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Interchange rule hearing tentatively set for Feb. 17

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WASHINGTON (1/27/11)--With the Federal Reserve’s April 21 deadline to craft a final rule on government controls on interchange fees steadily approaching, the House Financial Services Committee has tentatively scheduled a Feb. 17 hearing to study the Fed’s planned implementation. The Credit Union National Association (CUNA) has urged outright repeal of proposed interchange fee regulations. However, in the absence of repeal, CUNA has argued that lawmakers and the Federal Reserve should take time to review the interchange rules, and has urged lawmakers to conduct hearings on the interchange fee proposal. The Fed's interchange provisions, which were released just before the end of the year, could cap debit card interchange fees that are paid by merchants to card issuers at as little as seven cents per transaction. Issuers with under $10 billion in assets would be exempt from the interchange changes. The Fed proposal will remain open for public comment until Feb. 22. Fed officials during their December meeting said that the interchange provisions, if ultimately approved, would likely not become effective until after April. Also on the committee’s agenda, based on a tentative two-month scheduled released Tuesday by its chairman, Rep. Spencer Bachus (R-Ala.), are hearings on:
* Monetary policy and jobs, Feb. 9 (10 a.m.); * GSE reform, Feb. 9 (2 p.m.); * Markup of committee oversight plan, Feb. 10 *Implementation of derivatives provisions of Dodd-Frank Act, Feb. 15 (10 a.m.); * Government-sponsored enterprises' (GSE) legal fees, Feb. 15 (2 p.m.); * Financial Crisis Inquiry Commission, Feb. 16 (10 a.m.); * Housing finance, Feb. 16 (2 p.m.); * The Fed’s interchange plan, as mentioned, Feb. 17; * GSE reform, March 1; * HUD FY 2012 budget, March 2; and * Humphrey-Hawkins semi-annual Federal Reserve report on monetary policy, March 3.

CUNA FHLB voluntary merger plan enhances safety

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WASHINGTON (1/26/11)--The Credit Union National Association (CUNA) in a Tuesday comment letter told the Federal Home Finance Agency (FHFA) that it supports much of a proposed Federal Home Loan Bank (FHLB) voluntary merger rule that “could help maintain a safe and sound FHLB system capable of meeting FHLB-members’ needs.” The merger rule would implement voluntary FHLB merger authority that was added to the FHLB Act by the Housing and Economic Recovery Act of 2008. Many credit unions are members of FHLBs, and FHLBs provide liquidity to credit unions and have frequently awarded affordable housing-related grants to eligible credit unions. While CUNA supported the proposed ratification of a FHLB merger through a membership vote and backed language that would limit the number of votes each member may cast, CUNA questioned whether a proposed state-by-state limitation on FHLB member votes would be appropriate in the FHLB merger context. CUNA emphasized that it is important not to push directorship reductions in a merger to the point where the number of credit union representatives on FHLB boards is reduced. It is already “exceedingly difficult for credit unions to secure election to FHLB boards in the current configuration; it is essential to avoid making this problem worse,” CUNA said. CUNA also noted, however, that FHLB consolidation may create circumstances where it would be appropriate to reduce the number of directorships. Directorships typically represent specific states, and directorships should be equitably apportioned among the states following any FHLB merger, CUNA said. Any related reductions should be phased in slowly, and affected through the agency’s annual designation of directorships or a similar process, CUNA suggested. For the full comment letter, use the resource link.

Plain vanilla could be exempt from FASB fair value rule

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WASHINGTON (1/26/11)—The Financial Accounting Standards Board (FASB) signaled its intent to exclude consumer and other loans that are held for collection of contractual payments from fair value accounting standards, during a FASB meeting Tuesday. FASB’s decision is not final and there will be more deliberation by FASB on this issue. “I think this is a very positive development for credit unions,” said CUNA President/CEO Bill Cheney Tuesday, “CUNA, along with our Accounting Subcommittee, has been working for changes to the FASB fair value rule since the board first indicated it planned to apply fair value accounting principles to loans and other assets.” The subcommittee is headed by Scott Waite, chief financial officer of Patelco CU, San Francisco. “However,” Cheney added, “we need to carefully track developments on debt securities and the potential impact on credit unions that invest in mortgage and other asset-backed securities.” As indicated by FASB, entities that provide certain financial products to customers or members with the intent to hold them for collection of contractual payments will be able to record such products at their amortized cost, just as they do now. Debt securities, such as those securitized by loans, and some other types of investments would be subject to fair value accounting standards. It is unclear at this point how the Allowance for Loan and Lease Loss (ALL) Accounts would be affected. FASB’s fair value accounting proposal, which was released in May of 2010, would have required most financial assets and liabilities to be reported under U.S. Generally Accepted Accounting Principles (GAAP) at fair value. The proposal would also require the funding of ALL Accounts to utilize the expected loss model. Credit unions with assets of $10 million or more are required to comply with GAAP. CUNA has met regularly with FASB officials to oppose the proposed application of fair value accounting rules to loans and other credit union products, and has said that the proposed accounting changes would provide no benefit to credit unions while substantially increasing their compliance costs. In several meetings with the FASB board, Waite reiterated CUNA's claim that reporting fair value under GAAP is simply not useful to the members, creditors, board members, and regulators of credit unions. Waite told FASB that credit unions "provide an economic value to consumers by leveraging their not-for-profit status in the higher rates on deposit and lower rates on loans." "For us to be unfairly fair-valued on this business model changes the purpose of accounting standards," he said. "Accounting standards should not be the driver of shaping acceptable business models," but should "provide comparability, transparency, and relevancy," Waite added. FASB expects the final rule to be issued later this year and take effect sometime in 2013 with a four-year deferral for non-public entities under $1 billion in assets, which includes credit unions under the asset limitation. However, FASB has warned that issue date could change.

More SAFE Act registry info sessions planned

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WASHINGTON (1/26/11)--The Nationwide Mortgage Licensing System & Registry (NMLS) Resource Center has scheduled a second series of web-based workshops to inform financial institutions and their mortgage loan originating employees of pending regulatory requirements under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act). The SAFE Act requires credit union mortgage loan originators and their employing institutions to register with the Conference of State Bank Supervisors’ (CSBS) National Mortgage Licensing System & Registry. The sessions specifically address portions of the SAFE Act that require mortgage loan originators (MLOs), including those at credit unions, to register on the new NMLS system, which is scheduled to begin on or around Jan. 31. Once the registry launches, MLOs have 180 days to complete the initial round of registrations. The NMLS Resource Center has been holding “Introduction to the NMLS Federal Registry” workshops throughout the month of January. Those workshops will end on Jan. 28. The new NMLS Resource Center series will feature four separate sessions. Session A, entitled “Institution Basics: Getting Started on NMLS,” will cover account initiation, user registration, form MU1R submission, and VeriSign “Two Factor Credentials” registration. Institutions will learn how to create mortgage loan originator accounts and records and to manage filing MU4R forms and related fees, among other things, during Session B. Session C will serve as a training session for MLOs, and the fourth session, Session D, will cover confirming a mortgage applicant’s employment and managing MLO records. The informational sessions are staggered, and are scheduled to run from Feb. 1 through March 24. For more on the sessions, and a full session schedule, use the resource link. The Credit Union National Association has also provided its own SAFE Act compliance guide. For that guide, which is available only to CUNA members, use the second resource link.

Inside Washington (01/25/2011)

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* WASHINGTON (1/26/11)--The Obama administration has for the third time delayed the release of its proposed reforms for government-sponsored enterprises, including Fannie Mae and Freddie Mac. The administration said it will not make its Jan. 31 deadline for presenting the proposal to Congress and is now aiming for a mid-February release (American Banker Jan. 25). William Longbrake, an executive-in-residence at the University of Maryland, said the delay in releasing the report may be an indication of debate within the administration about whether to propose a specific plan or to summarize options. Many Republicans are in favor of abolishing Fannie and Freddie rather than maintain any government guarantee …