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CFPB small biz review panel discussed disclosures more

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WASHINGTON (3/7/12)--The Consumer Financial Protection Bureau (CFPB) conducted the first meeting of its small business review panel to discuss the bureau's recent work to integrate the Truth in Lending and Real Estate Settlement Procedures Act (RESPA) mortgage disclosure requirements.

The Small Business Regulatory Enforcement Fairness Act (SBREFA) panel, required by the Dodd-Frank Wall Street Reform and Consumer Protection Act,  is charged with seeking input directly from credit unions and other small financial service providers for any proposed rule that may have a significant economic impact on a substantial number of small providers.

The panel is comprised of representatives from the CFPB, the U.S. Small Business Administration (SBA), and the Office of Management and Budget. Representing credit unions during the forum were Lori Thompson, president of Premier FCU, Greensboro, N.C., Bernie Winne, CEO of Boston Firefighters CU, Boston, Mass., and Jeanne Kucey of JetStream FCU, Miami Lakes, Fla.

The panel discussion Tuesday involved topics including the prototype loan estimate and settlement disclosures developed by the CFPB through its Know Before You Owe mortgage disclosure project.

The review panel also discussed:
  • The definition of an "application" under RESPA to determine when a good-faith estimate under current rules is required to be generated and given to a consumer;
  • Certain re-disclosure requirements concerning loan-cost estimates,
  • Proposed recordkeeping and data collection requirements for lenders, and
  • The composition of annual percentage rate calculations under consideration by the bureau.
The bureau intends to issue a proposed combined mortgage disclosure rule in July.

OIG issues material loss review on Vensure

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ALEXANDRIA, Va. (3/7/12)--Although the National Credit Union Administration's (NCUA's) Office of Inspector General (OIG) noted that the low level of anticipated losses from the failure of Vensure FCU doesn't meet the threshold to require an OIG material loss review (MLR), circumstances surrounding the NCUA's conservatorship of the small credit union were sufficiently "unusual in nature" to prompt such a review.

The NCUA last July closed the Mesa, Ariz., Region V credit union, which had started out as a New York, Region I, credit union. At the time of liquidation, Vensure had 140 members and $8.1 million in assets. The OIG report noted an estimated $39,000 loss to the National Credit Union Share Insurance Fund.

The credit union had been taken into conservatorship by the NCUA on April 15, with the agency claiming that the credit union failed to properly diversify its business.

It was, in fact, that lack of diversity and the NCUA's notation of it and supervision of it that, in part, spurred the OIG report


"We determined Region I examiners failed to readily identify or adequately pursue the nature of Vensure's primary source of income, ACH-related fee activity, which was later determined to be tied to a criminal violation of the (Unlawful Internet Gambling Enforcement Act) UIGEA.

"This occurred despite Region I examiners conducting an on-site, risk-focused supervisory contact specifically focused on Vensure's FedWire controls and ACH activities and procedures," the MLR (OIG-12-05), dated Feb. 29, said.

The OIG report said examiners explained they did not identify the nature and scope of Vensure's fee activity because their primary focus was getting the credit union "back on track" through the identification of issues such as appropriate record keeping, written policies, a business plan, and appropriate operating procedures.

"As a result, we believe Region I examiners not only missed uncovering what turned out to be an elaborate money laundering scheme tied to illegal internet gambling involving several Vensure members, but also could have prevented or mitigated the current and potential loss to the NCUSIF," the report said.

In September 2011, the U.S. Department of Justice charged the owners and executives of an online gambling site, which deposited funds into Vensure, with paying themselves $444 million since 2007 while defrauding players in what the government alleged was a massive Ponzi scheme.

Vensure was one of 16 financial institutions that allegedly held funds tied to online gambling sites under investigation by the Federal Bureau of Investigation. The credit union challenged the NCUA's conservatorship, but the challenge was rejected in federal court.

Include MBLs in jobs bill CUNA urges key senators

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WASHINGTON (3/7/12)--The Credit Union National Association (CUNA) has urged Senate Banking Committee leaders in a letter to include provisions to expand authority for credit union member business lending (MBL) in any new jobs and capital formation legislation they will be considering--and to reject banker pleas to keep the credit union legislation out of the package.

CUNA also has launched an Action Alert to encourage and assist credit unions in contacting their senators to seek lawmakers' support for adding an MBL cap increase to any Senate small-jobs package as a "common sense" way to boost the economy by helping small businesses and creating jobs.  

In the letter to Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking member Richard Shelby (R-Ala.), CUNA President/CEO Bill Cheney noted that the only opposition to the credit union member business lending bill (S. 509 ) comes from organizations representing the banks that pulled back access to credit from their small business customers during the financial crisis.

Cheney also reminded the committee leaders that the banks that oppose S. 509 are "the same banks Congress bailed out in 2008 with TARP, the same banks to which Congress made available $30 billion of taxpayer money to lend to small businesses, the same banks that took only a fraction of that money and used most of what they took to refinance their TARP obligations."

The CUNA leader added that, today, these banks are asking Congress for reduced regulatory burden with a promise that the changes they seek will benefit small businesses. "At the same time, the American Bankers Association says it would rather see this committee's effort fail than to see S. 509 enacted into law," Cheney wrote.

"After devastating the housing market, retreating from the small business market, receiving taxpayer bailout after taxpayer bailout, being begged by the government to lend to small businesses and refusing that call, America's banks now come to Congress with the message: they will oppose their own regulatory relief legislation if Congress allows the credit unions to provide more assistance to small businesses," the CUNA president wrote.

CUNA estimates show that during the first year after enactment of legislation to increase the MBL cap to 27.5%, up from the current 12.25%, small businesses would see a $13 billion infusion of new credit and the general economy would witness the creation of 140,000 new jobs--all at no cost to taxpayers.

"It is clear: the banks are not interested in spurring growth through capital formation. They would rather see their legislation wither on the vine than see well-capitalized and experienced credit unions increase their lending to small businesses."  The CUNA letter was sent as the Senate's banking panel convened Tuesday to discuss initiatives that could create job growth during the second of a series of hearing entitled "Spurring Job Growth Through Capital Formation While Protecting Investors."

Use the resource links to read the complete text of Cheney's letter, view CUNA's comprehensive response to banker assertions about credit union business lending, and access CUNA's Action Alert.

Inside Washington (03/06/2012)

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  • WASHINGTON (3/7/12)--The Dodd-Frank Act appears to have created a disconnect in efforts to synchronize financial reform between U.S. financial institutions and other countries, according to participants at an Institute of International Bankers conference. Dodd-Frank created a mandate for U.S. regulators to rewrite financial regulation following the financial crisis of 2008 (American Banker March 6). Those changes have created a stronger possibility of divergent views among international regulators, said Jill Sommers, a board member on the Commodity Futures Trading Commission. Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc., said that despite efforts by the Basel committee to harmonize rules, every country must largely set its own regulatory agenda. Petrou said the gap between attempts to end "too big to fail" in the U.S. compared with its preservation in other nations is as wide as the Grand Canyon …
  • WASHINGTON (3/7/12)--As many as 27% of the 37 million U.S. student loan borrowers have past-due balances of 30 days or more, according to a report released Monday by the Federal Reserve Bank of New York. "In sum, student loan debt is not just a concern for the young," the report said. "Parents and the federal government shoulder a substantial part of the postsecondary education bill." From the second to the third quarter of 2011, the total outstanding student loan balance grew 2.1%, to $870 billion from $852 billion. Over the same period, other types of consumer debt declined or remained flat. Of the 241 million people in the U.S. who have a credit report with Equifax--which provided the data for the study—about 37 million (15.4%) hold outstanding student loan debt. Of the 37 million borrowers who have outstanding student loan balances as of third quarter 2011, roughly 14.4%, or about 5.4 million borrowers, have at least one past due student loan account. Together, these past due balances sum to $85 billion, or roughly 10% of the total outstanding student loan balance …
  • WASHINGTON (3/7/12)--The Obama administration said Tuesday it will reduce fees for certain borrowers who are refinancing mortgaged backed by the Federal Housing Administration (FHA) streamlined program (The New York Times March 6). Under that program, mortgages must already be FHA insured and cannot be delinquent. The refinancing must result in a lowering of the borrower's monthly principal and interest payments, and no cash may be taken out on mortgages refinanced using the streamline refinance process. The White House said the FHA's upfront mortgage insurance premium will drop to 0.01% of the loan balance from 1% for loans that were originated before June 1, 2009 …

Small CU roundtable featured at CUNAs GAC

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WASHINGTON (3/7/12)--Small credit unions will have the opportunity to discuss critical issues during the second annual, free, half-day Roundtable meeting at the beginning of the Credit Union National Association's (CUNA's) 2012 Governmental Affairs Conference (GAC).

The Roundtable will be held at the Washington Convention Center on the first day of this year's GAC, Sunday, March 18, from 3-5 p.m. (ET).

The small credit union session is scheduled to include several presentations, as well as group discussion on a variety of issues of concern to the nation's smaller credit unions. Wide-ranging discussion topics will include: small credit union collaboration initiatives; the National Credit Union Administration (NCUA); regulations and regulatory burden; and the transitioning of corporate credit union services, among other topics.

The collaboration discussion will feature Drew Egan and Jon Hernandez. Egan, of the Michigan Credit Union League & Affiliates and CU Corp, will speak about the Michigan league's shared branding initiative --a project that aims to create a strong brand for credit unions of all sizes.  Hernandez, CEO of three credit unions in Southern California (Mattel FCU, CalCom FCU and City of Downey FCU), will discuss the Southern California Credit Union Alliance--a forum for collaboration and cooperation focused on helping small credit unions thrive by reducing operating costs and sharing best practices.

Bill Myers, director of the NCUA's Office of Small Credit Union Initiatives (OSCUI), also will speak to attendees.  Myers is on the agenda to outline the agency's efforts to assist small credit unions through one-on-one help, loans and grants, partnerships and training provided by OSCUI.

CUNA senior staff Kathy Thompson and Ryan Donovan will be on hand during the session to weigh in on compliance issues and to brief attendees on the credit union legislative front.

Also on Sunday at the GAC, the Exhibit Hall Grand Opening Reception will take place from 7-9 p.m. (ET) and the opening concert, featuring Taylor Hicks, is scheduled for 9-10:30 p.m. at the Convention Center.

Small credit unions that register for the GAC can register for the Roundtable at the same time.  Credit unions that do not plan to attend the GAC must register for the Roundtable separately.  These credit unions can register by calling CUNA 800-356-9655 x5700 or by using the resource link below.