHINGTON (7/27/09)--House Small Business Committee members could propose legislation to revamp Small Business Administration (SBA) programs--including the 7(a) and 504 lending programs (American Banker July 24). Lender trade group representatives present at a finance and tax subcommittee hearing Thursday said SBA borrowers should be allowed to refinance with new loans, and that 7(a) criteria be expanded for development projects. Lawmakers appeared receptive. Rep. Kurt Schrader (D-Ore.) said more must be done to meet small business’ capital needs ... * WASHINGTON (7/27/09)--Credit unions whose yearly gross receipts are below $25,000 will take interest in recent Internal Revenue Service changes to some current reporting requirements. The IRS changes would amend current notification rules to require some tax-exempt organizations with under $25,000 in gross receipts that do not file yearly information returns to submit yearly electronic notifications. The changes, reported in the Federal Register, are effective as of July 23, 2009, and will apply to all yearly periods beginning after 2006...

Inside Washington (07/23/2009)

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* WASHINGTON (7/24/09)--The House Financial Services Committee Thursday approved changes to the government’s Section 8 housing program that provides rental housing assistance to about two million low-income families nationwide. The committee voted 41-24 in favor of H.R. 3045, the Section Eight Voucher Reform Act. The bill is intended to provide greater program flexibility, as well as streamline the process of providing Section 8 housing assistance. The measure was sponsored by Rep. Maxine Waters (D-Calif.). … * WASHINGTON (7/24/09)--President Barack Obama’s plan to revamp the financial regulatory system is losing steam, according to some financial observers. Critics of the plan say that the administration and policymakers are taking on too much--including revamping health care, energy and financials. Industry representatives also continue to oppose the creation of a consumer protection agency. On Tuesday, Rep. Barney Frank (D-Mass.) said he is surprised by the industry’s opposition to such an agency, but he said the agency should be a high priority (American Banker July 23). Lawmakers also are backing a proposal that would give systemic risk oversight to several regulators. The Senate Banking Committee was slated Thursday to consider the plan, which could allow the Federal Reserve Board, the Treasury Department, the Federal Deposit Insurance Corp. and other regulators to share the systemic risk responsibility. The proposal aims to prevent failures such as the American International Group Inc. failure, which cost the government more than $182 billion (Bloomberg July 23) ... * WASHINGTON (7/24/09)--Elizabeth Warren, chairman of an oversight panel for the Troubled Asset Relief Program (TARP), says the Treasury Department needs to charge more for bank stock warrants. The higher prices would benefit taxpayers but would not help banks trying to buy back their warrants after repaying TARP funds (American Banker July 23). If the warrants had been sold at market value, taxpayers would have received $10 million more,” Warren said. She acknowledged that the Treasury is more aggressively pricing the warrants. Her comments come after U.S. Bancorp and Goldman Sachs announced they would pay back their warrants. Goldman Sachs said it would pay the full proposed price of $1.1 billion, and U.S. Bancorp agreed to pay $139 million for the warrants. Goldman Sachs’ payback is at market rate, and U.S. Bancorp’s is higher than the estimated market rate ... * WASHINGTON (7/24/09)--Congress should consider the merits of assigning a systemic risk regulator with responsibility for overseeing systemwide leverage, and assess the extent to which reforms under Basel II will address risk evaluation and regulatory oversight concerns associated with advanced modeling approaches for capital adequacy purposes, said the Government Accountability Office (GAO) in a recent report. Basel II is a risk-based capital framework. The planned U.S. implementation of Basel II would increase reliance on risk models for determining capital needs for certain large institutions and regulators have not assessed if the Basel II reforms would address the concerns. “Such an assessment is critical,” the GAO said. World Council of Credit Unions (WOCCU) President/CEO Pete Crear has told the Basel Committee on Banking Supervision that credit unions “should not be penalized by tougher capital requirements than those faced by larger, riskier institutions that present systemic risk to the global financial system.” (News Now April 24) ... * WASHINGTON (7/24/09)--The U.S. Small Business Administration (SBA) on Thursday published in the Federal Register an interim final rule that will double the current amount of its surety bond guarantee on federal contracts to $10 million, effective Sept. 10, 2010. Current rules allow the SBA to guarantee up to $5 million of bonds related to public and private contracts and subcontracts. In a statement accompanying the release, SBA Administrator Karen Mills said that increasing the surety bond limit was a “critical step in making sure small businesses in the construction and service sector have access to federal contracting opportunities” that are crucial to economic recovery …

CUNA focus on open-end disclosure in Tues. session

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WASHINGTON (7/24/09)--The Credit Union National Association (CUNA) has added BECU’s Mary Davis-Wyne and Suzie Rao and American Airlines FCU’s Faith Anderson to the roster of panelists scheduled to discuss credit union concerns with implementing a troublesome provision of the new Credit Card Accountability Responsibility and Disclosure (CARD) Act during a CUNA July 28 audio conference. “Some credit unions that don’t offer credit cards may erroneously assume that the new Credit CARD Act doesn’t affect them,” Mike McLain, CUNA’s Senior Compliance Counsel noted Thursday. “This new requirement that there be 21 days between when a periodic statement is mailed and the payment due date in order for the credit union to charge a late fee or report a delinquency to a credit bureau affects all credit unions doing open-end lending.” While most of the Credit CARD Act is effective Feb. 22, 2010, this provision is one of two provisions effective August 20. The other provision effective in a few weeks, and applicable only to credit cards, requires that change-in-term notices that increase the interest rate or raise fees be mailed at least 45 days in advance of those actions. The 90-minute audio conference, which begins at 1:30 p.m. (ET) on Tuesday, will feature Federal Reserve Board Senior Attorney Benjamin Olsen, a co-author of the interim final regulation. Other speakers already announced in addition to McLain will be CUNA Senior Assistant General Counsel Jeff Bloch and University of Wisconsin CU Chief Credit Officer Mike Long. CUNA has urged the Fed to extend the existing compliance timeframe and continues to seek support in Congress for addressing this problem. To register for the audio conference, use the resource link.

NCUA guides California CUs on IOUs

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ALEXANDRIA, Va. (7/24/09)--The National Credit Union Administration (NCUA) has issued guidance for California credit unions accepting IOUs, or registered warrants, during the state’s budget crisis. On Monday, Calif. Gov. Arnold Schwarzenegger and state lawmakers reached an agreement to balance the state’s $26 billion deficit by making cuts throughout state government. However, details regarding the budget are still being negotiated (News Now July 22). Roughly 90 California credit unions are still accepting registered warrants issued by the state. According to NCUA:
* A federal credit union should not treat its acceptance of a warrant from a member as an investment but may treat its acceptance of a warrant as a collection item, deposit or loan depending on whether the credit union has extended credit to a member and the disclosures or other documentation it has provided to members; * A credit union should inform members of the charge back and collection rights the credit union may have if it extends credit in accepting the warrant; * Federal credit unions are not restricted in the type of collateral they can hold as security for payment of an extension of credit; * State-chartered credit unions are advised that if they choose to record the warrants as a credit union investment, they will have to reserve for a nonconforming investment under NCUA’s investment rule.
For more information, use the link.

Fed explores big Reg Z changes

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WASHINGTON (7/24/09)--The Federal Reserve Board has proposed several major changes to Regulation Z (Truth in Lending) that would modify the disclosures required of lenders for closed-end mortgage loans and home equity lines of credit (HELOCs). The Fed’s proposal regarding closed-end home mortgages--which follows recent changes to open-end credit disclosures--is intended to increase consumer awareness of potentially risky features, such as adjustable rates and prepayment penalties. The changes would apply to disclosures for all closed-end credit transactions secured by real property. Among other things, the changes would:
* Revise the annual percentage rate (APR) to include most fees and settlement costs, many of which are currently excluded from the annual percentage rate (APR); * Require lenders to provide, at application, a list of key questions borrowers should ask about the home mortgage loan; * Require lenders to provide a comparison of how the consumer's APR compares to the average rate offered to borrowers with excellent credit; * Require lenders that take part in adjustable rate mortgages to show how a consumer’s monthly payments could increase, and * Require lenders to notify borrowers 60 days in advance of a change in their monthly payment.
Current rules require lenders to give their customers 25 days of advanced notice. Also, lenders would need to provide home mortgage loan applicants with a “final disclosure” at least three days prior to the loan closing, which would likely require notification of any changes in the term or rate of the loan since the initial application. Consistent with the recently proposed legislation creating a Consumer Financial Protection Agency, the Fed said it is working with the Department of Housing and Urban Development (HUD) to make the required TILA disclosures consistent with HUD’s required disclosures under the Real Estate Settlement Procedures Act, potentially resulting in single disclosure. Another proposed rule would change portions of HELOC-related disclosures. The proposed changes would apply to disclosures required from the application stage through the life of the credit plan. Under these changes, lenders would be required to provide applicants with disclosures detailing specific credit terms for which the consumer qualifies and information about certain costs and potentially risky mortgage features both three days after the transaction begins and at closing. Creditors would also be required to provide enhanced periodic statements throughout the life of the plan, and to notify a consumer 45 days prior to changes in the terms of the plan. The proposed rule would also include additional guidance on a creditor’s ability to reduce the consumer’s credit limit, as well as the creditor’s obligation to restore such accounts. The Fed will accept comments on each of the two proposed rules for 120 days following official publication in the Federal Register. The Credit Union National Association's (CUNA) Consumer Protection Subcommittee will be reviewing the proposals in detail, and CUNA will post a regulatory comment call on each of the proposals shortly.

Committee vote on exec comp set for July 28

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WASHINGTON (7/23/09)—The House Financial Services Committee set July 28 as the mark up date for its recently announced bill that addresses both corporate and financial institutions executive compensation. H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act, was built on a 2007 House-passed compensation measure known as “Say-on-Pay,” combined with recent proposals unveiled by the U.S. Treasury Department. No limits on executive compensation are contained in the draft. Of its four component parts, two address compensation at financial institutions. "Incentive-Based Compensation Disclosure Requirements" proposes to require financial institutions to disclose compensation structures that include any incentive-based elements. “Compensation Standards for Financial Institutions" would require federal regulators to proscribe "inappropriate or imprudently risky" compensation practices as part of solvency regulation. This latter section—number four in the bill—is the only one that affects credit unions, including privately insured credit unions. It directs the National Credit Union Administration (NCUA) and federal banks and thrift regulators to jointly prescribe regulations requiring all financial institutions to disclose information related to the structure of incentive-based compensation structures. Regulations must be issued within 270 days of the date of enactment. The disclosed information, according to the bill, should be sufficient to determine whether a compensation structure:
* Properly measures and rewards performance; * Is structured to account for the time horizon of risks; * Is aligned with sound risk management; and * Meets other criteria appropriate to reduce unreasonable incentives for officers and employees to take undue risks that could have serious adverse effects.
The section also gives the regulators power to ban any compensation structure or incentive-based payment arrangement determined to encourage inappropriate risks by financial institutions that could have serious adverse effects on economic conditions or financial stability or could threaten the safety and soundness of the institution. The NCUA would enforce the section for federally insured credit unions; the Federal Trade Commission would be responsible for enforcement for privately insured credit unions.

Matz wants CU outreach effective regs at NCUA

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WASHINGTON (7/23/09)--National Credit Union Administration (NCUA) board nominee Deborah Matz told assembled Senate banking committee members that if confirmed she would work to establish a strong partnership with the industry while maintaining the "critical arms-length relationship" between a regulator and the regulated. Matz said she would work to “make certain” that the NCUA would “thoroughly” apply relevant consumer protections, promote “improved financial education,” and encourage member credit unions to “reach out to serve all eligible consumers.”
Click to view larger image Deborah Matz, the Obama administration's choice to fill a vacancy on the National Credit Union Administration board and become chairman, swears to tell the truth during her nomination hearing before the Senate Banking Committee Wednesday. Matz said her experience as a credit union officer taught her the need for "effective, rather than excessive, regulation." (CUNA Photo)
During her testimony, Matz provided legislators with a window into her regulatory philosophy, stating that her recent work as executive vice president and chief operating officer of Suitland, Md.’s $800 million-in-assets Andrews FCU “sensitized” her “to the need for effective, rather than excessive, regulation.” Matz added that as NCUA Chair she would “regulate and supervise credit unions closely, guide them where appropriate, make forceful suggestions, and always appeal to their commitment to their members.” While a number of recently approved changes to the national credit union system have “gone a long way” to stabilizing the corporate credit union system, Matz hinted that further work is needed. Addressing the current weak financial state of corporate credit unions, Matz said that a new corporate rule that would be developed during her tenure would be “fair” and would provide “flexibility” while also providing “sufficient parameters to prevent these events from occurring in the future.” Matz said she plans to begin work on this new rule by discussing it with NCUA staffers, credit union industry members, and other stakeholders, adding that the new rule could be presented by the end of this year. Matz was the lone member of the NCUA board to vote against corporate regulations presented in 2002, saying in her testimony that she did not believe that those regulations “adequately addressed” the critical issue of “risk concentration” at the time. Matz also cited her belief that “the investment authority being granted was overly broad and permissive” as justification for voting against those corporate regulations. Matz said she would also closely monitor the effects of the economy on natural person credit unions to “minimize” any potential damage. Increasing alternatives to payday lending and other sources of short-term loans, as well as aiding underserved consumers through financial education, will also be a point of emphasis for credit unions during her time in office, Matz said. When asked about the proposed creation of a federal Consumer Financial Protection Agency, Matz said that such a body would be effective as long as it streamlined existing regulations and removed redundancies. However, Matz questioned how this new agency would be funded, stating that she did not believe that many credit unions could afford to pay another assessment due to declines in retained earnings. The committee hopes to vote on Matz’s nomination before it begins its summer work period in early August. Matz’s nomination will then move to the full Senate for confirmation.

Bernanke More MBLs a direction to consider

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WASHINGTON (7/23/09)--U.S. Federal Reserve Chairman Ben Bernanke on Wednesday said that legislation that would lift the current member business lending (MBL) cap beyond the statutory rate of 12.25% would be “worth looking at.” Responding to Sen. Charles Shumer’s (D-N.Y.) direct question on small business lending, Bernanke told legislators at a Wednesday Senate banking committee hearing on monetary policy that lifting the MBL cap would be “a direction to consider” as the Fed looks to enable small businesses to have greater access to crucial loans. Schumer earlier this year announced that he plans to draft a bill that would raise the MBL cap. Rep. Ron Kind (D-Wis.) in recent months indicated that there is a "growing sentiment" among members of Congress that the MBL cap should be lifted. Credit Union National Association (CUNA) Small CU Committee member and Allied CU President/CEO Frank Michael recently told a Senate subcommittee hearing that giving the National Credit Union Administration the authority to lift the MBL cap above 20% of assets would "safely and soundly" result in $10 billion in new small business loans within one year. In a Monday story posted in The Wall Street Journal Online, CUNA Chief Economist Bill Hampel said that while credit unions continue to lend to small businesses, they could provide further assistance if the MBL cap was higher. Bernanke during the hearing also commended credit unions for their role in increasing minority involvement in U.S. financial markets through reduced-cost remittances. Rep. Luis Gutierrez (D-Ill.) last month said that he would introduce remittance-related legislation aimed at correcting some of the disclosure and transparency issues faced by the remittance industry. Gutierrez also hinted that larger reforms, including the possible creation of a federal regulatory regime for the remittance industry, could be a part of the ongoing financial industry regulatory reorganization.

House committee favors direct student loans over FFELP

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WASHINGTON (7/23/09)--The House Committee on Education and Labor on Tuesday voted to convert all federal student loans created after June 10, 2010 to “the stable, effective and cost-efficient Direct Loan program.” H.R. 3221, The Student Aid and Fiscal Responsibility Act of 2009, passed 30 to 17 in a committee vote, and will now move on to the full House. The legislation will also invest $40 billion in educational grants, increasing the maximum amount awarded through individual annual Pell Grants to $5,500 per scholarship in 2010 and $6,900 per scholarship in 2019. Federal student aid applications will also be simplified under the legislation. As previously reported, the legislation does eliminate the Federal Family Education Loan Program (FFELP), a program that currently allows over 1,000 credit unions to provide student loans to their members. The Credit Union National Association in a recent letter urged legislators to retain the FFELP, stating that these privately serviced student loans and the resulting customer support were “valuable option(s)”to students in need of educational funding.

New Hope CDCU placed into conservatorship

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ALEXANDRIA, Va. (7/23/09)--The National Credit Union Administration (NCUA) has assumed control of New Hope Community Development FCU, based in Birmingham, Ala., the agency announced Wednesday. Service continues uninterrupted at the credit union, and members can make deposits, access funds, make loan payments and use share drafts, NCUA said. "While the credit union was placed into conservatorship because of declining financial condition, the decision to conserve a credit union enables the institution to continue normal operations with expert management in place," said NCUA's press release. Originally chartered in 1996 to serve the West End community of Birmingham, New Hope Community Development FCU has about $1.3 million in assets and more than 900 members. NCUA noted that member accounts are insured to at least $250,000 under the National Credit Union Share Insurance Fund. Members with questions can contact NCUA's Share Insurance Call Center at 1-800-755-1030 and press 1 during normal business hours Monday through Friday.

Inside Washington (07/22/2009)

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* WASHINGTON (7/23/09)-- White House National Economic Council Director Lawrence Summers has suggested that it would be prudent for some financial institutions to recognize that profits they are currently enjoying reflect the government aid that has been distributed to bolster the economy. (Bloomberg News July 22) Summers said companies have benefited specifically from programs to guarantee debt, backstop commercial-paper issuance and to support weaker financial institutions that were those company’s counterparties, as well as benefiting from a general “aura of government support." However, the president’s chief economic advisor warned that while the economy is no longer in a free fall, it is also unlikely that the nation will experience a robust recovery in 2010. Summers also criticized some banks doing too little to help reduce the number of mortgage foreclosures despite receiving government aid. … * WASHINGTON (7/23/09)--The third-ranking Democrat on the Senate Banking Committee, Rep. Jack Reed of Rhode Island has said Federal Reserve Board Chairman Ben Bernanke deserves a second term in that position because of actions the Fed leader has taken over the past year to help stabilize the economy. Bernanke’s term expires Jan. 31, 2010. To date, President Obama has declined to share his thoughts publicly on who he might want to fill that post. Bernanke is a Republican appointed by former President George W. Bush in 2006. Sen. Charles Schumer (D-N.Y.) has also indicated he would not be “displeased” if Bernanke were re-upped to head the Fed. (Bloomberg.com July 22)… * WASHINGTON (7/23/09)—The U.S. Treasury Department has drafted a bill that would bar credit rating agencies from selling consulting services to companies they rate, and would force the agencies to disclose any conflicts of interests. The bill sent to Capitol Hill is intended to reduce or eliminate rating shopping (American Banker July 22)…

Agencies seek comment on flood insurance guidance

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WASHINGTON (7/22/09)—The National Credit Union Administration, along with the federal bank and thrift regulators and the Farm Credit System, released revised information in the form of questions and answers regarding flood insurance. The agencies are seeking comment on several of the newly posed questions, such as one addressing the determination of insurable value in calculating a maximum limit of coverage available for particular types of property. The regulators also want input on a question and answer about the timing of force placement of required flood insurance by lenders. After considering public comment, the agencies said in a joint release, they intend to incorporate comments into the “Interagency Questions and Answers Regarding Flood Insurance (2009).” The new document will supersede the 1997 interagency questions and answers document and supplements other guidance or interpretations issued by the agencies and the Federal Emergency Management Agency. Reps. Maxine Waters (D-Calif.) and Barney Frank (D-Mass.) introduced a bill earlier this month to extend authorization for the National Flood Insurance Program (NFIP) through March 31, 2010. Without legislative action, the program will expire at the end of September. Use the resource link below to read the comment request published in the Federal Register.

CFPA markup delayed until Sept. Frank says

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WASHINGTON (7/22/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) on Tuesday announced that further consideration of legislation that would establish a Consumer Financial Protection Agency (CFPA) will be delayed until after the upcoming August congressional recess. Frank had previously stated that his committee would begin marking up CFPA legislation in July, adding that his group would draft and approve a bill in committee before the August recess. There was some speculation that the CFPA legislation could be marked up as early as this week, as Frank’s committee tentatively scheduled a full committee markup session for this Thursday. Congress will officially begin its summer district work period on Aug. 3, and will return on Sept. 4. The CFPA legislation, which would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools, was introduced by the Obama administration last month. Frank also recently introduced a bill that would enact the Obama CFPA plan. However, Frank’s bill, H.R. 3126, departs from the Obama plan by preserving the current federal banking regulators' role of enforcers. Frank’s bill would also postpone consideration of the proposed merger of the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) into a prudential regulator, the National Bank Supervisory (NBS), until a later date. Frank has scheduled a number of general regulatory reform hearings throughout this month and those dates have not been changed.

NCUA names new Region 2 acting director

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ALEXANDRIA, Va. (7/22/09)--The National Credit Union Administration (NCUA) earlier this month named Marcia Sarrazin as Acting Director for Region 2, which includes Delaware, the District of Columbia, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia, and Alaska. Sarrazin most recently served as Associate Regional Director of Region 3, which covers Alabama, Florida, Georgia, Indiana, Kentucky, Mississippi, North Carolina, Puerto Rico, Ohio, South Carolina, Tennessee, and the Virgin Islands. The Region 2 office, which, like the NCUA, is located in Alexandria, Va., was formerly lead by Larry Blankenberger. Blankenberger was made acting regional director of Region 2 in March of this year after a stint as association regional director for Region 4.

Inside Washington (07/21/2009)

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* WASHINGTON (7/22/09)--Financial industry lobbyists are pushing to limit the powers of a proposed consumer protection agency. The House Financial Services Committee is scheduled to vote on the agency next week. In the meantime, industry representatives are working to convince policymakers that the agency should not be able to examine or enforce rules against financial institutions. Preemption of state consumer protection laws and shielding lenders from legal liability are also concerns (American Banker July 21). Rep. Mel Watt (D-N.C.), a cosponsor of the consumer protection plan, said the House Financial Services Committee will need to determine how to divide consumer protection powers among regulators, decide how rules would be enforced, determine the costs, and how to resolve conflicts. Rep. Barney Frank (D-Mass.), the chair of the House Financial Services Committee, has said he wants to pass the bill by the end of next week ... * WASHINGTON (7/22/09)--The House Financial Services oversight and investigations subcommittee Chairman Dennis Moore (D-Kan.) announced that the subcommittee will meet today for a hearing, “TARP Oversight: Warrant Repurchases and Protecting Taxpayers.” The hearing will focus on the ongoing administration and oversight of the Troubled Asset Relief Program (TARP) and examine issues surrounding the warrant repurchasing process under TARP to ensure taxpayer money is protected. Witnesses include: Herbert Allison, assistant secretary for financial stability, U.S. Treasury; Neil Barofsky, special inspector general for TARP; Elizabeth Warren, chair, Congressional Oversight Panel; and Thomas J. McCool, director of the Center for Economics at the Government Accountability Office ... * WASHINGTON (7/22/09)--Speaking before the Michigan Credit Union League's 75th annual convention, National Credit Union Administration (NCUA) Chair Michael Fryzel said that the NCUA would continue as an independent regulator and added that an independent insurance fund for credit unions would remain. As reported in the Michigan Monitor (July 20), Fryzel said that the NCUA is trying to stay ahead of the Obama administration's consumer protection plans by creating its own consumer protections. Fryzel also outlined the ongoing corporate credit union situation. He commended credit unions for handling their issues without taking federal bailout money...

Fed Reserve amends check routing number guide

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WASHINGTON (7/21/09)--The Board of Governors of the Federal Reserve has amended its routing number guide to next-day availability and local checks in Regulation CC to reflect recent changes in the Fed’s check processing operations. Under the Fed’s technical amendment, references to the head office of the Federal Reserve Bank of Chicago will be replaced by references and routing numbers that correspond to the head office of the Federal Reserve Bank of Cleveland, effective Sept. 12. The Fed in May approved amendments to Appendix A of Regulation CC regarding the restructuring of check processing operations, transferring the check-processing operations of the head office of the Federal Reserve Bank of Minneapolis to the head office of the Federal Reserve Bank of Cleveland.

CDFI applicants seek 9.8M through Native American program

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WASHINGTON (7/21/09)--A total of 17 applicants from 11 states have applied for a combined $9.8 million in financial assistance through the 2009 supplemental round of the U.S. Treasury’s Native American Community Development Financial Institutions (CDFI) Fund. Two of the 17 institutions that requested funds are credit unions, according to a U.S. Treasury release. An equal number of banks, thrifts or holding companies also applied for funding. CDFI Fund Director Donna J. Gambrell awarded $8 million in financial aid and $3.6 million in technical assistance funds to CDFIs that serve the Native American, Alaska Native, and Native Hawaiian communities on July 1. A further $3.7 million in funds will be distributed to the highest rated applicants in a combined pool that includes those who applied in response to the amended Notice of Funds Availability (NOFA) and those who applied under the original FY 2009 NOFA but did not receive an award in the first funding announcement.

Govt student loans a valuable option CUNA says

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WASHINGTON (7/21/09)--The Credit Union National Association (CUNA) in a Monday letter to Congress urged legislators to retain the Federal Family Education Loan Program (FFELP), a program that allows over 1,000 credit unions to provide student loans to their members. As currently written, H.R. 3221, The Student Aid and Fiscal Responsibility Act of 2009, would eliminate the FFELP program. The bill is scheduled for a House Committee on Education and Labor markup later today. In the letter, which was sent to House committee chairman George Miller (D-Calif.) and ranking member John Kline (R-Minn.), CUNA President/CEO Dan Mica said that CUNA was “concerned” by the prospect of eliminating the FFELP program. The elimination of this program would prevent some credit unions that specialize in educational loans and provide “much needed and individualized assistance if difficulties arise with regard to loan repayments” from offering the “valuable option(s)” to students. Over the last several years Congress has identified, and enacted legislation to address, several problems in the private student lending market. CUNA added that congressional remedies to issues in the private student lending market have “affected” credit unions that were “neither the target of the legislation nor the source of the problems,” with many credit unions having ceased to offer student loans and associated services to their members “as a result of the amendments to the Higher Education Act enacted last year.”

Inside Washington (07/20/2009)

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* WASHINGTON (7/21/09)--Financial industry representatives continue to debate the feasibility of giving the Federal Reserve Board sole responsibility of systemically significant institutions. The Obama administration has expressed interest in giving the Fed this role, but critics say the central bank already has its hands full (American Banker July 20). The move also would be politically unfeasible, said Rep. Barney Frank (D-Mass.). Frank once supported giving the Fed systemic risk oversight responsibility. Michael Barr, Treasury Department assistant secretary for financial institutions, said the proposal to give the Fed more oversight power only builds on the responsibilities the central bank already has. The Fed is already regulating the largest firms in the nation, so overseeing systemic risk is a “modest expansion” of that power, he said Friday. The Fed’s current responsibilities include controlling the nation’s monetary policy, and overseeing payments systems, holding companies and some state-chartered banks. If the Fed doesn’t oversee systemic risk, a new agency could be created. The agency should be independent and chaired by a presidential appointee, said William Isaac, former Federal Deposit Insurance Corp. chairman ...

Congress this week NCUA confirmation on tap

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WASHINGTON (7/21/09)--Credit union issues will remain on lawmakers calendars this week. The nomination hearing for potential National Credit Union Administration Chairman Deborah Matz and a possible House mark-up of the Obama administration's Consumer Financial Protection Agency (CFPA) legislation are scheduled for Wednesday and Thursday, respectively. Matz’s nomination hearing will take place before the Senate Banking Committee at 3 p.m. on Wedensday. If, as is expected, she is onfirmed, Matz would serve on the NCUA board for a second time. The President has said he intends to designate her as chairman. Though it is not officially on the schedule, the House Financial Services Committee has tentatively scheduled a full committee markup session for Thursday, and it is thought that the CFPA Act could be marked up at this time. The House will also discuss regulatory perspectives on the current financial regulatory reform proposals on Wednesday and Friday, with Securities and Exchange Commission Chair Mary Shapiro and U.S. Commodity Futures Trading Commission Chairman Gary Gensler scheduled to testify on Wednesday. Federal Reserve Board Chair Ben Bernanke on Tuesday will testify on the semiannual monetary report before the House Financial Services Committee, with similar testimony before the Senate Banking Committee scheduled for Wednesday. Both House and Senate committees will hold hearings on systemic risk regulation later in the week.

NCUAs new online reporting rule topic of Aug. 12 webcast

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ALEXANDRIA, Va. (7/21/09)--The National Credit Union Administration (NCUA) announced an Aug. 12 webcast to provide details of its upcoming web-based financial reporting system to credit unions. The new web-based reporting regime, which was approved as a final rule at the NCUA’s board meeting last Thursday, will provide a secure internet portal for federally insured credit unions to submit financial reports, reports of officials, and other information online. The new reporting system, which will replace the current 5300 call report system for natural-person credit unions, will go into effect on Sept. 1, 2009. The 5310 call report system for corporate credit unions will be replaced in 2010. The NCUA will provide further information on the program in an early September letter to credit unions. The system should be mandatory for credit unions with internet access by Oct. 1. The new system, which should eliminate many of the redundancies that occur under the existing reporting regime, will also collect information on all services provided to credit unions by CUSOs. The current system only collects information on the primary services performed. According to an NCUA release, the webcast will “provide a description of the new online reporting system and key items credit unions will need to transition to the online system.” The NCUA will also give credit union officials a chance to ask direct questions to NCUA staff. The NCUA will provide registration information for the webcast in early August.

Inside Washington (07/17/2009)

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* WASHINGTON (7/20/09)—Sen. Christopher Dodd (D-Conn.) called it disgraceful that his Senate Banking Committee had to hold yet another hearing on the progress of government efforts to promote loan modifications intended to stave of mortgage foreclosure. Both Democrats and Republicans on the panel agreed. However, officials from the Departments of Treasury and Housing and Housing and Urban development reminded that the housing crisis was years in the making and the Obama loan modification program is just a few months old. Witness Herb Allison, Treasury's assistant secretary for financial stability, said 160,000 trial modifications have begun under its home foreclosure prevention program. (American Banker July 17)… * WASHINGTON (7/20/09)—Former Treasury Secretary Henry Paulson was unapologetic before the House Financial Services Committee as he acknowledged his agency pushed Bank of America’s chief executive Ken Lewis to agree to a merger with Merrill Lynch—or lose his job. Paulson said he and Federal Reserve Board Chairman Ben Bernanke were concerned that if B of A backed out of the deal, it could cause a collapse of the financial system, However, critics have questioned whether a bank chief executive's job should be used by the government to accomplish a policy goal. (American Banker July 17)…

CUNA sets July 28 audio call on CARD Act notice provision

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WASHINGTON (7/20/09)—On July 28 at 1:30 p.m. (ET), the Credit Union National Association (CUNA) will hook up interested credit union representatives with financial industry experts who will address concerns about a 21-day notice period under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. CUNA has been working with the Federal Reserve Board to convey credit union concerns regarding a specific requirement in Section 106 of the CARD Act. That provision prohibits creditors from claiming a payment is late unless that creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date. Last Wednesday, the Fed issued interim final rules to implement that and other CARD Act requirements. On next Tuesday’s 90-minute audio call, Fed Senior Attorney Benjamin Olsen and University of Wisconsin CU Chief Credit Officer Mike Long will be among the speakers available to outline the Fed plan and address credit union concerns. Long also chair's the CUNA Lending Council Regulatory Committee. At issue is the fast-approaching Aug. 20 compliance date for the notice provision, which stretches well beyond credit cards to also cover such things as: general lines of credit, lines of credit associated with share draft and checking accounts, signature loans, and home equity lines of credit and--of particular concern to credit unions--to multi-featured, open-end lending programs. CUNA has urged an extended compliance timeframe. Notably, when the Fed issued its interim rule, the agency indicated that "for a short period of time after August 20," periodic statements for open-end credit other than credit cards may disclose due dates that are inconsistent with the 21-day requirement under certain circumstances. However, the Fed has to date declined to define the ambiguous “short period of time.” Other experts on hand for the call include CUNA Senior Assistant General Counsel Jeff Bloch and CUNA Assistant General Counsel and Senior Compliance Counsel Mike McLain. Use the resource link below to register for this important session.

Exec compensation draft released by Frank

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WASHINGTON (7/20/09)—An executive compensation “discussion draft” is now circulating among lawmakers and its designer, Rep. Barney Frank (D-Mass.) said his committee plans to mark up legislation this week. Frank, who is chairman of House Financial Services Committee, noted the draft is based on a House-passed 2007 “Say-on-Pay” bill combined with new U.S. Treasury Department proposals. The discussion draft, titled the Corporate Fairness Act of 2009, is comprised of four major components. Addressing credit unions and other financial institutions are sections labeled “Incentive-Based Compensation Disclosure Requirements” and “Compensation Standards for Financial Institutions.” The first proposes to require financial institutions to disclose compensation structures that include any incentive-based elements. The second would require federal regulators to proscribe “inappropriate or imprudently risky” compensation practices as part of solvency regulation. No limits on executive compensation are contained in the draft. John Magill, senior vice president of legislative affairs for the Credit Union National Association (CUNA) said Friday that credit unions can expect timely guidance from CUNA on the issues involved for credit unions. “We are carefully studying the committee’s draft and consulting credit union compensation experts about its impact on CUs,” Magill said.

Senate is next stop for CLF CDRLF funding bill

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WASHINGTON (7/20/09)—A bill that would, in part, allow the National Credit Union Administration’s Central Liquidity Facility to continue operating under its maximum amount through fiscal 2010 now awaits attention in the U.S. Senate. Late last week, the House approved the appropriations package by a very narrow 219-208 vote. The House measure note only seeks to allow the CLF to exercise its full borrowing authority in 2010—which currently equals about $40 billion, it also would provide $1.25 million for technical assistant grants for the NCUA’s —and Community Development Revolving Loan Fund. It also sets out $244 million for grants and assistance under the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund, in which credit unions may participate. Early this month, the Senate Appropriations Committee passed a comparable bill, but with a lower, $168 million allotment for the CDFI Fund. That legislation also would appropriate $10 million for the U.S. Agency for International Development's cooperative development programs sponsored by such organizations as the World Council of Credit Unions (WOCCU). The WOCCU program helps credit unions in developing nations provide financial services to their members. With less than two weeks before the Congress adjourns Aug. 3 for its month-long Summer District Work Session, the Senate is not expected to vote on the appropriation measure until September.

FCUs are not trusts of union sponsors

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WASHINGTON (7/20/09)—In a recent legal opinion letter, the National Credit Union Administration (NCUA) responded to an inquiry about whether a federal credit union is obliged to provide financial information to its sponsor labor union for the union’s annual Department of Labor (DOL) report for labor trusts. The NCUA stated that a federal credit union is not a trust within the meaning of the applicable DOL rule and, therefore, should not provide the financial information for the report. The inquiry was sparked by a recent DOL rule requiring labor unions to file a disclosure, Form T-1, for any trust “to which they contributed money or otherwise provided financial assistance or over which they exercised managerial control.” The NCUA’s legal opinion noted that three elements determine whether an entity is a trust for the purposes of a T-1 filing. They are:
* An entity must have been created or established by the labor organization, or the labor organization must have selected a member of the trust’s governing board; * It’s primary purpose must be to provide benefits to the members of the labor organization; and * The labor organization must select a majority of the board of directors or comprise 50% or more of an entity’s receipts over the course of the year
In the July 6 letter addressed to CFO Jeff Hampton of Operating Engineers Local Union No. 3 FCU, Livermore, Calif., NCUA Associate General Counsel Sheila Albin wrote that none of the three elements are satisfied.

CUNA to FTC Dont impose loan-mod rules on state CUs

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WASHINGTON (7/17/09)--State-chartered credit unions subject to Federal Trade Commission (FTC) jurisdiction should not be required to follow new rules applicable to those who offer loan modifications and foreclosure rescue services, said the Credit Union National Association (CUNA) in a recent comment letter. CUNA wrote in response to an advanced notice of proposed rulemaking (ANPR) from the FTC that addresses the practices of those who offer loan modification and foreclosure rescue services to consumers. The ANPR requests general comments as to whether the FTC should develop rules to restrict or prohibit activities in these areas. CUNA argued that the rules should not apply to state-chartered credit unions because they have not been the source of problems involving modifications and foreclosure rescues, and because the rules are not applicable to federal credit unions. “No matter how laudable, CUNA would not support rules which would only apply to one segment of the credit union industry,” the letter said. If state-chartered credit unions are covered by the new rules, they also would be subjected to new regulatory burdens that will add to their compliance costs, CUNA said. However, CUNA agrees that the FTC should move forward in this process to determine if additional rules should be implemented to restrict or prohibit practices that take advantage of vulnerable homeowners who seek loan modification or foreclosure rescue services. Credit unions are working with those members who are having difficulty in meeting their mortgage obligations by providing loan modifications, including the refinance and loan modification options that are available under the Treasury Department’s Making Home Affordable Programs. Although credit unions are offering their members valuable assistance in this area, CUNA recognizes that there are unscrupulous firms and individuals who offer loan modification and foreclosure rescue services to consumers.

Inside Washington (07/16/2009)

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* WASHINGTON (7/17/09)--At today’s House Financial Services Committee hearing entitled “Industry Perspectives on the Obama Administration’s Financial Regulatory Reform Proposals,” the panel has scheduled the following witnesses: Former congressman Richard Banker, now president of the Managed Funds Association; Chairman/CEO William Brodsky of the Chicago Board Options Exchange; Executive Vice President Randy Snook of Securities Industry and Financial Markets Association; Paul Schott Stevens, president, Investment Company Institute; Douglas Lowenstein, president, Private Equity Council; Diahann Lassus, president, Lassus Wherley on behalf of the Financial Planning Coalition; and Rob Nichols, president/CEO of the Financial Services Forum… * WASHINGTON (7/17/09)--National Credit Union Administration Chairman Michael Fryzel emphasized the need for continued member commitment among credit unions while speaking to the Michigan Credit Union League at its Annual Convention and Exposition last week in Traverse City, Mich. Credit unions are stepping forward to fill the void in financial services during the economic distress, Fryzel said, citing credit union’s proactivity helping small business owners. “The need for continued member commitment could not be greater. As credit union members continue to face the strains associated with the difficult economy, credit unions must recognize the essential role that they can play. The challenges are great, but so are the opportunities to make a real difference in the financial lives of millions of members,” Fryzel said ... * WASHINGTON (7/17/09)--The Financial Crisis Inquiry Commission, which announced its team of commissioners Wednesday, will study fraud in the financial system to determine the cause of the financial crisis. The commission can conduct hearings to examine industry practices, and subpoena regulators and financial institutions for information. Phil Angelides, commissioner and former California state treasurer, has not specified which issues the commission will take up first. Brian Gardner, KBW Inc. analyst, said he expects the commission will be careful and use its power guardedly (American Banker July 16). Another observer, Karen Shaw Petrou, managing director of Federal Financial Analytics Inc., said the panel would be more concerned with blame than with policy, but that although the “blame game” would be unpleasant, it could be constructive. The committee’s budget has not yet been approved, though commissioners are paid $153,000 for each day that they work ... * WASHINGTON (7/17/09)--President Barack Obama’s proposal to create a Consumer Financial Protection Agency triggered criticism from several financial services trade groups during a House Financial Services Committee hearing Wednesday. The committee invited the representatives to provide feedback on the plan. Among the concerns were questions about reduced credit access, limited consumer choice and rushed reform. Rep. Maxine Waters (D-Calif.) was angry at the industry’s concerns about the agency and said the witnesses were in denial about the financial crisis. She said the groups talk about preemption knowing that they would work to prevent any strong legislation coming from Congress (American Banker July 16). The Credit Union National Association said in a letter Tuesday to House Financial Services Committee Chairman Barney Frank (D-Mass.) that while it supports the creation of the proposed CFPA, “examination, supervision and enforcement” of the consumer protection rules should be left “to each credit union's prudential regulator” ...

Insurance premiums v. deposit recapitalizations NCUA

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ALEXANDRIA, Va (7/17/09)—Interested parties have 30 days to comment on a National Credit Union Administration (NCUA) plan to clarify how insurance premiums and deposit recapitalizations are calculated for only a portion of a year when a credit union either enters or departs the National Credit Union Share Insurance Fund (NCUSIF) in a year with an assessment. NCUA board member Gigi Hyland said at the agency’s Thursday open board meeting that this new rule is necessary to clarify ambiguities in the current regulations that came to light because of the NCUSIF expenses related to the corporates. The rule could apply to such situations as conversions from NCUSIF to private insurance; conversions from private insurance to NCUSIF insurance; and conversions to a federal thrift where the conversion is from NCUSIF insurance to FDIC insurance. Those scenarios could also include mergers of one type of charter with another. The proposal includes specific calculations for these types of assessments and distributions. The proposal would amend the definition of insured shares to include shares that would have been insured by the NCUSIF if the institution had been federally insured on the date of measurement. In addition, the proposal would add a definition of premium/distribution ratio and modified premium/distribution ratio to reflect a fraction of a year that a credit union was insured if it enters or departs the NCUSIF. An additional clarifications to distinguish premium assessments and assessments to replenish the 1% deposit is also in the plan. In response to a question from the board, NCUA staff clarified that the new regulation as proposed would not apply to TCCUSF payments.

Online reporting to NCUA intended to cut redundancies

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ALEXANDRIA, Va. (7/17/09)—A new online call report system approved by the National Credit Union Administration (NCUA) is expected by agency staff to eliminate many of the redundancies that occur under the existing reporting regime. The NCUA adopted a final rule Thursday that will provide a secure, web-based system to allow federally insured credit unions to submit financial reports, reports of officials, and other information online. The new approach will replace the current 5300 call report system for natural-person credit unions in late 2009, then in 2010 it will supplant the 5310 call report for corporate credit unions. The NCUA hopes to send details of the new program in a Letter to Credit Unions in early September, and then make the system mandatory for credit unions with internet access by Oct. 1. The NCUA estimates that around 435 credit unions without internet access will submit paper call reports in lieu of the online system initially, and NCUA will enter that call report information into the online system for them. NCUA will hold several informational webinars on this new system. Because under the new system all data may be submitted from any computer with an internet connection, NCUA will no longer issue software to submit the reporting data. The new system will collect information which is not collected under the current system about all services provided to credit unions by CUSOs. The current system only collects information on the primary services performed.

Overdraft disclosure rule mostly mirrors Feds

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ALEXANDRIA, Va (7/17/09)—A final rule adopted by the National Credit Union Administration (NCUA) Thursday will require credit unions to disclose on periodic statement the dollar amounts charged for overdraft fees and returned item fees, both for the month and the year-to-date. The NCUA action more closely aligns the federal credit union regulator’s Truth in Savings Act rule and its official staff commentary with that of the Federal Reserve Board's Regulation DD. Until now, only credit unions that promote or advertise payment overdrafts services were required to provide these disclosures. The rule is effective as of Jan. 1, 2010. The final rule will also require credit unions to provide account balance information through an automated system that discloses only the amount of funds available for withdrawal, without including the additional funds that would be available under an overdraft program. The rule also removes current provisions regarding the electronic delivery of disclosures.

18 FCU rate gets 18-month extension

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ALEXANDRIA, Va. (7/17/09)--The National Credit Union Administration (NCUA) at its Thursday open meeting voted to continue the 18% interest rate ceiling for loans made by federal credit unions. The ceiling is set for an 18-month period from Sept 10 to March 10, 2011. The agency will soon issue a Letter to Federal Credit Unions soon to notify them of this decision. The current 18% ceiling was due to revert to 15% on Sept. 10 absent NCUA's action. As required by Congress, the NCUA will review this rule again in 18 months, by may do so sooner if economic conditions warrant. The board discussed the benefits of a higher interest rate ceiling, which enables federal credit unions to provide affordable capital through risk-based lending and allows consumers to avoid predatory lenders. Vice Chairman Rodney Hood noted that credit unions are in the best position to help consumers in this way.

NCUA to woo investors through corp CU program changes

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ALEXANDRIA, Va. (7/17/09)--The National Credit Union Administration’s (NCUA's) Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP) agreement will now be more similar to portions of the Federal Deposit Insurance Corporation’s (FDIC) Debt Guarantee Master Agreement under a plan approved Thursday by the NCUA. The agency on July 16 unanimously supported a staff recommendation to “enhance corporate credit unions’ ability to maintain stable liquidity by enabling them to access funds through public offerings of senior unsecured debt obligations.” According to an NCUA board action memorandum, the board expects that these actions will “favorably impact the cost and marketability of corporate credit union debt offered in public markets” and increase the attractiveness of these assets for potential investors by eliminating some competitive disadvantages. The board also voted to implement its previous order which legally obligates the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), rather than the National Credit Union Share Insurance Fund (NCUSIF), for liabilities incurred under the TCCULGP. The approved changes will be published in the Federal Register, and a sample TCCULGP agreement will soon be posted on the NCUA Web site. Also at the monthly open board meeting, NCUA CFO Mary Ann Woodson reported little change in the monthly report on the financial state of the NCUSIF and TCCUSF, Woodson did detail the effects that recent NCUA board actions, including the assignment of the $1 billion capital note to the TCCUSF, have had on the NCUSIF balance sheet. Woodson also noted that the nine recorded credit union failures have cost the NCUSIF a combined $53 million so far this year.

Fed addresses CARD Act compliance problem

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WASHINGTON (7/16/09)—The Federal Reserve Board Wednesday issued an interim final rule under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act and included supplementary information that addresses a problem regarding sending out statements 21 days before a payment is due. Under the CARD Act, this provision applies to all open-end credit, not just credit cards, and is effective Aug. 20. The Credit Union National Association (CUNA) has been working with the Fed to convey credit union concerns about the fast-approaching compliance date for the provision that would reach way beyond credit cards and also cover such things as: general lines of credit, lines of credit associated with share draft and checking accounts, signature loans, and home equity lines of credit and--of particular concern to credit unions--to multi-featured, open-end lending programs. CUNA has urged an extended compliance timeframe. The interim final rule itself does not change the requirements in the law. However, in the supplementary information that accompanied the rule, the Fed acknowledged the difficulty in compliance. The Fed indicated that "for a short period of time after August 20," periodic statements for open-end credit other than credit cards may disclose due dates that are inconsistent with the 21-day requirement under certain circumstances. There must, for instance, be prominent disclosure elsewhere, either on the statement or in an insert, that the payment will not be treated as late if received within 21 days after the statement was mailed. CUNA staff remains in contact with Fed attorneys to further clarify the meaning of "a short period of time." “Our goal is to obtain at least an oral assurance from the Fed's staff that ‘a short period of time’ will allow a credit union to do nothing more than to provide this alternative disclosure to accountholders until the effective date of the final version of this rule,” said CUNA Senior Assistant General Counsel Jeffrey Bloch late Wednesday. Feb. 22, 2010 is the effective date for other sections of the CARD Act. This interim rule will be out for comment for 60 days. During that time CUNA will work to ensure that a final rule provides additional flexibility, both with regard to limiting the scope of the provisions to credit cards or, in the alternative, providing credit unions and others with the time necessary to comply, Bloch said. CUNA will be hosting an audio call soon, which will provide additional information about the interim final rule, including the latest on the "21-day" issue. Watch CUNA’s News Now for details.

Inside Washington (07/15/2009)

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* WASHINGTON (7/16/09)--A proposal by several federal agencies requiring originators at banks, thrifts and credit unions to be licensed by 2010 under a registration system created for nonbank lenders is generating criticism from industry representatives who say the proposal could impair loan modifications. The registry aims to increase tracking and accountability of originators, and reduce fraud by requiring originators to submit updated personal information and provide fingerprints. Although the proposal didn’t draw any controversy when it was considered by the Federal Deposit Insurance Corp. (FDIC) board in May, it has been cited by some industry groups as going too far (American Banker July 15). The proposal is intrusive because employees already undergo background checks, and community banks should be exempt because they already are scrutinized at the federal and state levels, according to one letter filed July 7. Another letter, dated July 9, said regulatory agencies should reduce the compliance burden on financial institutions and develop a standard form that could be adopted by all banks. Agencies involved with the proposal besides the FDIC include the National Credit Union Administration, the Office of Thrift Supervision, the Office of the Comptroller of the Currency, the Federal Reserve Board and the Farm Credit Administration ... * WASHINGTON (7/16/09)--Completed loan modifications fell 12% in April to about 13,800, according to the Federal Housing Finance Agency’s Foreclosure Prevention Report. The report details actions taken by Fannie Mae and Freddie Mac to prevent unnecessary foreclosures. Loan modifications accounted for 48% of all completed foreclosure prevention actions in April, compared with 47% in March. Completed short sales and deeds in lieu increased 15% in April to 4,000--more than three times the volume one year earlier. Delinquencies also continued to rise about 71,700 more loans going 60 days or more delinquent in April, the report said ... * WASHINGTON (7/16/09)--Congressional leaders announced appointments to the Financial Crisis Inquiry Commission Wednesday. Commissioners include: Bill Thomas, senior adviser, Buchanan, Ingersoll and Rooney; Douglas Holtz-Eakin, president, DHE Consulting LLC; Peter Wallison, co-director for Financial Policy Studies at the American Enterprise Institute; Keith Hennessey, assistant to the president for Economic Policy and director of the National Economic Council, 2008-2009; Phil Angelides, former California state treasurer; Brooksley Born, former chair of the Commodities Futures Trading Commission; John Thompson, chairman of the board of directors at Symantec Corp.; Bob Graham, former U.S. senator and governor of Florida; Heather Murren, retired managing director for Global Securities Research and Economics at Merrill Lynch; and Byron Georgiou, president of Georgiou Enterprises. Thomas, selected to serve as vice chair of the commission, was a former chairman of the House Ways and Means Committee from 2001 to 2007. Congress established the commission to investigate the causes of the financial crisis and the collapse of major financial institutions ...

OCCs Dugan to appear on this weeks HandFF Radio

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WASHINGTON (7/16/09)--Comptroller of the Currency John Dugan will discuss consumer protections for reverse mortgages during a July 19 appearance on Home & Family Finance Radio. During the interview, Dugan will discuss the growth of reverse mortgages and the potential risks posed to consumers. Dugan is also expected to detail the various forms of protections available to consumers that choose to take part in reverse mortgages and provide insight on the work that the Office of the Comptroller of the Currency (OCC) is doing to address reverse mortgage-related issues. The comptroller recently outlined many of his concerns in a press release, warning that reverse mortgages “pose significant compliance risks” and urging regulators to “get out in front of this issue, before real problems develop” so that reverse mortgage loans can be made in a way that benefits lenders and borrowers alike. According to Dugan, regulators should ensure that pending interagency guidance on reverse mortgages is “sufficiently robust” to protect consumers. While the OCC would monitor banks to “ensure compliance” with the resulting guidance and existing regulations, Dugan said that “guidance alone is not enough to address the consumer protection issues” related to reverse mortgages.

House appropriations bill could increase CDRLF funding

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WASHINGTON (7/16/09)--Credit Union National Association (CUNA) President/CEO Dan Mica on Wednesday thanked Rep. Alcee Hastings (D-Fl.) for adding to the House Financial Services and General Government Appropriations Bill an amendment that would increase funding for the Community Development Revolving Loan Fund (CDRLF) to $1.25 million for the 2010 fiscal year. The National Credit Union Administration (NCUA) in May requested $1 million in funding for the CDRLF for 2010. The amendment, which would add $250,000 to the CDRLF’s current level of funding, was offered as part of a manager’s amendment to the appropriations bill. That bill is expected to pass the House Rules Committee during a vote to be held later today. The CDRLF, which is administered by the NCUA’s Office of Small Credit Union Initiatives, provides low-interest loans and technical assistance grants to low-income designated credit unions. These small credit unions are then able to offer services like free income tax preparation and financial literacy classes to their members.

Bankruptcy rule must protect members says CUNA

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WASHINGTON (7/16/09)—The Credit Union National Association (CUNA) urged the U.S Solicitor General to continue to defend the Bankruptcy Reform Act in order to help protect credit union members from the cost of some debtors’ unscrupulous use of bankruptcy law. CUNA’s July 15 letter to Solicitor General Elena Kagan centers on the U.S. Supreme Court’s recent agreement to review the constitutionality of certain provisions in the 2005 bankruptcy law. The pending cases center on whether bankruptcy lawyers may counsel debtors to run up additional debt after deciding to declare bankruptcy but before the petition has been filed. “We were pleased that, during your confirmation hearing, you cited numerous factors that you said favored continuing the defense of the constitutionality of the Act,” CUNA President/CEO Dan Mica wrote. Mica explained that the issue of such abusive behavior in bankruptcy is of special importance to credit unions because, as member-owned, not-for-profit cooperatives serving as financial intermediaries between savers and borrowers, credit unions’ money is their members’ money. “When one credit union member has his or her debts discharged through bankruptcy, the credit union and its other member-owners ultimately pay for these debts through depletion of the cooperative’s jointly owned capital as well as lower dividends on savings and higher interest rates on loans. “This is particularly true for the many credit unions with fewer than $10 million dollars in assets for which losses of even thousands of dollars can have a material impact on operations and, in some cases, threaten a credit union’s viability as a going concern,” Mica warned. He assessed, “The government has a compelling, legitimate interest in regulating this form of speech because of bankruptcy’s harmful impact on credit unions and their members, especially during this major recession.” Mica concluded: “Credit unions have a long track record of giving their members a fair deal, and we see no persuasive argument why lawyers have a constitutional right to counsel their clients to capture as much of a credit union’s cooperatively-owned capital as possible through the bankruptcy process. “The public policies underlying 11 U.S.C. § 526(a)(4) are sound and we hope that you decide to continue the defense of that provision before the U.S. Supreme Court.”

Senate Banking schedules July 22 hearing for Matz

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WASHINGTON (7/16/09)--The Senate Banking Committee has scheduled a July 22 hearing on the nomination of Deborah Matz to a position on the National Credit Union Administration (NCUA) board Matz was named in May as President Barack Obama's choice to become the new NCUA chairman. Matz is a former member of the NCUA board, confirmed by the Senate on March 22, 2002 for a term that ended August 2005, although she remained a few months longer to assure a smooth transition to a new member. Matz was executive vice president and chief operating officer of $800 million-in-assets Andrews FCU, in Suitland, Md., until June 2008. If confirmed, Matz will fill a vacancy created by the expiration of Rodney Hood's term on the NCUA board.  Although that term expired in April, Hood has agreed to remain on the board until a new member's arrival. Current chairman Michael Fryzel will retain a spot on the board, but as a Republican will become the minority member on the three-person executive board. Board member Gigi Hyland is the third component to the board. The Credit Union National Association has noted that Matz has strong credit union credentials and that the trade group anticipates she will continue her role as "a solid and competent regulator

Community First CU judge rejects government appeal

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GREEN BAY, Wis. (7/16/09)--Saying that none of their arguments suggested “that the jury lacked an evidentiary basis for reaching its verdict,” U.S. District Judge William Griesbach on Tuesday rejected a Department of Justice motion which sought to overturn a recent jury verdict in favor of Community First Credit Union’s challenge against the federal government over the Internal Revenue Service's (IRS) position on credit union unrelated-business income taxation (UBIT). On May 14th, a jury found in favor of the credit union's refund claim of $54,604, the full amount the credit union sought, plus costs. The amount represented taxes paid on credit life and credit disability insurance and guaranteed asset protection (GAP) products. In the July 14 ruling, Griesbach said that the government’s challenge, which asked the court to “reweigh the evidence and find that the jury should have preferred its version of the evidence” to the credit union’s, was “outside the bounds” of what is allowed under Federal Rule 50. Under Federal Rule 50, courts may “grant judgment as a matter of law when a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue.” The government will have 60 days to appeal Griesbach’s ruling. In another pending court case that is relevant to credit unions, Judge Christine M. Arguello has scheduled a five-day jury trial for the case of Bellco Credit Union v. U.S. Colorado-based Bellco filed suit against the government in May seeking a nearly $200,000 refund from the Internal Revenue Service for UBIT taxes paid on accidental death and disability insurance, credit life and disability insurance, and other financial services. Both parties in the tax dispute have filed motions for summary judgment, and no decision has been made yet. The Community First CU decision is not expected to directly affect the proceedings in the Bellco case.

CUNA CUs wants positive reg changes Mica tells PBS

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WASHINGTON (7/16/09)--In an interview with the PBS Nightly Business Report’s Susie Gharib, Credit Union National Association (CUNA) President/CEO Dan Mica said that CUNA “would be interested in” the new financial regulations proposed by legislators as long as they would replace some current regulations rather than adding to the heavy regulatory burden. Asked if CUNA is "opposing any new regulations for credit unions," Mica said that CUNA and credit unions have not publicly opposed all new regulation for credit unions, and have expressed a willingness to work toward reasonable regulation that would offer increased “transparency and access” to credit union members. However, CUNA and credit unions would seek to create “good public policy” that works to “everyone’s advantage” by seeking to modify any unneeded or excessive regulations, he added.
Much of the PBS segment focused on how CUs are faring in today's difficult economic environment, when more of their memebers are suffering job losses. That is certainly affecting credit unions, but many other businesses as well, Mica pointed out. Mica also emphasized credit unions have conservative underwriting practices and a willingness to work with members to modify or extend the terms of existing mortgage loans. That, in turn, has helped credit unions avoid high default rates, Mica said. While credit unions in troubled economic areas like Florida, Nevada and California are feeling greater strain, Mica said that many continue to do well, and credit unions in these areas are seeing “green shoots” and some signs of stability. While there are still ongoing challenges, Mica reported that credit unions in these areas continue to maintain strong capital ratios. In a pre-produced segment on CUs that preceded Mica's interview, BrightStar Credit Union in Sunrise, Florida, was spotlighted as an example of a CU in a hard-hit area that has continued to perform well. "We were never involved in subprime lending," said CEO Ralph Crockett. "We've had conservative lending practices and sets of policies, and we've always adhered to those policies and programs," he added.

Monetary policy too big to fail on House hearing agenda

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WASHINGTON (7/16/09)—Federal Reserve Board Chairman Ben Bernanke is scheduled to deliver his semiannual report on monetary policy and the state of the economy before the House Financial Services Committee July 21. Bernanke will repeat his remarks before the Senate Banking Committee at a date yet to be made public. Also newly noticed on the House committee’s hearing schedule, and also slated for July 21, is an examination of the issues of “too big to fail” financial institutions. The committee’s study of systemic risk will look at whether some institutions truly are too big for the country to allow them to fail and, if so, what should be done about such a situation. A witness list was not yet available.

CUNA league back successful Chu for House seat

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WASHINGTON (7/16/09)--Judy Chu, a Democrat from California who has indicated support for credit union issues, was victorious in her special election for the House seat from the 32nd district. Chu, who ran against similarly named, but no relation, Betty Chu on the GOP ticket, will fill the seat vacated by Hilda Solis when she accepted the post of U.S. Secretary of Labor. C. M. Agrella also sought the position as a Libertarian. CUNA’s Credit Union Legislative Action Council (CULAC) supported the new congresswoman with a $2500 contribution. She was also backed by the California CU League. Chu won with just over 61% of the vote.

MICA Cool tempers must reign in hot Washington temps

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WASHINGTON (7/16/09)—In the nation’s capital in July, hot temperatures and work fatigue may push lobbyists or lawmakers to lose their cool, but good leaders remember to keep their emotions in check, counsels Credit Union National Association President/CEO Dan Mica in The Hill. In his most recent monthly K Street Insider column in the Capitol Hill publication, Mica recounted a lobbying experience where, despite his best intentions, he lost his cool, and offered what he called “ a few simple words about cooling off this summer” for lobbyists tempted to fly off the handle. “If we decide to lose our tempers, whether with congressional members, staffers or our own trade-association members, the cost may be too expensive in the end. Years of access may be gone in seconds. Decades of respect can be forgotten in minutes,” he reminded his readers. Mica acknowledge summer can be a tough time to keep emotions out of one’s work day: “By July, many of us are tired. We cannot wait for the August recess to come. Emotions run high as it becomes clear that deadlines are looming and legislation is moving at a snail’s pace.” He added that at the trade-association level, members are demanding to see accomplishment while, and on the congressional scene, demands are made on members and staffers while those accomplishments are called into question. "The lesson to remember is simply this: Keep your emotions in check. There is always another day on Capitol Hill,” Mica advised. He added, “Any issue --if you become too emotionally involved in it — can become fodder for a screaming match. A lobbyist’s responsibility is to constantly ask: “Is this worth it? Am I willing to lose it all? Is time to speak up? “Constituents are looking for solutions and for all of us to keep our tempers in check.” As its name implies, The Hill's K Street Insider column focuses on the lobbying business rather than CU issues. For the past two years, Mica has been one of a select number of former policymakers who became lobbyists that write the widely read column in rotation.

CUNA raises CU issues with SBA administrator lawmaker

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WASHINGTON (7/15/09)— Sen. Mary Landrieu (D-La.), chairman of the Senate Small Business Committee, and Small Business Administrator Karen Mills invited lender groups, including the Credit Union National Association (CUNA) to a breakfast meeting to discuss creditors’ concerns with current SBA programs. CUNA Deputy General Counsel Mary Dunn, attending on CUNA’s behalf, emphasized that credit unions want to work closer with the SBA to make more loans to small businesses. Dunn raised several issues during the meeting including:
* Making permanent the SBA 7(a) loan 90% guarantees approved temporarily under the 2008 Housing and Economic Recovery Act; * Containing fees under all SBA programs; and * Ensuring the agency has sufficient personnel to help review loan applications, handle problems, and process guarantee payments to lenders in the case of a borrower's default.
After the meeting, Dunn followed up with Landrieu and Mills, as well as Senate and SBA staff, to emphasize how credit unions can help small businesses across the country.

Inside Washington (07/14/2009)

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* WASHINGTON (7/15/09)—The House Financial Services Committee released its witness list for today’s hearing to address “Banking Industry Perspectives on the Obama Administration’s Financial Regulatory Reform Proposals.” The hearing is one in an ongoing series of examinations of issues and perspectives being held in advance of congressional action on the administration’s plan to revamp financial services regulation. Those scheduled to testify: Steve Bartlett, president/CEO of The Financial Services Roundtable; John Courson, president/CEO of the Mortgage Bankers Association; Chris Stinebert, president/CEO of the American Financial Services Association; Steven Zeisel, vice president and senior counsel of the Consumer Bankers Association; Todd Zywicki, George Mason University Foundation professor of law and senior scholar, Mercatus Center; Denise Leonard, vice president of government affairs, National Association of Mortgage Brokers; Edward Yingling, president/CEO of the American Bankers Association; and Michael Menzies, Sr., president/CEO of Easton Bank and Trust Company, on behalf of Independent Community Bankers of America. CUNA has submitted a letter for the written hearing record… * WASHINGTON (7/15/09)—An unnamed administration official told Reuters that policymakers are pondering what can be done to help stave off foreclosures for jobless homeowners who are falling behind on their payments. The July 14 article noted that the number of failing home loans has been climbing for three years as property values have declined and the unemployment rate has soared. Such a government program to help the unemployed, the source said, would be in alignment with other administration measures to help jobless Americans struggling through the recession. However, the plan—still definitively in the construction stage—presents policy challenges and possible pitfalls. One hazard could be setting up an environment that distorts the housing market and works against its recovery… * WASHINGTON ( 7/15/09)— The Securities and Exchange Commission (SEC) has launched an effort to bolster its enforcement efforts, better protect investors, and assure market integrity—actions mostly in response to the current financial crisis and the biggest case of investment fraud in U.S. history for which Bernard Madoff has received a 150-year prison sentence. The SEC was widely criticized for its failure to detect Madoff’s massive Ponzi scheme despite the existence of warning signs that were around, critics say, for many years. New SEC Chairman Mary Schapiro has said the agency has strengthened and accelerated its enforcement efforts and installed a new enforcement director. The SEC has also recently acted to restrict short-selling in down markets, strengthened its mutual fund oversight, shored up scrutiny of investment advisers, and eased the process for shareholders to seat directors on company boards. (Associated Press July 14) Related to Ponzi schemes, named after the legendary swindler Charles Ponzi and within which investors are defrauded to repay earlier investors, Telegraph.co.uk reported the following yesterday: Madoff was moved to the same U.S. Penitentiary in Atlanta that Ponzi spent some time…

Corp CU program discussion added to NCUA agenda

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ALEXANDRIA, Va. (7/15/09)--Possible revisions to the National Credit Union Administration’s (NCUA) Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP) will be yet another item for discussion at the NCUA’s monthly board meeting, scheduled for Thursday. The NCUA recently reported that the majority of corporate credit unions have agreed to take part in the TCCULGP. The Credit Union National Association also believes that the board could discuss the financial impact of potentially allowing credit unions to purchase their own private insurance in lieu of participation in the NCUA’s National Credit Union Share Insurance Fund. However, NCUA representatives have not confirmed that this item will be on the list of topics for discussion. The agenda for the upcoming meeting also includes scheduled discussions of final rules on credit union reporting and Truth in Savings Act disclosures, interest rate ceiling determinations under Section 107(5) of the Federal Credit Union Act, and the NCUA’s monthly Insurance Fund Report.

NCUA mortgage loan amendments open for comment

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WASHINGTON (7/15/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call on an interim National Credit Union Administration (NCUA) rule that would allow federal credit unions that take part in the U.S. Treasury’s home loan modification program to modify second mortgage loans to match the terms of modified first mortgages. Under the final rule, credit unions will be able to modify a second mortgage to match the term of a modified first mortgage--even if it is extended beyond 20 years. The NCUA currently allows credit unions to extend first mortgage loans to as long as 40 years. CUNA is looking to generally gauge public sentiment on the proposed rule, and is specifically asking if the interim rule should apply to all mortgage modifications. CUNA is also seeking industry input on whether or not the current maturity limit on second mortgages should be permanently removed. The rule is effective as of June 24, 2009. The NCUA will accept comments on the rule until August 24, and the NCUA has previously said that the final rule could be amended, if necessary. Comments are due to CUNA by August 12. For more information, use the link.

CUNA supports CFPA creation with caveats

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WASHINGTON (7/15/09)--In a Tuesday letter sent to House Financial Services Committee Chairman Barney Frank (D-Mass.), the Credit Union National Association (CUNA) said that while it supports the creation of the proposed Consumer Financial Protection Agency (CFPA), “examination, supervision and enforcement” of the consumer protection rules should be left “to each credit union’s prudential regulator.” The CFPA should have “full authority to write the rules for consumer protection,” the letter added. The letter followed a Tuesday briefing for Democratic members of the House Financial Services Committee by CUNA and other industry groups. Consumer groups briefed the members following CUNA's session. The briefing was scheduled in advance of House hearings on the government's proposals to revamp the financial services regulatory structure. Additional House hearings on regulatory restructuring are scheduled for later in the week. In the letter and its remarks to House members, CUNA also expressed credit union concerns over proposed mandates that would require credit unions to “first offer a member a ‘standard’ financial product” before they can offer that member a product that may be better suited to his or her financial needs. CUNA also urged legislators to ensure that the regulatory streamlining and modernization promised by the CFPA proposal “becomes a reality” and to address the issue of federal preemption of state consumer laws so that there is one set of rules consumers can become knowledgeable about and financial institutions need to comply with. CUNA made clear its intent that it was not dismissing the proposed agency out of hand as most other groups have done, but that it wants to participate in the policy dialogue to protect credit unions' interests. CUNA also spoke in favor of enlarging the proposed CFPA governance board beyond the planned five members, saying that the board should include space for “industry representatives, a state or federal credit union regulator,” and, potentially, a state consumer agency representative. CUNA’s commentary was also sent to other House Financial Services Committee members as well as Senate Banking Committee Chairman Christopher Dodd (D-Conn.), Treasury Secretary Timothy Geithner, and Treasury Assistant Secretary Michael Barr. Barr in prepared testimony delivered before the Senate Banking Committee on Tuesday said that “a new agency with a focused mission, comprehensive jurisdiction, and broad authorities” would be the only way to ensure that both “consumers and providers” benefit from “high and consistent standards and a level playing field across the whole marketplace.” The CFPA will also “consolidate existing regulators and authorities” rather than simply creating a “new layer of regulation,” Barr added. One such consolidation would be a single federal mortgage disclosure, Barr said. Barr has recently indicated that all financial institutions would receive the same treatment under the CFPA, regardless of their composition or charter. Noting that credit unions played little to no role in the genesis of the current financial crisis, Dodd during the Senate committee hearing indicated that there could be a lack of “willingness” for treating all financial institutions in the same manner.

Congress this week Consumer protection discussions

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WASHINGTON (7/14/09)--Debate on President Barack Obama’s proposed Consumer Financial Protection Agency will continue this week with Assistant Treasury Secretary for Financial Institutions Michael Barr testifying before the Senate Banking Committee during a Tuesday hearing. State government officials, industry insiders, and public policy advocates will testify during the hearing, and the Credit Union National Administration is considering submitting a prepared statement for the hearing. The Senate Banking Committee will also address foreclosure prevention during the week, with Treasury Assistant Secretary for Financial Stability Herbert Allison scheduled to testify. The House Financial Services committee will discuss regulatory reforms in more general terms later in the week, with separate hearings for banking insiders, community and consumer advocates and a hearing to discuss “industry perspectives” set for Wednesday, Thursday, and Friday, respectively. The House will also debate the contents of its Financial Services and General Government Appropriations bill. As currently written, the bill would allow the National Credit Union Administration's Central Liquidity Facility to maintain its maximum amount of $40 billion through the 2010 fiscal year and would increase funding for the U.S. Treasury Department's Community Development Financial Institutions fund and the Small Business Administration's business loan account.

NCUA releasing more U.S. Central WesCorp info

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ALEXANDRIA, Va. (7/14/09)--The National Credit Union Administration (NCUA) on Monday said it would release quarterly reports detailing the portfolio valuations of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union (WesCorp). According to the NCUA release, the reports include information on “quarterly valuations and future loss projections” for the commercial and residential mortgage-backed securities held by both corporate credit unions. In a statement accompanying the release, NCUA Chair Michael Fryzel said that the “NCUA consistently strives to strike a reasonable balance between the desire for transparency and the provision of detailed, relevant data to interested parties,” adding that the release of this information was “part of NCUA’s continuing commitment to make as much material available to the credit union industry and financial public as is possible.” The valuation reports, which were produced by Clayton IPS, LLC, will be made available to federally insured credit unions that agree not to publicly disclose any information contained in the report. More specifically, natural person credit unions may request a copy of the report from their corporate credit union, if it is associated with U.S. Central. These reports will be available for thirty days after U.S. Central and WesCorp’s quarterly financial results are posted. The NCUA has also recently responded to a Freedom of Information Act request by the Credit Union National Association by releasing documents on its early response to corporate credit union losses and liquidity concerns, including previously private information on NCUA board meetings, board actions, and valuations of the mortgage-backed securities portfolios held by U.S. Central and WesCorp. (See related story: NCUA FOIA reports detail early response to corp. CU crises News Now July 9.)

Inside Washington (07/13/2009)

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* WASHINGTON (7/14/09)--Congressional legislators will still oppose giving systemic oversight authority to the Federal Reserve Board, even if the Fed is found to have had no undue influence over Bank of America’s purchase of Merrill Lynch. As reported in American Banker July 13, 17 House legislators, including three Democrats, told President Barack Obama in a letter sent last Friday that his administration, the U.S. Congress, and citizens should carefully consider granting such far-reaching power to a single regulatory entity with little public accountability. Lawmakers have questioned Fed Chairman Ben Bernanke’s claims that he did not push Bank of America to purchase Merrill Lynch, and the House Oversight and Government Reform Committee will hold hearings on this issue in the near future... * WASHINGTON (7/14/09)—The Obama administration could bring over-the-counter (OTC) derivatives onto regulated exchanges and central clearing platforms under its potential plans to standardize OTC contracts. Speaking on Friday, Geithner told House legislators that the exact definition of standardization would change as markets changed. Though he could not give extensive details on the administration’s plan, Geithner said that the Commodity Future Trading Commission and the Securities and Exchange Commission have taken extensive steps toward solving some of their jurisdictional issues. Geithner and Rep. Barney Frank (D-Mass.) both seem to be in favor of allowing businesses and banks to protect themselves from changes in currencies and interest rates through the use of customized contracts. (American Banker July 13)… * WASHINGTON (7/14/09)—Representatives from the Office of the Comptroller of the Currency (OCC) told American Banker that it is revising a rule that governs its visitorial powers of national banks. They July 13 issue reported that while the revision has not been completed, the OCC said it will work to apply the rule in a proper fashion after the U.S. Supreme Court last month criticized the OCC’s rule and ruled that individual states could use the court system to enforce non-preempted state laws against national banks...

CUNA to participate in Treasury Hill interchange briefings

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WASHINGTON (7/13/09)--Though potential legislation aimed at addressing interchange fees was not added to a recent Senate appropriations bill, the Credit Union National Association continues to monitor the interchange issue and is scheduled to discuss interchange with U.S. Treasury officials this week. CUNA will join other members of the Electronic Payments Coalition in a meeting with Treasury Secretary for Financial Institutions Michael Barr. During the meeting, CUNA will advocate for the interests of credit unions regarding interchange. CUNA will hold additional interchange fee discussions with so-called “Blue Dog” conservative Democrats later this month. Both House and Senate members have looked to address interchange fees through legislation in recent months, but CUNA has recommended that legislators wait for the results of a Government Accountability Office review of interchange fees before they act.

Higher CLF CDFI and co-op development funding move ahead

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WASHINGTON (7/13/09)--A Senate committee last week approved a State-Foreign Appropriations Bill which includes a $10 million grant for the U.S. Agency for International Development's cooperative development programs sponsored by such organizations as the the World Council of Credit Unions (WOCCU). The WOCCU program helps credit unions in developing nations provide financial services to their members. The CDP also helps credit unions in these nations expand their technical and regulatory expertise. The Senate Appropriations subcommittee on financial services and general government also approved its appropriations bill last week. Under that bill, the National Credit Union Administration will be granted continued authority to allow the Central Liquidity Facility (CLF) to lend to its statutory cap of $41 billion. Low-income credit unions will also have access to $1 million in technical assistance funds under the Community Development Revolving Loan Fund, effective until September 30 of 2011. The Senate also approved $166.75 million in Community Development Financial Institution (CDFI) funds, which is short of the House's recommendation and the Obama administration's proposed budget of $234.6 million. The Senate bill will also make $236 million in funds available through the Small Business Administration's business loan account. A similar appropriations bill, which was approved by a House committee early last week, would allow the CLF to maintain its maximum amount through fiscal 2010 and would increase funding for CDFI fund and the SBA's business loan account.

Inside Washington (07/10/2009)

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* WASHINGTON (7/13/09)--Investors expect that the Federal Deposit Insurance Corp.’s (FDIC) plans to restrict private-equity bank owners will reduce the required capital amounts by half. The agency proposed July 2 a minimum Tier 1 leverage ratio of 15% for private-equity investors who purchase failed banks (American Banker July 10). Wilbur Ross, CEO of W.L. Ross & Co., and Patricia McCoy, a law professor at the University of Connecticut--who attended an FDIC roundtable July 6--expect the capital amounts will be dropped. After the proposed rule was released last week, FDIC Chairman Sheila Bair said the capital ratio may not be popular. The FDIC would consider external input on the matter, according to an agency spokesman ... * WASHINGTON (7/13/09)--Small businesses that would otherwise have difficulty securing private equity or venture capital may find funding easier to get as a result of changes to the U.S. Small Business Administration’s (SBA) Small Business Investment Company (SBIC) program. The changes are a part of the American Recovery and Reinvestment Act. The changes include: eligibility for greater SBA guaranteed funding; maximum SBA funding levels for SBICs that will increase up to three times the private capital raised by SBIC; and limits that are higher for SBICs licensed after Oct. 1 and that certify at least 50% of their investments will be made in small businesses in low-income areas--up to $175 million for single licenses and up to $250 million for joint licenses ...

NCUA to discuss share insurance premium Thursday

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ALEXANDRIA, Va. (7/13/09)--Discussion of proposed rules that address the National Credit Union Administration's (NCUA) National Credit Union Share Insurance Fund Premium and one percent deposit should headline the NCUA’s agenda for the upcoming July 16 board meeting. The NCUA is also scheduled to consider final rules on credit union reporting and Truth in Savings Act disclosures. The comment deadline for the NCUA’s proposals regarding Truth in Savings Act disclosures, which would require credit unions to disclose on the periodic statement the dollar amounts charged for overdraft fees and returned item fees, passed on May 26. Interest rate ceiling determinations under Section 107(5) of the Federal Credit Union Act are also expected to be discussed at the board meeting. The NCUA will also consider reprogramming its 2009 budget and discuss its monthly Insurance Fund Report at this week's meeting. As is routine, a closed session of the NCUA board will follow the early open session.

Dodd Frank want regulators to fix loan mod problem

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WASHINGTON (7/13/09)--Senate and House financial heavyweights Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.) have asked federal regulators to look into possibly inflated valuations of some second mortgages that are being held on banks balance sheets to aid government-sponsored assistance for distressed homeowners. According to a Friday letter sent to the leaders of the National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corporation, and other federal regulatory entities, carrying mortgage loans at “potentially inflated values” could prevent loan servicers from negotiating “the disposition of these liens” and “may stand in the way” of “increasing participation” in the Obama administration’s Hope for Homeowners (H4H) mortgage adjustment program. Another issue facing the H4H program is the “unwillingness of subordinate lien holders to extinguish their liens” in order to participate in the program. H4H allows eligible homeowners to refinance their subprime mortgage loans into fixed-rate, FHA-backed loans. The H4H program also allows the subordinated lien holders to share in any future appreciation of the property as a means to encourage them to participate in the program. In the letter, Dodd and Frank expressed concern that “significant volumes” of “closed-end second mortgages or home equity lines of credit” are being held on the balance sheets of large mortgage servicers, adding that the “loss allowances associated with these subordinated liens may be insufficient to realistically and accurately reflect their value… in light of the historically poor performance of first lien mortgages” and the “diminished values of the underlying collateral.” The legislators urged federal authorities to look into this issue “as expeditiously as possible.”

House committee to hear from consumer advocates on reg reform

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WASHINGTON (7/13/09)--Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, announced Friday his panel will conduct a hearing entitled “Community and Consumer Advocates’ Perspectives on the Obama Administration’s Financial Regulatory Reform Proposals” on Thursday, July 16. The hearing is one in a series the committee has scheduled to explore issues surrounding the government’s proposals to revamp the financial services regulatory structure. As background to the hearings, House Democrats are holding a round of briefings from representatives of groups affected by the proposed changes. CUNA will participate in such a briefing Tuesday. Scheduled for Thursday, the House Financial Services subcommittee on domestic monetary policy intends to hold a related hearing called “Regulatory Restructuring: Safeguarding Consumer Protection and the Role of the Federal Reserve.” And on Wednesday, the full committee has scheduled a look at the banking industry perspective on the administration’s proposal, witnesses to be announced.

Ellison introduces credit rating agency reforms

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WASHINGTON (7/13/09)--Congressman Keith Ellison this week introduced legislation that would seek to strengthen and reform the “wholly inadequate” regulation and oversight of credit rating agencies. According to a release, Ellison’s legislation, H.R. 3128, would amend the Federal Reserve Act to authorize Federal Reserve Banks to examine the methodologies of used by nationally recognized statistical rating organizations in analyzing and rating asset backed securities and structured finance products. This authority would extend beyond the Feds current administrative powers under the Term Asset-Backed Securities Loan Facility to cover all types of asset-backed securities. The Securities and Exchange Commission is currently tasked with performing some oversight of credit ratings agencies. Citing instances where credit ratings agencies “have given top ratings to products backed by dubious mortgages and other loans,” Ellison said that the approval that these agencies give to a given product may be conferring a “legitimacy” that does not exist. Further, current law gives no governmental organization the power to ensure that credit rating agencies are “making reasonable assumptions” or that they have “a basic understanding” of the risks that they are assessing, Ellison added. Subjecting credit rating agencies to “enhanced supervision” by a regulator with “relevant expertise” would provide a “sensible guard rail for our financial system,” Ellison said. Ellison's bill was awaiting action from the House Financial Services Committee at press time.

Dodd urges regulators Protect consumers from new card abuses

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WASHINGTON (7/10/09)--In a letter sent Thursday to National Credit Union Administration Chair Michael Fryzel, Federal Deposit Insurance Corporation Chair Sheila Bair, Federal Reserve Chair Ben Bernanke, and other federal regulators, Sen. Chris Dodd (D-Conn.) asked regulators to “immediately notify” credit card issuers in their respective jurisdictions that they would be “held accountable” for recent interest rate increases. In the letter, Dodd also urged federal regulators to “do everything in [their] power to protect cardholders from abusive credit card practices. It has been recently reported that credit issuers, including Citigroup, have been raising their interest rates on existing lines of credit, presumably in an effort to increase profits before new credit card regulations take effect in the near future. Portions of the recently passed CARD Act require credit issuers to review accounts for which the interest rate has been raised every six months and, under certain circumstances, reduce the consumer’s interest rate. This portion of the Act is retroactive to January 1 of this year. Dodd asked federal regulators to remind credit issuers of this upcoming guideline, adding that “all interest rate increases that have taken place this year will become subject to the mandatory 6-month review.” Dodd also encouraged the Fed to “draft regulations that provide clear, robust requirements for the review of rate increases,” adding that he expected federal financial enforcement agencies to “hold the credit card companies strictly accountable for conducting thorough reviews and decreasing rates where warranted.”

Flood insurance extension proposed by Reps. Waters Frank

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WASHINGTON (7/10/09)—Reps. Maxine Waters (D-Calif.) and Barney Frank (D-Mass.) introduced a bill Thursday that will extend authorization for the National Flood Insurance Program (NFIP) through March 31, 2010. Without legislative action, the program will expire at the end of September. In announcing their bill, the two House legislators said they intend also to draft reforms to the flood insurance program to incorporate studies and other information not available when the program was last reviewed by Congress. Waters is chairwoman of the House Financial Services subcommittee on housing and Frank is chairman of the parent committee. Frank and Waters also said they plan to engage the Obama administration and Federal Emergency Management Agency—or FEMA—officials in the reform process, as well as invite recommendations from all interested parties. Created in 1968, the NFIP provides over one trillion dollars of flood insurance to more than five and a half million American homes and businesses. In a release, Water said, “We saw the importance of this program following Hurricane Katrina and other storms that have devastated the Gulf Coast. Letting the program expire in the middle of hurricane season would have serious repercussions for areas prone to flooding. A six-month extension is prudent and necessary.”

Fed could perform consumer protection role Vice Chair says

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WASHINGTON (7/10/09)--Federal Reserve Vice Chairman Donald Kohn on Thursday said that the Federal Reserve is well placed to perform the job of consumer protection, and also recommended that Congress should strengthen the Fed’s consumer protection authority. Speaking before a House subcommittee on domestic monetary policy and technology hearing on balancing the Fed’s independence with its role as a systemic risk regulator, Kohn said that limiting the Fed’s independence over monetary policy could “lead to higher long-term interest rates” and could raise the cost of borrowing by reducing the U.S. Treasury’s debt rating. Continuing to grant the Fed operational independence would also enable legislators “to look beyond the short term as they weigh the effects of their monetary policy actions on price stability and employment.” This sort of independence also “prevents governments from succumbing to the temptation to use the central bank to fund deficits,” Kohn added in a prepared statement. While he agreed that Congress should support the Fed’s independence, former Fed Governor Frederic Mishkin told the subcommittee that consumer protection is not in the “core mission” of the Fed, and allowing the Fed to take on this role could be harmful to its independence. According to Mishkin, the “skills and mindset” or a consumer protection regulator are “fundamentally different” from those required by a systemic regulator.” Both Mishkin and fellow former Fed official Lawrence Meyer agreed that the Fed’s consumer protection powers should be curtailed if it is given increased power as a regulator of systemic risk. The Obama Administration has called for the creation of an independent Consumer Financial Protection Agency (CFPA) that would have broad jurisdiction to ensure that consumers and investors are protected from financial abuses related to credit, savings and payment products. Rep. Barney Frank has also introduced a nearly identical concept, with some exceptions, into the House. (See related story: Frank's consumer protection plan has CRA difference News Now July 9.)

CUNA SAFE Act rule proposals need changes

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WASHINGTON (7/10/09)--In a comment letter published on Thursday the Credit Union National Association (CUNA) said that rules proposed by the National Credit Union Administration (NCUA) and other federal regulators that would implement the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act need to be tweaked before final implementation. Under the SAFE Act, employees of financial institutions or their subsidiaries that act as residential loan originators would be required to register with the Nationwide Mortgage Licensing System and Registry. These proposed guidelines would apply to federally insured credit unions. While CUNA does not believe that privately insured credit unions should necessarily be subject to these guidelines, they should “have the same access to the Registry as all other financial institutions that are subject to the proposed rules,” and that access should “not be affected or dependent on whether they are subject to these rules.” CUNA also called for credit union service organizations that are owned by one or more credit unions to be included under the SAFE Act rules “to the extent that their employees engage in mortgage lending activities.” Failure to do so would subject CUSOs to state registration and licensing requirements, resulting in “significant, additional burdens” that would “place them at a competitive disadvantage” when compared to “subsidiaries of other financial institutions.” CUNA does not believe it is necessary to require all employees to renew their registration during the time period from Nov. 1 and Dec. 31 each year since it would require employees to register twice within the first calendar year. The better approach, CUNA said, is to allow employees to renew one year after their initial registration, or better, the agencies should consider requiring renewals once every other year instead. Finally, CUNA said the rules should not apply to loan modifications. However, the comment letter added, the SAFE Act rules should apply to mortgage originators that refinance existing loans. Use the resource link below to access the complete CUNA comment letter.

NCUA releases 2009 directory of all FCUs

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ALEXANDRIA, Va. (7/10/09)—The National Credit Union Administration has released its 2009 Directory of Federally Insured Credit Unions. It contains a state-by-state alphabetical listing of all active federally insured credit unions as of Jan. 1. The directory, published annually, also lists all corporate credit unions, as it features national statistics on credit unions and corporate credit unions. Use the link below to access the directory.

Inside Washington (07/09/2009)

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* WASHINGTON (7/10/09)--The Federal Housing Finance Agency (FHFA) has released its first five-year strategic plan, which lists its three strategic goals as safety and soundness, housing mission and conservatorship. The document also features a resource management strategy that the agency will use in “fulfilling its mission to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market,” according to an FHFA release… * WASHINGTON (7/10/09)--During a Wednesday hearing on President Barack Obama’s plan for a new consumer protection agency, members of the House Energy and Commerce Committee argued that the Federal Trade Commission (FTC) should retain its powers (American Banker July 9). The energy committee lost some of its powers in 2000 to the House Banking Committee, which was then renamed the Financial Services Committee. After the change, the Energy and House Financial Services committees have conflicted over what each is responsible for--including matters involving the FTC. Under Obama’s plan, the FTC and banking agencies would lose their authority over consumer protection issues. However, if the new consumer protection agency doesn’t act within 120 days on referrals, FTC or other banking agencies could pursue their own actions. Jon Leibowitz, FTC chairman, said consumers would benefit from the new consumer agency. The FTC would have “backstop authority” on financial matters concentrating on and doing more for consumers, he said ... * WASHINGTON (7/10/09)--The U.S. Court of Appeals for the District of Columbia District Court upheld a rule by the Office of Thrift Supervision that allows newly converted thrifts to strengthen the limit on the amount of stock one person can own. Shareholder Joseph Stilwell had challenged the rule, filing a petition in August asking a federal court to set the rule aside. The rule would allow subsidiaries of mutual holding companies to limit their minority stock for 10% of the total stock (American Banker July 9). Circuit Judge Brett Kavanaugh said the rule was “reasonable” ...

Franks consumer protection plan has CRA difference

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WASHINGTON (7/9/09)— House Financial Services Committee Chairman Barney Frank (D-Mass.) introduced a bill Wednesday that would enact President Obama’s plan to strengthen consumer protections as a part of a broader financial regulatory restructuring. In a release, Frank said his bill (H.R. 3126) would establish a Consumer Financial Protection Agency (CFPA. The new agency is intended to be a powerful independent agency with a range of rulemaking, information-gathering, supervisory, and enforcement tools to better protect consumers who purchase financial products from banks and non-bank financial institutions. Frank’s bill departs from the Obama plan in two significant ways. The administration had proposed to place Community Reinvestment Act (CRA) enforcement under the purview of the new agency. Frank’s bill preserves the current federal banking regulators’ role of enforcers. Also, Frank noted, the administration’s proposal “presupposes” the creation of the National Bank Supervisory (NBS), a new prudential regulator that would merge the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS). “While this is consistent with the administration’s goals for regulatory restructuring, these considerations will be done at later date,” the release declared. Accordingly, the introduced bill makes references to the OCC and OTS, instead of the NBS. The Credit Union National Association's (CUNA's) Governmental Affairs Committee and and Executive Committee are reviewing CUNA's policy in light of the new bill. CUNA will be among those briefing Democratic members of the House Financial Services Committee next Tuesday on financial industry views concerning the proposed agency and legislative language. The bill’s co-sponsors include: Reps. Maxine Waters (D-Calif.), Carolyn Maloney (D-N.Y.), Luis Gutierrez (D-Ill), Mel Watt (D-N.C.), Gary Ackerman (D-N.Y.), Brad Sherman (D-Calif.), Michael Capuano (D-Mass.), Brad Miller (D-N.C.), Al Green (D-Texas), Keith Ellison (D-Minn.), Jackie Speier (D-Calif.), and Alan Grayson (D-Fla.). Frank‘s financial service panel also announced a hearing entitled “Banking Industry Perspectives on Reform Proposals” for July 15; witnesses are to be announced at a later date.

No interchange fees in Senate appropriations bill

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WASHINGTON (7/09/09)—A Senate appropriations subcommittee, as expected, voted on the Financial Services Appropriations Act for fiscal year 2010 and no amendment was offered to impose restrictions on interchange fees--the bill was approved with no interchange language. Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill said CUNA will remain watchful as the bill goes forward to see if it becomes a vehicle for interchange language. The subcommittee website noted the following provisions of its bill:
* The bill provides $166.8 million for the U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund, an increase of $59.6 million, or 56%, over the last year’s enacted level. CDFI grants support financial services to underserved communities, including lending and investment in affordable housing, small business, and community development; and * For the Small Business Administration, the bill provides $860.9 million, an increase of $81.6 million over the FY10 budget request. The increase supports $25 million for the Microloan program and $114.4 million for Small Business Development Centers.
The bill is scheduled to be marked up by the full committee today. A similar appropriations bill was approved by a House committee Tuesday night. That bill would allow the National Credit Union Administration’s Central Liquidity Facility to maintain its maximum amount of $40 billion through the 2010 fiscal year. It also would increase funding for CDFI fund and the SBA’s business loan account.

FinCEN reports double-digit increase in fraud-related SARs

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WASHINGTON (7/9/09)--The Financial Crimes Enforcement Network (FinCEN) on Tuesday reported that Suspicious Activity Reports (SARs) related to fraud increased across the board during 2008, with depository institutions filing 12.85% more SARs than they had in 2007. Fraud violations account for 7 of the 20 types of violations tracked by FinCEN, and represented nearly half of all violations reported during 2008, the FinCEN release said. In comments accompanying a FinCEN release, director James H. Freis, Jr. said that “while increases in reporting of suspected fraudulent activity could mean that there is an increase in fraud, it also reflects an increase in awareness within financial institutions detecting such activity.” FinCEN reported double-digit increases in fraud-related filings, including fraud related to checks, mortgages, consumer loans, wire transfers, credit cards, debit cards, and commercial loans. However, the total amount of SARs filed only showed a slight increase of 3%, lower than the 16% increase recorded during 2007. To view the full FinCEN release, use the resource link.

NCUA FOIA reports detail early response to corp. CU crises

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ALEXANDRIA, Va. (7/9/09)--The National Credit Union Administration (NCUA) has posted online a redacted report which details the proceedings of closed sessions of several NCUA board meetings that took place between October 2008 and March 2009. The redacted report was released in response to requests by the Credit Union National Association (CUNA) and others under the Freedom of Information Act (FOIA). The report, which centers on corporate credit union assets and other related information, includes four NCUA Board closed meeting transcripts, two copies of the Board Action Memorandum authorizing the Temporary Corporate Credit Union Share Guarantee Program and related measures, and other once-private information regarding the NCUA's valuation of the mortgage-backed securities portfolios held by U.S. Central FCU and Western Corporate FCU’s (WesCorp). The redacted documents detail NCUA staff ’s presentations to the NCUA Board on how to deal with possible corporate credit union losses and liquidity concerns, and include information on the estimated costs that implementing a corporate credit union share guarantee would impose on federally-insured credit unions. The documents also outline the NCUA’s discussions on how best to determine the fair value of the corporate share guarantee. The NCUA Board closed meeting transcripts also provide some insight into the Pacific Investment Management Company LLC (PIMCO) credit analysis of the corporates' mortgage-backed securities, as well as details about WesCorp's and U.S. Central's mortgage-backed securities. A previously unreleased Board Action Memorandum (BAM) also provides the NCUA’s early estimates of the billions in unrealized losses related to U.S. Central and WesCorp. The BAM also discusses the other than temporary impairment charges assessed on U.S. Central, WesCorp, and some other corporate credit unions. The NCUA responded to an earlier CUNA FOIA request by releasing 56 highly-redacted pages related to the 4,500 page PIMCO report to CUNA early last month. The NCUA later posted those documents on its website. Use the resource links below to access a CUNA summary of the recently released items as well as the NCUA board meeting report.

CUNA to Senate Ease smothering effect of some CU regulations

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WASHINGTON (7/9/09)--Credit Union National Association (CUNA) Small CU Committee member and Allied CU President/CEO Frank Michael during a Wednesday Senate subcommittee hearing urged legislators to ease the “smothering effect” of increased regulatory scrutiny that is causing an increasing number of small rural credit unions to merge with their larger counterparts.
Click to view larger imageCUNA Small CU Committee member and Allied Credit Union President/CEO Frank Michael urged legislators to ease a regulatory burden that is pushing an increasing number of small rural credit unions to merge with their larger counterparts. He said Congress should find opportunities to provide exemptions from the most costly and time-consuming burdens to cooperatives and other small institutions as lawmakers move forward on financial regulatory reforms. (CUNA Photo)
Speaking before a Senate subcommittee on financial institutions hearing on the effects of the economic crisis on rural community banks and credit unions, Michael asked the assembled legislators to “look for opportunities to provide exemptions from the most costly and time-consuming initiatives to cooperatives and other small institutions” as they move forward with their work on financial regulatory reforms. Addressing the Obama administration’s recently released plans to create a Consumer Financial Protection Agency (CFPA), Michael said that while he agrees that consumers should be protected, adding an additional level of regulatory oversight would, in the case of his credit union, lead to a costly and burdensome regime of dual examinations. The administration has proposed consolidating the consumer protection roles currently held by the Federal Reserve, National Credit Union Administration and other federal financial regulatory agencies into the CFPA. National Credit Union Association (NCUA) Chair Michael E. Fryzel in late June said that the NCUA will propose the creation of a Consumer Protection Office in its 2010 Agency Budget. According to Fryzel, 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 Consumer Financial Protection Agency (CFPA), if that proposed entity becomes a reality." However, the Wall Street Journal on Wednesday reported that U.S. Treasury Assistant Secretary Michael Barr confirmed that the NCUA would lose its consumer protection powers under the administration’s proposed CFPA legislation. In House testimony, Barr said that credit unions would not be exempted from the new consumer protection regulations. Rather, all financial institutions would receive the same treatment under the CFPA, regardless of their composition or charter. Another pressing issue raised during the hearing was the impact that the current cap on member business lending (MBL) is having on both credit unions in general and, more specifically, on smaller rural credit unions. Michael said that while CUNA supports “strong regulatory oversight of how credit unions make member business loans, there is no safety and soundness rationale” for current laws that restrict the amount that credit unions may lend to their member businesses to 12.25% of the credit union’s total assets. Michael advocated that Congress grant the NCUA the authority to lift the current MBL cap above 20% of a given credit union’s assets “if safety and soundness considerations are met.” Such a move would “safely and soundly” result in $10 billion in new small business loans within one year, Michael added.

Inside Washington (07/08/2009)

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* WASHINGTON (7/9/09)—Twenty Senate Democrats, with Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and committee member Sen. Jack Reed (D-R.I.) at the lead, are pushing the Obama administration to take action to reduce home mortgage foreclosures. In a letter to the U.S. Treasury Secretary, the lawmakers—concerned by recent reports that borrowers wait up to two months for a response to a loan modification inquiry--said the government should use its authority to ensure servicers participating in the administration's Making Home Affordable foreclosure prevention program move more quickly. Among questions posed to Treasury Secretary Timothy Geithner, the senators asked if more legislation was needed (American Banker July 8) ... * WASHINGTON (7/9/09)—The Federal Deposit Insurance Corp. (FDIC) took heat recently from its inspector general (IG) for sometimes slow and inefficient oversight actions regarding Franklin Bank of Houston prior to that institutions November failure. The IG said the agency was on target with recommendations, starting in 2003, that Franklin monitor its loan concentrations, reduce liquidity risk and beef up its auditing activities. However, the IG criticized the FDIC for not always ensure that management of the CAMEL 2-ranked bank responded adequately to agency recommendations. The IG cited risky lending in the demise of the state thrift that had $4.9 billion in assets. (American Banker July 8) ... * WASHINGTON (7/9/09)—At least in part due to criticism of its failure to uncover Bernard Madoff’s $65 billion ponzi scheme, the Securities and Exchange Commission (SEC) is launching the biggest overhaul of its enforcement division in 30 years. The changes will result in more front-line investigators, fewer layers in the management level, and, probably, five specialist teams. The specialists will focus on such things as expanding, complex or opaque areas of the market, according to a July 8 article in American Banker ...

Small Calif. CU liquidation is 2009s sixth

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ALEXANDRIA, Va. (7/8/09)--California-based Watts United Credit Union on Monday was liquidated after the California Department of Financial Institutions determined that it was insolvent and had “no prospects for restoring viable operations.” In a statement released Tuesday, the National Credit Union Administration said that it will serve as the liquidating agent, and the NCUA Asset Management and Assistance Center will pay out funds to former Watts United members. The credit union, which was chartered to serve residents of the Watts neighborhood in Los Angeles, is the second federally insured credit union to shut its doors this year, according to the NCUA. A total of six credit unions have closed this year. The credit union held $800,000 in total deposits from just over 1,000 members prior to its liquidation.

Inside Washington (07/07/2009)

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* WASHINGTON (7/8/09)--Arguments in favor of keeping the thrift charter may be losing their strength as some financial observers question whether the thrift is needed. The Obama administration has proposed eliminating the charter and the Office of Thrift Supervision (OTS) as a part of its financial regulatory reform plan. Some lawmakers, including Rep. Barney Frank (D-Mass.), are against removing the charter and OTS. The charter has been abused, but it would be a mistake to abolish it altogether, Frank said (American Banker July 7). One argument for keeping the charter involves creating a charter focused solely on real estate lending. Such a charter could benefit consumers by ensuring that thrifts provide home mortgages and other consumer lending services, said John Bowman, OTS acting director. If the charter is kept, there could be wider interstate branching and more preemption powers. But both of those arguments for keeping the charter are losing steam, observers say ... * WASHINGTON (7/8/09)--The Federal Deposit Insurance Corp. (FDIC) Monday released a frequently-asked-questions document to explain swept fund rules. A sweep account involves the pre-arranged transfer of funds from a deposit account to an investment vehicle located outside the depository institution or another account or investment vehicle located within the depository institution. On Jan. 27, the FDIC finalized its rule “Processing of Deposit Accounts in the Event of an Insured Depository Institution Failure.” In addition to establishing practices for determining deposit and other account balances at a failed depository institution, the rule includes disclosure requirements for certain sweep accounts, effective July 1. According to the document, institutions must prominently disclose in writing to sweep account customers whether their swept funds are deposits within the meaning, FDIC said ... * WASHINGTON (7/8/09)--The House Financial Services Oversight and Investigations subcommittee announced a hearing scheduled for Monday, titled, “Preventing Unfair Trading by Government Officials,” but withdrew that announcement by days end. The hearing is expected to be resceduled, but no date has been set. The session is likely to focus on H.R. 682, the Stop Trading on Congressional Knowledge Act, introduced by Reps. Louise Slaughter (D-N.Y.) and Brian Baird (D-Wash.). A recent report by the Securities and Exchange Commission’s inspector general on alleged inappropriate trading also will be discussed...

Corp. CU update NCUA begins stabilization process

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ALEXANDRIA, Va. (6/8/09)--The National Credit Union Administration (NCUA) in its most recent update on the status of the corporate credit union system said that it has begun to use the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) to cover corporate stabilization-related expenses. In a Tuesday press release, the NCUA said that the implementation of the TCCUSF will allow natural person credit unions to “reflect a fully restored National Credit Union Share Insurance Fund (NCUSIF) deposit on their June 30 call reports.” According to the release, the TCCUSF has relieved the NCUSIF “from any reserve requirements” related to U.S. Central FCU’s capital note by paying $1 billion into the NCUSIF. The TCCUSF will also now oversee the Temporary Corporate Credit Union Share Guarantee Program (TCUSGP) and the Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP), the NCUA added. The majority of corporate credit unions have agreed to take part in the TCCULGP, the NCUA said. The NCUA also updated the status of U.S. Central and Western Corporate Federal Credit Union (WesCorp), reporting that “normal operations” at those two credit unions “continue without interruption.” WesCorp announced that it expects to recognize a 30% reduction in operating costs this year due to a number of cost cutting measures, including “consolidations and staff reductions,” the release said.

Longer compliance time needed on CARD Act provision CUNA

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WASHINGTON (7/8/09)—The Federal Reserve Board must give credit unions more time to comply with a provision of its expected rules to implement new credit card statutes if that provision is going to apply beyond credit cards, the Credit Union National Association (CUNA) urged the federal regulator Tuesday. CUNA has been working with the Fed to convey credit union concerns regarding a specific requirement in Section 106 of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). That section prohibits creditors from claiming a payments is late unless that creditor adopts reasonable procedures to ensure that p e riodic statements are delivered to consumers no later than 21 days before the payment due date. “As we explained in…earlier discussions with your staff, Section 106 of the CARD Act is very problematic both because it is one of the very few provisions that apply to all open-end credit, not just credit cards, and because of the upcoming Aug. 20 effective date,” wrote CUNA. Addressing the letter to Sandra Braunstein, director of the Fed’s Division of Consumer and Community Affairs, CUNA wrote that if Section 106 is truly to cover all open-ended credit, the scope would be so broad that credit unions cannot realistically comply with the fast-approaching compliance date. The letter reiterated CUNA’s strong and long-standing support for the intent of the CARD Act, which is to eliminate predatory credit card practices. Credit unions back the changes, CUNA said, even though they will require significant adjustments over the next six weeks to ensure that credit card periodic statements are mailed at least 21 days in advance before a late charge may be assessed. “Credit unions are diligently working with their data processors to implement these changes prior to the August 20, 2009 effective date,” CUNA assured. However, if the section applies also to general lines of credit, lines of credit associated with share draft and checking accounts, signature loans, and home equity lines of credit and--of particular concern to credit unions--to multi-featured, open-end lending programs, a longer compliance timeframe is imperative, CUNA urged. CUNA President/CEO Dan Mica sent similar letters to Fed Governors Elizabeth Duke and Daniel Tarullo, who are the Fed board members responsible for consumer issues, and asked them to take a leadership role in urging a regulatory correction of the “urgent credit union issues.” Beyond the regulatory front, CUNA is also working with key federal lawmakers and their staffs to clarify whether it was the intent of Congress to apply section 106 beyond credit cards. The section was added by the Senate shortly before its passage of the extensive credit card bill. Therefore the scope of the provision beyond credit cards was not fully appreciated until after it was signed by the President on May 22, and CUNA and other interested parties had no opportunity to raise questions or express concerns prior to enactment. “We note that others have also not appreciated the broad scope of this provision. For example, on June 25th, the Office of Thrift Supervision published a summary of the CARD Act, which stated that Section 106 only applies to credit cards. This has undoubtedly created further confusion within the financial institutions industry,” the CUNA letter pointed out. Members of CUNA's Lending Council met with CUNA staff on Monday to provide additional information on the procedural burdens and costs that credit unions face in trying to devise ways to comply with the 21-day requirement applicable to their open-end lending programs." Use the resource links below to access CUNA’s entire letter, as well further CUNA background information on the provisions in the new CARD Act that are scheduled to go into effect on Aug. 20.

Senate subc. CLF cap vote could include interchange issues

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WASHINGTON (6/8/09)—The Senate Appropriations subcommittee on financial services and general government later today is expected to take up the Financial Services Appropriations Act for fiscal year 2010. A similar bill that was expected to pass the House last night, as currently written, would not cap the borrowing authority of the National Credit Union Administration’s (NCUA) Central Liquidity Facility (CLF), allowing the CLF to maintain its maximum amount of $40 billion through the 2010 fiscal year. Portions of the bill would also increase funding for the U.S. Treasury Department’s Community Development Financial Institutions fund and the U.S. Small Business Administration’s business loan account. There is speculation that Sen. Richard Durbin (D-Ill.) could use this bill as a platform for legislation that would impose government limits on the interchange fee rates set for credit and debit card processing. Early last month, Durbin introduced S. 1212, The Credit Card Fair Fee Act, which would establish a full-time panel of three Electronic Payment System Judges to intervene in disputes between card service providers and merchants regarding fees set for use of the electronic payments system. This panel would also be granted the power to determine access rates and terms and to impose civil money penalties on any party that is deemed to be out of compliance with its authorities. Similar legislation offered by Reps. John Conyers, Jr. (D-Mich.) and Bill Shuster (R-Pa.), known as H.R. 2695, the "Credit Card Fair Fee Act of 2009," would permit merchants to negotiate interchange fees with financial institutions via an antitrust exemption. However, under the terms of this bill, credit unions that fall under the NCUA’s regulatory authority, as well as other financial institutions with under $1 billion in total assets, would be exempted from the terms of the bill. H.R. 2695 has been referred to committee, but no further action had been taken at press time. The Credit Union National Association has consistently opposed any changes to the existing interchange fee system, and last month asked members of Congress to delay any legislative action until the results of the Government Accountability Office’s study of interchange fees can be fully analyzed. Reps. James Sensenbrenner Jr. (R-Wis.) and Jason Chaffetz (R-Utah) also recently urged their Republican colleagues not to cosponsor interchange legislation. (See related story: House members urge opposition to interchange cap News Now June 29.)

Association Leaders series profiles CUNAs Dan Mica

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WASHINGTON (7/7/09)—In an influential biweekly publication aimed at association and nonprofit executives, Credit Union National Association (CUNA) President/CEO Dan Mica was featured as the vigilant “watchman for the credit union industry” amid such challenges as the current push in Washington for regulatory reform, as well as ever-present threats from the banking industry. The interview, which occurred just minutes after Mica attended the White House’s much-anticipated announcement on financial reform late last month, covered a broad range of topics. Among them, CEO Update, sought Mica’s comments on the just-announced administration plan to institute a new financial regulatory agency, the Consumer Financial Protection Agency. Mica said that some of the reforms the Obama administration has proposed have been “on the tips of the tongues of leaders for some time.” Not so, Mica noted, of the new consumer protection bureau. The CUNA leader said attached to this idea are the biggest concerns, as well as the biggest potential. Mica noted that key people in the banking industry have said they will fight the proposal “tooth and nail.” But Mica cautioned that given the support for the concept among House and Senate leadership and the makeup of Congress, conditions are aligned for “this or something like it” to happen. So what is CUNA’s strategy, the interview queries. Mica responded that the proposal will evolve as it moves through Congress. Instead of going on an all-out attack, CUNA and credit unions should become “a player,” offer input” and “try to find some common ground.” He said credit unions are the likely candidates to help define good public policy to meet both consumer and financial institution needs. “Credit unions are much closer to that than any other group of financial institutions,” Mica said. On the topic of the bad economy’s effect on CUNA’s financial situation, Mica underscored for CEO Update that CUNA’s system ensures that members’ dues dollars, which have remained stable, are directed to core advocacy functions. He acknowledged losses, but noted that they have been experienced though CUNA’s reserves and its defined benefits plan. CEO Update took note of CUNA’s strong track record over the 13 years since Mica took the helm of an almost bankrupt organization and built it into a premier national trade association. Others recently profiled in the CEO Update's "Association Leaders" series have included Dawn Sweeney of the National Restaurant Association and Tracy Mullin of the National Retail Federation.

CLF cap other CU issues on move in Congress this week

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WASHINGTON (7/7/09)—Lawmakers from both sides of the Capitol return to Washington this week, after a week-long July 4th District Work Period, to tackle a substantial agenda, including issues of interest to credit unions. On the House side, for instance, the House Appropriations Committee has scheduled a vote for Tuesday on the Financial Services Appropriations Act for fiscal year 2010. This bill, approved by the subcommittee on financial services prior to the recess, includes language that would permit the Central Liquidity Facility to lend to its highest statutorily authorized level. On Wednesday, the Senate Appropriations subcommittee on financial services and general government will mark-up its appropriations bill for fiscal year 2010. Also on Wednesday, as reported earlier in News Now, the Credit Union National Association will testify before the Senate Banking subcommittee on financial institutions at its hearing entitled "The Effects of the Economic Crisis on Community Banks and Credit Unions in Rural Areas." Frank Michael, CEO of Allied CU in Stockton, Calif., will testify on behalf of CUNA. Also of interest this week, the House Judiciary subcommittee on commercial and administrative law has scheduled a hearing entitled, "Home Foreclosures: Will Voluntary Mortgage Modifications Help Families Save Their Homes?" The same day, the House Financial Services Committee intends to hold one in its long series of regulatory reform hearing, this one called, "Regulatory Restructuring: Balancing the Independence of the Federal Reserve in Monetary Policy with Systemic Risk Regulation."

Inside Washington (07/06/2009)

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* WASHINGTON (7/7/09)--The Department of Housing and Urban Development (HUD) is revisiting its appraisal policies in light of complaints that its restrictions on appraisal management companies’ fees and lenders’ reliance on the management companies are discouraging appraisers from taking on loans insured by the Federal Housing Administration( FHA). Four trade groups wrote a letter July 1 to HUD Secretary Shaun Donovan. The letter stated that the loss of appraisers is adding risk to the FHA’s program (American Banker July 6). HUD said it is working on a response to the letter addressing the issue raised by the letter ... * WASHINGTON (7/7/09)--A proposed plan by the Federal Deposit Insurance Corp. (FDIC) to restrict private-equity firms from buying failed banks has sparked opposition from bank regulators. The plan would subject private-equity firms to additional capital, disclosure and cross-guarantee requirements (American Banker July 6). Financial observers say the plan goes too far and could increase resolution expenses. Private-equity investments would be unpalatable, said Wilbur Ross, an investor. Comptroller of the Currency John Dugan and Acting Office of Thrift Supervision Director John Bowman also said they oppose the plan. FDIC Chairman Sheila Bair noted the proposal is open for comment and is not final. The plan’s intent is not to scare off potential bidders of failed banks, but to prevent more failures, she added ...

Inside Washington (07/05/2009)

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* WASHINGTON (7/6/09)--The Small Business Administration’s (SBA) America’s Recovery Capital (Arc) program is off to a slow start. Only 71 lenders have made a total of 139 Arc loans--worth $4.6 million--as of June 22, SBA said (American Banker July 2). The program may be off to a sluggish start because of lenders’ concerns about underwriting costs and scrutiny if a borrower defaults, said Arne Monson of Holtmeyer and Monson, a Memphis-Tenn.-based firm. Monson said he serves about 400 community banks but has only made one Arc loan. Arc offers $35,000 in interest-free loans to small businesses. SBA anticipated great demand for the program, so it capped the number of loans financial institutions can offer by the week, but the limit could be eliminated, said Janet Tasker, SBA deputy associate administrator for capital access. Financial institutions can make an Arc loan after looking at three years’ worth of financial statements and two years’ worth of cash flow projections from the applicant ... * WASHINGTON (7/6/09)--During a speech in London last week, Charles Evans, president/CEO of the Federal Reserve Bank of Chicago, suggested several ways banks could create contingent capital and bankruptcy plans to avoid bringing down the entire financial system in the event of a crisis. “The argument is that banks need to hold more capital and they tend to resist holding higher levels because it is expensive,” he said. He noted that the Squam Lake Working Group proposes that systemically important banks should issue new contingent capital certificates, where securities could be sold as debt liabilities to make standard tax-deductible interest payments. However, the liabilities would be converted into equity shares if some predetermined threshold was breached, he said. Another option is to require firms to purchase contingent capital in the form of capital insurance. A final option is to require institutions to have a “shelf bankruptcy” plan that has already considered and addressed problem areas. To carry out this plan, supervisors would require firms to address potential problem areas. “One can envision this plan being stress-tested as part of the regulator examination process,” he said ... * WASHINGTON (7/6/09)--The loans that auto dealers use to purchase dealership inventory will now be partly guaranteed under the Small Business Administration’s Dealer Floor Plan Pilot Initiative, announced Wednesday. Under the plan, the agency will guarantee 75% of floor plan loans with values between $500,000 and $2 million. The program will also be open to boat, RV, and manufactured home dealers. (American Banker July 2) ... * WASHINGTON (7/6/09)--The Department of Housing and Urban Development (HUD) has sharply increased its enforcement actions this past year and is becoming less tolerant of errors in Federal Housing Administration (FHA) mortgages. Expected increases in the agency’s public profile and risk exposure could result in even stricted enforcement actions going forward. One source said that the department acted against 111 lenders during the first nine months of the current fiscal year, a far higher rate than 95 enforcement actions taken during the prior fiscal year. HUD also recently withdrew FHA approval for 102 lenders and fined several others. Lenders have been fined for failing to check credit reports or performing quality-control audits on loans within a prescribed deadline. (American Banker July 2) …

Senate hearing to address rural CU bank issues

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WASHINGTON (7/6/09)--The Credit Union National Association (CUNA) will testify Wednesday before a Senate Banking subcommittee's hearing entitled "The Effects of the Economic Crisis on Community Banks and Credit Unions in Rural Communities." The hearing is being conducted by the subcommittee on financial institutions. Frank Michael, president/CEO of Stockton, Calif.’s Allied CU will testify on CUNA's behalf, Community Reinvestment Association of North Carolina Executive Director Peter Skillern and representatives from other banking groups also will testify during the hearing, which is expected to be chaired by Sen. Tim Johnson (D-S.D.). On the House side, Rep. Barney Frank’s (D-Mass.) Financial Services Committee will hold a markup session for the Section 8 Reform Act of 2009 on Wednesday morning. Frank has also scheduled several hearings on proposed financial regulatory reforms for the remainder of July. He recently said that financial reform legislation could be submitted to the full House of Representatives as soon as August.

NCUA explains CUSO loan restrictions

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ALEXANDRIA, Va. (7/6/09)--In a recent National Credit Union Administration (NCUA) legal opinion letter, the agency addressed a query regarding which restrictions apply to credit union service organizations (CUSOs) that purchase and service delinquent loans. NCUA Associate General Counsel Sheila Albin wrote that the “primary restriction” for CUSOS that service delinquent loans may not “advance new principle.” While CUSOs cannot originate consumer loans that are not student loans or mortgage loans, they may “restructure loans in aid of their collection activity,” she added. According to Albin, the NCUA’s view on these types of transactions is that CUSOs that purchase “non-performing loans” are permitted to restructure delinquent debt, provided the “credit union made the original underwriting decision and no new credit is being extended to the borrower.” The NCUA currently permits CUSOs to change some loan terms, including payment schedules and/or interest rates. However, Albin added, CUSOs should not use these limited loan restructuring rights to attempt to circumvent lending restrictions on federal credit unions. To read the complete letter, use the resource link below.

FDIC advises investors in failed banks or thrifts

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WASHINGTON (7/6/09)--The Federal Deposit Insurance Corporation (FDIC) on Thursday published its Proposed Statement of Policy on Qualifications for Failed Bank Acquisitions. The new policy statement would advise private capital investors that wish to acquire or invest in failed banks or thrifts on the “terms and conditions of the investments or acquisitions,” according to a release. If the policies outlined in the statement came to pass, the FDIC would “establish standards for bidder eligibility in connection with the resolution of failed insured depository institutions.” FDIC Chair Sheila Bair said the agency is “particularly concerned with the owners’ ability to support depository institutions with adequate capital and management expertise.” This policy statement should provide the necessary safeguards, Bair added. Under the rules set forth in the policy statement, the acquired depository institution must be capitalized at a Tier 1 leverage ratio (15%). The leverage ratio must be maintained for three years. However, some of the safety and soundness considerations can be “satisfied with a lower, but a still high level, of Tier 1 capital.” While the FDIC is seeking comment on all aspects of the proposal, the agency particularly requested outside input on “the appropriate level of initial capital” needed to satisfy safety-and-soundness concerns and general economic concerns. Comments are due within 30 days of the statement’s publication in the Federal Register. For the full FDIC release, use the resource link.

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). ...