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Mortgage fraud SARs continue to drop

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WASHINGTON (6/27/12)--The total number of mortgage loan fraud suspicious activity reports (MLF SARs) filed with the Financial Crimes Enforcement Network (FinCEN) again declined, with financial institutions filing 31% fewer MLF SARs in the first quarter of 2012 than they did in the first quarter of 2011.

A total of 17,651 MLF SARs were filed in the first quarter of 2012. Nearly 25,500 were filed in the first quarter of 2011, according to FinCEN. The recent MLF SAR high of 29,558 was achieved in the second quarter of 2011, and the number of MLF SARs appears to have declined steadily since then. However, FinCEN Director James Freis earlier this year had said it was too soon to call this decline a trend.

Eighty two percent of the MLF SARs filed in the first quarter of 2012 related to activities that occurred more than two years before they were filed, and 72% occurred more than four years before the SAR was filed. Nearly half of the MLF SARs related to suspicious activities that began more than five years ago.

"This increase in very dated SARs could indicate that filers are still working through the backlog of bad loans originated in the 2006-2007 housing bubble," FinCEN said.

States that were hardest hit by the mortgage mess were among those that filed the highest number of MLF SARs during the quarter. Financial institutions in California, Nevada and Florida led the way in MLF SAR filings.

Forty-one percent of suspicious transactions were reported and stopped before they could be completed, and Freis said SARs remain "a tremendous tool to flag new criminal techniques, trends, and patterns, and to help identify and hold accountable those involved in organized and repeated criminal schemes."

Just over one-in-five of the fraud attempts reported in the first quarter of 2012 involved instances in which borrowers overstated their total income on finance forms. FinCEN also noted that fraudulent debt elimination schemes accounted for 14% of MLF SARs filed during the quarter, a five percentage point increase over the 9% total reported in 2011's first quarter. The number of appraisal fraud schemes reported fell to 3% during the quarter, a decrease from the 12% total reported in the first quarter of 2011.

FinCEN also detected some patterns in the suspicious activity reports. Certain mortgage and debt relief scammers were named several separate times in various MLF SARs, and several foreclosure rescue scams continued to falsely claim affiliation with the banks that serviced a given borrower's mortgage. The MLF SARs also uncovered a scheme in which a real estate professional shopped for more than one dozen short-sale properties using identical proof of funds documents and purchase agreements.

For the full FinCEN report, use the resource link.

CFPB arbitration review should target unregulated CUNA

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WASHINGTON (6/27/12)--Noting that most credit unions do not use pre-dispute arbitration agreements in their consumer contracts, the Credit Union National Association (CUNA) urged the Consumer Financial Protection Bureau (CFPB) to focus on unregulated product and service providers as it examines the use of pre-dispute arbitration agreements in consumer contracts.

Other than credit card agreements, the CFPB should not focus on any particular markets for consumer financial products and services when it reviews the prevalence of pre-dispute arbitration agreements, CUNA Assistant General Counsel Luke Martone added in a comment letter to the CFPB.

CUNA also suggested the CFPB examine the impact and purpose of the pre-dispute arbitration agreements, instead of directing its review to the prevalence of particular terms in the agreements.

Arbitration agreements are often added to account and financial product contracts between financial institutions and their members or consumers.

The Dodd-Frank Wall Street Reform Act requested that the CFPB study the use of arbitration agreements in consumer financial services contracts. As a first step, the agency requested suggestions on the scope, methods and data sources it should use in its study. The results of the study will be reported to the U.S. Congress.

CUNA in the letter said it supports the CFPB's attempts to evaluate how the use of pre-dispute arbitration agreements impacts consumers, and agreed that the CFPB should analyze the types and frequency of claims that consumers bring in arbitration. However, CUNA added, the agency should also consider and minimize any potential burdens that may be imposed on credit unions as a result of the study.

Military fin lit efforts discussed in Senate hearing

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WASHINGTON (6/27/12)--Educating servicemembers on their financial services options, and communicating basic financial literacy concepts, can be a challenging process. Witnesses at a Tuesday Senate Banking Committee hearing detailed their own work to improve financial literacy in the military and help shield members of the military from future financial issues.

Consumer Financial Protection Bureau (CFPB) Office of Servicemember Affairs leader Holly Petraeus during the hearing said her office is working hard to fulfill its mission to work on consumer financial education and consumer-protection measures for military personnel and their families. One obstacle to financial literacy efforts, she said, is the spread out nature of the military, which has facilities across the nation and the world.

New military recruits at one Air Force base had an average of $10,000 in debt when they arrived at their post, Petraeus noted.

Petraeus said she hopes the CFPB and others can reach incoming servicemembers before they attend initial boot camps, to give them "'just-enough and just-in-time' financial lessons that could be very helpful before they get that first military paycheck and start thinking of ways to spend it." Her office has developed a short financial-education curriculum that can be delivered via smartphone or computer after an individual has signed up for the military, but before they have begun their training. Petraeus said the Pentagon and senior military officials are enthusiastic about the planned education efforts, and have signaled their intent to help the CFPB field the program.

She also said she wants to enhance the CFPB's ongoing educational efforts through online and electronic means, such as websites and mobile apps, and hopes that these efforts would help increase the financial literacy of servicemembers' spouses as well.

Overall, Petraeus said, the CFPB's efforts seek to make financial education less of a lecture and more of a cooperative effort.

Delaware Attorney General and Delaware Army National Guard Major Beau Biden said the National Guard has stepped up its own financial literacy efforts, and noted that he has heard of many commanding officers that have stepped in, at times, to help their subordinates navigate financial issues.

Credit unions provide financial education and resources to servicemembers and their families in a variety of formats, including deployment briefings and guides to help soldiers prepare before they are deployed abroad. These financial efforts address steps servicemembers can take before, during and after they are deployed to achieve various financial goals.

Servicemembers and their families are members of more than 330 credit unions with military or defense-related charters that serve over 18 million memberships. Many credit union products that are provided through both on- and off-post credit union branches are specifically designed for servicemembers, veterans and their families, and address issues like active deployments, military relocations, and other circumstances.

The Defense Credit Union Council also represents the interests of credit unions that operate on military installations, and works closely with the Pentagon and member credit unions to coordinate policy, procedures and legislation impacting morale and welfare, financial readiness, and the delivery of quality financial products and services to Department of Defense personnel and their families. The council comprises 235 credit unions serving more than 14 million members.

For more on the hearing, use the resource link.

Inside Washington (06/26/2012)

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  • JAMESBURG, N.J. (6/27/12)--National Credit Union Administration (NCUA) Board Member Michael E. Fryzel, at the invitation of New Jersey Credit Union League President Paul Gentile, addressed credit union CEOs and leaders at a breakfast in Jamesburg, N.J., Tuesday. During his presentation, Fryzel urged New Jersey credit unions to continue helping their members who are struggling financially. "The state of New Jersey continues to face economic struggles, as does the nation," Fryzell said. "It is important that you continue to provide your members with the services and loans they need. Credit unions have shown the country they remain true to their principles: They have kept lending and kept helping their members and one another without costing the American taxpayers a single dollar. You must take this opportunity to boost credit union participation and good works to an even higher level." Other topics Fryzel addressed included the status of NCUA's Corporate Resolution Plan, economic issues affecting consumer credit unions, pending NCUA rulemakings, the proposed rules of other federal agencies and the future of credit unions. After his address Fryzel took questions from the audience …
  • WASHINGTON (6/27/12)--Between five and 10 large banks are expected to submit living wills by July 1, posing a critical test for both banks and regulators and their efforts to end "too big to fail," as mandated by the Dodd-Frank Act. The living wills, which are documents that explain how banks would divide up their assets if they fail, could run to thousands of pages, according to some observers (American Banker June 26). Regulators have indicated that banks are unlikely to fail the first round of reviews, but the initial submissions are likely to influence future expectations, said Sylvia Mayer, a partner at Weil, Gotshal & Manges. Each draft will include a public portion, representing only a small part of the overall plan that will provide an overview of the bank's resolution strategy. Regulators are very likely to review the initial plans and come back to institutions with pages of questions, said John Lane, a former Federal Deposit Insurance Corp. official who is now a special adviser at Promontory Financial Group …

CDRLF grant applications due June 29

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ALEXANDRIA, Va. (6/27/12)--Low-income credit unions (LICU) have until June 29 to apply for the $1.3 million available this year for technical assistance grants through the Community Development Revolving Loan Fund (CDRLF).

Applications for CDRLF reduced-rate loans, however, will be accepted from LICUs through the rest of the year or until the associated $11 million in funds is exhausted.

The National Credit Union Administration (NCUA) sent out a reminder yesterday that LICUs have until 5 p.m. (ET) Friday to participate in the 2012 application process for CDRLF grants of up to $25,000. The agency's Office of Small Credit Union Initiatives administers the CDRLF.

The 2012 CDRLF funding round is the first using the NCUA's new automated online application process, intended to  make it much easier to accesses the free funding.

The NCUA has prioritized grants for:
  • Financial literacy and education in school branches;
  • New product and service development;
  • Staff, official, and board member training;
  • Student and job creation internships; and
  • Volunteer Income Tax Assistance.
To help any credit union learn about the CDRLF grant program the NCUA has posted a video  on its YouTube channel , issued guidance in a Letter to Credit unions, and posted grant application guidelines to its website (use links to access these resources).

Credit unions may obtain CDRLF loans up to $300,000, but a new rule adopted by the NCUA  last year allows higher loans on a case-by-case basis. For 2012, NCUA has set the interest rate at a record low of 0.4%.