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National mortgage originators registry plan issued

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WASHINGTON (6/2/09)—Almost a year after the provisions were signed into law, the federal financial institution regulatory agencies are seeking comment on a plan to implement a national mortgage originators’ registry. The National Credit Union Administration (NCUA), along with five other federal regulators, issued proposed rules to implement the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act. The SAFE Act requires an employee of a financial institution or its subsidiary, who acts as a residential loan originator, to register with the Nationwide Mortgage Licensing System and Registry. If adopted, the proposed rules will apply to federally insured credit unions, but not to credit union service organizations (CUSOs), as they are not regulated by NCUA. However, CUSOs and their employees must comply with state licensing and registration requirements that are also mandated under the SAFE Act. The SAFE Act also requires the employee to obtain a unique identifier that is associated with the originator within the Registry system and requires the employee to maintain this registration. The proposal released Monday would implement these SAFE Act provisions and instructs financial institutions to require employees to comply with the SAFE Act provisions. It also would compel the financial institution to adopt and implement written policies and procedures that are intended to ensure compliance with these requirements. Those policies and procedures must be tailored based on the nature, size, complexity, and scope of the institution’s mortgage lending activities, according to the joint proposal. Comments on the proposed rule are due within 30 days of its publication in the Federal Register, which should be within the next few days. However, under the proposal, the initial registrations do not have to be completed until 180 days after the Registry is capable of receiving them, which is not expected until mid-year 2010. Use the resource link below to access the Federal Register document.

Miller v. BoA decision favors financial institutions

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WASHINGTON (6/2/09)-- The California Supreme Court Monday backed Bank of America’s (BoA) position and ruled that state law permits BoA and other depository institutions in California to cover overdrafts and overdraft fees from Social Security funds and other protected public benefit deposits. The state supreme court, ruling on an appeal in Miller v. Bank of America, said the practice did not violate the California Unfair Business Practices Act. Credit unions have been watching this case for years as it has moved through the California court system. The decision affects a broad swath of financial institutions, including California credit unions and credit unions doing business in the state. The Credit Union National Association (CUNA), the California CU League, banking trade associations, and the U.S. government filed amicus briefs in the appellate court in support of BoA's position. Many of the same parties, including CUNA, filed an amicus brief with the California Supreme Court. The implications of the case are important to consumers as well. For instance, CUNA General Counsel Eric Richard said Monday that the ruling helps to assure access to checking accounts for those receiving protected federal benefit funds . “If a financial institution’s ability to recoup losses and fees caused by overdrafts was invalidated because an account was funded in part or fully by protected federal benefit deposits such as Social Security funds , it could have the unfavorable result of making it harder for those consumers to have checking accounts and other services such as ATM cards ,” he said. Throughout the case, BofA had argued that federal law and regulation preempt a California law that prohibits tapping SS money in an account. However, in December 2004 a judge for the Superior Court of San Francisco upheld an over-$1 billion-dollar jury award against BofA for violating state law. But in November 2006, a California Court of Appeals reversed the lower court's ruling and award, and decided in favor of BofA. The plaintiff, Paul Miller, then filed an appeal with the California Supreme Court. However, the Supreme Court, as noted, also sided with the bank’s position. In its decision, the court declared that the state financial code “expressly excludes overdrafts and bank charges from the statutes definition of debt.” The court concluded: “…Bank of America’s practice of recouping overdrafts and charging insufficient funds fees is permissible in light of the Legislature’s unequivocal statement in Financial Code section 864 that overdrafts and bank charges are not debts and are therefore not subject to the limitations placed on a bank’s right of setoff set forth in that statute. “ In a related story, The Wall Street Journal reported Monday that the U.S. Treasury Department is getting some heat from a bipartisan group of federal lawmakers to close a loophole relating to federal benefits. Federal law prohibits creditors from taking SS, disability, veterans' and children's survivor benefits to pay a debt. However, the law is silent on how money deposited directly into accounts are financial institutions should be handled. The article reported that the U.S. Treasury and Social Security Administration, along with banking regulators, drafted rules to close the loophole earlier this year, but they have not progressed beyond the proposal stage. Members of the Senate Special Committee on Aging, as well as some members of the House, including Financial Services Committee Chairman Barney Frank (D-Mass.), have urged Treasury Secretary Geithner to act on the plan.

CUNA compliance dept. presents improved website

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WASHINGTON (6/2/09)—The Credit Union National Association (CUNA) on June 1 announced an improved and redesigned compliance website that will feature up-to-the-minute information on federal regulatory developments. Valerie Moss, director of compliance information for CUNA, said the new format will allow credit union compliance professionals to focus on their most pressing issues, with links to federal agency announcements, CUNA compliance information, even the “occasional rumor of when something is expected to be released or is stalled.” What's New in Compliance now appears front and center on CUNA’s compliance website. On the right hand column of the reworked page, users will find CUNA’s upcoming compliance-related events and training resources. This portion of the site will also contain key links to CUNA’s Regulatory Advocacy Website, which covers comment letters, comment due dates, regulatory effective dates, and other related information. The left hand column of the site will connect users to CUNA’s dues-supported compliance materials, including CUNA’s e-Guide to Federal Laws and Regulations, the Bank Secrecy Act Compliance Guide, as well as CUNA’s monthly Compliance Challenge. This portion of the site will also contain compliance-related stories from Credit Union Magazine. The site currently features information as far back as April 1 of this year. To see the redesigned site, use the resource link below.

Inside Washington (06/01/2009)

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* WASHINGTON (6/2/09)--During remarks at an annual credit union volunteers meeting Friday, National Credit Union Administration (NCUA) Chairman Michael Fryzel praised credit union volunteers and called on credit unions to participate in the reform of the corporate credit union system. During his speech, Fryzel detailed provisions of the new corporate credit union stabilization legislation, and applauded Congress and President Barack Obama for their “swift action” in passing the law. He also emphasized that volunteerism is the focus of the credit union philosophy. “When one looks at some of the founding documents of the credit union movement, from 100 years ago it was apparent that volunteer control of credit unions was considered an essential part of their make-up,” he said. The meeting, sponsored by the National Association of Federal Credit Unions, took place in Portland, Ore. ...

Senate Judiciary could vote on APR cap this week

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WASHINGTON (6/2/09)—The Senate Judiciary Committee later this week could vote on a bill aimed at capping the annual percentage rate for loans of all kinds by amending the current bankruptcy code. S. 257, the Consumer Credit Fairness Act, which is co-signed by Sens. Sheldon Whitehouse (D-R.I.), Richard Durbin (D-Ill.), and Sen. Bernard Sanders (I-Vt.), would alter current federal bankruptcy law by allowing consumers that have been pushed beyond the brink by so-called “high cost” consumer credit card transactions to transition directly to Chapter 7 “fresh start” bankruptcy proceedings. Under the terms set forth by the legislation, “high cost” would mean any loan with terms exceeding the lesser of 15%, plus the yield on 30-year U.S. Treasury securities, or 36%. Bankruptcy laws passed in 2005 made it more difficult for borrowers to qualify for Chapter 7. According to a May 29 American Banker story, the true aim of the bill is to force financial institutions to alter their consumer lending practices, such as how they factor annual percentage rates (APR), by making it harder for the creditors to collect on certain forms of consumer debts during bankruptcy proceedings. Such a move would create a de facto APR cap of 18.5%. A Senate amendment that would have imposed a 15% interest rate cap for credit cards was, in the end, not attached to the recently passed Credit Cardholders' Bill of Rights Act, but Sen. Chris Dodd (D-Conn.) has said the Senate should consider creating an interest rate cap for credit cards. Though S. 257 has been on hold for some time and has not yet been presented to the full Senate, sources told the American Banker that the bill has a good chance of clearing the judiciary panel. Negative public sentiment toward the banking industry could also help move the bill forward, the story said.

Coming up in Congress Bernanke on the economy

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WASHINGTON (6/2/09)—Although no finance-related legislation is expected this week, discussions in Congress should pick up midweek, with a pair of House Financial Services Subcommittees and the Senate Banking Committee set to hold hearings on issues that are of interest to credit unions. The Wednesday House schedule will feature Federal Reserve Board Chairman Ben Bernanke’s input on the current economic troubles, with the Fed chair set to testify at a 10 a.m. hearing before the House Budget Committee. Another early hearing, entitled "Remittances: Regulation and Disclosure in a New Economic Environment," will be held before the House subcommittee on financial institutions and consumer credit at 10 a.m. on Wednesday. The World Council of Credit Unions recently predicted that continuing economic instability could lead to a drop in the total number of remittances to the Caribbean and Latin America. (See related May 21 story: Expect decline in remittances for 2009.) Later on Wednesday, the House subcommittee on capital markets, insurance, and government-sponsored enterprises, will discuss the current and future condition of government-backed mortgage lenders Fannie Mae and Freddie Mac with academic and industry reps and officials from the Federal Housing Finance Agency, including current director James Lockhart. On Thursday, Fannie Mae President/CEO Herbert Allison will face the Senate Banking Committee as they hold confirmation hearings for the potential assistant Treasury secretary for financial stability. If confirmed, Allison would administer the Federal Government’s Troubled Asset Relief Program. The Senate Judiciary Committee on Thursday could also vote on S. 257, the Consumer Credit Fairness Act, which would grant increased relief to debtors by altering current federal bankruptcy law.