Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive


Inside Washington (07/23/2009)

 Permanent link
* WASHINGTON (7/24/09)--The House Financial Services Committee Thursday approved changes to the government’s Section 8 housing program that provides rental housing assistance to about two million low-income families nationwide. The committee voted 41-24 in favor of H.R. 3045, the Section Eight Voucher Reform Act. The bill is intended to provide greater program flexibility, as well as streamline the process of providing Section 8 housing assistance. The measure was sponsored by Rep. Maxine Waters (D-Calif.). … * WASHINGTON (7/24/09)--President Barack Obama’s plan to revamp the financial regulatory system is losing steam, according to some financial observers. Critics of the plan say that the administration and policymakers are taking on too much--including revamping health care, energy and financials. Industry representatives also continue to oppose the creation of a consumer protection agency. On Tuesday, Rep. Barney Frank (D-Mass.) said he is surprised by the industry’s opposition to such an agency, but he said the agency should be a high priority (American Banker July 23). Lawmakers also are backing a proposal that would give systemic risk oversight to several regulators. The Senate Banking Committee was slated Thursday to consider the plan, which could allow the Federal Reserve Board, the Treasury Department, the Federal Deposit Insurance Corp. and other regulators to share the systemic risk responsibility. The proposal aims to prevent failures such as the American International Group Inc. failure, which cost the government more than $182 billion (Bloomberg July 23) ... * WASHINGTON (7/24/09)--Elizabeth Warren, chairman of an oversight panel for the Troubled Asset Relief Program (TARP), says the Treasury Department needs to charge more for bank stock warrants. The higher prices would benefit taxpayers but would not help banks trying to buy back their warrants after repaying TARP funds (American Banker July 23). If the warrants had been sold at market value, taxpayers would have received $10 million more,” Warren said. She acknowledged that the Treasury is more aggressively pricing the warrants. Her comments come after U.S. Bancorp and Goldman Sachs announced they would pay back their warrants. Goldman Sachs said it would pay the full proposed price of $1.1 billion, and U.S. Bancorp agreed to pay $139 million for the warrants. Goldman Sachs’ payback is at market rate, and U.S. Bancorp’s is higher than the estimated market rate ... * WASHINGTON (7/24/09)--Congress should consider the merits of assigning a systemic risk regulator with responsibility for overseeing systemwide leverage, and assess the extent to which reforms under Basel II will address risk evaluation and regulatory oversight concerns associated with advanced modeling approaches for capital adequacy purposes, said the Government Accountability Office (GAO) in a recent report. Basel II is a risk-based capital framework. The planned U.S. implementation of Basel II would increase reliance on risk models for determining capital needs for certain large institutions and regulators have not assessed if the Basel II reforms would address the concerns. “Such an assessment is critical,” the GAO said. World Council of Credit Unions (WOCCU) President/CEO Pete Crear has told the Basel Committee on Banking Supervision that credit unions “should not be penalized by tougher capital requirements than those faced by larger, riskier institutions that present systemic risk to the global financial system.” (News Now April 24) ... * WASHINGTON (7/24/09)--The U.S. Small Business Administration (SBA) on Thursday published in the Federal Register an interim final rule that will double the current amount of its surety bond guarantee on federal contracts to $10 million, effective Sept. 10, 2010. Current rules allow the SBA to guarantee up to $5 million of bonds related to public and private contracts and subcontracts. In a statement accompanying the release, SBA Administrator Karen Mills said that increasing the surety bond limit was a “critical step in making sure small businesses in the construction and service sector have access to federal contracting opportunities” that are crucial to economic recovery …

CUNA focus on open-end disclosure in Tues. session

 Permanent link
WASHINGTON (7/24/09)--The Credit Union National Association (CUNA) has added BECU’s Mary Davis-Wyne and Suzie Rao and American Airlines FCU’s Faith Anderson to the roster of panelists scheduled to discuss credit union concerns with implementing a troublesome provision of the new Credit Card Accountability Responsibility and Disclosure (CARD) Act during a CUNA July 28 audio conference. “Some credit unions that don’t offer credit cards may erroneously assume that the new Credit CARD Act doesn’t affect them,” Mike McLain, CUNA’s Senior Compliance Counsel noted Thursday. “This new requirement that there be 21 days between when a periodic statement is mailed and the payment due date in order for the credit union to charge a late fee or report a delinquency to a credit bureau affects all credit unions doing open-end lending.” While most of the Credit CARD Act is effective Feb. 22, 2010, this provision is one of two provisions effective August 20. The other provision effective in a few weeks, and applicable only to credit cards, requires that change-in-term notices that increase the interest rate or raise fees be mailed at least 45 days in advance of those actions. The 90-minute audio conference, which begins at 1:30 p.m. (ET) on Tuesday, will feature Federal Reserve Board Senior Attorney Benjamin Olsen, a co-author of the interim final regulation. Other speakers already announced in addition to McLain will be CUNA Senior Assistant General Counsel Jeff Bloch and University of Wisconsin CU Chief Credit Officer Mike Long. CUNA has urged the Fed to extend the existing compliance timeframe and continues to seek support in Congress for addressing this problem. To register for the audio conference, use the resource link.

NCUA guides California CUs on IOUs

 Permanent link
ALEXANDRIA, Va. (7/24/09)--The National Credit Union Administration (NCUA) has issued guidance for California credit unions accepting IOUs, or registered warrants, during the state’s budget crisis. On Monday, Calif. Gov. Arnold Schwarzenegger and state lawmakers reached an agreement to balance the state’s $26 billion deficit by making cuts throughout state government. However, details regarding the budget are still being negotiated (News Now July 22). Roughly 90 California credit unions are still accepting registered warrants issued by the state. According to NCUA:
* A federal credit union should not treat its acceptance of a warrant from a member as an investment but may treat its acceptance of a warrant as a collection item, deposit or loan depending on whether the credit union has extended credit to a member and the disclosures or other documentation it has provided to members; * A credit union should inform members of the charge back and collection rights the credit union may have if it extends credit in accepting the warrant; * Federal credit unions are not restricted in the type of collateral they can hold as security for payment of an extension of credit; * State-chartered credit unions are advised that if they choose to record the warrants as a credit union investment, they will have to reserve for a nonconforming investment under NCUA’s investment rule.
For more information, use the link.

Fed explores big Reg Z changes

 Permanent link
WASHINGTON (7/24/09)--The Federal Reserve Board has proposed several major changes to Regulation Z (Truth in Lending) that would modify the disclosures required of lenders for closed-end mortgage loans and home equity lines of credit (HELOCs). The Fed’s proposal regarding closed-end home mortgages--which follows recent changes to open-end credit disclosures--is intended to increase consumer awareness of potentially risky features, such as adjustable rates and prepayment penalties. The changes would apply to disclosures for all closed-end credit transactions secured by real property. Among other things, the changes would:
* Revise the annual percentage rate (APR) to include most fees and settlement costs, many of which are currently excluded from the annual percentage rate (APR); * Require lenders to provide, at application, a list of key questions borrowers should ask about the home mortgage loan; * Require lenders to provide a comparison of how the consumer's APR compares to the average rate offered to borrowers with excellent credit; * Require lenders that take part in adjustable rate mortgages to show how a consumer’s monthly payments could increase, and * Require lenders to notify borrowers 60 days in advance of a change in their monthly payment.
Current rules require lenders to give their customers 25 days of advanced notice. Also, lenders would need to provide home mortgage loan applicants with a “final disclosure” at least three days prior to the loan closing, which would likely require notification of any changes in the term or rate of the loan since the initial application. Consistent with the recently proposed legislation creating a Consumer Financial Protection Agency, the Fed said it is working with the Department of Housing and Urban Development (HUD) to make the required TILA disclosures consistent with HUD’s required disclosures under the Real Estate Settlement Procedures Act, potentially resulting in single disclosure. Another proposed rule would change portions of HELOC-related disclosures. The proposed changes would apply to disclosures required from the application stage through the life of the credit plan. Under these changes, lenders would be required to provide applicants with disclosures detailing specific credit terms for which the consumer qualifies and information about certain costs and potentially risky mortgage features both three days after the transaction begins and at closing. Creditors would also be required to provide enhanced periodic statements throughout the life of the plan, and to notify a consumer 45 days prior to changes in the terms of the plan. The proposed rule would also include additional guidance on a creditor’s ability to reduce the consumer’s credit limit, as well as the creditor’s obligation to restore such accounts. The Fed will accept comments on each of the two proposed rules for 120 days following official publication in the Federal Register. The Credit Union National Association's (CUNA) Consumer Protection Subcommittee will be reviewing the proposals in detail, and CUNA will post a regulatory comment call on each of the proposals shortly.