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Housing reform draft includes CUNA-sought cap increase

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WASHINGTON (3/18/14)--With the release of the Johnson-Crapo housing finance reform bill over the weekend, the Credit Union National Association has confirmed an important modification from an earlier draft bill.  The cap for membership in an mutual securitization company was drastically increased , as recommended by CUNA in testimony last November and in meetings with legislative staff on Capitol Hill.

The Johnson-Crapo draft bill is lengthy--425 pages of reforms. It, of course, details the bipartisan agreement announced last week by Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) on how to overhaul the housing finance market, as well as on what to do with government-owned Fannie Mae and Freddie Mac. The discussion has both languished and been on the front burner for five years, and now some traction has been found.

CUNA supports housing finance reform but has insisted throughout discussions that credit unions must continue to have unfettered access to the secondary market under any revised system.

CUNA backed an idea found in an earlier bill, S. 1217, which proposed a mutual securitization company to provide credit unions and other smaller lenders access to securitizing their mortgages, access currently provided by Fannie Mae and Freddie Mac. However, CUNA had criticized a $15 billion-in-assets cap for participation in the mutual to be far too low.

As CUNA Chief Economist Bill Hampel emphasized during one of the hearings in which CUNA was asked to testify on reforms, "We believe that this cap is far too low, and would suggest that lenders of almost any size should be able to use the mutual, so long as they do not themselves issue covered securities."

"Restricting the mutual to serving just smaller lenders would preclude achieving necessary scale economies," he said, and added, "Indeed, it would be desirable for the mutual to be among the largest if not the largest issuer of covered securities. "

The Johnson-Crapo bill raises the proposed ceiling to $500 billion in assets--a half-trillion dollars--large enough to serve as a robust vehicle to the secondary market for credit unions.

Overall, CUNA has applauded Senate Banking Committee leadership for creating a bipartisan housing finance reform bill--one that builds on the work of Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.), and "takes significant steps to ensure that credit unions will continue to have access to a functioning, well-regulated, well-capitalized secondary mortgage market."

CUNA Senior Vice President of Legislative Affairs Ryan Donovan has noted, "While we have only just begun to review the legislative language, based on the information we have received so far, we believe many of the suggestions that we made in our testimony have been incorporated, and we are hopeful this will be a bill that credit unions can strongly support."

Clean audit for 2013 posted for NCUA Stabilization Fund

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ALEXANDRIA, Va. (3/18/14)--The Temporary Corporate Credit Union Stabilization Fund has received a clean audit opinion for the fifth consecutive year of its five-year existence, the National Credit Union Administration announced Monday.

The fund's condition is on the agenda for this Thursday's NCUA open board meeting, and at that time the NCUA's Chief Financial Officer will provide a detailed report. However, in its Monday release the NCUA highlighted that in 2013 the Stabilization Fund's financial condition "remained stable, maintaining sufficient available liquidity to meet its obligations while its deficit net position continued to decline."

KPMG LLP, the independent firm that audits the stabilization fund's financial statements, issued an unmodified audit opinion with no reportable findings. The agency released that opinion as well as the stabilization fund's 2013 audited financial statements (see resource link).

"Congress created the Stabilization Fund in 2009, and an independent auditor has given NCUA a clean financial statement audit opinion every year since then," NCUA Chairman Debbie Matz said in the release. "KPMG's latest report, following the board's announcement last November that we do not expect an assessment in 2014, demonstrates the agency's planning and management are prudent and that we are maintaining transparency as we work to complete the resolution of the corporate credit union crisis."

CFPB sets March 25 for payday loan field hearing

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WASHINGTON (3/18/14)--Payday loans will be the topic when the Consumer Financial Protection Bureau holds a field hearing in Nashville, Tenn., March 25.

The hearing is set to begin at 11 a.m. (CT) in the Nashville Public Library Auditorium and will feature remarks from CFPB Director Richard Cordray and testimony from consumer groups. Industry representatives and the general public will also have the opportunity to speak at the session.

The CFPB announced in November 2013 that it would accept complaints on payday lenders and later that month announce its first enforcement action against a payday lender.
The Credit Union National Association highlights credit unions as a consumer-friendly alternative to the high-cost payday loan industry. Around 20% of credit union members use payday lenders. A May 15 webinar from CUNA will examine why payday lending has increased in recent years and illustrate how to develop effective credit union loan alternatives to payday loans.

Credit unions often offer members alternatives to payday loans--short-term lines of credit with annualized interest rates generally capped at the usury ceiling, which has been currently determined by federal rules to be at 18%.  National Credit Union Administration regulations can allow credit unions to charge an annualized interest rate 10 points above the ceiling--at 28%. Most credit unions that offer payday loan alternatives also limit fees, offer counseling and encourage members to open savings accounts.

To register to attend the hearing, and sign up for the CUNA webinar, use the resource links.

CUNA urges continuation of SBA 7(a) waiver

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WASHINGTON (3/18/14)--The Credit Union National Association spoke out in support of continuing a Small Business Administration (SBA) 7(a) guaranteed loan program fee waiver into 2015, and promoted increasing the member business lending cap, in a letter to SBA Acting Administrator Marianne Markowitz.

The SBA currently waives upfront and annual fees of 7(a) small business loans of $150,000 or less, and President Barack Obama's recently released 2015 budget would continue this waiver. Without that extension, the waiver will expire in September.

"We appreciate the president's and SBA's recognition that the 7(a) fee waiver is an effective way to increase borrower participation in this important SBA loan program," CUNA President/CEO Bill Cheney wrote.

Cheney also again encouraged the SBA to review its 504 and 7(a) Loan Programs from a regulatory relief perspective.

"Credit unions have been working tirelessly to comply with a seemingly never-ending onslaught of regulatory requirements from a variety of federal regulatory agencies, and CUNA strongly supports efforts of federal agencies to eliminate unnecessary, outdated regulatory restrictions on credit unions," he said.

The CUNA CEO also strongly urged the SBA to follow the lead of the Obama administration and support congressional efforts to increase the credit union member business lending (MBL) cap. Increasing the MBL cap to 27.5% of assets, up from the current 12.25% limit,  would allow credit unions to lend an additional $13 billion to small businesses and help them create over 146,000 new jobs in the first year after enactment, CUNA reminded.

Rep. Ed Royce (R-Calif.) is a main sponsor of a House MBL increase bill, and he has also introduced related legislation to would exempt loans for one- to four-unit non-occupied dwellings from the MBL cap. The bill is called the "Credit Union Residential Loan Parity Act."  (See March 13  News Now ).

Republican senators oppose FATCA in letter to foreign-based citizens

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WASHINGTON (3/18/14)--The Foreign Account Tax Compliance Act (FATCA) "treats Americans living overseas unfairly," Sen. Rob Portman (R-Ohio) wrote in a letter sent on behalf of the National Republican Senatorial Committee last week.

The letter was sent to Republicans Overseas Action Inc., a group that bills itself as a 501(C)(4) organization that has been formed "for the purpose of educating the public worldwide on why FATCA violates U.S. citizens' and foreign passport-holding U.S. residents' constitutional protections."

The practical effect of FATCA is to "make it impossible for Americans living abroad to open a bank account since foreign banks have no desire to become the eyes of the American government," Portman said. He added he is glad the Republican National Committee has added FATCA opposition to its issues platform for upcoming elections.

FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities. Some provisions would apply to U.S. credit unions that make international payments. U.S. credit unions would also be required to identify and withhold on so-called "pass-through payments" to FFIs involving transfers of U.S.-sourced investment or interest income to an FFI that has not yet been subject to taxation.

Opposition to FATCA continues to grow in the U.S., and Rep. Bill Posey (R-Fla.) last year introduced H.R. 2299, which would repeal the Internal Revenue Service's recent expansion of U.S. credit union and bank reporting rules with respect to interest on deposits paid to nonresident aliens.

CUNA and the World Council of Credit Unions have supported the Posey repeal bill, saying in a joint letter to Posey that the legislation "would be instrumental in eliminating an unnecessary and unduly burdensome rule for credit unions." (See resource link.)