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CUs integral to housing finance CUNA tells Treasury

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WASHINGTON (8/17/10)--The Credit Union National Association (CUNA) encouraged the U.S. Treasury to recognize that credit unions perform, and can continue to perform, a valuable role in the mortgage lending system ahead of a Tuesday panel discussion on many issues that are central to housing finance reform. The panel discussion will take place between 9:00 A.M. and 1:30 P.M. (ET) today and will feature input from Treasury Secretary Tim Geithner and U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, as well as several academics and finance insiders. CUNA in a letter sent to the Treasury ahead of the panel discussion said that any administration housing finance reforms should ensure that credit unions and other financial services firms are able to take full advantage of the opportunities to sell their loans into the secondary market and to receive services from the Federal Home Loan Banks or other entities that may be created. Any potential legislative and regulatory burdens faced by credit unions should be minimized by the new housing finance plan, CUNA said, adding that the central aim of any reformed housing finance system should be ensuring that consumers receive mortgage loans that they can afford, not merely increasing home ownership. The hearing, which will be broadcast live on the Treasury's homepage (, will feature discussions on housing finance reform and its impact on the financial markets and housing policy. Assorted breakout sessions on the role of the private sector, access and affordability, securitization, and other topics will also take place. Reps. Barney Frank (D-Mass.) and Paul Kanjorski (D-Penn.) in late July announced that a number of similar housing finance hearings would take place in September.

Financial reforms to be covered in two-part CUNA conference

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WASHINGTON (8/17/10)—The pending changes caused by recently enacted financial regulatory reform bill will be the focus of two upcoming Credit Union National Association (CUNA) audio conference calls next week. The audio conference, which will be split into two sections scheduled for Aug. 24 and 25, will cover the overall impact of the legislation, and the implementation dates of key provisions. Debit interchange fee provisions and other important legislative changes in the new act, and their implementation, will be one focus of the discussion, which will be lead by CUNA’s Senior Vice President/Deputy General Counsel Mary Dunn, Vice President of Legislative Affairs Ryan Donovan, Senior Assistant General Counsel Jeff Bloch, and Special Projects counsel Michael Edwards. Part two of the conference will specifically address the proposed Consumer Financial Protection Bureau, as well as changes to home mortgage lending rules and truth in lending requirements. Proposed changes to credit union executive compensation, risk retention policies, and remittance policies will also be covered, as will potential changes to the National Credit Union Share Insurance Fund and material loss reviews. Conference attendees will be able to submit any questions ahead of time via email. To register for the two-part CUNA audio conference, use the resource link.

Inside Washington (08/16/2010)

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* WASHINGTON (8/17/10)--The Federal Reserve Board has announced its annual adjustment of the dollar amount of points and fees that trigger additional disclosures and prohibitions under the Truth in Lending Act for certain mortgage loans. The dollar amount will be adjusted from $579 for 2010 to $592 for 2011, which is based on the Consumer Price Index. The adjustment will be effective Jan. 1 and does not affect the new mortgage lending rules adopted by the Fed in July 2008 for “higher-priced mortgage loans.” Coverage of mortgage loans under those rules is determined using a different rate-based threshold...

Fed unveils a series of mortgage-rule changes

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WASHINGTON (8/17/10)--The Federal Reserve Board on Monday released a series of announcements involving mortgage lending rules, changes and proposed changes affecting Truth in Lending Act, Mortgage Disclosure Improvement Act (MDIA), and Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) financial regulatory reform rules. In one of its actions, the Fed finalized interim final rules requiring consumers receive notice when their mortgage is sold. The board also approved a new interim final rule, issued under MDIA authority and effective Jan. 30, 2011, which requires lenders to disclose how borrowers' regular mortgage payments can change over time. Lenders' cost disclosures must include a payment summary in the form of a table, and the rule specifies what must be revealed in the disclosure. Credit unions and other interested parties have 60 days to comment. The Fed governors also approved a final rule to prohibit “steering.” Under this rule a loan originator may not receive compensation based on a loan’s interest rate or other loan terms. The rule is intended to prevent loan originators from increasing their own compensation by raising the consumers' loan costs, such as by increasing the interest rate or points. Under the rule, effective April 1, 2011, loan originators can continue a common practice and receive compensation based on a percentage of the loan amount. Issued for a 90-day comment period, the Fed board also proposed enhanced consumer protections and disclosures for home mortgage transactions under Regulation Z (Truth in Lending rules). The proposal represents the second phase of the Fed’s comprehensive review and update of Reg Z mortgage lending rules, and reflect extensive consumer testing executed by the agency. Under the plan, the Fed intends to:
* Improve the disclosures consumers receive for reverse mortgages and impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information; * Prohibit certain unfair practices in the sale of financial products with reverse mortgages; * Improve the disclosures that explain a consumer's right to rescind certain mortgage transactions and clarify the responsibilities of the creditor if a consumer exercises the right; and * Ensure that consumers receive new disclosures when the parties agree to modify the key terms of an existing closed-end mortgage loan.
The agencies that comprise the Federal Financial Institutions Examinations Council (FFIEC), including the National Credit Union Administration (NCUA), issued reverse mortgage guidance Monday in connection with the Fed rule. This guidance finalizes the proposed guidance that was issued by NCUA and the other agencies late last year. Although the Fed proposal and FFIEC guidance have not yet been reviewed in detail, the Credit Union National Association (CUNA) generally supports enhanced consumer protections for reverse mortgages, recognizing the complexity of these loans and the fraud and abuse that have been associated with these types of products, according to Jeff Bloch, CUNA senior assistant general counsel. Reverse mortages allow retirees and others to use their home equity to supplement income and, without additional protections, the current fraud and abuse would only grow as the population ages, added Bloch. Under a separate proposal with a 30-day comment period, the Fed would revise the escrow account requirements for higher-priced, first-lien "jumbo" mortgage loans. The proposed rule, which implements a provision of the Dodd-Frank Act, would increase the annual percentage rate (APR) threshold used to determine whether a mortgage lender is required to establish an escrow account for property taxes and insurance for first-lien jumbo mortgage loans. Jumbo loans are loans exceeding the conforming loan-size limit for purchase by Freddie Mac or Fannie Mae, as specified by the legislation. Although some may have thought there would have been a lull in consumer protection rulemaking until the new Consumer Financial Protection Bureau (CFPB) created under the Dodd-Frank Act got up and running, this is clearly not going to be the case, according to Bloch. He added that it looks like the Fed will proceed with its hectic rulemaking schedule in this area and will continue to do so until the CFBP is ready to take the handoff. Use the resource links for more information on each of the Fed’s actions.

CUNA reminder Limits here on cards for young folks

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WASHINGTON (8/17/10)--The fall semester is about to begin at many colleges across the country, and the Credit Union National Association (CUNA) wants to remind credit unions about new constraints on their lending and marketing programs. “Changes to Regulation Z that became effective last February will have a major impact on credit cards issued to college students,” said Mike McLain, CUNA senior compliance counsel and assistant general counsel. “Reg Z, which implements the Truth-in-Lending Act, generally prohibits a credit union from issuing a credit card to anyone under the age of 21 unless there is a co-borrower, cosigner or guarantor over the age of 21 on the card who is jointly or secondarily liable and has income sufficient to make the required payments,” explained McLain. The only exception to this rule is if the underage borrower can document that he has an independent means to make the required minimum periodic payments based upon his income, assets and current obligations.” The revised Reg Z also addresses increases in lines of credit provided to borrowers under 21, McLain added. “If a credit card is issued to an underage borrower along with a joint party, then the credit limit may not be increased without first obtaining the written agreement of the joint party that he or she will assume liability for the increase.” February amendments to Reg Z, required by the 2009 Credit Card Accountability, Responsibility, and Disclosure (CARD) Act , also restrict credit union marketing programs on college campuses. Credit unions can’t offer a college student any tangible item or “gift” to induce the student to apply for a credit card or any other type of open-end loan if the offer is made:
* On the college or university campus; * Near the college or university campus; or * At an event sponsored by or related to the college or university.
McLain explains that the Federal Reserve Board, in charge of writing Reg Z, has defined a “tangible item” as any physical item such as a gift card, t-shirt, magazine subscription or similar item. Tangible items do not include non-physical inducements such as discounts, reward points, or promotional credit terms. Furthermore, a tangible item that is offered to any college student, and which the student will receive whether or not he or she applies for or opens a credit card account or other open-end loan, is not prohibited by the final rule. For example, refreshments or pens offered to a college student on campus that are not conditional on whether the student applies for a credit card account would not violate the rules.