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CUNA participates in today's White House GSE reform meeting

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WASHINGTON (3/26/14)--As the attention of the Senate Banking Committee is dominated by preparations for a vote on its housing finance reform bill, White House staff continues to conduct meetings with stakeholders, like the Credit Union National Association, on policy concerns.
 
In a meeting at the White House today, CUNA Chief Economist Bill Hampel and General Counsel Eric Richard will represent credit union concerns. CUNA urges the U.S. Congress as it considers comprehensive housing finance reform to ensure that credit unions and other community financial institutions continue to have access to the secondary mortgage market.
 
In his January State of the Union address, President Obama called on Congress to pass a housing finance reform bill that would "protect taxpayers" and keep "the dream of homeownership alive for future generations."
 
A fact sheet released at that time outlined four White House principles for reform:
  • Utilize the private sector as the center of the housing finance system;
  • End Fannie Mae and Freddie Mac as they currently exist;
  • Ensure widespread access to safe and simple mortgage products such as the 30-year fixed rate mortgage; and,
  • Support affordability for creditworthy first-time homebuyers and access for affordable rental housing.
As the Senate Banking Committee prepares for its markup within the next few weeks of the Senate's plan for a new housing finance system, CUNA is drafting a comprehensive list of suggested changes and improvements for the panel ( News Now March 25).
 
In essence, the bipartisan draft winds down and eliminates Fannie Mae and Freddie Mac and establishes a "modernized, streamlined and accountable" Federal Mortgage Insurance Corporation (FMIC). The draft bill also creates a reinsurance fund, to be known as the Mortgage Insurance Fund, to protect taxpayers.
 
The bill is 425 pages long. (See resource links.)

Mobile banking use jumps to one-in-three, Fed report says

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WASHINGTON (3/26/14)--The number of consumers that used mobile phones to access credit union and bank accounts in 2013 rose to 33%, a sharp, five-percentage-point increase over 2012's total, the Federal Reserve Board said in a report released Tuesday.

Additionally, the Fed report found that smartphone users really tipped the balance in mobile phone banking.  In 2013, 51% of smartphone users had used mobile banking applications.

Consumers most frequently used their phones to review account balances, monitor recent transactions and transfer money between accounts, the Fed said. In addition, 38% of mobile banking users deposited a paper check with their phone's camera in 2013.

The underbanked were frequent users of mobile financial services: 39% of underbanked consumers with mobile phones used mobile banking last year.

"Mobile phones may also allow for the extension of financial services to an additional 10% of the population that is unbanked…as 69% of this group has a mobile phone, 64% of which are smartphones," the Fed said in a release.

The ubiquitous mobile phones aren't just changing the face of banking services. Consumers are also more frequently using their phones to make purchases, compare product prices and read product reviews, according to the Fed report. Those numbers show:
  • 17% of smartphone owners had used their phone to make a purchase at a retail store;
  • 44% of smartphone users used their phone to compare prices while shopping; and
  • 42% of smartphone users browsed product reviews in-store with their phone.
However, not all are embracing this technology. The Fed report noted that "well over half of mobile phone owners who do not currently use mobile banking say they have no interest in using this technology." Many are also skeptical regarding the safety and benefits of mobile in-store payments.

Data for the report was collected from 2,600 respondents. For the full Fed report, use the resource link.

CFPB: 80% of payday loans renewed or followed by more loans

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WASHINGTON (3/26/14)--More than 80% of short-term loans taken out at payday lenders are rolled over or followed within two-weeks by another loan, according to a new Consumer Financial Protection Bureau report.
 
The report got a public unveiling Tuesday at a payday lending field hearing in Nashville, Tenn.
Click to view larger image The CFPB slide pictured above shows the number of loan sequences per new borrower. According to the bureau, defaulters are more likely than repayers and renewers to have just a single loan sequence. Defaulting on a loan can preclude a consumer from borrowing again, the bureau noted.
CFPB Director Richard Cordray said the bureau study "again confirms that payday loans are leading many consumers into longer-term, expensive debt burdens."
 
While the CFPB believes that some payday loans should continue to be available, it is expected that the bureau will issue new restrictions on their practices.

"Too many borrowers get caught up in the debt traps these products can become. The stress of having to re-borrow the same dollars after already paying substantial fees is a heavy yoke that impairs a consumer's financial freedom," Cordray added in his written remarks.

The bureau said same-day renewals were less frequent in states with mandated cooling-off periods, but also noted that 14-day renewal rates in states with cooling-off periods were nearly identical to states without those limitations.
 
The CFPB analysis found that:
  • 15% of new loans are followed by a loan sequence at least 10 loans long;
  • Half of all loans are in a sequence at least 10 loans long;
  • Increases in loan amounts are more likely to occur early in a loan sequence;
  • Few borrowers amortize, or have reductions in principal amounts, between the first and last loan of a loan sequence;
  • Loan size is more likely to go up in longer loan sequences, and principal increases are associated with higher default rates;
  • Monthly borrowers are disproportionately likely to stay in debt for 11 months or longer; and,
  • The majority of monthly borrowers are government benefits recipients.
The field hearing also featured testimony by consumer groups. Industry representatives and the general public also were provided an opportunity to speak at the session.

The CFPB announced in November 2013 that it would accept complaints on payday lenders and later that month announced 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 (see resource link) 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.

For the full CFPB study, use the first resource link.