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UPDATED: Senate Banking postpones finance reform markup

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WASHINGTON (4/29/14, UPDATED 10:45 A.M. ET)--The Senate Banking Committee postponed the markup of S. 1217, the Johnson-Crapo Housing Finance Reform bill, in response to committee members, according to a statement from Chairman Tim Johnson (D-S.D.).
"As all of the members already know, there continue to be important discussions to build a larger coalition supporting the bill. While we have the votes to report the bill out today, members of the Committee have asked for a brief delay to try to work out additional issues prior to a final vote," Johnson's statement said. "I have talked with ranking member (Mike) Crapo, and we will continue working with interested members on both sides. Staff will notify members when the committee is set to reconvene in the coming days."
Important changes backed by the Credit Union National Association were included in the draft manager's amendment to S. 1217 prior to the vote that is now scheduled for Wednesday. The Senate Banking Committee is expected to vote on numerous amendments to the legislation's provisions.
"Markup of this legislation is one of the most significant activity to take place in the Banking Committee since the Dodd-Frank Act," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said Monday. He added that lawmakers will be using the amendment process to continue to build the bill's strong bipartisan support while trying to ensure that any changes do not undermine the intent of the legislation.
CUNA, as part of a coalition with the National Association of Federal Credit Unions and the Independent Community Bankers of America, sent a recent letter to key lawmakers seeking changes to the draft bill. In part, the changes would address:
  • The bill's regulatory burden on credit unions and community banks;
  • Issues to ensure that the housing finance market remains accessible to credit unions and other smaller institutions; and
  • Giving credit unions, and community banks, representation in governance of the new federal entities envisioned under the proposal.
The April 11 letter was addressed to Johnson and Crapo (R-Idaho)--the chief sponsors of the housing finance reform bill.
The Senate bill proposes to replace government-sponsored enterprises Freddie Mac and Fannie Mae with a single agency that would be supported by the housing industry. It would also set stricter underwriting standards for new mortgage loans--and reduce taxpayer exposure to housing market busts.
CUNA, along with other major financial trades groups, backed an expected amendment Monday regarding the new proposed agency--the Federal Mortgage Insurance Corporation (FMIC). CUNA expressed concern that, as proposed, the FMIC would "create yet another prudential regulator with sweeping authority over the primary and secondary mortgage markets."
CUNA warned that would result in unnecessary complications for financial institutions, consumers and the broader mortgage market and backed a bipartisan amendment introduced by Sens. Jerry Moran (R-Kan.) and Joe Manchin (D-W.Va.) to improve the FMIC governance structure.
CUNA also joined the effort by another broad coalition to defuse a threat posed by a new eminent domain scheme. CUNA is backing an amendment from Sens. Patrick Toomey (Penn.) and Tom Coburn (Okla.).  The Republican duo are expected to offer language that would ban any municipality from using its eminent domain power to acquire performing but underwater mortgage loans held by private-label mortgage-backed securities and then refinancing the loans through programs administered by the Federal Housing Administration. Such a maneuver, CUNA and the coalition said, could devastate investor confidence in the country's mortgage markets.
CUNA's Donovan underscored Monday that the Senate Banking Committee votes occur within a "very fluid situation." In addition to the manager's amendment circulated to CUNA and other stakeholder over last weekend, there are several dozen more amendments that could be offered during the markup process.
"A lot of pre-markup negotiations have taken place over the last few weeks," Donovan said. "The pace and depth of these discussion have accelerated over the last two weeks. We expect the bill will clear the committee, the question is by what margin."

CUNA seeks CU comments on chartering, FOM changes

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WASHINGTON (4/29/14)--The Credit Union National Association is seeking credit union comment on proposed amendments to credit union chartering and field of membership rules regarding associational common bond requirements.
The National Credit Union Administration at last week's open board meeting proposed amendments to its chartering manual which, in part, would expressly establish a threshold requirement that an association must not be formed primarily for the purpose of providing credit union membership.
If approved, the rule would expand the criteria for considering whether an association meets NCUA's requirements to be added to a federal credit union's field of membership.

If an association satisfies the common bond requirements based on a totality of the circumstances, the group qualifies for inclusion in the federal credit union's field of membership.
Comments are due to the agency 60 days after the plan is published in the Federal Register. The plan is expected to be published soon.
For the CUNA comment call, use the resource link.

Fed Banks offer update on payments system project

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WASHINGTON (4/29/14)--Possible approaches to improving the payments system, quickening the pace of payments and enhancing network security are among the items covered in the Federal Reserve Banks' latest update on their Payment System Improvement project.
The Fed banks are working to address potential gaps, as well as opportunities, in the payments system, including payment speed, closed payment communities, and international, mobile, and traditional payment channels. The Fed is also exploring where it fits in the payment system going forward.
Last year, the Fed banks released a paper on potential payments system changes, and held a series of town hall-style discussion meetings across the country, to help collect public comment on these issues.
The banks recently released an update on how the project has progressed during the research phase.  In that update, they share highlights on their research regarding end-user demand for payment attributes. The banks plan to publish a follow-up paper on their next steps in the second half of this year.
The Credit Union National Association, its Payments Subcommittee and credit unions continue to work with the Fed banks on this project.
CUNA late last year filed a comment letter on the payment system issue, encouraging the Fed banks to create a payments framework that facilitates the ability of credit unions and small financial institutions to access and utilize the latest developments in payments, without undue regulatory restrictions.

The banks must also fully consider the costs and benefits, and ensure credit unions will not be negatively impacted by any changes to the payments system, CUNA said.

For more on the project, use the resource link.

Heartbleed, DDoS risks covered in cybersecurity newsletter

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WASHINGTON (4/29/14)--New details on the OpenSSL Heartbleed vulnerability and distributed denial of service (DDoS) attacks, as well as resources to help credit unions and others deal with these threats, are provided in the April edition of the Financial Services Sector Coordinating Council for Critical Infrastructure's industry newsletter.

Items covered in the publication include:
  • The release of the National Institute of Standards and Technology cybersecurity framework;
  • Federal Financial Institution Examination Council warnings on the risks of cyberattacks on ATMs and card authorization systems;
  • The creation of the Critical Infrastructure Cyber Community C3 Voluntary Program; and
  • The U.S. Senate Committee on Commerce, Science, and Transportation's report on the 2013 Target data breach.
For the newsletter, use the resource link.

NEW: McWatters NCUA nomination approved by Senate Banking Committee

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WASHINGTON (4/29/14, UPDATED 10:25 a.m. ET)--The nomination of J. Mark McWatters to become a member of the National Credit Union Administration board was just cleared to go to the full U.S. Senate for final confirmation.

McWatters was nominated in December to fill Republican Michael Fryzel's spot on the NCUA board. Fryzel has been serving since July 2008 and his term has expired.

During his March nomination hearing before the Senate Banking Committee--the panel that just voted to clear his name for Senate floor action--McWatters said he intends to work with NCUA board members, agency staff and external stakeholders "in an open and respectful manner, with the goal of finding a common ground and working cooperatively through any differences."

He said that is the approach that has served him well in past positions, which include service on the TARP Congressional Oversight Panel, and as counsel for Rep. Jeb Hensarling (R-Texas), who is chairman of the House Financial Services Committee, and in his current position as assistant dean for graduate programs at Southern Methodist University's School of Law in Dallas.

If fully confirmed by the Senate, as expected, McWatters will join NCUA Chair Debbie Matz and board member Rick Metsger to fill out the three-member board.

Also approved by the committee were the nominations of Stanley Fischer to be a member and vice chairman of the Federal Reserve Board of Governors; Jerome Powell to be a member of the Federal Reserve Board of Governors; Lael Brainard to be a member of the Federal Reserve Board of Governors; and Gustavo Velasquez Aguilar to be an assistant secretary of the Housing and Urban Development.

FHFA gets $280M settlement from Barclays action

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WASHINGTON (4/29/14)--Barclays Capital agreed to pay the Federal Housing Finance Agency $280 million to settle allegations it sold faulty mortgage bonds to Fannie Mae and Freddie Mac. The bonds were among those that helped create the financial crisis in 2008.

Under reported terms of the deal, Barclays will pay $227 million to Freddie Mac and $53 million to Fannie Mae. The settlement resolves a suit that was brought against the bank and three of its executives in addition to claims brought in another suit against Ally Financial. The suit against Barclays covered approximately $4.9 billion in mortgage-backed securities sold by the bank to the  government-sponsored enterpreises.

Late last month, the FHFA announced similar settlements in cases involving Bank of America, Countrywide Financial, Merrill Lynch and others. Those settlements provide for an aggregate payment of around $9.33 billion by Bank of America.

The agency has now settled 13 of the 18 securities suits it brought against large banks in 2011. The FHFA has said it remains committed to satisfactory resolution of pending lawsuits.

The National Credit Union Administration has taken its own actions against Wall Street firms. In November, JP Morgan agreed to pay the NCUA $1.4 billion in a settlement over mortgage-backed securities issued, underwrote and sold to now-defunct corporate credit unions in 2006 and 2007. The wholesale lenders collapsed in 2009 due, in part, to the faulty instruments.