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MBL cap harms biz competitiveness ACI notes in iHuffPoi

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WASHINGTON (11/20/12)--There is no downside, just upside, to lifting the credit union member business lending (MBL) cap and letting small businesses grow, American Consumer Institute (ACI) Center for Citizen Research President Steve Pociask said in a Huffington Post column.

"Public policy needs to encourage competition, remove market entry barriers and stimulate private investment…Artificial barriers like lending caps are designed to protect big banks, not consumers and not small businesses," he added.

Pociask noted that banks rejected 60% of small business loan applications last year, and reduced their small business lending practices by 20% during the last recession. "Without capital, small businesses do not expand, entrepreneurial dreams are put on hold and jobs are not created."

Credit unions have tried to help small businesses expand, increasing their small business lending activities by 40% during the last recession, Pociask noted. However, he said, "the outdated cap on credit union lending is suppressing small business access to capital."

The MBL cap currently stands at 12.25% of a credit union's assets. U.S. House and Senate legislation that would increase the cap to 27.5% of assets has been introduced, and a Senate vote on credit union MBL legislation, S. 2231, has been promised during this session.

Advocacy for these MBL cap increase bills will be the main focus of a late-November National Hike the Hill being organized by the Credit Union National Association (CUNA) and the state credit union leagues.

CUNA has estimated that the proposed MBL cap increase could inject $13 billion in funds into the economy, creating as many as 140,000 new jobs in the first year following enactment.

These credit union investments would create a multiplier effect, Pociask said. He estimated that the knock-on impact of a credit union MBL cap increase could mean a $32.7 billion contribution to U.S. Gross Domestic Product, $8.2 billion in employment earnings and 188,000 new jobs.

An MBL cap increase could also mean more small business loans at lower market risk, he added. Credit union investment in small business could also lead to advancements in new technology, and a host of additional economic benefits "that make consumers and small businesses big winners.

"Whatever the actual benefits turn out to be, one thing we know--the resulting economic expansion will not put taxpayers on the hook, like the big bank bailouts have," Pociask said.

For the full HuffPost piece, use the resource link.

Inside Washington (11/19/2012)

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  • WASHINGTON (11/20/12)--After announcing that the Federal Housing Administration continues to be impacted by losses from mortgages originated prior to 2009, FHA Acting Commissioner Carol Galante Friday outlined a series of steps it will take after an audit discovered a $16.3 billion shortfall in the agency's capital reserves (American Banker Nov. 19). The measures include increased insurance premiums, accelerated short sales and aggressive sales of defaulted loans. The U.S. Department of Housing and Urban Development Friday released its annual report to Congress on the financial condition of the FHA Mutual Mortgage Insurance (MMI) Fund. The independent study found that as the housing market continues to recover, the capital reserve ratio of the MMI Fund used to support FHA's single-family mortgage and reverse mortgage insurance programs fell below zero to -1.44%, which accounts for the $16.3 billion shortfall …
  • WASHINGTON (11/20/12)--To save millions in premium payments, Fannie Mae is seeking alternatives to the dominant carriers in the forced-placed insurance market, the American Banker (Nov. 19) reported Monday. Under a plan submitted to the Federal Housing Agency, Fannie would require banks and other mortgage servicers to replace existing force-placed policies on loans it guarantees with insurance provided by a consortium of carriers offering 30% to 40% discounts. The plan has not been made public. Force-placed insurance is a form of hazard coverage banks buy to protect the properties of buyers who have let their homeowners' insurance lapse …
  • WASHINGTON (11/20/12)--Fifteen million dollars in civil money penalties has been assessed against First Bank of Delaware, Wilmington, Del., for that bank's alleged failure to implement an effective Bank Secrecy Act/anti-money laundering compliance program. The Federal Deposit Insurance Corp. (FDIC) and the Financial Crimes Enforcement Network (FinCEN) announced concurrent regulatory actions against the bank on Monday. The bank also settled civil charges that were brought by the U.S. Department of Justice. In a release, the FDIC and FinCEN said First Bank of Delaware lacked the internal controls needed to detect and report evidence of money laundering and other suspicious activity ...
  • WASHINGTON (11/20/12)--U.S. Secretary of Education Arne Duncan on Monday announced that 500 colleges and universities have committed to using the Consumer Financial Protection Bureau's (CFPB) Financial Aid Shopping Sheet for the 2013-2014 academic year. The CFPB and the Department of Education have worked together to improve how schools communicate financial aid offers to students. "The Shopping Sheet provides a standardized award letter allowing students to easily compare financial aid packages and make informed decisions on where to attend college. Students and their families now have a clear, concise way to see the cost of a particular school," Duncan said …

CFPB FTC investigating alleged mortgage ad violations

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WASHINGTON (11/20/12)--The Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) have joined to warn about 12 mortgage lenders and mortgage brokers that some of their marketing practices may be illegal.

The CFPB and FTC said consumer complaints in some cases drove them to examine more than 800 randomly selected mortgage-related ads. The ads were scrutinized for potential violations of the 2011 Mortgage Acts and Practices Advertising Rule, the CFPB release said. Ads examined included online ads, print ads and direct mail solicitations. They promoted mortgage loans, refinancings and reverse mortgages. 

The CFPB mainly focused on mortgage advertisements. The FTC examined ads from realtors, builders and lead generators.

The CFPB is also investigating six companies for potentially serious violations.

"Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives," CFPB Director Richard Cordray said. "Baiting consumers with false ads to buy into mortgage products would be illegal. We will conduct a fair and rigorous investigation into these issues and will take appropriate action for any violations we find."

The agencies urged the lenders and brokers to review all their advertising for potential violations. Many of the advertisements in question are tied to products marketed to older Americans and military veterans.

According to a CFPB release, potential violations include:

  • Inaccurate or dishonest interest rate information;
  • Misleading information on reverse mortgage costs; and
  • Misrepresentations regarding the amount of cash or credit that will be made available to reverse mortgage participants.
The CFPB also cited instances in which reverse mortgage lenders promised borrowers they would be able to stay in their homes payment-free. The CFPB noted that reverse mortgage borrowers are normally required to continue paying for taxes and insurance--and will most likely lose their homes if they don't.

The use of official-looking seals or logos that imply some kind of government connection is also a prohibited practice, the CFPB said. "Although government agencies do guarantee some loans, they are not involved in the actual lending or advertising of loans," the CFPB release added.

For more on the investigations, use the resource link.

Future NCUA nominee must understand reg burden CUNA

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WASHINGTON (11/20/12)--As the Senate announces its confirmation of two new Federal Deposit Insurance Corp. (FDIC) officials, the Credit Union National Association (CUNA) is taking the opportunity to note that any future nominee for a similar position on the National Credit Union Administration's (NCUA) board must understand regulatory burden.

CUNA Deputy General Counsel Mary Dunn said CUNA will continue to  advocate for "a well-qualified individual who fully appreciates the need for a positive regulatory environment that will facilitate growth while supporting reasonable safety and soundness."

Although FDIC officials have been appointed, credit unions should likely expect the NCUA appointment to take longer. NCUA Chairman Debbie Matz last month, noting that the timeline for filling the open board spot created by board member Gigi Hyland's recent departure is up to the White House and U.S. Senate, indicated that the position likely will not be filled in the near future.

Legislators last week approved Martin Gruenberg to serve as FDIC chairman. He has served as acting chairman since July 8, 2011. Thomas Hoenig, who previously served as Kansas City Federal Reserve chief, will serve as vice chairman of the FDIC. Both nominations were unanimously approved by the Senate. Both men are scheduled to serve six-year terms.

President Barack Obama will need to fill a number of cabinet and general government positions as he enters his second term, with Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner among those that have said they will not return to their posts.

Impact of Sandy covered in NCUA video update

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ALEXANDRIA, Va. (11/20/12)--The aftereffects of Hurricane Sandy and the impact of the storm on credit unions and members ares addressed in the National Credit Union Administration's (NCUA) latest YouTube economic briefing.

NCUA Chief Economist John Worth also discusses general economic trends.



The video is the latest in a series of YouTube videos to inform the public and credit unions about general economic and credit union specific developments.

The videos can also be viewed on the NCUA's YouTube page by using the resource link below.