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Washington Archive

Washington

Flood insurance COBRA extensions lurch toward vote

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WASHINGTON (4/14/10)--Following positive results in a Monday cloture vote, H.R. 4851, the Continuing Extension Act of 2010, needs only Senate approval to be sent to President Barack Obama for full approval. The legislation, if approved, would extend authorization for the National Flood Insurance Program (NFIP) and continue federal subsidies to COBRA health insurance recipients through April 30. Federal unemployment insurance would be extended until May 5. NFIP is important to cedit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. Since flood insurance is unavailable in many parts of the country, the NFIP is an important resource to credit unions and other lenders. Congress did not take any action before its recently concluded spring recess began, and the NFIP and other programs lapsed on March 29. The NFIP cannot issue new flood insurance policies, increase coverage on existing policies, or issue renewal policies until the Congress restores NFIP authority. A full Senate vote on H.R. 4851 is expected to take place later this week. If amended by the Senate, the bill would return to the House for another vote.

House Fin. Committee discusses 2nd lien modifications

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WASHINGTON (4/14/10)--The House Financial Services Committee on Tuesday discussed the Obama administration's 2nd Lien Modification Program, or 2MP, which gives federally based incentives to second lien mortgage holders that write down or extinguish those second liens. Under the plan, homeowners are be required to have their first lien modified through the Administration’s Home Affordable Modification Program (HAMP) before they can become eligible for the 2MP program. During the Tuesday hearing, some members of the committee expressed caution at the potential “moral hazard” that the 2MP legislation creates by allowing some homeowners to voluntarily allow their mortgages to become delinquent to qualify for the Administration’s homeowner assistance programs. Committee Chairman Rep. Barney Frank (D-Mass.) agreed that not every homeowner should receive help, and Rep. Brad Miller (D-N.C.) said he was concerned by the prospect of potential conflicts of interest for financial institutions that hold second liens and service primary liens on the same homes. Credit unions have not been impacted by the current mortgage crisis as much as other types of lenders due to their normally conservative lending practices. However, credit unions have been impacted when they have made second lien loans, according to the Credit Union National Association. The House will hold additional hearings on the Community Reinvestment Act, HAMP revisions, and the housing finance system both today and tomorrow.

Inside Washington (04/13/2010)

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* WASHINGTON (4/14/10)--The Volcker Rule, named after former Federal Reserve Board chairman Paul Volcker, may have some staying power, according to financial observers. The rule aims to ban proprietary trading. Some said the rule wouldn’t be in the Senate regulatory reform bill. Brian Gardner, KBW Inc. analyst, said it was included in the bill as a “negotiating tactic” (American Banker April 13). However, Gregory Lyons, partner at Debevoise and Plimpton LLP, said there was doubt if the rule would make it into the bill at all--and the fact it’s in there is noteworthy. Thomas Hoenig, Kansas City Federal Reserve Bank president, said provisions like the Volcker rule or something similar could help manage risk and give regulators the ability to deal with large financial institutions ... * WASHINGTON (4/14/10)--Misinformation about the regulatory reform bill could slow its approval, according to Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair. There have been some “badly misinformed” criticisms of the legislative reforms that have no purpose but to delay enactment, Bair said (American Banker April 13). She spoke at a conference Monday for the Council of Institutional Investors. Bair also indicated that her agency hopes to tie banks’ compensation structures to the deposit insurance rate. The FDIC should be able to consider risky pay schemes when it decides how much a bank should pay for deposit insurance. The FDIC issued an advance notice of proposed rulemaking in January on how it could do this. The FDIC board planned to meet Tuesday to discuss such a proposal ...

Compliance Challenge Reg E does not cover all accounts

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WASHINGTON (4/14/10)--According to the Credit Union National Association (CUNA), overdraft rules that were issued under Regulation E, the Electronic Fund Transfer Act, only apply to “accounts established primarily for personal, family or household purposes,” not member business accounts. New Reg E rules will become effective on July 1, although accounts that were established before July 1 and have not opted-in to overdraft programs may be charged fees until Aug. 15. These rules prevent financial institutions from assessing overdraft fees on ATM and one-time debit card transactions without prior consumer consent. Credit unions that do not have formal overdraft programs are also covered by this opt-in requirement if they charge any fees for ATM and one-time debit card overdrafts. In this month’s Compliance Challenge, CUNA adds that “trust and estate accounts should also be excluded” from the Reg E requirements, as the rule only applies to “natural persons.” “Therefore, it is a business decision for the credit union to decide how it will handle overdrafts of these accounts,” CUNA said. Credit unions may also decide whether or not they will “provide the opt-in consent option to all members with ATM and debit cards… it’s a business decision of the credit union to whom it wants to provide the overdraft protection service within its membership,” CUNA said. CUNA has recently encouraged the Federal Reserve to alter the Reg E rules to allow credit unions and others to charge members an overdraft fee in instances where intervening transactions reduce the account balance after the debit transaction is authorized, but before it is paid, and when merchants request authorization for a transaction in an amount less than the actual total of the purchase. For the full Compliance Challenge, use the resource link.