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CDFI Fund budget remains high despite federal budget cuts

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WASHINGTON (4/13/11)--Funding for Community Development Financial Institution (CDFI) Fund programs, including financial and technical assistance, will, in spite of federal budget cuts, “remain significantly above historical averages,” the National Federation of Community Development Credit Unions has said. A total of $38 billion in funding cuts is proposed as part of the continuing resolution that was agreed to late last week. The continuing resolution would determine federal government spending until Sept. 30 of this year. The continuing resolution would provide the CDFI Fund with $227 million in funds, a $23 million cut from the amount proposed for fiscal 2011. The administration sought $250 million in CDFI funding for FY 2011. The federation said it takes this slight spending reduction “as a strong statement of Obama Administration support for the CDFI Fund.” However, the federation noted that there could be “significant program reductions next year” if certain spending cuts are approved. Legislators have proposed a total of $88 million in cuts for housing counseling assistance under the Department of Housing and Urban Development. The federation in its release said that several housing counseling programs would cease operations on October 1, “severely reducing the supply of responsible counseling services in communities across the country.” The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. According to the Treasury Department in January, credit unions represent 13% of the total applicant pool for the 2011 round of the CDFI Fund program.

CUNA trades note depth of interchange delay allies

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WASHINGTON (4/13/11)--The Credit Union National Association (CUNA) has joined eight other trade associations to point out “the extraordinary breadth and depth of organizations and government officials” that have expressed concern over the Federal Reserve’s plan, which would set a cap on debit interchange fees. In a letter to key regulators, the groups cite critical comments made by the Federal Deposit Insurance Corp., the National Credit Union Administration (NCUA), the Comptroller of the Currency, several senators, various chambers of commerce and other groups. The criticisms have noted the need for additional study of the impact of the new interchange regulations, the harm that the new regulations could inflict on consumers, small merchants and small financial institutions, and other legal considerations related to interchange fee cap implementation mandated for debit card services by the Dodd-Frank Wall Street Reform Act. The trade group letter was sent to Fed Chairman Ben Bernanke, U.S. Treasury Secretary Tim Geithner, and NCUA Chairman Debbie Matz, as well as other key regulators. The letter was also sent to the White House and House and Senate financial services committee leaders. Interchange concerns also have been aired by TechNet, a technology industry group that represents firms such as Apple, Cisco, craigslist, eBay, Symantec, Google, HP, Intel, Facebook, Microsoft and Yahoo. According to a TechNet letter, which was sent to Sen. Susan Collins (R-Maine) last week, the new interchange provisions will “drive networks to cut costs by routing consumer’s financial transactions through cheaper networks regardless of a network’s security or functionality. TechNet also predicted that the interchange proposal would impact payment network operations by making cost savings a greater priority than security. “The new regime would also make it more difficult for banks and other financial institutions to quickly and efficiently identify fraud and other financial infringements on networks operating with minimal security components,” the letter adds. CUNA has called on Congress to “stop, study and start over” on the interchange fee cap regulations. Credit union backers have made over 85,000 separate contacts to members of Congress since CUNA launched an action alert last month. This type of direct, grassroots advocacy is vital to the interchange fight, and CUNA later today will hold a conference call to prepare credit unions and their members for additional action during the upcoming district work session. (See related story: Registration still open for CUNA call on interchange) For the letters, use the resource links.

House subcommittee to study risk-retention plan

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WASHINGTON (4/13/11)--A joint agency risk-retention rule released in March is scheduled to come under the scrutiny of the House Financial Services subcommittee on capital markets at a hearing scheduled for Thursday. The proposed rule aims to address abuses in the mortgage lending market that contributed to the financial crisis and would do so by requiring a loan securitizer--but not most loan originators--to retain a 5% economic interest in a material portion of the credit risk for any asset that it transfers, sells, or conveys to a third party. The subcommittee hearing will examine the implications of the proposed rule to determine its effects on liquidity and the cost of credit to homeowners, students, consumers and businesses seeking financing, according to the subcommittee announcement. Rep. Spencer Bachus (R-Ala.), head of the parent committee, said in the release, “Requiring securitizers to retain some ‘skin in the game,’ will hopefully encourage them to take more care in selecting high quality assets. For risk retention to be successful, however, the standard must not stifle the securitization of loan products, thereby raising costs to consumers and cutting down on the availability of credit.” The Credit Union National Association (CUNA) has questioned the potential impact of the 5% risk requirement on the credit union mortgage market even though the proposal would generally exempt originators from these requirements. CUNA has emphasized that credit unions did not participate in abusive practices, and has noted concerns that credit union mortgage lending will be impacted by these rules and standards that develop in the marketplace. The risk-retention proposal has been released by each of the following agencies: the Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve, the Department of Housing and Urban Development, and the Federal Housing Finance Agency. The first panel of subcommittee witnesses includes a representative from each of the aforementioned agencies. The second panel includes representatives from the securities industry and from the Center for Responsible Lending.

Registration still open for CUNA call on interchange

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WASHINGTON (4/13/11)--Registration will remain open until 1 p.m. (ET) for the Credit Union National Association‘s (CUNA) National Credit Union Briefing on Interchange, which will be held today at 3 p.m. (ET). In addition to providing an update, the free 30-minute session also will offer guidance on how to mobilize credit union members on the issue. The Dodd-Frank Wall Street Reform Act has ordered the Federal Reserve to have a cap on debit card interchange fees in place by July 21. CUNA, and many others, are seeking a delay of that deadline so the U.S. Congress can address unintended consequences of the rule. CUNA President/CEO Bill Cheney, who will lead the call, has noted that "the time window for action is relatively short" with the statutory implementation date looming. Cheney said that because of the tight timeframe, credit unions, the leagues, and CUNA "must further step up our efforts" to ensure that a proposed interchange implementation delay becomes reality. Use the resource link below to register for the briefing session. CUNA Audio Conference Registration

Inside Washington (04/12/2011)

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* WASHINGTON (4/13/11)--The proposed settlement sought by the 50 state attorneys general and a host of federal agencies with the top five mortgage firms could create “unintended negative consequences” for housing and financial markets and extend the foreclosure crisis, according to a study by three economists (American Banker April 12). The study said the settlement would drive up the number of defaults and servicing costs; slow down new home construction and consumer spending; and increase mortgage rates by 20 to 45 basis points per year. Under the settlement, servicers must add new requirements to mortgage documentation, interaction with borrowers, relationships with active military personnel, loan modifications, principal reductions, bankruptcy proceedings, short sales and technology systems. These changes would be cost prohibitive, driving up servicing costs, defaults and foreclosure inventory, said the study. The study, commissioned by the financial services industry, was conducted by Charles Calomiris, a professor of financial institutions at Columbia Business School; Eric Higgins, a professor of finance at Kansas State University; and Joseph Mason, the chair of banking at Louisiana State University and a senior fellow at the Wharton School … * WASHINGTON 4/13/11--The fiscal budget negotiated between lawmakers and the Obama administration late Friday includes annual audits of the Consumer Financial Protection Bureau (CFPB) by both the private sector and the Government Accountability Office (American Banker April 12). The audits will “monitor [the CFPB’s] impact on the economy, including its impact on jobs, by examining whether sound cost-benefit analyses are being used with rulemakings,” according to a summary provided in a blog post by House Speaker John Boehner (R-Ohio). In another blog post, the White House said it avoided Republican efforts to limit funding for the establishment of the CFPB. “They also wanted to limit funding for the establishment of the new Consumer Financial Protection Bureau and block the Environmental Protection Agency from enforcing clean air and water rules,” the White House blog post said. “While we made significant cuts, we just couldn't afford to cut these important programs that are critical to our nation” …

Credit data due when regs are implemented CFPB

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WASHINGTON (4/13/11)--Credit unions and other financial institutions are not yet required to comply with regulations that would order them to “collect and report information concerning credit applications made by women- or minority-owned businesses and by small businesses,” according to the Consumer Financial Protection Bureau (CFPB). CFPB General Counsel Leonard Kennedy said in a letter released this week that the regulatory change, which is mandated by the Dodd Frank Act, would not become effective “until the [CFPB] issues necessary implementing regulations.” The new regulation, which amends the Equal Credit Opportunity Act, is meant to “facilitate enforcement of fair lending laws” and help regulators and the public identify the needs of surrounding communities and local businesses. "Given the sensitivity of the data at issue, we believe Congress intended that the bureau first provide guidance regarding appropriate procedures, information safeguards and privacy protections. Waiting to commence information collection until implementing regulations are in place will also ensure that data is collected in a consistent, standardized fashion that allows for sound analysis by the bureau and other users of the data," Kennedy added. For the full letter, use the resource link.