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CUNA: Victory for CUs in court interchange ruling

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WASHINGTON (3/24/14)--Calling it "truly a victory for credit unions and a rebuke to the merchants," the Credit Union National Association welcomed a federal appeals court ruling Friday that upheld the Federal Reserve's debit interchange regulation.
 
A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit unanimously reversed an earlier decision of U.S. District Judge Richard Leon, issued in July, that the Fed interchange rules violated the plain text of the Durbin Amendment to the Dodd-Frank Act. 
 
By superseding Leon's opinion, this newest ruling removes the chaos and confusion caused when Leon vacated the Fed rule and then issued a stay so the rule remained in place until the appeals process was completed.
 
In this case known as NACS, et al. v. Board of Governors of the Federal Reserve System, a merchants' coalition challenged the Fed's implementation of a Dodd-Frank Act-imposed debit interchange cap as too high. CUNA and its partner members of The Clearing House coalition maintain that the cap, in fact, is too restrictive.

"The district court granted summary judgment to the merchants, concluding that the rules violate the statute's plain language. We disagree," the three circuit court judges penned in their opinion.
 
"Applying traditional tools of statutory interpretation, we hold that the (Federal Reserve) Board's rules generally rest on reasonable constructions of the statute, though we remand one minor issue--the Board's treatment of so-called transactions-monitoring costs--to the Board for further explanation," they continued.

CUNA General Counsel Eric Richard explained of the judges' opinion, "This decision constitutes an almost total rejection of the merchants' arguments.

"We hope this will be a first step toward restoring some grounding in reality to the debate over interchange fees, not only in the courts, but also in Congress and at the regulatory agencies."
 
On Friday, the National Retail Federation said it is disappointed in the decision, and said it is weighing an appeal to the U.S. Supreme Court. 
 
At this point, the merchants have a few options.  First, they could do nothing, almost certainly ending the case.  Or they could ask the D.C. Circuit to review the case "en banc," which would ask all members of that court to decide whether they want to re-hear the case.  Or they could appeal to the Supreme Court. 
 
CUNA will continue to monitor the case, and should a Supreme Court review move forward, will alert credit unions.

Golden Plains CU of Kan. assumes liquidated CU's shares

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ALEXANDRIA, Va. (3/24/14)--The Kansas Department of Credit Unions announced a decision Friday that Parsons Pittsburg CU of Parsons, Kan., placed into conservatorship on Jan. 24, has no prospect for restoring viable operations on its own and should be liquidated.

Upon announcing Parson's  insolvency and liquidation, the Kansas regulator also named the National Credit Union Administration as liquidating agent. Golden Plains CU of Garden City, Kan., immediately assumed Parsons Pittsburg's 1,466 members, $13.4 million in assets, and its shares and loans. Service to former Parsons Pittsburg's members will continue uninterrupted.

Golden Plains is a federally insured, state-chartered credit union with $418.5 million in assets and 59,413 members, according to its most recent Call Report.

Chartered in 1951, Parsons Pittsburg served persons residing or employed within a 45-mile radius of Labette, Bourbon, Cherokee or Crawford counties in Kansas. The credit union also operated a branch in Pittsburg, Kan.

Parsons Pittsburg CU is the third federally insured credit union liquidation of 2014.
 

GSE limits must be part of total reform package, CUNA urges

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WASHINGTON (3/24/14)--Housing finance reforms must be considered in a comprehensive way, not broken out as piecemeal changes, the Credit Union National Association warns in a comment letter to the Federal Housing Finance Authority.
 
Last year that agency proposed a plan that could  gradually reduce maximum loan limits by more than 4% for loans eligible to be purchased by Fannie Mae or Freddie Mac. 
 
"As you know, Congress is currently actively looking at a number of ways to reform the housing finance system," CUNA President/CEO Bill Cheney wrote to FHFA Director Mel Watt, a former member of Congress. "Any legislation to reform the housing finance system will establish a system that may last for decades, and Congress should have the opportunity to address loan limits as part of a comprehensive package...We recommend that FHFA not take any action on loan limits as conservator of the (government-sponsored enterprises) until Congress first acts."
 
The GSEs are of crucial importance to credit unions that sell and service mortgage loans. In 2012, credit unions originated $123 billion of first mortgages, or about 6.5% of the total mortgage origination market. Although credit unions traditionally are portfolio lenders, the number of credit union loans sold has almost doubled from 2009 to present, to an average of 52%.
 
Cheney wrote that CUNA believes the new housing finance system should apply a reasonable conforming loan limit that adequately takes into consideration local real estate costs in higher cost areas.
 
Under the plan, the current statutory maximum loan limit for one-unit properties would decline from $417,000 to $400,000. The FHFA said the loan purchase limit would be reduced by the same percentage in other parts of the country, including high-cost areas in the contiguous states where current limits are set at $625,500. Those loan purchase limits would be set at $600,000, according to the FHFA.

The CUNA leader went on to say that it is "an open question" as to whether FHFA even has the legal authority to lower loan limits without a statutory change.
 
"In section 1124 of the Housing and Economic Recovery Act of 2008 (HERA), Congress modified the charter acts for the GSEs to set forth a requirement that loan limits be adjusted annually to reflect housing prices. However, in setting $417,000 as the baseline for single-family residences, Congress required that loan limits not be adjusted downward."

Comments were due March 20.

Use the resource link to access CUNA Comment Letters.

President signs Flood Insurance delays into law

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WASHINGTON (3/24/14)--President Barack Obama has signed The Homeowner Flood Insurance Affordability Act into law.
 
The new law delays the implementation of certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012.
 
Biggert-Waters extended the National Flood Insurance Program's (NFIP) authority through Sept. 30, 2017, and mandated major flood insurance reforms, including phasing out subsidies for many properties and raising the cap on annual premium increases.
 
This new law delays increases in NFIP premiums until the Federal Emergency Management Agency puts in place a plan to ensure they are implemented affordably. It reinstates lower rates for grandfathered properties, which were repealed by Biggert-Waters, and extends the effective date of pending flood insurance escrow rules to Jan. 1, 2016, from July 6, 2014. 

The law also clarifies that escrow requirements would apply to loans closed on or after the new effective date, and that certain loans would not be subject to the escrow requirements, such as second liens if proper coverage is in place in connection with the first lien, HELOCs, commercial loans secured by a residence, and more.

The National Credit Union Administration and federal banking regulators were in middle of writing rules to implement certain sections of Biggert-Waters when the bill, upon which the new law is based, passed the House and Senate.  The regulators now need to amend the proposed regs to address the escrow changes.

SBA moves to 'invigorate' flagship guaranteed lending programs

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WASHINGTON (3/24/14)--The U.S. Small Business Administration has made changes to its flagship business lending programs, effective April 21, intended to increase eligibility for loans under the 504 Loan Program and the 7(a) Loan Program.

By increasing eligibility the SBA hopes to reinvigorate the guarantee programs. The agency describes the changes as:

Eliminating the personal resource test: A borrower will no longer be required to obtain a maximum level of personal finance resources for a 7(a) or 504 loan. This will streamline the loan process by eliminating complicated regulations used to determine the amount of collateral required.

Revising the rule on affiliation: Revising this rule will open access to SBA loans to businesses that, under current rules, would not qualify as a small business under SBA's size standards by virtue of their association with other companies. It also would streamline 504 loan applications and reduce paperwork requirements for 504 and 7(a) loan applications.  

Eliminating the nine-month rule for the 504 loan program: Eliminating the nine-month rule removes a restriction that limits a business to include in its 504 project only expenses incurred nine months prior to submitting the loan application. The new rule would allow inclusion of expenses incurred at any time (e.g., projects put on hold for more than nine months due to a natural disaster).

Increasing accountability of the Certified Development Companies' (CDC) board of directors while eliminating requirements for membership: Refocusing CDC corporate governance requirements will reinforce the importance of board accountability for CDC oversight for the 504 loan program and set in place measures to strengthen oversight in order to maintain program integrity.

The Credit Union National Association has urged the SBA to provide such flexibility and supports the changes as a step in the right direction to make it easier for credit unions and other participating entities to navigate the SBA loan process.

CUNA also recently contacted the SBA to urge continuation of an 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.

Use the resource links to read more about the SBA final rule.