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CUNA Home Act notice regs should apply to mortgages only

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WASHINGTON (1/20/10)--The Credit Union National Association (CUNA) in a Tuesday letter commented on portions of Federal Reserve Board rules which implement the Helping Families Save Their Homes Act that require financial institutions to notify consumers if their mortgages have been sold or transferred to another party. In the letter, CUNA did not object to the 30-day notice requirements for mortgage loans but did not support these requirements for loan participations. “ Participation transactions are complicated” and borrowers may be confused “when they receive a notice that details the various parties who have purchased portions of these loans ,” CUNA senior assistant regulatory counsel Jeff Bloch wrote. According to CUNA, “the confusion for borrowers outweighs the benefits this information provides.” CUNA also urged the Fed to "review the applicability of this rule with regard to participation loans" and to “expand the exception to participation loans in which legal title transfers for some portion, but not for the entire loan, especially when the servicer does not change.” Under the Act, purchasers and assignees that acquire a mortgage loan must provide the notice within 30 days after the loan is acquired, which provides information about the transfer. The notice required under the Act would be provided by the purchaser or assignee of the loan, and while credit unions typically do not purchase loans, the rule would apply to credit unions that purchase loans via participation agreements or merge with other credit unions, CUNA said. According to CUNA, the rule would also apply to credit union service organizations (CUSOs) that purchase mortgage loans from credit unions. Consumers will also "have little interest” in these notifications if the mortgage servicer does not change, as the mortgage servicer collects the mortgage payments “and serves as the main contact for the borrower.” CUNA's letter was developed with CUNA's consumer protection subcommittee, chaired by Idaho CU League President Alan Cameron. For the full comment letter, use the resource link.

Inside Washington (01/19/2010)

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*WASHINGTON (1/20/10)-- While Congress was in recess last week, U.S. Senate Minority Whip Jon Kyl, of Arizona, met with seven credit union leaders from his state and spent more than 45 minutes discussing the Senate version of a member business lending (MBL) bill, The Small Business Lending Enhancement Act (S. 2919.) That bill proposes to increase the MBL cap to 25% of a credit union’s assets. The credit union representatives stressed to Kyl and his staff that the current cap represents an unnecessary restriction on lending and is forcing credit unions to turn down small businesses seeking credit. They explained that even credit unions that aren’t hitting the cap feel pushed to "cherry-pick" loans because the cap doesn't allow them to diversify their portfolios to meet the needs of their membership as a whole. Austin De Bey, of the Arizona Credit Union League, reported from the meeting, “One credit union held that they aren't near the cap yet, but the request for loans has increased so much because banks are referring them to credit unions, that they would reach the cap very soon if the rate of new loan request continued”... * WASHINGTON (1/20/10)—On Jan. 29, at the Federal Deposit Insurance Corp.’s conference on interest rate risk, Federal Reserve Board Vice Chairman Donald Kohn will be a featured speaker. The symposium is being conducted to address topics associated with banks' potential exposure to an expected rise in short-term interest rates this year. (American Banker Jan. 19) Specific topics are to include interest-rate risk management strategies at banks of all asset sizes, how extending maturities on liabilities might mitigate risk, and also the FDIC’s supervisory view on banks' management of interest rate risk...

Feds new variable rate credit restrictions cause issues for CUs

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WASHINGTON (1/20/10)--In the final rule issued last week that implements provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), the Federal Reserve Board (Fed) indicated that credit unions that have a floor on their variable rate credit cards may not take advantage of the variable rate exception when increasing the annual percentage rates (APR) of those cards. Under these provisions, effective February 22, 2010, credit unions will only be able to raise their credit card rates under specific circumstances. One of these is when there is a variable rate and the increase is based on a change in an index that is not under the card issuer's control. However, under the rule issued last week, the Fed has indicated that the ability to raise rates under these circumstances will not apply if the issuer imposes a floor that will not permit the rate to decrease at all times in a manner consistent with reductions in the index. According to Credit Union National Association senior assistant general counsel Jeffrey Bloch, "many credit unions that impose variable rates use a floor to ensure that the APR is sufficient to compensate for the risks of their credit card programs and that these floors have also been necessary due to the very low levels of the underlying indexes that have existed in recent years." Bloch said that "CUNA has already been in contact with the Fed about this issue and the Fed has indicated its willingness to continue discussions with CUNA on the impact of these provisions on credit unions. Credit unions are not only concerned with this change, but are also concerned with the very short period of time they will have to make the necessary adjustments.” Bloch also notes that this change was first implemented in the final rule and that credit unions and others did not have an opportunity to comment on this restriction during the rulemaking process. The CARD Act rules issued last week also outline numerous other credit card industry reforms, including rules that prevent lenders from raising rates on existing balances, require issuers to consider a consumer's ability to make payments, and prevent over-the-limit fees, among other things. CUNA will hold an audio conference call on the new Regulation Z CARD Act rule on Feb. 2nd at 2 pm ET. More information on this call will be announced soon.

Congress Hearings dominate the week for CUs

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WASHINGTON (1/20/10)--The full Congress returns to work this week for the first time in 2010, and while credit union concerns will not be addressed in legislation this week, there will be a busy schedule, with plenty of hearings on the docket. On Wednesday, the House Financial Services Committee Subcommittee on Housing and Community Opportunity will hold a hearing on H.R. 476, the Housing Fairness Act. The Senate Banking Committee on Wednesday will hold confirmation hearings for Department of Commerce, Department of Housing and Urban Development, Government National Mortgage Association, and Securities Investor Protection Corporation nominees. The Finance industry will also be a focus of this weeks hearings, with the House Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit holding a Thursday hearing on the condition of financial institutions and the full House Financial Services Committee discussing finance industry compensation on Friday. The House Financial Services Committee Subcommittee on Housing and Community Opportunity will also hold a field hearing in Minneapolis, Minn., entitled "The Impact of the Foreclosure Crisis on Public and Affordable Housing in the Twin Cities." The hearing will take place on Saturday.
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