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CUNAs Cheney CFPBs Cordray talk CU issues

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WASHINGTON (8/15/12)--Credit Union National Association (CUNA) CEO Bill Cheney discussed CUNA's concerns about the Consumer Financial Protection Bureau's (CFPB) remittances rule, qualified mortgage proposal, and regulation of overdrafts with CFPB Director Richard Cordray in a Tuesday conversation initiated by the CFPB.

The CFPB director regularly contacts Cheney to stay abreast of credit union viewpoints.

Cheney during the discussion noted that the implementation costs of the CFPB's remittances rule would make it untenable for some credit unions, possibly causing them to stop providing a valued service to their members.

The CFPB's final remittance transfer rule, which is scheduled to take effect on Feb. 7, would require remittance transfer providers to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers also will be required to investigate disputes and correct errors.

The CFPB last week announced that financial institutions that provide 100 or fewer remittance transfers per year would be exempted from the terms of the rule. The CFPB has estimated that this exemption would protect 80% of credit unions, but credit unions that are not exempted are very concerned about the rules, Cheney said.

Cheney emphasized that the remittance rules have not taken effect yet, and asked Cordray to discuss remittance concerns with credit unions.

The CUNA CEO said CUNA is also developing a list of best overdraft practices and wants to work with the CFPB, but credit unions are concerned that reasonable overdraft programs will be overregulated.

Cheney also reiterated CUNA supports the safe harbor approach in the CFPB's pending qualified mortgage regulations. (See Aug. 14 News Now item: CUNA, CFPB discuss qualified mortgage concerns.)

Cordray indicated he would like to work with CUNA and credit unions on these issues going forward.

"We had a productive discussion, and I appreciate the outreach from the CFPB director," Cheney said afterward.

OCC chief counsel former acting comptroller to retire

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WASHINGTON (8/15/12)--Office of the Comptroller of the Currency (OCC) Chief Counsel Julie Williams, who twice served as Acting Comptroller of the Currency during her 19 years at the agency, will step down from her position on Sept. 30, the OCC announced this week.

Williams will retire from public service at the end of this year, the OCC added.

Williams briefly served as acting comptroller in 1998 and between October 2004 and August 2005, and served as chief counsel for four Comptrollers of the Currency.

The OCC in a release noted Williams' work to strengthen bank privacy policies and protections and her advocacy of extending the Federal Trade Commission Act's ban on unfair and deceptive practices to protect bank customers. Williams has also called for improved consumer disclosures and, more recently, has worked on several Dodd-Frank Wall Street Reform Act projects, the OCC release added.

Current Comptroller of the Currency Thomas Curry said Williams' "contributions to the agency and her role in the world of financial services regulation have been extraordinary."

Deputy Chief Counsel Daniel Stipano will serve as acting chief counsel between Oct. 1 and the end of the year. Deputy Chief Counsel Karen Solomon will take on the role of acting chief counsel on Jan. 1, and serve in that capacity until March 31, while the OCC searches for a full-time chief counsel.

CUNA seeks CU reverse-mortgage comments

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WASHINGTON (8/15/12)--Reverse mortgages could soon come under Consumer Financial Protection Bureau (CFPB) regulation. Credit unions that offer reverse mortgages can provide their own comments on what drives their members to choose reverse mortgage products and how those members use reverse mortgage proceeds, in a new Credit Union National Association (CUNA) comment call.

The CFPB in June asked for public comment on reverse mortgages, which allow homeowners over age 62 to cash out a portion of their home equity. While these products are not widely available at credit unions, CUNA has asked credit unions if they have comments or concerns that should be passed on to the CFPB.

In their comments, credit unions that offer reverse mortgages can also detail how employees who sell reverse mortgages are compensated and provide more general comments.

The agency has asked for information on how the decision to enter a reverse mortgage transaction can impact consumers' long-term finances, and  for any differences in market dynamics and business practices among the broker, correspondent, and retail channels for reverse mortgages.

The CFPB in a recent report called reverse mortgages "inherently complicated products that are not easy for the average consumer to understand." Federal disclosures and other tools provided to consumers "are insufficient to ensure that consumers are making good tradeoffs and decisions" when they take out reverse mortgages on their homes, the CFPB added.

While fewer than 3% of homeowners have taken out reverse mortgages on their homes, the CFPB noted that those who take out the reverse mortgages do so at younger ages. They also are taking out funds from their reverse mortgages sooner. These two factors may increase some of the financial risks associated with reverse mortgage products, CFPB said.

CUNA Senior Assistant General Counsel Jared Ihrig said the agency has the authority to regulate reverse mortgages, and the agency expects to undertake a project to integrate reverse mortgage Truth in Lending (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosure requirements in a future rulemaking. This project would be separate from the agency's current TILA/RESPA integration project, which addresses the forms that are provided in connection with most traditional forward mortgage closed-end credit transactions.

For the CUNA comment call, use the resource link.

CLF low-income CUs focus of NCUA webinar

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ALEXANDRIA, Va. (8/15/12)--Issues facing the National Credit Union Administration's (NCUA) Central Liquidity Facility (CLF) and low-income credit unions (LICUs) took center stage at a Tuesday NCUA webinar.

NCUA staff in the webinar stressed that more than 6,000 natural person credit unions will lose access to the CLF, which serves as a liquidity lender to credit unions in need of emergency funding, when U.S. Central Bridge Corporate CU closes in late October. This pending lack of backup liquidity could create significant issues if systemic financial issues arise, NCUA Division of Capital Markets Director and CLF President Owen Cole said.

In anticipation of this closing, the NCUA last month released a proposed rule that would require some credit unions to establish new sources of emergency liquidity through becoming CLF members or establishing direct borrowing access to the Federal Reserve's discount window.

Applying for regular CLF membership is a "very brief" and simple process, Cole said. Along with an application, copies of a credit union's balance sheet, income/expense statement, delinquent loan report, and a check for the calculated amount of the required capital stock subscription are all that is required. State-chartered credit unions must also provide a copy of their charter and bylaws, along with the application and other materials.

Cole said corporates can help those credit unions that may need some assistance signing up for their own CLF coverage.

Collateral requirements for CLF membership are "fairly broad," and Cole said the amount of stock that a credit union subscribes for when it signs up for CLF coverage does not determine the maximum amount of financial backing they would receive from the CLF if any issues arise.

CLF access for the 93 natural person credit unions that currently hold CLF stock will not change in late October, he said.

Whether a credit union picks the CLF or the Fed's discount window as its source of emergency liquidity is an individual choice for each credit union, and Coyle said he would not dissuade credit unions from doing both.

In a second webinar session, NCUA Office of Small Credit Union Initiatives Director Bill Myers and other NCUA staff said that credit unions that are interested in receiving a LICU designation, but were not contacted by the NCUA during a recent outreach effort, may still apply.

The NCUA earlier this month contacted nearly 1,000 credit unions to inform them that they are eligible for low-income designations. That designation brings benefits that include the ability to accept supplemental capital and an exemption from the small business lending cap under certain circumstances.

Myers said that credit unions that wish to apply for a LICU designation may need to undertake deeper examinations of their membership, including verifying some address information, examining loan data, generating statistically valid samples of member data, and performing a membership survey to see if they meet LICU criteria.

The NCUA can also work with state-chartered credit unions and their state regulators to determine their LICU status. Myers noted that credit unions are not required to have community charters to qualify for LICU status.

LICU designation eligibility will be updated by the agency quarterly, and credit unions may request the exact results of the NCUA's analysis of their LICU status.

Credit unions that lose their status will be notified by the NCUA, and those that are dropped from the NCUA's list of LICUs may attempt to requalify for five years. They will also be given five years to come into compliance with any new regulations that may impact them as a result of their loss of low-income status.

An audio version of the webinar, and a transcript, will be archived on the NCUA site in the near future.

Inside Washington (08/14/2012)

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  • WASHINGTON (8/15/12)--Ginnie Mae officials are hesitant to accept requests from mortgage banks to become issuers of its mortgage-backed securities (MBS) following refusals from large banks to purchase the loans. Bank of America, Ally Financial and MetLife have left the correspondent lending market (American Banker Aug. 14). In July, Wells Fargo refused to fund mortgages from independent mortgages through its wholesale channel. Many of the new requests are from mortgage banks that do not have the capital levels to share the risk of loan defaults. The agency said it may raise the minium net-worth requirements for its MBS issuers to strengthen the field of applicants …
  • WASHINGTON (8/15/12)--The 12 Federal Home Loan Banks (FHLB) earned a combined $552 million in the second quarter, an increase of $301 million compared with the same period in 2011, the FHLB's Office of Finance said Monday. The increase was driven by lower other-than-temporary-impairment charges and lower assessments. Net income for the six months ended June 30 was $1.285 million, an increase of $676 million compared to the same period last year. The banks suffered a loss of $113 million in noninterest income for the quarter; however, that was an improvement of $287 million compared with a year earlier …
  • WASHINGTON (8/15/12)--The Consumer Financial Protection Bureau (CFPB) has partnered with Cornell University to provide a new way for the public to learn of and comment on new financial regulatory initiatives.  The CFPB has posted its recent mortgage servicing proposal to the website, which is operated by Cornell students and staff. The site is part of a research project meant to explore how public participation in the rulemaking process can be increased. The CFPB said it wants to make it easier for consumers and small businesses to tell the agency what they think about the rules it is working on …