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Inside Washington (08/03/2009)

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* WASHINGTON (8/4/09)--Rep. Carolyn Maloney (D-N.Y.), has introduced the Mutual Holding Company Beneficial Owners’ Protection Act of 2009 (H.R. 3291), which would preserve the rights of public shareholders to vote on the stock benefit awards to members of the mutual holding companies' boards of directors. The bill was introduced in response to a 2008 ruling by the Office of Thrift Supervision (OTS) that restricts the rights of public shareholders. “In an era when we are seeking to provide shareholders more say in the compensation structure of executives, I simply cannot understand how the OTS could rule to further limit the rights of shareholders of mutual holding companies,” Maloney said in a statement ... * WASHINGTON (8/4/09)--The Federal Deposit Insurance Corp. (FDIC) took the next step in the development of the Legacy Loans Program (LLP) through the auction of toxic assets from a failed financial institution. The agency did not provide details about the institution involved in the auction but noted that the first test using the LLP funding mechanism commenced last week. In the transaction to be offered, the receivership will transfer a portfolio of residential mortgage loans on a servicing released basis to a limited liability company (LLC) in exchange for an ownership interest in the LLC. The LLC also will sell an equity interest to an accredited investor, who will be responsible for managing the portfolio of mortgage loans ... * WASHINGTON (8/4/09)--Esther George has been picked by the Federal Reserve Board to temporarily serve as director of the Fed’s supervision and regulation division while the central bank seeks a permanent director (American Banker Aug. 3). George will succeed Roger Cole, who is retiring. Before being picked as director, George had been promoted to first vice president of the Federal Reserve Bank of Kansas City. Prior to her promotion, she was senior vice president for supervision and risk management at the Kansas Fed. She has experience overseeing discount window lending ...

CUNA NASCUS Exempt state CUs from FTC mortgage power

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WASHINGTON (8/4/09)--The Credit Union National Association and the National Association of State Credit Union Supervisors (NASCUS) in separate comment letters have asked the Federal Trade Commission (FTC) to exempt state-chartered credit unions from expanded FTC mortgage power that was granted in the 2009 Omnibus Appropriation bill. Both comment letters are responses to the FTC’s recent advance notice of proposed rulemaking (ANPR) which asked whether the FTC should restrict or prohibit some advertising, marketing, loan origination, appraisal, and loan servicing practices related to the mortgage loan process. In the comment letter, CUNA said that while the FTC should continue its rulemaking process as it attempts to address predatory lending and the general mortgage loan process, any rules that are developed “should not be imposed on state-chartered credit unions that are subject to the FTC’s jurisdiction under the FTC Act as credit unions have not been the source of the problems that these rules would address.” Applying these rules to state-chartered CU’s would also “needlessly” subject them to regulatory burdens that create additional compliance costs. CUNA would prefer that the FTC develop rules that “address practices in which either current state or federal law is silent or if an entity is otherwise unsupervised.” CUNA also cautioned against “prohibiting or favoring certain types of loans,” including some types of variable rate mortgage loans. NASCUS mirrored CUNA’s sentiments in a press release, objecting to the rule’s coverage of state-chartered credit unions and adding that the already “highly regulated” state credit unions “would suffer a disparate impact in the marketplace with little offsetting benefit to consumers if only state-charters are subject to this rule.” To see CUNA’s comment letter, use the resource link.

Keep higher SBA limits for good of economy says CUNA

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WASHINGTON (8/4/09)--The Credit Union National Association supports proposed changes to the U.S. Small Business Administration’s (SBA) 7(a) Business Loan Program, saying in a letter sent Monday that changes in the size criteria would help alleviate the economic crisis in some measure by facilitating lending to a greater number of small businesses. The SBA’s revised rule would extend 7(a) loans to small businesses with a net worth of $8.5 million or less. The change will stand until Sept. 30, 2010, but CUNA has urged the SBA to make this change permanent before that time. The amendments to the 7(a) program are estimated to grant eligibility to as many as 70,000 additional small businesses, and CUNA has praised the current program and other SBA programs as being “very helpful for credit unions in their efforts to provide credit to their members who own small businesses.” CUNA has also lobbied on behalf of lifting the cap on member business lending (MBL), a move that could inject as much as $10 billion in funds. Rep Paul Kanjorski (D-Pa.) recently introduced legislation that would double the current MBL cap of 12.25% of assets. The cap would not apply to loans of less than $250,000, business loans in underserved areas, and loans to non-profit religious institutions under Kanjorski’s legislation. CUNA also pledged to work with the SBA and legislators to address additional limitations on SBA lending program fees and to ensure that the SBA has the staff needed to properly “review loan applications, process guarantee payments to lenders, and handle other problems that arise with specific lenders.” For CUNA's letter to the SBA, use the resource link.

Congress Senate hearings on banking ratings on tap

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WASHINGTON (8/4/09)--Although many House members have now left Washington for their yearly summer district work period, the Senate will remain busy this week, with several finance-related hearings planned. The first item on the Senate agenda that is of interest to credit unions is a Tuesday hearing before the Senate Banking Committee, entitled "Strengthening and Streamlining Prudential Banking Supervision.” Federal Deposit Insurance Corporation Chairman Sheila Bair, Comptroller of the Currency John Dugan, Federal Reserve Governor Daniel Tarullo and Office of Thrift Supervision Director John Bowman are scheduled to testify, with testimony from additional witnesses set to follow on a separate panel. The committee will also examine proposals to enhance credit rating agency oversight on Wednesday, witnesses to be announced. There is not a scheduled vote on the confirmation of Deborah Matz to join the National Credit Union Administration, but the Senate could add that vote to the agenda this week. Matz is expected to pass via unanimous consent once the vote takes place. While the House left Washington a week ahead of the Senate, the House Small Business Committee subcommittee on finance and tax on Tuesday will hold a hearing on easing small businesses' access capital. The hearing will take place in Salem, Ore. and Rick Hein, president and CEO of Corvallis, Ore.-based OSU FCU, will testify for the Credit Union Association of Oregon.

FHFAs latest foreclosure report (08/03/2009)

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WASHINGTON (8/4/09)--The Federal Housing Finance Agency (FHFA), regulatory overseer of Freddie Mac and Fannie Mae and the 12 Federal Home Loan Banks, released its May monthly foreclosure report Monday, revealing its most recent information available on mortgage delinquencies and foreclosures. The monthly information does not include data on refinancings or modifications from the Obama administration’s Making Home Affordable Program (HAMP). The FHFA reports that as of May 31, of the government-sponsored enterprises’ 30 million residential mortgages:
* There was a decline in completed loan modifications for the second consecutive month, to approximately 10,400. The FHFA said the drop occurred as Freddie and Fannie “continue to focus on implementing the Home Affordable Modification Program (HAMP),” which requires a three-month trial period for the borrower to demonstrate the ability and willingness to make modified payments; * Loan modifications accounted for 47% of all completed foreclosure prevention actions in May. The majority of loans modified in May involved both rate reductions and term extensions; * There was a 3% increase in completed short sales to nearly 3,700. The FHFA said that represents more than three times the volume of one year earlier; and * Delinquencies continued to increase as approximately 80,100 more loans became 60 days or more delinquent in May. Those loans increased approximately 7% to 1.3 million.
The FHFA said that loss of income continues to be the top reason for delinquency, cited by 40% of borrowers in May, up from 34% in January. The agency also reported that foreclosure starts jumped 5% compared with April, to nearly 90,600, from processing of non-owner occupied properties and properties determined to be ineligible for HAMP. Use the resource link below to access the FHFA report.

GAO looks at nonprime loan bill

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WASHINGTON (8/4/09)—The Government Accountability Office (GAO) recently studied a 2007 mortgage reform bill (H.R. 3915), which was introduced but not passed, and evaluated what the long-term impact of the bill would have been if enacted. The report also dipped into the history of nonprime loans and revealed that almost 75% of securitized nonprime mortgages originated from 2000 through 2007 would not have met H.R. 3915's safe harbor requirements. Those requirements included such things as full documentation of a borrower’s income and assets and a prohibition on mortgages for which the loan principal can increase over time. The extent to which mortgages met specific safe harbor requirements varied by origination year, the GAO noted, citing for example the percentage of nonprime mortgages with less than full documentation rose from 27% in 2000 to almost 60% in 2007. “Consistent with the consumer protection purpose of the bill, GAO found that certain variables associated with the safe harbor requirements influenced the probability of a loan entering default (i.e., 90 or more days delinquent or in foreclosure) within 24 months of origination,” the report summary said. All other factors being equal, GAO said its statistical analysis showed a five percentage point increase in the likelihood of defaults for “the most common type of nonprime mortgage product.” The potential long-term impact of the bill, which was the topic of the report, is disputed, the GAO said. The mortgage industry generally stated that some of the bill’s provisions would limit mortgage options and increase the cost of credit for nonprime borrowers. Consumer groups, for the most part, argued a need that the provisions be strengthened to protect consumers from predatory loan products. The GAO is the audit, evaluation, and investigative arm of the U.S. Congress and generally executes studies requested by members.

NCUA bars six from further finance work

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ALEXANDRIA, Va. (8/4/09)--The National Credit Union Administration (NCUA) announced that it has barred six individuals from participating in the affairs of any federally insured financial institution. Under the order, individuals that have taken part in a range of crimes, from embezzling to tax fraud, would be forced to pay as much as $1 million in fines and face possible imprisonment if this prohibition is violated. Included on the list are former credit union employees Rhonda Campbell, of Lima, Ohio’s North Star FCU, and Sacramento, Calif.-based Capital Power CU’s Richard James Ditzel, as well as former Financial One CU President Richard Lange, all of whom were convicted of embezzlement, and have been forced to serve significant jail time and hundreds of thousands of dollars in restitution for their crimes. Ditzel’s sentence is the most significant of the three, with the former CU employee set to serve 33 months of jail time and pay nearly $500,000 in restitution. Lange will pay $249,691 in restitution and serve a 21-month jail term, with three years of probation to follow, for embezzlement and filing false tax returns. Rebecca Andino, Sharon Quattrone, and Hyacinth Richardson are also barred from further involvement with federally insured financial firms due to their activities. Andino, who was formerly employed by Southern Delaware Postal Employees FCU, is serving six months of work release, with a further 12 months of probation and $54,800 in restitution, following her conviction for theft. Quattrone, who was formerly an employee of CCSE FCU in New York, was sentenced to three years of supervised release for making a false statement to a federal credit union. Richardson has signed an order of prohibition, and did not admit nor deny fault for alleged wrongdoing during her time at Mid Island FCU, St. Croix, Virgin Islands. Her charges were not disclosed by the NCUA. For the full NCUA release, use the resource link.