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FFIEC releases loss mitigation guidance

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WASHINGTON (8/7/09)--The Federal Financial Institutions Examination Council (FFIEC) on Thursday said that mortgage loan servicers “have an obligation to act in the best interests” of their clients and should not consider “the potential impact” of a loan modification on a first or subordinate lien mortgage. The FFIEC, which includes the National Credit Union Administration as well as other federal regulators, said that mortgage loan servicers should modify first lien mortgages or subordinate liens “when doing so would produce a greater anticipated recovery” to the lienholders “than not modifying the loan.” Failing to follow these standards “may be a breach of the servicer’s obligation” to their clients, the FFIEC statement warned. The joint agency release noted that it was a reiteration of guidance given in the past. Perhaps coincidentally, there has been a spate of negative attention to loan modification efforts by some of the nation’s mortgage lenders who critics charge could be doing more to help troubled mortgage holders avoid foreclosures on their homes.

Fryzel to Fed Consider CU CARD Act compliance challenges

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ALEXANDRIA, Va. (8/7/09)—Underscoring the Federal Reserve Board’s own words about a “short” reprieve from an August 20 compliance date for the 21-day Credit CARD Act notice requirement, Michael Fryzel this week reiterated credit union concerns regarding the tight compliance timeframe they face. Fryzel, chairman of the National Credit Union Administration (NCUA), wrote to Fed Chairman Ben Bernanke asking the Fed leader to “give every consideration to the significant costs and operational difficulty many credit unions will experience as they work to come into compliance” with the Fed’s recent interim final rule. At issue is a section of the interim rule that prohibits creditors from claiming a payments 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. Fryzel expressed confidence with credit union preparations for the rule, but said gearing up for the new disclosures “is expected to be costly, and full compliance may take some months.” “I am sure you appreciate that, as a result of this rule, creditors are now vying with one another to tap the available vendors and resources to make these changes to meet the requirements of the interim final rule. “As a result, the credit union industry, for which any additional regulatory costs are particularly burdensome, may experience difficulty in achieving full compliance, particularly in these uncertain economic times,” Fryzel noted to the Fed chairman. In its interim rule, 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. However, the Fed to date has declined to be any more precise about how long a short period of time may extend. The Credit Union National Association (CUNA) has been seeking to address the compliance problem through both statutory and regulatory avenues. CUNA has requested that Congress address the problem by stating that the provision was never intended to go beyond application to credit cards. Without that fix, CUNA has also been working with regulators to seek a later compliance deadline. However, CUNA, noting the realities that credit unions face with the pressing deadline, also this week issued copious guidance to support credit union compliance with the new rules. (See related story: CUNA doc helps CUs cope with CARD Act regs)

Inside Washington (08/06/2009)

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* WASHINGTON (8/7/09)--Treasury Secretary Timothy Geithner took financial regulators to task when they voiced objections to the Obama administration’s plan to revamp the financial system. Geithner told them that they are somewhat responsible for the financial crisis and their objections are “playing into the hands” of financial industry groups trying to stop the plan (The New York Times Aug. 6). Geithner said Wednesday that he’s confident Congress will accept the plan and he understands that regulators are trying to preserve their jurisdiction. But the regulators can’t lose sight of the plan’s objective to revamp the financial system just because of a few policy differences. Regulators should not let efforts to defend their turf take away from getting the legislation passed, Geithner said ... * WASHINGTON (8/7/09)--Federal Housing Finance Agency (FHFA) Director James Lockhart is set to resign soon and his departure could stir up questions about whether the government-sponsored enterprises, which the FHFA supervises, should be reformed. Fannie Mae and Freddie Mac have three options--nationalization, privatization or remaining the same (American Banker Aug. 6). Lockhart’s departure would mark another change in leadership for Fannie and Freddie, who have had three CEOs in three years. But financial observers said they didn’t think the leadership change would cause a problem. Brian Harris, Moody’s Investors Service analyst, said the GSEs have a lot of government support, so the leadership changes shouldn’t create instability. Ed DeMarco, FHFA senior deputy director and CEO, is expected to take over the agency on an interim basis until candidates for a permanent replacement are found ... * WASHINGTON (8/7/09)--Senate Banking Committee members at a Wednesday hearing on credit ratings agencies criticized some of the Obama administration's regulatory proposals, saying that they do not do enough to ensure that ratings agencies verify information supplied to them by their customers. American Banker on Thursday reported that committee chairman Sen. Chris Dodd (D-Conn.) was “stunned” to learn that credit ratings agencies do not fact check the information reported to them by customers. Dodd also expressed dismay that the administration’s proposal, as currently crafted, would not require the agencies to take additional due diligence measures, but Treasury assistant secretary for financial institutions Michael Barr said that expanding due diligence rules for the agencies would lead to the government dictating the agencies' methodology. Sen. Charles Schumer (D-N.Y.) during the hearing proposed that the Securities and Exchange Commission could help eliminate some conflicts of interest that occur in the credit rating system by randomly selecting securities to receive a second rating from a separate agency...

NCUA webinar will detail present future states of CLF

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ALEXANDRIA, Va. (8/7/09)--The National Credit Union Administration (NCUA) on Monday will hold a webinar to discuss recent changes to the structure and operations of the Central Liquidity Facility. The webinar, which will be hosted by CLF President J. Owen Cole, will take place at 2 p.m. on Monday and will offer credit unions an opportunity to speak directly with the NCUA via a question and answer session. Cole will also discuss some of the near-term changes to the CLF that are currently under consideration during the webinar. The NCUA last week announced that it transferred $1.8 billion in CLF funds from U.S. Central Federal Credit Union to the U.S. Treasury. The NCUA at that time said that it is also 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." Interested parties can register for the webinar at

CUNA doc helps CUs cope with CARD Act regs

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WASHINGTON (8/6/09)—The Credit Union National Association (CUNA) is working for legislative or regulatory relief for the by-now-well-known 21-day notice provisions for open-end credit plans, other than credit cards set, set to take effect Aug. 20. Meanwhile, however, CUNA has created a compendium of information to help credit unions tackle the “horrendous” compliance challenges that loom ahead. As a cure, CUNA is seeking a law change so the notice provision would apply only to credit cards. Concurrently, CUNA is addressing the problem via a regulatory route urging the Federal Reserve Board to approve a compliance date delay. The Fed rule implements provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009. In the memo, CUNA details steps that credit unions must take to comply with the 21-day requirement and the 45-day change-in-terms requirement. CUNA provides an overview of these regulatory requirements, provides information on some of the alternative approaches that credit unions are considering, and addresses some of the more frequent questions that have been asked about the regulations. While CUNA does not specifically advocate or suggest any method of complying with the 21-day requirement, the memo does present a number of options that have been taken by some credit unions, including changing due dates to establish a uniform payment due date, printing the current and following month's payment due dates on the account user’s periodic statement, and retaining the existing due dates, but providing additional periodic statements. CUNA has also provided answers to which types of loans are covered by the 21-day requirement, how the 21-day period is determined, and which actions a credit union could take to assure delivery when a member has decided to use electronic periodic statements. For access to the document, use the resource link.