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Inside Washington

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* WASHINGTON (11/19/07)--Regulators shouldn’t be blamed for problems in the mortgage markets, said Alan Greenspan during a keynote speech at the opening session of the Bank Administration Institute’s Retail Delivery conference in Las Vegas Tuesday (American Banker Nov. 16). Global market forces had driven the crisis, and investors are going to “stay away,” eliminating the need for legislation, he said … * WASHINGTON (11/19/07)--A Federal Housing Administration (FHA) reform bill and a bill that would increase the caps on the portfolios of Fannie Mae and Freddie Mac by 10% were held from voting Thursday (American Banker Nov. 16). Senate Democrats wanted to pass the FHA measure before Thanksgiving, but after it cleared Sen. Elizabeth Dole's (R-N.C.) hold, it was blocked from the Senate floor by Sen. Tom Coburn (R-Okla.) and Sen. Jim DeMint (R-S.C.). Coburn stated that he thought the bill was "too important to consider under unanimous consent." At the same time, Sen. Charles Schumer (D-N.Y.) brought the bill concerning the government-sponsored enterprises’ portfolio caps to the floor, winning support from Senate Majority Leader Harry Reid. But Sen. Richard Shelby (R-Ala.), the top-ranking Republican, rejected the measure. Democrats were expected to try for a vote again Friday … * WASHINGTON (11/19/07)—On Friday the Senate passed a measure that would make minor changes to the government’s terrorism risk insurance program and extend it past its expected sunset date at the end of this year. However, the Senate bill is significantly different from an approach approved earlier by the House that would expand the program, all but guaranteeing a face-off between the two houses of Congress. House Financial Services Chairman Barney Frank (D-Mass.) has threatened to push through a three-month extension if differences cannot be worked out in December before Congress adjourns for the year. (CongressDaily Nov. 16)…

Compliance New Fed rules affect CU e-disclosures

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WASHINGTON (11/19/07)—Federal Reserve System staffers may have felt recently as though they were sitting in a big bowl of alphabet soup as they worked on amendments to the Fed’s Regulations B, E, M, Z, and DD. All their work resulted in the Fed’s recent adoption of clarifications to requirements for providing consumer disclosures in electronic form. Now the soup bowl gets passed to financial institutions and the compliance folks at the Credit Union National Association (CUNA) want credit unions to consider: How will these changes affect the way credit unions deliver electronic disclosures? “In a nutshell,” Writes CUNA’s Valerie Moss in the November Compliance Challenge, “the regulations allow credit unions flexibility in delivering disclosures electronically, and eliminate any confusion about the status of the Fed’s regulations concerning electronic communication.” In 2001, the Fed published interim final rules to establish uniform standards for the electronic delivery of consumer disclosures required under Regulations B (Equal Credit Opportunity), E (Electronic Fund Transfers), M (Consumer Leasing), Z (Truth in Lending) and DD (Truth in Savings). The interim rules addressed the timing and delivery of electronic disclosures, consistent with the requirements of the Electronic Signatures in Global and National Commerce Act (ESIGN). The Fed has now withdrawn these provisions and simplified the regulations with regard to electronic communication. The mandatory compliance date is Oct. 1, 2008. The new rules eliminate certain portions of the 2001 interim final rules that restate or cross-reference provisions of ESIGN, things such as the consumer consent provisions. The regulations now simply state that the required consumer disclosures may be provided in electronic form, subject to ESIGN. They also adopt guidance on the use of electronic disclosures. The rules vary slightly because they each address different disclosure requirements , so CUNA’s Moss urges credit unions to take a look at each one. To find out what else is new in the Fed rules, used the resource link below and take the CUNA Compliance Challenge.

House votes yes on mortgage reform

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WASHINGTON (11/16/07)—The House voted 291-127 Thursday in favor of an amended Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915), a comprehensive bill intended to combat abuses in the mortgage lending market and to provide basic protections to mortgage consumers and investors. But by the next day, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said Congress may not need to act. (American Banker Nov. 16) Dodd told reporters on a conference call that Federal Reserve Board rules that are due out in proposed form in December may be sufficient to address abusive lending practices. Dodd said he would be pleased if the Fed’s action make legislation unnecessary, but the article noted that Dodd will likely feel growing political pressure to move legislation. Meanwhile, the House-passed mortgage bill targets reform to three areas of mortgage practices. It would:
* Establish a federal duty of care, prohibit steering, and call for licensing and registration of mortgage originators, including brokers and bank loan officers; * Create a licensing system for residential mortgage loan originators, * Set a minimum standard for all mortgages which states that borrowers must have a reasonable ability to repay; and * Attach limited liability to secondary market securitizers who package and sell interest in home mortgage loans outside of these standards. The bill would not make individual investors in the securities liable.
The bill proposes expanding and enhancing consumer protections for "high-cost loans" under the Home Ownership and Equity Protection Act and includes important protections for renters of foreclosed homes. Notable among the many revisions to the bill made during the hours of debate before the House vote are:
* An amendment reflected provisions of Rep. Paul Kanjorski’s bill, The Escrow, Appraisal, and Mortgage Servicing Improvements Act (H.R. 3837), which would require escrow accounts for borrowers who might experience difficulty with repayment of their mortgages and would establish disclosure for consumers who waive escrow accounts. The amendment was also designed to improve mortgage servicing, protect appraiser independence, and ensure quality appraisal and regulatory oversight; * A requirement was added that borrowers receive an option of a mortgage without a prepayment penalty, if they are offered an amendment with such a penalty. The maximum time for a prepayment penalty would be three years and a maximum prepayment amount would be set at 3% for the first year, 2% for the second year and 1% for the third year; * The removal of civil liability of a lender and of a borrower’s right of rescission in instances where the borrower lied on a mortgage application. A second degree amendment was added stating that an obligor must have actual knowledge of the false material information for the exemption from liability to take effect.
To address any lingering concerns of critics who charge the mortgage reform bill could cut into the availability of mortgage credit for potential homebuyers, the bill directs the Government Accountability Office (GAO) to determine the effects of the legislation on the availability and affordability of credit for homebuyers and to submit a report to Congress within one year of the bill’s enactment. H.R. 3915 followed a fast track to final approval in the House, with less than a month between the bill’s introduction by Reps. Barney Frank (D-Mass.), Brad Miller (D-N.C.) and Mel Watt (D-N.C.) and the House vote. However, no similar legislation is currently being considered by the Senate, a necessary step for enactment into law. Congress adjourned Friday for Thanksgiving.