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Washington Archive

Washington

Inside Washington (02/14/2008)

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* WASHINGTON (2/15/08)--National Credit Union Administration Chairman JoAnn Johnson highlighted important credit union programs and initiatives that are making a positive impact in African-American communities because of February as African-American History Month. “I appreciate the role credit unions are playing in empowering African American communities, particularly in the area of financial literacy and homeownership,” Johnson said ... * WASHINGTON (2/15/08)--The U.S. Small Business Administration (SBA) renewed its partnership with the Minority Business RoundTable (MBRT) yesterday in an effort to support small-business development initiatives in underserved communities. The partnership will allow organizations to share resources and educate minority entrepreneurs on how to use SBA products and services to grow business. The two-year agreement intends to help strengthen and expand small-business development in the nation for minority entrepreneurs ... * WASHINGTON (2/15/08)--A bailout of the bond insurance industry is not necessary, said Charles Chaplin, chief financial officer of bond insurer MBIA, during testimony to a House panel. MBIA is adequately capitalized to meet policyholder obligations, he added (The New York Times Feb. 14). Problems in the bond industry were triggered by the subprime mortgage crisis, leaving insurers worried about their credit ratings. Gov. Eliot Spitzer (D-N.Y.) said millions of Americans who own bonds could lose money, and college loans, state and local taxes, and museum budgets could be affected. U.S. Rep. Paul Kanjorski (D-Pa.) has suggested tighter regulation of the bond industry while Warren Buffett, billionaire investor, said he could help by offering $800 billion in second insurance ...

Financial Services member circulates CU story

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WASHINGTON (2/15/08)—Rep. Tom Price sent a letter to all his colleagues in the House focusing their attention on a Wall Street Journal article entitled “Credit Unions Offer Lifeline on Mortgages.” Price, a Republican from Georgia, is a member of the House Financial Services Committee. Price wrote to his fellow lawmakers, “The article points out that while some lenders have tightened underwriting standards given current market conditions,…many credit unions remain well capitalized and in a position to help the consumer refinance.” The article, which originated as a Dow Jones News Service column and was picked up by WSJOnline, said: “Big banks still smarting from multibillion-dollar subprime losses have tightened lending standards and are lending almost exclusively to those with top credit scores. Many individual who were eligible a year ago fro a traditional mortgage can’t get refinancing for their subprime loan. “Credit unions to the rescue. Unlike big lenders, credit unions didn’t suffer losses in recent months because they never made risky subprime loans.” The article also highlighted Credit Union National Association Chief Economist Bill Hampel's assessment that most credit unions have strong balance sheets and near-record capital levels, which allow them to make any type of loan despite the subprime crisis.

Compliance Mortgage Forgiveness Act and Form 1099-C

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WASHINGTON (2/15/08)--Cancellation of debt reporting requirements have NOT changed under the Mortgage Forgiveness and Debt Relief Act of 2007 and information to the contrary is just plain wrong, according the compliance experts at the Credit Union National Association (CUNA). Under the act, credit unions still must:
* Fill out the Form 1099-C on home loans in foreclosure; * Fill out the Form 1099-C on home loans where they work out with the borrower a loan modification where less debt will be repaid by the borrower than under the original contract; and * Fill out the Form 1099-C on bankruptcies involving business and investment debt.
"Just keep filing those 1099-C form, as required," says Kathy Thompson, CUNA's senior vice president of compliance. "An ‘identifiable event'--as spelled out in the 1099-C instructions--has occurred, so the form needs to be filed, even though the person may no longer have to pay tax on the amount reported as ‘canceled.'" What does the new law do? Thompson says it temporarily provides that the discharge of indebtedness on mortgage loan "acquisition indebtedness" up to $2 million--secured by the borrower's principal residence--will not trigger federal income taxation. And the law only waives the income taxation for 2007, 2008 and 2009. Thompson explains: A key reason the IRS needs the 1099-C is to start that dialogue with the taxpayer on whether taxes are due or are forgiven under the temporary law. The loan not only must have been secured by the member's principal residence but also had to be "acquisition debt" – money borrowed to buy, build or improve the home. "Debtors who have heard about the new law may be surprised to learn that if they refinanced and used money to buy a car, pay tuition or take a vacation, the new law doesn't provide them tax relief," noted Thompson. "And mortgage loans secured by property that is not the debtor's principal residence aren't covered by the 2007 debt relief act." "But whether the borrower qualifies for tax relief isn't the credit union's concern. Credit unions just need to keep filing the 1099-C any time a debt over $600 is canceled. Don't make any changes in your current 1099-C filing procedures--or if applicable, 1099-A ‘abandonment' forms, Thompson warns. Use the resource link below for more on this and other credit union compliance issues.

NCUA releases Feb. 21 meeting agenda

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ALEXANDRIA, Va. (2/15/08)—The National Credit Union Administration (NCUA) released the agenda for its Feb. 21 open board meeting. The agency will consider a final rule on Part 797 of its rules and regulations for debt collection procedures. Also on the agenda is the agency’s quarterly insurance fund report.