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Inside Washington (11/29/2011)

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  • WASHINGTON (11/30/11)--A final rule released Monday by the Federal Housing Finance Agency could  create a more merger-friendly environment for Federal Home Loan Banks. Although the banks previously were allowed to merge, they lacked regulatory guidelines for conditions under which mergers would be approved (American Banker Nov. 29). The final rule did not provide some procedural details, such as what kind of voting programs would be appropriate for obtaining members' approval of a proposed merger; how those should be structured; and how to address the transition from a separate board of directors to a combined board. Regarding the size and composition of the board, directors should have input from both banks, according to the final rule. Merger approvals will be a one-step process, a decision following comments from banks that a two-step approach would be lengthy and burdensome. The rule also changed the voting rights of each member of a constituent bank to ensure fair governance. The final rule provides that each member of the bank can cast one vote for each share of bank stock the member was required to own by a certain date …
  • WASHINGTON (11/30/11)—U.S. Rep. Maxine Waters (D-Calif.) is poised to succeed Barney Frank (D-Mass.) as lead Democrat on the House Financial Services Committee, according to industry insiders. Frank on Monday announced he would not seek reelection for his House seat next November. Waters is the most senior Democrat on the committee, and she has political ties to House Speaker Nancy Pelosi (D-Calif.) (American Banker Nov. 29). Waters is African American. It would be unlikely to not appoint someone who is both senior and a minority, according to former Rep. John LaFalce, who preceded Frank as lead Democrat on the Financial Services panel. Waters is under an ethics investigation, a factor that could work against her appointment. Other possible appointees include U.S. Rep. Carolyn Maloney (D-N.Y.), U.S. Rep. Luis Gutierrez (D-Ill.) and U.S. Rep. Melvin Watt (D-N.C.) …
  • WASHINGTON (11/30/11)--The Federal Housing Finance Agency (FHFA) has announced the appointments of Richard B. Hornsby as the agency's chief operating officer and Jon Greenlee as deputy director of the division of enterprise regulation. Hornsby served at the Federal Reserve Bank of San Francisco for 26 years, most recently serving as group vice president and division head for the reserve bank's financial planning and control and corporate administration divisions. In this position, he oversaw many of the bank's support functions in nine states. Greenlee joins FHFA from KPMG LLP, where he was the managing director in the financial services regulatory advisory practice. In that role, he provided support to clients concerning the Dodd-Frank Act and Basel II and III, and credit, capital, liquidity and resolution planning issues …

Compliance Ad requirement deadline approaches

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WASHINGTON (11/30/11)--The Jan. 1 mandatory compliance date for the National Credit Union Administration's (NCUA) new share insurance advertising requirements is rapidly approaching, the Credit Union National Association (CUNA) has reminded credit unions in a recent CompBlog post.

The NCUA in May approved revisions to its advertising regulations to require radio and television ads to include a reference to National Credit Union Share Insurance Fund (NCUSIF) coverage. CUNA pressed the NCUA not to require all ads to feature this reference, and the NCUA in its final rule elected to exempt ads that are less than 15 seconds from the rule.

The final rule applies to the cover page of credit union annual reports and main internet pages.

Credit unions may choose one of three methods to provide the NCUA's official advertising statement: A longer statement saying "this credit union is federally insured by the National Credit Union Administration"; a shorter version, simply stating "federally insured by NCUA"; or a visual reproduction of the NCUA's official sign. Although the agency's advertising regulation does not dictate a specific font size for the so-called "official statement," the statement must be clearly legible and the font size must be no smaller than the smallest font size used in other portions of the advertisement, CUNA added.

CUNA said credit unions should ensure that these official statements are included in applicable radio and television ads, their annual reports, and their statements of condition required to be published by law. The statements must be placed in a "prominent position on the cover page of such documents or on the first page a reader sees if there is no cover page," according to the NCUA rule.

For CUNA's full CompBlog post, use the resource link.

Wachovia is latest big bank to see NCUA legal action

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ALEXANDRIA, Va. (11/30/11)--Wachovia becomes the latest financial institution to face the National Credit Union Administration (NCUA) in court after the agency filed suit alleging violations of federal and state securities laws and misrepresentations in the sale of securities to now-failed U.S. Central FCU and Western Corporate FCU.

The suit, which was filed in the Federal District Court for the District of Kansas, is tied to actions that North Carolina-based bank Wachovia took before it was taken over by Wells Fargo in a government-arranged sale in 2008.

U.S. Central and WesCorp in 2006 each purchased around $44 million in residential mortgage-backed securities from Wachovia, and U.S. Central bought an additional $112 million in Wachovia-underwritten securities that were originated by a third party, NovaStar Mortgage Funding Trust.

The NCUA suit claims that Wachovia as a seller and underwriter made several material misrepresentations in the offering documents, leading the corporates to believe the risk of loss associated with their investments was minimal, when in fact the risk was substantial. The mortgage-backed securities experienced dramatic, unprecedented declines in value, effectively rendering the corporates insolvent, the agency added.

The NCUA complaint adds that "NovaStar routinely and systemically disregarded its own underwriting standards and guidelines in order to generate more loan origination business, from which it reaped enormous profits."

U.S Central, WesCorp, and several other corporates bought substantial amounts of highly rated mortgage-backed and asset-backed securities before 2009. These securities were severely devalued as a result of the turmoil in the overall mortgage market. Credit unions continue to pay for the losses that these investments brought upon the credit union system.

NCUA Chairman Debbie Matz said the agency "continues to do everything within [its] authority to seek maximum recoveries and ensure that those who caused the problems in wholesale credit unions pay for the losses incurred by retail credit unions."

The NCUA is currently attempting to reclaim billions in securities-related corporate credit union losses from other Wall Street firms, and has requested nearly $2 billion in combined damages from Goldman Sachs, RBS Securities and J.P. Morgan.

Citigroup and Deutsche Bank Securities earlier this month elected to avoid legal proceedings and settle with the agency, with Deutsche Bank agreeing to pay the agency $145 million, and Citigroup will pay $20.5 million, under the terms of the separate settlements.

Neither Citigroup nor Deutsche Bank Securities admitted any fault in the settlements.

The agency may take between four and nine additional legal actions.

CFPB asks for input on streamlining existing regs

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WASHINGTON (11/30/11)--The Consumer Financial Protection Bureau (CFPB) on Tuesday announced it would accept public input on how to best streamline over one dozen rules that it will soon inherit from seven federal agencies "to make it easier for banks, credit unions and others to follow the rules."

De facto CFPB leader Raj Date in a release said the agency is asking the public to help identify and prioritize concrete ways that the CFPB can streamline regulations to ensure that they work better for consumers and the firms that serve them.

Under the Dodd-Frank Act, rulewriting authority for more than 12 consumer protection laws was transferred from the National Credit Union Administration, the Federal Reserve, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the Office of Comptroller of the Currency and the Office of Thrift Supervision.

Overall, the CFPB said it plans to "consider practical measures to make it easier for firms, especially smaller ones, to comply with the inherited regulations," the release added. The CFPB added it would consider simplifying some regulations, standardizing some common terms across regulations, updating outdated or unneeded regulations, and removing unnecessary restrictions on consumer choice or business innovation as it reviews these regulations.

The Credit Union National Association was among those that took part in a Tuesday call on this CFPB endeavor.

The request for comment is expected to be published in the Federal Register soon. The public will then have a 90 day public comment period, followed by an additional 30 day period to respond to other comments, the CFPB said.

Home prices up in 3Q FHFA says

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WASHINGTON (11/30/11)--U.S. home prices increased by 0.2% between the second and third quarters of 2011, reversing a trend that saw home prices fall over the past five quarters, the Federal Housing Finance Agency (FHFA) reported.

The 0.2% increase is based on the FHFAs seasonally adjusted purchase-only house price index (HPI), which the FHFA said is calculated from home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages.

FHFA Principal Economist Andrew Leventis said third-quarter home values were relatively stable in many parts of the county, "even in some areas that experienced sharp price declines in preceding quarters." Leventis added: "While most housing markets still face stiff headwinds, the fact that some beleaguered states—such as Idaho, Florida and Utah—saw quarterly price increases is a positive development."

Home prices increased by 0.7%, on an adjusted basis, during the quarter, but seasonally adjusted home prices fell 3.7 percent from the third quarter of 2010 to the third quarter of 2011, the FHFA said.

Home prices increased by 4% in the Warren-Troy-Farmington Hills, Michigan, metropolitan area during the quarter. The FHFA added that home prices were more stable in States and counties with significant mining and oil extraction industries. Home prices in the West North Central census division, which includes Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota, increased by 1.5% during the quarter, the FHFA said.

For the full release, use the resource link.

NEW Wachovia is latest big bank to see NCUA legal action

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ALEXANDRIA, Va. (UPDATED: 4:15 P.M. ET, 11/29/11)--Wachovia could become the latest financial institution to face the National Credit Union Administration in court after the agency filed suit alleging violations of federal and state securities laws and misrepresentations in the sale of securities to now-failed U.S. Central FCU and Western Corporate FCU.

The suit, which was filed in the Federal District Court for the District of Kansas, is tied to actions that North Carolina-based bank Wachovia took before it was taken over by Wells Fargo in a government-arranged sale in 2008.

U.S. Central and WesCorp in 2006 each purchased around $44 million in residential mortgage-backed securities from Wachovia, and U.S. Central bought an additional $112 million in Wachovia-underwritten securities that were originated by a third party, NovaStar Mortgage Funding Trust.

The NCUA suit claims that Wachovia as a seller and underwriter made several material misrepresentations in the offering documents, leading the corporates to believe the risk of loss associated with their investments was minimal, when in fact the risk was substantial. The mortgage-backed securities experienced dramatic, unprecedented declines in value, effectively rendering the corporates insolvent, the agency added.

The NCUA complaint adds that "NovaStar routinely and systemically disregarded its own underwriting standards and guidelines in order to generate more loan origination business, from which it reaped enormous profits."

U.S Central, WesCorp, and several other corporates bought substantial amounts of highly rated mortgage-backed and asset-backed securities before 2009. These securities were severely devalued as a result of the turmoil in the overall mortgage market. Credit unions continue to pay for the losses that these investments brought upon the credit union system.

NCUA Chairman Debbie Matz said the agency "continues to do everything within [its] authority to seek maximum recoveries and ensure that those who caused the problems in wholesale credit unions pay for the losses incurred by retail credit unions."

The NCUA is currently attempting to reclaim billions in securities-related corporate credit union losses from other Wall Street firms, and has requested nearly $2 billion in combined damages from Goldman Sachs, RBS Securities and J.P. Morgan.

Citigroup and Deutsche Bank Securities earlier this month elected to avoid legal proceedings and settle with the agency, with Deutsche Bank agreeing to pay the agency $145 million, and Citigroup will pay $20.5 million, under the terms of the separate settlements.

Neither Citigroup nor Deutsche Bank Securities admitted any fault in the settlements.

The agency may take between four and nine additional legal actions.