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Washington Archive

Washington

Fed weighs in When do loan mods equal adverse actions

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WASHINGTON (1/5/10)—Prompted by questions from consumer compliance examiners, the Federal Reserve last month issued a letter addressing whether adverse action notices under Equal Credit Opportunity rules are required for mortgage loan modification declinations, including those made under to the U.S. Department of Treasury's Making Home Affordable Modification Program (HAMP). Although credit unions have steadily been working with members on loan modifications—in fact, at a much accelerated rate compared to banks—few lenders are yet involved with the administration’s HAMP program. However, if the administration—through Freddie Mac and Fannie Mae—decides to move forward with ideas to tweak the program through such things as assistance with principal reductions, credit union use of the HAMP program may increase, as might that of other lenders. The December letter, signed by the Fed’s Sandra Braunstein, director of the division of consumer and community affairs, states that the “equal credit” rule (Regulation B) “makes clear that such notice requirements are inapplicable to borrowers in default (Reg. B, § 202.(c)(2)(ii)).” However, the letter also notes “a major caveat in that regard.” The letter outlines four questions to be answered to determine whether declining a HAMP or other loan modification constitutes a disclosure-triggering adverse action:
* First, is there an extension of credit? * Second, is there an application? * Third, was the application for extension of credit declined? * Fourth, was the borrower currently delinquent or in default?
The letter concludes: “Even if an adverse action notice is not required under Regulation B, borrowers may find it helpful to receive from institutions information regarding why their mortgage loan modification request was declined. "For example, we understand that Treasury has directed HAMP servicers to provide written notice to a borrower that has been evaluated for HAMP but is not offered a trial period plan or modification, or is at risk of losing eligibility for HAMP because the borrower has failed to provide the required financial documentation.” Use the resource link to access the Fed letter.

High-ranked reps Matz added to GAC lineup

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WASHINGTON (1/5/10)--The Credit Union National Association (CUNA) continues to build the lineup for its upcoming Governmental Affairs Conference (GAC), adding House Financial Services Committee Chairman
Rep. Barney Frank (D-Mass.), House Majority Whip Rep. James Clyburn (D-S.C.), and National Credit Union Administration (NCUA) Chairman Debbie Matz to a substantial list of speakers. Matz will be the first of the three additions to speak, taking the stage on the morning of Feb. 22. Clyburn will speak the following day, with Frank scheduled to appear early on Feb. 24. Reps. Paul Kanjorski (D-Penn.), Spencer Bachus (R-Ala.), and Ed Royce (R-Calif.) also recently agreed to speak at the event, which will also feature Financial Accounting Standards Board Chairman Robert Herz, Larry Kudlow, economist and host of CNBC's The Kudlow Report, former Federal Reserve Chairman Alan Greenspan, and Richard Phillips, Captain of the Maersk Alabama, which was hijacked by Somali pirates in 2009. Former Congressman and current host of MSNBC's Morning Joe, Joe Scarborough, will debate politics and the economy with Presidential candidate and former Democratic National Committee Chairman Howard Dean. The GAC, which begins on Feb. 21, will start with a CUNA Council-sponsored concert by the World Classic Rockers, featuring member of Santana, Journey, Boston, Steppenwolf, Toto and Lynyrd Skynyrd. Use the resource link below for more 2010 GAC information.

Financial regs jobs bill on early 2010 legislative agenda

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WASHINGTON (1/5/10)--While the House and Senate are not expected to return to Washington for another two weeks, one item of business that is high on the Senate’s list is financial regulatory restructuring debate, which was completed by the House just prior to the ongoing holiday break. The break ends for the House on Jan. 11 and the Senate on Jan. 19. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) in a recent statement said that "meaningful progress" has been made in the area of financial regulatory reform, with accord being reached on some aspects of enhanced consumer protections and preventing government bailouts of financial firms, modernizing the country's financial regulatory structure and the current oversight of the derivatives market. The legislators also will attempt to end the issue of "Too-Big-to-Fail" financial institutions and will look to focus the Federal Reserve more fully on monetary policy. The legislators are “committed to working together," and are hopeful that the remaining issues that do exist can be resolved before the Senate reconvenes on Jan. 19. The House passed a number of significant financial regulatory reforms late last month. The Senate is also expected to discuss pending jobs legislation this month, and Sen. Mark Udall’s (D-Colo.) S. 2919, the Small Business Lending Enhancement Act, could be considered as part of that job creation legislation. The legislation, which was co-signed by Sens. Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillebrand (D-N.Y.), would increase credit union member business lending (MBL) to 25% of assets and raise the "de minimis" threshold for a loan to be considered a member business loan to $250,000.

Rep. Sherman urges colleagues Put MBLs in jobs bill

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WASHINGTON (1/5/10)--Rep. Brad Sherman (D-Calif.) in a letter to House Education & Labor Committee Chairman Rep. George Miller (D-Calif.) said that Rep. Paul Kanjorski’s H.R. 3380, the Promoting Lending to America's Small Businesses Act of 2009, should be included as part of any future “jobs bill” that the Congress could bring to the House floor. The Credit Union National Association (CUNA) has advocated for litfing the member business lending cap through frequent communication with legislators as well as its recently completed national hike the hill, and CUNA has estimated that expanding the capacity of credit unions to make business loans could result in $10 billion in new business loans through credit unions and at least 108,000 new jobs in the first year after enactment, with no additional costs to taxpayers. “While business lending by credit unions represents merely a fraction of that by banks and other financial institutions,” Sherman said that “credit unions are ready to expand their business lending” and “are eager to put their capital to work to help sustain the recovery.” In the letter, which was also sent to Kanjorski and Reps. Nancy Pelosi (D-Calif.) and Barney Frank (D-Mass.), Sherman added that the current de minimis threshold for MBLs, which stands at $50,000, is “prohibitively small to allow credit unions to effectively serve the borrowing needs of their business members in today’s economy.” Kanjorski’s bill, which was introduced in the fall of 2009, would increase the MBL cap to 25% of a credit union's total assets, would raise the de minimis threshold for a loan to be considered a "member business loan" to $250,000, and would exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap.

Chartway action ends 2009 liquidations

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ALEXANDRIA, Va. (1/5/10)--Chartway FCU ended 2009 by assuming the assets, loans and shares of Toole, Utah-based HeritageWest FCU after the National Credit Union Administration (NCUA) approved the liquidation of HeritageWest on Dec. 31. HeritageWest was the 15th federally insured credit union to be liquidated in 2009. The NCUA also approved 15 credit union liquidations during 2008, and NCUA Director of Public and Congressional Affairs John McKechnie said that the NCUA would not predict how the number of liquidations or mergers would play out during the coming year. The National Credit Union Share Insurance Fund lost $116.5 million due to liquidations and assisted mergers as of Nov. 30, 2009, McKechnie said. A total of 140 banks closed during 2009. The 40,000 members of HeritageWest, which held $311 million in assets before its closure, will now be served by Chartway, which holds $1.2 billion in assets from 154,000 members located nationwide. Chartway serves its members through 4,000 shared service locations and an additional 52 branch locations in Arkansas, Florida, Georgia, New Jersey, North Carolina, Ohio, Rhode Island, Texas, and Virginia. McKechnie told News Now that the “two boards made the decision in the best interest of their respective memberships.” During the recent NCUA board meeting, which was held on Dec. 17, Chief Financial Officer Mary Ann Woodson reported that a total of 328 credit unions, holding nearly $41 billion of insured shares, were rated at CAMEL 4 and 5 status. This information, which reflected the status of these credit unions as of November 2009, represented a 27% increase over the amount of CAMEL 4 and 5 credit unions reported as of November 2008. CAMEL 4 and 5 credit unions are often in danger of failing or being liquidated.

Inside Washington (01/04/2010)

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* WASHINGTON (1/5/10)--National Credit Union Administration (NCUA) Supervisory Examiner Hal Krause has left NCUA after 27 years of service (Daily Exchange 1/5/10). Krause began his NCUA career as an examiner out of Philadelphia in 1983. He stayed in that position for 9 years, moved on to become a problem case officer for a few years, and assumed the Supervisory Examiner position for Region II in 1993. He said his proudest moments were helping credit unions succeed. NCUA will focus on transitioning to a 12-month cycle in 2010 from a risk-based exam cycle. Compliance issues like the Bank Secrecy Act are still in focus and credit unions heavy in real estate will see increased scrutiny, he said ... * WASHINGTON (1/5/10)--The Treasury Department is delaying a report on regulatory capital requirements for banks and other financial holding companies. The report, which was supposed to be released at year-end, is still in progress. The report was announced as part of the Obama administration’s plan to revamp financial markets (American Banker Jan. 4) ... * WASHINGTON (1/5/10)--A financial regulatory reform bill will have a tough battle through the Senate, financial observers said. One issue in the bill is a proposed consumer financial protection agency. Sen. Jack Reed (D-R.I.) said that there are several issues with the proposed agency, including enforcement of the agency’s rules and whether rulemaking will be unique to the agency or a shared responsibility (American Banker Jan. 4). The bill, by Senate Banking Committee Chair Christopher Dodd (D-Conn.) also may be very different than what Dodd initially released, said Mark Calabria, former aide to Committee Ranking Member Sen. Richard Shelby (R-Ala.). On Dec. 24, Dodd and Shelby said they were “on track” to make a deal in January. However, Dodd said negotiations can be tricky, and anything could happen in five minutes to change things. A new draft of the bill is expected to be dropped after the Senate comes back from recess Jan. 19. Dodd initially intended to make a deal on the legislation with Shelby last summer ...