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NEW: CUNA Outlines CU Principles For Housing Market Reforms

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WASHINGTON (UPDATED, 7/23/13, 3:54  p.m. ET)--Credit Union National Association Chief Economist Bill Hampel, testifying this afternoon at the Senate's first hearing this year on housing finance reform, will note credit unions appreciate the need to reform the current housing finance system, but any reforms must not hinder the ability of credit unions to meet their members' housing finance needs in a member-friendly cooperative way.

Hampel, the credit union witness for the Senate Banking subcommittee on securities, insurance and investment members hearing entitled "Creating a Housing Finance System Built to Last: Ensuring Access for Community Institutions," in part discusses S. 1217, a secondary mortgage market reform bill recently introduced by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.). Other co-sponsors include Sens. Mike Johanns (R-Neb.), Jon Tester (D-Mont.), Dean Heller (R-Nev.), Heidi Heitkamp (D-N.D.), Jerry Moran (R-Kan.) and Kay Hagan (D-N.C.).

"CUNA believes that S. 1217 is a positive step towards creating a sustainable and affordable housing market," Hampel emphasizes in his remarks.

"CUNA appreciates the attention this subcommittee is giving to housing finance reform," and "credit unions need equal and fair access to a secondary market for lenders of all sizes that will ensure affordable mortgage products for our members," Hampel adds.

However, he said, there are a number of principles that CUNA hopes a new housing market finance system will accommodate. Those principles include:
  • Maintaining a strong regulator with rigorous market oversight to ensure safety and soundness, system standardization and equal access;
  • The ability to retain servicing rights when mortgages are sold on the secondary market;
  • Ensuring that even in troubled economic times, mortgage loans will continue to be made to qualified borrowers;
  • Emphasizing consumer education and counseling as a means to ensure that borrowers receive appropriate mortgage loans;
  • Maintaining consumer access to products that provide predictable, affordable mortgage payments to qualified borrowers, such as the 30-year fixed rate mortgage; and
  • Setting reasonable conforming loan size limits that adequately take into consideration variations in local real estate costs.
Overall, Hampel says, the transition from the current system to any new housing finance system must be reasonable and orderly, and the transition deadline needs to be flexible.

The hearing is taking place as the House Financial Services Committee today marks up its own housing finance reform bill, the Protecting American Taxpayers and Homeowners (PATH) Act (H.R. 2767).

CUNA: Today Is 'Don't Tax Tuesday'

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WASHINGTON (7/23/13)--Credit unions and their members are being urged to get on board with the Credit Union National Association's "Don't Tax My CU Tuesday" campaign today and ignite their advocacy efforts by lighting up the social media world to get their message across.
As detailed in the newest edition of "Inside Exchange," CUNA's video dialogue on the credit union movement's hottest topics, the initiative is intended to utilize the credit union community's growing presence on social media to instantly enforce a unified message to Capitol Hill that a tax on credit union would be a tax on their 96 million member-owners.

Trey Hawkins, CUNA vice president of political affairs, tells viewers that social media is the "new frontier" on Capitol Hill for reaching lawmakers, and its smart use goes far to bolster the effort to support the credit union tax status as policymakers considered tax reform measures.
"Every Senate office has a Twitter presence and 90% of House members have a presence on Twitter," Hawkins says.  And unlike traditional communications through mail or e-mail or phone massages that often are monitored by a lawmaker's staff, most senators and House members monitor their own Twitter or Facebook accounts.

"With social media, your message goes straight to your target," Hawkins says.
CUNA and the state credit union leagues have set today--July 23--as "Don't Tax My CU Tuesday"--a day to maximize the power of social media to make a single-day punch for credit unions in advance of a Senate deadline for tax reform recommendations.

July 26--this Friday--is the deadline for senators to submit their tax reform proposals to Finance Committee leaders, who will then begin to build legislation to create a comprehensive proposal for a new U.S. tax code.
Already credit union advocates have sent more than 440,000 "Don't Tax My Credit Union" messages to Congress through the CUNA system alone--and not counting social media contact.

"Tomorrow is a terrific opportunity to get everyone to send one tweet or make one Facebook post--or one more tweet or Facebook post for those who have already done so--to really make an impact: To tell their senators and House members that a tax on credit unions is a tax on their 96 million member-owners," Hawkins says.

Hawkins suggest a tweet can  be as simple as "Please #DontTaxMyCU @ (Twitter handle of your senator here) #DontTaxTuesday." He notes credit unions and individuals can participate by tweeting to their senators and congressmen using the #DontTaxMyCU hashtag, or posting on Facebook by including the senator or representative in a post by typing the "@" sign and then typing the lawmaker's name.

House GSE-reform PATH Act Is Officially Introduced

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WASHINGTON (7/23/13)--The Protecting American Taxpayers and Homeowners--or PATH--Act, unveiled by House Financial Services Committee Chair Jeb Hensarling (R-Texas) on July 11, has now been formally introduced in the House.
It was introduced Monday by Rep. Scott Garrett, a Republican representing New Jersey.
The housing finance reform bill, now H.R. 2767, was subject to a Financial Services Committee hearing last week and is scheduled for markup starting this morning at 10:15 a.m. (ET).
During last week's hearing, it was clear that there was a partisan divide regarding support for the bill. Republican committee members mostly hailed it as the way to "create a sustainable housing finance system." Many Democrats expressed worry that it would kill availability of the traditional 30-year, fixed rate mortgage for many Americans.
Also on housing, on the Senate side, Credit Union National Association Chief Economist Bill Hampel is scheduled to testify Tuesday before a Senate Banking subcommittee on the topic of  "Creating a Housing Finance System Built to Last: Ensuring Access for Community Institutions." (See related story: CUs' Mortgage Market Access Is Key In Housing Reform: CUNA Testifies Today.)

Proposed Treatment Of Credit Life Insurance Positive, CUNA Tells CFPB

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WASHINGTON (7/23/13)--A Consumer Financial Protection Bureau amendment to the mortgage loan originator (MLO) compensation rules regarding the payment of monthly credit-related insurance premiums in connection with certain home loans is positive, according to the comment letter filed yesterday by the Credit Union National Association.
"Where creditors are adding a monthly credit insurance premium to the principal balance of the loan, but subtracting the premium from the principal balance immediately or as soon as the premium or fee is paid," this would not constitute prohibited financing of such premiums in a prohibitive way under the proposal, CUNA noted.  
Nonetheless, credit union mortgage lenders remain "extremely concerned" about their compliance responsibilities in order to be ready for a January 2014 implementation of various mortgage rules recently issued by the Consumer Financial Protection Bureau, CUNA noted in its comment letter to the agency listing 14 separate areas under mortgage rule requirements.
In the letter commenting on mortgage rules under the Equal Credit Opportunity Act (Reg B), the Real Estate Settlement Procedures Act (Reg X) and the Truth in Lending Act (Reg Z), CUNA also urged the agency to set up a compliance "hotline" for creditors to use in the first part of 2014 to direct their questions and concerns about compliance to the CFPB.
"We also urge the agency to agree to review the implementation of mortgage-related rules in the summer of 2014 and in January 2015 through stakeholder meetings to determine whether further changes are needed to minimize regulatory burdens without jeopardizing the purpose of Dodd-Frank Act mortgage credit provisions," CUNA wrote.
Moreover, where credit unions have evidence of working with their members to avoid foreclosures, CUNA is also seeking flexibility so that an inevitable foreclosure does not have to be delayed 120 days. Also properties should not be allowed to fall within disrepair during the pre-foreclosure period, CUNA stressed, to avoid further losses to the credit union that are born by all other members.   
The 14 areas that the letter addresses are:
  • Regulation B "Valuation" Amendments;
  • Loss Mitigation Procedures;
  • Application Time Period Disclosures;
  • Foreclosure Sale Clarification;
  • Short-Term Forbearance Clarifications;
  • Reasonable Expectation of Completeness;
  • Pre-Foreclosure Review Period Clarifications;
  • 120-Day Foreclosure Period;
  • Clarification of Points and Fees;
  • Rural & Underserved Exception;
  • Escrow Exception;
  • Loan Originator Clarifications;
  • Prohibition on Financing of Credit Insurance Premiums or Fees;
  • Effective Date for Other Provisions of the Mortgage Loan; and Originator Compensation Rule
The CUNA letter can be accessed through the link below.

News Coverage Helps Poke Holes In Banks' Attacks

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WASHINGTON (7/23/13)--Goliath. Meet David. He's not backing down.
In news publications across the country, commentators are comparing credit unions to the Bible's David, a young man with a small-but-true weapon who takes on a terrible giant who has hounded David's people.
Nowhere is this analogy more apt than in situations, like a recent segment on KETKNBC in Texas, where a single credit union advocate, Scott Rose, president/CEO of Kelly Community FCU, Tyler, Texas, stands up to the likes of the Texas Bankers Association to debunk  misinformation they say the banks are spreading about the credit union tax status
Where the banks offer up the credit union exemption from federal income tax as a
Scott Rose, president/CEO of Kelly Community FCU, Tyler, Texas, tells KETKNBC that the credit union tax status is determined by the credit union difference.
solution to the country's budget deficit, Rose points out to KETKNBC reporter and anchor Roger Gray: "Credit unions in America have 6% of the financial pie. Banks have 94%. I dare say, that is not going to have a huge impact on the deficit."
And where banks say credit unions should be taxed because they offer a broad array of financial services to consumers, Rose points out that has nothing to do with the credit union tax status.
"We were created as a not-for-profit, financial cooperative," he told Gray. That is why credit unions were exempted from federal income tax 76 years ago and why the tax status remains good public policy today, credit unions say.
In other media coverage, a local news program on CBS-affiliate K21 News in Maryland also paints a darker image of the banks as they fight to add more taxes to credit unions.
"That image of starched, white-collared, cordial bankers is coming undone," the news piece says. 
It goes on to add that, "Commercial bankers often complain to Congress about an unfair market advantage that credit unions have, claiming the non-profit cooperatives are a real threat.
"They say that at a time when some commercial banks are recording near record profits."

In fact, "(t)he number of credit unions has shrunk over the last several years," points out John Bratsakis, CEO of Maryland and District of Columbia Credit Union Association, who was interviewed in the clip. That decline has been particularly steep since the 2009 economic downturn, which, Bratsakis notes, credit unions, unlike banks, were not responsible for.
Bratsakis also clarifies the truth behind the credit union tax status--that it is "nonsense" for banks to say credit unions do not pay taxes.
"Credit unions do pay tax. They pay payroll tax, they pay property taxes that go to pay for those municipalities," Bratsakis told TV news reporter Kristine Frazao.

CUs' Mortgage Market Access Is Key In Housing Reform: CUNA Testifies Today

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WASHINGTON (7/23/13)--Consumers are increasingly choosing credit unions as their mortgage lenders, and it is critical credit unions have fair and readily available access to a functioning, well-regulated secondary market that accommodates their members' demand for long-term, fixed-rate mortgages, Credit Union National Association Chief Economist Bill Hampel will tell members of a Senate Banking subcommittee this afternoon.

Hampel will testify this afternoon before a Senate Banking subcommittee on securities, insurance and investment hearing entitled "Creating a Housing Finance System Built to Last: Ensuring Access for Community Institutions."

The 90-minute hearing is scheduled to begin at 3 p.m. (ET).

Sandra Thompson, deputy director, Division of Housing Mission and Goals, Federal Housing Finance Agency, will be the lone witness for on the first witness panel.  On the second panel, Hampel will be joined by the following witnesses: Jack A. Hartings, president/CEO, The Peoples Bank Company on behalf of the Independent Community Bankers of America; Andrew J. Jetter, president/CEO, Federal Home Loan Bank of Topeka; and Michael Middleton, chairman/CEO of Community Bank of Tri-County, on behalf of the American Bankers Association.

CUNA has told housing policy makers, through letters to the Obama administration and in earlier congressional testimony, that the needs of credit unions and other small mortgage lenders must be considered as the country moves forward on needed reforms.

Hampel outlined a series of principles that CUNA hopes a new housing market finance system will accommodate during a housing policy discussion hosted last month by Rep. Maxine Waters (D-Calif.), the ranking Democrat of the House Financial Services Committee.

Other hearings scheduled for this week include:
  • A Tuesday House Financial Services Committee markup of the Protecting American Taxpayers and Homeowners (PATH) Act of 2013 (H.R. 2767). It could take multiple days to complete consideration of this bill;
  • A Tuesday Senate Banking financial institutions and consumer protection subcommittee hearing entitled: "Examining Financial Holding Companies: Should Banks Control Power Plants, Warehouses, and Oil Refineries;"
  • A Tuesday Senate Appropriations financial services and general government subcommittee markup of the 2014 fiscal year Financial Services and General Government Appropriations bill; and
  • A Wednesday Senate Banking Committee hearing entitled "The FHA Solvency Act of 2013."
Also this week, the House is expected to consider the Defense Appropriations bill, the Energy Consumers Relief Act of 2013 (H.R. 1582) and the Coal Residuals Reuse and Management Act of 2013 (H.R. 2218). The Senate is expected to renew the motion to proceed to the Transportation, Housing and Urban Development, and Related Agencies Appropriations bill (S. 1243).

Suit Challenges CFPB Constitutionality

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WASHINGTON (7/23/13)--The Consumer Financial Protection Bureau is facing yet another challenge to its constitutionality: This time, a pair of plaintiffs are arguing the agency structure insulates it from political accountability and internal checks and balances in violation of the U.S. Constitution.

The suit, filed in the U.S. District Court for the District of Columbia by Connecticut attorney Kimberly Pisinski and a Nevada software firm she contracts with, Morgan Drexen, Inc., alleges that the CFPB has engaged in abusive practices, including:
  • Attempts to regulate the practice of law;
  • Threatening plaintiffs with legal action and using improper and coercive tactics against plaintiffs;
  • Attempts to collect attorney-client protected material; and
  • Making overreaching demands for, and mining of, personal financial information of American citizens.
The plaintiffs have sought an order halting these tactics and declaring CFPB's structure to be unconstitutional, and declaring unconstitutional the provisions of the Dodd-Frank Act creating and empowering the CFPB, according to a complaint.

The suit follows a March 13, 2012 CFPB Civil Investigative Demand (CID) that was issued to Morgan Drexen. Pisinski offers bankruptcy services as part of her practice, and Morgan Drexen has provided debt resolution, bankruptcy, personal injury, mass tort litigation, and tax preparation support services to Pisinski and other attorneys.

The CID sought confidential financial information tied to clients of some attorneys that employ Morgan Drexen's support services, and information from Morgan Drexen CEO Walter Ledda.

The CFPB has threatened enforcement action against Morgan Drexen, and has itself alleged that attorneys supported by Morgan Drexen are in violation of the Telemarketing Sales Rule.

Morgan Drexen denies these allegations.  The firm, according to its complaint, has said that:
  • CFPB did not have jurisdiction over the law practice of the attorneys supported by Morgan Drexen;
  • Fees charged by the attorneys supported by Morgan Drexen for bankruptcy services are not collected in connection with debt settlement and are thus not 'upfront fees' prohibited by the TSR; and
  • The CFPB could not prohibit Morgan Drexen from supporting attorneys who provide services in parallel with debt settlement because this would be tantamount to an outright ban on commercial speech in violation of the First Amendment.

Sen. Brown Outlines Upcoming Overdraft Bill

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WASHINGTON (7/23/13)--Legislation that aims to prevent financial institutions from reordering account deposits and withdrawals to maximize the amount of overdraft fees that may be charged to accountholders was announced by Sen. Sherrod Brown (D-Ohio) Monday.

The senator outlined the bill, which has not been introduced in the Senate, at a press conference in Cleveland. "Banks should play by the rules instead of purposefully 'reordering' their customers' debit card transactions so that they profit while consumers rack up costly penalties," he said.

Brown's bill, which is still being finalized, would also:
  • Give the Consumer Financial Protection Bureau authority to monitor banks overdraft practices;
  • Allow that agency to establish fair guidelines to protect consumers, as well as credit unions and banks that treat members and customers well; and
  • Ensure that financial institutions clearly post transactions in an easy to understand format.
Under the bill, the CFPB would also offer safe harbor to financial institutions that follow any new CFPB overdraft guidelines.

For the full release, use the link.

Reg Cost-benefit, MLO Payments And More Detailed In CUNA Report

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WASHINGTON (7/23/13)--This week's edition of the Credit Union National Association's Regulatory Advocacy Report features updates on three slightly under-the-radar items that are of importance to credit unions: An Administrative Conference of the U.S. call for regulators to improve their own cost-benefit analyses, a U.S. Appeals Court decision regarding Mortgage Loan Officer payments, and potential action on Department of Defense (DoD) service members consumer credit regulations.

The Administrative Conference of the U.S. (ACUS), an independent federal agency focused on improving the administrative process, has adopted a number of best practices for cost-benefit analysis in rulemaking by independent regulatory agencies, and the group believes independent regulatory agencies and other governmental bodies should document their own cost-benefit analysis practices.

The ACUS has also encouraged agencies to:
  • Develop written guidance on cost-benefit analysis; and
  • Consider analytical practices under current Office of Management and Budget requirements for major rules.
CUNA continues to urge the Consumer Financial Protection Bureau and National Credit Union Administration to conduct detailed cost-benefit analysis on proposed and final rules to minimize regulatory burdens on credit unions.

Developments in a U.S. Court of Appeals for the District of Columbia Circuit case are also being closely watched by CUNA. That court recently vacated a 2010 Department of Labor (DOL) federal wage-and-hour law interpretation, under which the DOL concluded the typical duties performed by mortgage loan officers do not qualify for the administrative exemption under the Fair Labor Standards Act. Under this decision, mortgage loan officers would be eligible for overtime pay, unless they qualified for another exemption.

CUNA has also asked credit unions that are offering small dollar loans to servicemen and women to detail those programs in a new comment call. The DoD recently released an advanced notice of proposed rulemaking (ANPR) on protections that apply to consumer credit extended to members of the armed forces and their dependents. The agency is considering changes to these regulations. The CUNA comment call also includes a summary and draft discussion points regarding the DoD ANPR.

For more on these issues and other key credit union regulatory developments, as detailed in this week's RAR, use the resource link.