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Lawmakers voice concerns over Internet gambling plan

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WASHINGTON (1/2/08)—Sixteen House Republicans wrote to the Treasury Department and Federal Reserve Board recently warning that their joint proposal to implement a 2006 ban against most forms of Internet gambling could have major unintended consequences for financial institutions and credit card companies. Led by Rep. Pete Session (R-Tex.), the House members wrote that the proposal was overly broad and does not give clear and consistent guidance to the regulated entities charged with blocking Internet gambling transaction. (CongressDaily Dec. 20). The Unlawful Internet Gambling Enforcement Act, signed into law Oct. 13, 2006, prohibits financial institutions and credit card companies from processing payments associated with online gambling. Under the law, banks and credit card companies are prohibited from processing payments for online bets. Businesses that accept credit cards, wire transfers or any other bank instrument to process those payments could be prosecuted. The Credit Union National Association (CUNA), as reported earlier, also has expressed reservations about the joint agency proposal, warning it threatens to impose an "unforeseen regulatory burdens" on credit unions and other financial institutions. CUNA President/CEO Dan Mica recently wrote House Financial Services Chairman Barney Frank (D-Mass.) asking for a moratorium on the law's implementation until "a more reasonable approach can be considered by Congress and the regulators."

Inside Washington (12/31/2007)

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* WASHINGTON (1/2/08)--The Federal Home Loan Bank (FHLB) of Indianapolis announced Friday it will provide $100 million as a part of a lending initiative, named HomeRetain (American Banker Dec. 31). The money will be divided among FHLB member institutions in Indiana and Michigan, and institutions can use the funds to refinance or modify primary residence mortgages in any state. The program ends in June, and the bank will analyze the initiative’s results shortly after … * WASHINGTON (1/2/08)--The Federal Housing Finance Board has adjusted the cap on total assets that define a community financial institution and the limits on annual compensation for Federal Home Loan Bank directors. The changes were effective yesterday …

Treasury opens new round of New Market Tax Credits

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WASHINGTON (1/2/08)—The Treasury Dept. has kicked off its sixth round of competition for Its New Market Tax Credits (NMTC) program, making $3.5 billion of equity investments available to qualified credit unions and other applicants. The NMTC program is administered by Treasury Department's Community Development Financial Institutions (CDFI) Fund. The program attracts private-sector capital investment into the nation's urban and rural low-income areas to help finance community development projects, stimulate economic growth and create jobs. The NMTC allows individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments in investment vehicles known as Community Development Entities (CDEs). The CDFI reports that the program to date has made 294 awards equaling a total $16 billion in allocation authority. According to a Federal Register document submitted by the Treasury, parties interested in applying under the NMTC program that are not yet CDE designated must apply for certification by Feb. 6. While credit unions are eligible for CDE designation, to date many have found a costly application process and other factors have kept them out of the competition for the credits. Applications for tax-credit allocations must be submitted electronically by March 8. Use the resource link below for more NMTC information.

A copy of a substitute check Is it legal

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WASHINGTON (12/31/07)—If a substitute check created under CHECK 21 is the legal equivalent of an original check, should a photocopy of the substitute also be accepted also as equivalent, asks the December Compliance Challenge from the Credit Union National Association (CUNA). The Challenge quizzes compliance experts on the following situation: If a member writes a share draft to a nonmember, and the nonmember’s bank converts it to a substitute check under Check 21, can a photocopy of the substitute be used to collect the funds from the credit union if the original or substitute are lost or destroyed? The answer, CUNA’s compliance folks advise, is no--a credit union should not cash the photocopy because it is not the legal equivalent of a check. Accepting a photocopy of a check as a valid check and cashing it could expose the credit union to liability and a potential lawsuit by the member. Under Check 21 a substitute check is the legal equivalent of an original check, if the substitute check:
* Accurately represents all of the information on the front and back of the original check as of the time the original check was truncated; and * Bears the legend: “This is a legal copy of your check. You can use it the same way you would use the original check.”
“Clearly, a photocopy of a substitute check might appear the same as a substitute check, but is only a ‘copy’ and would not be considered the legal equivalent of the original check. Therefore, a photocopy would not be considered a negotiable instrument and could not be cashed,” says the Challenge. To see what actions are advised and to test your compliance acumen, use the resource link below to take CUNA’s Compliance Challenge.

Mortgage Forgiveness is now law

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WASHINGTON (12/31/07)--The Mortgage Forgiveness Debt Relief Act of 2007 became Public Law (PL) number 110-142 with the stroke of President George W. Bush's pen just before/after Congress adjourned for 2007. The act, signed into law Dec. 20, is intended to provide temporary tax relief to homeowners who might lose their home to foreclosure or who negotiate a loan modification. Previously under the country's tax code, if a lender--voluntarily or involuntarily--forgave a portion of a borrower's mortgage debt, the forgiven amount had to be treated as taxable income. Credit unions and other lenders had to file Form 1099-C, "Cancellation of Debt," to report to the Internal Revenue Service any debt of $600 or more cancelled or forgiven. The new law allows the discharge of indebtedness on loans up to $2 million and secured by the borrower's principal residence not to trigger federal income taxation. PL 110-142 covers only discharges made between Jan. 1, 2007 and Dec. 31, 2009. Kathy Thompson., SVP for compliance for the Credit Union National Association, reminds credit union that 1099-C filing requirements haven't disappeared for any discharge of indebtedness of $600 or more. Credit unions are expected to file their 1099C forms as usual. "Also, we will be watching for guidance I assume the IRS will release on how to handle information returns in these situations for this temporary period," Thompson said. In a statement issued at the bill's signing, the President noted the serious strains on the country's housing market. "Home values have fallen in many parts of our country. At the same time, many homeowners with adjustable rate mortgages have seen their monthly payments increase faster than their ability to pay. And now some homeowners face the prospect of foreclosure," he said. He noted recent steps taken by his administration meant to address the problems, included increased flexibility for the Federal Housing Administration to refinance loans for struggling homeowners and the assemblage of a private sector group of lenders, loan servicers, investors, and mortgage counselors called the HOPE NOW Alliance.

Inside Washington (12/28/2007)

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* WASHINGTON (12/31/07)--An association for the brokerage industry has issued guidance this month regarding the supervision and review of electronic communications for brokers. The Financial Industry Regulatory Authority’s guidance requires firms to monitor all of their electronic communications used to conduct business, including e-mail, text and instant messaging, blogs, podcasts, message boards and e-faxes, and work-related messages from personal accounts. Communications must be recorded and documented, supervised and monitored, and firms are required to give their representatives and brokers guidance on what is permitted in electronic messages (Money Management Executive Dec. 28) … * WASHINGTON (12/31/07)--Electronic payments association Nacha is gaining ground on its three major initiatives to reform automated clearing house (ACH) rules. The initiatives would fight fraud, use the ACH network for online transactions and clear checks over the network (American Banker Dec. 28). Last month, a Network Enforcement Rule was passed. Its first phase was deployed two weeks ago. The rule allows higher fines, up to $500,000, for financial institutions that allow unauthorized debits. The rule also allows Nacha to suspend an originator. The second phase, effective in March, will authorize more reporting requirements for financial institutions with high levels of return. The rule is considered a rebound from Nacha’s Network Entry Fee proposal, which was rejected in 2004 because critics said it was too tough for minor infractions …

EEOC rules on retiree health benefits

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WASHINGTON (12/28/07)—The Equal Employment Opportunity Commission (EEOC) has issued a controversial new rule that would allow employers who provide retiree health benefits to offer differing treatment to retirees under 65 years old and those above that age. The EEOC in a release issued this week said the rule is intended to “to preserve and protect employer-provided retiree health benefits which are increasingly less available and less generous.” But, the Dec. 27 issue of The New York Times reported, the AARP and other groups that advocate for older Americans criticized the rule that carves out an exemption for retiree health benefits from age discriminiation laws for employers. The AARP projected that 10 million people could be adversely affected by the rule. The EEOC rule clarifies the legality of a practice in which employers coordinate retiree health benefits they provide with Medicare, without having to ensuring that the benefits received by Medicare-eligible retirees are identical to those received by younger retirees. Employers sometimes reduce or eliminate retiree health benefits once Medicare eligibility kicks in. That practice came under fire after a 2000 ruling by the U.S. Court of Appeals for the Third Circuit regarding the Age Discrimination in Employment Act (ADEA). The court held that the ADEA required that the health insurance benefits received by Medicare-eligible retirees be the same, or cost the employer the same, as the health insurance benefits received by younger retirees. The EEOC noted that it had voted to approve this regulation in April 2004, but was blocked from doing so when the AARP filed suit against the commission. The court ultimately issued an opinion, according to the EEOC release, that the rule was “a reasonable, necessary and proper exercise of [EEOC’s] authority.” EEOC Legal Counsel Reed Russell said, “Our rule makes clear that it is lawful for employers to continue to provide retirees with the health benefits they currently receive. Contrary to what some interest groups have erroneously asserted, the rule will not require any cuts to retiree benefits.”

CU examiners schooled on third-party relationships

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ALEXANDRIA, Va.(12/28/07)—On a number of occasions during 2007, the National Credit Union Administration (NCUA) has identified credit union due diligence for third-party relationships as a topic of key interest. The agency has wrapped up the year by posting examiner guidance on the subject. The supervisory letter, “Evaluating Third Party Relationships,” is a summation of guidance on the use of third-party vendors to leverage their ability to provide services to members or customers. Although posted to the NCUA website in late December as Letter to Credit Unions No. 07-CU-13, the guidance to the agency field staff was distributed in October. That is the same month that the agency said an increase of seven full-time equivalent employees would be necessary in 2008, in part, because of plans to increase monitoring of credit union practices that raise potential for safety and soundness issues—including third-party relationships and outsourcing. The NCUA letter recognizes that credit unions use third parties for many types of services, including lending programs, regulatory compliance and electronic delivery. The agency endorsed the value of such relationships, and stated that it does not intend to stifle innovative use of the arrangements to meet members’ needs. “NCUA’s goal is to ensure credit unions clearly understand risks they are undertaking and balance and control those risks considering the credit union’s safety and members’ best interest,” wrote David Marquis, director of the NCUA’s office of examination and supervision. However, the guidance also states that even with proper due diligence procedures, a credit union can only mitigate, rarely eliminate, risks associated with outsourcing. It states that when examiners evaluate third-party arrangements, they should ensure a credit union has addressed the following areas in a way that is commensurate with their size, complexity and risk profile:
* Risk assessment and planning; * Due diligence; and * Risk management, monitoring and control.
The letter expands upon the agency’s expectation of the steps to be taken in each of these areas, and also includes a list of the numerous previous letters NCUA has issued on the importance of risk assessment and due diligence. The Credit Union National Association is studying all guidance on third-party relationships and soon will issue an analysis for credit unions.

Inside Washington (12/27/2007)

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* WASHINGTON (12/28/07)--The Office of Enterprise Housing Oversight (OFHEO) has classified Freddie Mac and reaffirmed Fannie Mae as adequately capitalized as of Sept. 30. Both have released financial results publicly. Fannie reported a 5.9% surplus above the OFHEO requirement, while Freddie Mac’s surplus was 1.7% … * WASHINGTON (12/28/07)--The Small Business Administration (SBA) seeks to increase Export Express’ loan minimum to $350,000 and rid some application paperwork, according to Richard Ginsburg, SBA senior international trade specialist. Export Express is SBA’s export loan program for small businesses. The agency also is working on a marketing strategy that would include outreach to lenders (American Banker Dec. 26). The changes, which aim to make Export Express more attractive, will be effective before Sept. 30, when fiscal year 2008 is complete. If the changes are successful, the program will be permanent …

CUNA seeks Treasury meeting to discuss tax report

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WASHINGTON (12/27/07)—The Credit Union National Association (CUNA) recently asked the Treasury Department to clarify its rationale behind failing to remove credit unions from a discussion document on tax reform when the department removed other, more questionable, entities from the white paper. Specifically, CUNA noted that the Treasury’s revised “Approaches to Improve the Competitiveness of the U.S. Business Tax System for the 21st Century,” issued last week, focused on repealing various business tax breaks in the federal code, listing the credit union tax exemption as a possible target. In a letter to Treasury Secretary Henry Paulson , CUNA President/CEO Dan Mica underscored CUNA’s understanding that the white paper does not represent a proposal by the Treasury to change tax policy. However, Mica questioned how credit union concerns were not addressed in the revised report while mention of such bodies as state and municipal governments was eliminated. Mica reiterated to Paulson that listing the credit union tax exemption among possible tax revisions wholly contradicts a 2004 letter to CUNA from President George W. Bush, in which he stated, "I support strongly the tax-exempt status of credit unions, and will continue to highlight the important contributions that credit unions make to our financial system.” Further, the CUNA letter noted that the entities that have been removed from the original white paper have a greater impact on the tax system than the credit union tax exemption could ever have. “Investors do not have the ability to invest in credit unions in order to gain a tax advantage,” CUNA wrote. “In contrast, state and municipal governments do issue tax-exempt bonds that attract investors in high-tax brackets precisely because of the resulting tax benefits of state and municipal bond investments vis-à-vis non-tax-favored investments. “Credit unions should be eliminated from this report because the credit union tax exemption plays little role in investment decisions, whereas the tax-exempt entities eliminated from the December 20, 2007 draft of this report do influence investment decisions because of their tax-favored status.” In his letter, Mica repeated CUNA’s request, made when the first draft was released during the summer, for an opportunity to meet with Paulson to discuss the issues involved. At that time, CUNA wrote to Paulson questioning the Treasury's suggestions that a way to reduce corporate income taxes would be to repeal various business tax breaks, listing the exemption of credit union income among the preferences. That letter noted that the Treasury paper fell silent on the "substantial benefits of credit unions to consumers," but the Treasury document praised Subchapter S Corporations which a government study showed cost the government $726 million in lost revenues in 2006 alone.

Inside Washington (12/26/2007)

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* WASHINGTON (12/27/07)—Last week the Senate approved a second seven-year term for Allan Mendelowitz as a director of the Federal Housing Finance Board. His previous term expired in February and his new appointment will extend to Feb. 27, 2014. The Federal Housing Finance Board is the agency charged with oversight of the safety, soundness, and mission of the 12 regional Federal Home Loan Banks Just prior to joining the Finance Board in December 2000, Mendelowitz served as executive vice president of the Export-Import Bank of the United States…

Congress increases CDFI funding for 08

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WASHINGTON (12/27/07)—An omnibus spending bill approved last week by Congress included the first increase in years in the funds appropriated for the Treasury Department’s Community Development Financial Institutions (CDFI) Fund. The bill included $94 million for grants, investments and technical assistance for community development projects through the CDFI. In recent years, the Bush administration repeatedly pushed for and secured cuts in the CDFI funding, maintaining that CDFIs should have a higher rate of return on their investments and not need increased taxpayer support. Last year the program was funded at $55 million. The Credit Union National Association (CUNA) has worked with the National Federation of Community Development Credit Unions and the Coalition of Community Development Financial Institutions to oppose attempts to cut the fund. The CDFI Fund provides capital grants, equity investments and awards for technical assistance to community development financial institutions, including credit unions Financial institutions are required to provide a 1:1 match for most of the awarded funds, which are offered on a competitive basis. Also in Congress’ massive spending bill, $975,000 was approved for the National Credit Union Administration’s (NCUA’s) Community Development Revolving Loan Fund (CDRLF), up from $941,000 the previous year. CUNA backs an even higher funding level for the program it believes plays a vital role in underserved communities. The CDRLF provides loans and technical assistance grants to credit unions, enabling them to enhance their technologies in order to provide increased products and services. Funding for the NCUA’s Central Liquidity Fund, which has functioned as a backup liquidity lender for the credit union system since Congress established it in 1978, was set at $1.5 billion, the same level as for FY 2007.

Fed adjusts asset threshold for HMDA

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WASHINGTON (12/26/07)--The Federal Reserve Board published last week its annual notice and final rule of the asset-size exemption threshold for depository institutions under Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The adjustment is effective Jan. 1. The asset-size exemption for depository institutions will increase from $36 million to $37 million based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the twelve-month period ending in November 2004. Financial institutions with assets of $37 million or less as of Dec. 31, 2007 will be exempt from the data collection requirements 2008. An institution's exemption from collecting data in 2008 does not affect its responsibility to report the data it was required to collect in 2007, according to Credit Union National Association (CUNA) Senior Assistant General Counsel Jeff Bloch. HMDA and the Board's Regulation C require most depository institutions and certain for-profit, nondepository institutions to collect, report and disclose data about applications for, and originations and purchases of, home mortgage loans, home improvement loans and refinancings. Data reported include the type, purpose, and amount of the loan; the race, ethnicity, sex and income of the loan applicant; and the location of the property. The purposes of HMDA include helping to determine whether financial institutions are serving the housing needs of their communities and assisting in fair lending enforcement. Use the link below to access the Fed’s notice.

Credit card bills float in Washington

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WASHINGTON (12/26/2007)--The Credit Union National Association is tracking two bills floating on Capitol Hill that would prohibit several ways credit card companies charge fees and raise rates. House Financial Institutions Subcommittee Chair Carolyn Maloney (D-N.Y.) plans to introduce early in 2008 a bill that would protect consumers from double-cycle billing and any rate or fee adjustments not covered in the contract, reports the Dec. 21 American Banker newspaper. Provisions of the yet-to-be-introduced House bill also would ban universal default on outstanding debt. In May, Sen. Carl Levin (D-Mich.), with co-sponsor Sen. Claire McCaskill (D-Mo.), introduced the Stop Unfair Practices in Credit Cards Act (S. 1395), which would, in part:
* Prohibit interest on debt paid on time; * Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period; * Prohibit added interest charges on credit card debt which the card holder paid on time and in full; * Limit on penalty interest; * Allow interest rate increases only to future debt; and * Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.
Credit Union National Association (CUNA) Legislative Affairs Vice President Ryan Donovan, who is reviewing the legislation, said the credit card issue will be a high priority for both the House and Senate committees in the first three or four months of next year.

Inside Washington (12/21/2007)

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* WASHINGTON (12/26/07)--Peggy Nalls, Missouri Credit Union Association senior vice president of public and legislative affairs, attended a meeting in Kansas City Dec. 18 with Treasury Department Secretary Henry Paulson. Paulson held the meeting to discuss foreclosure prevention. “It is clear that governmental agencies are working to avoid creating legislation to fix the subprime meltdown,” Nalls said. “However, it was also very clear that there is an expectation that the government will expect us, the industry, to step up to the plate to eliminate fraudulent and unfair practices, as well as help consumers remain in their homes.” Paulson said the government’s objective is to help avoid foreclosures to prevent negative impacts to consumers, neighborhoods and the home and mortgage industry (Legislative Updates Dec. 21) …

House financial committee leaders to speak at GAC

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WASHINGTON (12/21/07)--House Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.) have joined the growing list of speakers for the Credit Union National Association’s (CUNA) 2008 Governmental Affairs Conference (GAC). The 2008 GAC is March 2–6, and CUNA's first at the landmark Washington Convention Center. Frank and Bachus are scheduled to speak Wednesday morning of the conference. Visits to Capitol Hill are scheduled for Wednesday afternoon. Also featured on the 2008 GAC program are Gen. Colin Powell and political commentator Chris Matthews, host of MSNBC's "Hardball" and NBC's "The Chris Matthews Show." Other lawmakers on the program include Senate Minority Leader Mitch McConnell (R-Ky.); Senate Finance Committee Chairman Max Baucus (D-Mont.); Sen. Joe Lieberman (I-Conn.); House Minority Whip Roy Blunt (R-Mo.); and House Ways and Means Committee Chairman Charles Rangel (D-N.Y.). New to the GAC this year is an opening kickoff concert Sunday evening, March 2, featuring the band "America" and sponsored by the CUNA Councils. Use the resource link below for more information or to register.

Mica History shows CUs benefit consumers

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WASHINGTON (12/21/07)—-Credit Union National Association (CUNA) President/CEO Dan Mica said results of a new study underscores that credit unions are as relevant today as when the U.S. movement began--nearly 100 years ago. The National Association of State Credit Union Supervisors (NASCUS) released the credit union service survey results Wednesday. Mica said even as the U.S. credit union movement approaches its 100th anniversary in 2009, credit unions’ benefit to consumers has not changed. “The NASCUS study illustrates credit unions were created out of a consumer credit crisis early in the 20th century and still, in today's turbulent economic times, hard-working Americans continue to turn to their credit unions for affordable credit,” said Mica. The study found that state-chartered credit unions serve their members in “a manner consistent with their history as financial cooperatives serving groups based on occupation, association or community, by charging lower loan rates and providing higher return on savings.” According to the report, the creation of “cooperative, member-owned credit unions was an innovative response to the unmet demand in the consumer market for access to financial capital at fair and affordable rates.” While credit unions’ principles, structure and consumer benefits have remained constant, Mica said the financial cooperatives “have evolved to fulfill their mandate: Satisfy members’ demand for affordable financial services delivered via modern, convenient channels.” Use the resource link below to access the complete report.

Inside Washington (12/20/2007)

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* WASHINGTON (12/21/07)--Credit unions’ enterprise risk management programs must keep pace with the ever-changing market, said National Credit Union Administration (NCUA) Vice Chairman Rodney E. Hood, during a meeting with the Duke University FCU board of directors in Durham, N.C., this week. Hood commended the credit union for the grand opening of its new central office, stating that “this opening is proof positive of continued credit union development despite the current economic climate.” He also discussed the impact of credit unions on the communities they serve, and encouraged small credit unions to provide innovative member business lending products and financial literacy programs … * WASHINGTON (12/21/07)--The next Financial Literacy and Education Commission meeting has been scheduled for Jan. 15 at 10 a.m. at the Department of the Treasury. Attendees should respond by Jan. 9 …

Inside Washington (12/19/2007)

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* WASHINGTON (12/20/07)--The House passed a Senate bill Tuesday that would extend for seven years a government terrorism insurance program created after the Sept. 11 attacks. The bill also would include domestic terrorism coverage. The insurance program was scheduled to expire at the end of the year (American Banker Dec. 19). Rep. Gary Ackerman (D-N.Y.) said he was disappointed that the House didn’t expand the coverage program to include coverage for nuclear, biological, radiological and chemical terrorism, but added he would continue seeking additional coverage … * WASHINGTON (12/20/07)—Sen. John Kerry (D-Mass.) applauded the Senate's passage of a consolidated appropriations bill, which would provide more than $40 million in additional funding for key Small Business Administration (SBA) programs over last year's funding, according to a press release distributed by PRNewswire. He noted that it has been seven years since program spending levels have been increased. The Senate bill specifically would provide increases for the following SBA programs: Small Business Development Centers, up 9%, from $89 million to $97.1 million; Women's Business Centers, up 4% from $12.5 million to $13 million; Microloan Technical Assistance Grants, up 15% from $13 million to $15 million; Microloans, up 53% from $1.3 million to $2 million in funds to leverage almost $20 million in loans -- up from $12.7 million last year; Program for Investment in Microentrepreneurs - up 50% from $2 million to $3 million; 7(j) Technical Assistance, up 53% from $1.5 million to $2.3 million; HUBZone Program, up 5% from $2 million to $2.1 million; and the Surety Bond Program, up 6% from $2.8 million to $3 million. The legislation also provides that the SBA will be able to leverage up to $28 billion in loans and venture capital deals through the 7(a), 504, and Small Business Investment Company programs… * WASHINGTON (12/20/07)--The Treasury Department Tuesday announced the opening of the sixth round of competition for tax credits on $3.5 billion of equity investments under the New Markets Tax Credit Program. The program attracts private-sector capital investment into the nation’s urban and rural low-income areas to help finance community development projects, stimulate economic growth and create jobs. This year’s allocation round will emphasize placing investments in underserved rural communities. The application deadline is March 5, 2008 … * WASHINGTON (12/20/07)--The Federal Deposit Insurance Corp. (FDIC) board of directors approved a $1.14 billion corporate operating budget for 2008. The budget is 3.1% higher than 2007’s budget. The board also approved an increase in authorized FDIC staffing to 4,810 in 2008, from 4,716 in 2007. The added staff is primarily for bank examiner positions …

DIF income up 14 FDIC plans tweak to failure process

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WASHINGTON (12/20/07)—The Federal Deposit Insurance Corp. (FDIC) Wednesday announced a 14% increase in comprehensive income for the Deposit Insurance Fund (DIF) for the first nine months of this year. That increase represented earnings of $1.6 billion, which the FDIC said increased the fund balance to $51.8 billion as of Sept. 30. Also, excluding exit fees of $345 million earned during the first quarter of 2006, which was a one-time adjustment, comprehensive income rose by $539 million, or 51%, from a year ago. DIF assessments were $170 million for the third quarter of 2007, compared to $140 million for the second quarter. The $30 million increase primarily resulted from a reduction in the estimate of assessment credits to be used by financial institutions to offset gross assessments, according to an FDIC release. Also on Wednesday, the agency proposed a two-part plan to improve the process for determining uninsured depositors at larger institutions in the event of a failure. The measure was designed to enhance the FDIC's ability to make funds promptly available to insured deposit customers if a large financial institution were to be closed, an event the FDIC assured is “unlikely.” The first section of the proposal relates to “covered institutions,” which the FDIC said are those with at least $2 billion in domestic deposits, have more than 250,000 deposit accounts, or have total assets of more than $20 billion, regardless of the number of deposits or accounts. Currently, the agency identifies 159 FDIC-insured institutions that meet the criteria. The second section applies to all FDIC-insured institutions, regardless of size, and governs the specific time and circumstance under which account balances will be determined in the event of a failure, the release explained. The FDIC is proposing to use the end-of-day ledger balance as normally calculated by the institution. There will be a 90-day comment period beginning when the proposal is published in the Federal Register.

CURIA still counting Rep. Pearce signs on

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WASHINGTON (12/20/07)—Credit union supporters continue to add their names to the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537) even as Congress zooms toward final adjournment for the year. Most recently, Rep. Steve Pearce (R-N.M.) became the 142 official backer of the bill. The Credit Union National Association (CUNA) continues to be in close contact with House Financial Services Committee leadership about a hearing date for H.R. 1537, a bill intended to modernize the regulatory structure for credit unions to enable them to offer improved service to members.
U.S. Rep. Steve Pearce (R-N.M.) met Dec 10 with New Mexico credit union officials and decided to sign on to CURIA. From left are U.S. New Mexico FCU CEO Jim Raquet, Pearce, Credit Union Association of New Mexico CEO Sylvia Lyon, New Mexico Energy FCU CEO Kathy Cranage, and CUANM Vice President of Governmental Affairs Juan Fernandez Ceballos. (Photo provided by CUANM)
As early as May this year, one of the bill’s chief sponsors, Rep. Ed Royce (R-Calif), said he had been assured of a hearing date by House Financial Services Committee Chairman Barney Frank (D-Mass.). Frank has since reiterated his intention to give the credit union bill a full hearing in the 110th Congress. Royce, together with Rep. Paul Kanjorski (D-Pa.), introduced the 2007 version of the credit union bill on March 15. CUNA Senior Vice President John Magill noted recently, "Bipartisan support for CURIA has been building rapidly in the 110th Congress and, thanks to the consistent efforts of credit unions and the leagues, that support keeps building even in the final hours of this session of the 110th Congress." Magill heads CUNA’s legislative affairs department. "CUNA continues to work for the broadest possible support for this important credit union legislation and will be encouraging leagues and credit unions to contact their federal lawmakers when they are home for the winter break," Magill has said. Two key provisions of CURIA would: implement a risk-based capital approach for credit unions to make it more closely resemble the current Federal Deposit Insurance Corp. capital standard for banks, and; raise the current threshold on credit unions' member-business lending to 20% of assets from the current 12.25%. The bill also proposes to clarify the 1998 Credit Union Membership Access Act to allow all credit unions, regardless of charter type, to serve those in underserved areas. The bill would also update the definition of an underserved area, incorporating definitions from the Community Development Financial Institutions Act and the New Markets Tax Credit.

Mortgage debt forgiveness plan heading to President

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WASHINGTON (12/20/07)--The House Tuesday passed the "Mortgage Forgiveness Debt Relief Act" (H.R. 3648). The bill is identical to the bill the Senate passed late last week to provide temporary tax relief to homeowners who might lose their home to foreclosure or who negotiate a loan modification. President Bush is expected to sign the bill. On Dec. 6, as part of an administration plan to provide relief to subprime borrowers, the president urged Congress to "temporarily reform the tax code to help homeowners refinance during this time of housing market stress." Under current law, if the lender--voluntarily or involuntarily--forgives a portion of a borrower's mortgage debt, the tax code treats the amount forgiven as taxable income. Credit unions and other lenders are required to file Form 1099-C, "Cancellation of Debt," to report to the Internal Revenue Service any debt of $600 or more cancelled or forgiven. H.R. 3648 will allow the discharge of indebtedness on loans up to $2 million and secured by the borrower's principal residence not to trigger federal income taxation. The bill would only cover discharges made between Jan. 1, 2007 and Dec. 31, 2009. "Even though this bill, when signed by the president, will be retroactive to the beginning of the year, credit unions that have already filed 1099-C forms relating to home loans shouldn't feel they have to file amended returns. "We assume that the IRS will release some guidance on how to handle information returns in these situations for this temporary period," noted Kathy Thompson, SVP for Compliance for the Credit Union National Association. However, it should be noted that the Act does not impact a credit union's responsibility to file the 1099C forms when a discharge of indebtedness of $600 or more has occurred, she added. H.R. 3648 includes a number of unrelated tax provisions, most of which are included to help cover the cost of this tax relief. One provision provides a three-year extension of the personal tax deduction for the cost of private mortgage insurance premiums.

NASCUS survey CUs serve all Americans

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ARLINGTON, Va. (12/20/07)—The National Association of State CU Supervisors (NASCUS) Wednesday released findings of its major survey of credit union service and reported that the income levels of credit union members tracks that of the U.S. population. NASCUS noted that although there are no state statutes, laws or regulations that specify credit unions shall serve individuals of low and modest means, more than 38 million members from all walks of life receive low-cost services from their credit union. That statement holds true, NASCUS said, regardless of charter type. The NASCUS research, based on a survey of 469 state-chartered credit unions, reflects the findings of a 2006 National Credit Union Administration (NCUA) report on credit union service. Both research projects were in response to a request by Rep. Bill Thomas (R-Calif.) who in 2005 chaired a House Ways and Means Committee hearing to examine the credit union tax status. Thomas has since retired from Congress. Credit Union National Association (CUNA) President/CEO Dan Mica said Wednesday, “The methodology and conclusions of the NASCUS report track very closely with the 2006 report released by the National Credit union Administration. “Taken together, these reports reflect that credit unions, regardless of charter type, are doing exactly what Congress intended them to do: serving ordinary working Americans. “CUNA is pleased that NASCUS's efforts add to the body of data that clearly demonstrate credit unions continue to offer a range of low-cost financial services and help a broad cross-section of the American public to make prudent financial decisions that promote thrift.” NASCUS said it analyzed more than 28 million account records for this report. The records represented accounts held by more than 14 million members of state-chartered credit unions. NASCUS focused on the committee’s four areas of inquiry: membership; executive compensation; Unrelated Business Income Tax (UBIT); and Credit Union Service Organizations (CUSOs). When the state regulators’ group launched its survey effort in September 2006, it explained that every state with state-chartered credit union but one would be included in the sampling. Alaska, with one such institution, would not be providing data. Some other states were expected to combine their information-gathering efforts due to such things as number of credit unions involved.

FTC keeps data security in sights

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WASHINGTON (12/19/07)—Personal financial data security issues have all but been supplanted as a topic on Capitol Hill by the pressing concerns regarding the subprime mortgage and credit markets, but data security problems still loom large for financial services providers. The Federal Trade Commission (FTC), however, will be moving into 2008 with a program to spread the word on data protection. The FTC this week held a briefing for to reveal two key elements of its plan. First, the agency noted, it will schedule a series of regional workshops, the first of which is slated for April 2008 in Chicago. The workshops will explore steps an individual organization can take to protect itself from identity rip-offs and fraud, as well as mitigating actions after an event has occurred. The FTC said it will also be making staff experts available as speakers for outside organizations’ seminars and conferences. The FTC reiterated the precepts of its AVOID ID Theft program, which essentially is a how-to guide to protect against ID theft. Materials disseminated through the AVOID program address ways to: detect suspicious activity; deter identity thieves through safeguarding information; and defend against information theft promptly once there is a suspicion of a problem. The FTC also said it is now promoting a new website featuring data security information, including a 20 minute tutorial. The site, the FTC indicated, describes five steps of a sound data security plans:
* Take stock - know what personal info you have; * Scale down - keep only what you need for your business; * Lock it - protect the information you keep; * Pitch it – but carefully--properly dispose of data you don’t need anymore; and * Look ahead – have a plan in case your data is breached.
Use the resource link below to access the FTC website information.

Knollenberg a new CURIA supporter

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WASHINGTON (12/18/O7)—Rep. Joe Knollenberg (R-Mich.) is the latest federal legislator to declare support for the bill intended to improve credit union service to members, the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537).
Click to view larger image U.S. Rep. Joe Knollenberg (R-Mich.), right, with the Michigan Credit Union League's Patick LaPine and during the 2006 CUNA GAC. (Photo provided by CUNA)
Knollenberg is a first-time supporter of CURIA this year and his backing brings the number of sponsors to 141. Knollenberg is also known to credit unions for his support of the credit union tax exemption. In a 2004 letter to the Michigan CU League expressing his strong support, the federal lawmaker said the presence of credit unions in a community provides needed financial opportunities to small businesses, families and workers. He noted that credit unions are unlike other financial institutions as not-for-profit financial cooperatives owned by their members and said “(c)learly, credit unions' tax-exempt status should not be repealed or altered." Use the resource link below for details of CURIA and a list of all co-sponsors.

NCUA urges care in holiday credit card use

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ALEXANDRIA, Va. (12/19/07)— National Credit Union Administration (NCUA) Chairman JoAnn Johnson, as a member of President Bush’s Financial Literacy and Education Commission (FLEC), made use of the holiday season to alert consumers about safe credit card practices. She said the increase in consumer spending this time of year makes it a good time to remind credit card users to take steps to guard against identity theft. Johnson outlines the following practices for the wise use of credit cards:
* Be cautious when using cash advances and read the fine print in the agreement, particularly since they usually carry higher interest rates; * Be aware that paying the maximum amount possible on your credit card balance, instead of the minimum required, decreases the time it takes to pay off your credit card, saves money in interest charges, and helps establish a better credit rating.
In addition to prudent use of credit cards, Johnson also stressed greater consumer awareness as a tool to combat identity theft. The NCUA noted a recent survey released by the Federal Trade Commission, which reported 8.3 million American adults were victims of identity theft in 2005. Johnson recommended these steps to help prevent identity theft include:
* Safeguard any documents that contain sensitive personal information, including proper disposal and shredding; * Read financial and credit card statements as soon as they arrive and look for unauthorized transactions; and * Review your credit report from all three credit reporting agencies and make certain there are no inaccuracies, annually if possible.
Use the resource links below for more information about financial literacy programs.

CAMEL Matrix gone for exams after Jan. 1

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WASHINGTON (12/19/07)--Starting Jan. 1, the National Credit Union Administration (NCUA) will eliminate the CAMEL Matrix and focus CAMEL evaluations on “risk consistent with NCUA’s Risk Focused Examination Program (RFE),” the agency said yesterday. In its decision, NCUA cited concerns that some credit unions may target and measure performance against the Matrix rather than focus on broader risk management. “Targeting CAMEL benchmarks in the Matrix can lead to unsafe and unsound goals and may lead to poor business decisions,” said NCUA in a letter to federally insured credit unions. By eliminating the Matrix, NCUA said the focus will be on “evaluating a credit union’s goals and determining strategic plans are realistic, tailored to the credit union’s unique needs, reflective of the current economic environment, and ultimately, in the best interest of the membership.” The agency pointed out that the Matrix maintained an element of controversy even after it became an optional examiner tool because credit unions “do not have identical risk profiles or business models.” The Matrix applied static ratio benchmarks to every credit union. The NCUA said its examiners will continue the RFE practice to assign CAMEL component and composite codes for examination and supervision contacts. It said examiners will assign the “C”, “A”, and “E” component ratings without a matrix following the approach currently used for assigning the “M” and “L”. The RFE practice to disclose CAMEL component ratings and the overall rating in the Examination Report Overview will continue. “When a CAMEL component or composite rating changes, examiners will inform management,” wrote the agency. “Disclosing ratings facilitate understanding of NCUA’s assessment of the credit union’s overall operation.” According to the letter, NCUA staff that use CAMEL will receive training prior to implementation. “This same training will be made available to state supervisory authority staff that needs to be aware of NCUA’s CAMEL Rating System,” it said. Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said NCUA earlier this year briefed several CUNA committees about the upcoming changes. Dunn said she believed the Matrix elimination is positive for credit unions and consistent with NCUA's risk focused examinations. “We plan to work with NCUA and credit unions to monitor the agency's implementation of the changes to help ensure that is the case, and we want to hear from credit unions if they have concerns about the implementation of the CAMEL changes,” said Dunn. Use the link below to access NCUA’s complete letter to credit unions.

Fed issues awaited fair lending plan

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WASHINGTON (12/18/07)—The Federal Reserve Board Tuesday unanimously agreed to issue for comment a set of proposals intended to better protect consumers from unfair or deceptive home mortgage lending practices and related advertising. Some are hopeful this effort will be sufficient to stave off Congressional intervention in the regulation of home mortgage lending. As anticipated, the Fed’s proposed rules address such subprime lending practices as prepayment penalties, failure to offer escrow accounts for taxes and insurance, stated-income and low-documentation lending, and the failure to give adequate consideration to a borrower's ability to repay. The consumer protections would be adopted under the Home Ownership and Equity Protection Act (HOEPA), which gives the Fed authority and responsibility to prohibit unfair or deceptive mortgage lending practices. The proposal includes four protections for “higher-priced mortgage loans” secured by a consumer’s principal dwelling. They are:
* Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers’ ability to repay the loan; * Creditors would be required to verify the income and assets they rely upon in making a loan; * Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase; and * Creditors would have to establish escrow accounts for taxes and insurance.
The rule would define “higher-priced mortgage loan” in a way intended to capture loans in the subprime market but generally would exclude loans in the prime market. A loan would be covered if it is a first-lien mortgage and has an annual percentage rate (APR) that is three percentage points or more above the yield on comparable Treasury notes, or if it is a subordinate-lien mortgage with an APR exceeding the comparable Treasury rate by five points or more, according to a Fed release. Also, the release noted the following protections would apply to all loans secured by a consumer’s principal dwelling, regardless of the loan’s APR: Lenders would be prohibited from compensating mortgage brokers by making payments known as “yield-spread premiums” unless the broker previously entered into a written agreement with the consumer disclosing the broker’s total compensation and other facts. A yield spread premium is the fee paid by a lender to a broker for higher-rate loans. The consumer’s written agreement with the broker must occur before the consumer applies for the loan or pays any fees. The comment period ends ninety days after publication of the proposal in the Federal Register, which is expected shortly. The CUNA Consumer Protection Subcommittee will be reviewing the proposal in detail to develop the Credit Union National Association’s (CUNA's) comment. The proposal quickly became the target of criticism by Rep. Barney Frank (D-Mass.) , who chairs the House Financial Services Committee. Frank said he and his committee staff have reviewed the Fed’s plan to crack down on abusive lending. “We now have confirmation of two facts we have known for some time: one, the Federal Reserve System is not a strong advocate for consumers, and two, there is no Santa Claus. People who are surprised by the one are presumably surprised by the other.” Last summer, Frank, frustrated with the pace the Fed was maintaining in implementing HOEPA, said he would want to redistribute the Fed’s power to forbid unfair or deceptive banking practices to the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. The Treasury Department, on the other hand, backed the Fed’s action. Treasury Under Secretary for Domestic Finance Robert K. Steel issued the following statement: "Treasury commends the Federal Reserve's efforts announced today to improve mortgage lending practices. The Federal Reserve has used its authority to restrict certain practices that are unfair or deceptive and to provide enhanced information to consumers. We support the development of such rules, which recognize the need to protect consumers without unnecessarily restricting their access to credit." However now, in the midst of the country’s subprime woes, criticism of Washington’s inaction is becoming more widespread. A Dec. 18 article in The New York Times said that prior to hitting crisis proportions, it was all but impossible to get regulators’ attention focused on what some saw as a looming threat. The article noted, for instance, that the late Edward Gramlich, a former Fed governor, started nearly seven years ago to warn that there was a burgeoning mass of a new type of lender who were teasing people into loans they couldn’t really afford, but Gramlich’s concerns was rebuffed by the Fed. Also, Sheila C. Bair, when she was a senior Treasury official in 2001, worked to get subprime lenders to adopt best practices with outside monitoring for compliance, but with little effect. Bair is now chair of the Federal Deposit Insurance Corp. Use the resource link below for more on the Fed plan.

Inside Washington (12/18/2007)

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* WASHINGTON (12/19/07)--Freddie Mac is using YouTube to warn delinquent homeowners about foreclosure scams. The video warns homeowners about scammers who offer to help them evade foreclosure if they hand over the deeds to their homes. The scammers sell the homes for a profit, pocket the difference, and then charge borrowers rent for staying in the home while a new loan is processed. Because foreclosure notices are public record, it’s easy for scammers to get copies of the notices and contact troubled borrowers, according to the video … * WASHINGTON (12/19/07)--Former Federal Reserve Board Chairman Alan Greenspan said he supports a federal bailout to help subprime borrowers. In an interview with ABC, Greenspan stated that cash from the government is “available” and should be infused to help borrowers (American Banker Dec. 18). Also, the Greenlining Institute met Monday to discuss solutions that would go beyond the Bush administration’s proposed plan to help borrowers. Bob Gnaizda, Greenlining policy director, said he held the meeting because Treasury Secretary Henry Paulson’s plan, which would encourage lenders to freeze starter interest rates on subprime loans for certain borrowers, is not enough. Under Paulson’s plan, most of those in need will not be helped, Gnaizda said …

Inside Washington (12/17/2007)

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* WASHINGTON (12/18/07)--Financial services providers are hoping that the Home Ownership and Equity Protection Act (HOEPA), which is scheduled for release today, could eliminate the need for tougher mortgage reform legislation while ensuring that all lenders follow the same rules (American Banker Dec. 17). Federal Reserve Chairman Ben Bernanke wrote a letter to Rep. Brad Miller (D-N.C.) last week stating that the HOEPA proposal would eliminate most abusive lending, and that the central bank is working to improve disclosures. Fed officials have stated that the proposal will target low-documentation loans, lenders who don’t assess a borrower’s ability to pay, lenders who don’t offer escrow accounts for insurance and taxes, and pre-payment penalties. The Fed has been criticized for not doing enough to stop abusive lending, and industry observers expect that HOEPA will be similar to the subprime guidance that federal regulators released in June … * WASHINGTON (12/18/07)--Rep. Julia Carson (D-7), right, the first African-American and the first woman to represent Indianapolis in Congress, died Saturday after battling lung cancer. She was first elected to Congress in 1996 and was a member of the House Financial Services Committee. “She was generous with her time on behalf of Indiana’s credit unions,” said Indiana League President John McKenzie (left). Carson served as the keynote speaker at the Indiana Credit Union League’s Legislative Affairs Forum in 2004. (Photo provided by the Indiana Credit Union League) …

CUNA nominates two to BSA advisory group

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WASHINGTON (12/18/07)—The Texas CU League and the Association of Corporate CUs would make significant contributions as members of the Bank Secrecy Act Advisory Group (BSAAG), said the Credit Union National Association (CUNA) in letters nominating the groups for membership. BSAGG was established in 1992 to enable the financial services industry and law enforcement to advise the Treasury Secretary on ways to enhance the usefulness of Bank Secrecy Act (BSA) reports. CUNA has been a member of BSAAG since 2003 with a term that has been extended to 2009. In nomination the Texas league, CUNA wrote of that group’s “unique position” of being a state credit union trade association that is very knowledgeable about Bank Secrecy Act (BSA) issues. The league regularly provides assistance to its members with regard to these issues. “This perspective will provide a substantial contribution to the BSAAG while its credit union membership will provide diversity among the trade associations that are members of the BSAAG,” CUNA said. The letter added that the state league last year produced a BSA training video that is used not only by Texas credit unions, but other state credit union trade associations and credit unions across the country. In support of a membership position for the Association of Corporate CUS (ACCU), CUNA wrote that group “provides awareness to corporate credit unions about applicable laws and regulations, including (BSA issues), submits input on proposed regulations, assists with regulatory and compliance issues, and creates industry specific best practices.” “In essence, corporate CUs are banker’s banks and are responsible for adhering to every aspect of monitoring and reporting as required by the BSA. We believe the ACCU would be in an excellent position to make a significant contribution to the activities of the BSAAG, as it is in the unique position of being a trade association that is very knowledgeable about BSA issues and provides assistance to its members with regard to these issues,” CUNA said. Earlier this year, Navy Federal CU was selected to serve a three-year BSAAG term. CUNA had nominated the credit union. BSAAG is part of the Treasury Department's Financial Crimes Enforcement Network (FinCEN).

GAO studies new reaffirmation agreements

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WASHINGTON (12/18/07)--A Government Accountability Office (GAO) report recently stated that a survey of bankruptcy filings in five districts shows that new rules for reaffirmation agreements are being used in a significant majority of bankruptcy dealings. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act required lenders to better inform individuals filing for personal bankruptcy about their options for reaffirming debt by requiring extensive disclosures and possible court review. The “reaffirmation agreements” are voluntary and enable borrowers to pay certain creditors in order to keep an asset, such as an automobile. The 2005 law required the GAO to study the new reaffirmation process, and in its recent report Congress’ investigative arm looked at: the extent to which the required bankruptcy reform act disclosures have been incorporated into reaffirmation agreements; the types of debts generally reaffirmed and what percent of a debtor’s overall debt it represents; and how reaffirmed and original interest rates compare. The GAO said it reviewed a representative sample of over 1,000 reaffirmation agreements in bankruptcy courts in five state: Alabama, California, Illinois, Texas and West Virginia. The report noted the sample “cannot be generalized to all bankruptcy courts, but can be generalized to each of the selected bankruptcy courts.” The GAO found:
*For the five districts, the required disclosure statement for the “Annual Percentage Rate” was included in an estimated 86% to 97% of agreements and the disclosure statement for the “Amount Reaffirmed,” and the amount was included in an estimated 87% to 98% percent of agreements (the California court filings were consistently the highest in compliance); * For the five districts, debts secured by assets, such as an automobile, were the most frequently reaffirmed type of debt—comprising an estimated 90% or more of all reaffirmations. Unsecured debt—such as credit card debt—was reaffirmed infrequently in reaffirmation agreements, occurring in an estimated 2% to 10% of agreements. * In an estimated two-thirds (75%) of the bankruptcy cases in the five districts, the reaffirmed debt burden comprised 25% or less of the debtors’ total debts; and * In cases where an original interest rate was provided, rates on reaffirmed debt were generally less than or equal to the original rate. Credit union lending and collections staff may be particularly interested in pages 28-31 of the report addressing interest rates in reaffirmation agreements;
The report highlighted the different reaffirmation rules that apply to credit unions under the 2005 law, since the presumption of undue hardship when a debtor’s expenses exceed income are not applicable to credit unions if the debtor is represented by an attorney. Reaffirmation agreements with credit unions comprised an estimated 6% to 20% of all reaffirmations in each of the five districts. The GAO report indicated that the bankruptcy courts have under consideration a May 2007 recommendation by a federal judiciary advisory committee to require a reaffirmation agreement coversheet in order to simplify judges’ review of whether a hardship possibly exists with the debtor’s reaffirmation agreement. The Credit Union National Association is discussing with the courts’ administrative office under what conditions a credit union reaffirmation agreement would have to provide such a coversheet., but any change in paperwork requirements is not expected before late 2009. Last week, the various reports indicated that consumer bankruptcy filings across the country increased more than 28% in November from a year ago, but were down 5.5% from October. For more details of the GAO report, use the resource link below.

Senate GOP leader to address CUNA GAC

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WASHINGTON (12/18/07)—Senate Minority Leader Mitch McConnell (R-Ky.) joined the growing lineup of lawmakers scheduled to speak during the 2008 CUNA Governmental Affairs Conference (GAC). The 2008 GAC is March 2–6, and CUNA's first at the landmark Washington Convention Center. McConnell will speak to the GAC on Wednesday morning, March 5. McConnell was first elected to the U.S. Senate in 1984. He became Senate Minority Leader in 2006. He currently serves as a senior member of the Appropriations, Agriculture and Rules Committees. Also featured on the 2008 GAC program are Gen. Colin Powell and political commentator Chris Matthews, host of MSNBC's "Hardball" and NBC's "The Chris Matthews Show." Other lawmakers on the program include Senate Finance Committee Chairman Max Baucus (D-Mont.); Sen. Joe Lieberman (I-Conn.); House Minority Whip Roy Blunt (R-Mo.); and House Ways and Means Committee Chairman Charles Rangel (D-N.Y.). New to the GAC this year is an opening kickoff concert Sunday evening, March 2, featuring the band "America" and sponsored by the CUNA Councils. Use the resource link below for more information or to register.

Members gain back control of their Omaha CU

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ALEXANDRIA, Va. (12/18/07)—Control of an Omaha, Neb. federal credit union, whose board of directors and CEO were removed after a 2005 loss of $416,203--$391,000 of which was in the fourth quarter—has been placed back in the hands of its members, according to the National Credit Union Administration (NCUA). During a 22 months in conservatorship, “all material concerns” of $28 million-asset Union Pacific Streamline FCU were resolved, according to federal regulators. The credit union was placed into conservatorship Feb. 16, 2006, with the goal of returning the credit union operation to its approximately 7,000 members. At that time, Steven R. Slater, president/CEO, and Trudi Stastny, executive vice president, were placed on administrative leave. The NCUA also removed the credit union's board of directors after its examiners found problems with the $38 million asset credit union's performance.

Five options available in card breach settlement

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WASHINGTON (12/17/07)—Credit unions and other U.S. Visa card issuers have until Wednesday to decide how to proceed in recouping credit and debit card replacement costs following a security breach at discount retailer TJX Cos. According to Credit Union National Association (CUNA) General Counsel Eric Richard, affected issuers have five options related to a $40.9 million settlement with Visa Inc. and the company's credit card payments processing bank, Fifth Third Bancorp, in a lawsuit over the largest customer data breach in U.S. history. Three options involve recovery through Visa, while two involve litigation, said Richard, who participated in a conference call with state credit union and Visa representatives last week. The options include:
* Alternative recovery offer through the Visa/TJX settlement agreement; * Account data compromise recovery; * Visa compliance process; * Potential class action litigation; or * Individual litigation.
To take effect, at least 80% of U.S. Visa card issues must approve the settlement by Dec. 19. By accepting the deal, they would agree to waive their right to sue TJX and Fifth Third, in exchange for payment of their breach-related costs by Dec. 27. Affected credit unions should have received their offer from Visa on Dec. 6. If the 80% threshold is not met, Visa, TJX, and TJX’s acquirers have the option to withdraw the alternate recovery offer. The agreement does not include other credit card associations such as MasterCard. Richard said while CUNA was not in a position to assess an individual credit union’s situation, the trade association drafted a summary of each option, along with preliminary pros and cons. Use the resource link below to access the CUNA summary.

CUNA to join in overdraft case amicus brief

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WASHINGTON (12/17/07)—The Credit Union National Association (CUNA), in concert with national banking and thrift trade groups, intends to file an amicus curiae brief today in the case of Miller v. Bank of America (BofA). The California court case involves Social Security deposits that were tapped for overdrafts and nonsufficient fund (NSF) fees at BofA and is now before the state’s Supreme Court. BofA originally appealed an earlier ruling by the California Superior Court in San Francisco that the bank pay $1.3 billion to the plaintiff and a class of 1.3 million disabled and elderly customers who had overdraft fees withdrawn from their accounts. In November 2006, a California Court of Appeals reversed the lower court's ruling and award, and decided in favor of BofA. The appellate court ruled that BofA's practice of netting government benefit deposits against overdrafts and overdraft fees was not restricted by either the holding in a 1970's case, Kruger v. Wells Fargo Bank, or by California state law, therefore such practices were appropriate. In late 2006 the plaintiff, Miller filed an appeal with the California Supreme Court, which agreed to hear the case. “The case has tremendous importance to credit unions, “said Mike McLain, assistant general counsel and senior compliance counsel at CUNA. Friday. “It could have a huge negative impact on the products and services credit unions could offer to recipients of Social Security benefits if the appellate court ruling is not affirmed by the California Supreme Court.” The amicus brief raises the issue of federal preemption for federally chartered institutions, including federal credit unions , and provides information about the operational problems that would arise in providing accounts to Social Security beneficiaries—especially those with direct deposit. Other parties to the brief are the American Bankers Association, Consumer Bankers Association, Financial Services Roundtable, and Independent Community Bankers of America. . The government issues more than 62 million benefit checks each month, and the Social Security Administration has pushed for direct deposit to ensure beneficiaries receive their funds... The Miller v. BOA lawsuit was filed after the bank mistakenly credited almost $1,800 to plaintiff Paul Miller's account. It later discovered the mistake, and reversed the deposit, emptying Miller's account. The CA Supreme Court next will review the parties’ briefs and all the amicus briefs and perhaps reach a decision based on available information, although there is an unlikely chance the court could schedule the case for oral argument, bur not very likely. This state Supreme Court’s decision should be the end of the years-long case, McLain said.

FHA modernization bill moving forward

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WASHINGTON (12/17/07)—The Senate Friday voted 93-1 in favor of legislation intended to modernize the Federal Housing Administration’s (FHA’s) mortgage insurance program. The House passed a version of an FHA overhaul in September, but that bill differs in significant ways from the Senate’s legislation—differences that must be worked out before Congress can approve a final measure. Among the difference, the Senate bill would increase FHA loan limits from the current $362,000 to a level similar to those of Fannie Mae and Freddie Mace, which are $417,000, according to Michele Johnson, director of federal legislative affairs for the Credit Union National Association (CUNA). The House bill, she noted, would raise the loan limit to 125% of an area’s median home price and would include authority for the House and Urban Development secretary to increase that amount by $100,000 in times of crisis in the home-mortgage market. The Senate bill also would lower the minimum down payment for an FHA-insured loan and simplify the down payment calculation. While the bills differ, reform to the FHA insurance program is seen by lawmakers in both houses of Congress as a way to provide for home buyers a low-cost alternative to subprime loan. Greeting news of the Senate’s action, House Financial Services Committee Chairman Barney Frank (D-Mass.) issued a statement noting the agreement in House and Senate that “ this is an important action in dealing with our subprime challenges, and that we should act quickly so that the FHA can be a resource for people who can refinance their loans.” He said he looked forward to working with the Senate, but added that he would work to preserve “important elements” of the House bill that differ from the Senate approach.

Bush sends Fryzels name to Senate for OK

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WASHINGTON (12/17/07)--The White House has officially nominated Michael E. Fryzel, an Illinois real estate lawyer and former director of the state's Department of Financial Institutions, to become a member of the National Credit Union Administration (NCUA) board of directors, and ultimately to be its chairman. President George W. Bush has sent Fryzel’s name to the Senate for confirmation, but the Senate Banking Committee has not yet scheduled a hearing on his nomination, which is a necessary step to securing the position. Fryzel was with the Illinois Department of Financial Institutions from 1977 to 1989 and headed the agency from 1982 to 1989. Integral to that job, according to his resume, was the licensing and regulation of more than 700 state-chartered credit unions with assets exceeding $4.3 billion. Upon leaving that position, Fryzel founded his private law practice, the Law Offices of Michael Fryzel, which specializes in financial regulatory and real estate law. Listed among his profressional affiliation, Fryzel said he is a member of the Governor’s Board of CU Advisors and has been since 1992. He received his bachelor's degree from Valparaiso University, his MBA from the University of Chicago, and his JD from Loyola University of Chicago School of Law. If confirmed, Fryzel will replace JoAnn Johnson as chairman. Johnson's term expired in August of this year. She has been on the NCUA board since 2002 and has served as chairman since 2004. Johnson has indicated she will likely remain as chairman until her successor makes it through the nominating process.

Inside Washington (12/14/2007)

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* WASHINGTON (12/17/07)--On Tuesday, the Federal Reserve board is scheduled to provide a first glance at proposed amendments to Home Ownership and Equity Protection Act of 1994 implementation rules (American Banker Dec. 14). The amendments could require brokers and bankers to underwrite home loans at the fully indexed rate. The Fed is also looking for comment regarding low- or no-documentation loans, prepayment penalty restrictions and a rule requiring borrowers to pay insurance premiums and taxes in escrow … * WASHINGTON (12/17/07)--The Senate Friday approved a measure that would help homeowners delinquent on their loan payments because of climbing interest rates to refinance into loans backed by the Federal Housing Administration (FHA). The legislation was approved 93-1 (Associated Press Dec. 14). The bill also allows the FHA to accept lower down payments on the loans and to improve counseling for homeowners nearing default. About 2 million to 2.5 million adjustable-rate mortgages will reset in 2008, jumping to interest rates that could force many borrowers into foreclosure … * WASHINGTON (12/17/07)--An internal report expected to be released next week indicated that the Federal Deposit Insurance Corp. (FDIC) does not empower “rank-and-file” workers enough (American Banker Dec. 14). The report, which also indicated that the agency’s bank examination and staff performance award system is flawed, was undertaken by a consultant to analyze FDIC employee morale issues. The survey was given to employees in October, and three-quarters of the 4,700 total FDIC employees responded. A spokesman stated that FDIC Chairman Sheila Bair is taking the report seriously but said it’s too early to “draw conclusions” … * WASHINGTON (12/17/07)--Next year, state legislatures likely will shift their focus to preventing foreclosures from predatory lenders. About 40 states created laws that cracked down on predatory lending, including stricter penalties for mortgage fraud and stronger licensing requirements. But because many borrowers’ mortgages will reset to high interest rates next year, the states are expected to look at how they can keep borrowers from foreclosure. California and Maryland legislators have proposed measures to prevent borrowers from losing their homes. The states will be involved with anti-foreclosure measures because the crisis keeps growing, and because the federal government has not provided adequate solutions, said Robert Gnaizda, general counsel of the Greenlining Institute … * WASHINGTON (12/17/07)--Treasury Secretary Henry Paulson will travel to Orlando, Fla.; Kansas City, Mo.; Stockton, Calif.; and Los Angeles this week to discuss efforts to address mortgage market issues and help families avoid foreclosure. He will meet with local officials, community leaders and representatives from local businesses to discuss what has been proposed and what can be done to help more people. More details will be announced this week …

Community development CU placed into conservatorship

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ALEXANDRIA, Va. (12/17/07)—The National Credit Union Administration (NCUA) announced Friday that $ 4.2 million-asset Zion United Community CU has been placed into conservatorship. The NCUA said that the State of Colorado assumed control of the Denver-based credit union and has appointed “several credit union leaders” as an advisory board for the conservatorship. According to State Commissioner of Financial Services Chris Myklebust, Zions United Community is the state’s only community development credit union. The unusual step of creating a conservatorship advisory board is intended to foster creative ways to help the credit union survive its current problems, Myklebust told New Now Friday. The state regulator said he worked with the NCUA to develop an advisory board whose members “will be active and who will care” about the ultimate outcome of the conservatorship. Service continues uninterrupted at Zion United Community and members may freely make deposits, access funds, and make loan payments. An NCUA release reminds that member funds are safe. Accounts are federally insured up to at least $100,000 per account by the National Credit Union Share Insurance Fund (NCUSIF), a federal fund managed by NCUA and backed by the full faith and credit of the U.S. Government. Zion United Community Credit Union serves approximately 1,300 members. The advisory board group members are:
* Darrell E. Nulan of Trimble Nulan and Evans, P.C., an attorney and community leader; * The Rev. John Thompson, senior minister of Park Hill United Methodist Church and community leader; * Stacey A. Campbell of Baker Hostetler, attorney and community leader; * Valerie A. Harrison, credit union program officer, National Federation of Community Development CUs; * Carla Hedrick, president/CEO, of Denver Community FCU; and * Darrick Weeks, chief business development officer, Westerra CU.

CURIA gets backer number 140

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WASHINGTON (12/17/07)—Rep. Robert "Bud" Cramer (D-Ala.) has signed onto the co-sponsor list for the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537) to become the 140 official backer. The bill is now co-sponsored by 97 Democrats and 43 Republicans and 34 of those names are first-time supporters this year. Of those 34, 18 are incumbents signing on in support of CURIA for the first time this session. Last year, a CURIA bill drew the support of a total of 126 co-sponsors from both political parties The 2007 CURIA bill is similar to the 2006 version, but with the addition of two key provisions: One addresses field of membership rules, the other would add more consumer safeguards in the event of a credit union conversion to another form of financial institution. The 2007 bill also contains changes to the National Credit Union Administration's original prompt corrective action (PCA) reform plan, changes crafted specifically to address the Treasury Department's concerns that a credit union risk-based system must more closely resemble the current Federal Deposit Insurance Corp. capital standard for banks. As introduced, H.R. 1537 would:
* Clarify the 1998 Credit Union Membership Access Act to allow all credit unions, regardless of charter type, to serve those in underserved areas. The bill would also update the definition of an underserved area, incorporating definitions from the Community; *Development Financial Institutions Act and the New Markets Tax Credit; and Increase the current cap on loans to members for business purposes (MBLs) from 12.25% to 20% of assets, allowing credit unions to assist more members start and expand small businesses and to promote economic growth. The bill would also exempt loans under $100,000 and those to nonprofit religious organizations from the MBL calculation. Last year, a CURIA bill drew the support of a total of 126 co-sponsors from both political parties

Inside Washington (12/13/2007)

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* WASHINGTON (12/14/07)--Small companies will not be required to report on their internal financial controls, as mandated under a section of the Sarbanes-Oxley Act, for another year, Securities and Exchange Commission (SEC) Chairman Christopher Cox said Wednesday(American Banker Dec. 13). Cox said during a meeting with a House committee that Section 404 of Sarbanes-Oxley is being re-oriented to eliminate inefficient “make-work” procedures …

NCUA puts strategic plan out for comment

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ALEXANDRIA, Va. (12/14/07)—-During its monthly meeting yesterday, the National Credit Union Administration (NCUA) Board released for comment the agency’s five-year strategic plan, and revised its National Credit Union Share Insurance Fund (NCUSIF) investment policy. The five-year plan covers 2009-2014 and is based on NCUA’s mission of “providing a safe, sound credit union system.” The NCUA strategic plan highlights three major goals:
* Ensure a safe, sound, and healthy credit union system; * Increase access to financial services to all eligible individuals within the credit unions' fields of membership; and * Provide a flexible and efficient regulatory environment for all federal credit unions.
The proposed plan includes specific objectives for how the goals will be attained. The strategic plan will be open for comments for 60 days. Use the resource link below to access the draft strategic plan online. Comments are due by Feb. 29. During the same meeting, the NCUA board unanimously approved revisions to the NCUSIF investment policy, which provides guidelines for the investment of NCUSIF funds. “These revisions will establish maturity limits, clarify permissible investments, and describe the general investment strategy,” according to the NCUA. Under these revisions, the NCUSIF funds will be invested under the following strategy:
* Maintain an overnight liquidity target determined by projected liquidity needs; * Invest 5% of the non-liquidity balance minus $50 million in a five-year Treasury ladder each quarter; and * Invest $50 million in a 10-year Treasury ladder each quarter.
By adding this additional Treasury ladder to the investment portfolio, NCUA said the fund will “experience additional earnings stability while providing a higher expected future return.”

NCUSIF dividend for 2007 unlikely says agency

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ALEXANDRIA, Va. (12/14/07)--A dividend from the National Credit Union Share Insurance Fund (NCUSIF) to federally insured credit unions for 2007 is unlikely, said National Credit Union Administration (NCUA) staff during yesterday’s monthly board meeting. Meanwhile, the board voted unanimously to maintain the 2008 NCUSIF normal operating level at 1.3% and approved a policy to determine and monitor future levels. The operating level is the upper end of the target range for the NCUSIF's equity ratio, which represents the amount of insured shares in relation to the amount in the NCUSIF. A dividend must be distributed to federally insured credit unions when the equity in the fund exceeds the normal operating level at the end of a year. Data showed the fund's equity ratio dropped to 1.27% in June, after remaining at 1.31% for the first quarter and 1.32% for April and May. The agency projected two more months at 1.27% before that ratio might return to 1.31% and better during the September though December period of this year. However, NCUSIF dividends to credit unions are determined on year-end calculations, and NCUA CFO Dennis Winans said it seemed unlikely a dividend will be paid for 2007. During the same meeting, the board unanimously approved changes in how it sets the NCUSIF normal operating level, as well as determines dividends and premium assessments. The purpose of the change is to provide greater transparency in the process, according to the agency. To determine adequacy of the equity level, the policy includes stress scenarios to apply when preparing quantitative analysis to set the normal operating level. Stress scenario applications include:
* Highest share level in past 10 years; * Highest NCUSIF operating expense level in past 10 years; * Highest insurance loss level in the past 10 years; and * 300 basis point shock of the investment yield in the NCUSIF investment portfolio.
Stress test results will “determine a range in which the equity level can be actively managed to avoid premiums during a decline in the business cycle,” said the agency. The NCUA Board traditionally set the NCUSIF normal operating level at the end of each calendar year. NCUA said the new policy will continue to review the operating level at least annually, taking action when change is necessary. CUNA Associate General Counsel Mary Dunn said the agency's goal to provide more transparency is laudable, but said credit unions should have had the opportunity to comment on the policy before it was adopted. She said CUNA will analyze the policy in greater detail and raise any concerns with NCUA.

New pandemic guidance for CUs

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WASHINGTON (12/14/07)—The Federal Financial Institutions Examination Council (FFIEC) this week issued guidance for all financial institutions to use to minimize the effects of a pandemic disaster. This guidance is intended to supplement the “Letter to Credit Union 06-CU-06 - Influenza Pandemic Preparedness” issued by the National Credit Union Administration in March 2006, as well the “Interagency Advisory on Influenza Pandemic Preparedness” issued on March 15, 2006 by the federal banking and thrift regulators. The new FFIEC document identifies actions that a financial institution should take to build its business continuity Plan (BCP). Such a plan should include planning for a pandemic event and provide for a preventive program, as well as:
* A documented strategy scaled to the stages of a pandemic outbreak; * A comprehensive framework to ensure the continuance of critical operations, * A testing program; and * An oversight program to ensure that the plan is reviewed and updated.
The FFIEC advised that the pandemic segment of a BCP must be sufficiently flexible to address a wide range of possible effects that could result from a pandemic, and also be reflective of the institution’s size, complexity, and business activities. The FFIEC is comprised of representatives from the NCUA, Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. Use the resource link below to read the interagency guidance.

Lawmakers urge strong consumer protections from Fed

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WASHINGTON (12/14/07)-–Nineteen members of the House Financial Services Committee urged the Federal Reserve Board Thursday to include strong consumer protections in its soon-to-be-released Home Ownership and Equity Protection Act (HOEPA) rules. Federal Reserve Board Governor Randall Kroszner announced during a hearing last week that the Fed would issue proposed HOEPA regulations before the end of this month. He was testifying before the Financial Services Committee during that panel’s look at “accelerating loan modifications, improving foreclosure prevention and enhancing enforcement.” The lawmakers’ letter, addressed to Fed Chairman Benjamin Bernanke, noted the committee’s work on mortgage issues during the past year. During that process, the letter said, the members have identified a number of lending products and practices they believe the Fed should address, such as new rules to:
* Prohibit prepayment penalties for subprime loans and require that any remaining prepayment penalties be limited in size and duration and expire at least three months before an interest rate reset; * Require realistic underwriting of the borrower’s ability to pay a mortgage, not just for the initial “teaser period” but for the entire term of the loan. Prudent underwriting should require a verification of income or assets necessary to repay the loan including the likely taxes, insurance and fees: * Eliminate “perverse incentives” to steer consumers into more expensive loans by, for example, prohibiting originator compensation that varies according to the terms of the mortgage, and promulgating rules that eliminate abusive and discriminatory lending practices; and * Improve disclosures so that consumers can fully understand the material terms of their loans and better compare costs and terms among different loans and loan originators.
The letter was signed by the following Democrats: Reps. Barney Frank (Mass.), Brad Miller (N.C.), Paul E. Kanjorski (Pa.), Maxine Waters (Ca.), Carolyn B. Maloney (N.Y.), Luis V. Gutierrez (Il.), Melvin L. Watt (N.C.) Michael E. Capuano (Mass.), Wm. Lacy Clay (Mo.), Carolyn McCarthy (N.Y.), Joe Baca (Ca.), Al Green (Tex.), Emanuel Cleaver (Mo.), Gwen Moore (Wi.), Albio Sires (N.J.), Paul Hodes (N.Y.), Keith Ellison (Mn.), Ed Perlmutter (Co.), and Christopher S. Murphy (Conn.).

CUNA Internet gambling plan unworkable

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WASHINGTON (12/14/07)—Credit union compliance with proposed rules to crack down on illegal online gambling would be difficult if not impossible, and the Credit Union National Association (CUNA) urged regulators to shelve their current plan. “The law passed by Congress has commendable objectives, but is difficult to implement,” CUNA wrote in a comment letter to the Treasury Department and Federal Reserve Board about their joint proposal to implement the Unlawful Internet Gambling Enforcement Act. “We feel that rather than continue with implementation of the current proposal, which raises a range of problematic issues, the regulators should work together with Congress to develop an approach that will meet public policy goals in a clearly understood manner and without inflicting undue hardships on the financial institution sector in the process,” CUNA said. The Dec. 12 CUNA letter noted that President/CEO Dan Mica recently communicated his group’s concerns with the Internet gambling proposal to House Financial Services Committee Chairman Barney Frank (D-Mass.). In a letter to Frank, Mica urged a moratorium on actions to implement the law until “a more reasonable approach can be considered by Congress and the regulators.” CUNA identified the following problem areas in the joint agency plan:
* The definition of “Unlawful Internet Gambling” is unclear; * The “Policies and Procedures” explanations should be expanded; * The “safe harbor” should be enlarged; * Enforcement provisions should be clarified; and * The effective date should be extended.
Use the resource link below to read CUNA’s complete letter.

Former CUNA director named to Fed advisory group

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WASHINGTON (12/14/07)--The Federal Reserve Board Thursday announced the names of seven new members of its Thrift Advisory Council (TIAC), including Christopher T. Jillson of Sandia Laboratory FCU in Albuquerque, N.M., a former Credit Union National Association (CUNA) board member. TIAC is an advisory group made up of twelve representatives from thrift institutions. The council was established by the Board in 1980 and includes members from savings and loan associations, savings banks, and credit unions. It meets three times each year with the Board of Governors to discuss developments relating to thrift institutions, the housing industry, mortgage finance, and regulatory issues. In addition to Jillson, the new TIAC members, named for two-year terms beginning Jan. 1, 2008, are:
* F. Edward Broadwell, Jr., chairman/CEO, HomeTrust Bank, Asheville, N.C.; * Michael W. Perry. Chairman/CEO, IndyMac Bank, F.S.B., Pasadena, Ca.; * Joseph R. Ficalora, chairman, president/CEO, New York Community Bancorp, Westbury, N. Y.; * Curtis L. Hage, chairman/CEO, Home Federal Bank, Sioux Falls, S.D.; * Peter L. Judkins, president/CEO, Franklin Savings Bank, Farmington, Me.; and * William A. Donius, chairman/CEO, Pulaski Bank, St. Louis, Mo.

CUNA warns bankruptcy deal has unseen pitfalls

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WASHINGTON (12/13/07)—Almost 500 credit unions, representing 36% of all credit union assets, could be adversely affected by a “manager’s amendment” to a mortgage bankruptcy bill that was scheduled for mark up Wednesday by the House Judiciary Committee, warned the Credit Union National Association (CUNA) Wednesday. In a letter to the committee chairman, Rep. John Conyers (D-Mich.), CUNA urged lawmakers to tailor the bill’s broad definition of “non-traditional mortgages” so that carefully underwritten credit union loans are not treated the same as the questionable subprime loans that have caused an upheaval in the subprime and mortgage markets. CUNA said that if such a modification were made, it could support the manager’s amendment to H.R. 3609, the Emergency Home Ownership and Mortgage Equity Protection Act. Under the provisions of the bill, loans falling under the definition contained in the bill could be subject to modification of terms by a bankruptcy judge. “This would impact almost 500 credit unions that have made ‘interest only’ loans in good faith and in response to member requests," CUNA wrote. "These are not subprime loans, but rather loans which were rigorously underwritten with full and clear disclosures. “Members of credit unions in housing markets such as California found these types of loans were necessary to allow them to purchase what, in many cases, would be classified as ‘starter homes.’" CUNA also told Conyers that credit unions appreciate the fact that the manager’s amendment includes provisions that indicate the bill will only apply to mortgages made within a defined time period and bankruptcy courts would only be able to use this temporary authority for seven years. "During our meetings with your staff, we indicated our flexibility with regard to the time period chosen to define loans subject to modification in bankruptcy," CUNA wrote. "Therefore, we can support the January 1, 2000-to-date-of-enactment period specified in the manager’s amendment. These provisions should address concerns about the potential long-term adverse effects of the legislation."

Dodd bill targets subprime lending practices

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WASHINGTON (12/13/07)—Sen. Christopher Dodd (D-Conn.) Wednesday introduced his anticipated mortgage reform bill, The Homeownership Preservation and Protection Act of 2007. In an announcement, Dodd said the bill is intended to “help put an end to the abusive and predatory lending practices that have sent thousands of Americans into foreclosure and put thousands more in danger of losing their homes.” Provisions of the bill would:
* Establish new protections for all borrowers, such as prohibiting brokers from steering prime borrowers to more expensive subprime loans, create a fiduciary duty for mortgage brokers towards borrowers, and provide for a duty of good faith and fair dealing toward borrowers for all lenders; * Establish new protections for subprime borrowers and borrowers who get nontraditional mortgages, in part by requiring a “real analysis” of the borrowers’ ability to repay the loan.; * Provide remedies to make sure such standards are met. The bill would allow state attorneys general to enforce the provisions of the law, and does not preempt state law; and * Provide for limited liability for holders of a mortgage made in violation of law, whether it is the original lender or a subsequent investment trust. Unlike current law, which puts the burden on the borrower to find the party responsible for causing the harm, the legislation would allow borrower to go directly to the current mortgage holder for a cure.
In November the House voted 291-127 in favor of the Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915), a comprehensive bill also intended to combat abuses in the mortgage lending market and to provide basic protections to mortgage consumers and investors. That bill 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.

NCUA backs coordinated consumer hotline

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WASHINGTON (12/13/07)—The National Credit Union Administration’s (NCUA’s) current consumer complaint system works well but the regulator supports a plan to establish a single, toll-free hotline number for all consumers complaints associated with any financial institution, NCUA Executive Director Leonard Skiles testified Wednesday. However, Skiles stressed the importance that the NCUA continue to have direct responsibility over inquiries regarding credit unions. The agency, he said, is the authority on the unique nature of credit unions, and especially the use of a credit union’s independent supervisory committee to resolve disputes. He was testifying before the House Financial Services subcommittee on financial institutions and consumer credit on the "Financial Consumer Hotline Act of 2007." While underscoring the NCUA’s belief that its present system works, Skiles also acknowledged that the multitude of regulators, the distinction between federal and state regulatory responsibility, and the increasing complexity of financial institution ownership structures can make it difficult for consumers to know which regulatory agency can assist them. "Frankly, consumers just want the problem fixed, and Congress' proposal would improve the process to do just that," Skiles said. Skiles represented the NCUA as part of the subcommittee’s first panel of witnesses, comprised of federal and state financial institution regulators. A second panel of witnesses featured consumer groups, Consumers Union and U.S. Public Interest Group. Use the resource link below to access Skiles' complete testimony.

Inside Washington (12/12/2007)

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* WASHINGTON (12/13/07)--Progress reports on the Treasury Department’s loan modification plan are scheduled to be released to the public in January, but details regarding how that information will be reported are unclear. Some industry representatives have stated they will report data on a monthly basis. But they haven’t decided who will report or how the reporting will take place (American Banker Dec. 12). When the Treasury announced its plan encouraging loan servicers to report loan modifications, the American Securitization Forum recommended 28 metrics to guide servicers. The Hope Now alliance, which is leading the data collection, is using the forum’s criteria. The progress reports will likely center on how many people did or did not receive help with their modifications, and what happened to those who didn’t, said William Longbrake, a Washington Mutual vice chairman and policy adviser to the Financial Services Roundtable …

Reynolds signs on as CURIAs 139 supporter

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WASHINGTON (12/13/07)—Rep. Thomas Reynolds (R-N.Y.) is the newest co-sponsor of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537), bringing the total number of official backers to 139. The addition of Reynold’s name to the co-sponsor list also brings the number of House co-sponsors from New York to 15. CURIA provisions are intended to help credit unions better serve their members. Two key proposals in CURIA would: implement a risk-based capital approach for credit unions to make it more closely resemble the current Federal Deposit Insurance Corp. capital standard for banks, and; raise the current threshold on credit unions' member-business lending to 20% of assets from the current 12.25%. The bill also proposes to clarify the 1998 Credit Union Membership Access Act to allow all credit unions, regardless of charter type, to serve those in underserved areas. The bill would also update the definition of an underserved area, incorporating definitions from the Community Development Financial Institutions Act and the New Markets Tax Credit. For information about other CURIA provisions and to access the official co-sponsor list, use the resource links below.

Court dismisses conversion suit against NCUA

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WASHINGTON (12/13/07)—A federal court ruled Wednesday that the Coalition for CU Charter Options lacked standing to bring suit against the National Credit Union Administration (NCUA) and dismissed the case challenging the agency’s rules on credit union conversions to banks. Credit Union National Association (CUNA) President/CEO Dan Mica proclaimed the court’s decision “good news for consumers” and said his group was not surprised by the outcome of the lawsuit. The U.S. District Court for the Eastern District of Virginia found that the Coalition failed to show that any of its members were directly damaged or affected by the NCUA’s new conversion rules and thereby the group had no “standing” to bring a lawsuit challenging the agency’s actions. The ruling, Mica said, “ensures that the federal agency that best understands credit unions and their commitment to their members continues to have authority over the conversion process of credit unions to another type of financial institution.” “We had been optimistic that this challenge to the agency’s rule and authority would fail given the fact that the case did not provide evidence of injury to the plaintiffs. “We concur with this outcome, commend NCUA for its rulemaking, and continue to believe that credit union members deserve transparency and openness when they are faced with a tough decision about whether their credit union should convert to another form of financial institution,” Mica added. The CCUCO lawsuit was brought against the NCUA in July and the plaintiff sought to have the court overturn the agency’s conversion rule as invalid and arbitrary. The coalition challenged the rule on the grounds that it was inconsistent with the Federal Credit Union Act which requires that the NCUA's conversion regulation to be consistent with that of other financial regulators, such as the Office of Thrift Supervision and the Office of the Comptroller of the Currency. In its short published opinion, the court concluded that NCUA has authority to regulate conversions. It also stated that the Coalition had not shown that any of its members were harmed by the regulations or that any of its members have immediate plans to come under the rules through a conversion application.

No more delays FASB biz combo statement done

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WASHINGTON (12/12/07)—The often-delayed, much-awaited final accounting rule for mutual business combinations has been issued by the Financial Accounting Standards Board's (FASB's) and it reflects a different approach to accounting for business combinations than credit unions used previously, according to Scott Waite, chairman of the Credit Union Natrional Association's Accounting Task Force and an advisor to the FASB. Years in the making, the merger accounting guidance was designed jointly by FASB and the International Accounting Standards Board (IASB) and eliminates the pooling-of-interests method of accounting for business combinations. In effect, it prohibits the continuing institution in a merger from simply combining the balance sheet and retained earnings. The revised final FASB/IASB Statement No. 141 applies to mergers, involving business entities including credit unions, transacted in fiscal years beginning on or after Dec.15, 2008. The 2006 Financial Institutions Regulatory Relief Act, in anticipation of FASB's final rule, amended the definition of net worth under the Federal Credit Union Act to eliminate a concern that, under the purchase method, a surviving credit union couldn't count the merged credit union's acquired retained earnings in its own net worth calculation. That would, in turn, lower its net-worth classification under Prompt Corrective Action. It is based on the conclusion that such business combinations are acquisitions and, should be treated the same way that other asset acquisitions are accounted for, which is based on the values exchanged, said Waite, who is also SVP-CFO of Patelco CU, San Francisco. Waite said also of note in the FASB/IASB rule are the following points:
* FASB clarified that it does not apply to combinations involving not-for-profit organizations but credit unions were not included under that term; * The new statement requires that certain asset acquisitions be recognized apart from goodwill. To assist in identifying such acquired intangible assets, the statement provides a list of intangible assets that meet those criteria; and * Credit unions involved in mergers after the effective date of the statement must be mindful of its directives, as all business combinations in the scope of the statement are to be accounted for using one method, the purchase method.
The statement retains current disclosure requirements and requires disclosure of the primary reasons for a business combination as well as the allocation of the purchase price paid for the assets acquired and liabilities assumed. According to Waite, the new statement also contains some changes in how acquisition costs are determined for an acquired entity and how such costs should be expensed or capitalized. Some expenses previously capitalized would have to be expense at the time of the merger. Waite also noted that although the result may not please many credit unions, our issues and concerns were certainly taken seriously and considered by the FASB during the long process. “We certainly made our presence felt. Credit Unions are specifically mentioned 15 times in the final standard. That’s more than any other industry”, said Waite. “They definitely know who credit unions are now.

Inside Washington (12/11/2007)

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* WASHINGTON (12/12/07)--The Senate was scheduled Tuesday to consider a tougher mortgage bill, authored by Sen. Christopher Dodd (D-Conn.). Dodd’s legislation would create new regulations for investment banks and mortgage brokers and crack down on aggressive lending practices, according to congressional aides (The New York Times Dec. 11). Dodd’s bill is similar to Rep. Barney Frank’s (D-Mass.) legislation, which the House approved last month. But unlike Frank’s measure, Dodd’s proposal would bar prepayment penalties and would not call for a national registry for loan officers and brokers. Strong opposition to Dodd’s bill from bankers and mortgage companies is expected …

Norlarco buyer decision expected in January

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WASHINGTON (12/12/07)--The National Credit Union Administration (NCUA) Region V director will post a “dear member” letter this afternoon on the Norlarco FCU website saying a decision will not be made on an acquiring bid until next month. Originally the regulator anticipated a purchase-and-assumption agreement would be approved by December, chosen from among three credit union proposals. However, according to John McKechnie, NCUA director of public and congressional affairs, the process is taking longer than expected. McKechnie said the delay doesn’t indicate a problem with the acquisition, but rather a “problem of timing.” “We making sure the acquirer gets a clean balance sheet,” McKechnie said, restating the agency’s goal of protecting the members’ assets, keeping the acquisition costs down, and avoiding lawsuits. NCUA continues to negotiate with Norlarco creditors. Norlarco became eligible for acquisition proposals after being place by Colorado state into conservatorship in May. That action was taken after the $334 million-asset, Fort Collins, Co.-based credit union was found to have a growing number of delinquent construction loans issued in Lee County, Fla. In July, the NCUA took control of the credit union and removed its board of directors. Norlarco's delinquent loans totaled more than $65 million. According to reports, Bellco CU, Greenwood Village; Ent CU, Colorado Springs; and Public Service Employees CU, Denver, have submitted bids to the NCUA. NCUA has not confirmed the identity of the bidders, but today’s members’ letter confirms that all three bidders under consideration are based in Colorado and have “a longstanding history of sound financial management and are federally insured by the National Credit Union Share Insurance Fund.” “We had projected the selection process to be complete in December 2007 and consolidation finalized in early 2008. We anticipate naming the winning credit union bidder in January; consolidation will be finalized soon thereafter,” says the letter signed by Region V Director Melinda Love, who also bears the designation “agent for the conservator.” One observer noted that due to the continued volatility in the Lee County market, bidders may be "dragging their feet" hoping for a better deal.

NCUAs Skiles to testify on easy access hotline

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WASHINGTON (12/12/07)—National Credit Union Administration (NCUA) Executive Director Leonard Skiles is scheduled to testify today on the merits of establishing a single, toll-free telephone number consumers with banking problems could call to reach the appropriate credit union, bank or thrift regulator. Skiles is slated to be part of a panel of witnesses representing federal and state financial institution regulators and will present his agency’s views on the “Financial Consumer Hotline Act of 2007.” The hearing is being conducted by the House Financial Services subcommittee on financial institutions and consumer credit. The chair of that committee, Rep. Carolyn Maloney (D-N.Y.), in announcing the hearing said of the hotline idea, “A number of different governing bodies currently regulate banks, which can make it difficult for consumers to figure out who they should contact with concerns and complaints. One number could help cut down on the confusion and put consumers in quicker contact with the appropriate regulator.” A second panel of witnesses will feature consumer groups, Consumers Union and U.S. Public Interest Group.

Five banned from CU activity

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ALEXANDRIA, Va. (12/12/07)-- The National Credit Union Administration (NCUA) has issued orders prohibiting six former credit union employees from participating in the affairs of any federally insured financial institution. Five of the individuals received jail terms and four were ordered to pay a total of almost $1.75 million in restitution. According to an agency announcement posted on its Web site Tuesday, Stephen E. Edraney, former manager and consultant at #11713 Bethlehem Municipal Employees FCU, Bethlehem, Pa., agreed to an order of prohibition, without admitting or denying fault, in order to save the time and expense of litigation. The other prohibition directives involved:
* Renee Brizza-Davis, a former teller at Connects FCU, Richmond, Va., who was convicted of embezzlement and sentenced to 10 years in prison. All but eight months of the sentence was suspended, a period which is to be followed by supervised release. Brizza-Davis was ordered to pay $46,400 in restitution. * Stephen W. Deaton, a former employee of River Valley CU, Middletown, Ohio, who pled guilty to theft of credit union funds. He was sentenced by the state of Ohio to 18 months in prison and ordered to pay $128,000 in restitution. * Karl R. Hedke, a former loan officer at Wyandotte FCU, Wyandotte, Mich., who pled guilty to bank fraud and was sentenced to 64 months in prison to be followed by four years of probation. Hedke was ordered to pay $1,494,131.96 in restitution. * Reatha Hall Johnson formerly with North Gulfport Community FCU, Gulfport, Miss., who pled guilty to bank fraud and embezzlement. The former manager was sentenced to 21 months in prison to be followed by five years of supervised probation and was ordered to pay $78,461 in restitution. * Matthew A. Pickup, former treasurer at Hopes Employees FCU, Jamestown, N.Y., who pled guilty to grand larceny and was sentenced to 6 months in prison followed by 5 years of probation.
Violation of an NCUA prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link below to read NCUA administrative orders.

CUNA urges Internet Gambling Act plan moratorium

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WASHINGTON (12/11/07)—The Credit Union National Association (CUNA) today is urging a moratorium for implementation of provisions of the Unlawful Internet Gambling Enforcement Act of 2006. In a letter to House Financial Services Committee Chairman Barney Frank (D-Mass.), CUNA President/CEO Dan Mica voiced concerns about a pending implementation plan issued by the Treasury Department and Federal Reserve Board. The CUNA letter backed the law’s intent to crack down on illegal online gambling and added that credit unions support “reasonable efforts” to protect consumers from falling prey to unscrupulous unlawful gaming activities through the Internet. However, Mica said CUNA members are concerned that the current plan to implement the law will place “unforeseen regulatory burdens” on credit unions and other financial institutions. Noting that a Treasury-Fed comment period ends Dec. 12, Mica wrote, “We urge you to step in now to direct a moratorium on the implementation of the pending proposal, until a more reasonable approach can be considered by Congress and the regulators.” On another topic of key interest to credit unions, Mica commended Frank for his leadership, and that of Chairman Melvin Watt (D-NC) of the House Financial Services subcommittee on oversight and investigations,. in May demonstrated by holding a hearing on Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs). The CUNA letter said a full committee hearing addressing “the continuing issues” regarding the Bank Secrecy Act (BSA) would be “extremely beneficial” and should look at the scope of BSA requirements that financial institutions must meet, as well as enforcement inconsistencies. “Credit unions are not looking for ways to simply avoid regulatory responsibilities, and they support efficient efforts to combat terrorism and regulate money laundering,” Mica wrote to the chairman. “However, the growing burden credit unions must bear is increasingly diverting them from meeting their primary objective of serving their members.”

Mortgage bankruptcy bill might get action says CUNA

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WASHINGTON (12/11/07)--The House Judiciary Committee may mark up an amended version of its Emergency Home Ownership and Mortgage Equity Protection Act (H.R. 3609), which seeks to revise sections of the U.S. Bankruptcy Code and give judges power to modify certain terms in existing mortgages. The committee suspended consideration of the bill almost a month ago amid criticism by some in the financial services industry who opposed the idea of being forced by the courts to change loan terms. Ryan Donovan. Credit Union National Association (CUNA) vice president of legislative affairs, said Monday that the committee may vote on the bill Wednesday. He said CUNA has been meeting with both majority and minority staff seeking changes to the bill. As outlined in a CUNA letter sent in November, credit unions are seeking limits in the bill on what terms may be rewritten by bankruptcy court judges. Also, CUNA has recommended setting a timeframe on mortgages that would be eligible for alterations to reduce risks to financial institutions going forward into mortgage markets. “At this point we don’t know what compromises might be offered in a new version of the bill, but we have been very active in working for changes and will closely monitor progress of the bill,” Donovan said. H.R. 3609 was introduced by Rep. Brad Miller (D-N.C.) and 37 co-sponsors.

Congress That busy unpredictable time of year

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WASHINGTON (12/11/07)—It is shaping up to be a busy and unpredictable week in Congress, a situation that Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill noted Monday is nothing unusual for this time of year. House Majority Leader Steny Hoyer, of Maryland, has announced the House is in session this week and will conduct votes through Friday. This is an extension from a previously announced December House schedule and more changes are expected. However, Hoyer has stated intentions to complete the year’s legislative business by the end of this week. In the House that includes several suspension bills, which are considered noncontroversial and able to attract the necessary two-thirds vote for passage, as well as the Democrats’ omnibus appropriation bill. Also slated for the week, the House is expected to consider conference reports for the Intelligence Authorization Act and the National Defense Authorization Act, as well as a seven-year extension of the Terrorism Risk Insurance Act (TRIA) program. Also possible, Magill said, is a House vote on an energy bill, and a State Children's Health Insurance Program (SCHIP) bill, as well as “some kind of a patch” on the Alternative Minimum Tax. On the Senate side, the Finance Committee Thursday has scheduled a hearing on housing issues under the committee's jurisdiction. Likely to be considered are proposals from Treasury Secretary Henry Paulson to aid homeowners by excluding debt forgiveness from taxation and making available tax-exempt financing for borrowers struggling to pay their mortgages. Also, on Thursday, Sen. Tom Carper (D-Del.) is expected to chair a hearing of the Senate Banking Committee on spending trends and consumer protection issues during the holiday season. Also possible, action on the Foreign Intelligence Surveillance Act and, possibly, an omnibus appropriations measure. And at the White House, President George W. Bush’s 2008 State of the Union address is now scheduled for Jan. 28.

No closed NCUA session Noralco bid still pending

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ALEXANDRIA, Va. (12/11/07)—The National Credit Union Administration (NCUA) has no closed meeting scheduled for this week, although its online calendar published earlier in the year notes such a session. It is routine for a closed board session to follow an open board meeting and observers of the acquisition efforts surrounding Norlarco CU of Fort Collins, Colo. had been watching to see if the board took the opportunity of a December closed meeting to consider bids submitted by three credit unions. According to reports, Bellco CU, Greenwood Village; Ent CU, Colorado Springs; and Public Service Employees CU, Denver, have submitted bids to the NCUA. Colorado state regulators placed Norlarco into conservatorship in May after a number of construction loans it issued in Lee County, Fla., became delinquent. In July, the NCUA took control of the credit union and removed its board of directors. Norlarco's delinquent loans totaled more than $65 million.

Inside Washington (12/10/2007)

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* WASHINGTON (12/11/07)--The Federal Deposit Insurance Corp. (FDIC) released its third-quarter banking report Friday financial on trends in all 50 states. The report shows each state’s employment growth rates, asset quality, capital and earnings, liquidity, and sensitivity and loan concentrations … * WASHINGTON (12/11/07)--The Basel II final rule will go into effect April 1, 2008, according to a Federal Deposit Insurance Corp. financial institution letter released Friday. The final rule applies to the determination of risk-based capital requirements for wholesale, retail, equity and securitization exposures and requires a financial institution to determine risk-based capital requirements for operational risk … * WASHINGTON (12/11/07)--Tax savings for small businesses will be the topic for the Small Business Administration (SBA’s) December web chat, scheduled for Dec. 20 at 1 p.m. (EST). Thomas P. Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants (AICPA), will answer questions about the importance of year-end tax preparation and planning for small business owners. He also will provide tax tips. Participants can join the live Web chat by going online to www.sba.gov, and clicking “Online Business Chat.” Web chat participants may post questions for Ochsenschlager before the chat by visiting …

Inside Washington (12/07/2007)

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* WASHINGTON (12/10/07)--A loan modification bill by Rep. Mike Castle (R-Del.) could be revised to ease opposition from federal banking regulators, who stated that the bill could trigger problems in the secondary market. Castle stated that he is open to changes, but has not yet decided on how he should proceed. Castle’s legislation would provide protection to loan servicers, who engage in loan modification, from lawsuits. At a House Financial Services Committee hearing, Comptroller of the Currency John Dugan said that Castle’s bill could “create a new field of potential litigation that is more challenging and inhibits loan modification efforts” (American Banker Dec. 7). Sheila Bair, Federal Deposit Insurance Corp. chairman, commented that the bill, if passed in its current form, could be in violation of the Constitution. She also said that she was unsure if the bill is even needed, a statement also supported by House Financial Services Committee Chairman Barney Frank (D-Mass.) … * ALEXANDRIA, Va. (12/10/07)—National Credit Union Administration (NCUA) Vice Chairman Rodney Hood last week said he would “look forward wholeheartedly’ to supporting Michael Fryzel as new chairman of the agency. President George W. Bush announced his intention to nominate Fryzel, an Illinois real estate lawyer and former director of the state's Department of Financial Institutions, to the NCUA board and designate him as chairman. The current chairman’s term expired in August, but JoAnn Johnson said she would remain as the agency’s leader until Fryzel can be nominated and confirmed for the position…

Washingtons top lawmakers signing on for GAC

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WASHINGTON (12/10/07)—Three of Washington’s top lawmakers recently accepted invitations to address the 2008 CUNA Governmental Affairs Conference to be held here March 2-6. Senate Finance Committee Chairman Max Baucus (D-Mont.) will address the credit union conference on Thursday morning , March 6. House Ways and Means Chairman Charles Rangel (D-N.Y.) and House Minority Whip Roy Blunt (R-Mo.) are on the schedule Wednesday morning, March 5. As minority whip, Blunt is a key figure in forming his party's responses to current legislation and in coordinating the Republican caucus. He previously has addressed CUNA's GAC in 2007 and 2002. In 1997, his first year in Congress, Blunt co-sponsored the historic CU Membership Access Act, which became law a year later. On bankruptcy reform, Blunt became personally involved in inserting CUNA-supported language protecting credit union members' right to reaffirm their debts. On retirement savings, he helped ensure that CUNA-supported provisions to expand Individual Retirement Accounts (IRAs), pensions, and Education Savings Accounts (ESAs) were included in the final 2001 tax bill. Rangel, who is serving his 19th term in the House, became chairman of the powerful tax-writing panel, the Ways and Means Committee, in January of this year, after the federal elections established the Democratic party with a slight majority in the House. Rangel succeeded Republican chairman Bill Thomas of California, who in November 2005 conducted a hearing into the tax status of federal credit unions. Rangel spoke out forcefully in support of credit unions at that hearing. Baucus was elected to the Senate in 1978, after two terms in the House of Representatives, and has served consecutive terms ever since. As chairman of the Finance Committee, Baucus was key to the deliberations regarding how financial institutions should treat Social Security and other government benefits when recouping funds or assessing fees in an overdraft situation. Baucus said he preferred a regulatory approach over a legislative one. The federal financial institution regulators, including the NCUA, have since issued guidance. The 2008 GAC will be CUNA’s inaugural event in the new Washington Convention Center. For 30 years, including 2007, the event was hosted at the Washington Hilton & Towers. Also featured on the 2008 GAC program are Gen. Colin Powell, political commentator Chris Matthews, host of MSNBC's "Hardball" and NBC's "The Chris Matthews Show," and humorist Dave Barry. New to the GAC this year is an opening kickoff concert Sunday evening, March 2, featuring the band "America" and sponsored by the CUNA Councils. Additional speakers will be announced in coming weeks as they are confirmed. Housing reservation lines opened Nov. 5. Use the link below for more information.

NCUA to look at insurance fund operating level

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ALEXANDRIA, Va. (12/10/07)—The National Credit Union Administration (NCUA) has scheduled action on the 2008 normal operating level of the National CU Share Insurance Fund (NCUSIF) at its open board meeting Thursday. In July the agency reviewed the mid-year NCUSIF projections, which showed an estimated 2007 net income of $207 million, an increase of more than $25 million from the previous year. Data showed the fund's equity ratio dropped to 1.27% in June, after remaining at 1.31% for the first quarter and 1.32% for April and May. The agency projected two more months at 1.27% before that ratio would return to 1.31% and better during the September though December period of this year. At that level, the NCUSIF would pay a 2007 dividend. Also on the Dec. 13 open board meeting agenda are the NCUSIF’s investment policy and the NCUA’s five-year strategic plan.

IRS releases updated model HSA agreements

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WASHINGTON (12/7/07)--The Internal Revenue Service (IRS) has released updated versions of its model Health Savings Account (HSA) agreements many credit unions use to establish HSAs for their members. The model HSA agreements, Forms 5305-B, Health Savings Trust Account and 5305-C, Health Savings Custodial Account, have been updated to reflect the 2007 and 2008 annual HSA contribution limits and the catch-up contribution limits for 2007, 2008, 2009 and later. The revised agreements also expand the definition of permitted HSA contributions to include direct rollovers from health flexible spending accounts, health reimbursement accounts, and traditional IRAs. These new HSA funding options were created by passage of the Tax Relief and Health Care Act of 2006. The high deductible health plan minimum annual deductibles and annual out-of-pocket maximums were also updated to reflect calendar year 2007 and 2008 limits. The revised model agreements, dated November 2007, replace the previous versions, which have not been updated since their release in August 2004. The IRS has not issued formal guidance on use of the revised model agreements and they have no plans to do so, according to Dennis Zuehlke, compliance manager for CUNA Mutual Group, which serves 80% of credit unions offering HSA programs. “In our discussions with senior IRS staff, we’ve been informed that use of the revised model HSA agreements is optional and that HSAs established under the prior versions of the model HSA agreements need not be amended,” Zuehlke noted. Most forms vendors are expected to update their versions of the model HSA agreements to reflect the new higher contribution limits and funding options. Although not required, credit unions would be well advised to begin using the new agreements as soon as they are available to ensure the information provided to their members is current, according to Zuehlke.

NCUA backs efforts to help subprime borrowers

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WASHINGTON (12/7/07)—The National Credit Union Administration (NCUA) Thursday backed “good faith attempts to facilitate loan modifications” to help troubled subprime mortgage borrowers, calling prudent workout arrangements good for both credit unions and their members.
Click for slide show The NCUA has encouraged its federally insured credit unions to work with troubled borrowers using appropriate loss mitigation strategies including loan modifications and work out plans when available and practicable, NCUA Board Member Gigi Hyland said in her written testimony. CLICK TO VIEW SLIDESHOW (Photo provided by CUNA)
Testifying before the House Financial Services Committee, NCUA board member Gigi Hyland noted that, while delinquencies and foreclosures in credit union mortgage lending have increased, they remain a very small part of overall credit union real estate lending. However, Hyland stressed that the NCUA is “mindful of the broader market dislocation" and vowed that the agency will continue its work to encourage judicious mortgage lending by credit unions, particularly in the non-traditional segment of the market. While supporting Congressional scrutiny of the subprime mortgage market, Hyland also offered her agency’s suggestions regarding several proposals currently being considered by the committee. They included:
* Broadening language to include FHA as well as VA loans in a definition of mortgages qualified for certain workout plans; * Extending the window for workouts and modifications from 6 to 12 months; * And conforming a definition of "reasonably foreseeable default" to one used by NCUA and other regulators in lending guidance issued earlier this year.
Hyland also urged lawmakers to be “balanced and consistent” in their approach to the current subprime crisis. She raised concerns regarding an provision in a House-approved bill (H.R. 3915, The Mortgage Reform and Anti-Predatory Lending Act of 2007) intended to provide basic protections to mortgage consumers and investors. That provision would impose civil penalties on creditors who violate minimum standards for writing mortgage loans. Hyland said the NCUA supported the additional penalty as a deterrent but is concerned that, as written, the penalty would not be applied equally to offenders. “It appears that under this amendment, a federally regulated entity would be subject to an administrative monetary penalty and a civil penalty in contrast to non-federally regulated entities. This result would be inconsistent with the general direction of H.R. 3915 of applying similar regulatory standards to all mortgage loan originators,” she said. "NCUA supports any responsible effort that enhances consumer protection while preserving the mortgage financing market's ability to attract and retain capital and liquidity," Hyland added. Also during the hearing, Chairman Frank generally applauded today’s announcement by the Bush administration (see related New Now story) regarding subprime mortgage workouts. The White House said mortgage lenders have voluntarily agreed to help homeowners with subprime mortgages taken out between January 2005 and July 2007, as those borrowers face resets to a higher, and perhaps unaffordable, rate—facing the threat of foreclosures. However, Frank expressed frustration with a part of the plan that he said would exclude those with credit scores higher than 660 from being eligible for help. Frank said borrowers who managed their credit wisely should not be unfairly punished: "I think it is a terrible idea for us to perpetuate." Other witnesses testifying before Frank’s committee included:
* Panel One: Sheila C. Bair, chairman, Federal Deposit Insurance Corporation; Randall S. Kroszner, governor, Federal Reserve Board; John C. Dugan, comptroller, Office of the Comptroller of the Currency ; Scott M. Polakoff, senior deputy director/CEO, Office of Thrift Supervision ; and North Carolina Deputy Commissioner of Banks Mark E. Pearce, on behalf of the Conference of State Bank Supervisors. * Panel Two: Faith Schwartz, executive director, HOPE NOW Alliance; Hilary O. Shelton, director, National Association for the Advancement of Colored People;; Damon Silvers, associate general counsel, AFL-CIO; and Richard Kent Green, Oliver T. Carr, Jr. Chair of Real Estate Finance, The GW School of Business, George Washington University. * Panel Three: Laurence E. Platt, partner, K&L Gates, on behalf of the Securities Industry and Financial Markets Association;Josh Silver, of the National Community Reinvestment Coalition; and Michael Calhoun, president, Center for Responsible Lending.
Use the resource link below to access written testimony.

Inside Washington (12/06/2007)

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* WASHINGTON (12/7/07)--Rep. Carolyn Maloney (D-N.Y.), chair of the Financial Services Subcommittee on Financial Institutions and Consumer Credit, announced that a hearing on the Financial Consumer Hotline Act of 2007 will take place next Wednesday. The act will establish a toll-free telephone number that consumers can call if they have a problem with their financial institution. The National Credit Union Administration is scheduled to testify … * WASHINGTON (12/7/07)--The House Wednesday approved a bill to give the Federal Deposit Insurance Corp. and the Comptroller of the Currency power to define unfair and deceptive practices. It also passed a bill that would require the Treasury Department and the four banking agencies to give Congress annual reports about their progress regarding expansion of minorities’ ownership of depository institutions (American Banker Dec. 6) … * WASHINGTON (12/7/07)--A study conducted by Federal Financial Analytics Inc. indicates that Basel II could actually increase capital levels, despite industry representatives’ worries that the accord would drop the levels. Assets have become riskier than some had anticipated, so risk-based capital requirements would increase, said Karen Shaw Petrou, managing director of Federal Financial Analytics (American Banker Dec. 6). The study did not state how much the levels would increase, but did note that introducing Basel II during credit problems in the markets could strain banker’s profits …

White House reveals subprime mortgage relief efforts

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WASHINGTON (12/7/07)—The Bush administration Thursday announced an agreement with major mortgage servicers to freeze interest rates for five years for certain subprime mortgage borrowers who are facing steep interest rate resets that may make their loans no longer affordable. The rate freeze would be available to homeowners who took on adjustable-rate subprime mortgages between Jan. 1, 2005 and July 31, 2007. The agreement promises to accelerate the process for these borrowers seeking to refinance their mortgages through lenders or state and local housing authorities. According to the White House, up to 1.2 million homeowners could be eligible for assistance. The plan was developed by HOPE NOW, an alliance of mortgage servicers, mortgage counselors, government officials and non-profit groups formed this Fall under the auspice of the Treasury Department. In addition to the five-year freeze, HOPE NOW members have agreed on other industry-wide standards to help provide systematic relief to these targeted borrowers:
* Refinancing existing loans into new private mortgages; and * Moving them into an FHASecure loan.
President George W. Bush also called on Congress to act, specifically pressing for passage of his proposal to modernize the Federal Housing Authority, to fund mortgage counseling and to make changes in the tax code to help troubled homeowners. The President sought to assure the country that it would weather the subprime storm. He said America's economy has proven itself “highly resilient -- and it is strong, and it is flexible, and it is dynamic enough” to withstand its current housing and credit market problems. However, he added, “For individual homeowners, the problem is more difficult.” He called the threat of foreclosure a “terrible burden for hardworking families, and a source of concern for entire communities and neighborhoods across our country.”

More time needed for breach settlement says CUNA

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WASHINGTON (12/7/07)--Credit unions and other financial institutions need more time--such as 30 days--to determine their best course of action in accepting the “alternative recovery offer” in the settlement reached between TJX Cos., Visa and Fifth Third Bank, the Credit Union National Association (CUNA) told officers of the three organizations. In a letter, CUNA President/CEO Dan Mica pointed out that the current 10-day “window” given to financials for accepting the offer is “unreasonably short.” “Such an important decision requires a great deal of consideration,” Mica wrote. “The alternative recovery offer is likely to have a major impact on card issuers, including smaller financial institutions. Many of these institutions will need the most time to review the offer due to smaller staff and reduced access to legal counsel,” he said. Mica highlighted two other factors that compound the need for more time: The onset of the holiday spending season (when mounting consumer spending taxes the resources of financials’ staffs), and the fact that acceptance of the “alternative recovery offer” waives the right of financials’ right to any other recovery. “When waiver of rights is involved it is extremely important to have adequate time to examine and consider the options available,” Mica stated.

Levin keeps heat on credit card issues

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WASHINGTON (12/6/07)—Sen. Carl Levin (D-Mich.) said at a hearing this week that he will keep the heat on a credit card system that he believes engages in practices that are unfair to consumers. As chairman of the Senate Permanent Subcommittee on Investigations, Levin conducted a second hearing Tuesday on credit card practices zeroing in on the circumstances under which credit card issuers may increase the interest rates of cardholders who are in compliance with the terms of their credit cards. In March, the subcommittee examined credit card grace periods, interest charges assessed against debt paid on time, and excessive fees. Many credit Levin’s efforts with inspiring changes at the card companies who appeared before him on the witness stand. At that time, he criticized a JPMorgan Chase representative for his company’s practice of assessing repeated over-the-limit fees. The company dropped the practice soon after the hearing, although it attributed its action to a reevaluation of customers’ needs and not to the political environment. Citibank, also on the March witness list, announced at the time that it had changed its repeat-fee practice. Levin opened this week’s credit card hearing by reviewing the woes of his first panel of three consumer witnesses, which included:
* Retroactive interest rate increases; * FICO score drops resulting in card interest rate increases; and * The difficulty of understanding credit reports and the causes of interest rate increases.
Levin, with co-sponsor Sen. Claire McCaskill (D-Mo.), has introduced the Stop Unfair Practices in Credit Cards Act (S. 1395), which would, in part: Prohibit interest on debt paid on time; prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period. prohibit added interest charges on credit card debt which the card holder paid on time and in full; limit on penalty interest; allow interest rate increases only to future debt; and prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees. Credit card industry witnesses included representatives from Capital One, Discover and Bank of America.

Senators urge Treasury to forego narrow loan changes

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WASHINGTON (12/6/07)—Four members of the Senate Banking Committee pressed Treasury Secretary Henry Paulson to ensure that the terms of the department’s much-anticipated plan to address subprime mortgage problems help as many borrowers as possible. Paulson announced a press conference for today (see related story in Inside Washington) conference to discuss the Bush administration's efforts to help struggling homeowners keep their homes. In anticipation of the Treasury’s announcement, the banking panel members wrote urging Paulson to negotiate rigorous terms, which would include the following five points:
* Eligibility for modification must not be too narrow, and people must be afforded every opportunity to ensure that they remain in their home; * Loan modifications must be long enough to ensure the long-term affordability of mortgages, not merely delay foreclosure; * All prepayment penalties must be waived; * The guidelines must guarantee the fair treatment of families who will not be able to avoid foreclosure, even with modification; and * The modification program must be transparent to allow for independent monitoring.
The letter was signed by Senate Banking Committee Chairman Christopher Dodd (D-Conn.), and four other Democrats, Sens. Bob Casey of Pennsylvania, Charles Schumer of New York, and Sherrod Brown of Ohio. “All of these matters are extremely important to the economic well being of millions of families and the country as a whole. These issues are also evolving very quickly and we understand you may be entering the final stages of negotiating the loan modification plan,” the lawmakers wrote. They noted to Paulson that there is not a consensus in the Senate that “strong legislative action is needed. “ “Majority Leader Reid’s efforts to pass the reform of the Federal Housing Administration prior to the Thanksgiving recess were frustrated by an objection from Senate Republicans. Just as you have adjusted your position over time and begun to see the need for actions we have been advocating for some time, we hope that you will join us in impressing upon our colleagues the dire need for action,” the letter urged.

Inside Washington (12/05/2007)

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* WASHINGTON (12/6/07)—The Treasury Department announced that Secretary Henry M. Paulson, Jr. will join Housing and Urban Development Secretary Alphonso Jackson today for a press conference to discuss the Bush administration's ongoing efforts to help struggling homeowners keep their homes. Members of the mortgage industry, as well as mortgage investors and mortgage counselors, will also participate in the 1:45 p.m. EST press event in the Treasury’s Media Room … * WASHINGTON (12/6/07)—House Financial Services Chairman Barney Frank (D-Mass.) met with about 150 members of Women in Housing and Finance Tuesday evening at a reception at Credit Union House on Capitol Hill. Frank spoke to the group about mortgage reform legislation passed last week by the House... * WASHINGTON (12/6/07)--The Office of Federal Housing Oversight (OFHEO) announced Wednesday the appointment of Christopher H. Dickerson as the director of OFHEO’s Office of Supervision, effectively immediately. Dickerson has served as the agency’s first chief compliance examiner in charge of the Office of Compliance, established in December 2003. In his new position, Dickerson will provide oversight and ensure coordination among all supervisory offices: Examinations, Capital Supervision, Chief Accountant, Compliance, Risk Analysis and Financial Performance, Policy and Research, and Policy Systems and Quality Assurance … * WASHINGTON (12/6/07)--The Office of the Comptroller of the Currency is the sole enforcer of banking laws for national banks, a federal appeals court ruled Tuesday. In 2005, then-attorney general Gov. Eliot Spitzer tried to access national bank records to determine their compliance with anti-discrimination laws (American Banker Dec. 5). The OCC denied the request, stating that it had sole regulatory powers. The appeals court also overturned a decision made by a lower court regarding Spitzer’s access to records of national banks enforcing the Fair Housing Act. The appeals court ruled that the lower court did not have the authority to decide on the matter, and remanded the case to district court. The district court has been instructed to dismiss the claim. The ruling is important to the scope of preemption, said Rob Lacy, a partner at Sullivan and Cromwell LLP, because it upholds the fact that national banks are subject to only one supervision system …

Hyland to testify on subprime issues today

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WASHINGTON (12/6/07)—National Credit Union Administration (NCUA) board member Gigi Hyland is scheduled to testify today as the House Financial Services Committee takes a broad look at recent proposals to help troubled subprime mortgage borrowers threatened with the loss of their homes. Rep. Barney Frank (D-Mass.), the committee’s chairman, has announced the panel intends to examine recent proposals intended to improve the pace and volume of mortgage loan modifications, such as interest rate resets that could keep people from moving into foreclosure proceedings. Frank has noted that, to date, most modifications to subprime loans are being made by servicers and lenders on a case-by-case basis, which may be slowing the pace and limiting the number of these workouts. The committee has scheduled the following three panels of witnesses:
* Panel One: NCUA’s Hyland, Sheila C. Bair, chairman, Federal Deposit Insurance Corporation; Randall S. Kroszner, governor, Federal Reserve Board; John C. Dugan, comptroller, Office of the Comptroller of the Currency ; Scott M. Polakoff, senior deputy director/CEO, Office of Thrift Supervision ; and North Carolina Deputy Commissioner of Banks Mark E. Pearce, on behalf of the Conference of State Bank Supervisors. * Panel Two: George P. Miller, executive director, American Securitization Forum; Faith Schwartz, executive director, HOPE NOW Alliance; Michael Calhoun, president, Center for Responsible Lending; Damon Silvers, associate general counsel, AFL-CIO; and Richard Kent Green, Oliver T. Carr, Jr. Chair of Real Estate Finance, The GW School of Business, George Washington University. * Panel Three: Laurence E. Platt, partner, K&L Gates, on behalf of the Securities Industry and Financial Markets Association; Hilary O. Shelton, director, National Association for the Advancement of Colored People; and John Taylor, president/CEO, National Community Reinvestment Coalition.

NCUA posts info on free tax prep help

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ALEXANDRIA, Va. (12/6/07)—The National Credit Union Administration (NCUA) has made accessible through it website a recent webcast on credit union opportunities to provide fee tax preparation service. The November webcast was a follow up to an NCUA Access Across America program, which included a panel on Volunteer Income Tax Assistance (VITA), and was a collaborative effort between NCUA, the Department of Housing and Urban Development and the Internal Revenue Service (IRS). The webcast features speakers from the IRS and two credit unions, actively involved in the VITA program, who presented information regarding VITA and partnerships with community coalitions. Currently, nearly 200 credit unions are involved in the VITA program and related coalition outreach efforts. “Providing free tax preparation enhances credit unions’ ability to connect with their communities and provides a vital service to the members,” NCUA board member Gigi Hyland said introducing the webcast. “What’s more, the VITA program provides credit unions access to a network of national organizations, 325 community coalitions and the IRS.” Hyland promised future NCUA webcasts that will focus on ways to establish a VITA website and additional opportunities to partner with government agencies. Use the resource links below to access the NCUA webcast and to view additional information regarding the VITA program.

CUNA suggests limitations in Senate bankruptcy bill

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WASHINGTON (12/6/07)—As Senate Majority Whip Richard Durbin was poised to conduct a hearing on the “looming foreclosure crisis,” the Credit Union National Association (CUNA) urged him to include some limits on a plan to allow mortgage modifications in bankruptcy proceedings. In a letter to Durbin, a Democrat from Illinois, CUNA addressed the Helping Families Save Their Homes in Bankruptcy Act (S.2136), which would eliminate the current exemption for first mortgages from modification during Chapter 13 bankruptcy proceedings. The CUNA letter said credit unions could support the legislation only if it included five limitations. It should:
* Permit bankruptcy judges to lower the principal amount of a loan, no less than the value of the house at the time the mortgage was made; * Permit bankruptcy judges to lower interest rates on mortgages, no less than current market rates for standard mortgage loans; * Permit bankruptcy judges to extend the remaining term of a loan secured by a borrower’s primary residence by up to five years, but to no more than 40 years; * Permit the cancellation of prepayment penalties; and * Extend the authority for bankruptcy judges to modify the terms on loans secured by a borrower’s primary residence only to loans made between January 1, 2003 and the date of enactment of the bill.
“This approach targets the real source of the threat to the many borrowers and the economy over the coming few years: payment shock resulting from loan rate resets,” wrote CUNA President/CEO Dan Mica. “It does this by providing for substantial reductions in payments from what the post-reset levels would otherwise be,” the CUNA executive said and added that this approach not only limits “cramdowns” to amounts resulting from high fees that were financed into the mortgage, negative amortization, and greater than 100% loan-to-value lending; but it also sets a timeframe that targets the solution to the specific problem. On Wednesday afternoon, Durbin presided over a hearing entitled “The Looming Foreclosure Crisis: How to Help Families Save Their Homes.” Scheduled witnesses included: Jacqueline P. Cox. U.S. Bankruptcy Court Judge for the Northern District of Illinois, Thomas Bennett, U.S. Bankruptcy Court Judge for the Northern District of Alabama, and Henry J. Sommer, president, National Association of Consumer Bankruptcy Attorneys.

Latest round filed in Pa. FOM lawsuit

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WASHINGTON (12/5/07)—Credit union parties involved in a bankers’ lawsuit against the National Credit Union Administration (NCUA) filed a court document Tuesday that outlined the regulator’s process in a contested field-of-membership decision to show it was methodical and well-considered. The document argued against a recent motion by banking plaintiffs that seeks a summary judgment against the NCUA. That action would invalidate the agency’s decision to grant community charters to the following Pennsylvania credit unions: Members 1st FCU, New Cumberland FCU, and Americhoice FCU. The bankers' case was brought earlier this year in the name of the American Bankers Association and a group calling itself the Credit Union Task Force of Pennsylvania. The litigation challenges NCUA's determination that a six-county area in south central Pennsylvania constitutes a "well-defined local community" under the Federal Credit Union Act. Citing the years-long Members 1st pursuit of approval for a community charter, CUNA argued that many modifications and revisions were made to the credit union’s original request. The deliberate process, CUNA argued, shows that the NCUA’s decision was careful and studied and therefore refutes the bankers’ charges of arbitrary action. The CUNA court document was filed in cooperation with the Pennsylvania Credit Union Association, the affected credit unions, and the National Association of Federal Credit Unions. The credit union document also criticized what it called an attempt by the banker plaintiffs to “make their weak case appear stronger” by improperly submitting new material after the court had announced it would rule based on the administrative record associated with the NCUA’s actions. The case is before the U.S. District Court for the Middle District of Pennsylvania.

CUNA on subprime woes Washingtons three views

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WASHINGTON (12/5/07)—Credit Union National Association (CUNA) President/CEO Dan Mica told a national television audience Tuesday that a Treasury plan to provide foreclosure relief to some subprime mortgage borrowers has promise, but warned that no action can be a “silver bullet.”
Click to view larger image CUNA President/CEO Dan Mica appears during a live Bloomberg broadcast shown on the Verizon Center's Jumbotron in downtown Washington, D.C. (Photo provided by CUNA)
During a live interview on Bloomberg TV, Mica advised that Congress needs to act carefully when considering actions to ease the country’s subprime mortgage woes. But, he added, action is necessary because no one would benefit from mass foreclosures—neither homeowners nor investors nor the economy in general. Mica also noted that the recent willingness of federal policymakers to publicly consider action to mitigate foreclosures when they were reticent just a few months ago to do so is an indication of the severity” of the problems in the subprime mortgage market. In fact, amid a tumult of disturbing subprime mortgage headlines, Washington appears to be investigating three types of approaches to the challenges threatened by looming foreclosures. Ryan Donovan, the CUNA vice president of legislative affairs, advises that most of what is being discussed can be broken into three categories: retrospective—looking back at all that has occurred and what can be done to keep people in their homes; prospective—looking into the future and how to prevent anything similar occurrences in the future; or they are seeking ways to restore sources of consumer credit. Falling into that final category is one of the most recent pronouncements relating to mortgage relief. On Monday, Reuters reported that Treasury Secretary Henry Paulson said he hoped to have such a plan ready by the end of the week. Paulson said federal lawmakers should give local governments more borrowing power to stave off the flood of impending foreclosures. Reuters also noted that the Bush administration is pushing for an agreement with the mortgage industry to freeze resets of interest rates on subprime loans whose rates are headed for a sharp jump up. The administration is also encouraging Congress to consider other measures to ease the strains in the housing market. The retrospective approach to the subprime problem can be represented by efforts in the House and Senate to investigate whether changes to the U.S. Bankruptcy Code might be an effective way to keep more people in their homes purchased through subprime hybrid ARM loans. While the House Financial Services Committee and the Senate Banking Committee are involved in examining “retrospective” proposals, the chairmen of those panels have also expressed keen interest in avoiding any similar problems in the future with “prospective” actions.

Inside Washington (12/04/2007)

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* WASHINGTON (12/5/07)--Federal Housing Finance Board Chairman Ronald Rosenfeld has responded to a letter written by Sen. Charles Schumer (D-N.Y.) regarding concerns with Countrywide Financial Corp.’s advances from the Federal Home Loan Bank of Atlanta. Relationships between the banks and their members are supervised, Rosenfeld said. He declined to agree with Schumer’s request that the board prohibit banks from accepting collateral that is out of line with non traditional mortgage guidance (American Banker Dec. 4) … * WASHINGTON (12/5/07)--The Small Business Administration (SBA) and Nationwide Mutual Insurance Company launched a disaster planning guide for small business owners. The guide was announced Tuesday during an event at the National Press Club in Washington, D.C. The guide provides strategies to help small businesses identify hazards, create plans to remain in operation if the office is unusable and understand the limitations of insurance coverage. Hard copies of the guide will be distributed by the SBA field offices. An electronic guide will be made available …

BSA focus of meetings with regulators lawmakers

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WASHINGTON (12/5/07)--The Credit Union National Association’s Bank Secrecy Act (BSA) Task Force met for over an hour Tuesday with Director James Freis of the Financial Crimes Enforcement Network (FinCEN) to discuss BSA issues. Freis reiterated to the credit union group the importance of information gleaned from Suspicious Activity Reports (SAR) and Currency Transaction Reports (CTR).
Click to view larger image NCUA Director of Examination Dave Marquis (left) and CUNA Deputy General Counsel Mary Dunn before CUNA's BSA Task Force meeting Tuesday with NCUA Board Member Gigi Hyland at the agency's Alexandria, Va., headquarters. (Photo provided by CUNA)
Click to view larger image NCUA Board Member Gigi Hyland (right) and Senior Policy Advisory Gary Kohn discuss compliance issues Tuesday with CUNA's Bank Secrecy Act Task Force. (Photo provided by CUNA)
Click to view larger image From left, Watt Prichard, president/CEO of River City FCU in San Antonio, Texas; Edwin Collins, CEO of Lockheed Georgia Employees FCU, Marietta, Ga.; Lilly Thomas, CUNA Regulatory Affairs Assistant General Counsel; and BSA Task Force Chairman Eugene Foley (right), president/CEO of Harvard University Employees CU, Cambridge, Mass. The group was part of a meeting held Tuesday with NCUA Board Member Gigi Hyland and her senior policy advisory, Gary Kohn. (Photo provided by CUNA)
“We got a credible explanation of where SARs information is going and how important it is to (file the reports),” Task Force Chair Eugene Foley said, describing the meeting. He said an FBI official attending noted that 42% of all terrorism cases currently being investigated by U.S. law enforcement have associated SAR or CTR filings. Foley said the FinCEN leader expressed his appreciation for credit union cooperation in the law enforcement efforts through BSA information gleaned from Suspicious Activity Reports (SAR) and Currency Transaction Reports (CTR). compliance. The task force also met with a staff member of House Financial Services Committee Chairman Barney Frank (D-Mass.) to request a hearing on BSA compliance issues. Foley said his group requested an examination of such BSA-related issues as duplicative filings and risk assessments through a full committee hearing. Foley said the group met also with National Credit Union Administration board member Gigi Hyland, who underscored that her agency believes BSA compliance should be a cooperative effort between financial institutions and their regulators. She also told the group that she favored a “simple, streamlined” approach to compliance. The task force also discussed technical aspects of BSA compliance with NCUA Director of Supervision Joy Lee and Judy Graham, a program officer with the agency’s office of examination and insurance. The task force is comprised of Foley of Massachusetts, Shelley Clarke of Utah (not able to attend), Watt Prichard of Texas, Dale Dalbey of Alabama, Ed Collins of Georgia, and Mary Ann Clancy also of Massachusetts.

Congress back Subprime woes credit cards in sights

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WASHINGTON (12/4/07)—Subprime mortgage woes and credit card practices are just two of the issues that appear to be slated for attention by the recently returned House and Senate as lawmakers barrel toward the close of the first session of the 110th Congress. In the Senate this week, a Senate Homeland Security and Government Affairs subcommittee is scheduled to shine a spotlight on credit card practices today—and specifically on the circumstances under which credit card issuers may increase the interest rates of cardholders who are in compliance with the terms of their credit cards. In March, the subcommittee examined credit card grace periods, interest charges assessed against debt paid on time, and excessive fees. Today’s follow-up hearing, entitled “Credit Card Practices: Unfair Interest Rate Increases,” will feature a panel of three consumers identified by a subcommittee release as having experienced interest rate increases. A second panel of witness will be comprised of representatives from credit card companies. Also in the Senate, on Wednesday an oversight subcommittee is expected to look into the country’s subprime mortgage woes and whether the country’s bankruptcy code could provide some relief to beleaguered homeowners. The Credit Union National Association (CUNA) has urged lawmakers to use extreme care in making any changes to bankruptcy laws and will continue to weigh in on the subject. The subprime issue is also scheduled for attention on the House side this week. As reported earlier, the House Financial Services Committee Thursday intends to take an overall look at recent proposals to improve the pace and volume of subprime mortgage loan modifications that are meant to help troubled borrowers hang onto to their homes purchased with hybrid ARMs and other nontraditional loans. The committee is expected to zero in on the subject of whether mortgage lenders could suffer from liability issues if they alter mortgage loan terms to help borrowers stay in their homes. Also possible for this week or later: The House Judiciary Committee in November set aside a mark up on its bill seeking to revise sections of the bankruptcy code to give judges power to modify certain terms in existing mortgages. CUNA’s Legislative Affairs Vice President Ryan Donovan said Monday that the committee has identified action on the bill before yearend as a priority, although nothing has yet been scheduled.

NCUA schools examiners on bylaw rule focus

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ALEXANDRIA, Va. (12/4/07)—Federal credit union examiners have received direction from the top about how to view the National Credit Union Administration’s (NCUA’s) recent action re-incorporating federal bylaws into regulations. In a supervisory letter sent both to NCUA examiners and federal credit unions, the agency reiterated its position that reincorporating the bylaws into NCUA’s rules and regulations imposes” no new regulatory burden, as all FCUs are already required to have NCUA-approved bylaws.” “Under the risk-based examination system in use for FCUs, examiners do not currently, nor will they with the reincorporation of the Bylaws, inquire into an FCU’s bylaw disputes unless the FCU’s management raises the issue,” the NCUA letter, signed by David. Marquis, director of the Office of Examination and Insurance, said. The Credit Union National Association (CUNA) in October asked the NCUA to send a clarifying letter – communicating directly with federal examiners—that spells out the agency’s intent that bylaw enforcement will not be part of routine examinations. CUNA President/CEO Dan Mica urged the regulator also to instruct examiners that bylaw disputes should be addressed internally by credit unions before the appropriate NCUA regional director becomes involved. Such a letter, CUNA said, would “go a long way toward helping examiners understand how the rule is to be implemented and assisting federal credit union appreciate the Board meant what it said. In its supervisory letter, the NCUA explains that the bylaws were reincorporated to provide clear authority to act if a bylaw violation threatened a fundamental, material credit union member right. It also reminded that the agency will limit its involvement to bylaw disputes to six areas of members’ rights, which are:
* Maintain a share account; * Maintain credit union membership; * Have access to credit union facilities; * Participate in the director election process; * Attend annual and special meetings; and * Petition for removal of directors and committee members.
Use the resource link below to read the NCUA letter.

Inside Washington (12/03/2007)

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* WASHINGTON (12/4/07)--Efforts to redefine Freddie Mac and Fannie Mae’s role in helping the mortgage crisis have drawn more criticism, further dividing lawmakers and regulators on the issue. Office of Federal Housing Enterprise Oversight (OFHEO) Director James Lockhart stated last week that the two enterprises should stay out of the crisis due to their lack of experience in the jumbo market (American Banker Dec. 2). Conversely, Ben Bernanke, Federal Reserve Board chairman, stated last month that the enterprises, under control of the federal government, could take on the jumbo loans and sell them to the secondary market. But some industry representatives, such as Judy Kennedy, president/CEO of the National Association of Affordable Housing Lenders, are skeptical. Kennedy said it would be a “mistake” to allow the enterprises into the market without reform legislation. Kurt Pfotenhauer, Mortgage Bankers Association lobbyist, recognized that letting the enterprises into the market could bring equal amounts of risk and promise. On Monday, Angelo Mozilo, CEO of Countrywide, said he supported efforts to allow Fannie and Freddie to securitize loans, stating that the two should take action to increase liquidity in the market (CNNMoney.com Dec. 3) … * WASHINGTON (12/4/07)--The discussion draft of Sen. Christopher Dodd’s (D-Conn.) industrial loan company (ILC) bill has been released. If passed, the legislation would prevent ILCs from establishing loan offices or placing ATMs in states outside of those that the ILCs operate. The draft also states that ILCs may only be grandfathered in if they are approved by the Federal Deposit Insurance Corp. (FDIC). The draft has been released just one month before the FDIC’s moratorium on ILCs is set to expire …

Fryzel to be nominated to NCUA board named chairman

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WASHINGTON (12/3/07)--The White House late Friday announced President George W. Bush's intention to nominate Mike Fryzel, an Illinois real estate lawyer and former director of the state's Department of Financial Institutions, to fill a vacancy that will be created when Chairman JoAnn Johnson leaves her position as chairman of the National Credit Union Administration (NCUA). Johnson's term expired in August of this year. She has been on the NCUA board since 2002 and served as chairman since 2004. She replaced Dennis Dollar who retired from the board in April 2004. The White House announcement said the President intends to designate Fryzel chairperson of the agency upon confirmation. His term would expire on Aug. 2, 2013. Fryzel currently serves on the Illinois Governor's Board of Credit Union Advisors and has been a member of the Governor's Cabinet. He received his bachelor's degree from Valparaiso University, his MBA from the University of Chicago, and his JD from Loyola University of Chicago School of Law. Following the White House announcement, Johnson issued a statement saying that serving as part of the NCUA board for six years has been “an honor in every sense of the word.” “During that time, the challenges faced by the Agency and the industry we regulate have been real, but have been transformed into opportunities instead of obstacles thanks to the extraordinary talents of the people who contribute so much to the American people through their work with credit unions,” Johnson said and pledged to remain as chairman until Fryzel can be confirmed. On behalf of the Credit Union National Association (CUNA) and its 8,000 members, President/CEO Dan Mica offered credit unions’ “sincere thanks” to Johnson for “rendering dedicated public service” through her work at the NCUA. “Throughout her complete six-year tenure on the board, Chairman Johnson has shown both a commitment to the continued safety and soundness of credit unions on behalf of American consumers, as well as an affinity for the movement’s philosophy of ‘people helping people.’ “We appreciate the solid effort she contributed as a credit union regulator, and wish her the very best in the future,” Mica said Friday.