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Inside Washington (03/29/2010)

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* WASHINGTON (3/30/10)--The authority of the National Flood Insurance Program (NFIP) lapsed as of March 29. Unlike the short-term extensions that the U.S. Congress has been providing to the program for a number of months, it failed to take any action before going on recess until April 12. Until Congress restores NFIP authority, the program will not be able to issue new flood insurance policies, increase coverage on existing policies, or issue renewal policies. The Federal Emergency Management Agency (FEMA), which runs the NFIP, issued a memorandum last October on “Recommendations/Guidance for Possible NFIP Authority Lapse and Hiatus” in anticipation that a lapse in the flood insurance program might occur. FEMA says that agents should look to its October memo to determine the ramifications of the “hiatus.” This is not the first time that the NFIP authority has lapsed due to congressional inaction in recent years, and as the memo notes, Congress can retroactively extend NFIP authority. As reported by News Now Monday, Sen. Harry Reid (D-Nev.) cancelled a weekend cloture vote on H.R. 4851, the bill that would have extended authorization for the NFIP and federal unemployment insurance, as well as continue federal subsidies to COBRA health insurance recipients through April 30. Funding for the NFIP, unemployment insurance, and COBRA will lapse until Congress reconvenes on April 12. A vote on H.R. 4851 is now scheduled for April 12… * WASHINGTON (3/30/10)—Recess appointments announced by the White House on Saturday included Jeffrey Goldstein as Under Secretary for Domestic Finance and Michael Mundaca as Assistant Secretary for Tax Policy. The Goldstein appointment is of interest to credit unions because it is his department at Treasury within which many issues related to credit unions are discussed. In fact, Goldstein was in attendance prior to his appointment at a meeting between Assistant Treasury Secretary for Financial Institutions Michael Barr and the Credit Union National Association. Goldstein is Barr’s new boss. The new under secretary has served as manageing director of Hellman & Friedman LLC, a private equity investment firm with offices in San Francisco, New York and London, as well as managing director and CFO at the World Bank from 1999 to 2004. Mundaca, Treasury’s new tax assistant secretary, currently is senior policy adviser for the Treasury's Office of Tax Policy and the Acting Assistant Secretary for Tax Policy. He served at the Treasury during the Clinton administration and returned to the Treasury Department in 2007, as the Deputy Assistant Secretary for International Tax Affairs, where he served as Managing Director and CFO. The positions must be confirmed by the U.S> Senate... * WASHINGTON (3/30/10)—Although the Obama administration's latest foreclosure prevention plan, announced Friday, is getting high marks from many observers, but some consumer groups think the plan must become mandatory to have a significant impact on loan modifications. Under the initiative the U.S. Treasury Department’s Home Affordable Mortgage Program (HAMP) will push for writedown of a mortgage’s principal amount rather than reductions in interest rates and payments. Without a shift to make the new approach mandatory for servicers, some expect it will help only borrowers on the margins. However, the U.S. Treasury Department says that without new legislation, it does not have statutory authority to mandate participation. Still some said the new focus on unemployed borrowers is a good move toward improving the HAMP program…

Only flexible-rate home equity terms may be changed writes NCUA

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ALEXANDRIA, Va. (3/30/10)--While federal credit unions usually cannot adjust the terms of home equity plans, Regulation Z “does not prohibit rate changes that are set forth in a home equity agreement, such as stepped-rate or preferred rate plans,” the National Credit Union Administration (NCUA) said in a recently released legal opinion. According to NCUA Associate General Counsel Sheila Albin, federal credit unions “cannot change the annual percentage rate (APR) on a home equity plan unless the plan has a variable rate.” Federal credit unions “may add a floor rate to an existing home equity loan if the original agreement disclosed the possibility of adding the rate and any associated triggering event or the borrower agrees to the addition in writing,” she added. Reg Z “specifically prohibits FCUs from changing, by contract or otherwise, the annual percentage rates (APR) on home equity plans, unless the change is based on a publicly available index that is not under the [credit union’s] control.” For the full opinion, use the resource link.

Treasury extends CDCI app deadline to April 30

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ALEXANDRIA, Va. (3/30/10)--The U.S. Treasury on Monday extended the deadline for funding applications under its Community Development Capital Initiative (CDCI) until April 30. Eligibility for the CDCI program, which allows low-income credit unions (LICUs) that are certified as Community Development Financial Institutions (CDFIs) to obtain up to 3.5% of their assets as secondary capital, is determined by the National Credit Union Administration (NCUA) and the Treasury. According to an NCUA release, secondary capital plans are also required to take part in the CDCI program, and these plans must “meet the requirements per NCUA’s Rules and Regulations 701.34 (b)(1).” Secondary capital plans must be submitted by May 10. The National Federation of Community Development Credit Unions' recently opted to make $1 million in secondary capital available as matching funds for member community development credit unions (CDCUs) that might not be immediately eligible for CDCI investments in a bid to help more CDCUs qualify for CDCI funds.

Comment due May 28 on NCUA changes for merger director rules

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WASHINGTON (3/30/10)--The National Credit Union Administration (NCUA) on Monday published for public comment a series of proposed changes to rules that address the fiduciary duties of federal credit union directors, credit union-to-bank mergers, and charter and insurance conversions. Comment on the proposed rule changes, which would require federal credit union directors to "carry out their duties in good faith, and have, or gain, an understanding of basic finance and accounting practices," must be received by May 28. The NCUA proposal, which was approved by the Board at its March 18 open meeting, would also prohibit federal credit unions from "indemnifying its officials or employees for liability associated with misconduct that is grossly negligent, reckless, or willful in connection with a decision that affects the fundamental rights of members." The NCUA proposal also covers changes to its current standards governing "the information that credit unions seeking to convert must disclose to members," including the approval of conversion proposals, the certification of member votes on conversion proposals, and guidelines on how those votes must be completed. The Credit Union National Association's (CUNA) Mergers Task Force, chaired by Paul Mercer, will be reviewing the proposal for CUNA. For the full release, as published in the Federal Register, use the resource link.

CUs voice heard through CUNA Dahlstrom tells Spokane paper

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WASHINGTON (3/30/10)--Speaking in an interview published in the March 26 edition of the Spokane Journal of Business, Spokane Teachers CU President/CEO Steve Dahlstrom described the Credit Union National Association's (CUNA’s) role as a voice for credit unions, particularly the small cooperatives that comprise the “bulk” of CUNA’s membership. Dahlstrom recently began a term on the CUNA board of directors. One significant area where CUNA’s work has stood out is the ongoing battle over interchange fees, and, according to Dahlstrom, CUNA has the ability to oppose large retailers in Congress, a task that credit unions themselves could not take on. CUNA also provides much needed feedback to the National Credit Union Administration (NCUA) and other financial regulators and “helps its members interpret and implement regulations” and “ensure compliance,” Dahlstrom said. Dahlstrom in the interview also cited CUNA’s role in ensuring that credit unions “could spread out over several years the special assessments they're required to pay to restore to fiscal health the National Credit Union Insurance Fund, rather than having to make far bigger single lump payments, as was originally mulled by members of Congress.” Other focal points for CUNA and, now, for Dahlstrom, include potential changes to member business lending rules for credit unions, new credit card rules, and high-level changes to the way that corporate credit unions are structured and governed. Dahlstrom also gave his own opinion as a credit union leader in the interview, calling on the NCUA to simplify required account disclosures “so people can understand what it is they are reading more easily.” "We've erred on the side of disclosure to the point where it's hard to do what you want to do," he added. Dahlstrom's term on the board will run through CUNA's 2012 Annual General Meeting.