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CUNA backs enhancements to Hope for Homeowners

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WASHINGTON (3/10/09)—The Credit Union National Association (CUNA) supports enhancements to the Hope for Homeowners (H4H) program as outlined in an interim final rule intended to draw more borrowers and lenders to that program. Under H4H, eligible homeowners may refinance their subprime mortgage loans into fixed-rate, FHA-backed loans. The H4H program also allows the subordinated lienholders to share in any future appreciation of the property as a means to encourage them to participate in the program. In a recent comment letter to the U.S. Department of Housing and Urban Development (HUD), which administers the FHA, CUNA especially endorsed a provision in the new interim final rule that would allow up-front payments to subordinated lienholders. The interim final rule would allow the subordinated lienholder to receive 3% of the subordinated loan balance if the cumulative loan-to-value ratio exceeded 135%, or 4% if this ratio was less than or equal to 135%. However, CUNA said that even with that enhancement, credit unions would continue to view the process of qualifying as an FHA-approved lender to be very burdensome. CUNA expressed a strong desire to work with the FHA to determine how the process may be streamlined to further facilitate credit union participation. Use the resource link below to read CUNA’s complete comment.

Upcoming hearings of CU interest

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WASHINGTON (3/10/09)—There are several hearings of interest to credit unions upcoming this week. The Credit Union National Association (CUNA) will be monitoring the following sessions:
* Today, the House Appropriations Committee subcommittee on financial services and general government will hold a hearing on "Treasury Action Related to the Financial Crisis;" * Also today, the Senate Budget Committee has scheduled a hearing on President Barack Obama's Fiscal Year 2010 budget proposal. A second day of hearings will be held on Thursday. Office of Management and Budget Director Peter Orzsag will testify on Tuesday; Treasury Secretary Geithner on Thursday; * On Wednesday morning, the House Financial Services Committee will mark-up S. 383, a bill that provides for a special inspector general for the U.S. Treasury Department's Troubled Asset Relief Program—or TARP. In the afternoon, that panel’s subcommittee on financial institutions and consumer credit will conduct a hearing on "Mortgage Lending Reform: A Comprehensive Review of the Mortgage Lending System”; and * The Joint Economic Committee will hold a hearing on TARP accountability and oversight on Wednesday.
Also, as noted in CUNA’s March 9 News Now, on Thursday, the House Financial Services subcommittee on capital markets, insurance and government-sponsored enterprises will examine mark-to-market accounting practices and its implications. CUNA will submit a statement for the record of this hearing.

Congress update Status of spending cramdown bills

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WASHINGTON (3/10/09)—Unable to complete consideration of the FY 2009 Omnibus Appropriations Act last week, the U.S. Congress passed a continuing resolution through March 11 to keep the government going. The Senate resumed consideration of the spending bill Monday and is expected to cast its final vote on it Wednesday. Important to credit unions, the legislation includes language that removes a cap on the Central Liquidity Facility lending authority through Sept. 30. The appropriations bill also includes language to expand the mortgage lending rule-making authority of the Federal Trade Commission, a move that is opposed by the Credit Union National Association (CUNA). A CUNA-supported amendment to strip this provision from the spending bill was withdrawn last week, but only after key lawmakers agreed to address this issue on the next available piece of legislation. CUNA also continued to work on the Senate side on compromise language to H.R. 1106, the Helping Families Save Their Homes Act, approved 234-191 in the House. This legislation includes language permitting bankruptcy courts to modify the terms of loans secured by a debtor's principal residence, and CUNA strongly advocates a narrowing of the courts’ “cramdown” authority. H.R. 1106, however, also includes language that would make permanent the $250,000 share and deposit insurance limit. It also would extend the amount of time the National Credit Union Administration (NCUA) has to replenish its share insurance fund when it drops before 1%, and would increase the NCUA borrowing authority. Those provisions have CUNA’s strong support. Also of note, Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) continue to design a House bill comparable to Senate legislation being drafted by Sen. Charles Schumer (D-N.Y.), to lift the cap on credit union member business lending. Last week Schumer announced his intention to introduce legislation raising the MBL cap as a way to provide additional credit to America's small businesses. Schumer said that credit unions have a long track record of scrutinizing borrowers, and have low delinquencies as a result. "Because deposits have been on the rise as people move their savings from the stock market to savings accounts, (credit unions) have cash on hand to loan to small businesses," he noted. The current MBL cap is set at 12.25% of assets. CUNA estimates that credit unions could lend $10 billion to small businesses in the first year after the cap is lifted.

Inside Washington (03/09/2009)

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* WASHINGTON (3/10/09)—The Senate Banking Committee has hired three staff members, according to the “Washington People” section of the March 9 American Banker. Charles Yi was hired as a senior policy adviser and counsel and will cover Troubled Asset Relief Program oversight, insurance and commercial banking law, regulatory modernization, and other legislative issues. Yi was a counsel to the House Financial Services Committee. Beth Cooper is now a committee professional working on affordable housing and community development. She was a congressional liaison for the National Association of Housing and Redevelopment Officials. Mitch Warren has been hired by the banking panel to handle transportation issues as a senior policy adviser. He previously worked for Majority Leader Harry Reid on Senate Environment and Public Works Committee issues, and transportation and other issues for the Senate Budget Committee. The “Washington People” section also noted that Sen. David Vitter (R-La) has added Travis Johnson to his staff as a legislative assistant working on Senate Banking Committee issues… * WASHINGTON (3/10/09)—Federal Reserve Bank of Kansas City President Thomas Hoenig said it is a misnomer to criticize the idea of public authorities taking over large institutions as being a nationalization of the country’s financial system. He said that step would be temporary and targeted at a limited number of failed institutions that needed cleaning up. The goal would be to return them to private ownership as quickly as possible. His comment appeared to be at odds with statements the same week by Federal Reserve Board Chairman Benjamin Bernanke who told the Senate Banking Committee that some companies are so large the government must do what is necessary to support them (American Banker March 9)… * WASHINGTON (3/10/09)—The Federal Deposit Insurance Corp. (FDIC) has said it is attempting to use its new premium structure to reduce the cost of bank failure or to at least move more of the potential high cost upfront. (American Banker March 9) Loss rates now are significantly higher than previous rates with estimated rates for the 16 failures so far in 2009 averaging 23% of the bank’s asset size. Lat year the loss rates for 24 failures, excepting Washington Mutual Inc., was around 25%. The FDIC’s final rule last month making changes to the premium structure are meant to temper the high cost. The rule takes aim at brokered funds and Federal Home Loan Bank advances, which the FDIC has identified as factors in the increased loss rates at failed banks…