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CUNA seeks first round of CFPB mortgage comments

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WASHINGTON (7/16/12)--The Consumer Financial Protection Bureau (CFPB) last week proposed a new, simplified mortgage disclosure form and released rules that implement the mortgage form changes. The Credit Union National Association (CUNA) is asking credit unions for general and specific suggestions on how elements of the CFPB proposals could be improved.

The proposed rules amend Regulation Z, which implements the Truth in Lending Act (TILA), and Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA). The regulations back up the changes made to the TILA and RESPA forms that homebuyers are given when they apply for and close a mortgage. (See related July 10 News Now story: CFPB unveils proposed mortgage disclosure forms)

The mortgage rules would apply to the majority of consumer mortgages, but would not apply to home equity lines of credit, reverse mortgages, or mortgages that are secured by mobile homes or dwellings that are not attached to land. Creditors that process five or fewer mortgages per year would also not be subject to the rules.

CUNA continues to work through the 1099 page CFPB mortgage rule release, and is planning multiple comment calls and surveys on different aspects of the proposal.

Most of the CFPB proposal has a comment deadline of Nov. 6, but there are two significant provisions that have a comment deadline of Sept. 7. Those two provisions are addressed in this first comment call.

One such provision would require lenders to include most up-front costs associated with a mortgage to be included in the finance charge. Under the proposal, loan charges or fees would need to be included in the finance charge, but late fees, delinquency or default charges, seller's points, some escrow payments and most insurance premiums would not need to be included.

CUNA in the comment call asks credit unions which fees should be removed from or added into the proposed finance charge structure, and whether the proposed changes to the finance charge structure would create financial or compliance burdens for credit unions.

The CFPB has also asked for earlier comment on a list of disclosures it is considering delaying. That list includes disclosures related to:

  • Negative amortization features;
  • State law protections for borrowers regarding deficiency judgments;
  • Partial payment policies;
  • Mandatory escrow accounts;
  • Escrow waivers;
  • Monthly payments for variable rate loans;
  • Repayment analysis;
  • Settlement charges and fees;
  • Mortgage origination fees;
  • Total interest as a percent of principal; and
  • Optional appraisal management company fee disclosures.
CUNA's comment call asks whether the compliance date for these disclosures should be extended, and if delaying the compliance date for these disclosures until January 2014 would be sufficient.

CUNA has asked credit unions to respond to this first comment call by Aug.10. For the CUNA comment call, use the resource link.

The association's second comment call will have additional details on the requirements contained within the proposed rule.

Inside Washington (07/13/2012)

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  • WASHINGTON (7/16/12)--The Department of Justice on Thursday reached a $175 million settlement with Wells Fargo Bank to resolve the government's allegations that the bank discriminated against qualified African-American and Hispanic borrowers between 2004 and 2009 in violation of the Equal Credit Opportunity Act and the Fair Housing Act. As part of the settlement--which is subject to the U.S. District Court's approval--Wells Fargo will provide $125 million in compensation to borrowers who were victimized by its widespread practice of charging higher fees and rates to non-white borrowers. The bank will provide another $50 million in direct payments for down payment assistance to residents within eight metropolitan areas where the bank's discriminatory practices had a significant impact. Wells Fargo also has agreed to injunctive relief, monitoring, and an internal review of its retail mortgage lending practices--with additional compensation for minority borrowers who received subprime loans from its retail division while white borrowers with similar credit profiles were offered prime loans. "The department's action makes clear that we will hold financial institutions accountable, including some of the nation's largest, for lending discrimination," said Deputy Attorney General James M. Cole at a press conference announcing the settlement. "An applicant's creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for" …
  • WASHINGTON (7/16/12)--The Federal Deposit Insurance Corp. (FDIC) sent a letter to insured financial institutions last week discouraging them from charging specific customer fees for deposit insurance or from stating or implying that the FDIC is charging such fees. While FDIC-insured depository institutions (IDI) are not prohibited from passing the costs of deposit insurance on to customers, "institutions that characterize fees in this manner may (1) reveal information that could be used to determine an institution's confidential supervisory ratings, (2) mislead customers into believing that the FDIC charges IDI customers or requires IDIs to charge customers for deposit insurance, or both," the regulator said in the letter. In the past, the FDIC has advised banks in published advisory opinions that it does not prohibit them from passing deposit insurance costs to depositors with notice that the cost is for that purpose, but those opinions pre-date risk-based pricing and are obsolete, the regulator said …

CDFI Fund announces 2012 NMTC program

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WASHINGTON (7/16/12)--The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund on Friday opened the 2012 round of the New Market Tax Credit (NMTC) program.

The CDFI Fund in a release said it would make up to $5 billion in tax credits available during the 2012 round of the NMTC, pending authorization by the U.S. Congress.

Credit unions are among those eligible to participate in the NMTC, which seeks to spur the investment of new private sector capital into low-income communities. To do so, it permits individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs). Those investments must be made in designated Community Development Entities (CDEs). The CDFI Fund allocates the tax credits annually through a competitive application process.

CDFI Fund Director Donna Gambrell said the NMTC program "has been the key to financing countless investments in low-income communities, investments that have bettered the lives of Americans across the country."

This is the 10th year the CDFI Fund has conducted the program. The NMTC program has made 664 awards, totaling $33 billion in tax credit allocations, during that time, the CDFI Fund said.

Applications for CDE certification must be received by Aug. 3, and applications for the NMTC itself must be received by Sept. 12.

For the CDFI Fund release, use the resource link.

LIBOR issues unlikely to affect CUs CUNA

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WASHINGTON (7/16/12)--The global investigation into manipulation of the London interbank offered rate (LIBOR) and other interest rates will further sully the reputation of big banks, but the interest rate issues are unlikely to have a significant impact on credit unions, Credit Union National Association (CUNA) Chief Economist Bill Hampel said.

LIBOR is used by financial institutions to set interest rates on a variety of financial products, including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is based on information provided by 18 global financial institutions, including several U.S. banks.

British bank Barclays PLC recently admitted that some of its employees conspired with employees of other financial firms to manipulate LIBOR and the Euro Interbank Offered Rate to support their own financial positions. The manipulations took place between 2005 and 2009.

Regulators have fined Barclays, and governments and individuals may also take legal actions against Barclays and other firms. Some Barclays executives resigned following the LIBOR revelations.

"The LIBOR manipulations apparently took place several years ago, and are unlikely to be occurring now. The interest rate distortions that did exist were likely to have been measured in basis points rather than percentage points," Hampel said. "Credit unions that peg one or more products to LIBOR should be prepared to answer member questions arising from the publicity. And, of course, there is likely to be a flurry of legal actions stemming from the scandal, and credit unions could get caught up in the crossfire," he added.

Barclays agreed to pay $160 million in fines, and to implement compliance and internal control measures, under a settlement it reached with the U.S. Department of Justice (DOJ) late last month. The U.S. Commodity Futures Trading Commission has also imposed a $200 million fine on Barclays, and the U.K.'s Financial Services Authority (FSA) has fined it around $92 million.

British authorities also are looking into the relationship between Barclays and the FSA, and governments and authorities in several countries are investigating big banks such as JP Morgan and Citigroup for their roles in potential interest-rate-manipulation schemes.

The Senate Banking Committee is also planning to investigate interest-rate-manipulation allegations, and is holding briefings to inform committee members on how the manipulations may have impacted American consumers and the U.S. financial system. The committee will hold hearings in July with Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, committee Chairman Tim Johnson (D-S.D.) said.

A group of 12 senators last week asked U.S. Attorney General Eric Holder, Geithner, Bernanke, the National Credit Union Administration and other U.S. financial regulators on the Financial Stability Oversight Council to undertake "a thorough, independent investigation into the LIBOR manipulation scandal." Banks and employees that have broken the law "should face appropriate criminal prosecution and civil action," the letter added. The senators in that letter also asked the DOJ to examine "allegations that U.S. and foreign bank regulators may have been aware of this wrongdoing for years," and to hold any regulators that knew of the abuses accountable for their failure "to stop wrongdoing that they knew, or should have known about."

A Barclays employee in early 2008 told Federal Reserve Bank of New York representatives that "underreporting of LIBOR was prevalent in the market," according to documents released by the New York Fed Friday.

The New York Fed said it "helped to identify problems related to LIBOR and press the relevant authorities in the U.K. to reform this London-based rate." Geithner, who was the head of the New York Fed at that time, discussed LIBOR issues in an e-mail to Bank of England Governor Mervyn King. Geithner suggested that United Kingdom regulators improve the integrity and transparency of the rate-setting process, and make LIBOR submissions subject to internal and external audits.