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Washington Archive

Washington

GSE Reform Will Remain Hot Topic As Congress Returns

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WASHINGTON (4/1/13)--The U.S. Congress is scheduled to return to Washington early next week, and housing issues are likely to remain a front-burner issue.

Housing policy changes discussed in the U.S. House, the Senate, and the Obama administration in recent months have ranged from almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages.

The Senate Banking Committee earlier this month met to discuss potential bipartisan housing finance changes, and the committee chairman, Sen. Tim Johnson (D-S.D.), said during that hearing that he would work closely with ranking committee member Sen. Mike Crapo (R-Idaho) and hold additional committee hearings before developing a comprehensive reform bill.

Crapo noted that Republicans and Democrats may not completely agree on how best to move forward, but said that disagreement should not preclude them from beginning negotiations.

However, Johnson said he is concerned by the prospect of a fully privatized mortgage financing system, noting that such a system could "place homeownership out of reach for many middle income families and rural communities."

In the Congress' other chamber, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has made housing finance reforms a top priority of his committee, and the chairman has held several hearings on the topic.

At a March 19 hearing, Hensarling and Federal Housing Finance Agency Acting Director Ed DeMarco agreed that Congress should get to work and develop a plan for the future of the U.S. mortgage market. Hensarling has called for a housing finance system that is both sustainable and competitive. He wants to see the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, to be shut down.

DeMarco noted during that hearing that only Congress can abolish or modify the GSE charters "and set forth a vision for a new secondary market structure."

There is broad consensus that comprehensive housing finance reform will not arrive quickly or easily. Meanwhile, bills that address other aspects of the housing market also have been introduced recently.

In the House, the ranking financial services committee member, Rep.  Maxine Waters (D-Calif.), reintroduced legislation meant to strengthen the Federal Housing Administration (FHA) and help ensure that agency's long-term solvency.

A separate Senate bill, the Jumpstart GSE Reform Act, would prohibit any increase in the guarantee fees charged by Fannie Mae and Freddie Mac from offsetting other government spending, and prohibit the sale of preferred GSE shares without congressional approval and structural housing finance reform. (See March 15 News Now story: Housing Policy Bills Unveiled In House And Senate.)

The Credit Union National Association has repeatedly said that any changes to secondary mortgage market structure must allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.

Editor's note: This article is the first ihn a two-part series on housing policy reform. Watch News Now this week for a look at related regulatory actions.

Guidance Addresses Flood Insurance Reform Effective Dates

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WASHINGTON (4/1/13)--The National Credit Union Administration, along with bank and farm credit agencies, put out guidance to address any confusion that might be surrounding effective dates in the Biggert-Waters Flood Insurance Reform Act of 2012.

That act amended the Flood Disaster Protection Act of 1973 and a couple of its provisions were effective immediately upon enactment. They were:

* Amended force-placed insurance provisions (see resource link for details); and

* An increase in the maximum civil money penalty for an FDPA violation to $2,000, and removal of an annual penalty cap.

However, the joint agency guidance clarifies, there is a longer list of provisions that will not go into effect until their implementing regulations are drafted, discussed and made final.  These changes include requirements that:

* Lenders accept private flood insurance policies if the coverage meets the Act's standards;

* Lenders disclose to borrowers certain information regarding the National Flood Insurance Program; and

* Certain lenders and servicers establish certain escrow accounts for flood insurance premiums and fees for loans (outstanding or entered into after July 6, 2014) secured by residential improved real estate or a mobile home. 

Some financial institutions with less than $1 billion in assets will be exempt from the above escrow requirement. 

The agencies intend to publish escrow regulations in sufficient time for the industry to implement them prior to July 2014, the guidance noted.

The Credit Union National Association will provide more information and a summary of all new rules to credit unions when they are available.  Watch CUNA's News Now.

The guidance was issued by NCUA, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Farm Credit Administration.

Time's Up: All BSA Reports Must Be E-Filed Now

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WASHINGTON (4/1/13)--Time's up! Credit unions and other financial institutions must begin using new, online-only Bank Secrecy Act (BSA) report forms starting today, the Financial Crimes Enforcement Network (FinCEN) reminds.

Suspicious Activity Reports, Currency Transaction Reports, Registration of Money Services Business, and Designation of Exempt Person Reports are among the reformatted reports that must be filed electronically, FinCEN said.

FinCEN said reports that are filed in paper format may be rejected, and returned to the institution that filed them. "Financial institutions that continue to file mandated reports in paper format will fail to meet BSA reporting requirements and may be subject to civil money penalties," FinCEN added.

Use the resource link for the FinCEN advisory.

NCUA Prohibits Four From CU Work

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ALEXANDRIA, Va. (4/1/13)--The National Credit Union Administration has issued orders prohibiting four former credit union employees from any future involvement with federally insured financial institutions.

The following individuals have been banned, according to the agency:
  • Holly Cowan, a former employee of Lawrence County School Employees FCU in New Castle, Pa., pleaded guilty to the charge of embezzlement and income tax evasion. Cowan was sentenced to 15 months in prison, three years of supervised release, and ordered to pay restitution in the amount of $285,641;
  • Lisa Hood, a former employee of AllSouth FCU in Columbia, S.C., was sentenced to five years in prison and five years of probation on charges of financial identity fraud, crimes against a federally insured financial institution and breach of trust with fraudulent intent;
  • Crystal Lankford, a former employee of H.B.E. CU in Seward, Neb., pleaded guilty to the charge of embezzlement. Lankford was sentenced to 45 months in prison, five years of supervised release and ordered to pay restitution in the amount of $633,998.56; and
  • Keiona Rutledge, a former employee of G.I.C. FCU in Cleveland, Ohio, pleaded guilty to the charges of trafficking and possessing criminal tools. Rutledge was sentenced to one year of community control and ordered to pay a $500 fine.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

For more on the orders, use the resource link.

Cheney Report: CUNA Forming Student Loan Working Group

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WASHINGTON (4/1/13)--The Credit Union National Association is developing a working group to address credit union student loan issues with the Consumer Financial Protection Bureau, and recent developments on the student lending front are one of many issues discussed in this week's edition of The Cheney Report.

In the Report, Credit Union National Association President/CEO Bill Cheney recounts a recent CUNA meeting with the CFPB. CFPB staff, he notes, said they have received thousands of complaints on student loans. However, barely any of those complaints have referenced credit union student lending practices. "Once again, the good work you do helps us advocate for credit unions being treated differently," Cheney told credit unions.

Cheney also suggested that the National Credit Union Administration could move to eliminate some student lending burdens created by troubled debt restructuring (TDR) standards.

Other topics tackled in this week's Cheney Report include:

  • An update on Rep. Carolyn Maloney's (D-N.Y.) new bill to impose new limits and caps on overdraft protection plans;
  • The future of the Senate Banking Committee after current chairman Tim Johnson (D-S.D.) retires from Congress next year;
  • CUNA's plans for April 10 House Financial Services financial institutions subcommittee hearing on credit union regulatory burden;
  • Favorable credit union coverage in the media; and
  • The NCUA's updated estimates of 2012 corporate resolution costs.
Each Friday, The Cheney Report delivers Cheney's insights on three to four key events and policy developments affecting credit unions into the e-mail inboxes of credit union CEOs.

The report also provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership, CUNA Executive Vice President of Strategic Communications Paul Gentile notes.

Past issues of The Cheney Report are archived on cuna.org.

CUNA: CFPB Reg Z Changes Unlikely To Impact Many CUs

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WASHINGTON (4/1/13)--In a new Final Rule Analysis, the Credit Union National Association notes that the Consumer Financial Protection Bureau's recent amendments to Regulation Z will likely benefit some credit card issuers, but should not have a major impact on credit union issuers directly, because credit union fees on members' credit card accounts are typically well below the limit.

Regulation Z generally limits the total amount of fees that an issuer may charge on a consumer's credit card account to 25% of the credit limit in effect when the account is opened.

The CFPB's final rule, which came into effect on March 28, amends Reg Z so that the limitation applies only during the first year after account opening.

The CFPB action specifically amends Section 1026.52 of Reg Z. In the Final Rule Analysis, CUNA Senior Assistant General Counsel for Regulatory Advocacy Luke Martone notes that all methods of compliance under previous regulation remain available to card issuers. The CFPB regulatory measure states that card issuers who were previously in compliance with Section 1026.52(a) of Reg Z "need not take any additional action to remain so."

For the full Final Rule Analysis, use the resource link.