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Inside Washington (04/11/2008)

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* WASHINGTON (4/14/08)--The Federal Deposit Insurance Corp. (FDIC) will conduct its first national survey to assess banks’ efforts to reach out to the unbanked this spring. Questionnaires will be sent to a probability sample of FDIC-insured institutions during the second quarter. Questions will focus on banks’ financial education and outreach strategies; deposit, payment and credit products offered to entry-level consumers; and other related topics. The survey will identify challenges insured institutions face in serving the unbanked. Case studies highlighting specific institutions’ programs will be a part of the survey. The FDIC also will consider conducting a national household survey with the U.S. Census to collect data on the numbers and demographics of unbanked and underbanked households, and the obstacles they perceive when deciding how and where to conduct their finances ... * WASHINGTON (4/14/08)--Sen. John McCain (R-Ariz.) has changed his position on home loan aid after two weeks ago saying he objects to government bailouts (American Banker April 11). The senator Thursday proposed the “HOME” plan, which would ask the government to back delinquent subprime loans by allowing borrowers to trade in their subprime mortgages for 30-year, fixed-rate mortgages. Eligible borrowers are those who have subprime mortgages made after 2005 and who are delinquent on their payments or nearing an interest rate reset ... * WASHINGTON (4/14/08)--Republicans have objected to Sen. Christopher Dodd’s (D-Conn.) plan to help the housing crisis. On Thursday, Sens. Robert Bennett (R-Utah) and Richard Shelby (R-Ala.) said the Senate Banking Committee chairman’s plan would cost the government more money (American Banker April 11). Dodd’s plan would allow lenders to voluntarily write down mortgages. Dodd maintained at a press conference after the hearing that his plan would be successful, and said he hopes to bring it to the Senate by Memorial Day ... * WASHINGTON (4/14/08)--Less than 2% of loans set to reset in January and February received a five-year loan modification that would freeze interest rates, the Hope Now alliance said Thursday (American Banker April 11). The Treasury department originally said 600,000 loans would be eligible for the freeze. The Hope Now Alliance released a statement Thursday saying that since July 2007,mortgage servicers have provided loan workouts to borrowers that have helped 1.2 million homeowners prevent foreclosure ... * WASHINGTON (4/14/08)--The witness list for Rep. Paul Kanjorski’s (D-Pa.) Tuesday hearing on the Emergency Mortgage Loan Modification Act of 2008 has been released. Ralph DaLoisio, managing director, Natixis Structured Finance Group; Robert Story Jr., president, Seattle Financial Group, and vice chairman of the Mortgage Bankers Association; and Marlo Young, partner, Thacher Proffitt and Wood, will testify ...

New bill would stop anti-gambling rules

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WASHINGTON (4/11/08)—Reps. Barney Frank (D-Mass.) and Ron Paul (R-Texas) introduced a bill Friday that would call a halt to efforts to implement the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006. The legislation, H.R. 5767, would forbid the U.S. Treasury Department and the Federal Reserve Board from proposing, prescribing, or implementing any regulation that requires the financial services industry to identify and block internet gambling transactions. Those bodies are jointly charged under UIGEA with putting rules in place. The Fed has noted publicly that it is a challenge is to craft a role for financial institutions without having an adverse effect on the country's payment system. The UIGEA rules have not been finalized. A House Financial Services subcommittee conducted a hearing April 2 which, in part, served to highlight the burden the proposed regulations would place on financial institutions, as well as the problems regulators are facing in drafting implementation rules, a process that has been have been bogged down with complications and controversy. Credit Union National Association (CUNA) witness Harriet May,
Click to view larger image CUNA board member Harriet May, CEO of GECU, El Paso, Texas, greets House Financial Services Committee member, Rep. Luis Gutierrez (D-Ill.) before testifying at an April 2 subcommittee hearing on the Internet gambling law passed in 2006. CUNA Vice President of Legislative Affairs Ryan Donovan is far left in picture. (Photo provided by Bob Knudsen.)
president/CEO of GECU, El Paso, Tex as, reiterated CUNA's concerns that credit unions could be swamped by the compliance burden associated with UIGEA. She stated that the proposal as issued should not be adopted and sought action from Congress to block the rule. In announcing the introduction of H.R. 5767, Frank and Paul said they believe the ban on Internet gambling infringes upon two freedoms “important to many Americans: the ability to do with their money as they see fit, and the freedom from government interference with the Internet.” “The regulations and underlying bill also force financial institutions to act as law enforcement officers. This is another pernicious trend that has accelerated in the aftermath of the Patriot Act, the deputization of private businesses to perform intrusive enforcement and surveillance functions that the federal government is unwilling to perform on its own,” according to the two House lawmakers. Frank is chairman of the House Financial Services Committee and Paul is a senior Republican member. Use the resource link below for more information on the Frank-Paul bill.

CUNA-WOCCU urge high microenterprise funding

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WASHINGTON (4/14/08)—Two key members of a Senate Appropriations subcommittee were asked to support a high level of funding for the Office of Microenterprise Development and the Cooperative Development Program. The request came in a joint letter from the Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU). In letters to Sen Patrick Leahy (D-Vt.), chairman of the subcommittee on state, foreign operations, and related programs, and Sen. Judd Gregg (R-N.H.), its ranking minority member, the credit union groups said they strongly support the two programs of the U.S. Agency for International Development (USAID). “CUNA, WOCCU and our members strongly support funding for microenterprise development by USAID in the FY2009 Foreign Operations Appropriations bill at the level of $500 million, with $30 million of that designated for the Microenterprise Development office,” said the letters signed by CUNA President/CEO Dan Mica and WOCCU President/CEO Pete Crear. The credit union leaders also voiced their support of the Senate’s approval of $12 million for the Cooperative Development Program for FY2008, and urged that the same funding level be maintained for FY2009. “Microenterprise development projects funded by USAID play a critical role in increasing access to safe and affordable financial services to people in developing countries who have none. “This access not only increases the financial well-being of microenterprise beneficiaries, but improves the living conditions and economic health of their communities,” wrote Mica and Crear. They added: “The Cooperative Development Program aids the work of credit unions and other cooperatives in developing countries by funding sustainable development assistance carried out by eight U.S.-based cooperative development organizations, including WOCCU. “The program results in economic growth, enhanced community-based democracy and improved stability in some of the world’s most impoverished countries.” The letter was sent in anticipation of the subcommittee’s April 9 hearing on FY2009 state and foreign operations appropriations. The subcommittee has jurisdiction over the State and Foreign Operations Appropriations bill, which is the vehicle through which WOCCU receives funding.

GAO study sought on fair lending laws

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WASHINGTON(4/14/08)—Sixteen Democrats on the House Financial Services Committee, including Chairman Barney Frank of Massachusetts, sent a request to the Government Accountability Office seeking a study on fair lending laws. In their letter to GAO Acting Comptroller General Gene Dodaro, the House lawmakers specifically asked Congress’ investigative arm for a comprehensive review of the current state of the federal enforcement of the Equal Credit Opportunity Act (ECOA), the Home Mortgage Disclosure Act (HMDA) and the Fair Housing Act (FHA), and other related fair lending laws. The review is to assess the monitoring and enforcement efforts of the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, Department of Justice, and Department of Housing and Urban Development. The House members also asked the GAO to review how shortcomings regarding the data collected under current law might be overcome. “We are troubled that HMDA data continue to reveal significant racial and ethnic disparities in mortgage lending, particularly in the incidence of higher-priced lending to minorities,” the congressmen wrote. However, they said that because current HMDA data lack key variables involved in the underwriting process--such as borrowers’ credit history, debt-to-income ratio, and loan-to-property value--HMDA data alone cannot be used to determine whether lenders are violating fair lending laws. For more details on the lawmakers’ request to GAO, use the resource link below.

Credit card reform gets April 17 spotlight

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WASHINGTON (4/14/08)—Rep. Carolyn Maloney has scheduled an April 17 hearing on her bill intended to reform abusive practices of the credit card industry and improve consumer protections. The New York Democrat, who chairs the House Financial Services subcommittee on financial institutions and consumer credit, said in her announcement that the American consumer is feeling dual pressures concerning their credit card use. As more consumers use their credit cards to “help pay bills, buy groceries, and make ends meet in a troubled economy,” they find the relationship between cardholder and car company has become “very one-sided in recent years” to the disadvantage of consumers, she said. Maloney introduced her package of credit card reforms, which is being billed as the Credit Cardholder's Bill of Rights (H.R. 5244), in February. It was introduced with 40 co-sponsors and is intended to curb abusive practices, such as some interest-rate increases and late fees and the subcommittee held its first hearing on it on March 13. In part, the bill would require card issuers to provide a 45-day notice period for consumers before an interest rate could be executed. Cardholders would then have the right to cancel their card and pay off their existing balance at the existing rate and repayment schedule. H.R. 5244 would also prohibit a practice known as "double-cycle billing," in which card companies charge interest on payments made on time during a grace period. It would also ban arbitrary changes in the credit card contract. A witness list has not yet been made public, but Maloney said the subcommittee will hear from consumers, regulators, and credit card industry representatives.

CUNA urges Bush to continue CU support

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WASHINGTON (4/14/08)—Credit Union National Association (CUNA) President/CEO Dan Mica went straight to the top and sent a letter to President George W. Bush about a credit union concern involving the U.S. Treasury Department’s plan to restructure the regulation of the financial sector. Mica noted that in its restructuring “blueprint,” Treasury seeks a presidential order to expand a Presidential Working Group (PWG) on financial markets policy to include all federal banking regulators, while excluding the National Credit Union Administration (NCUA). “While we feel it is important that all financial institutions, including credit unions, be represented on the PWG, it is particularly significant now as the Administration and other key policymakers seek ways to deal with the current economic concerns,” Mica said. He reiterated that CUNA and credit unions were “stunned and dismayed by the long-term recommendation of the report which would effectively eliminate credit unions and NCUA." Mica added that CUNA is concerned that excluding NCUA from the PWG now is a prelude to the pursuit of those recommendations, yet has been heartened by the statements of congressional support following the release of the report. “Throughout both your administrations, credit unions have been very grateful for your support of their tax exempt status, and we urge you to continue recognizing their role, as well as that of NCUA, in helping to offer financial alternatives. We urge you to include NCUA on the PWG,” Mica concluded.

Wash. Post CUs blueprint opposition helps Main Street

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WASHINGTON (4/14/08)--The Washington Post Friday noted that the Credit Union National Association’s (CUNA) and credit unions’ opposition to the Treasury Department’s blueprint to revise the financial system will help Main Street--instead of Wall Street. Organizations lobbying against the Treasury’s plan have stated that it caters primarily to large businesses on Wall Street--instead of those that help local communities, such as credit unions. CUNA and other groups have talked about creating an opposition coalition to the Treasury plan, which would scrap the current financial regulation system, the newspaper said. The Post quoted Dan Mica, CUNA president/CEO, saying that the blueprint has little chance of moving ahead in Congress at this time. Mica told the Post that he has asked state associations and credit union directors to write the Treasury, expressing their concerns that they do not need a new regulator. CUNA’s members are outraged at the proposal. They ultimately fear that the blueprint would do away with credit unions, the paper said. CUNA also has filed a request under the Freedom of Information Act (FOIA) asking the Treasury to disclose bankers' attempts to influence the Treasury's plan in ways intended to put credit unions out of business. The request was submitted on behalf of Credit Union Magazine, which intends to publish a story based on its findings (News Now April 4).

Compliance CU boards role in 3rd-party relationships

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WASHINGTON (4/14/08)—A credit union board of directors has an important role in assuring third-party relationships further a credit union’s mission, and every director should be on top of the issues involved, advises a compliance article in the April issue of Credit Union Magazine. The article notes that the National Credit Union Administration (NCUA) has designated third-party relationship reviews a 2008 regulatory “hot topic,” backed by a 2007 supervisory letter on evaluating vendor relationships. It also highlights efforts by the Credit Union National Association’s (CUNA’s) Due Diligence Task Force, which is assembling resources, including sample vendor management policies and procedures, and addressing credit union concerns about the due diligence examinations process. The Due Diligence Task Force's key objectives are to develop a core due diligence model that credit unions can use to evaluate third-party vendors, as well as develop a due diligence best practices guide that goes beyond the core due diligence model. In “The Board’s Role in Vendor Due Diligence,” guest author David A. Reed, a Fairfax, Va. private practice attorney who advises credit unions, tells directors their vendor due diligence policies must incorporate the following five areas:
* Expectations for outsourcing: Outlining how vendor relationships enhance credit union services; * Planning; Make it clear before contracting with a vendor that your credit union will plan adequately, including assessing the need for and risks related to third-party support; * Due diligence: Conduct a background check of vendors, evaluate the company’s business model, perform cash-flow analyses between the parties involved, review a vendor’s affiliates’ financial conditions, and understand accounting and legal issues involved in the relationship; * Performance monitoring; Keep the relationship active by stating that the credit union will set up controls to monitor the vendor’s performance, including compliance with laws and regulations; and * Reports to the board: Define the content and frequency pf re[porting to the board on third-party relationships.
“NCUA and credit unions share the same goals: having vendors provide good value and faithfully perform according to their contracts,” Reed says, “There’s not question properly managed third-party relationships can be invaluable to credit unions and members by providing new services and cost savings.” CUNA is sponsoring a May 13 audioconference called “Due Diligence with Third Party Vendors – Getting it Right!” Use the resource link below for registration information.