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Washington Archive

Washington

York to testify for CUNA on MBLs Oct. 12

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WASHINGTON (10/7/11)--Jeff York, president/CEO of Coasthills FCU, Lompoc, Calif., will testify Oct. 12 on the benefits a higher cap on credit union member business lending (MBL) would have on the nation’s economy and its small businesses. York, a Credit Union National Association (CUNA) board member, will testify on behalf of the CUNA. National Credit Union Administration (NCUA) Chairman Debbie Matz is also among the scheduled witnesses. The hearing, announced last week by the House Financial Services subcommittee on financial institutions and consumer credit, will study pending legislation that would increase the MBL cap to 27.5% of a credit union’s assets, up from the current 12.25%. Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) introduced H.R. 1418, the Small Business Lending Enhancement Act, earlier this year in the House. The bill has 80 co-signers. On the Senate side, Sen. Mark Udall (D-Colo.) has introduced S. 509, the Small Business Lending Enhancement Act, which has 20 co-sponsors. CUNA emphasizes that lifting the MBL cap would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment—all at no cost to the American taxpayer. Also scheduled to testify, according to a subcommittee announcement, are:
* Sal Marranca, president/CEO of Cattaraugus County Bank, on behalf of the Independent Community Bankers of America; * Albert C. Kelly, Jr., president/CEO of SpiritBank and chairman-elect of the American Bankers Association; * Gary Grinnell, president/CEO of Corning CU, on behalf of the National Association of Federal Credit Unions; and * Mike Hanson, president/CEO of the Massachusetts Credit Union Share Insurance Corporation.
The hearing is scheduled for 2 p.m. (ET).

30- 15-year mortgages remain at record lows

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WASHINGTON (10/7/11)--Average rates on 30- and 15-year fixed rate mortgages fell to all-time lows for the second straight week, totaling 3.94% and 3.26%, respectively, Freddie Mac reported. Thirty-year mortgages averaged 4.01% last week and 4.27% this time last year. Fifteen-year mortgages averaged 3.28% last week and 3.72% this time last year. Freddie Mac Chief Economist Frank Nothaft said these record low mortgage rates are due to a “sharp drop in 10-year Treasuries early in the week as concerns over a global recession grew.” Five-year Treasury indexed hybrid adjustable-rate mortgages (ARMs) also fell during the week, averaging 2.96%. Last week’s total as 3.02%. However, one-year Treasury-indexed ARMs averaged 2.95% this week, up from the 2.83% total reported last week. Nothaft said the one-year ARM increase was tied to the Federal Reserve’s move to replace $400 billion in short-term Treasury securities. These securities serve as benchmarks for many ARMs, Nothaft said. For the full release, use the resource link.

Cordray CFPB nomination approved by Senate Banking Committee future bumpy

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WASHINGTON (10/7/11)--The nomination of Richard Cordray to be Consumer Financial Protection Bureau director will now move on to the full Senate after the nominee was approved by the Senate Banking Committee Thursday. The committee by a Thursday voice vote also approved Alan Krueger to join the Council of Economic Advisers, David Montoya to serve as U.S. Department of Housing and Urban Development Inspector General, Cyrus Amir-Mokri to serve as Assistant Secretary of the U.S. Treasury, and Patricia Loui and Larry Walther to join the Export-Import Bank Board of Directors. Cordray's nomination was approved by a party-line 12-10 vote. Committee Chairman Tim Johnson (D-S.D.) said the vote was “an important step forward for American consumers,” and called on his Senate colleagues to confirm Cordray as soon as possible. Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said Cordray's nomination "still faces several obstacles," adding that "over 40 senators have said they will not vote to confirm any CFPB nominee unless changes to the CFPB are enacted." Those changes include increasing CFPB leadership to a five-member commission and reforming some operational rules. Speaking before the committee following the nomination hearing, Treasury Secretary Tim Geithner encouraged members of the committee that did not support Cordray's nomination to meet with the CFPB nominee. Geithner said Cordray is "exceptionally qualified" for the job, and reminded the senators that a "vast array" of financial institutions will remain outside the scope of consumer protection regulations if the Senate fails to nominate a CFPB director. CUNA has encouraged Cordray to "consider ways in which the bureau can help minimize regulatory requirements for credit unions and other financial institutions" and has also encouraged the CFPB to establish an Office of Regulatory Burden Monitoring to help the agency "track, consider, and help mitigate the cumulative regulatory burden under which credit unions and others must operate."

Matz NCUA will review TDR standards

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WASHINGTON (10/7/11)--The Credit Union National Association (CUNA) strongly supports a plan announced by the National Credit Union Administration (NCUA) to review its Troubled Debt Restructuring (TDR) policy, and has been raising TDR-related issues in meetings with agency staff, CUNA Deputy General Counsel Mary Dunn noted Thursday. State leagues have also weighed with the agency on these issues. Early Thursday, NCUA Chairman Debbie Matz said the agency would review its TDR policy in the near future. A timeline for the board review has not been set, but the agency told News Now that NCUA staff members are reviewing the TDR policy to make recommendations for change. TDR loans, which have very specific accounting and reporting requirements, occur when a credit union or other lender grants a concession to the borrower and modifies the terms of the loan based on the borrower’s financial situation. The financial statement notes and call report data associated with TDRs are also unique. Matz said the agency “supports credit union efforts to find creative solutions for members who need loan modifications to stay in their homes,” and added that the NCUA “is seeking solutions that would better assist credit unions which are working diligently to provide members with alternatives to foreclosure.” However, CUNA and others have followed up on credit union complaints that NCUA examiners have sometimes discouraged TDRs. Credit unions are also burdened by regulatory requirements that force credit unions to segregate TDRs and report TDR payments as delinquent until the member has made timely and consecutive payments for six months after the modification. This generally requires credit unions to manually track such payments, Dunn said. NCUA board member Gigi Hyland in July said an Interpretive Ruling and Policy Statement (IRPS) on TDRs, if released, would recommend that credit unions adopt charge-off, loan grading and modification frequency standards that are similar to those currently used by banks. Credit unions would be advised to create and implement their own limits on the number and frequency of loan extensions, loan deferrals, loan renewals and loan rewrites, and would need to develop effective risk management, reporting and internal controls related to these types of loans, Hyland said.

Inside Washington (10/06/2011)

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* WASHINGTON (10/7/11)--Regulators will soon release one of the most contentious elements of the Dodd-Frank Act: a proposal to ban proprietary trading and limitations on private equity investments. The plan would define proprietary trading, describe the circumstances in which financial institutions can invest in hedge or private-equity funds, and require banks to put in place internal compliance controls for the so-called Volcker Rule (American Banker Oct. 6). The Federal Deposit Insurance Corp. is scheduled to issue its proposal Tuesday. Other regulators are expected to unveil their plans around the same time. Under the proposal, regulators would define proprietary trading as participating in the purchase or sale of one or more covered financial positions as principle for the trading account of the banking entity. It would not include acting as an agent, broker, or custodian for unaffiliated third parties. Under the original statute, banks can engage in underwriting and market making-related activities. In the new proposal, certain requirements must be met so the trading activities are within exempted categories. A separate section of the proposal outlines the types of relationships a bank is prohibited from having with hedge and private-equity funds. The proposal would also prohibit a bank from acting as a general partner or trustee, selecting directors and managers, or having a name similar to a covered fund. Any bank taking part in certain trading or fund activities would be also required to comply with the prohibitions and restrictions related to Volcker Rule. These would include internal written policies and procedures, internal controls, management framework, independent testing, training and record keeping … * WASHINGTON (10/7/11)--U.S. banks have made progress in reforming their compensation practices since the 2008 financial crisis, but more changes are needed, according to a Federal Reserve report released Wednesday. “Incentive compensation practices at banking organizations are continuing to evolve and develop,” the Fed said. “We expect this evolution to continue.” Before the crisis, big banks didn’t pay adequate attention to risk when creating their incentive compensation packages, according to the report. “Some employees were provided incentives to take imprudent risks,” the Fed added. But all firms reviewed in the report have made progress in identifying the employees, such as traders and loan originators, whose incentive compensation packages could threaten the safety and soundness of an organization, the Fed said … * WASHINGTON (10/7/11)--Although he did not publicly criticize Bank of America Corp.’s decision to charge a monthly fee for debit card use, Raj Date, the de facto head of the Consumer Financial Protection Bureau, implied that a uniform disclosure standard for checking-account terms may be in the best interests for consumers (American Banker Oct. 6). Checking accounts often come with unexpected costs that can add up for consumers, Date said. Consumers should ideally have a more simple way to evaluate checking account costs, he suggested. Consumer groups and financial institutions are developing simplified disclosures that allow consumers to compare the checking account options from credit unions, large banks and community banks, he said …

Geithner testifies on oversight committee issues

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WASHINGTON (10/7/11)--U.S. Treasury Secretary Timothy Geithner appeared before the Senate Banking Committee Thursday to review recommendations that were included in the Financial Stability and Oversight Council’s (FSOC’s) first annual report, which was released in July. The report included a comprehensive view of financial market developments and potential threats to the U.S. financial system and Geithner is the current chair of FSOC. The council is comprised of 10 voting members--nine federal financial regulators, including the National Credit Union Administration (NCUA), and one independent member--and five nonvoting members. Geithner used the opportunity of the hearing to express his support for The American Jobs Act, stating that, “according to estimates by outside economists, [the act] would raise economic growth by one to two percentage points and help create one to two million new jobs.” The Obama administration noted on its twitter feed, WHLIVE, Thursday that the U.S. Senate will begin consideration of the jobs bill Tuesday; it is expected that the early votes will be mainly on procedural matters. Secretary Geithner summarized the recommendations of FSOC’s report, which include:
* Taking further action to strengthen the financial position of the core of the U.S. financial system, particularly the largest institutions, which should be able to manage their businesses so that they have the ability to weather more challenging future environments without government assistance in crisis; * Reforming the housing finance system, including taking action to establish national standards for the mortgage servicing market, in order to better align incentives and help reestablish confidence in the integrity of the housing market.
The report emphasizes the importance of broader reforms to help return private capital to the housing market, strengthen mortgage underwriting, and reduce over time the role of the government in the housing markets. While saying he was optimistic about the future, Geithner acknowledged that much work remains to sufficiently strengthen the financial system, stating that the U.S. must continue to implement financial reform and move forward with the other recommendations in the report. “We will do this with a balanced approach, weighing the benefits of regulation against the costs of excessive restraint.” This is an approach that the Credit Union National Association (CUNA) strongly supports, and one that CUNA urges the NCUA to follow to avoid unnecessary regulatory burdens for credit unions. Geithner, in his prepared remarks to the committee, also said that in order to continue to repair our financial system, the country must have qualified people in place to run the financial agencies, which, he added, requires that Congress provide sufficient funding for enforcement agencies to do their jobs in a complicated and challenging financial environment. Geithner testified later in the day before the House Financial Services Committee.

Compliance Employee rights notice deadline is postponed

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WASHINGTON (10/7/11)--Private-sector employers got a reprieve Thursday from an approaching regulatory deadline that would require them to publicly post notices of employee rights, as detailed under the National Labor Relations Act (NLRA), in their offices beginning on Nov. 14. The National Labor Relations Board (NLRB) pushed the implementation date for its rule back to Jan. 31, 2012. The NLRB said it delayed the deadline following queries from businesses and trade organizations indicating uncertainty about what businesses fall under the board’s jurisdiction. The board finalized the rule to a back drop of significant opposition from the business community, saying that "many employees protected by the NLRA are unaware of their rights under the statute" and adding that the rule "will increase knowledge of the NLRA among employees, in order to better enable the exercise of rights under the statute." The new notice is similar to one required by the U.S. Department of Labor (DOL) for federal contractors. The NLRA notice must be posted "in conspicuous places” where they are readily seen by employees, including all places where notices to employees concerning personnel rules or policies are customarily posted. A similar notice must be posted online if personnel rules and policies are customarily posted there. Translated versions of the poster are required in workplaces where 20% or more of employees speak a language other than English. Credit Union National Association (CUNA) compliance staff noted that since credit unions that are not specifically excluded from the NLRA's definition of "employer," they will be subject to the rule. CUNA has noted that credit unions that already comply with DOL posting requirements will be in compliance with the new NLRB rule. For more on the NLRB rule, use the resource link below to see recent postings on CUNA’s CompBlog. NLRB Release http://www.nlrb.gov/news/posting-employee-rights-notice-now-required-jan-31-board-postpones-deadline-allow-further-educa

NEW Cordray CFPB nomination approved by Senate Banking Committee

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WASHINGTON (UPDATED: 10:40 a.m. ET, 10/6/11)--The Senate Banking Committee this morning approved the nomination of Richard Cordray to be Consumer Financial Protection Bureau director. Cordray’s nomination was approved by a 12-10 vote, and will now move on for a vote in the full Senate. Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said Cordray's nomination "still faces several obstacles," adding that "over 40 senators have said they will not vote to confirm any CFPB nominee unless changes to the CFPB are enacted." Those changes include increasing CFPB leadership to a five-member commission and reforming some operational rules. Speaking before the committee following the nomination hearing, Treasury Secretary Tim Geithner encouraged members of the committee that did not support Cordray’s nomination to meet with the CFPB nominee. Geithner said Cordray is “exceptionally qualified” for the job, and reminded the senators that a “vast array” of financial institutions will remain outside the scope of consumer protection regulations if the Senate fails to nominate a CFPB director. CUNA has encouraged Cordray to "consider ways in which the bureau can help minimize regulatory requirements for credit unions and other financial institutions" and has also encouraged the CFPB to establish an Office of Regulatory Burden Monitoring to help the agency "track, consider, and help mitigate the cumulative regulatory burden under which credit unions and others must operate."