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CUs only lenders to increase 2011 mortgage lending FFIEC

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WASHINGTON (9/19/12)--Home purchase mortgage loans orignated at credit unions increased by 8.5% in 2011, and credit unions were the only type of financial institution to increase their mortgage lending in that year, according to Federal Financial Institutions Examination Council (FFIEC) data.

Mortgage lending for home purchases at banks decreased by 7.1%, and mortgage lending at thrifts declined by 24.1% during 2011, the FFIEC added.

Overall, the FFIEC reported that the total number of originated loans of all types and purposes declined by 780,000 between 2010 and 2011, in part due to a 13% decline in refinancings.

These numbers are part of the FFIEC's data on the mortgage applications, originations, purchases, and denials that were filed by credit unions and other Home Mortgage Disclosure Act (HMDA) -covered financial institutions in 2011. Documents detailing this data were released on Tuesday.

Under HMDA, credit unions with total assets of more than $40 million that have home or branch offices in defined metropolitan statistical areas must collect their loan data and report it to federal regulators.

The Federal Reserve in a separate release on the FFIEC data noted that the overall credit scores of borrowers are "considerably higher now than at any point in the past 12 years." The median score of mortgage borrowers has risen about 40 points since the end of 2006, the Fed said.

The FFIEC mortgage data covers transactions at 7,632 financial institutions, 2,017 of which were credit unions. The data also includes information on 11.7 million home loan applications, 7.1 million of which resulted in loan originations, and 2.9 million loan purchases. Information on 186,000 loan preapproval requests that did not result in home loans is also included.

The Fed noted that the 7.1 million loan originations reported in 2011 is the lowest loan total recorded in HMDA data since 1995's total of 6.2 million. Government-backed loans originated through the Federal Housing Administration's mortgage insurance program, the Department of Veterans Affairs (VA) loan guarantee program, and other government programs accounted for nearly 50% of all home purchase loans made in 2011, a slightly smaller share than the total reported in 2010, the Fed added.

The FFIEC data also includes disclosure statements, aggregate data for metropolitan statistical areas, nationwide summary statistics of lending patterns, and Loan/Application Registers, the FFIEC said. The data is further broken down by loan type, loan purpose, loan amount, property type, property location, applicant background, and census tract characteristics.

For more on the FFIEC report, use the resource link.

The FFIEC is comprised of the leaders of the National Credit Union Administration (NCUA), the Federal Reserve Board, the office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corp. (FDIC), and the newest member, the Consumer Financial Protection Bureau. NCUA Chairman Debbie Matz succeeded FDIC Chairman Sheila Bair as head of the FFIEC on March 4, 2011. She is serving a two-year term.

Congress not just NCUA must act on MBLs says CUNA

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WASHINGTON (9/19/12)--While credit unions certainly appreciate any actions the National Credit Union Administration (NCUA) takes to reduce their regulatory burden and allow them to better serve their members, the Credit Union National Association (CUNA) is still urging the U.S. Congress to act to help credit unions meet rising business loan demands and to help our economy more quickly recover, CUNA President/CEO Bill Cheney said.

Cheney's remarks followed the NCUA's release of a legal opinion letter that expanded the definition of "fleet" of vehicles, as used in its member business lending (MBL) rule, to mean five or more vehicles. The Sept. 13 NCUA opinion said the agency's former use of two vehicles to define fleet was "overly restrictive."

The NCUA said the revision better reflects "marketplace realities" and provides regulatory relief to credit unions, enabling them to more effectively serve the business needs of their members.

This effort to lighten the load on credit unions is commendable, Cheney said--and CUNA appreciates it. However, the CUNA leader acknowledged there are limits to what the NCUA can do. "It is hard to foresee an action that the agency could take which ultimately would have the impact that passage of member business lending legislation would have for small business and for credit unions. Passage of this vital legislation remains our top priority," he added.

This effort to lighten the load on credit unions is commendable, but there are limits to what the NCUA can do, Cheney said. "It is hard to foresee an action that the agency could take which ultimately would have the impact that passage of member business lending legislation would have for small business and for credit unions. Passage of this vital legislation remains our top priority," he added.

Bills that would increase the MBL cap to 27.5% of assets, from 12.25%, have been introduced in the House and Senate. Members of both parties support the MBL cap increase bills, and H.R. 1418 has 140 cosponsors. S. 2231 has 21 cosponsors, and Senate leadership remains committed to a floor vote on the MBL legislation. Udall and Royce are sponsors of the bills in their respective chambers.

CUNA has estimated that an MBL cap increase would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits would come at no cost to taxpayers.

The NCUA in a release said the "fleet" definition revision gives credit unions greater flexibility in making lending decisions. A credit union making a loan to a member who owns a business with fewer than five vehicles would qualify for a loan-to-value exception under current regulations, according to the NCUA.

The agency emphasized that its legal opinion is "consistent with the way fleet vehicles are treated by the IRS and auto industry standards."

In reviewing how best to define "fleet," the NCUA said it evaluated case law, how other government agencies use the term, and auto industry standards. NCUA Associate General Counsel Frank Kressman, who penned the opinion, said the agency was "particularly persuaded" by Internal Revenue Service (IRS) publications on the topic and treatment of fleets by auto industry fleet programs.

"Accordingly, we amend the definition of 'fleet' as follows: A fleet is five or more vehicles that are centrally controlled and used for a business purpose, including for the purpose of transporting persons or property for commission or hire.

"The revised definition also addresses our safety and soundness concerns about collateral devaluation. In this definition, we intend to capture only those vehicles that depreciate at a faster rate than personal vehicles not used for a commercial purpose," Kressman wrote.

However, the opinion letter added, the NCUA continues to expect credit unions to properly underwrite MBLs, taking into account all risks posed by business lending.

The opinion was requested by John Hirabayashi, president and CEO, Community First CU of Florida, who is on CUNA's Examination and Supervision Subcommittee.

For the full NCUA release, use the resource link.

CUNA seeks comment on CFPB mortgage servicing proposal

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WASHINGTON (9/19/12)--Credit unions can detail the compliance costs and regulatory burdens associated with the Consumer Financial Protection Bureau's (CFPB) pending proposal on mortgage servicing, and the efforts it will take to implement these changes, in a new Credit Union National Association (CUNA) Comment Call.

The Comment Call is one of several released by CUNA on recent CFPB's proposals.

The proposed rules regarding mortgage servicing would amend Regulation Z, which implements the Truth in Lending Act (TILA), and Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA). The regulations would coordinate with changes proposed in connection with the combined TILA and RESPA forms that will be provided for most closed-end mortgage loans.

The mortgage forms and proposed rules are scheduled to be finalized by January.

In this latest Comment Call, CUNA has asked for information from credit unions on what types of exemptions might be appropriate for small servicers and how much time credit unions will need to effectively implement the mortgage changes. The Comment Call also notes that the CFPB has sought comment on the impact of delayed implementation on consumers and on other market participants.

Credit unions may also comment on the CFPB's proposed payoff statements, timing requirements for periodic statements, and their own methods of combining financial statements for their members. Comments on rate changes, late fees, and prepayment penalty changes are also requested in the Comment Call.

For the full CUNA Comment Call, use the resource link.

Inside Washington (09/18/2012)

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  • WASHINGTON (9/19/12)--After a quiet summer, financial system regulators are under pressure to release a slate of contentious new rules before the end of 2012, according to the American Banker (Sept. 18). Among the areas the rules will cover a ban on proprietary-trading ban, mortgage regulations and a scheme for identifying systemically important financial institutions (American Banker Sept. 18). First, the Volcker Rule, a provision to stop banks from engaging in proprietary trading, was supposed to become effective two months ago. Martin Gruenberg, the acting Federal Deposit Insurance Corp. chairman, last week said regulators are working toward completing the rule by year-end. Second, the Dodd-Frank Act requires the Consumer Financial Protection Bureau to finalize a qualified mortgage (QM) rule by Jan. 21 that would require lenders to verify a borrower's ability to repay unless a loan is a QM. Lenders and consumer advocates have argued over the definition of a QM, and how much lenders should be protected from liability when they make loans that involve qualified QMs. Third, the Federal Reserve is reviewing two sets of proposals that would establish new industry standards under section 165 of the Dodd-Frank Act and the Basel III accord. The Dodd-Frank rules would set new capital and liquidity standards, and other requirements, for systemically important financial institutions. The agency also released a proposal to implement capital and liquidity requirements under the Basel III accord. However, industry observers say the complexity of the Dodd-Frank rules and the Basel III proposal may prevent their approval by the end of the year. Fourth, the Financial Stability Oversight Council is expected move forward "in earnest" with establishing rules formally designating certain nonbanks as systemically important financial institutions, said Coryann Stefansson, managing director at PricewaterhouseCoopers. And finally, the Commodity Futures Trading Commission is expected to finalize several derivative regulations in the fourth quarter, according to industry observers …

NEW NCUA opinion loosens fleet definition

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ALEXANDRIA, Va. (UPDATED: 12:25 P.M. ET, 9/18/12)--The National Credit Union Administration (NCUA) has expanded the  definition of "fleet" of vehicles, as used in its member business lending rule, to mean five or more vehicles--saying its former use of two vehicles to define fleet is "overly restrictive."

The NCUA, in a legal opinion letter dated Sept. 13, said the revision better reflects "marketplace realities" and provides regulatory relief to credit unions, enabling them to more effectively serve the business needs of their members.

The NCUA said that in reviewing how best to define "fleet," it evaluated case law, how other government agencies use the term, and auto industry standards.  NCUA Associate General Counsel Frank Kressman, who penned the opinion, said the agency was "particularly persuaded" by Internal Revenue Service publications on the topic and treatment of fleets by auto industry fleet programs.

"Accordingly, we amend the definition of 'fleet' as follows: A fleet is five or more vehicles that are centrally controlled and used for a business purpose, including for the purpose of transporting persons or property for commission or hire.

"The revised definition also addresses our safety and soundness concerns about collateral devaluation. In this definition, we intend to capture only those vehicles that depreciate at a faster rate than personal vehicles not used for a commercial purpose," Kressman wrote.

However, the opinion letter added, the NCUA continues to expect credit unions to properly underwrite MBLs, taking into account all risks posed by business lending.

The opinion was requested by John Hirabayashi, president and CEO, Community First CU of Florida, who is on CUNA's Examination and Supervision Subcommittee.

"This is a positive development, and we encourage the agency to replicate this approach as often as possible," said Mary Dunn, CUNA deputy general counsel.