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Inside Washington (05/30/2011)

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* WASHINGTON (5/31/11)--Mortgage industry and real estate insiders last week acknowledged the need for market reforms, but also told Senate Banking Committee members that completely removing the government from the mortgage sector could harm the overall housing market. National Association of Realtors President Ron Phipps told the committee that "pure privatization of the secondary mortgage market is unacceptable," and warned that limiting the government’s role would “cause mortgage products to be more aligned with business goals than the nation's housing policy or the consumer" (American Banker May 27). Sen. Richard Shelby (R-Ala.) countered these claims, saying that Congress “cannot assume a government guarantee of mortgages can be achieved without risk to the taxpayer." Committee Chairman Sen. Tim Johnson (D-S.D.) said that his committee must find ways to bring private funds back to the mortgage market “while also ensuring that credit remains available." Several witnesses said some form of government backing would need to be maintained in order to draw private funds back into the market … * WASHINGTON (5/31/11)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair told members of the House Financial Services subcommittee on financial institutions and consumer credit that she wants to prove that the FDIC’s new resolution powers would work as planned (American Banker May 27). While some members questioned the FDIC’s ability to deal with its new authority over larger institutions, Bair said that her group addressed the failure of $300 billion-asset Washington Mutual and also aided other large banks. Bair said that her agency understands these banks due to their work as an insurer, and added that she would match her staff’s experience “against anybody” in the Federal Reserve, the U.S. Treasury, or the Office of the Comptroller of the Currency. “We have very smart people who do this for a living," Bair added. Bair also addressed the structure of the pending Consumer Financial Protection Bureau, saying that she has “no reservations” about allowing the CFPB to maintain its single-leader structure. Some members of Congress have suggested that CFPB leadership be expanded to a five- member board, and legislation that would make that change, among others, is currently active …

Compliance Notifying members under Reg E

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WASHINGTON (5/31/11)--Member notifications and other disclosures are addressed in this month’s Credit Union National Association (CUNA) Compliance Challenge. In the Challenge, CUNA recommends that credit unions inform members who do not wish to be sent monthly account statements that other notification options exist. They include electronic statement delivery via e-mail, the option of picking up their paper statements at their credit union, or delivery to an alternate address or P.O. box. Credit unions may not simply cease sending statements; they are required to provide statements to their members by Regulation E. Those statements must be sent in each monthly cycle that a direct deposit, ATM transaction, debit card purchase, or other electronic transfer occurs. However, the frequency can be scaled back to four times per year if these transactions do not occur. Credit unions may also stop sending notifications for accounts that have become inactive, CUNA noted. ATM-related disclosures that are required by Reg E were also covered this month. According to CUNA, credit unions do not need to disclose on their own ATMs that their members may be charged fees for using another institution’s ATM. Disclosures for so-called “foreign fees,” which are charged by the account-holding institution when a credit union member uses an out of network ATM, are disclosed in the account agreement and appear on the member’s monthly account statement. For more of this month’s Compliance Challenge, use the resource link.

NCUA webinar covers ALLL best practices

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ALEXANDRIA, Va. (5/31/11)--Credit unions must fully understand the current economic environment and various economic trends before they determine whether, and to what degree, to adjust their allowance for loan and lease losses (ALLL), National Credit Union Administration (NCUA) Chief Economist John Worth said during a webinar held last week. Worth and NCUA staff used the webinar to cover some best ALLL practices for credit unions. The NCUA staffers did not provide any new information regarding the ALLL, but did provide guidance on how credit unions can adjust their ALLL based on different qualitative and environmental (Q&E) factors. NCUA Senior Economist Ralph Monaco and regional problem case officer Elizabeth DiNapoli also took part in the interactive webinar. The NCUA staff mentioned the importance of appropriate historical look-back periods for assessing the ALLL, and recommended that credit unions assess each type of loan individually in order to determine an appropriate historical period for that particular type. The NCUA staff also noted that credit unions may determine that a shorter look-back period is more appropriate for their credit card loans than their auto loans. Staff stated that such a determination is appropriate, as long as it is based on adequate evaluation of the factors affecting the type of loan and the evaluation is documented. CUNA’s Accounting Subcommittee continues to review the NCUA webinar, and will release more information on the webinar and on ALLL in general later this week.

30- 15-year rates set new lows for 2011

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WASHINGTON (5/31/11)--Thirty- and fifteen-year fixed-rate mortgages continued to slide during the week ended May 26, setting new yearly low points, with 30-year loans averaging 4.60% and 15-year loans averaging 3.78%. The previous lows for this year were set last week. Freddie Mac Vice President/Chief Economist Frank Nothaft said that reports of slowed economic activity cause the decreased mortgage rates. Nothaft added that U.S. home prices may bottom out soon, as prices only fell by 0.3% between February and March. Five-year and one-year adjustable rate mortgages (ARM) also fell during the week, averaging 3.41% and 3.11%, respectively. Those rates stood at 3.48% and 3.15% last week. Five-year ARMs averaged 3.97% this time last year, while one-year ARMs averaged 3.95%.