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New ability-to-pay comment process may be burdensome CUNA

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WASHINGTON (6/8/12)--The Consumer Financial Protection Bureau recently re-opened the comment period for a proposed ability-to-repay rule to collect specific data and information on mortgage lending underwriting criteria and loan performance, but the Credit Union National Association (CUNA) in a new comment call warned this and other information sought by the bureau "is highly technical and may be very difficult and time consuming for credit unions to provide."

The CFPB's ability-to-repay rule comment deadline was extended to July 9 after new mortgage data came to light, the CFPB explained. Agency director Richard Cordray said the sheer volume of comments the agency has received regarding the issue also contributed to the decision to extend the comment period.

For the new comment round, the CFPB has expanded its request for information and has asked for data on estimates of litigation costs and liability risks associated with claims alleging an ability-to-repay requirements violation, for both qualified and non-qualified mortgage loans. However, CUNA in the comment call noted that responses to questions regarding possible litigation would be speculative at best.

CUNA has weighed in with the CFPB to let the bureau know that providing responses to this request for comments will be extraordinarily burdensome. However, credit unions that wish to forward their comments to CUNA may do so until July 2. (For the CUNA comment call, use the resource link)

The CFPB has said the new data and public comments could change how it designs the final rule.

Under the still-developing CFPB rule, mortgage originators would be required to consider a homebuyer's ability to repay a loan before a loan could be offered. The CFPB's ability-to-repay requirements would apply to consumer credit transactions that are secured by a dwelling and be further defined by the agency's definition of a qualified mortgage (QM).

A final version of a QM rule was scheduled to be released this summer, but the CFPB has also pushed that date back—likely to late this year.

The ability-to-repay rule was one of many topics discussed at a Wednesday Senate Banking Committee hearing on Dodd-Frank Wall Street Reform Act implementation.

Cordray testified on a panel with Deputy U.S. Treasury Secretary Neal Wolin, Federal Reserve Governor Daniel Tarullo, Comptroller of the Currency Thomas Curry, and Acting Federal Deposit Insurance Corporation Chairman Martin Gruenberg.

Cordray said the CFPB would not convene a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel before the ability-to-repay rule is issued. However, he did encourage concerned small businesses to contact the CFPB directly with their comments.

Under certain circumstances,  the CFPB is required to hold SBREFA panels to gauge the potential impact that upcoming regulations could have on small businesses, but Cordray noted Wednesday that a panel would not be held in this case, as the rule was a Federal Reserve project at first.

A new qualified residential mortgage (QRM) definition, and accompanying rules, was also discussed, but federal regulators on Wednesday said they would wait for the CFPB to complete its ability-to-repay work before they moved forward on the QRM rulemaking.

Accounting council could have big impact on CU operations CUNA

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WASHINGTON (6/8/12)--The Financial Accounting Foundation's (FAF) recently established Private Company Council (PCC) could have important implications for credit union operations, according to the Credit Union National Association (CUNA).

The council will review existing U.S. generally accepted accounting principles (GAAP) and determine how those standards could be improved to better serve the needs of private companies. The group could then make recommendations to the Financial Accounting Standards Board (FASB), as needed.

The council will also advise FASB on how certain agenda items that FASB is considering could impact private companies.

CUNA has repeatedly emphasized that financial accounting standards for credit unions and other private companies need to be improved, and has called for the challenges that many credit unions and others face due to the complexity of existing accounting standards to be addressed.

CUNA has also called on FASB to "take the steps necessary to mitigate the burden on smaller entities, particularly when there is no or only minimal resulting benefit."

The PCC could recommend that FASB endorse changes on these and other issues once the council is up and running, CUNA Assistant General Counsel Luke Martone said. If endorsed by FASB, a proposal would then be open for public comment. Once comments have been received the PCC would then have an opportunity to seek a final decision on endorsement from FASB; if FASB endorses the changes they would then be incorporated into GAAP.

The FAF is accepting nominations for the council, which will be comprised of nine to 12 members. Financial statement users, financial statement preparers, and auditors are among those that may be nominated for a PCC post. Members will serve initial three-year terms and may be reappointed to a subsequent two-year term.

Many organizations made recommendations to the FAF as the PCC was developed, and one CUNA suggestion, requiring that the PCC chair not be a FASB member, was accepted.

CUNA is reviewing the FAF's report on the new council with its Accounting Subcommittee, and will update credit unions on future PCC actions.

For more on the council, use the resource link.

NCUA CDRLF funding passes House subcommittee

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WASHINGTON (6/8/12--Funding for the National Credit Union Administration's (NCUA) Community Development Revolving Loan Fund (CDRLF) program would be less than half of the Obama administration's requested budget under an appropriations bill approved by the House Appropriations subcommittee on financial services this week.

The CDRLF, which provides loans and technical assistance to federal and state credit unions that are designated as low-income credit unions, as defined by NCUA regulations, would only receive $500,000.

The Obama administration requested $1.19 million in funds for the 2013 edition of the CDRLF earlier this year.

A total of $1.25 million in CDRLF funding was approved in the 2012 budget.

Funding for the U.S. Treasury's Community Development Financial Institutions (CDFI) fund would hold steady in 2013, matching the 2012 budget's funding level of $221 million.

The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. Credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding to help maintain their credit union's presence in the community. CDFI fund distributions are merit-based.

A total of 44 credit unions applied for a combined $59 million in funding during the 2012 round of the CDFI Fund, and the fund awarded $142,302,667 to 155 institutions, including 25 credit unions, in 2011.

The next step for this appropriations bill is a full House Appropriations Committee vote.

Inside Washington (06/07/2012)

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  • WASHINGTON (6/8/12)--House Democrats on Wednesday criticized a bill that would require a self-regulatory organization for registered investment advisers. The Investment Adviser Oversight Act of 2012, sponsored by Financial Services Committee Chairman Spencer Bachus (R-Ala.), and Carolyn McCarthy (D-N.Y.), would shift oversight from the Securities and Exchange Commission (SEC) to a self-regulatory organization (SRO), most likely the Financial Industry Regulatory Authority (American Banker June 7). Congress should weigh an increase in funding for the SEC before creating a SRO, said Barney Frank (D-Mass.). Maxine Waters (D-Calif.) said she will introduce a measure that would provide the SEC with the authority collect user fees from advisers to fund more examinations. State regulators have also argued against the proposal, saying that an SRO would negatively affect smaller investment firms currently regulated by the states …
  • WASHINGTON (6/8/12)--Democratic senators Wednesday criticized Office of the Comptroller of the Currency (OCC) head Thomas Curry for his agency's handling of the JPMorgan Chase's $2 billion trading loss. Jeff Merkley (D-Ore.) one of the authors of a proposal to prohibit firms from making proprietary trades, said JPMorgan's trades would not have been allowed under the rule, known as the Volcker Rule (American Banker June 7). Curry was unable to say whether his London or New York offices had full authority to direct the trade that led to the losses. Sherrod Brown (D-Ohio) said the OCC failed to meet acceptable standards in providing strong risk management and audit functions. Brown questioned if such a large trade should have been made without the OCC's knowledge …
  • WASHINGTON (6/8/12)--The Consumer Financial Protection Bureau (CFPB) is extending the comment period for its mortgage banking compensation proposals. On Monday, the CFPB sent out an e-mail to the 17 participants in the program notifying them that questions remain whether origination fees in transactions with creditor-paid and brokerage-paid compensation should vary with the size of the loans (American Banker June 7). In May, the CFPB asked mortgage professionals at firms with less than $7 million in annual revenue to discuss and provide comments on the agency's compensation proposals, which are nearly 40 pages long …
  • WASHINGTON (6/8/12)--The Financial Crimes Enforcement Network (FinCEN) has made a tweak to its Currency Transaction Report rule that allows depository institutions to exempt transactions of certain payroll customers from the requirement to report transactions in currency in excess of $10,000. The change substitutes the term "frequently" for the similar-but-not-identical term "regularly" in the provision of the exemption. The change brings the exemption clause for payroll customers in line with the one that governs exemptions for "non-listed businesses."  In other words, under the old rule, a non-listed business, to be exempt, had to, among other things, "frequently engage in transactions in currency with the bank in excess of $10,000."  To be an exempt payroll customer, a person had to, among other things, "regularly withdraw more than $10,000 in order to pay its U.S. employees in currency." FinCEN interpreted "frequently" to mean five or more transactions a year but had no specific interpretation of the term "regularly" …
  • WASHINGTON (6/8/12)--The Nationwide Mortgage Licensing System & Registry (NMLS) has released the "Nationwide View of State-Licensed Mortgage Entities" and the "NMLS Federal Registry Quarterly Report" for the first quarter 2012. The two reports provide a overview of all individuals, mortgage companies and depository institutions originating U.S. residential mortgages. The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires credit union mortgage loan originators and their employing institutions to register with the NMLS. …