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CUNA defends CU tax status Its good policy

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WASHINGTON (9/1/10)--Directly on the heels of an advisory panel’s report on possible tax law revisions, the Credit Union National Association (CUNA) sent a letter to each member of the President’s Economic and Recovery Board (PERAB) to underscore the public-policy value of the federal credit union tax status. The PERAB is an outside advisory panel and is not part of the Obama administration, and its report does not represent recommendations, but rather options to be considered for tax reform. However, CUNA President/CEO Bill Cheney immediately and adamantly defended the credit union tax exemption, explaining that the strong public-policy reasons that first inspired that tax status remain valid today. “It may be the case that not all tax preferences have lived up to expectations, but the credit union tax exemption is one of the highest-yielding investments the federal government has made,” Cheney wrote. CUNA figures show that America’s 92 million credit union members receive substantial benefits in the form of better pricing on services, saving them about $7.5 billion a year. The $7.5 billion savings to consumers is especially significant when measured against the $1.5 billion in lost federal revenue a year that the government says is represented by the credit union tax exemption. “Further, the tax exemption helps to ensure consumers have choices beyond commercial banks in the financial marketplace. It is appropriate to view these results not as an economic distortion,” Cheney said referring to the report’s own language, “but as evidence of sound public policy.” The 118-page PERAB report, released Monday, spent a scant few paragraphs discussing the credit union tax exemption in its Section IV. “Nevertheless,” Cheney declared in his letter to policymakers, “on behalf of credit union members and credit unions, I am compelled to set the record straight on the importance of the public policy justification for the continuation of credit unions’ federal tax exemption. “CUNA will continue our strongest efforts to ensure that policymakers understand the purpose and effects of the credit union tax exemption,” Cheney concluded, offering to meet and discuss points raised in his letter. The letter was sent also to representatives of the U.S. Treasury Department and White House, as well as to congressional leaders and National Credit Union Administration Chairman Debbie Matz.

Inside Washington (08/31/2010)

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* WASHINGTON (9/1/10)--A report by the Department of Housing and Urban Development’s inspector general urged the Federal Housing Administration (FHA) to guide mortgage servicers on how to address an increasing number of senior citizens who are defaulting on their federally insured reverse mortgages. Four servicers are holding 13,000 home equity conversion mortgages where borrowers had defaulted by not paying the real estate taxes and insurance on their homes (American Banker Aug. 31). The loans had a maximum claim amount of more than $2.5 billion, according to the audit, released last week. FHA said it is drafting guidance to instruct servicers to contact borrowers who have defaulted and require specific actions to bring the loan into compliance with the mortgage’s terms, an official said. FHA also said it plans to modify its systems to monitor defaulted home equity conversions ... * WASHINGTON (9/1/10)--Savings and loans are concerned about a potential crackdown as the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board prepare to oversee thrifts and their holding companies. The thrifts will comply with the same capital standards they’ve had for years, but they also expect to be required to comply with bank-like requirements (American Banker Aug. 31). The Office of Thrift Supervision (OTS) will be dissolved under the enacted regulatory reform bill, but has one more year until it officially closes. Industry representatives expect the Fed and the OCC to crack down on their institutions. Lawrence Kaplan, a lawyer at Paul, Hastings, Janofsky and Walker, told the Banker that the concern is whether the OCC will “kick the tires harder to prove the OTS wasn’t a good regulator.” Tom Barnes, assistant deputy director at the OTS, said the concerns might be triggered by change itself, because people always perceive change differently. Barnes said he was confident “things will be ironed out.” Regarding credit unions, the Credit Union National Association (CUNA) worked diligently during the regulatory reform process to ensure that the National Credit Union Administration remained the prudential regulator for federal credit unions ...

Lehrer blogs Unfetter MBLs help the country

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WASHINGTON (9/1/10)--The only reason conservatives should get excited about the U.S. Senate’s pending small business lending bill, blogged Eli Lehrer of The Heartland Institute recently, is because it could include a cost-free credit union provision that would really give the economy a shot in the arm. Lehrer is national director of the Center on Finance, Insurance, and Real Estate at The Heartland Institute, which is a conservative policy think tank located in Chicago. In his posting entitled, “For a Better Stimulus: Free the Credit Unions,” Leherer said that an amendment under consideration that would ease the cap on member business lending “deserves consideration both on its own and as a template for bipartisan action to get the economy moving.” Leherer calls the small business bill “well intentioned,” even the proposed $30 billion in federal aid to small banks who are then to lend more to credit-strapped small businesses. But, he says, he sees a problem: “If more government intervention of any sort would have produced a strong, sustained recovery, we’d already be in the middle of one.” But he also sees a solution: “The (MBL) amendment, proffered by Sen. Mark Udall (D-Colo.), however, is a lot better than the bill as a whole.” The amendment would increase the MBL cap to 27.5% of total assets, up from 12.25%. The blogger says the cap should be even higher because it would “interject billions of dollars of new business credit into the economy” and doesn’t “put a single federal dollar at risk.” He also noted, “The cap has no good reason for existing at all.” He warns that banks oppose the bill “because they don’t want the additional competition.” “But,” he says of the MBL cap increase, “it’s good for the economy.” The Heartland Institute is one of 19 diverse business groups that have formed a coalition in support of increased MBL for credit unions. Others members include the National Association of Realtors, National Small Business Association, League of United Latin American Citizens, National Association for the Self-Employed, and the National Association of Manufacturers. Use the resource link to access the article which ran Aug. 30 in the Frum Forum.

Crisis commission looks at too big to fail

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WASHINGTON (9/1/10)--“Too big to fail,” a Washington catch phrase, is also the topic of a two-day public hearing of the Financial Crisis Inquiry Commission (FCIC), which starts today. The complete heading of the session is "Too Big to Fail: Expectations and Impact of Extraordinary Government Intervention and the Role of Systemic Risk in the Financial Crisis." The forum will be webcast live at http://www.FCIC.gov and is part of an ongoing investigation into the financial crisis. The commission, set up in mid-2009, was created to study fraud in the financial system and to determine the cause of the financial crisis. The commission can conduct hearings to examine industry practices, and subpoena regulators and financial institutions for information. Today’s session features two panels of witnesses. Expected to testify on panel one regarding Wachovia Corp. are:
* Scott G. Alvarez, general counsel, Federal Reserve Board; John H. Corston, acting deputy director, Division of Supervision and Consumer Protection, of the Federal Deposit Insurance Corp. (FDIC); and Robert K. Steel, former president/CEO of Wachovia Corporation
And scheduled for panel two to testify about Lehman Bros. are:
* Thomas C. Baxter, Jr., general counsel and executive vice president of the Federal Reserve Bank of New York; Richard S. Fuld Jr., former chairman/CEO of Lehman Bros.; Harvey R. Miller, business finance and restructuring partner for Weil, Gotshal & Manges LLP; and Barry L. Zubrow, chief risk officer for JPMorgan Chase & Co.
Fed Chairman Ben Bernanke and FDIC Chairman Sheila Bair are the sole witnesses on day two of the hearing, which is Thursday. The FCIC is charged with issuing a final report on the nation's financial crisis to the U.S. Congress by December 2010.

Temporary corporate CU guarantee extended

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ALEXANDRIA, Va. (9/1/10)--New investments in participating corporate credit unions made before Dec. 31, and which have maturities of two years or less, will now be fully covered by the National Credit Union Administration’s (NCUA’s) Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP). The agency announced Tuesday that it has extended the expiration date of its TCCUSGP to Dec. 31, 2012 from Sept. 30, 2012, which was itself an extension. The agency has said in earlier statements that the extensions send a “clear signal” to natural person credit unions that investments in corporate credit unions are not only safe, but also meet sound asset-liability management principles by providing for “orderly laddering of these investments.” Twenty-six of the 27 corporates participate in the guarantee program; Iowa Corporate CU is the one outside of the program. The TCCUSGP backs up the National Credit Union Share Insurance Fund's (NCUSIF) coverage of all shares--excluding paid-in-capital and membership capital accounts--at corporate credit unions. Corporate CU Participants in TCCUSGP

CUNA Despite headwinds more gradual improvement in CU results

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WASHINGTON (8/31/10)—The Credit Union National Association’s (CUNA’s) economists, analyzing mid-year credit union call report data released yesterday by the National Credit Union Administration (NCUA), conclude that following the initial positive signs for credit union operations of the first quarter, most indicators continued to move in the right direction in the second quarter. This of course follows two of the most difficult years ever for credit unions operations in 2008 and 2009. Most significant, the economists noted, was the further improvement in credit union earnings in the second quarter. Although net income, or return on assets (ROA), was down slightly during the quarter, to 38 basis points (bp) of assets from 46 in the first, the drop was due to the corporate stabilization assessment of 13.4 bp of insured savings levied during the quarter. Net income before the separate National Credit Union Share Insurance Fund (NCUSIF) stabilization expenses actually rose from 48 bp in the first quarter to 79 bp in the second. This means, the economists said, that ROA for the first half, after stabilization expenses was 42 bp. Although that pales in comparison to the 90 bp to 100 bp that many credit unions became accustomed to before the recession, it represents a marked improvement from the near zero earnings of the previous two years. The most significant contributor to the earnings improvement was another decline in the provision for loan loss expense, from 115 bp of assets for all of 2009 to 82 bp in the first quarter and 73 in the second quarter. Other signs of improvement in credit quality were a reduction in net loan charge-offs, from 1.21% of loans outstanding in 2009 to 1.17% in the first quarter and 1.09% in the second. Credit unions’ average delinquency rate, which had soared from 0.68% in 2006 to 1.87% last December, has stabilized, dropping to 1.79% as of March and 1.77% as of June. “This remains a difficult economy in which to operate,” said CUNA Chief Economist Bill Hampel, “but it’s a big relief that conditions are no longer deteriorating as they were in the past two years. Most signs point to continued slow improvement in credit union results for the rest of the year. An ROA after both NCUA assessments of over 50 bp for the full year is very likely.” To CUNA’s economists, the only real surprise in the data was the slowdown in savings growth in the second quarter. Savings rose by only 1.6% on an annual basis in the second quarter. “This is very unusual considering the increase in household saving as a result of the recession,” Hampel said. Loan growth was even weaker at a 0.7% annual rate. “It appears that members are using their extra cash balances to pay down loans rather than to build savings balances,” said Hampel. “That’s not surprising considering the very low rates available on most savings accounts right now.” Use the resource link to access the complete data from NCUA.

Inside Washington (08/30/2010)

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* WASHINGTON (8/31/10)--The Obama administration will deploy an emergency loan program for the unemployed and a government mortgage refinancing effort to help homeowners after home sales decreased in July. The effort will launch in the next few weeks, said Housing and Urban Development Secretary Shaun Donovan Sunday on CNN (American Banker Aug. 30). Sales of new homes dropped to the lowest level on record. Purchases fell 12% from June, the weakest since data began in 1963. Donovan said it’s too early to determine whether the administration’s $8,000 first-time homebuyer credit tax credit will be revived. The credit expired April 30 ... * WASHINGTON (8/31/10)--Regulators of the Group of 20 (G-20) will meet next month in Switzerland to try and reach an accord on new banking rules that aim to prevent another financial crisis (The Wall Street Journal Aug. 30). Regulators last met July 26. Two large issues remain for the September meeting--size and timing, the newspaper said. Regulators will have to agree on the level of capital needed to cushion against risk. Basel officials suggested 5%, but some countries push for a lower buffer of 4% or 2%. Regulators also must agree on the date by which banks will have to comply with the new rules. Some have suggested 2020 as a good deadline, while others said a shorter time frame would force banks to protect themselves against another crisis. A schedule of about five years likely will be adopted, the newspaper added. The G-20 is planning two meetings in Basel the next few weeks ...

FHA designing new reverse mortgage option

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WASHINGTON (8/31/10)--The Federal Housing Administration (FHA) held a telephone briefing recently to inform the housing industry that it is looking at options to provide a lower-priced home equity conversion mortgage(HECM) option. An FHA spokesman told News Now that there has been no formal agency announcement because FHA is still working out details. But he confirmed it is FHA’s intention to “make the product more attractive while limiting FHA’s exposure to risk.” As reported by a number of news outlets, FHA is designing a reverse mortgage product it will call HECM Saver. It is also considering changes to its original HECM program. The HECM Saver is targeted to senior citizens who want to tap the equity in their homes to help cover medical costs, or even daily living expenses, according to an Aug. 30 article in American Banker. For a reduced up-front premium, a borrower would take 10% to 18% less in available funds than the standard home equity conversion mortgage provides.

CUs in advisory panel report on tax options

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WASHINGTON (8/31/10)--The Presidential Economic Recovery Advisory Board (PERAB) has released a comprehensive report on possible tax revisions, each intended to simplify the tax system, improve taxpayer compliance with existing tax laws, and reform the corporate tax system. The report represents a laundry list of options that the government could pursue in order to reform tax law, but is not a blueprint for government action. In fact, the board itself emphasized that it is “an outside advisory panel and is not part of the Obama administration.” Under Section IV, the corporate tax reform pages, and under the subhead of “Eliminate Other Tax Expenditures,” the report dedicates four lines to the possibility of eliminating the federal credit union tax exemption to raise revenue and “level the playing field.” ‘Unlike other financial institutions like banks and thrifts, credit unions do not pay corporate taxes on their income. This puts them at a competitive advantage relative to other financial institutions for tax reasons. Eliminating this exemption would raise revenue and level the playing field, but would clearly raise taxes on credit unions,” the report says in full. The subsection also discusses the low-income housing credit and special employee stock ownership plan (ESOP) rules. The PERAB, also known as the Volcker Commission because the 16-member panel is headed by former Federal Reserve Board Chairman Paul Volcker, released its 118-page report on Friday. Credit Union National Association (CUNA) President/CEO Bill Cheney said, “While it is always a grave concern to CUNA and credit unions to have the credit union tax status come into question, credit unions should be aware that the advisory board report is simply an exploration of all policy-change options. “The threat to the credit union tax status is always alive. Bankers are always pushing for tax advantages while attacking the tax status, which belongs to credit unions because of our not-for-profit, cooperative structure,” Cheney added. “The ‘level-playing field’ language is often employed by the banks to justify their hypocritical attack on credit union tax status. We will continue to educate policymakers regarding the credit union difference, which reinforces the uniqueness of credit unions, in structure and service, from other financial institutions.” Also included in the board’s report are tax-change options that involve subchapter S corporations, a structure sometime used by banks to reduce their tax obligation. Sections on at least six pages of the report discuss subchapter S arrangements. The report also details the lack of taxpayer compliance with current laws.

Court dismisses Corp. Central case v. US Central NCUA

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WASHINGTON (8/31/10)--A suit alleging breach of conduct, violation of bylaws, and more, against U.S. Central FCU was dismissed by the U.S. District Court for the Eastern District of Wisconsin earlier this month. Corporate Central CU (CCCU) filed suit in October 2009 seeking a refund of $6 million, which represents a portion of its membership capital shares balance from U.S. Central FCU. In addition to charging breach of conduct and bylaws violations, the complaint sought an injunction against the National Credit Union Administration (NCUA) to stop the agency from “continuing and enforcing a policy that violates Corporate Central’s constitutional right to equal protection,” and a declaration of CCCU’s “rights with respect to Corporate Central’s property.” The NCUA took over U.S. Central in early 2009, but was named in the suit because of its role as regulator, not conservator. The agency sought dismissal of the lawsuit last January. While rejecting portions of the agency’s motion to dismiss, District Judge Lynn Adelman granted the request on Aug. 19, finding that the NCUA’s actions had a “rational basis” and therefore did not violate constitutional equal protection under the Fifth Amendment. The judge wrote that the NCUA can take “any action that is necessary to put [U.S. Central] in a sound and solvent condition; and… (is) appropriate to carry on the business of [U.S. Central] and preserve and conserve the assets and property of [U.S. Central].”) The NCUA’s action to bar members from receiving refunds of excess MCS investments, which is key to CCCU’s suit against the agency and U.S. Central, “clearly furthers its interest in putting U.S. Central in a sound financial condition and thus has a rational basis,” the court decision said. The court declined to rule on CCCU’s breach-of-contract, violation-of-bylaws, and other state-law claims on the basis that those claims belonged in state court. The judge went on to opine that the NCUA’s decision “likely prevented a run on excess investment on members’ capital accounts, surely a desirable outcome.” The decision also noted that even if CCCU’s argument that the NCUA could have handled the situation differently is true, that does not negate the agency’s authority to take the action that it did. An attorney for CCCU, Daniel Kelly of Reinhart Boerner Van Deuren s.c., in Milwaukee, said his client “has no comment about the case at this time.” The NCUA also declined to comment except to endorse the court’s decision.

NEW Advisory panel issues report on tax options

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WASHINGTON (UPDATED 8/30/10, 2:05 p.m. ET)--The Presidential Economic Recovery Advisory Board (PERAB) has released a comprehensive report on possible tax revisions, each intended to simplify the tax system, improve taxpayer compliance with existing tax laws, and reform the corporate tax system. The report represents a laundry list of options that the government could pursue in order to reform tax law, but is not a blueprint for government action. In fact, the board itself emphasized that it is “an outside advisory panel and is not part of the Obama administration.” Under Section IV, the corporate tax reform pages, and under the subhead of “Eliminate Other Tax Expenditures,” the report dedicates four lines to the possibility of eliminating the federal credit union tax exemption to raise revenue and “level the playing field.” ‘Unlike other financial institutions like banks and thrifts, credit unions do not pay corporate taxes on their income. This puts them at a competitive advantage relative to other financial institutions for tax reasons. Eliminating this exemption would raise revenue and level the playing field, but would clearly raise taxes on credit unions,” the report says in full. The subsection also discusses the low-income housing credit and special employee stock ownership plan (ESOP) rules. The PERAB, also known as the Volcker Commission because the 16-member panel is headed by former Federal Reserve Board Chairman Paul Volcker, released its 118-page report on Friday. Credit Union National Association (CUNA) President/CEO Bill Cheney said. “While it is always a grave concern to CUNA and credit unions to have the credit union tax status come into question, credit unions should be aware that the advisory board report is simply an exploration of all policy-change options.” “The threat to the credit union tax status is always alive. Bankers are always pushing for tax advantages while attacking the tax status, which belongs to credit unions because of our not-for-profit, cooperative structure,” Cheney added. “The ‘level-playing field’ language is often employed by the banks to justify their hypocritical attack on credit union tax status. We will continue to educate policymakers regarding the credit union difference, which reinforces the uniqueness of credit unions, in structure and service, from other financial institutions.”

Mo. league relates states CU concerns to NCUA

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ALEXANDRIA, Va. (8/30/10)--The Missouri Credit Union Association’s (MCUA) recent board resolution on key credit union issues resulted in a letter to the National Credit Union Administration (NCUA), which related credit union concerns regarding such things as merger policy and share insurance assessments. “The resolution, passed unanimously by the MCUA board, makes a strong statement that there is concern over NCUA actions and their effect on the sustainability of the credit union system in this stressed economy,” said Rosie Holub, MCUA president/CEO, of the board action. “Our hope is that the agency will respond positively and act within their statutory and discretionary authority to minimize the impact of the assessments on credit unions.” In its letter to the NCUA earlier this month, the Missouri association strongly urged the NCUA to allow the maximum time period for restoration of the equity ratio for the National Credit Union Share Insurance Fund and the corporate stabilization fund through assessments. Holub wrote such action is needed to “preserve the ability of credit unions to financially recover” in the face of economic woes and increased strain on credit union income and capital from legislative initiatives, which will results in a string of new regulations, the “negligible investment interest rate environment, and declining loan demand,” which the association predicts will continue for the “foreseeable future.” On the topic of mergers, the MCUA letter noted Missouri credit unions’ concern that mergers are approved without adequate coordination with stakeholders. Holub reminded the NCUA that for mergers of state-chartered credit unions, state leagues and state regulators can be a valuable resource in understanding “membership base and service needs within the immediate vicinity...[and] regional culture.” “We urge that priority be given to proximity and in-state merger acquirers within your due diligence process,” the letter said. Addressing “supervisory issues and actions,” in broader strokes, the MCUA letter said recent actions by the NCUA “appear to be less operationally constructive to survival of credit unions and, in effect, more punitive.” “We urge the agency to ensure that the examination staff is acting consistently with the directives of the NCUA board in assessing and implementing enforcement actions,” the letter stated.

Treasury seeks comment on fin. lit. direction

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WASHINGTON (8/30/10)--The U.S. government is working to develop a list of financial education core competencies to further efforts to increase the financial literacy of the country’s population. The Treasury Department, as lead agency of the Financial Literacy and Education Commission (FLEC), is seeking public comment on the list. The department is proposing the development of core competencies for financial education because of its perception that the financial education field lacks a common understanding of what the administration is trying to achieve through its national strategy to promote basic financial literacy and education. Treasury has identified five core concept areas:
* Earning; * Spending; * Saving; * Borrowing; and * Protecting against risk.
In the Treasury proposal, each concept area is broken down into specific things consumers should be taught in each category. Treasury specifically seeks comment on whether the list of core competencies “is complete and whether there are portions that should be deleted, revised, or expanded.” Comments are due on Sept. 12. The National Credit Union Administration (NCUA) is part of a 20-agency make-up of FLEC. NCUA Chairman Debbie Matz, at the 2010 Congressional Financial Literacy Day last April, noted credit unions' dedication to, and efforts to strengthen, consumer financial education programs and outreach. "If there's one clear and obvious bright spot in the recent economic turmoil, it's the rededication of NCUA and the credit union industry to financial education," Matz said, adding that "credit unions demonstrate a natural affinity for making real-world, practical and useful financial literacy tools available to their members.”

Inside Washington (08/27/2010)

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* WASHINGTON (8/30/10)--Neighborhood stabilization in the face of massive foreclosures is the topic of a Federal Reserve System national summit on Sept. 1-2. Neighborhoods with high numbers of foreclosed properties face a raft of problems, such as declining property values, loss of public services due to reduced tax revenue, and increased levels of crime. The symposium is intended to take an extensive look at practical and tested strategies that nonprofit organizations, local and regional governments, federal officials, and lenders can use to mitigate the impact of vacant and real estate owned (REO) property--property held on the books of banks, typically after failure to sell at foreclosure auction. Summit speakers shall include Federal Reserve Governor Elizabeth A. Duke; U.S. Department of Housing and Urban Development Secretary Shaun Donovan; Federal Reserve Bank Presidents Charles Evans (Chicago), Sandra Pianalto (Cleveland), and Eric Rosengren (Boston); and representatives of various sectors involved in the foreclosure process and community stabilization efforts. Live video of the event will be available online at: http://www.ustream.tv/channel/federalreserve ... * JACKSON HOLE, Wyo. (8/30/10)--Federal Reserve Board Chairman Ben Bernanke said Friday that if the economic recovery remains slow and threatens to slip into a cycle of falling prices, the Fed will stand ready to resume its large purchases of longer-term debts, adding to its already hefty level of such holdings. Speaking at the Federal Reserve Bank of Kansas City’s Economic Symposium here, Bernanke said specifically, “I believe that additional purchases of longer-term securities, should the (Federal Open Market Committee) choose to take them, would be effective in further easing financial conditions.” The FOMC sets interest rates. Bernanke also said, however, that he believes that economic growth would continue in the second half of this year, although he predicted it would come at a modest pace. debt-crisis abate, and increased consumer savings levels. He further predicted a “pickup of growth in 2011” if certain “preconditions” stay true--such as increased bank lending, decreased concerns over the European sovereign “Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more-rapid growth in household spending next year,” the Fed leader said …

Inside Washington (08/26/2010)

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* WASHINGTON (8/27/10)--The Securities and Exchange Commission (SEC) this week voted to increase shareholder influence over corporations by approving rules that will force corporations to print the names of shareholder board nominees on corporate ballots. Shareholders currently must pay for the mailing of separate corporate ballots. The result is a boon to labor unions and pension funds that have agitated for greater corporate responsibility and responsiveness. However, the result has been decried by businesses and Republican members of the SEC board… * NEW YORK (8/27/10)—The Federal Reserve has requested a 90-day delay on a ruling that would require it to release documents related to borrowing from its discount window and other lending programs used during the recent financial troubles. As reported in The Wall Street Journal, a Fed representative said that the stay was needed to “permit the board to consult with the Department of Justice regarding an appeal to the Supreme Court." Both Bloomberg News and Fox Business Network sought access to the documents in separate court cases brought against the Fed…

NACHA introduces payment cycle pilot program

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WASHINGTON (8/27/10)--NACHA, The Electronic Payments Association, earlier this week announced that it has launched a pilot program that will allow credit unions and other financial institutions to “truncate low-value consumer checks and collect them as ACH debits.” NACHA said that it structured the pilot program, which will go on for a minimum of 18 months, “to identify and quantify cost savings for both originating and receiving financial institutions.” NACHA President/CEO Janet Estep said in the press release that the program could “transform the collection of low-value consumer checks by removing them from the payment cycle at the point of deposit.” The association will monitor the progress of the program and may follow it up by establishing a full program. Six financial institutions had signed up for the program at the time of the release. NACHA told News Now that while there are no credit unions currently enrolled in the program, it is actively encouraging credit unions to take part. For the full release, use the resource link.

NCUA approves low-income FCU charter

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ALEXANDRIA, Va. (8/27/10)—The 1,400 members and employees of Charlotte, N.C.-based Unity, the Way of Holiness Christian Church may now become members of their own credit union after the National Credit Union Administration (NCUA) approved the charter of Shepherd’s FCU on Thursday. The credit union, which has been granted a low-income designation by the NCUA, expects to open in September. In comments accompanying the release, NCUA Chairman Debbie Matz said that the credit union “will offer hands-on help and long-term hope to a group that is striving to build a more prosperous community.” “With its low-income designation, the credit union will have opportunities to participate in special NCUA programs--including valuable technical assistance grants and low-cost loans to provide needed services and stimulate economic activities,” Matz added. The credit union, which is sponsored by Charlotte’s Neighborhood Church Coalition, will offer share accounts, unsecured loans, and used-vehicle loans at first, and may extend its services to include share certificates of deposit, new-auto loans and check-cashing services in the future. The credit union is the third to be chartered in 2010. For the full release, use the resource link.

Quality of Fannie Freddie-backed mortgages improves

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WASHINGTON (8/27/10)--The credit quality of the mortgages acquired by Fannie Mae and Freddie Mac has “improved substantially” since Fannie and Freddie were taken under government conservatorship, the Federal Housing Finance Agency (FHFA) reported on Thursday. Both Fannie and Freddie were placed under government conservatorship in 2008. In its Conservator’s Report on the Enterprises’ Financial Condition, the FHFA noted that the single-family mortgages that Fannie and Freddie have acquired during this period “have, on average, higher credit scores and lower loan-to-value ratios, resulting in lower early cumulative default rates.” The report, which will be released quarterly, also addresses the sources of Fannie and Freddie’s losses, related capital reductions, their loss mitigation activities, and other mortgage market information. According to the report, Fannie and Freddie’s investments and capital markets business segment was responsible for 9% of the total capital reductions realized between the end of 2007 and the second quarter of 2010. Their single-family credit guarantee business segment accounted for 73% of the capital losses realized during that same period. In a recent panel discussion, U.S. Treasury Secretary Timothy Geithner said that the federal government must adjust the housing finance system to eliminate the conflict between Freddie Mac's and Fannie Mae's public policy role and the need to enhance shareholder returns. Reps. Paul Kanjorski (D-Pa.) and Barney Frank (D-Mass.) have scheduled a slate of housing finance hearings for September, and Kanjorski has said that policies related to calculating guarantee fees and ideas for recovering the costs associated with Fannie and Freddie’s conservatorship will be discussed. For the full FHFA release, use the resource link.

Cheney touts low CU chargeoff delinquency rates on CNBC

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WASHINGTON (8/26/10)--In a Wednesday appearance on CNBC’s "Closing Bell," Credit Union National Association (CUNA) President/CEO Bill Cheney said that the underwriting practices and cooperative structure of credit unions result in lower delinquency and chargeoff rates among membership. “We do see consumers paying down debt, and there have certainly been chargeoffs on credit cards at credit unions,” Cheney said. “It does make some sense” to pay down debt, but only if you have the money available to do so, Cheney said. While year-over-year chargeoff rates are up overall, recent trends have improved at credit unions, with declining delinquency rates in both credit cards and mortgages, Cheney said. Credit unions are “starting to see some improvement,” Cheney added. However, noting recent press reports that many are foregoing payments on their mortgages to pay off their credit card debt, Cheney recommended that those who are having trouble with their mortgage should first contact their lender. For the full interview, click on the image.

Inside Washington (08/25/2010)

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* WASHINGTON (8/26/10)--A Federal Reserve official this week hinted that increasing the financial literacy of potential homebuyers may do more to prevent future housing market and foreclosure-related troubles than strengthened regulations would. As reported in American Banker on Aug. 25, Federal Reserve Bank of Chicago President Charles Evans indicated that while governmental elimination of so-called "nonstandard" mortgage loan products would reduce the number of risky loans, eliminating those types of loans would result in fewer options for qualified, knowledgeable homebuyers. Rather, promoting greater financial literacy could “keep those who shouldn't be in exotic mortgages from getting them while leaving such mortgages available to the small group of people for whom they are appropriate," Evans said…

Congress could correct some reg reforms CUNA says

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WASHINGTON (8/26/10)—Though the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law just before the August congressional recess began, Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan said that the Congress may consider technical corrections and other changes, possibly before the end of the year. According to Donovan, a technical corrections bill is "almost a certainty" given the size and the complexity of the legislation. As the legislation is implemented, CUNA may identify areas that are problematic to credit unions and will address statutory concerns with Congress. "We will be following the implementation of this legislation. As we identify areas that need correction, we will be working with Congress to make those corrections," Donovan said. Donovan spoke during a Wednesday CUNA audio conference. Jeff Bloch, CUNA senior assistant general counsel, hinted that the rulemaking process itself could prove to be a drawn out affair, with many of the rules not being finalized until after their prospective effective dates. The panelists again emphasized that a small percentage of the total number of reforms will impact credit unions. Many of the rules will be written by the yet-to-be-established Consumer Financial Protection Board (CFPB) but could be taken on by the Federal Reserve if the establishment of the CFPB is delayed. One set of rules that will likely not directly impact credit unions are new remittance restrictions, CUNA Special Projects Counsel Michael Edwards said. During the development of the regulatory reforms, CUNA encouraged Sen. Chris Dodd (D-Conn.) to consider exempting credit unions or, more broadly, exempting transactions that are routed through programs administered by the major central banks, including Fedwire, Fed Global ACH, NACHA ACH, and the SWIFT system, from the remittance provisions.

FASB Chair Herz to retire

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WASHINGTON (8/26/10)—Financial Accounting Standards Board (FASB) Chairman Robert Herz will retire, effective Oct. 1, the board announced on Wednesday. Current FASB member Leslie Seidman will take on the role of acting chairman following Herz’s retirement. In a release, Herz said that his eight years as chairman of the FASB “have been among the most professionally challenging and personally satisfying” of his career. Herz has overseen the progress of several issues during his tenure, including the protracted, and still ongoing, process of converging international and U.S. accounting standards. The Credit Union National Association (CUNA) has worked with its accounting subcommittee to identify key problems and frame its message to FASB regarding pending changes to FASB's Generally Accepted Accounting Principles (GAAP). The proposed changes, as set forth in a FASB exposure draft released in May, would modify GAAP by requiring most financial instruments to be measured at fair value. The changes would require loan loss reserves to be measured on a forward-looking "expected loss" basis, which differs from the historical "incurred loss" approach that is currently used. FASB has informally stated that it would like to have a final rule in place by next summer. Credit unions over $10 million in assets are required to comply with GAAP, and CUNA is working with the National Credit Union Administration and other policymakers to ensure credit union concerns are presented to and considered by FASB. CUNA will also meet with FASB and file a formal comment letter in the near future, and CUNA welcomes input from member credit unions.

Compliance Where does line fall on APR increase ban

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WASHINGTON (8/25/10)--Change is in the air for many credit unions that offer credit cards, and one credit union has asked the Credit Union National Association if the rules imposed by the now effective Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) would prevent them from switching all credit cards to variable-rate plans. According to CUNA’s August Compliance Challenge, the CARD Act’s prohibition on increases to the annual percentage rates (APR) and fees during the first year after an account is opened applies to accounts opened on or after Feb. 22, 2010. Generally, Reg. Z permits the APR and fees to be increased at any time after a credit card account is opened only if certain exceptions apply. For example, an increase in the APR upon the expiration of an introductory or promotional period is permitted, provided certain disclosures are given to the member before the start of the introductory or promotional period. Furthermore, an increase in the APR or fee due to completion of a workout arrangement or the failure of the member to complete a workout arrangement is permitted, provided certain disclosures are given to the member prior to commencement of the workout arrangement. Additionally, an increase in the APR on a credit card account is also permitted where the account opening or card agreement provides for changes in the rate according to the operation of an index that is not under the control of the creditor and is available to the general public. Finally, an increase in the APR and fees is permitted if the creditor provides a 45-day notice of change in terms. However, unlike the prior exceptions, this last exception does not permit a card issuer to increase an APR or any fee during the first year after the account is opened. For the full Compliance Challenge, use the resource link.

CUNA Dodd-Frank rule burden lighter than some fear

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WASHINGTON (8/25/10)—While the recently enacted financial regulatory reform package contains numerous changes to current financial laws, the Credit Union National Association’s (CUNA) Senior Vice President/Deputy General Counsel Mary Dunn said that many fewer of them than most fear, perhaps about 35 of the new anticipated regulations, may impact credit unions, with a number of the changes likely only altering existing regulations. While credit unions are still going to experience burdens related to the regulations, there may not be that many “wholesale” changes, Dunn added during the first of two CUNA audio conference calls, adding that no one knows for sure how various provisions will be regulated. However, key rules that will impact many credit unions brought on by the spate of reforms are those the Federal Reserve Board (Fed) will write on interchange fees and related issues. While CUNA strongly opposed the interchange fee provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Dunn said that CUNA is now working with the Federal Reserve to ensure that any future fee structure that is imposed on financial institutions is as “reasonable and proportional” as possible. CUNA is also advocating a two-tiered system, with smaller fees for larger issuers and larger fees for smaller issuers, which would include most credit unions, Dunn added. Overall, CUNA is encouraged key staff appreciate these concerns raised during conversations CUNA has had with members of the Fed, Dunn said. Another change created by the reform package is the creation of the new Consumer Financial Protection Bureau, and while much of this new organization’s oversight abilities will not apply to credit unions, CUNA Vice President of Legislative Affairs Ryan Donovan said that the creation of the CFPB represents a significant opportunity for the existing financial regulatory structure to be streamlined. The CFPB, as well as changes to home mortgage lending rules, truth in lending requirements, risk retention policies, and remittance policies, will be covered during the second audio conference call, which is scheduled to take place at 2 P.M. ET today. To register for the audio conference, use the resource link.

Inside Washington (08/24/2010)

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* MINNEAPOLIS, Minn. (8/25/10)-- Addressing the Defense Credit Union Council’s 47th Annual Conference and Showcase here Tuesday, National Credit Union Administration board member Michael Fryzel praised defense credit unions for providing “outstanding financial services to the men and women who serve in our armed forces.” Fryzel told his audience of nearly 200 that the job they do on the nation’s military bases across the world, especially in providing financial counseling to service members from their first week of basic training and throughout their lives, is “not only commendable but goes above and beyond the call of duty.” On another subject, Fryzel told the credit union representatives that he believes it will take the efforts of “both the regulator and the regulated” to face upcoming challenges and ensure the survival and growth of the credit union system. “We must keep our head high and our shoulder broad as we carry the industry forward through this difficult period” that will lead to better financial times for the nation, he said… * WASHINGTON (8/25/10)--As the government hammers out new policy regarding a revamp of the nation’s housing policy in general, and the failed mortgage giants Fannie Mae and Freddie Mac specifically, policymakers will have to take a very close look at government guarantees.(The Wall Street Journal Aug. 24) The big challenge will be to figure out what types of loans or mortgage-backed securities should be given a guarantee, and how much the government should charge the housing industry for its backing. New policy must finely delineate between pricing a guarantee to accurately reflect the level of risk it poses to the taxpayer, while not pricing it so high that the cost of the guarantee to mortgage borrowers becomes too high. Alex Pollock, resident fellow at the American Enterprise Institute, acknowledged that setting the right fee to adequately reflect the value-vs.-cost ratio will be quite a challenge. However, Pacific Investment Management's Bill Gross, said at the administration’s housing summit last week that to suggest the private market can come back to take the place of the government simply won't work… * WASHINGTON (8/24/10)--The U.S. Court of Appeals in New York, in an Aug. 20 docket entry, declared it would not reconsider its ruling that demands that the Federal Reserve Board disclose the identity of financial firms that were kept alive by a government bailout. (Bloomberg News Aug. 24) The Fed had asked the court to review its decision and now may take its case to the U.S. Supreme Court. The appeals court decision, which upheld a lower-court ruling, requires the Fed to release documents of the unprecedented $2 trillion loan program that started after the 2008 collapse of Bear Stearns Cos… * WASHINGTON (8/25/10)--While many credit the Federal Reserve Board under Ben Bernanke’s leadership as having steered the economy away from a second Great Depression, some subsequent policy decisions by that agency are just becoming more contentious as the economic recovery is showing some signs of reversal.(The Wall Street Journal Aug. 24) In fact, the most contentious issue to come over the Fed’s horizon recently is whether to infuse more money into the system and buy long-term securities beyond what was purchased through a bond-buying program that ended in March. With a back drop of a sputtering recovery, an Aug. 10 meeting of the Fed’s top officials featured perhaps some of the most diverse debate since Ben Bernanke began his tenure as Fed chairman four-and-a-half years ago. At least seven of 17 Fed officials, to some degree, spoke against a proposal that would change the way the Fed manages its huge portfolio of securities--but the move was approved…

NACHA warns of second phishing scam

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WASHINGTON (8/25/10)—NACHA, the electronic payments association, is again warning of a phishing scam perpetrated by individuals that are claiming to be representatives of NACHA. The scam mirrors earlier reports of emails that claimed that the accountholder in question made an unauthorized auto clearinghouse (ACH) transaction. NACHA reported similar emails late last month. While the email says that the transaction was “rejected” by NACHA, the organization has again stated that it “does not process nor touch the ACH transactions that flow to and from organizations and financial institutions.” “NACHA does not send communications to individuals or organizations about individual transactions that they originate or receive,” NACHA added in a Tuesday release. NACHA warned recipients not to click on the link included in the email, and added that similar fraudulent emails, with some changes, could be sent in the future. NACHA also recommended the use of antivirus programs. For the full NACHA advisory, use the resource link.

CUNA HMDA should only apply to large lenders

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WASHINGTON (8/24/10)--The Credit Union National Association (CUNA) has said that while it does not advocate that specific, additional information be reported under the Home Mortgage Disclosure Act (HMDA), it agrees with a recent suggestion that the new HMDA reporting requirements apply “only to the largest mortgage lenders that make the vast majority of mortgage loans.” Such a plan would initially exclude credit unions and small community banks, but could be expanded as needed, CUNA said. CUNA recommended that the Federal Reserve take a “bright line” approach to HMDA reporting, limiting the need for HMDA reports to situations in which there is a lien on a given home. The Fed is considering whether certain data elements of HMDA should be added, modified, or deleted, and is holding a series of hearings to collect input from interested parties. CUNA in a comment letter filed to the Fed last week said that credit unions could support additional changes to the HMDA requirements if the Fed or the to-be-established Consumer Financial Protection Bureau (CFPB) “clearly demonstrates that the new information would further the goal of ensuring fair lending and anti-discriminatory practices” while minimizing the reporting burden on credit unions. CUNA said it opposes portions of HMDA that would require credit unions to disclose the existence of existing home equity lines of credit and to report the total income and credit scores of potential mortgage-holders. It also recommended that HMDA reporting requirements related to loan pre-approvals, unsecured home improvement loans, and whether the home is a manufactured home be removed from the final rules. The association also encouraged the Fed to hold additional meetings with affected financial institutions as the HMDA rulemaking process moves forward, and to give credit unions at least two years to adapt to the new HMDA requirements once they are imposed. For the full comment letter, use the resource link.

NCUA provides indirect lending guidance

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ALEXANDRIA, Va. (8/24/10)--Saying that an “improperly planned or loosely managed indirect lending program can lead to unintended changes in the risk profile and financial performance” of a credit union, the National Credit Union Administration (NCUA) released Letter to CUs 10-CU-15 providing credit unions with guidance on how best to build or review their indirect lending programs. Risks associated with indirect lending include material shifts in balance sheet composition and increased credit risks, liquidity risks, transaction risks, compliance risks, and reputation risks, the letter said. The NCUA “has seen seemingly healthy credit unions fail in a matter of months due to indirect lending programs that spun out of control,” it added. The agency recommended that credit unions mitigate these risks by properly establishing the goals and portfolio limitations for indirect lending programs, creating and following specific underwriting standards and vendor policies, and maintaining a “comprehensive, effective, and ongoing due diligence program.” Credit unions should also “determine the level of lending and collection staff sufficient to operate and monitor” indirect lending programs. They also should undertake periodic risk-reward or cost-benefit analyses “to determine if the net return to the credit union is sufficient for the risk” and “establish an exit strategy” that could be followed if the risks posed by indirect lending become too great. Examiners will be monitoring credit unions for high concentrations of indirect loans to total loans, “inadequate analysis of overall indirect loan portfolio performance,” and insufficient loan documentation, and those examiners may contact credit unions if these or other assorted “red flags” are noticed, the NCUA said. The NCUA has also recently provided credit unions with guidance on liquidity risk management and the Secure and Fair Enforcement for Mortgage Licensing Act. For the NCUA letters, use the resource links.

Inside Washington (08/23/2010)

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* WASHINGTON (8/24/10)--There are two sessions this week sponsored by the National Credit Union Administration’s Office of Small Credit Union Initiatives: a Credit Union Roundtable, in Cleveland, Ohio, on Thursday and a Credit Union Workshop in Montgomery, Ala., on Friday. The workshops are tailored to credit unions with assets of $50 million or less. However, credit unions of all asset size groups are welcome to participate in the free training sessions. The 2010 sessions, which began in Aug. 14 in Honolulu, focus on these topics: Issues facing credit unions, maximizing the bottom line, regulatory hot topics, allowance for loan lease losses (ALLL), and alternatives to predatory lending. Click here for the complete calendar of events … * WASHINGTON (8/24/10)--Commodity Futures Trading Commission Chairman Gary Gensler said recently that the U.S. Congress, by passing the Dodd-Frank Act, made it clear that the new regulatory regime should usher in transparency where it comes to standard swaps. U.S. regulators will not bow to Wall Street efforts to weaken financial oversight, he said. Lawmakers’ actions to increase oversight of derivatives came after private swap deals increased the difficulty of containing the country’s economic meltdown because regulators had a hard time determining to what degree problems had spread among different firms. Gensler, in an interview for Bloomberg Television's “Political Capital with Al Hunt,” said the Securities and Exchange Commission, the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) will let in as much sunshine as possible in publicly disclosing meetings with banks and their lobbyists related to implementing new rules. The FDIC already announced plans to post reports of meetings on its website (American Banker Aug. 23)...

Inside Washington (08/20/2010)

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* WASHINGTON (8/23/10)--National Credit Union Administration (NCUA) Board Member Michael E. Fryzel met last week with delegates from Uzbekistan at the Illinois Credit Union League’s office in Naperville, Ill. The event was part of an exchange program administered by the Council of International Programs Chicago to give the delegation an opportunity to learn about U.S. credit unions, their supervision and management role in the financial system, and their relationship with the federal and state governments and credit union associations and different institutions supporting the development of credit unions. “It is my hope that the information they receive will assist them in overcoming the challenges facing the credit union system of Uzbekistan and help them create a thriving structure for their members,” Fryzel said. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (8/23/10)--Community Reinvestment Act data released by regulators Thursday indicate that the credit crisis has triggered a slowdown in lending. The report, which has data from 941 lenders, said small business loans originated or purchased in 2009 dropped 42% from the previous year--to 6.2 million. The value of the loans fell 30%, to $206 billion (American Banker Aug. 20). Small loans to farms dropped 29%, and the amount of those loans fell 18%. The total amount of community development loans originated or purchased dropped 52%, to $34.7 billion. Regulators said this was due to the high number of loans purchased in 2008. Total community development originations dropped 29%, to more than 15,800 ... * WASHINGTON (8/23/10)--Housing’s hold on government policy won’t weaken, according to a news analysis in The Wall Street Journal (Aug. 20). The “foreclosure wave” could subside by the end of 2011, which reduces the need for the government’s intervention. Foreclosures likely will continue to fall, even if the economy continues to struggle, the newspaper said. However, chances that the government will retreat from the housing sector are slim. Government entities back all new mortgages, while banks guarantee almost zero because few borrowers will take out mortgages from those banks when the government is offering 30-year fixed-rate loans with low rates. For the housing market to recover completely, it must draw participation from investors or private banks, the analysis said. That may not happen until Fannie and Freddie are “scaled back” and the housing market clears, the newspaper added ... * WASHINGTON (8/23/10)--The Federal Deposit Insurance Corp. (FDIC) has been granted supervisory powers over large companies the Federal Reserve Board oversees, and financial observers are questioning the dynamics of FDIC’s and Fed’s relationship. Douglas Landy, former Fed lawyer, said he could see a “rocky road” ahead because it’s “difficult to bring in people whose agenda is not exactly the same as yours,” he told American Banker (Aug. 20). Under the reform bill, the FDIC can examine systemically important financial institutions with more than $50 billion in assets. The agency has received backup enforcement authority over bank holding companies that pose a risk to the Deposit Insurance Fund ...

UW CUs Mike Long among HMDA panelists

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WASHINGTON (8/23/10)--UW CU Chief Credit Officer Mike Long will be among those speaking at a Sept. 16 Federal Reserve Board hearing on the Home Mortgage Disclosure Act (HMDA) and Regulation C. The hearing, which will take place in Chicago and will feature testimony from credit union and bank representatives as well as academics, regulators and consumer groups, is the third in a series. The Credit Union National Association (CUNA) suggested that Long be included as a panelist at this hearing. Recent public hearings on the HMDA rules were held in Atlanta and San Francisco, and a fourth hearing will be held on Sept. 24 in Washington, D.C. American Airlines FCU's Vice President and General Counsel Faith Anderson and State Employees CU Senior Vice President Phil Greer, both of whom were recommended by CUNA, testified at the Atlanta hearing. The hearings are meant to evaluate whether the 2002 revisions to Regulation C, which required lenders to report mortgage pricing data, helped provide useful and accurate information about the mortgage market. The hearings are also aimed at helping the agency assess the need for additional data and other improvements and identify emerging mortgage market issues. The HMDA requires mortgage lenders to provide detailed annual reports of their mortgage lending activity to regulators and the public. The Fed has asked for input on what types of data should be excluded or eliminated, and if any existing data elements should be modified. The Fed has also requested comment on whether some types of institutions or mortgage loans should be excluded from HMDA reporting. While the new Consumer Financial Protection Bureau (CFPB) will be responsible for making future changes in HMDA, information provided by panelists at these hearings will be considered by the CFPB as part of this process, Jeff Bloch, CUNA senior assistant general counsel, said.

Frank to FHFA Go after mortgage market abusers

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WASHINGTON (8/23/10)--The Federal Housing Finance Agency (FHFA) has “the power to pursue legal claims” against private firms that shifted their losses onto Fannie Mae and Freddie Mac, and should "use this power aggressively,” Rep. Barney Frank (D-Mass.) said on Friday. In a letter to President Barack Obama, Frank said that while some of the $150 billion in losses suffered by Fannie and Freddie were due to “honest but flawed” business decisions, “some of these losses result from deception.” Rep. Paul Kanjorski (D-Pa.), along with Reps. Brad Miller (D-N.C.) and Jackie Speier (D-Calif.), expressed similar sentiments in an Aug. 13 letter to President Obama. Deals in which private companies created “private profits at public expense” should “be fought with every tool at the companies’ and the agency’s disposal,” Frank said. “These deals must not be allowed to get lost in the shuffle,” he added. Frank and Kanjorski have scheduled a slate of housing finance hearings for September, and the administration held its own hearing on that topic last week. (See related News Now story: "Treasury outlines administration's critical housing issues," Aug. 18)

CUNA assesses Dodd-Frank regulatory burden for CUs

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WASHINGTON (8/23/10)--Although some credit unions officials who have been anticipating about 200 new rules to come out of the recently enacted Dodd-Frank regulatory reform law may find little comfort in this number, the Credit Union National Association has culled through the act’s 2,000 pages and found the number of whole, new rules that affect credit union may be closer to 35. Even an investigation as careful and thorough as CUNA’s, however, cannot at this time reveal a precise number, says the group’s deputy general counsel, Mary Dunn, because the law is complex, some of its language is vague, and the regulatory process itself generally takes twists and turns that may consolidate or add rules. CUNA has produced a comprehensive chart, to appear in its members-only, bi-weekly publication, Credit Union NewsWatch Aug. 23, that delineates the sections and provisions of the new law that most affect credit unions and specifies any known, upcoming rulemaking dates. There are sections on debit interchange fees, consumer protection laws, new requirements for mortgage lending and disclosures, and payments and settlement, and more. “As the Dodd-Frank law is activated through the rulemaking process, rest assured CUNA’s chief objectives will be to fight for interchange income and protect against undue regulatory burden--as much as we possibly can,” Dunn pledged. For CUNA members not yet subscribers, use the resource link below to sign up for your free online subscription of Credit Union NewsWatch to begin with the Aug. 23 issue. The issue will be available after noon eastern time. Also, sign up for CUNA’s two-part audio conference on regulatory reform issues.

CUNA to Obama Help CUs help the economy

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WASHINGTON (8/23/10)--Credit Union National Association (CUNA) President/CEO Bill Cheney last week urged President Barack Obama to include support for legislation that would lift the cap on credit union member business lending (MBL) as he continues to publicly back a Senate job creation bill. Obama’s support for the MBL legislation, which has met opposition from community bankers, “would provide a critical boost to the efforts in Congress to help credit unions facilitate the creation of jobs across the country,” Cheney said. In a speech delivered late last week, Obama asked members of Congress to put political games aside and work on creating new jobs. “Consistent with your goal to boost small businesses and the economy, we believe credit unions should be allowed to help create more jobs by making more member business loans, in the aggregate up to 27.5% of their assets,” Cheney said. “This move, championed by Senator Mark Udall (D-Colo.) and others, will not cost taxpayers one cent,” Cheney added. CUNA has estimated that lifting the cap would create over 108,000 new jobs and inject as much as $10.8 billion in funds into a still ailing economy.

CDFI Fund grants over 12M in funds to CUs

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WASHINGTON (8/20/10)--Twenty-one credit unions were awarded a combined $12 million in funds via the 2010 round of the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund. Nearly one-third of the credit unions received $750,000 in funding, the highest amount awarded to any financial institution during this round. The National Federation of Community Development Credit Unions was also awarded $750,000 in funds. In total, credit unions and related organizations from 12 states and the District of Columbia received CDFI funds. This round of grants, which was announced Thursday and totaled $104.9 million in funding for 180 CDFI Fund-eligible institutions, is the largest combined amount to be awarded since the CDFI Fund program began in 1994. The CDFI Fund received $467 million in requests from 408 financial institutions during this round. CDFI Fund Director Donna Gambrell said that the awards “will enable CDFIs to expand their impact and to provide the critically needed loans, capital, and support that have been instrumental in establishing and sustaining successful small businesses.” The CDFI Program is funded via congressional appropriations and has awarded over $926 million to eligible CDFIs since its inception. For the CDFI Fund release, use the resource link.

Kansas CUs to testify at Aug. 23 hearing

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WASHINGTON (8/20/10)--Representatives of the Kansas Credit Union Association and Kansas-based Mainstreet CU and Meritrust CU will be among those testifying during a pair of House finance subcommittee hearings set for Aug. 23 and 24. Kansas association President and Credit Union National Association board member Marla Marsh, as well as John Beverlin, CEO of Mainstreet Credit Union, will testify during the first hearing. The second hearing will feature testimony from Meritrust CU's community development liaison, Chris Wolgamott. The hearings, which will be chaired by House financial services oversight and investigations subcommittee leader Dennis Moore (D), are the second and third in an “End of Excess” series which is examining the causes of the financial crisis. The first hearing, which was held earlier this year in Washington, addressed debt and leverage issues. The Kansas association in a release said that testimony at the upcoming hearings will center on credit unions successful responses to the financial crisis and “examples of how Kansas credit unions’ financial literacy efforts can play a role in a more stable financial system.” The Aug. 23 hearing will take place at Johnson County Community College in Overland Park, Kansas, and the Aug. 24 hearing will be held at the University of Kansas in nearby Lawrence.

Federation CEO Closed CU should still have day in court

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WASHINGTON (8/20/10)--Following the recent liquidation of Kappa Alpha Psi FCU by the National Credit Union Administration (NCUA), National Federation of Community Development Credit Unions President/CEO Cliff Rosenthal said that the right to appeal NCUA-ordered liquidations appears “hollow.” In a release, Rosenthal said that the “logic of liquidation proceedings is puzzling at best” to the federation and credit unions. “It would be more transparent to inform credit unions that NCUA's actions are irrevocable,” he added. Rosenthal criticized the “extremely high bar” that credit unions are forced to meet during liquidation cases, adding that the NCUA “can always produce data and arguments to support its case.” However, Rosenthal added, “that does not mean that the credit union movement will perceive NCUA's actions against credit unions as appropriate, unavoidable, and fair.” Kappa Alpha Psi in early August legally challenged an NCUA liquidation order, but abandoned its injunction request on Wednesday. However, further hearings are planned in the near future. The NCUA had formally liquidated the troubled credit union last Friday, redistributing its assets to its former members. Rosenthal said that he hopes that the credit union decides to continue with the legal action.

Inside Washington (08/19/2010)

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* WASHINGTON (8/20/10)--The Federal Deposit Insurance Corp. (FDIC) announced relief measures to help banks affected by severe weather in Missouri. On Tuesday, a federal disaster was declared in certain parts of the state (American Banker Aug. 19). The agency said it would consider relief from certain filing and publishing requirements for affected institutions. The FDIC’s Kansas City office also will move forward with requests to create temporary banking facilities for banks whose offices have been damaged. Missouri Gov. Jay Nixon this week said federal officials granted his request for disaster assistance in 29 counties, which were affected by floods and severe storms occurring from June 12 to July 31 (Associated Press Aug. 17) ...

CUNA backs FHA risk management initiatives

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WASHINGTON (8/19/10)--The Credit Union National Association (CUNA) this week said it supports the Federal Housing Administration’s (FHA) pending imposition of new down-payment requirements. The new down-payment requirements, which were proposed by the FHA last month, would remove potential borrowers with credit scores of 500 or less from consideration for FHA loans and would require borrowers with scores between 500 and 579 to make a minimum 10% down payment. The FHA currently requires borrowers with credit scores below 500 to make a minimum payment of 10% of the value of the home being purchased. In a comment letter sent this week, CUNA said that it would support stricter requirements if those requirements were imposed on a graduated basis. CUNA said that it also agrees with the FHA’s potential plan to exempt borrowers who refinance current loans from the credit score requirements, as long as it is restricted to an interest rate reduction refinance, as well as the FHA’s proposal to reduce the amount of the buyer’s closing costs that may be paid by the seller from 6% to 3% of the purchase price of the property. Jeff Bloch, CUNA senior assistant general counsel, said that CUNA's understanding is that these proposed changes will not affect credit union mortgage lending, as credit union underwriting standards generally meet or exceed these standards. "The goal of these changes appears to be to help ensure that the lax underwriting standards of others in the past do not reoccur," he added. For the full comment letter, use the resource link.

NCUA to hold Oregon-based CU town hall

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ALEXANDRIA, Va. (8/19/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz has encouraged “all interested parties” to take part in the NCUA’s next town hall, which is set for Oct. 5 in Portland, Ore. The town hall will address portions of the recently enacted financial regulatory reform package that impact credit unions. It also will include NCUA staff presentations on recent NCUA regulatory developments, and several issues that are occurring in both the natural person and corporate credit union systems. In a statement accompanying the release, Matz said that she looks forward to “the same vigorous dialogue and forthright examination of the important issues facing the credit union system at this Town Hall as we saw in previous sessions.” The NCUA has held several live and virtual town halls in recent months, and Matz said that public interaction would be a hallmark of her term as NCUA head. The NCUA held several town hall meetings as it developed its new set of corporate credit union rules. Those rules are expected to be released next month. The NCUA has always benefited from “reasoned, constructive input from stakeholders,” Matz added. For the NCUA release, use the resource link.

CU-backed candidates win in Wash. state

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WASHINGTON (8/19/10)--The trend of strong results for credit union-backed candidates continued on Tuesday, with credit union backers moving on to general election contests in Washington State. Senate incumbent Patty Murray (D), who has been backed by the Credit Union National Association (CUNA) and the Washington Credit Union League, will move on to face Dino Rossi (R) in November after she won 46% of the total primary vote on Tuesday. Rossi won 34% of the total electorate, with a pair of Tea Party-supported Republican nominees garnering 15% of the total vote. Washington’s primary system ends in a general election runoff between the top two vote-getters, regardless of party affiliation. Murray last year worked with the league, as well as GESA CU and Spokane Teachers CU, to promote financial literacy legislation in the senate. State Representative Jamie Herrera (R), who has also worked with the Washington league on a successful public funds bill, will face Denny Heck (D) in November. The contest, which is expected to be competitive due to the close party registration in Washington’s third district, is for the open seat of retiring congressional Rep. Brian Baird (D). "Both of these candidates--Senator Murray and Representative Herrera--are strong credit union friends who will face very competitive races in the general election," said Trey Hawkins, CUNA vice president of political affairs. "We look forward to working with the Washington Credit Union League to ensure that these candidates win in November."

CUNA CEO Interchange reg. reform remain on radar

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WASHINGTON (8/19/10)--In his weekly regulatory action update, Credit Union National Association (CUNA) President/CEO Bill Cheney said CUNA is “actively engaged” in the Federal Reserve’s development of pending interchange fee rules. CUNA’s legislative staff is also looking to work with the U.S. Congress to make some technical corrections to key interchange statutory provisions, Cheney added. Cheney noted that the Fed will soon distribute surveys on the regulation of debit interchange and network fees to debit card issuers, and added that CUNA’s Interchange Working Group is currently developing its own comments to provide to the Fed. CUNA’s Corporate Credit Union Next Steps and Supervisory Issues Working Groups both continue their work. The Next Steps group is compiling a report on the investment services, and payment and settlement service options available to natural person credit unions, and that report is expected to be released in September. The Supervisory Issues Working Group also is gathering information of its own via a new site on CUNA’s homepage. That site, which will be labeled “top initiatives,” will allow credit unions to share examination and supervisory concerns with the working group. CUNA also is monitoring ongoing regulatory reform developments and will keep credit unions updated via a two-part audio conference on Aug. 24 and 25, and a comprehensive implementation date database, to be published in next week’s edition of CUNA’s bi-weekly, members-only publication, NewsWatch. For more on the audio conference and to sign up for NewsWatch, use the resource links.

Federations Rosenthal NCUA pushing CU mergers consolidation

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WASHINGTON (8/19/10)--In a recent release, National Federation of Community Development Credit Unions (federation) President/CEO Cliff Rosenthal said that “there is a broad and growing feeling among many small credit unions that there is an unwritten agenda to force mergers and consolidation within the credit union industry.” Rosenthal pointed to the National Credit Union Administration’s (NCUA) recent liquidation of Kappa Alpha Psi FCU as one event that “has heightened that perception.” Kappa Alpha Psi earlier this month filed a legal challenge to the NCUA's liquidation order, alleging that the "significant drop" in its net worth ratio that predicated the liquidation was created by assessments charged by the NCUA. The NCUA countered, saying that its liquidation order was well founded and was directly related to the credit union's inability to generate profits, build its net worth, and adequately grant, service, and collect loans. The NCUA on Friday formally liquidated the troubled credit union by distributing all shares held in the credit union to its former members, and the credit union abandoned its injunction request on Wednesday. Rosenthal had backed Kappa Alpha Psi’s challenge, saying recently that “it is important for credit unions who feel that they have been mistreated by their regulators to use all means available, ultimately including the courts, to assert their legal rights and argue their case publicly.” Rosenthal also noted that the federation “receives a steady stream of complaints” from member credit unions CDCUs about examiners acting overly aggressively or inappropriately.

Inside Washington (08/18/2010)

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* WASHINGTON (8/19/10)--The Government Accountability Office (GAO) released a report this week on federal efforts to end mortgage-fraud schemes and recommended that the government develop a more comprehensive strategy than currently exists. In 2009, the administration created the Financial Fraud Enforcement Task Force (FFETF), headed by the Department of Justice, to combat mortgage fraud and other financial crimes. The GAO report said: To develop a comprehensive strategy for the FFETF’s Mortgage Fraud Working Group’s efforts to counter mortgage fraud, the U.S. Attorney General, as the head of the FFETF, should develop clear, long-term strategies and performance measures that the working group can use to evaluate its progress toward its long-term goal of increasing enforcement in the area of mortgage fraud”…

CUNA seeks comment on indemnification changes

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WASHINGTON (8/17/10)--The Credit Union National Association (CUNA) has asked credit unions to comment on whether a proposed prohibition on indemnification payments would discourage institution-affiliated parties (IAPs) from working with credit unions. The NCUA’s indemnification proposal would prohibit federally insured credit unions from making indemnification payments to an institution-affiliated party (IAP) for legal and other professional expenses in administrative and civil proceedings by NCUA or a state regulatory agency where the IAP is assessed a civil money penalty, removed from office or made subject to a cease and desist order. Credit unions may also comment on whether or not the NCUA should prescribe an indemnification prohibition on IAPs regardless of the financial condition of the credit union that they are involved with. CUNA’s comment call has also asked if the aforementioned indemnification payment prohibitions, as well as prohibitions on so-called “golden parachute” compensation arrangements, should apply to both natural person and corporate credit unions. The NCUA proposed prohibiting so-called “golden parachute” compensation packages to the departing executives of troubled federally insured credit unions. These prohibitions would not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements, and would not apply to current employment contracts, only to those that are agreed to or renewed after the rules take effect. Comments are due to CUNA by Aug. 27. Comments to NCUA should be submitted by Sept. 7. For the comment call, use the resource link.

NCUA Kappa Alpha Psi seek hearing delay

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WASHINGTON (8/18/10)—Kappa Alpha Psi FCU will now have until Aug. 23 to respond to the National Credit Union Administration’s most recent court statement after the credit union and the National Credit Union Administration (NCUA) agreed to extend the deadline on Tuesday. The NCUA will be given until Aug. 30 to respond to any claims that the credit union may make at that time, and the two sides also agreed that any additional hearings related to the case will take place between Sept. 15 and 30. The two sides were set to take part in a full hearing to be held later today in the U.S. District Court for the District of Columbia. However, the credit union failed to respond to an NCUA brief by the previously scheduled Aug. 16 deadline. The credit union filed a legal challenge to the NCUA’s liquidation order earlier this month, alleging in the challenge that the NCUA’s forced liquidation of the credit union was unjust. Specifically, the credit union alleged that the “significant drop” in its net worth ratio was created by assessments charged by the NCUA. The NCUA countered, saying that its liquidation order was well founded and was directly related to the credit union’s inability to generate profits, build its net worth, and adequately grant, service, and collect loans. The NCUA on Friday formally liquidated the troubled credit union by distributing all shares held in the credit union to its former members. The NCUA on Tuesday said that it “has a statutory obligation to pay members their shares and give them access to their funds as soon as possible.” Any member funds that were still held in the credit union as of Friday were mailed to the former members on that day, the NCUA said. A total of just over $700,000 in member funds were paid to the credit union’s 1,472 members. However, the NCUA said that it could not locate the holders of 150 accounts which typically held the minimum $25 account balance, and nothing more. The NCUA said that it is continuing the search for the holders of these accounts.

Inside Washington (08/17/2010)

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* WASHINGTON (8/18/10)--Donna Gambrell, director of the Treasury’s Community Development Financial Institutions (CDFI) Fund, will announce the recipients of the 2010 Technical Assistance and Financial Assistance Awards on Thursday. The announcement will take place at Lower East Side People's FCU, New York City, a federation member, and the largest community development credit union in New York City. The round is expected to be the largest ever, with $247 million allocated to the CDFI Fund through the 2009 Omnibus Bill ... * WASHINGTON (8/18/10)--Banks eased loan standards in the second quarter, according to a Federal Reserve Board Survey. The July 2010 Senior Loan Officer Opinion Survey on Banking Lending Practices indicated that some domestic banks eased standards and terms on commercial and industrial loans of all sizes. Large domestic banks reported easing standards on almost all of the different categories of loans to households. Other banks showed smaller net fractions easing policies or a net tightening of policies. Regarding residential real estate lending, few large banks reported easing standards on prime mortgage loans, while a modest net fraction reporting tightening standards. Banks reported an increased willingness to make consumer installment loans for the third consecutive quarter and small net fractions of banks reported easing standards on credit card or consumer loans. A small net fraction of respondents reported tighter terms and conditions on credit card loans ... * WASHINGTON (8/18/10)--Sen. Carl Levin (D-Mich.) Monday told the American Bar Association that law firms should implement anti-money laundering guidance, which directs lawyers to tighten their protocols by identifying the beneficial owners of trusts and shell companies to improve how firms identify risky clients (American Banker Aug. 17). It also defines the procedures needed to evaluate the source of client funds deposited into an attorney-client or law office bank account, suggesting firms designate an anti-money laundering compliance officer. Levin called on legal groups in February to crack down on misconduct. He has praised the guidance, but said it is just a first step ...

Treasury outlines administrations critical housing issues

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WASHINGTON (8/18/10)--At a housing conference Tuesday, U.S. Treasury Secretary Timothy Geithner outlined what the administration has identified as significant issues that have to be addressed in restructuring the government-sponsored housing enterprises and the housing finance industry. He added that there must be a new system that eliminates the conflict between Freddie Mac’s and Fannie Mae’s public policy role and the need to enhance shareholder returns. “Based on the panel discussions after Geithner’s remarks, it appears that the issues of most concern are the role of the government and the need for transparency in the mortgage securitization market,” said Jeff Bloch Tuesday. Bloch is senior assistant general counsel for the Credit Union National Association. “As for the role of government, the panels’ thoughts ranged anywhere from limited guarantees for only certain types of mortgages and securities to having the entire housing finance industry under the control of one large government agency. There was also agreement that more transparency and disclosure was needed in the mortgage securitization market and that although this was addressed in the Dodd-Frank Act, the success of these provisions will depend on the implementing regulations,” Bloch added. Additional issues made during the conference:
* The role of the government in promoting stability in the market in good times and bad. Specifically, the role and extent of the federal guarantee and whether it's to be explicit, or implicit as it was before the collapse of the industry, and the extent that the private market absorbs losses. For example, one idea here is to set up an insurance fund, similar to deposit insurance, in which premiums from the private sector go to a fund that pays losses and the losses beyond that are paid by the government; * The extent to which there should be financial support for affordable housing and the extent that this should encourage rental housing instead of home ownership; * The makeup of the mortgage securitization market and the need for transparency. The Dodd-Frank Act addresses a number of these issues; and * The time that would be necessary to transition to a new system.
National Urban League President/CEO Marc Morial, American Enterprise Institute Fellow Alex Pollock, Bank of America Home Loan President Barbara Desoer, and other academics and industry insiders were among the panelists.

CUs integral to housing finance CUNA tells Treasury

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WASHINGTON (8/17/10)--The Credit Union National Association (CUNA) encouraged the U.S. Treasury to recognize that credit unions perform, and can continue to perform, a valuable role in the mortgage lending system ahead of a Tuesday panel discussion on many issues that are central to housing finance reform. The panel discussion will take place between 9:00 A.M. and 1:30 P.M. (ET) today and will feature input from Treasury Secretary Tim Geithner and U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, as well as several academics and finance insiders. CUNA in a letter sent to the Treasury ahead of the panel discussion said that any administration housing finance reforms should ensure that credit unions and other financial services firms are able to take full advantage of the opportunities to sell their loans into the secondary market and to receive services from the Federal Home Loan Banks or other entities that may be created. Any potential legislative and regulatory burdens faced by credit unions should be minimized by the new housing finance plan, CUNA said, adding that the central aim of any reformed housing finance system should be ensuring that consumers receive mortgage loans that they can afford, not merely increasing home ownership. The hearing, which will be broadcast live on the Treasury's homepage (www.treasury.gov), will feature discussions on housing finance reform and its impact on the financial markets and housing policy. Assorted breakout sessions on the role of the private sector, access and affordability, securitization, and other topics will also take place. Reps. Barney Frank (D-Mass.) and Paul Kanjorski (D-Penn.) in late July announced that a number of similar housing finance hearings would take place in September.

Financial reforms to be covered in two-part CUNA conference

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WASHINGTON (8/17/10)—The pending changes caused by recently enacted financial regulatory reform bill will be the focus of two upcoming Credit Union National Association (CUNA) audio conference calls next week. The audio conference, which will be split into two sections scheduled for Aug. 24 and 25, will cover the overall impact of the legislation, and the implementation dates of key provisions. Debit interchange fee provisions and other important legislative changes in the new act, and their implementation, will be one focus of the discussion, which will be lead by CUNA’s Senior Vice President/Deputy General Counsel Mary Dunn, Vice President of Legislative Affairs Ryan Donovan, Senior Assistant General Counsel Jeff Bloch, and Special Projects counsel Michael Edwards. Part two of the conference will specifically address the proposed Consumer Financial Protection Bureau, as well as changes to home mortgage lending rules and truth in lending requirements. Proposed changes to credit union executive compensation, risk retention policies, and remittance policies will also be covered, as will potential changes to the National Credit Union Share Insurance Fund and material loss reviews. Conference attendees will be able to submit any questions ahead of time via email. To register for the two-part CUNA audio conference, use the resource link.

Inside Washington (08/16/2010)

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* WASHINGTON (8/17/10)--The Federal Reserve Board has announced its annual adjustment of the dollar amount of points and fees that trigger additional disclosures and prohibitions under the Truth in Lending Act for certain mortgage loans. The dollar amount will be adjusted from $579 for 2010 to $592 for 2011, which is based on the Consumer Price Index. The adjustment will be effective Jan. 1 and does not affect the new mortgage lending rules adopted by the Fed in July 2008 for “higher-priced mortgage loans.” Coverage of mortgage loans under those rules is determined using a different rate-based threshold...

Fed unveils a series of mortgage-rule changes

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WASHINGTON (8/17/10)--The Federal Reserve Board on Monday released a series of announcements involving mortgage lending rules, changes and proposed changes affecting Truth in Lending Act, Mortgage Disclosure Improvement Act (MDIA), and Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) financial regulatory reform rules. In one of its actions, the Fed finalized interim final rules requiring consumers receive notice when their mortgage is sold. The board also approved a new interim final rule, issued under MDIA authority and effective Jan. 30, 2011, which requires lenders to disclose how borrowers' regular mortgage payments can change over time. Lenders' cost disclosures must include a payment summary in the form of a table, and the rule specifies what must be revealed in the disclosure. Credit unions and other interested parties have 60 days to comment. The Fed governors also approved a final rule to prohibit “steering.” Under this rule a loan originator may not receive compensation based on a loan’s interest rate or other loan terms. The rule is intended to prevent loan originators from increasing their own compensation by raising the consumers' loan costs, such as by increasing the interest rate or points. Under the rule, effective April 1, 2011, loan originators can continue a common practice and receive compensation based on a percentage of the loan amount. Issued for a 90-day comment period, the Fed board also proposed enhanced consumer protections and disclosures for home mortgage transactions under Regulation Z (Truth in Lending rules). The proposal represents the second phase of the Fed’s comprehensive review and update of Reg Z mortgage lending rules, and reflect extensive consumer testing executed by the agency. Under the plan, the Fed intends to:
* Improve the disclosures consumers receive for reverse mortgages and impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information; * Prohibit certain unfair practices in the sale of financial products with reverse mortgages; * Improve the disclosures that explain a consumer's right to rescind certain mortgage transactions and clarify the responsibilities of the creditor if a consumer exercises the right; and * Ensure that consumers receive new disclosures when the parties agree to modify the key terms of an existing closed-end mortgage loan.
The agencies that comprise the Federal Financial Institutions Examinations Council (FFIEC), including the National Credit Union Administration (NCUA), issued reverse mortgage guidance Monday in connection with the Fed rule. This guidance finalizes the proposed guidance that was issued by NCUA and the other agencies late last year. Although the Fed proposal and FFIEC guidance have not yet been reviewed in detail, the Credit Union National Association (CUNA) generally supports enhanced consumer protections for reverse mortgages, recognizing the complexity of these loans and the fraud and abuse that have been associated with these types of products, according to Jeff Bloch, CUNA senior assistant general counsel. Reverse mortages allow retirees and others to use their home equity to supplement income and, without additional protections, the current fraud and abuse would only grow as the population ages, added Bloch. Under a separate proposal with a 30-day comment period, the Fed would revise the escrow account requirements for higher-priced, first-lien "jumbo" mortgage loans. The proposed rule, which implements a provision of the Dodd-Frank Act, would increase the annual percentage rate (APR) threshold used to determine whether a mortgage lender is required to establish an escrow account for property taxes and insurance for first-lien jumbo mortgage loans. Jumbo loans are loans exceeding the conforming loan-size limit for purchase by Freddie Mac or Fannie Mae, as specified by the legislation. Although some may have thought there would have been a lull in consumer protection rulemaking until the new Consumer Financial Protection Bureau (CFPB) created under the Dodd-Frank Act got up and running, this is clearly not going to be the case, according to Bloch. He added that it looks like the Fed will proceed with its hectic rulemaking schedule in this area and will continue to do so until the CFBP is ready to take the handoff. Use the resource links for more information on each of the Fed’s actions.

CUNA reminder Limits here on cards for young folks

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WASHINGTON (8/17/10)--The fall semester is about to begin at many colleges across the country, and the Credit Union National Association (CUNA) wants to remind credit unions about new constraints on their lending and marketing programs. “Changes to Regulation Z that became effective last February will have a major impact on credit cards issued to college students,” said Mike McLain, CUNA senior compliance counsel and assistant general counsel. “Reg Z, which implements the Truth-in-Lending Act, generally prohibits a credit union from issuing a credit card to anyone under the age of 21 unless there is a co-borrower, cosigner or guarantor over the age of 21 on the card who is jointly or secondarily liable and has income sufficient to make the required payments,” explained McLain. The only exception to this rule is if the underage borrower can document that he has an independent means to make the required minimum periodic payments based upon his income, assets and current obligations.” The revised Reg Z also addresses increases in lines of credit provided to borrowers under 21, McLain added. “If a credit card is issued to an underage borrower along with a joint party, then the credit limit may not be increased without first obtaining the written agreement of the joint party that he or she will assume liability for the increase.” February amendments to Reg Z, required by the 2009 Credit Card Accountability, Responsibility, and Disclosure (CARD) Act , also restrict credit union marketing programs on college campuses. Credit unions can’t offer a college student any tangible item or “gift” to induce the student to apply for a credit card or any other type of open-end loan if the offer is made:
* On the college or university campus; * Near the college or university campus; or * At an event sponsored by or related to the college or university.
McLain explains that the Federal Reserve Board, in charge of writing Reg Z, has defined a “tangible item” as any physical item such as a gift card, t-shirt, magazine subscription or similar item. Tangible items do not include non-physical inducements such as discounts, reward points, or promotional credit terms. Furthermore, a tangible item that is offered to any college student, and which the student will receive whether or not he or she applies for or opens a credit card account or other open-end loan, is not prohibited by the final rule. For example, refreshments or pens offered to a college student on campus that are not conditional on whether the student applies for a credit card account would not violate the rules.

Inside Washington (08/13/2010)

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* WASHINGTON (8/16/10)--Elizabeth Warren, who chairs the Congressional Oversight Panel and is a leading candidate to head the Consumer Financial Protection Bureau, met with White House officials last week. A presidential spokesperson said that while a decision has not been made, Warren could be chosen to lead the consumer bureau (The Washington Post Aug. 13). The consumer bureau was largely Warren’s idea, and if President Barack Obama doesn’t choose Warren, “he may risk infuriating his liberal supporters who see Warren as the only logical candidate,” the newspaper said ... * WASHINGTON (8/16/10)--It’s likely that higher standards for bigger banks will be passed onto smaller institutions, according to financial industry representatives. Under the regulatory reform bill, banks with more than $50 billion in assets are considered systemically significant and will be subject to liquidity, capital and leverage rules. Banks under the $50 billion standard also should pay attention to the standards, observers told American Banker (Aug. 13). Some requirements already are taking effect--one example is a provision by Sen. Susan Collins (R-Maine), which states that trust-preferred securities no longer count toward Tier 1 capital after a six-year transition period. Companies with less than $15 billion in assets will be grandfathered in, while companies with $500 million in assets are exempt. Paul Miller, managing director at FBR Capital Markets Corp., said trust-preferreds are phasing out and are a “moot point” ... * WASHINGTON (8/16/10)--The Federal Deposit Insurance Corp. (FDIC) announced Thursday an open door policy so the public can give input and track the rulemaking process as the agency implements the Dodd-Frank Act and Consumer Protection Act. The FDIC will have roundtable discussions with external parties on implementation issues to provide balanced public input throughout the rulemaking process. The discussions will be available for public viewing via webcast. The agency also will release the names and affiliations of private sector individuals who meet with senior FDIC officials to discuss implementing the new law through independent or joint rulemakings. The FDIC will also release the subjects of the meetings and webcast all open board meetings, including those regarding regulatory reform ...

CUNA E-guide covers ADA guidelines for ATMs

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WASHINGTON (8/16/10)—The ATM machines provided by credit unions and other financial institutions will be required to be usable by individuals that are blind or have low vision under changes to the U.S. Department of Justice’s (DOJ) Americans with Disabilities Act (ADA) regulations, the Credit Union National Association (CUNA) reports. ATMs must also have modifications that allow them to serve the needs of deaf or hard of hearing members, as well as members that are wheelchair bound, according to the DOJ. Specifically, at least one ATM at a given location must be provided to ensure compliance with Section 707 of the ADA. The adapted ATMs must also be able to provide a member with all the functionality of a conventional ATM. ATMs that are installed on the outside and inside of a given credit union would be considered separate locations, according to CUNA. For additional details, follow the resource link to access CUNA’s e-Guide.

NCUA argues record supports Kappa Alpha Psi FCU closure

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WASHINGTON (8/16/10)--The ordered liquidation of failed Kappa Alpha Psi FCU was neither “arbitrary” nor “capricious,” and did not represent an “abuse of discretion,” the National Credit Union Administration (NCUA) said in court papers filed on Friday. The NCUA in its statement filed with the U.S. District Court for the District of Columbia added that the potential liquidation of the approximately $750,000-in-asset credit union, which was ordered on Aug. 3, was supported by the “administrative record” created by NCUA. The credit union attempted to obtain an injunction against the NCUA following the announcement of the liquidation, alleging that a "significant drop" in its net worth ratio between 2007 and 2009 "was attributable to 'full accrual' accounting” and the costs created by the NCUA’s assessments to replenish its Temporary Corporate Credit Union Stabilization Fund. John McKechnie, director of public and congressional affairs at NCUA, said early last week that the credit union was involuntarily liquidated due to its inability to “generate consistent operational profits; build its net worth position; maintain its records in a sound manner; grant quality loans; or adequately collect on delinquent loans." "Newly founded credit unions have 10 years to reach an adequate capital level, which is a 6% net worth ratio; however, Kappa Alpha Psi FCU has never been able to show it can reach that level of capitalization," McKechnie told News Now. The community development credit union, which was established to serve members of the Kappa Alpha Psi fraternity and affiliated organizations, reported a net worth ratio of 0.58% as of Dec. 31. In its statement, the NCUA noted that while Kappa Alpha Psi said that it was liquidated by a “surprise” order, current credit union regulations do not require the NCUA to serve prior notice in situations where the credit union in question is “determined to be insolvent or bankrupt.” Further, the NCUA said that while the credit union claims that it’s net worth ratio had improved from 1.95% to 3.67% during the 2010 second quarter, “such a showing would not preclude liquidation under the applicable NCUA regulations.” The NCUA's filings dispute the net worth level reported on the credit union's second quarter call report, claiming that the credit union's board failed to properly accrue approximately $20,000 in data processing expenses. Kappa Alpha Psi will have until noon today to respond to the NCUA statement, and the NCUA will then need to reply by noon on Tuesday. A full hearing on the case is scheduled for Wednesday.

Freddie Mac reports record 15- 5-year mortgage rates

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WASHINGTON (8/16/10)--Freddie Mac’s weekly mortgage rate survey recorded a five-year adjustable rate of 3.56% during the week ended Aug. 12, a record low since Freddie Mac began reporting on that rate in 2005. That five year rate averaged down from last week when it averaged 3.63 percent. A year ago, the 5-year ARM averaged 4.75 percent. Fifteen year mortgage rates also reached a record low during the week, with a reported average of 3.92%. Freddie Mac Vice President/Chief Economist Frank Nothaft said that these and other low mortgage rates “are helping to heal many battered local housing markets by increasing home-purchase activity.” Thirty-year fixed rate mortgages averaged 4.44% during the week, down from the 5.29% average recorded during the previous year, while one-year Treasury-indexed adjusted rate mortgages averaged 3.53%. For the Freddie Mac release, use the resource link.

CUNA Watch the FDICs overdraft proposal closely

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WASHINGTON (8/13/10)—Although a recent consumer-protection proposal issued by the Federal Deposit Insurance Corp. (FDIC) obviously does not apply to credit unions, the head of the Credit Union National Association’s (CUNA’s) compliance department suggests credit unions pay attention to it for possible clues aobut their regulatory future. The FDIC has proposed that state-chartered banks under its jurisdiction be required to go farther in incorporating consumer protections in their overdraft protection programs than the Federal Reserve Board’s mandates in its overdraft regulations that go into effect on Aug. 15. The Fed’s Regulation E amendments, effective on July 1 for new accounts and Aug. 15--this Sunday--for existing accounts, require all banks and credit unions to obtain “opt in” consent by accountholders before charging fees for covering ATM and one-time debit transactions when there are insufficient funds in the account. An “opt-in” is not required by the Fed’s rules to cover a check or ACH payment, such as used for on-line bill paying services, when the account doesn’t have adequate funds. Regulation E implements the Electronic Fund Transfer Act. The FDIC is proposing that banks that rely on automated overdraft payment programs should establish procedures to address all types of overdrafts, including those triggered by checks and ACH transfers. The FDIC says that bank practices should:
*Promptly honor a customer’s request to decline payment rather than to cover the overdraft and charge a fee (that is, to “opt out” of an overdraft system); * Educate the accountholder about alternative overdraft payment products; *Monitor accounts and take meaningful action to limit overdraft use by a customer, including “giving customers who overdraw their accounts on more than six occasions during a 12-month period” less costly alternatives or eliminating overdraft protection on the account; * Institute “appropriate daily limits” on overdraft fees, whether by capping the amount of transactions subject to an overdraft fee or putting a dollar daily limit on the fee; and * Not process transactions in a manner designed to maximize the cost to consumers.
In approving these proposed supervisory guidelines for public comment, the FDIC board cited a 2008 study it conducted of bank overdraft practices and growing complaints it had received from consumers about overdraft fees. The agency notes that this proposal builds on a 2005 joint-agency guidance on overdraft programs (issued by NCUA in Letter to Credit Unions 05-CU-03) and is consistent with good risk management practices and oversight over third-party vendors. Bank examiners would use this guidance to evaluate the adequacy of a bank’s overdraft program. The FDIC is accepting comments until Sept. 27 on its proposed guidance. “Although this is being proposed by the FDIC, new requirements and additional restrictions on overdraft programs could very well eventually also apply to credit unions,” noted Kathy Thompson, CUNA’s senior vice president for compliance. “Many of the staff at the FDIC who are handling consumer protection issues are expected to be transferred to the new Consumer Financial Protection Bureau. And the Office of Thrift Supervision in April issued its own proposed ‘supplemental guidance’ to the 2005 joint agency guidance--and under the new regulatory reform law, OTS is being disbanded, so it’s very likely that the authors of the OTS overdraft guidance will end up at the CFPB,” Thompson said. “Many credit unions already address points raised in the FDIC’s proposal by educating members on alternatives, addressing over usage, and honoring opt-out requests,” she said. “However, having these standards subject to examiner scrutiny may result in rigid tests, a concern that has already been raised by the banking industry about the FDIC proposal. Thompson added, “Bankers have also expressed concern that while the FDIC says it is only targeting automated overdraft programs, there is nothing that really keeps examiners from also evaluating, for instance, whether banks that make case-by-case decisions are tracking how often the same customer is allowed to overdraft an account during the year. “And the FDIC didn’t just pull the ‘six-overdraft-fees-a-year’ limit out of thin air,”Thompson said. “This is a provision that appears in recent overdraft bills in Congress, as well as limits on daily overdraft fees and the order transactions are processed.” In a related development, earlier this week Wells Fargo Bank was ordered to repay $203 million in overdraft fees it assessed between 2005 and 2007 for processing transactions from “high to low,” meaning the largest dollar amounts were first handled. While financial institutions, including Wells Fargo, argue that processing the biggest payments first, which are often for mortgage and car loan payments, benefits consumers. a federal court in California found that the bank did this in order to generate more overdraft fees and failed to provide meaningful disclosure of how it processes transactions, and ruled that this violated California consumer protection laws. While the bank plans to appeal and there are other lawsuits pending on this same issue, federal regulatory pressure is already having financial institutions re-evaluate their processing practices.

Administration launches housing reform examination

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WASHINGTON (8/13/10)--U.S. Treasury Secretary Tim Geithner and U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan will discuss issues central to housing finance reform at an Aug. 17 panel discussion. The panel discussion, which will take place between 9:00 A.M. and 1:30 P.M. (ET), will be broadcast live on the Treasury’s homepage (www.treasury.gov). Treasury Domestic Finance Undersecretary Jeffrey Goldstein said in a release that the conference is an opportunity for regulators and legislators to broaden their perspectives “on a number of key issues in a transparent way to make certain that all of the best ideas are on the table." The Obama administration is planning to provide its housing finance reform proposal to Congress in early 2011. Bank of America home loan president Barbara Desoer, National Urban League President/CEO Marc Morial, American Enterprise Institute fellow Alex Pollock, and other academics and industry insiders will take part in the panel discussions. Panel discussions on housing finance reform and its impact on the financial markets and housing policy will follow opening remarks, with assorted breakout sessions on the role of the private sector, access and affordability, securitization, and other topics to follow. Reps. Barney Frank (D-Mass.) and Paul Kanjorski (D-Penn.) late last month announced a slate of housing finance hearings set for September. Frank chairs the House Financial Services Committee, while Kanjorski leads the House subcommittee on capital markets, insurance and government-sponsored enterprises. Last month, Kanjorski said that the hearings would examine policies related to calculating guarantee fees and would allow legislators to consider “innovative ideas for recovering the costs resulting from the decision to place Fannie Mae and Freddie Mac into conservatorship." Both Fannie and Freddie were placed under government conservatorship in 2008.

Inside Washington (08/12/2010)

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* WASHINGTON (8/13/10)--The Federal Deposit Insurance Corp. (FDIC) is looking into whether life insurers misled consumers about retained death benefits. It urged companies to disclose that the funds are not guaranteed by the government (Bloomberg Aug. 12). Chairman Sheila Bair said the FDIC suspects consumers may believe the accounts are FDIC-insured. Life insurers need to tell consumers that the accounts are not insured. This information needs to be given to policyholders and their beneficiaries. Last month, Bloomberg Markets magazine reported that more than 100 carriers profit by holding and investing $20 billion owed to life insurance beneficiaries. The accounts are guaranteed by insurer guaranty associations, which insurers should disclose, Bair said in a letter to the National Association of Insurance Commissioners ...

NCUA announces public board meeting video archive

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In a move that National Credit Union Administration (NCUA) Chairman Debbie Matz said will "enhance the agency’s transparency,” the NCUA on Thursday announced that it will make all open board meetings available for online viewing, starting with its July 2010 meeting. In a Thursday release, Matz said that posting the videos online “will enhance the agency’s transparency.” “Our intent is to provide the credit union community and other interested stakeholders with opportunities to watch the NCUA Board in action. We believe it will be informative for stakeholders who cannot attend our meetings in person to see and hear the deliberations that result in NCUA Board actions,” Matz added. The video of the open portions of the NCUA meetings, which will be captioned, will be available online within weeks of the meeting, and will remain online for several of the following months. To view the NCUA’s most recent meeting, use the resource link.

Matz notes CUs reduced loan losses operating expenses in 1Q 2010

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ALEXANDRIA, Va. (8/13/10)—The general financial condition of credit unions nationwide remained “sound” during the first quarter of 2010, enabling credit unions to reduce their provisions for loan losses, lower their costs of funds, and cut operating expenses during that time period, National Credit Union Administration (NCUA) Chairman Debbie Matz said in a recent letter to federally insured credit unions. The letter noted that a 29 basis point reduction in provisions for loan losses led to an increase in earnings of the same amount during the quarter. Matz also noted that for the first time in five years, operating expenses were lower than credit unions' net interest margin. "Federally insured credit unions reported improved earnings performance and overall declining loan delinquency," Matz pointed out. However, Matz said that the NCUA is closely monitoring credit and interest rate risks faced by credit unions, adding that credit unions are specifically facing increasing real estate and business loan delinquencies as economic uncertainties persist. "The NCUA expects credit unions to implement plans to mitigate these risks,” Matz said. “Proactive sructuring and proper control over loan concentrations and share products will be fundamental to the future viability of credit unions,” she added. “While some short-term numbers are moving in the right direction,” Matz said that “credit unions still have a long way to go before overcoming all the effects of the economic downturn,” adding that the NCUA will work with credit unions “to take proactive steps to protect the safety and soundness of the credit union industry.” For the NCUA letter, use the resource link.

Inside Washington (08/11/2010)

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* WASHINGTON (8/12/10)--Financial industry experts expect that many merchants will steer customers toward cheaper payment methods soon, now that merchants can do so without violating contracts, said American Banker (Aug. 11). Some may push consumers to use personal identification-number payments over signature-based transactions, the newspaper said. Retailers likely will impose minimum transaction amounts for cards, which is a practice MasterCard and Visa had prohibited until reform legislation--the Dodd-Frank Act--allowed it. Processors, who worry that steering customers away from certain payment methods could reduce transaction volumes, are telling retailers that turning away payments could cost them sales. However, debit cards could benefit if merchants set limits on credit cards, because consumers would be forced to use debit to pay for less expensive items. Bob Baldwin, president and chief financial officer of Heartland Payment Systems, said merchants should carefully look at sales records and processing expenses before imposing minimums. Heartland recently sent a notice to its merchants saying the minimum allowed under Dodd-Frank cannot exceed $10 and applies only to credit cards ... * WASHINGTON (8/12/10)--The Federal Deposit Insurance Corp. (FDIC) proposed guidance for public comment on how the banking institutions it supervises should implement and maintain oversight of automated overdraft payment programs. The proposal focuses on ways banks can monitor their programs for excessive use by consumers as short-term credit. Under new rules, banking institutions must give consumers the opportunity to opt-in to overdraft protection. Consumers have until Sunday to opt-in ... * WASHINGTON (8/12/10)--The Federal Deposit Insurance Corp. (FDIC) plans to create two new divisions to handle consumer protection and systemic resolutions, the agency said Tuesday (American Banker Aug. 11). The Office of Complex Financial Institutions will conduct reviews and oversee bank holding companies with more than $100 billion in assets. A Division of Depositor and Consumer Protection also will be established to complement the activities of the Consumer Financial Protection Bureau, which was created under the recently enacted regulatory reform bill ... * WASHINGTON (8/12/10)--A new Federal Housing Administration (FHA) program could help up to 1.5 million people who are current on their mortgages but owe more than their homes’ value. Participation will likely be in the low six figures, but would be higher than earlier FHA programs, the agency said (American Banker Aug. 11). FHASecure helped fewer than 1,000 borrowers, and Help for Homeowners aided fewer than 100. Under the new program, servicers would write down a loan by at least 10%. The first lien has to be written down to 97.75% of the home’s current value before being refinanced--a “short refi.” For second liens, the combined loan-to-value after refinancing cannot be more than 115%. The program offers a debt-to-income ratio of 50% and homeowners’ total monthly mortgage payments cannot be more than 31% of monthly income ...

CU-backed candidates fare well in primaries

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WASHINGTON (8/12/10)--Credit union-backed candidates came out victorious in some of this week’s primaries in Georgia, Colorado, and Connecticut. Supported by the Credit Union National Association (CUNA), Georgia Credit Union Affiliates, and Gwinnett FCU in the GOP primary runoff for a shot at retiring Rep. John Linder’s (R) seat, Linder's chief of staff Rob Woodall, defeated conservative talk show host Jody Hice 56% to 44%. CUNA, the Georgia League, and the Lawrenceville. Ga.-based Gwinnett Federal conducted a partisan communications campaign on Woodall's behalf, mailing 8,500 credit union members of Gwinnett Federal two mailers in support of Woodall. In addition to CUNA’s Credit Union Legislative Action Council’s (CULAC's) $10,000 in direct donations to Woodall in the primary and runoff, CULAC also financially supported the Georgia league's mailings with a $2500 donation. “The district is heavily Republican, so Woodall should easily win the general election and is likely to prove a strong credit union supporter,” said Trey Hawkins, CUNA vice president of political affairs, after the primary. He also noted that CULAC was one of only two federal political action committees--or PACs--to back Woodall in his primary against the favored candidate in that race. In Colorado, the credit union-favored candidate in the Democratic primary for a U.S. Senate seat was Michael Bennet (D), who defeated his primary challenger Andrew Romanoff 52% to 46%. Bennet, who is a strong credit union supporter and a backer of the legislative effort to increase the credit union member business lending cap, will face Weld County District Attorney Ken Buck in a highly competitive race in November. Credit union support in Connecticut helped secure a successful bid by state attorney general Richard Blumenthal, who won the Democratic nomination to replace retiring Sen. Chris Dodd (D). Currently, Blumenthal is expected to prevail over the Republican nominee, former WWE CEO Linda McMahon, although her public commitment to spend $50 million in personal funds has the potential to make the race competitive. Also of note in this month’s primary votes, long-time credit union supporter Rep. Roy Blunt (R), of Missouri, beat eight Republican challengers to face the state’s Secretary of State Robin Carnahan (D) for a seat vacated by retiring Sen. Kit Bond (R). And in Tennessee's primary, credit union-backed incumbent Rep. Steve Cohen (D), a co-sponsor of MBL legislation, staved off a strong challenge from former the Memphis mayor, Willie Herenton (D). The Missouri Credit Union Association announced it is mailing Democrat and Republican primary winners a candidate’s with questions focusing on credit union concerns. The league said the candidates responses will be published in the autumn edition of Missouri Courier.

FOX Congress stifles Main Street with MBL inaction

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WASHINGTON (8/12/10)--A recent article from FOX Network’s Small Business Center zeroed in on “Eight Ways Congress is Stifling Main Street.” Number four among the gripes was that lawmakers won’t allow credit unions to increase their member business lending (MBL) authority. FOX quoted the Credit Union National Association’s (CUNA’s) research findings that show if the cap were simply doubled to 25% of total assets, up from the current 12.25% limit, credit unions could add $10 billion of small business credit within the first year of enactment, and could produce more than 100,000 new jobs. CUNA also stresses that these benefits to the economy come at no cost to taxpayers. “Though bills introduced in both the House and the Senate enjoy broad support, no action whatsoever has been taken,” noted FOX writer Rob Reuteman. Reuteman said he based his article on National Small Business Association’s (NSBA’s) May 27, 2010 report: “Squandered Opportunities and Misplaced Priorities: Why Small Business is Too Big to Fail.” CUNA is urging credit unions to continue advocacy efforts for an MBL amendment, drafted by Sen. Mark Udall (D-Colo.), which would increase the cap to 27.5%. Udall and other Senate supporters want the MBL language attached to a small business jobs bill currently under Senate consideration. (See related story: CUNA-- Five week break equals MBL opportunity.)

Fed interim rule sets gift-card disclosure dates

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WASHINGTON (8/12/10)--The Federal Reserve Board, charged with implementing the 2009 Credit Card Accountability Responsibility and Disclosure Act, approved an interim final rule Wednesday that changes the effective dates applicable to new gift card rules in order to be consistent with the recent legislation that changed these dates. The mandatory compliance date for the gift card rules rules was set for Aug. 22. However, after these rules were issued, the U.S. Congress enacted a law in which the disclosure requirements required on cards issued before April 1, 2010 would not be effective until January 31, 2011, under certain conditions. Those conditions include: there is no expiration date on the funds, replacement cards are issued at no cost, and these disclosures are provided by way of in-store signs, consumer service calls, websites, and general advertising. However, Credit Union National Association (CUNA) reminds that the portions of the new gift-card rules that address notices, fees and expiration dates will still come into effect on the original date of Aug. 22. During the transition period, gift-card issuers may notify consumers of their rights through signage, customer service numbers, websites, and general advertising.

CUNA Five-week break equals MBL opportunity

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WASHINGTON (8/12/10)--Although the calendar of the U.S. Congress gets pretty wobbly this time of year with work days being added and deleted based on various pressures, there are in fact 41 weekdays left before the targeted adjournment date and credit unions should make good use of each one to advocate for credit union issues. That was the message, in part, of Credit Union National Association (CUNA) President/CEO Bill Cheney Wednesday as he continued to rally grassroots advocacy support for credit union priorities, such as an increased cap for credit union loans to small business members. The window for MBL action, in fact, is even more narrow, with credit unions having between now and Sept. 13 to work to convince federal lawmakers to approve this important change this year. “We are at a crucial point in our effort to expand the member business lending cap,” Cheney emphasized. “We’ve never been closer to success than we are today, but there is still much we must do if we want to see this legislation enacted by Congress.” The U.S. Senate, currently in a five-week recess, is expected to complete consideration of the Small Business Lending Fund Act when back in session on the thirteenth. The bill includes $30 billion in funds to encourage banks to lend more to small businesses, but as yet does not include an amendment drafted by Sen. Mark Udall (D-Colo.) that would increase the member business lending (MBL) cap to 27.5%, up from 12.25%. CUNA has estimated that the statutory cap change would bring $10 billion of new credit to the country’s small business and underscores that it would do so at no cost to taxpayers. The change could also spark the creation of 108,000 new jobs, providing another boost for the economy. Cheney urged credit unions to use the current August District Work Period to meet with senators on their home turf and seek support for the MBL increase. Use the opportunity, Cheney advised, to refute banker rhetoric in opposition to the Udall MBL amendment. “The August recess gives us a terrific opportunity to reach senators at home--in meetings in their state offices, at town hall or campaign events. It also gives us time to generate additional grassroots letters and emails,” Cheney said.

Administration announces 3B in new foreclosure aid

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WASHINGTON (8/12/10)--U.S. Treasury Assistant Secretary for Financial Stability Herb Allison Wednesday announced the government would provide additional support for homeowners struggling with unemployment through two existing targeted foreclosure-prevention programs. Treasury will make $2 billion of additional assistance available for the Housing Finance Agency’s (HFA’s) Innovation Fund for the Hardest Hit Housing Markets (the Hardest Hit Fund). Additionally, the U.S. Department of Housing and Urban Development (HUD) soon will launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance to mortgage holder at risk of losing their home and who have experienced a “substantial reduction” in income due to involuntary unemployment, underemployment, or a medical condition. Qualified mortgage holders could receive up to 24 months of assistance. "HUD's new Emergency Homeowner Loan Program will build on Treasury's Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures," said Bill Apgar, HUD Senior Advisor for Mortgage Finance. "Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the administration's efforts to stabilize housing markets and communities across the country." For more on the programs, and to see what states are eligible for funds, use the resource link below.

Inside Washington (08/10/2010)

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* WASHINGTON (8/11/10)--Investors have a healthy demand for Troubled Asset Relief Program (TARP) warrants, according to a report the Treasury Department released last week (American Banker Aug. 10). The Warrant Disposition Report follows an earlier report released in January. It indicated that a number of banks still have their federal aid. After banks repay the government, they have two weeks to decide whether to buy the warrants back or auction them off. Holders of the warrants can buy a company’s common shares at a set price for up to a decade. Most warrants expire by 2018 or 2019, the Banker said. Thirteen of the 50 banks that repaid the government as of June 30 decided to go the auction route. Only one of 13 banks that went to auction route--Wells Fargo--chose to buy back its securities ... * WASHINGTON (8/11/10)--Fannie Mae and Freddie Mac could garner profits in the next couple of quarters, according to analysts (American Banker Aug. 6). The enterprises lost $230 billion in the past two and a half years, and $9 billion in the last quarter, but their financial pictures are improving. If their finances improve, the debate over their futures could change, the Banker said. Freddie posted a net loss of $6.01 billion Monday, after a $1.3 billion preferred dividend payment to the government. Last quarter, Freddie lost $7.98 billion. The amount of money it set aside to cover future losses dropped 11% from the second quarter of last year to $5.03 billion. Fannie and Freddie were taken into conservatorship in September 2008, and lawmakers have not reached a consensus about their futures. The regulatory reform bill, which was signed by President Barack Obama last month, did not address how the government will handle Fannie and Freddie. Next week, the White House will host a conference on their futures ...

Fed is reviewing checkhold rules

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WASHINGTON (8/11/10)--In reviewing the new financial reform law, comprised of more than 2,000 pages of text, Mike McLain has noted that among the big changes are nestled some seemingly small ones of which credit unions should be aware. McLain, who is senior compliance counsel and assistant general counsel for the Credit Union National Association (CUNA), noted recently that one such change is a provision amending the Expedited Funds Availability Act to raise the next-day-availability dollar requirement. “The law will require credit unions to make up to $200, rather than the current limit of $100, available the day after certain checks are deposited,” explained the CUNA rep. “What looks like a minor change will require new disclosures, data processing changes and staff training for many credit unions.” As currently required by the Fed’s Reg. CC for changes that expedite the availability of funds, credit unions and other depository institutions would have to notify members or customers of the increase within 30 days of the effective date of the increase to $200. “Contrary to what credit unions may have read on the Internet, this change was not effective the day President Obama signed the Dodd-Frank bill into law,” emphasized McLain. “The provision goes into effect when the new Consumer Financial Protection Bureau is established, which we expect could happen sometime in 2011.” At the end of 2009, the Federal Reserve Board staff assured CUNA that it planned to revisit the out-of-date Regulation CC, which implements the Expedited Funds Availability Act. The Fed said at the very least it would reconsider current check-hold exemptions in light of the need for depository institutions to better protect themselves from fraud due to the elimination of “nonlocal checks” that occurred in February 2010 when the Fed centralized all its check-processing operations in Cleveland. The regulation and the model forms have not yet been updated to correct the numerous references to “nonlocal checks.” “We understand that the Fed is busy reviewing Reg CC and will have a proposal out this fall, maybe as early as sometime in September, which will incorporate the new $200 figure,” McLain said. “CUNA will emphasize in its comment on the proposal the need for credit unions to have adequate time to comply with the higher next-day-availability requirement.”

FDIC announces savings pilot for underbanked

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WASHINGTON (8/11/10)--To encourage banks to offer unbanked and under-banked households affordable basic banking services, the Federal Deposit Insurance Corp. (FDIC) will launch a pilot program to test offering safe, low-cost transactional and savings accounts to low- and moderate-income consumers. At its open board meeting Tuesday, the FDIC approved a one-year plan for the “Model Safe Accounts Pilot” and encouraged banks to submit applications to become one of nine institutions the agency will choose to be in the test program. Under the pilot, according to an FDIC announcement, participating institutions will offer electronic deposit accounts with product features identified in the FDIC Model Safe Accounts Template (see resource link). Accounts offered by pilot institutions will be FDIC-insured, have “reasonable” rates and fees that are “proportional to their cost,” and be subject to applicable consumer protection laws, regulations and guidance. Participating institutions may not charge fees for non-sufficient funds or overdrafts for these accounts. Citing its 2009 “National Survey of Unbanked and Underbanked Households,” the FDIC said that more than one-quarter of U.S. households are underserved; 7.7% lack any banking relationship and 17.9% percent are "underbanked," which means that they have bank accounts but rely on non-bank alternative financial services. Minorities and lower-income households are much more likely to be underserved. The FDIC added that one in five households earning under $30,000 are unbanked, and these households comprise over 70% of the unbanked total. Many credit unions provide a wide range of financial products and services to low-wealth consumers through REAL Solutions, the signature program of the National Credit Union Foundation (NCUF). In fact, NCUF research shows that two of the most popular REAL Solutions products are savings programs for emerging low-wealth markets. Figures from one year ago show 81% of REAL Solutions credit union were providing special savings accounts for youth from ages 11 to 17 total 81%; and about 68% were providing or planning to offer comprehensive savings programs, including financial education to help low-wealth members save and build wealth. Use the resource links for more.

CUNA comment urges legacy asset corp CU rule action

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WASHINGTON (8/11/10)—The Credit Union National Association (CUNA) this week submitted comprehensive remarks addressing each subject of the National Credit Union Administration (NCUA’s) 2010 Regulatory Review List. The agency examines one-third of its regulations as part of a yearly review process. The NCUA's Office of General Counsel maintains the schedule that identifies the agency regulations up for review each year. Among this year’s topics for examination were:
* Share insurance; * Administrative actions; * Member business loans; * Fidelity bond and insurance coverage; * Leasing; * Incidental powers; * Regulatory Flexibility Program (RegFlex); * Supervisory committee audits and verifications; * Privacy; * Fair Credit Reporting (FACT Act); and appropriately enough, * The process for identifying rules for review and soliciting comments.
Within its comments on share insurance issue, CUNA seized the opportunity to urge the agency to act by its Sept. 16 open board meeting on two key issues for credit unions; legacy assets and a new regulatory framework for corporate credit unions. “While no credit union official wants the agency to rush the development of the solution, we encourage the agency, to the extent feasible, to make public its decision regarding these assets at (the September meeting), the target date most recently indicated by the board for consideration of the final corporate credit union rule as well as the legacy assets,” wrote CUNA Deputy General Counsel Mary Dunn in the letter. CUNA also urged that if complications preclude such an announcement by the September date, the board should at least provide more information to the credit union system on the approaches being considered and any impediments to their implementation. The NCUA estimated that there were $64 billion in total legacy assets as of early 2009. CUNA has expressed two major concerns with these assets: First, if the actual losses turn out to be sufficiently less than expensed thus far, there should be an opportunity for the credit unions that took the losses to share in the gains; and, second, if the actual losses are greater than expensed thus far, that future capital contributors should not be liable for those losses. Regarding the corporate credit union rules, the NCUA has been reviewing over 800 comment letters submitted on it's proposed rule to strengthen corporate credit union regulation. For CUNA’s complete remarks on the NCUA 2010 rule review, use the resource link below.

MBL amendment deadline is Sept. 13

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WASHINGTON (8/10/10)--Though another segment the 2010 congressional session effectively ended on Friday, the Credit Union National Association's (CUNA) push for increased member business lending (MBL) authority will continue, as amendments to a pending small business jobs bill may be offered when the U.S. Senate reconvenes on Sept. 13. Members of the U.S. House will return briefly to vote on funding items and other unfinished business this week, but after that, the legislators will return to their districts until early September. As the legislators campaign in their respective districts, CUNA, the leagues, and credit unions will meet with lawmakers on their home turf to discuss the benefits to the economy and to small businesses of lifting the credit union MBL cap. CUNA Director of Grassroots Advocacy Elizabeth Kangas said that credit unions will use the long recess to push the Senate on MBLs and can "lay the ground work" for MBLs to be considered in September "by being present at every opportunity and continuing to engage small businesses." CUNA has been working to get an MBL amendment, which would lift the current 12.25% cap to 27.5% of a credit union's assets, added to the small business jobs bill, but the Senate recessed before taking final votes on the bill. National Credit Union Administration (NCUA) Chairman Debbie Matz last week again publicly backed the MBL increase. In remarks published in the St. Louis Post Dispatch on Aug. 8, Matz said that there is "a tremendous need" for such loans within the small business community, adding that the potential risks posed by increased commercial lending are "not an issue" if those loans are well executed. Matz earlier this year said that lifting the MBL cap could help credit unions spur future job creation and added that the NCUA would "promptly revise" its regulation "to ensure that additional capacity in the credit union system would not result in unintended safety and soundness concerns" if the MBL cap was lifted.

Inside Washington (08/09/2010)

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* WASHINGTON (8/10/10)—The Federal Deposit Insurance Corp. (FDIC) later today is expected to discuss potential changes to its use of external ratings agencies to set capital requirements. As reported in , the discussion is part of a process required by the recently enacted Financial Regulatory Reform laws. The new regulations give federal authorities one year "to remove any reference to or requirement of reliance on credit ratings." Former Federal Reserve official Richard Spillenkothen told the Banker that "the idea of trying to find an approach to capital that is simpler than the internal ratings-based approach, but that doesn't over-rely on credit ratings, is a reasonable thing to explore." Spillenkothen suggested that regulators could mandate additional risk categories… * WASHINGTON (8/10/10)—The Senate last week rejected Federal Reserve Governor nominee Peter Diamond after Senate Republicans questioned his macroeconomic experience. As reported in American Banker, the Senate will likely approve Janet Yellen to become Fed Vice Chairman and Sarah Bloom Raskin to also join the Fed. The nominations will likely be taken up in September… * WASHINGTON (8/10/10)--The third of four joint public hearings on modernizing rules that implement the Community Reinvestment Act, to be held Thursday in Chicago, will be available for online viewing at www.ustream.tv/channel/federalreserve . The session is sponsored by the sponsored by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. It is scheduled to start at 9 a.m. (CT) and to end at 4:30 p.m. (CT). The agenda includes welcoming remarks, three topical panels, and a host of individual presentations. After the hearing, the agencies will post a hearing transcript and audio recording at www.federalreserve.gov . The final hearing is scheduled for Aug. 17 in Los Angeles…

FinCEN seeks comment on monthly SAR report value

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WASHINGTON (8/10/10)—Credit unions and other financial institutions will soon be encouraged to give their insight on the usefulness of the Financial Crimes Enforcement Network's (FinCEN’s) updates on its Suspicious Activity Reports (SARs), the U.S. Treasury announced this week. Specifically, FinCEN said it is seeking input on its SAR Activity Review - Trends, Tips & Issues release and its SAR Activity Review - By the Numbers release. An opinion survey, which will be provided online, will be completely voluntary. FinCEN in a release said that it hopes to learn more about the needs of financial institutions and to "identify opportunities to improve" the reports. The survey results will be reported to FinCEN "only in the aggregate," according to the release. "Individual responses will be grouped anonymously along with those of other FinCEN customers," the release added. The activity reviews are released on a monthly basis and cover both the latest results of SARs and how financial institutions can best deal with fraudulent activity. FinCEN earlier this year reported that the total amount of SARs filed decreased slightly to 1.28 million in 2009, down from the 1.29 million SARs recorded in 2008.

CUNA league to begin MBL push anew over recess

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WASHINGTON (8/9/10)--With both bodies of Congress away on their yearly summer recess this month, the Credit Union National Association (CUNA) is encouraging credit union backers to urge their senators to support pending member business lending (MBL) legislation. Credit unions can expect to be contacted by their respective leagues as CUNA and the leagues organize in the coming weeks. The focus of MBL advocacy will be Sen. Mark Udall’s (D-Colo.) recently introduced legislation that would lift the current cap on MBLs. Udall’s legislation would increase credit union business lending authority to 27.5% of total assets, up from the current 12.25% cap. As Udall has noted on the Senate floor, CUNA estimates that more than $10 billion in credit could become available if the MBL cap were lifted, even if just to 25%. The statutory change would also serve to add 108,000 jobs into a struggling market. CUNA and Udall were aiming to include the MBL legislation as part of a small business jobs package, but the jobs legislation will not see action until Congress returns in September. While the small business legislation may have ultimately become a victim of politics, credit unions have received attention and recognition on Capitol Hill, and CUNA will be back at the first opportunity to finish the job, CUNA Senior Vice President of Legislative Affairs John Magill said recently.

IRS will not offer debt indicator program in 2011

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WASHINGTON (8/9/10)--The U.S. Internal Revenue Service (IRS) has announced that it will not make its debt indicator program available to tax preparers and financial institutions for the 2011 tax season. The debt indicator, which helps financial institutions discern whether a tax filer's refund will be delayed, facilitates refund anticipation loans (RALs). RALs are short-term, high-interest loans that are heavily marketed by paid tax preparation firms during tax time. They can deplete hundreds of dollars from a typical tax refund. Many credit unions offer Volunteer Income Tax Assistance (VITA) programs to steer tax filers away from the costly RALs. VITA is an IRS program that helps low- and moderate-income taxpayers complete their annual tax returns at no cost. Credit unions and community organizations receive IRS- provided training in preparing basic tax returns and establishing tax-preparation sites. The National Credit Union Foundation’s REAL Solutions program estimated in 2009 that the free tax preparation, electronic filing, and refund deposits provided by the VITA program to low-income tax filers has saved those tax filers a combined $20 million. The National Credit Union Administration (NCUA) earlier this year announced that it will expand its participation in the credit union-based VITA tax prep program. A total of 541 credit unions participated in the VITA program in 2009, the NCUA reported.

Inside Washington (08/06/2010)

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* WASHINGTON (8/9/10)–The Obama administration last week approved $600 million in foreclosure prevention assistance funds that will be used to “support local initiatives to assist struggling homeowners” in states with high unemployment. The funds are targeted to aid areas in North Carolina, Ohio, Oregon, Rhode Island and South Carolina. The funds will be distributed through state housing authorities. State authorities estimated that 50,000 eligible homeowners would receive aid via various programs to address mortgage payment issues. The funds also will be used to facilitate first and second liens, short sales, and/or deeds-in-lieu of foreclosure, according to a U.S. Treasury release … * WASHINGTON (8/9/10)—Christina Romer, who had served as chair of President Barack Obama’s Council of Economic Advisers, announced last week that she would leave the administration, effective Sept. 3. Romer will teach at the University of California, the White House said. Office of Management and Budget Director Peter Orszag left the administration in July … * WASHINGTON (8/9/10)—Representatives from President Barack Obama’s White House have been privately encouraging banks, including Citigroup, Bank of America, Wells Fargo, and JP Morgan Chase to adopt portions of the recently enacted financial regulatory reforms ahead of schedule. One provision the administration is promoting would allow consumers to access their credit scores at no charge if those credit scores will negatively effect their finances, American Banker reported Friday. U.S. Treasury Secretary Tim Geithner said last week that financial institutions should adopt the reform measures early. While many banks were still undecided on whether to participate, President Obama is reportedly hoping to promote their compliance in the coming days, the Banker said …

Inside Washington (08/05/2010)

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* ALEXANDRIA, Va. (8/6/10)--National Credit Union Administration board member Gigi Hyland at this week’s National Directors’ Convention urged credit union directors to serve as the “voice” of their members and “ask the tough questions at board meetings.” “You are not management’s rubber stamp,” Hyland added. She also suggested that boards, management and staff should be as diverse as their credit union’s field of membership. Hyland empathized with the rigors of serving as a credit union director, saying that “staying abreast of current issues and trends is tough.” However, she added, directors can “use all of the resources available” to stay current on issues … * WASHINGTON (8/6/10)—While many federal regulators acquired new authorities following the enactment of comprehensive financial regulatory reform, American Banker this week reported that the Office of the Comptroller of the Currency (OCC) may be losing its influence. While past law advised the Federal Reserve to share some of its duties related to large national financial institutions with the OCC, the recently enacted reforms grant the Fed greater authority over large-institution oversight. While most are unsure of how this change in oversight authority will play out, the Banker reported that many within the OCC are concerned. However, there are others who feel that the Fed will still lack the resources to deal with this nascent authority, and, thus, the OCC will retain its current role in full, said the publication. Former Comptroller of the Currency Bob Clarke told the Banker that the OCC and the Fed would “have to sit down and sort out what kind of information the Fed is going to want” as part of its systemic-risk authority …

CRA hearing coverage available via webcast

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WASHINGTON (8/6/10)--Credit unions will be able to keep up with the latest developments in the Community Reinvestment Act (CRA) debate during a live webcast of a joint CRA hearing sponsored by the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The webcast will cover a hearing to be held at the Federal Reserve Bank of Atlanta at 9 a.m. ET. The hearing is expected to go on until 4 p.m. ET. Representatives from the sponsoring regulatory agencies, local and state-wide political jurisdictions, and various community organizations will speak during the hearing. A representative will also speak on behalf of Self-Help CU, based in Durham, N.C. CRA was enacted in 1977 in response to a practice known as "redlining," which refers to the failure to lend to lower-income and minority neighborhoods by banks and thrift institutions during the 1960s and early 1970s. Fed Governor Elizabeth Duke earlier this year called for a comprehensive update of the CRA. Panelists at an earlier CRA hearing called for additional enforcement, and suggested that CRA rules also be applied to credit unions. The Credit Union National Association (CUNA) has repeatedly opposed any effort to include credit unions under CRA requirements, and CUNA has maintained credit unions already achieve the CRA’s goal of ensuring that financial institutions meet the financial needs of all levels of society. For access to the CRA hearing, use the resource link.

Fed webinar to cover consumer regulatory changes

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WASHINGTON (8/6/10)--The Federal Reserve will cover recent consumer regulatory changes during an Aug. 19 webinar. The webinar, which will take place between 2 p.m. and 3 p.m. ET, will cover the state of current regulatory proposals, upcoming final rules, and details of the recently passed financial regulatory reform rules. Webinar participants will be able to have their regulatory questions answered by attorneys from the Fed’s division of consumer and community affairs. Questions may be submitted ahead of the webinar via email or can be submitted during the webcast. The Credit Union National Association (CUNA) has also published its own analysis of the recently enacted financial regulatory reforms. To register for the Webinar or access CUNA's reg reform resources, use the resource links.

FBI reports on CU bank crimes

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WASHINGTON (8/6/10)--A total of 94 robberies and four burglaries were recorded at credit unions during the first quarter of this year, the Federal Bureau of Investigation (FBI) has reported. In its quarterly compilation of financial institution crime reports, the FBI noted that a total of 1,160 robberies, 21 burglaries, and two larcenies occurred at all reporting financial institutions. Just over $9 million in funds were taken, and nearly $2 million of those funds were eventually recovered during this time period. The majority of the crimes were committed at branch offices in commercial areas of metropolitan cities. The FBI also noted that one bank extortion violation occurred at a credit union over this time period, but none of the total of three extortion attempts were successful. For the full FBI report, use the resource link.

Fed increases HOEPA fee trigger to 592 for 2011

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WASHINGTON (8/5/10)--The minimum fee trigger for Home Ownership and Equity Protection Act (HOEPA) requirements will be increased to $592 in 2011, the Federal Reserve reported this week. The Fed is required to adjust the amount of mortgage fees that trigger additional disclosures under Truth in Lending as required under HOEPA. The Fed has annually adjusted the $400 amount based on the annual percentage change reflected in the Consumer Price Index as reported on June 1, the release added. For the Fed release, use the resource link.

CUNA covers what recent reg reforms mean for CUs

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WASHINGTON (8/5/10)--The Credit Union National Association has provided a comprehensive overview of the portions of the new financial regulatory reform rules that are most relevant to credit unions. Among those items are portions of the legislation that specifically address credit unions, amendments to the Truth in Lending Act regarding residential mortgages, and portions of the to-be-established Consumer Financial Protection Bureau (CFPB) that could address credit union practices. Several reforms set forth by the legislation are of interest to credit unions, including the inclusion of the National Credit Union Administration chairman on a pending financial stability oversight council. Credit unions holding under $10 billion in assets will not be examined by the pending CFPB. The legislation is mainly aimed at Wall Street and larger financial firms, and seeks to help avoid a repeat of the country's recent crisis prompted by a meltdown of housing and mortgage markets. The legislation also addresses thrifts, deposit insurance reforms, hedge funds, credit rating agencies, executive compensation, and investor protections, among other items. For a quick reference guide to the regulatory reforms plus a more comprehensive breakdown of the new regulatory rules and their impact on credit unions, use the resource link below.

CUNA responds to Durbin comment on CU credit cards

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WASHINGTON (8/5/10)--Credit Union National Association (CUNA) President/CEO Bill Cheney has urged Sen. Richard Durbin (D-Ill.) to “take a more complete look at the facts regarding how credit unions and banks offer credit cards differently” after Durbin recently criticized credit unions for increasing annual fees on credit card accounts. “We believe credit unions should be commended--not condemned--for the way that they offer credit cards to consumers,” Cheney added in a letter sent to Durbin late yesterday. In a statement delivered on the Senate floor this week, Durbin expressed concern with rising consumer fees, detailing one example in which, as reported in The Wall Street Journal, credit union annual fees on credit cards “soared” 67% and the median cash-advance and balance-transfer fees assessed by credit unions “jumped by 33%” between July 2009 and March. Cheney said that in spite of this reported information, a July 22 report by the Pew Charitable Trust found that the average annual fee of credit union-issued credit cards “remains significantly lower than the average annual fee on a bank-issued credit card.” “Further, the average annual fee charged by banks and credit unions has increased nearly the same dollar amount, and this increase for credit unions was a consequence of the effect that the implementation of the CARD Act has had on them,” Cheney said, adding that many credit unions continue to offer “no annual fee” credit card options to their members. Cheney added that Durbin may have incorrectly attributed the median cash-advance and balance transfer fee increases to credit unions, as the Pew report found that the median balance transfer fees charged by credit unions during the time period in question “remained unchanged.” “Regardless of any change, these fees remain significantly lower on credit union-issued credit cards than on bank-issued credit cards,” Cheney said. “It is crystal clear that consumers are better off with a credit union-issued credit card than with a bank-issued credit card. Instead of being criticized for accounting for the impact of newly enacted legislation, credit unions should be commended for all that they have done to keep costs down for their members in a seemingly unending period of increased regulatory burdens,” Cheney added. For the full letter, use the resource link.

CUNAs Cheney addresses supervisory other issues

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WASHINGTON (8/5/10)--While the Credit Union National Association (CUNA) appreciates the National Credit Union Administration’s (NCUA) move toward establishing a national registry of potential credit union merger partners, CUNA President/CEO Bill Cheney said that the NCUA should also work to address due diligence and loss-sharing incentives as it further refines its approach to the merger process. In a letter that was sent to all three NCUA board members, Cheney said that the agency also should provide credit unions with greater information on how it works with assorted state regulators in the event that a dual-chartered credit union is involved in a merger. CUNA also recommended that NCUA provide greater detail on its criteria for selecting which credit unions on the merger partner registry should serve as acquirers. Many credit unions are concerned by the NCUA’s increasing use of documents of resolution, letters of understanding and agreement, and cease and desist orders in its supervisory activities, Cheney said, recommending that NCUA further examine some of its own supervisory practices. CUNA’s supervisory working group will examine these and other NCUA practices, and will develop a report that reviews the rights and responsibilities of credit unions during material disputes with examiners. The report will clarify some current NCUA examiner practices and will provide future recommendations to the NCUA, Cheney added. For the full letter to the NCUA, use the resource link.

Inside Washington (08/04/2010)

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* WASHINGTON (8/5/10)--Treasury Secretary Timothy Geithner appears to be pursuing efforts to end Bush-era tax cuts for the wealthy, which will expire at year-end. “These tax cuts save more than $2,000 per year for a typical middle class family,” Geithner said Wednesday at the Center for American Progress. “But given the size of the deficits and debt that we inherited, we must provide that tax relief in a fiscally responsible way.” He said the best way to do that is by allowing the tax rate for the top 2% to go back to levels seen at the end of the 1990s, “a time of remarkable growth and economic strength.” There are some who suggest that the government should hold the tax cuts for the middle class hostage, until Congress extends the tax cuts for the top 2%--and permanently repeals the estate tax too, he added. “If the middle class tax cuts are not extended, Americans will face a sharp increase in taxes and a sharp fall in disposable income,” Geithner said. The cuts, enacted in 2001 and 2003 under former President George W. Bush, will expire at year-end. President Barack Obama said he would extend the cuts beyond this year for 98% of Americans who make less than $250,000 annually, or individual filers who make under $200,000. Republicans argue that because of the economic recovery’s slowdown, the cuts should continue for wealthy Americans, too, because the group includes some small business owners who file individually (The New York Times Aug. 4) ... * WASHINGTON (8/5/10)--The Federal Deposit Insurance Corp. (FDIC) announced that Joseph A. Jiampietro, senior adviser for markets to FDIC Chairman Sheila Bair, will leave the agency Aug. 13. He has served in that position since March 2009. Before joining the FDIC, he served as managing director of the Financial Institutions Group at JP Morgan in New York ...

Inside Washington (08/03/2010)

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* WASHINGTON (8/4/10)--The Securities and Exchange Commission (SEC) has raised concerns about “abbreviated disclosures” that don’t tell investors enough about why the mutual funds use derivatives. Regulators said they worry that more funds are using derivatives without shareholders knowing the risks or investment strategies (American Banker Aug. 3). The SEC criticized inadequate disclosures in a letter to the Investment Company Institute. Barry Miller, associate director in the SEC division of investment management, said all funds that use derivatives should “assess the accuracy and completeness” of disclosures ... * WASHINGTON (8/4/10)--The state of the U.S. banking system has improved significantly since the worst of the financial crisis, Federal Reserve Board Chairman Ben Bernanke said in a speech Monday. Loss rates on most types of loans are peaking and bank capital ratios have risen to new highs. However, many banks have large volumes of troubled loans and lending standards remain tight. With weak credit demand and banks writing down problem credits, bank loans outstanding have continued to decline, he added. Bernanke noted that the Fed has been working to improve the flow of funds to creditworthy small businesses. The Credit Union National Association (CUNA) and credit unions support an amendment to a stimulus bill that would raise credit unions’ member business lending caps to 27.5% from 12.25%. CUNA has said lifting the caps would generate $10 billion in credit for small businesses in the first year and create 108,000 jobs ... * WASHINGTON (8/4/10)--Rep. Maxine Waters (D-Calif.) said she does not agree with a House ethics report released Monday that calls for an investigation into her relationship with a bank that received money from the Troubled Asset Relief Program (TARP). The report focuses on Waters’ involvement in a 2008 meeting with the National Bankers Association and then-Treasury Secretary Henry Paulson (American Banker Aug. 2). The meeting was called to discuss OneUnited Bank, Boston. Waters’ husband, Sidney Williams, served on the bank’s board until 2008 and has investments in OneUnited. The bank received $12 million in TARP funds. Waters said in a press release that she has not violated any rules and will seek a trial ...

NCUA liquidates Tex.-based Kappa Alpha Psi FCU

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ALEXANDRIA, Va. (8/4/10)—Addison, Texas-based Kappa Alpha Psi FCU has been liquidated, effective Tuesday, the National Credit Union Administration (NCUA) reported. The $780,000-asset, 1,341-member credit union was closed due to minimal capitalization, NCUA said in a press release. “There are no reasonable prospects for the credit union to achieve adequate capitalization,” NCUA added. Members of the credit union will have their deposited funds returned to them via checks, which will be issued soon, NCUA said. The credit union, which was founded in 2004, drew its membership from members of the Kappa Alpha Psi Fraternity and their families. Employees of the fraternity and members of affiliated organizations were also eligible for membership, according to the credit union. For the NCUA release, use the resource link.

NCUA provides CUs with opt-in guidance

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ALEXANDRIA, Va. (8/4/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz on Tuesday strongly encouraged credit unions “to notify members of their opportunity to ‘opt in’ to overdraft protection before the Aug. 15 deadline.” Matz’s comments were accompanied by a sample overdraft disclosure form that, according to the NCUA, provides “a succinct explanation of the options available to protect consumers in the event their account is overdrawn.” A similar notice was provided by the Federal Reserve Board earlier this year. NCUA said that while credit unions will not be forced to use this particular disclosure, the disclosure is “a convenient way to provide the required notice to members.” The Reg E changes prohibit the assessing of overdraft fees without the consumer's affirmative consent. This prohibition applies to all institutions that charge such fees for ATM and one-time debit card overdrafts. The Reg E changes also address sustained overdraft, negative balance, or similar fees associated with paying overdrafts, and clarify that institutions are not prohibited from assessing a fee when a negative balance is attributable in whole or in part to a transaction that is not subject to the fee prohibition. For the NCUA release, use the resource link.

Congress extends some gift-card provisions

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WASHINGTON (8/4/10)--Congress last week extended until Jan. 31, 2011, the effective date of pending gift-card requirements--allowing businesses to sell their existing stock of gift cards and gift certificates produced before April 1. However, according to Credit Union National Association (CUNA) staff, the portions of the new gift-card rules that address notices, fees and expiration dates will still come into effect on the original effective date of Aug. 22. During the transition period, gift-card issuers may notify consumers of their rights through signage, customer service numbers, websites, and general advertising, CUNA staff added. The final rules, which were implemented under the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), specifically restrict the fees and expiration dates that may apply to gift cards, and require that gift-card terms and conditions be clearly stated. The gift-card rules also prohibit dormancy, inactivity, and service fees on gift cards unless the consumer has not used the certificate or card for at least one year, the card issuer charges no more than one service fee per month, and the consumer is given clear and conspicuous disclosures about the fees. An expiration date for funds underlying gift cards must be at least five years after the date the card was issued, or five years after the last date the card was reloaded. The rules cover network-branded gift cards, which are redeemable at any merchant that accepts the card brand, as well as retail gift cards that can be used to buy goods or services at a single merchant or affiliated group of merchants.

Inside Washington (08/02/2010)

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* WASHINGTON (8/3/10)--The Financial Stability Council, which will be created under the recently enacted regulatory reform bill, has some financial industry representatives wondering if the council itself will be too tough to manage because of competing interests, said American Banker (Aug. 3). Council members will include the heads of nine federal agencies, three state representatives, the heads of the Federal Insurance Office and the Office of Financial Research, and a president-appointed insurance expert. Observers have questioned how regulators will define “systemic risk.” “No one has the faintest idea,” said Peter Wallison, a fellow in financial policy studies at the American Enterprise Institute. When defining risk, the council will need to consider assets, leverage, size, liabilities and interconnectedness, Banker said. The council will present reports to Congress and be subject to audits by the Government Accountability Office ... * WASHINGTON (8/3/10)-- The administration plans to move as quickly as it can to bring clarity to new rules of finance, said Treasury Secretary Timothy Geithnerin a speech at New York University Monday. The administration plans to provide full transparency and disclosure. It will not layer new rules on top of old rules, or risk killing the freedom for innovation that is necessary for economic growth, he added. Also, the administration wants to ensure that it has a more “level playing field” nationally and internationally and brings more order and coordination to the regulatory process. The process is broad and complicated, and will take time, Geithner said. He noted some of the administration’s priorities--including consumer protection and ensuring financial firms have more capital than they did before the financial crisis ... * WASHINGTON (8/3/10)--The Federal Deposit Insurance Corp. (FDIC) Thursday closed on a sale of securities as a part of a securitization backed by about $471.3 million of performing single-family mortgages from 16 failed banks. The pilot program marks the first time the FDIC has sold assets in a securitization in the financial crisis. About $400 million senior certificates were sold at a coupon of 2.184% with an average life span of 3.66 years. As outlined in the FDIC’s proposed Securitization Safe Harbor Rule, the deal incorporates transaction-governance procedures that align compensation of the servicer with resolving problem loans and minimizing losses to the trust ...

NCUA shutters Calif.s Certified FCU

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ALEXANDRIA, Va. (8/3/10)--The 8,850 members of $37.6 million in assets Certified FCU will now be served by Vons Employees FCU after the National Credit Union Administration (NCUA) officially liquidated Certified FCU on Saturday. Certified FCU, which was based in Commerce, Calif., was closed due to it’s declining financial condition, according to the NCUA. Vons is centered in nearby El Monte and holds $332 million in assets from 40,500 members spread throughout the greater Los Angeles area. Vons primarily serves employees of Vons supermarkets. All Certified FCU member accounts will continue to be backed by the National Credit Union Share Insurance Fund, the NCUA added. Certified FCU is the 12th federally insured credit union to be liquidated this year. For the full NCUA announcement, use the resource link.

With House gone focus is on Senate this week

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WASHINGTON (8/3/10)--While the annual summer exodus begins for members of the House this week, the Senate will remain in Washington through Friday. Senators are seemingly stuck, and have shown little desire to move forward on small business job creation legislation. However, the Credit Union National Association (CUNA) continues to advocate for consideration of Sen. Mark Udall’s (D-Colo.) pro-member business lending legislation. Udall’s bill, which has been touted as a possible amendment to stalled small business legislation, would increase credit union business lending authority to 27.5% of total assets, up from the current 12.25% cap. Doing so would create more than 108,000 new jobs and provide small businesses with over $10 billion in funds to reinvest into the flagging economy, according to CUNA estimates. The small business legislation would provide small banks with $30 billion in funds to lend to small businesses. Udall, who backs the small business legislation, recently said that he did so with the understanding that if the Senate was "going to finance $30 billion to increase lending," it would "at the very least" also move to "increase lending without costing taxpayers a dime." There are no credit union-relevant hearings scheduled this week, and the Senate is expected to discuss legislation related to Medicaid and the oil spill, as well as the Supreme Court nomination of Elena Kagan.

CUNA rep GAAP changes would cost CUs thousands

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WASHINGTON (8/3/10)--Speaking during a recent Credit Union National Association (CUNA) audio conference on proposed changes to the Financial Accounting Standards Board’s (FASB'S) Generally Accepted Accounting Principles (GAAP), Mid Minnesota FCU's Pam Finch said that the proposed changes could result in up to $40,000 in additional annual costs for her credit union. Finch, who is the Chief Financial Officer (CFO) of her Baxter, Minn.-based credit union and also serves as CUNA CFO Council chair, said that while much of the increased cost would be related to use of an outside firm to value her credit union's financial instruments, additional costs are likely, such as costs related to increased resources necessary to gather and analyze information. Representatives from FASB and the National Credit Union Administration (NCUA), as well as CUNA Accounting Subcommittee chair and CFO of San Francisco, Calif.'s Patelco CU Scott Waite took part in the audio conference. The proposed changes, as set forth in a FASB exposure draft released in May, would modify GAAP by requiring most financial instruments to be measured at fair value. In addition, the changes would require loan loss reserves to be measured on a forward-looking "expected loss" basis. This differs from the current method, which uses a historical "incurred loss" approach. FASB has informally stated that it would like to have a final rule in place by next summer. Credit unions over $10 million in assets are required to comply with GAAP. CUNA raised general concerns with FASB prior to the issuance of the proposal, and CUNA remains extremely concerned about the proposed changes. CUNA has been working with its accounting subcommittee to identify key problems and frame its message to FASB, and will also be working with the NCUA and other policymakers to ensure credit union concerns are presented to and considered by FASB. While the primary goal of the FASB standards is reportedly to increase transparency for investors, panelists asked how this would benefit credit unions due to the unique, member-owned, credit union model. CUNA regulatory staff said that while FASB has provided a four year deferral of most requirements for entities with under $1 billion in assets, credit unions--regardless of asset size--should provide FASB with their input as soon as possible, either directly or indirectly through CUNA. “It is vital that credit unions speak up during the FASB's comment period for these significant proposed changes,” CUNA Regulatory Counsel Luke Martone added. The comment period for the proposal ends on Sept. 30. CUNA will be meeting with FASB and filing a formal comment letter, and CUNA welcomes input from member credit unions. For an archived version of the audio conference, use the resource link.