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Inside Washington (06/17/2010)

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* WASHINGTON (6/18/10)--The federal bank and thrift regulatory agencies have proposed a change to Community Reinvestment Act (CRA) rules that they say is intended to support stabilization of communities affected by high foreclosure levels. The proposed rule change specifically would encourage depository institutions to support the Neighborhood Stabilization Program (NSP) administered by the U.S. Department of Housing and Urban Development (HUD). It would allow banking institutions to receive CRA consideration for NSP-eligible activities in additional NSP-targeted areas and thereby, it is hoped, leverage government funding targeted to these areas. Also on the CRA front, bank and thrift agencies announced Thursday that there will be a series of public hearings on updated rules that implement the CRA. There are currently four hearings planned around the country: July 19, in Arlington, Va.; Aug. 6 in Atlanta; Aug. 12 in Chicago; and Aug. 17 in Los Angeles. The agency involved is the Federal Reserve Board. It intends to consider how to update the regulations to reflect changes in the financial services industry, changes in how banking services are delivered to consumers today, and current housing and community development needs… * WASHINGTON (6/18/10)--The House passed legislation this week that would temporarily save millions of gift cards from being destroyed under the Credit Card Accountability, Responsibility and Disclosure Act. The bill would delay the effective date of rules that require cards to prominently display expiration dates. Originally, the rules would have gone into effect Aug. 22, but will now be effective Jan. 31. Cards produced before April 1 would be affected (American Banker June 17). The measure aims to avoid having to destroy the cards and cardholder agreements, said Terry Maher, partner with Baird Hom LL law firm and general counsel for the Network Branded Prepaid Card Association ... * WASHINGTON (6/18/10)--Conferees on the regulatory reform bill analyzed provisions that would give the Government Accountability Office (GAO) more power to audit the Federal Reserve Board and also give shareholders a nonbinding vote on executive compensation (American Banker June 18). Conferees agreed to allow GAO to conduct ongoing audits of the Fed’s monetary policy decisions after a two-year delay, but disagreed on limitations regarding its emergency lending powers. Regarding executive compensation, conferees were not able to resolve some differences. The House version would give shareholders a nonbinding vote on golden parachute packages for senior executives, while the Senate did not want to add a provision. The final bill includes a measure to allow a similar vote on general compensation ... * WASHINGTON (6/18/10)--A spending bill that would extend jobless benefits has been set back in the Senate after Democrats struggled to garner support for the measure. Senate Finance Chairman Max Baucus (D-Mont.) said he hopes Democrats’ moves to narrow benefit payments to the unemployed and pare down a proposal to suspend cuts in Medicare payments to doctors would help move the bill toward passage (Wall Street Journal June 17.) Changes also were made to a proposed tax on income that managers of hedge funds earn. Sen. Dianne Feinstein (D-Calif.), who supported the bill, said she questioned how long unemployment insurance--at 99 weeks currently--would run. Senators also approved a measure that would lengthen the time individuals have to qualify for a homebuying tax credit. The credit, originally set to expire June 30, would run through Sept. 30, although buyers would have had to enter into the purchase contract by April 30 to qualify ...

FinCEN reports jump in foreclosure rescue scams

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VIENNA, Va. 6/18/10)--Suspicious Activity Reports (SARs) that note foreclosure rescue scams increased dramatically in 2009, according to the Financial Crimes Enforcement Network (FinCEN), and the agency said it is not clear whether the activity has skyrocketed or financial institution awareness of the fraud has increased. In its report entitled “Loan Modification and Foreclosure Rescue Scams—Evolving Trends and Patterns in Bank Secrecy Act (BSA) Reporting,” FinCEN said it analyzed more than 3,500 SARs filed from 2004 through 2009, 3,000 of which were filed in 2009. In addition to a dramatic rise in this type of fraud report, FinCEN said its analysis shows that the nature of foreclosure rescue scams has shifted during the period examined in the study. The earlier SARs identified persons or entities that purported to be loan modification or foreclosure rescue specialists, but who were later identified as fraudsters who targeted financially troubled homeowners with promises of assistance. “The scams involved the homeowners signing quit claim deeds, and resulted in loss of equity in or title to their property. The scammers used straw borrowers, who misrepresented income, employment, or occupancy, or provided other fraudulent information to deceive a new lender into making a new mortgage loan,” FinCEN noted. Later SARs zero in on scams that FinCEN said reflect “an evolution into advance fee schemes, in which purported loan modification or foreclosure rescue specialists promised to arrange modification of a homeowner’s mortgage for more favorable repayment terms”. Following receipt of large advance fees, scammers rarely, if ever, provided any service. FinCEN added: A variation of the advance fee scam involved phony debt elimination programs in which the homeowners paid advance fees and were given bogus documents, or were instructed to contact their lenders with specious assertions that the original mortgage debt was illegal. Use the resource link below to see the top 10 major metropolitan areas reporting these scams and to read more about the FinCEN report.

As House aids bank lending MBL cap lift remains option

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WASHINGTON (6/18/10)—A government-backed $30 billion fund that would ease the ability of small banks to lend to customers who own small businesses inched one step closer to becoming law on Thursday. The House bill, which would provide funds that small community banks could then use to lend to small businesses, passed by a 241-182 vote. It is not entirely clear where that $30 billion in funding would come from. The Credit Union National Association (CUNA) and a growing list of backers, including the U.S. Treasury, Rep. Paul Kanjorski (D-Penn.), and Sen. Mark Udall (D-Colo.), have posited that the current lending crunch could be eased by lifting the 12.25% of assets cap on credit union member business lending. Both Udall and Kanjorski have prepared separate bills that would increase the MBL cap, and Kanjorski’s bill continues to enjoy strong support in the House. The Treasury also recently proposed lifting the MBL cap to as high as 27.5% of total assets, and Rep. Barney Frank (D-Mass.), who chairs the House Financial Services Committee, has said that that committee would soon take up the topic of MBLs. CUNA has estimated that lifting the MBL cap to 25% of a credit union's assets would create over 100,000 new jobs and inject over $10 billion in funds into the economy, at no cost to taxpayers.

FOM proposal approved by NCUA with modifications

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ALEXANDRIA, Va. (6/18/10)--The National Credit Union Administration (NCUA) on Thursday approved a final version of previously proposed chartering and field of membership (FOM) policy changes, setting objective and quantifiable criteria to determine the existence of a well-defined local community for areas that encompass multiple political jurisdictions.
Click to view larger image NCUA Chairman Debbie Matz and Board Memeber Michael Fryzel are briefed on one of many topics tackled at the June 17 NCUA meeting
Under the final rule, single political jurisdictions, such as a county, may continue to be the basis for a new or expanded community charter without having to meet further statistical standards. While portions of the original proposal were retained that eliminated the so-called “narrative approach” from the application, that specified how underserved areas and single political jurisdictions may be addressed, and that grandfathered previously approved well-defined local communities into the new regulations, the NCUA did make some changes in the final rule. One such change is an alteration that would allow districts with populations of 200,000 or less to be classified as “rural” for credit union community charter purposes. The upper population limit for this classification was 100,000 under the previous proposal. NCUA Chairman Debbie Matz said that the NCUA’s revised proposal removes some of the more “burdensome” elements of the previous charter application process and provides credit unions with the “flexibility” to serve consumers that would otherwise go unserved. Matz warned that while charter approval will not be “automatic,” the NCUA proposal, which will be enacted 30 days after it is published in the Federal Register, “dramatically improves” both the application process and the NCUA’s ability to evaluate those applications. NCUA staff has previously estimated that the redesigned process will shorten the amount of time needed to approve an application to "a couple of months" in most situations, with the more difficult situations needing slightly more time to be resolved. The NCUA during the meeting also voted to authorize regional directors and the director of the Office of Small Credit Union Initiatives “to process a broad range of chartering transactions” to help expedite the overall chartering process. The NCUA will also seek to ensure that credit union marketing plans address how those credit unions will implement their business plans to serve the entire community and that the plans address the needs of the underserved and various demographic groups. Other factors will also be considered, and the NCUA members during the meeting noted that credit unions should not fear immediate corrective action if their business plans do not immediately conform to the new NCUA standards.

NCUA assesses 13-bp charge to repay corporate CU coverage

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ALEXANDRIA, Va. (6/18/10)--Credit unions will soon be charged an assessment of 0.134% of insured shares as the National Credit Union Administration (NCUA) collects a portion of the funds necessary to pay for the costs of the corporate stabilization. Invoices for the assessment will go to credit unions in July with the assessment due in August. In accordance with the stabilization fund established by Congress last year, the agency may collect the funds necessary to cover the costs of corporate stabilization over a period of as long as seven years. The NCUA assessment of the likely amount of those costs is in the neighborhood of $6 billion, but the actual amount of the losses will not be known for some time, Credit Union National Association (CUNA) Chief Economist Bill Hampel said. This year’s assessment will provide $1 billion toward the eventual losses, he added. Credit unions should expense their assessment in June and report the expense on their June 2010 call reports, according to NCUA. CUNA President/CEO Dan Mica said that while the NCUA’s assessment is close to CUNA’s prior predictions, it “is still a burden on the nation’s credit unions coping with a recovering economy. “Given that, and looking forward, we are hopeful that the agency will take the necessary actions to keep future assessments to cover corporate credit unions costs and for the National Credit Union Share Insurance Fund (NCUSIF) at the lowest level possible,” Mica added. NCUA Chairman Debbie Matz said that the agency would discuss a separate assessment to replenish the NCUSIF later this year. Hampel predicted that the pending NCUSIF assessment would be somewhere between 5 and 10 basis points (bp), bringing the total amount assessed by the NCUA this year to between 18 and 23 bp. In it’s monthly report on the status of the NCUSIF, which was delivered later in the NCUA's monthly board meeting, the NCUA staff noted that the fund’s equity ratio was at 1.22% as of the end of May 2010, adding that the fund increased it’s reserves for both specific and non-specific natural-person credit union (NPCU) losses by $132 million, bringing the total amount of its reserves to $1.1 billion. The NCUA’s $1.1 billion “provision” for natural person credit union insurance losses “is not this year's expense,” but is “what the NCUSIF has expensed over the past couple of years in anticipation of future losses,” Hampel added. “The language NCUSIF uses can be confusing compared to credit union terminology. The ‘Provision for CU Losses’ is analogous to a credit union’s allowance for loan losses, and the NCUSIF’s ‘Insurance Loss Expense’ is similar to a credit union’s loan loss provision,” Hampel said. Overall, insurance loss expenses are “running at budget” this year, and “expenses for the rest of the year will likely depend primarily on changes in the number and size of troubled credit unions,” Hampel added.