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House Senate financial hearings postponed

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WASHINGTON (8/3/11)--With debt ceiling lift legislation gaining final approval from President Barack Obama on Tuesday, Congress is set to leave for August recess once its work is complete this week. Senate Banking Committee and House Financial Services Committee hearings that were scheduled for this week are among those that have been postponed ahead of the August recess. The recess is scheduled to last until Sept. 6. Most notably, the Senate committee’s confirmation hearing for potential Consumer Financial Protection Bureau (CFPB) director Richard Cordray has been pushed back to September. A House Financial Services subcommittee on insurance, housing and community opportunity hearing on the future roles of the Federal Housing Administration, the Rural Housing Service and the Government National Mortgage Association in single- and multi-family mortgage markets is also among the hearings that have been postponed. The deficit reduction and debt ceiling lift package, which will lift the debt ceiling by $2.4 trillion and cut an estimated $2.1 trillion in government spending between 2012 and 2021, was approved by the Senate by a 74 to 26 vote count on Tuesday.

Inside Washington (08/02/2011)

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* WASHINGTON (8/3/11)--Debt issuers with procedures “reasonably designed” to prevent debit-card fraud may be eligible for a one-cent increase in their debit interchange fees, according to the final rules issued by the Federal Reserve in June (American Banker Aug. 2). The new rules take effect Oct. 1. But many issuers fail to meet best-practice fraud protection standards, and meeting the demands that risk presents may not cover debt issuers’ costs, according to Beth Robertson, director of payments research for Javelin Strategy & Research. The Fed has not provided specifics on the level of fraud protection debit issuers will be required to provide. The board is gathering industry comments on its final rule--including the fraud-prevention allowance--through Sept. 30. The financial institutions with the most efficient fraud prevention procedures may be compensated for the one-cent allowance, but other operators could be left out, according to Mahesh Makhija, head of the cards and payments practice at Infosys Ltd.’s Infosys Technologies unit … * WASHINGTON (8/3/11)--The Obama administration has targeted banks for alleged redlining and other fair lending violations. Bankers claim the government is abusing its authority and contradicting findings by other federal regulators (American Banker Aug. 2). Among the key issues is last year’s launch of a special fair-lending unit within the Justice Department’s civil rights division. The unit is charged with enforcing laws such as the Fair Housing Act and Equal Credit Opportunity Act and investigating claims of discrimination in lending practices. The department has said such referrals increased drastically in the wake of the financial crisis. In 2010, the civil-rights division received 49 referrals, which was more than in the prior 20 years combined. Assistant Attorney General Thomas Perez, who leads the civil rights division, has indicated the department’s fair-lending authority had been previously underused … * WASHINGTON (8/3/11)--A federal court has stopped an online operation that allegedly made withdrawals from consumers’ bank accounts without their consent when consumers visited the defendants’ web sites to inquire about payday loans (American Banker Aug. 1). The court also froze the assets of the defendants. The Federal Trade Commission (FTC) seeks to permanently cease the illegal practices and require the defendants to refund the consumers’ money. The defendants’ web sites, which include mypaydayangel.com and juniperloans.com, request consumers’ personal and financial information, such as Social Security, driver license and bank account numbers, according to the FTC’s complaint. Consumers are offered programs unrelated to the loan for food, travel and merchandise discounts, or for long distance calling and Internet access. Many consumers who submitted a payday loan application were enrolled into the programs without their knowledge, and their bank accounts were charged up to $59.90 per month, or later charged $99.90 per year. Some people who declined the offers were charged for the programs anyway, the FTC alleged …

Low minimum hindered prepay plan CUNA

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WASHINGTON (8/3/11)--A higher minimum size for the National Credit Union Administration’s (NCUA) proposed prepayment program for corporate credit union stabilization assessments would have attracted more credit union participation, the Credit Union National Association (CUNA) noted when the agency announced Tuesday it had not received sufficient credit union pledges to go forward with the plan. The NCUA had set a threshold of $500 million in credit union pledges to prepay their assessment in order to trigger a prepayment plan. Last Friday was the deadline for credit unions to commit to the program, and the NCUA announced yesterday that 799 federally insured credit unions pledged a total of $369.9 million. CUNA President/CEO Bill Cheney said of the news, “It’s unfortunate that the minimum size of the program could not have been larger, as CUNA had recommended, so that the prepayment would have provided for a greater decrease in this year’s assessment.” He cited, by way of example, if the minimum size had been set at $1 billion, this year's assessment could have been reduced to about 12 basis points. “Had that been the case, credit unions may well have found that the program would be more attractive, and they might have committed substantially more to the program,” Cheney said Tuesday. NCUA Chairman Debbie Matz noted in her announcement of the pledge figures, “While the pledges fell short of meeting the required threshold to move forward, the NCUA board remains open, perhaps, to reconsidering this issue next year.” Having missed the $500 million trigger, the NCUA noted it will not debit any voluntarily pledged amount from any credit union. CUNA’s Cheney also said, “For the many credit unions experiencing improved earnings in 2011, this year’s higher assessment will be manageable. However, for a number of hard-hit credit unions still recovering from the recession, even a modest reduction in this year’s assessment would have been welcomed. Nevertheless, the very fact that the prepayment plan is not going forward means that next year’s assessment should be about half of this year’s projected rate of 25 basis points.”

QRM could limit tailoring loans to member needs CUNA warns

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WASHINGTON (8/3/11)--The proposed definition of a Qualified Residential Mortgage(QRM) could create unnecessary barriers for qualified borrowers, limit credit unions’ ability to tailor loans to their members’ needs, and could potentially make it difficult for small financial institutions like credit unions to make non-QRM loans, the Credit Union National Association (CUNA) said in a recent comment letter. The comment letter addressed the QRM defintion contained in a proposed joint agency credit risk retention rule. The proposed QRM definition would set a 20% minimum down payment threshold for mortgages that would be exempt from the credit risk retention requirements contained within the rule. CUNA in a comment letter said that the 20% down payment threshold is too high, adding that “there is credible evidence that high minimum down payments alone are not always a significant factor in reducing defaults compared to underwriting and other mortgage product features.” The CUNA comment letter on the proposed rule and the QRM definition was sent to the Securities and Exchange Commission, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Federal Housing Finance Agency, and the Department of Housing and Urban Development. While the proposed credit risk retention rule was not aimed directly at the practices of credit unions, CUNA said that many credit unions are “seriously concerned” about the proposal. CUNA noted that the QRM, as proposed, could “become a template that regulators will seek to impose on all home mortgage loans, whether they are securitized or not.” Such an action “would severely limit the ability of credit unions to tailor mortgage loans to meet their members’ needs” and could “effectively shut out an entire class of otherwise qualified borrowers from the market for low-cost financing” and dry up mortgage liquidity for small lenders. CUNA in the comment letter noted that credit unions frequently structure very low-risk loans to meet the needs of members that are reliable borrowers, but cannot provide a 20% down payment. “Indeed, with delinquency rates at a fraction of those of the major banks, credit unions have demonstrated an ability to safely originate high loan-to-value mortgages,” the letter said, adding that credit unions must retain the ability to tailor their mortgages to member needs. For the full comment letter, use the resource link.

CUs can comment on new CFPB TILARESPA draft

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WASHINGTON (8/3/11)--Credit unions that wish to comment on the latest draft of the Consumer Financial Protection Bureau’s (CFPB) combined mortgage disclosure form must do so by Aug. 8. The agency is working on a combined form for Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures. The most recent draft is the third of five planned draft disclosure releases. Two additional forms will be released between now and September, and a single draft disclosure will be developed later in the year. The CFPB has specifically asked for comment on whether the form will help consumers understand closing costs associated with their loans. Credit unions can also comment on whether lenders and brokers will be able to clearly and easily explain the form to their customers, and can recommend any improvements that would clarify the form. The Credit Union National Association (CUNA) has discussed previous disclosure drafts with the CFPB, and will soon discuss CUNA members’ reactions to this draft of the form with CFPB as well. The leagues and credit unions also been active members in this revision process, and CUNA has encouraged the CFPB to consider the needs of credit unions as it continues its work. The CFPB has repeatedly noted that it is "committed to remaining attentive" to the concerns of credit unions and other small financial institutions, and looks forward to addressing the concerns of credit unions and community banks throughout the development of CFPB priorities. For the latest CFPB release, use the resource link.

AEA FCU finances improve under NCUA conservatorship

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ALEXANDRIA, Va. (8/3/11)--The financial condition of Yuma, Ariz.-based AEA FCU has improved dramatically during its National Credit Union Administration (NCUA) conservatorship, with the agency reporting year-to-date net income of $2.2 million and $229 million in total assets as of June 30. Streamlined operations, improved facility management practices, and positive progress in business loan delinquency and recoveries helped the once troubled credit union regain its financial feet, as AEA FCU’s net income increased by $3.6 million in 2011, the NCUA said in a Tuesday release. The credit union’s total expenses dropped 41% since January. Provisions for loan losses expenses fell by 68% and occupancy expenses dropped by 30%. The credit union also made cuts in miscellaneous operating expenses and compensation expenses. NCUA Region V Director Elizabeth Whitehead said that the NCUA’s priority was “to restore the credit union’s net worth” and to ensure that the credit union remained operational for its 44,000 members. The NCUA placed the credit union into conservatorship in late December, saying that it was not adequately capitalized under standards set forth in the Federal Credit Union Act and had earnings "insufficient to enable it to continue under present management." The agency at that time said the credit union's difficulties sprang from problems in its loan portfolio.

NEW NCUA wont launch corporate assessment prepay plan

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ALEXANDRIA, Va. (UPDATE 8/2/11, 2:40 p.m. ET)—The proposed prepayment program for corporate credit union stabilization assessments failed to attract the required $500 million in pledges that the National Credit Union Administration (NCUA) set as the requirement to launch the plan. However, the agency’s chairman said the board is open to reconsidering the issue in 2012. Credit Union National Association (CUNA) President/CEO Bill Cheney said of the news, “It’s unfortunate that the minimum size of the program could not have been larger, as CUNA had recommended, so that the prepayment would have provided for a greater decrease in this year’s assessment.” He cited, by way of example, if the minimum size had been set at $1 billion, this year's assessment could have been reduced to about 12 basis points. “Had that been the case, credit unions may well have found that the program would be more attractive, in which case they might have committed substantially more to the program,” Cheney said Tuesday. Credit unions that wished to take part in the assessment prepayment plan had to notify the agency of their intent by last Friday. The NCUA said today that of the nation’s nearly 7,300 federally insured credit unions, 799 pledged $369.9 million to voluntarily prepay assessments. Having missed the $500 million trigger that would have launched the program, the NCUA noted it will not debit any voluntarily pledged amount from any credit union. NCUA Chairman Debbie Matz commented, “NCUA responded to credit union requests and created a viable alternative to offer prepayments as a way to manage assessments in the long run. She added, “While the pledges fell short of meeting the required threshold to move forward, the NCUA board remains open, perhaps, to reconsidering this issue next year.”