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Inside Washington (03/30/2010)

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* WASHINGTON (3/31/10)--Credit unions may want to let their business members know that the Small Business Administration (SBA) is warning small businesses to use caution if they are contacted by firms offering to help them apply for funds available through SBA programs. The SBA and Office of Inspector General have received several complaints from businesses about abusive marketing practices, scams, and exorbitant fees charged by firms offering to help them obtain a loan, grant or other federal funds. When using a third party to apply for SBA funding, businesses should remember they can get free assistance from SBA’s district offices and website, SBA said. They also should ask for references and confer with trusted colleagues when selecting service providers, and should establish and document what they are being charged, when they will be charged, what they must do and what services they will receive. The SBA Office of the Inspector General will investigate and respond to all complaints ... * WASHINGTON (3/31/10)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said Monday she supports charging big banks a fee to pay for future takeovers of systemically significant institutions (American Banker March 30). The House passed a financial reform package to create a resolution account of $200 billion. Bair said the account is not a “bailout fund”--but rather a taxpayer protection plan. A prefunded system also would be more “predictable” than assessing banks a fee after the takeover ... * WASHINGTON (3/31/10)--Banking industry representatives argue that creating a consumer protection agency could result in rules that conflict with safety and soundness standards, but some regulators said that such conflicts are rare (American Banker March 30). Brad Sabel, former New York Federal Reserve Bank official, said he did not recall a case where consumer protection regulations posed threats to institutions’ safety and soundness. Comptroller of the Currency John Dugan also noted in a recent speech that such conflicts would be rare. Bankers have argued that the agency could write rules, like forcing broad loan modicfications, that could lead to risky bank practices and more lending to uncreditworthy borrowers. However, reform bills in the House and Senate directs the consumer agency to consult with the primary financial regulator prior to writing a rule, and to allow plenty of time for public comments before finalizing a plan...

Congressional recess key time for grassroots MBL push

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WASHINGTON (3/31/10)--With Congress away from Washington until April 12, the central front for member business lending (MBL) advocacy has shifted to individual districts. Credit union members and representatives alike are participating in grassroots action, and the Credit Union National Association (CUNA)has sought to coordinate these activities with a trove of online resources. Items in the CUNA archive include background information for advocates and members of the press, letters both to and between members of Congress in support of MBLs. In the information that CUNA has shared with credit union backers, CUNA cites not only the safety and sound financial judgment that credit unions represent, but also addresses small businesses and their needs for funding. CUNA also notes the vast experience that many credit unions have regarding business lending, and cites statistics that demonstrate that while bank lending has decreased by 11% over the last year, the amount of business lending done by credit unions has grown by 15% over the same time period. CUNA has estimated that lifting the current member business lending cap of 12.25% to 25% of credit unions’ assets would allow credit unions to extend up to $10 billion in additional business loans to their members, helping them to create 108,000 jobs in the first year following enactment. As CUNA was urging credit unions to advocate for MBLs, a Wall Street Journal article outlined the credit union push for increased lending and the bankers' opposition to it. "The stars are aligned, and now is the perfect time for this to happen," CUNA Senior Vice President of Legislative Affairs John Magill told the Journal. Magill also noted commercial lender opposition to credit unions attempts to “impede” on their loan market share, “especially during the financial turmoil that has crippled more than 200 banks." National Credit Union Administration Board Member Michael Fryzel, speaking at the Illinois Credit Union League’s Legislative Conference, recently encouraged credit union advocates to share their story with their elected representatives.

CDFI Fund to hold conference call for CMF applicants today

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WASHINGTON (3/31/10)--The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund this week announced that it will hold a pair of conference calls for potential applicants to its Capital Magnet Fund (CMF). During the calls, which will take place today at 3 p.m. ET and 3 p.m. ET on Friday, potential applicants will be able to ask questions of CDFI Fund staff about the current round of the Capital Magnet Fund. The CMF is a competitive grant program for CDFIs and other nonprofits to attract private capital for development, preservation, rehabilitation, and purchase of affordable housing for low-income families. It is also meant to stir economic development activities or community service, which in conjunction with affordable housing activities may implement a concerted strategy to stabilize or revitalize a low-income area or underserved rural area. The CDFI Fund is currently searching for qualified application reviewers and recently extended the application deadline for FY 2010 examiners until March 31. For the full CDFI Fund release, use the resource link.

Fed article covers Reg Z escrow provisions

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WASHINGTON (3/31/10)--The Federal Reserve Board has amended Regulation Z, Truth in Lending, to require escrow accounts for all "higher-priced" first-lien mortgages that are secured by a consumer's principal dwelling, and the new escrow rules for these mortgages go into effect Thursday. The amendments, which were issued in 2008, establish new protections for consumers from unfair or deceptive home mortgage lending and advertising practices and were issued under the authority provided by the Home Ownership Equity Protection Act (HOEPA). The rules also impose limits on prepayment penalties and require escrow accounts for taxes and insurance, prohibit certain servicing practices, and prevent certain misleading and deceptive advertisements. Escrow accounts are required for condominium property taxes, but not for insurance if it is paid by the association under a master policy. (See related story: April 1 deadline for higher-priced mortgage loans) According to the Credit Union National Association, loans are classified as "higher-priced" if the annual percentage rate exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by 1.5%. Last year, the Federal Reserve Bank of Philadelphia released an article entitled "Escrow Accounting Rules: Are You in Compliance?" The article, which may be helpful for credit unions, provides information on escrow accounting methods, preparing escrow disclosure statements, and ensuring that annual analyses result in correct balances. For the full article, use the resource link.