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Reid says FAA deal set but CUs were ready

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MADISON, Wis. (8/5/11)--As U.S. Senate Majority Leader Harry Reid (D-Nev.) and Congress reached an agreement to fund the Federal Aviation Administration (FAA) Thursday afternoon, credit unions serving FAA employees had already begun offering financial assistance for work disruptions caused by the funding stalemate. The agreement ended a partial shutdown of the FAA that left 74,000 transportation and construction employees out of work and 40 safety inspectors working without pay The New York Times Aug. 4). At FAA FCU, Oklahoma City, Okla., furloughed employees with delayed paychecks were offered 60-day, 0% interest rate loans for 100% of their last paycheck up to $6,000. The $502 million FAA FCU offered overdraft forgiveness and skip-a-payment on up to two monthly loan payments, excluding mortgages, to furloughed members up to 60 days from the furlough date. The credit union also offered to waive its $40 overdraft fee. SkyOne FCU, with $339 million in assets, Hawthorne, Calif., offered a Crisis Co-Pilot signature loan up to $5,000 with a 0% annual percentage rate for the first six months and terms as long as 48 months, with no payments the first 90 days. SkyOne FCU also offered reversals on select fees for six months if needed, extensions on loan payments and free credit counseling.

Inside Washington (08/04/2011)

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* WASHINGTON (8/5/11)--The Department of Housing and Urban Development and Bank of America (BofA) have reached a settlement that releases the bank from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent mortgages insured by the Federal Housing Authority. The agreement was reached separately from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures. Under the settlement, BofA will waive a minimum of $10 million in unpaid mortgage payments and reach out to each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative. In agreeing to the settlement, HUD decided not to pursue steep monetary damages or admissions of error from BofA. Instead, BofA agreed to implement steps that in most cases it was supposed to have already taken under the terms of its government-guaranteed loans… * WASHINGTON (8/5/11)--The U.S. Small Business Administration (SBA) has announced the first 20 non-profit community organizations to receive financing under a new program. The Small Business Jobs Act of 2010 created The Intermediary Lending Program, which is intended to support businesses in underserved markets. The three-year pilot program provides direct loans to eligible non-profit intermediaries for the purpose of making small business loans of up to $200,000. The SBA said a goal over the next two years is to assess the intermediary model as an effective tool for increasing lower-dollar lending to small businesses and startups, particularly those in traditionally underserved communities … * WASHINGTON (8/5/11)--Although legislation to create a new mortgage finance system is unlikely, some industry representatives continued to urge the government to transition away from Fannie Mae and Freddie Mac at a Senate subcommittee hearing Wednesday (American Banker Aug. 3). Under one proposal, Fannie and Freddie would develop a subordinated bond structure, where private investors would take the first-loss position on the two government-sponsored enterprises’ bonds, either side-by-side or ahead of Fannie and Freddie. That approach likely would require the approval of the Federal Housing Finance Agency, which regulates Fannie and Freddie. Thomas Hamilton, managing director at Barclays Capital, said that he would like to see the size of mortgages that Fannie and Freddie guarantee lowered significantly over the next year and a half … * WASHINGTON (8/5/11)--“Too big to fail” financial players continue to harm the U.S. economy, according to several prominent economists who testified at a Senate Banking financial institutions subcommittee hearing Wednesday (American Banker Aug. 3). The presence of the largest players creates a “distorted economy” because small- and medium-sized lenders are starved for funds relative to big banks engaged in more speculative activities, said Joseph Stiglitz, an economist and professor at Columbia University Business School. As a result, larger institutions are able to get access to capital at lower costs, especially compared with community financially institution, said Stiglitz. With less government involvement, the private sector would bear the risk that U.S. taxpayers currently hold, said Paul Pfleiderer, a finance professor at Stanford University’s Graduate School of Business. With an implicit government guarantee, big financial players are more likely to take on more risk, with taxpayers inevitably left to bear the losses, according to economists …

CFPB setup continues director awaits confirmation

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WASHINGTON (8/5/11)--The Consumer Financial Protection Bureau (CFPB) remains without an official leader after a Senate Banking Committee nomination hearing for potential director Richard Cordray was postponed until September earlier this week, but the agency has continued to take initial steps in recent weeks to set the stage for its future work. Rules that authorize CFPB officials to begin civil investigations, demand investigation-related materials and documents from individuals and businesses, and hold investigational hearings are among those released. The CFPB has also set forth rules covering adjudication proceedings related to these investigations. Groups or individuals that are involved in adjudication proceedings will have standard legal rights during the hearings, and would ultimately have the right to appeal a CFPB ruling if the agency rules against them. The agency has published rules that codify how state government officials will notify the agency of any of their own regulatory or enforcement actions. Specifically, the CFPB has said that state officials must notify the CFPB of these types of actions within 10 days of the action. Additionally, rules addressing how citizens and others can obtain CFPB-related information under the Freedom of Information Act have been released. CFPB recordkeeping practices were also covered in a release. All of these rules are effective as of July 28, and all are open to public comment. The CFPB has said it will accept comment until Sept. 26. The CFPB also continues to set up specialized consumer offices. For instance, it announced earlier this week that Holly Petraeus would lead its Office of Servicemember Affairs. Petraeus has previously served as the director of the Better Business Bureau (BBB) Military Line, a joint BBB/Department of Defense project that provides consumer education and advocacy for military families. She is the wife of General David Petraeus and the daughter of a former West Point superintendent. The CFPB office will work to shield U.S. servicemembers and their families from abusive financial practices and will generally monitor servicemember questions and complaints regarding consumer financial products and services. It will also coordinate responses with CFPB staff and other federal and state agencies. For more on this CFPB initiative, and the CFPB’s other recent actions, use the links below to read information published in the Federal Register.

CU views sought on CUSO reporting plan

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WASHINGTON (8/5/11)--The National Credit Union Administration (NCUA) last month said its proposed regulation to require credit union service organizations (CUSOs) to directly file their financial statements to the agency would be “controversial,” and credit unions can forward their own comments to the Credit Union National Association (CUNA) through a comment call released this week. The NCUA late last month released its CUSO reporting proposal, which would also subject subsidiaries of CUSOs to the same financial reporting standards. Financial reports would also need to be forwarded to appropriate state supervisors. The agency previously had the statutory authority to examine CUSOs, but that authority expired in 2001, and Congress has not moved to reinstate that authority. In releasing the proposal, the NCUA noted that its current CUSO information gathering system, which partly relies on natural person credit unions that obtain services from the CUSOs to provide the majority of financial information on CUSOs to the NCUA, is inefficient. This system, and the overall lack of detailed CUSO information, "restricts NCUA's ability to conduct offsite monitoring and evaluate systemic risks posed by CUSOs," the agency added. The NCUA does currently have the authority to inspect the books and records of some CUSOs, but that authority is not universal. Agency leaders in a release said that the proposal, if enacted, would "enhance protections to consumers, credit unions and the National Credit Union Share Insurance Fund." CUNA’s comment call asks credit unions to also comment on whether CUSO subsidiaries should be covered under this rule, and whether less than adequately capitalized credit unions should be required to seek NCUA approval before they can make any investments in CUSOs. CUNA will receive comments until Sept. 16. The NCUA has requested that all comments be submitted by Sept. 26. For the full comment letter, use the resource link.