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Compliance The deal on risk-based pricing notices

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WASHINGTON (11/17/10)--Risk-based pricing notices must be provided before the first transaction is made under open-end loan plans, but not earlier than the time that an approval decision is communicated to the member, according to the Credit Union National Association (CUNA). In this month’s Compliance Challenge, CUNA noted that additional notices are not required for subsequent line of credit advances, but separate notices are required whenever the lending credit union makes periodic reviews of a given account. These account reviews can take place, for example, on a semi-yearly or yearly basis, and must, like the notices that are provided for credit applicants, include a statement that the consumer’s credit report includes information about the consumer’s credit history. The review notices must be provided at the time that the decision to increase the annual percentage rate (APR) of a given loan is communicated to the member or consumer, “or no more than five days after the APR increase if no such notice is provided, if permitted by law,” CUNA said. This next section is confusing here since the original creditor only comes into play w/ the risk-based pricing notice provided to loan applicants, not existing borrowers. This was from another Q&A. For the full Compliance Challenge, use the resource link.

MBL opportunities coming up in Congress CUNA says

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WASHINGTON (11/17/10)--While it is unclear how much the Congress will accomplish during the year-ending lame duck Congressional session, the Credit Union National Association (CUNA) will attempt to attach member business lending related legislation to any and all legislative vehicles that look likely to progress through Congress. CUNA Vice President of Legislative Affairs Ryan Donovan said that “there is plenty that could keep Congress in session through much of the month of December, and that gives us more time to continue to push the enactment of the MBL cap increase.” CUNA is working with Senators Mark Udall (D-Colo.), Charles Schumer (D-N.Y.) and Harry Reid (D-Nev.) to advance the MBL cap lift legislation, and is currently laying the ground work for further work when the new Congress begins next year. The most noteworthy hearing of this week took place on Tuesday, as the Senate Banking Committee approved the nomination of Peter Diamond for the Federal Reserve’s Board of Governors. The Committee also discussed mortgage servicing, modification and foreclosure issues during the hearing.

FHA report to lawmakers shows improvements

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WASHINGTON (11/17/10)—The capital reserve ratio of the Federal Housing Administration’s (FHA’s) Mutual Mortgage Insurance (MMI) Fund has held steady over the last 12 months and insurance claims declined significantly, according to the FHA’s just-released annual report to the U.S. Congress. The MMI Fund is FHA’s principal insurance account that includes all single-family and reverse mortgage activity. The FHA report said the economic value of FHA’s single-family insurance program grew by more than $1 billion, to $4.7 billion in 2010, up from $3.6 billion in 2009. In a statement accompanying the public release of the report, FHA said that its survey, like last year’s, shows that FHA is “sustaining significant losses from loans insured prior to 2009 and its capital reserve ratio remains below the congressionally mandated threshold of 2% of all insurance-in-force.” However, the release continued, the report concludes that “under conservative assumptions of future growth of home prices, and without any new policy actions, FHA’s capital ratio is expected to approach two percent in 2014 and exceed the statutory requirement in 2015.” “It’s clear that FHA is in a stronger position today than we were just one year ago,” said FHA Commissioner David H. Stevens. “While we are not yet completely out of the woods, based on the evidence we’re seeing, FHA is weathering the economic storm while helping to create a firm foundation for our nation’s recovery.” Use the resource link to access the FHA report.

CUs shouldnt have to follow FTC UDAP rule says CUNA

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WASHINGTON (11/17/10)--State-chartered credit unions, which would fall under a proposed Federal Trade Commission (FTC) rule addressing unfair and deceptive (UDAP) mortgage practices, need flexibility in meeting the UDAP requirements, the Credit Union National Association (CUNA) said in a recent comment letter. CUNA recommended that the FTC should allow state-chartered credit unions to be in compliance with the proposed rule if those credit unions are successfully following current and future mortgage lending rules that apply to all financial institutions. The FTC proposal, which does not impact federal credit unions, would ban "all material misrepresentations in advertising about consumer mortgages." The proposed rule, which also does not cover banks and thrifts, specifically targets mortgage lenders, brokers, and servicers; real estate agents and brokers; advertising agencies; home builders; lead generators; rate aggregators; and other entities under the FTC's jurisdiction. The proposal, originally released in September, would, in part, ban misrepresentations in commercial communications and advertisements regarding any term of any mortgage credit product and would also impose corresponding recordkeeping requirements. CUNA's comment letter emphasizes that state-chartered credit unions are already heavily regulated and should treated like other financial institutions, and not be covered under this rule. The FTC rule would be duplicative of other current mortgage rules, as well as future rules under the Dodd-Frank Act, and would unnecessarily add to the already “staggering” compliance burden of state-chartered credit unions. While CUNA supported the FTC’s efforts to do more to address predatory lending practices, CUNA also noted that credit unions have not engaged in any of the practices addressed in the FTC proposal. CUNA has also recommended that the FTC's rules focus on practices that are not adequately addressed under current law, but not prohibit or favor certain practices. The National Association of State Credit Union Supervisors (NASCUS,) in a separate comment letter also supported exempting state-chartered credit unions from the proposed mortgage rule, saying that "while consumer protection is a critical regulatory issue," additional advertising rules and record retention requirements should not be extended "exclusively to a single depository charter, particularly when the proposed rules are duplicative of existing rules." NASCUS instead recommended that the FTC "focus its efforts on filling in regulatory gaps and addressing non depository entities lacking the existing comprehensive regulation of credit unions and banks." For the full CUNA comment letter, use the resource link.

Inside Washington (11/16/2010)

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* ALEXANDRIA, Va. (11/17/10)—The National Credit Union Administration has revised the agenda for today’s closed meeting. The new schedule lists the following matters to be considered: Pilot Programs (2). Closed pursuant to some or all of the following: exemptions (4) and (8); Insurance Appeals (3). Closed pursuant to some or all of the following: exemptions: (4) and (6); Personnel (2). Closed pursuant to some or all of the following: exemption (2); and Consideration of Supervisory Activities (4). Closed pursuant to some or all of the following: exemptions (8), (9)(A)(ii) and (9)(B)… *WASHINGTON (11/17/10)--Elizabeth Warren is recruiting staff to organize and conduct the Consumer Financial Protection Agency’s supervision of large firms offering consumer credit. Warren is the special assistant to the president charged with launching the agency. Steven Antonakes, the Massachusetts bank commissioner, is likely to be recruited to lead the supervision unit for financial institutions that offer consumer products such as mortgages and credit cards (Wall Street Journal Nov. 12). And observers speculated that Peggy Twohig, director of the U.S. Treasury’s Office of Consumer Protection, will organize the unit that will oversee non-bank supervision, which includes debt collectors, payday lenders and mortgage originators. Wall Street is scrutinizing Warren’s staff selections as she creates a supervisory structure aimed at ensuring that consumers are protected from risky products and abusive practices. The agency is expected to recruit additional staff from outside government as well as the ranks of federal bank examiners … * WASHINGTON (11/17/10)--Regulators are pondering whether big banks should be required to create subsidiaries for their international operations. Known as “subsidiarization,” this practice could make it easier to separate international business divisions when American regulators take resolution action against a big bank. Bankers attending a Federal Deposit Insurance Corp. (FDIC) roundtable event last month resisted the idea, citing the need to be able to easily move capital and manage liquidity across all areas of operations (American Banker Nov. 16). But other regulators counter that it is currently difficult to achieve resolution when a firm has operations in many different nations that each have their own financial rules. Regulators also said subsidiarization could make it easier to clearly identify separate business lines. Global resolution rules do not exist at this time, although leaders at the recent Group of 20 conference in South Korea urged the Basel Committee and the Financial Stability Board to address the issue …