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Washington Archive

Washington

Inside Washington (02/11/2009)

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* WASHINGTON (2/12/09)--A program that would create a new lending facility for the Small Business Administration’s (SBA) secondary market by allowing investors to borrow money to buy securities through the Term Asset-Backed Securities Loan Facility (TALF) has spurred criticism from market observers. They say the program needs to be tweaked before its implementation (American Banker Feb. 11). Market observers say that haircuts of 5% for SBA pool holders and the interest rates the Federal Reserve board plans to charge for a TALF loan are too high. Observers indicated that the Fed appears to be responsive to their concerns ... * WASHINGTON (2/12/09)--Included in the Senate’s $838 billion economic stimulus package--which was approved Tuesday--are provisions to limit executive compensation and help struggling homeowners. Under the Senate’s version of the bill, institutions using federal bailout money for bonuses would have to repay the cash portion or pay an excise tax of 35% on what is not repaid to the Treasury. Another measure in the plan would require that $50 billion of Troubled Asset Relief Program funds be used to implement a loan modification program to stem foreclosures. The program would have to implemented within 15 days of the bill’s enactment ... * WASHINGTON (2/12/09)--The Obama administration should use part of the second half of the Troubled Asset Relief Program funds to boost capital of private mortgage insurance companies so Freddie Mac and Fannie Mae can help more homebuyers, Federal Housing Finance Agency Director James Lockhart said at a conference this week (National Mortgage News Feb. 11). Stress on mortgage insurance companies’ capital has affected negatively the enterprises’ market share, causing it to fall about 30% in third quarter 2008, Lockhart said ... * ALEXANDRIA, Va. (2/12/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel said he intends to restate his earlier requests to the Treasury Department to make money available to credit unions through its asset purchase program, and to ensure that rules are written to enable credit unions the ability to take advantage of any newly created aspects of the government’s reponse to the financial crisis. Fryzel also commended Treasury Secretary Timothy Geithner for his focus on helping banks improve their lending. “Credit unions have continued to exhibit strong loan growth, but I realize that all sectors of the financial services industry must do their part for the American consumer if the nation is to regain strong financial footing,” he said ...

OTS urges foreclosure suspension

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WASHINGTON (2/12/09)—In the wake of the Obama administration’s announcement Tuesday that its initiative to help homeowners facing foreclosure will not be unveiled for at least a week, the Office of Thrift Supervision (OTS) urged its institutions to suspend foreclosures. “OTS-regulated institutions would be supporting the national imperative to combat the economic crisis by suspending foreclosures until the new (p)lan takes hold,” OTS Director John Reich said in a release. U.S. Treasury Secretary Timothy Geithner, while announcing the administration’s widely reported Financial Stability Plan's to boost the financial sector yesterday, said a $50 billion initiative will help troubled homeowners avoid foreclosure by reducing monthly payments. The OTS regulates the national thrift industry.

Senate Democrats meet with CUNA financial services

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WASHINGTON (2/12/09)—The Credit Union National Association (CUNA) took part in a meeting Wednesday with members of the Senate Democratic Caucus and leading financial industry trade associations. According to CUNA Senior Vice President of Legislative Affairs John Magill the discussion focused on the economic stimulus bill, financial recovery plan, and the future needs of the financial industry to help the economy recover, and also included health care reform. Magill said many of the financial services participants, including representatives from banking, the securities industry, and the Realtors, had the same types of concerns as have credit unions. He said topics ranged from: How to thaw credit markets, how to restore consumer confidence, what are the post-stimulus, post-TARP-announcement issues that need to be addressed next by lawmakers? "We were very pleased to be invited to participate in this meeting. The exchange of ideas about how to get the economy going again was very positive," Magill said. Ryan Donovan, CUNA vice president of legislative affairs, added that there also was recognition that there is a lot of work ahead. “We all know there is no easy, quick solution, but I think there was general agreement that the stimulus bill combined with the Treasury (TARP) action were big steps in the right direction," Donovan said. Those present included Democratic Sens. Debbie Stabenow (Mich.), Thomas Carper (Del.), Amy Klobacher (Minn.) , Michael Bennett (Colo.), Mark Begich (Ark.), Benjamin Cardin (Md.), Ted Kaufman (Del.), Sheldon Whitehouse (R.I.), Jack Reed (R.I.), Kay Hagen (N.C.), Ben Nelson (Neb.), Bill Nelson (Fla.), Jeanne Shaheen (N.H.), Jon Tester (Mont.), Daniel Akaka (Hawaii), Evan Bayh (Ind.), John Rockefeller (W.V.), Roland Burris (Ill.), Frank Lautenberg (N.J.), Mark Warner (Va.), Claire McCaskill (Mo.), Sherrod Brown (Ohio) and Tom Udall (N.M.).

CUNA Clarification needed to Fed emergency term

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WASHINGTON (2/12/09)—The Federal Reserve Board needs to provide “significant additional” examples to clarify the term “financial emergency” under its proposed revision to Regulation Z mortgage disclosure requirements, according to the Credit Union National Association (CUNA). The Fed’s proposed Reg Z changes implement provisions of the Mortgage Disclosure Improvement Act (MDIA), which was enacted last July and amends certain provisions of the Truth in Lending Act (TILA). Even prior to the 2008 legislation, the Fed had been in the process of reviewing Reg Z mortgage disclosure requirements in their entirety. Significant additional revisions are expected in 2010. The Fed Reg Z proposal would allow a consumer to modify or waive the timing requirements for loan disclosures if requested due to a bona fide personal financial emergency. In a recent comment letter, CUNA urged the Fed to clarify what situations may qualify under this exception. CUNA also urged the agency to limit the term to cover “unusual and unforeseeable circumstances.” Furthermore, CUNA wrote, the burden should be on the borrower to provide an explanation, in writing, of a circumstance that may qualify as a financial emergency to the lender, as opposed to the borrower signing a statement that is prepared by the lender. “We believe these parameters for exercising the ‘financial emergency’ exception are needed to both ensure that the right of cancellation is preserved for the borrower and to protect lenders who may be challenged if they grant a modification or waiver from these timing requirements,” the CUNA letter said. The 2008 The MDIA imposes timing requirements, such as when consumers must receive certain disclosures. For instance, borrowers would have to receive mortgage disclosures at least seven days before a mortgage settlement and receive corrected disclosures, if needed, at least three days before settlement. Use the resource link below to read more of the Fed proposal and the complete CUNA comments.