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Ways and Means launches look at tax reforms with charitable deductions hearing

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WASHINGTON (2/7/13)--The tax policy-writing House Ways and Means Committee has scheduled a hearing next week on itemized charitable deductions. The hearing is part of what will be a broader look by the committee at the subject of comprehensive tax reform.

"We do not expect the credit union tax status to be any part of the focus at this upcoming hearing," said Ryan Donovan, Credit Union National Association senior vice president of legislative affairs, Wednesday.

"However," he added, "we will be watching this closely, as it could shed light on how the committee intends to evaluate tax provisions going forward."

Preserving the credit union tax status is always a top CUNA priority. CUNA's 2013 four-pillar legislative agenda focuses on: preserving the credit union tax status; reducing regulatory burden; engaging in housing finance reform; and advancing credit union charter enhancements, such as increased member business lending authority and supplemental capital.

House Ways and Means Chairman Dave Camp (R-Mich.) announced the hearing will take place on Thursday, Feb.  14,  in room 1100 of the Longworth House Office Building, beginning at 9:30 a.m. (ET).

Treasury blocks money transfer firms linked to drug cartel

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WASHINGTON (2/6/13)--Prodira S.A. de C.V., Prodira, Inc. and Internacional & Nacional Exchange Services Inc., have been designated as blocked properties by the U.S. Treasury due to their alleged connections to a Mexican money laundering network.

The money transfer businesses are owned by Filemon Garcia Ayala, a Mexican citizen who has been tied to Los Zetas, a massive Mexican drug cartel, according to the Treasury release. Filemon Garcia Ayala leads a money laundering network that makes large international transfers on behalf of Los Zetas, the Treasuy said. Mexican authorities have sought his arrest since June 2012, and he is currently a fugitive.

The Treasury has also designated Prodira Casa de Cambio S.A. de C.V. and Trastreva S.A. de C.V., as blocked properties.

U.S. persons are forbidden from conducting financial or commercial transactions with these designees. Any assets held by the companies that are held under U.S. jurisdiction have also been frozen, the Treasury added.

"By exposing another key money operation tied to Los Zetas, Treasury is depriving the Zetas of an important avenue to launder their narco-dollars," Treasury Office of Foreign Assets Control Director Adam Szubin said. "We will continue to target individuals and businesses linked to Los Zetas and take any action necessary to protect the U.S. financial system from their illicit financial dealings," he added.

Tuesday's action was part of an ongoing effort under the Kingpin Act to apply financial measures against significant foreign narcotics traffickers and their organizations worldwide. The Treasury Department reports that it has designated more than 1,200 individuals and entities pursuant to the Kingpin Act since June 2000. Penalties for violations of the Kingpin Act range from civil penalties of up to $1.075 million per violation to more severe criminal penalties.

For the full Treasury release, use the resource link

Derivatives plan could be out 'soon,' Matz says

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ALEXANDRIA, Va. (2/6/13)--National Credit Union Administration staffers continue to examine credit union derivatives issues, and a proposed rule on derivatives could be released in the first half of 2013, NCUA Chairman Debbie Matz said in a Tuesday webinar with Consumer Financial Protection Bureau Director Richard Cordray.

Matz noted that the agency is considering allowing well-run credit unions with the necessary expertise to use simple derivatives to hedge against interest rate risk (IRR). She said managing interest rate risk is a key concern for the agency and the proposal would be issued "soon."

The agency will also address clarity in member business lending waivers, she said. An agency letter that addresses blanket waivers, guarantees and when a waiver is required for a structured or balloon loans is in the works. The NCUA will also release credit ratings and troubled debt restructuring guidance, Matz added. Guidance that clarifies the agency's expectations for enterprise risk management practices will also be released by mid-2013, NCUA Director of Examinations and Insurance Larry Fazio said.

Cordray also previewed some of his agency's future plans during the webinar. A final version of proposed remittance transfer regulations will be released in February or March, and will become effective 90 days after it is released, he said. The CFPB has provided a safe harbor exemption from the rule for remittance providers that transact 100 or fewer remittances per year, and the final exemption threshold will remain at this level, he added.

The CFPB director said his agency is also considering giving credit unions that hold $2 billion or less in assets, and make more than 500 mortgage loans per year, safe harbor from portions of qualified mortgage/ability-to-repay regulations.

Rules addressing prepaid cards will also be released this year, but how far reaching those will be is still under consideration by the bureau, Cordray said. The CFPB is also developing plain language guides to aid smaller institutions with compliance with the new mortgage final rules. "The CFPB has reached out to CUNA for our input as they work to develop these and other resources for credit unions and we expect more details to be unveiled in the coming weeks," Credit Union National Association Senior Assistant General Counsel Jared Ihrig said.

Matz also discussed the state of the credit union system during the webinar. The credit union system's overall health is "very encouraging" with a solid average capital level of 10%, and declining delinquencies and chargeoffs, she said.

However, Matz added that some of the smallest credit unions, those with $10 million or less in assets, are struggling with a return-on-assets of zero, which in fact is an improvement over recent negative numbers. She said the pressures on these smallest credit unions are spurring a number of mergers.

"The NCUA is concerned about the health and survival of some small credit unions," Matz told the webinar audience. She added that the agency has come up with a number of plans and tools to support their operations, such as:

  • Reducing the number of examinations hours to around 40;
  • Providing more services through the agency's Office of Small Credit Union Inititiatives, such as consulting and helping with net worth restructuring plans; and
  • Increasing the use and availability of web tutorials.
She also noted the recent significant change, advocated by CUNA, that increased the threshold that defines a small credit union to $50 million in assets, up from $10 million.

The NCUA will post an archived version of the webinar in the next two weeks.

Compliance: Direct Express March 1 deadline brings issues

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WASHINGTON (2/6/13)--Federal benefits payments will be made only by direct deposit or the Direct Express debit MasterCard after March 1, and the Credit Union National Association has answered one key credit union compliance question ahead of this deadline.

CUNA Senior Vice President for Compliance Kathy Thompson in a recent CUNA Comp Blog post reminded credit unions that federal benefits recipients with the Direct Express MasterCard will be able to make no-fee cash withdrawals from any bank or credit union through a teller where the institution displays the MasterCard acceptance mark.

Therefore, Thompson said, credit unions that display the MasterCard acceptance mark will be required to provide cash to Direct Express cardholders, with no fee attached, whether the cardholder is a member or not. "If your credit union has an agreement with MasterCard that requires you to honor these cards, that trumps any field of membership issue," she said.

CUNA has recommended that any credit union with an agreement with MasterCard read its agreement to ascertain the credit union's contractual responsibilities in honoring the Direct Express debit card. MasterCard representatives can also help address any compliance concerns, Thompson noted.

For more on this issue, use the resource link.

Waters asks for hearing on Independent Foreclosure Review demise

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WASHINGTON (2/6/13)--The top Democrat of the House Financial Services Committee Tuesday asked that panel's chairman to conduct a hearing about "the abrupt end of the Independent Foreclosure Review (IFR) process."

Rep. Maxine Waters (D-Calif.), who has been an advocate for foreclosure prevention, noted in her request to Chairman Jeb Hensarling (R-Texas) that on Jan. 7, the Office of the Comptroller of the Currency and the Federal Reserve Board announced a settlement with 14 mortgage servicing companies, in which it was agreed to replace the process with an $8.5 billion settlement, effectively terminating the IFR.

Waters identified concerns regarding the settlement. She said it lacked:
  • Identification of a minimum amount for principal reductions,
  • An escalation process for homeowners, and,
  • The prevention of foreclosures for the 4.4 million borrowers still in their homes.
House Financial Services has its first hearing scheduled for today. The topic is "Examining the Proper Role of the Federal Housing Administration in our Mortgage Insurance Market."

Scheduled witnesses are:
  • Edward Pinto, resident fellow, American Enterprise Institute;
  • Anthony B. Sanders, distinguished professor of real estate finance, senior scholar, Mercatus Center at George Mason University;
  • Basil Petrou, managing partner, Federal Financial Analytics, Inc.; and,
  • Julia Gordon, director, Housing Finance and Policy, Center for American Progress.

FEMA rescinds flood insurance program guidance

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WASHINGTON (2/6/13)--The Federal Emergency Management Agency (FEMA) has rescinded its Mandatory Purchase of Flood Insurance Guidelines booklet (F-083) saying the guide hadn't been updated since 2007 and was obsolete.

The guide booklet was originally produced to help lenders comply with National Flood Insurance Program (NFIP) requirements. However, the current version was made obsolete by recent legislation, "The Biggert-Waters Flood Insurance Reform Act of 2012."

The guidance is no longer available in hard copy format nor from the FEMA website as of Feb. 4. 

FEMA suggested "lenders should consult their respective regulatory agency for information regarding compliance with the mandatory purchase requirements."

The agency said it will continue to provide assistance on NFIP-related questions regarding underwriting, rating, and claims processing.

For the full FEMA release, use the resource link.

Congress last year approved a five-year extension of the NFIP, and the extension legislation contained some reforms to the program. However, the NFIP has had issues in recent years, and House Financial Services Committee Chairman Rep. Jeb Hensarling (R-Texas) has committed his panel to taking up the issue of flood insurance with a look at ways to privatize the flood insurance market.