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Inside Washington (11/13/2012)

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  • WASHINGTON (11/14/12)--A lawsuit filed by the Federal Housing Finance Agency (FHFA) charging Bank of America subsidiary Merrill Lynch with misleading Fannie Mae and Freddie Mac into buying billions of dollars of risky mortgage debt can proceed, a federal judge ruled Monday. The FHFA alleges that Merrill and other firms misrepresented that underlying mortgages complied with certain underwriting guidelines and standards (American Banker Nov. 13). The suit involves 88 mortgage-backed securities certificates that corresponded to 72 securitizations by Merrill. U.S. District Judge Denise Cote denied Merrill's claim that a District of Columbia law required the FHFA to demonstrate that Fannie and Freddie relied on the underwriter's claims. Merrill also maintained that the FHFA had forfeited its right to recover the amounts Fannie and Freddie paid for the securities because the statute of limitations had expired before the FHFA filed its lawsuit and that the agency cannot seek punitive damages …
  • WASHINGTON (11/14/12)--Federal Reserve Board Gov. Elizabeth Duke Friday suggested mortgage regulations should be eased for community banks. Increased regulatory standards may limit community banks' ability to compete in the mortgage lending market, she said. "Balancing the cost of regulation that is prescriptive with respect to underwriting, loan structure, and operating procedures against the lack of evidence that balance sheet lending by community banks created significant problems, I think an argument can be made that it is appropriate to establish a separate, simpler regulatory structure to cover such lending," Duke said in a speech to the Community Bankers Symposium. Credit unions make up 7% of home originations, according to information collected under the Home Mortgage Disclosure Act. Banks with between $500 million and $10 billion of assets account for about 13% of home loan originations, while those under $500 million of assets account for about 5% …
  • WASHINGTON (11/14/12)--Raj Date, the No. 2 official at the Consumer Financial Protection Bureau (CFPB), announced Monday he will leave the agency. Date's departure will likely take place in January after he helps the agency finalize several mortgage rules, including the qualified mortgage rule, which the agency is required to implement as part of the Dodd-Frank reform law (American Banker Nov. 13). Date had served as the agency's de facto leader following the departure of Elizabeth Warren, who formed the CFPB, and before the hiring of the agency's current director, Richard Cordray …

NCUA 2013 spending restraint is needed CUNA urges

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WASHINGTON (11/14/12)--With the National Credit Union Administration (NCUA) set to announce its 2013 budget at this week's  open board meeting, the Credit Union National Association (CUNA) continued to urge the agency to contain its costs and warned that if the agency increases its annual budget it would be the fourth consecutive year to do so.

Rejecting additional budget growth, holding the line on travel, increasing transparency and accountability are the top recommendations made by CUNA. CUNA President/CEO Bill Cheney noted that these recommendations are based on the "very serious concerns" credit unions have about the management of the agency's budget, based on "substantial increases the NCUA has approved" over the last three years.

In a letter to the NCUA, Cheney noted that the general financial condition of credit unions has improved in recent years as the country moves past some of its worse economic woes. He also noted that the number of troubled credit unions has declined.

However, he pointed out that the number of credit unions in the system has also declined by 10.8% while the NCUA's budget has expanded by 48.1% between 2009 and 2012. The number of agency employees, represented by full time equivalent (FTE) positions, has risen from 965 to 1,261.5, a 30.7% increase. Moreover, travel costs are up 69% and contract service expenses have mushroomed by 130% during this same time frame, Cheney said.

"The NCUA's budget is funded overwhelmingly by credit unions, and they deserve to have their funds allocated prudently and efficiently to support reasonable safety and soundness objectives," Cheney noted.

He also urged the NCUA to provide more frequent, detailed and useful information to credit unions on the budget, the assumptions supporting the budget, and the connection between the budget and the agency's strategic plan.

The NCUA approved a 2012 budget of $234.8 million. CUNA noted that the NCUA last July moved to reduce that budget by 1% or $2 million, and said this change "was a positive step, although NCUA increased staffing by two positions."

The agency in July also said that "projecting the cost of agency-wide staffing for the remainder of 2012 provides a $3.7 million reduction to the budget. "We are hopeful that statement will hold up," Cheney said.

CUNA also urged the agency to provide more transparency to credit unions about its budget decisions, before and after the budget is adopted in final form, Cheney said. A website detailing NCUA budget information could help create this much needed transparency, he noted.

Cheney noted that the recommendations made by CUNA are reasonable ones "that will enhance the agency's efficiency as well as ensure credit unions have access to appropriate information about the agency's budget and resource allocations."

For the full letter, use the resource link.

CUNA asks Obama to add CUs to job discussions

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WASHINGTON (11/14/12)--The White House should include credit unions in upcoming discussions on ways to enhance job creation and economic growth, the Credit Union National Association (CUNA) said in a letter to President Barack Obama just one week after his re-election.

Obama last week said he would invite business, labor and civic leaders from across the country to Washington, D.C. to discuss employment and economic issues.

"In recognition of the important role that credit unions play in helping small businesses as well as consumers survive the current economic downturn and prosper into the future, credit unions should be included in [these] discussions," CUNA President/CEO Bill Cheney wrote.

CUNA backs U.S. House and Senate bills that would increase the member business lending authority to 27.5% of assets, up from the current limit of 12.25%. If enacted, CUNA estimates that the legislation would serve to inject $13 billion in business loans into the economy and create as many as 140,000 new jobs in the first year--at no cost to taxpayers.

In the CUNA letter to the White House, Cheney noted that U.S. credit unions currently serve 95 million members and have assets of over $1 trillion, which equals greater than 35% of the assets of all institutions insured by the Federal Deposit Insurance Corporation with assets under $10 billion.

"Credit unions are significant institutions in the lives of America's consumers and small businesses," and serve as an important source of affordable loans and favorable savings rates, he added.

Credit unions granted $157 billion in loans of all types in the first six months of 2012, representing a 29% increase in the amount of originated loans when compared to the same time period in 2011. "This represents the largest dollar amount of loan originations in the first six months of the year in credit union history," Cheney said.

He also noted the important role that credit unions already serve in supporting small businesses. Credit unions held $41 billion in small business loans as of December 2011, and stand ready to do more if the MBL bills are passed.

Senate leadership has committed to a floor vote on the MBL legislation, and advocacy for MBL cap increase bills in the Senate (S. 2231) and House (H.R. 1418) will be the main focus of a late-November National Hike the Hill being organized by CUNA and the state credit union leagues.

H.R. 1418 has 140 cosponsors and S. 2231 has 21 cosponsors. During the Nov. 27-28 CUNA advocacy event, credit unions and small business owners will urge members of Congress to move forward and pass the MBL bills.

Compliance Confiscating counterfeit cash (11/13/2012)

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WASHINGTON (11/14/12)--The compliance experts at the Credit Union National Association received an interesting question recently: How should a credit union handle suspected counterfeit currency? Specifically, are credit unions allowed to confiscate it--even when the member insists that we return it?

Knowing that the answer would be of interest to many, the compliance team featured the answer Thursday on CUNA's go-to compliance resource, CompBlog.

The U.S. Secret Service provides this guidance:

  • Do not return counterfeit currency to the passer;
  • Delay the passer if possible;
  • Observe the passer's description, as well as that of any companions, and the license plate numbers of any vehicles used;
  • Contact your local police department or U.S. Secret Service field office. These numbers can be found on the inside front page of your local telephone directory;
  • Write your initials and the date in the white border areas of the suspect note;
  • Limit the handling of the note. Carefully place it in a protective covering, such as an envelope; and,
  • Surrender the note or coin only to a properly identified police officer or a U.S. Secret Service special agent.
For more information go to the U.S. Secret Service website by using the resource link below.

The Secret Service has a "Know Your Money" page that warns: Those who fail to carefully examine the money they receive or who cash checks and bonds without requesting proper identification are potential victims. Only with the public's cooperation can the U.S. Secret Service reduce and prevent these crimes.

The site is designed to help detect counterfeit currency and guard against forgery loss.

FinCEN sets Dec. 3 due diligence discussion

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WASHINGTON (11/14/12)--The Financial Crimes Enforcement Network (FinCEN) will host a fifth and final roundtable discussion on proposed consumer due diligence (CDD) regulations that would require financial institutions and others to establish and maintain member and customer account monitoring policies.

The FinCEN roundtable will take place on Dec. 3 at the Miami Branch of the Federal Reserve Bank of Atlanta. The meeting will consist of two separate three-hour sessions. The first session will start at 9:30 am ET, and the second session will begin at 1:30 pm ET. FinCEN said advanced registration is required.

Discussion will focus on FinCEN's March Advanced Notice of Proposed Rulemaking that would codify, clarify, consolidate and strengthen CDD rules. The CDD proposal, which would apply to financial institutions, securities brokers and dealers, mutual fund brokers and dealers, futures commission merchants, and some introducing commodities brokers, addresses standards for verifying the identity of each member/customer and understanding the "nature and purpose" of each account held at an institution to assess the likelihood of suspicious activity.

The FinCEN plan, if made final, would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crime, including money laundering, terrorist financing, and tax evasion.

How and when financial institutions collect "beneficial ownership" information from their customers and members, and how this information is verified, will be discussed during the meeting. FinCEN is also interested in any costs associated with obtaining this information. Roundtable attendees will also have the chance to discuss how they conduct due diligence on trust accounts, and how financial institutions identify whether their customers are or are not "shell companies."

The Credit Union National Association (CUNA) supports the objectives of the FinCEN proposal, but noted the burdens and costs credit unions could face as a result would far outweigh the purported benefits to FinCEN. CUNA has suggested that FinCEN abandon the due diligence proposal and, alternatively, work with the National Credit Union Administration and other federal financial regulators to further clarify current Bank Secrecy Act and anti-money laundering rules.

For more on the FinCEN meeting, use the resource link.

NEW Budget cuts urged ahead of November NCUA meeting

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WASHINGTON (11/13/12, UPDATED 3:45 p.m. ET)--With the National Credit Union Administration's 2013 budget set to be announced at this week's  open board meeting, the Credit Union National Association (CUNA) continued to urge the agency to contain its costs and warned that if it increases it annual budget it would be the fourth consecutive year to do so.

In a letter to the NCUA, CUNA President/CEO Bill Cheney noted that the general financial condition of credit unions has improved in recent years as the country moves past some of its worse economic woes. He also noted that the number of troubled credit unions has declined.

However, he pointed out that the number of credit unions in the system has also declined by 10.8% while the NCUA's budget has expanded by 48.1% between 2009 and 2012. The number of agency employees, represented by full time equivalent (FTE) positions, has risen from 965 to 1,261.5, a 30.7% increase.  Moreover, travel costs are up 69% and contract service expenses have mushroomed by 130% during this same time frame, Cheney said.

"The NCUA's budget is funded overwhelmingly by credit unions, and they deserve to have their funds allocated prudently and efficiently to support reasonable safety and soundness objectives," Cheney noted.

He also urged the NCUA to provide more frequent, detailed and useful information to credit unions on the budget, the assumptions supporting the budget, and the connection between the budget and the agency's strategic plan.

The NCUA approved a 2012 budget of $234.8 million. CUNA noted that the NCUA last July moved to reduce that budget by 1% or $2 million, and said this change "was a positive step, although NCUA increased staffing by two positions."

The agency in July also said that "projecting the cost of agency-wide staffing for the remainder of 2012 provides a $3.7 million reduction to the budget. "We are hopeful that statement will hold up," Cheney said.

CUNA also urged the agency to provide more transparency to credit unions about its budget decisions, before and after the budget is adopted in final form, Cheney said. A website detailing NCUA budget information could help create this much needed transparency, he noted.