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TILARESPA proposal published in iFederal Registeri

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WASHINGTON (8/24/12)—With the comment period on key terms such as finance charges due Sept. 7, the Consumer Financial Protection Bureau (CFPB) Thursday published in the Federal Register its recently proposed amendments to Regulation Z, Truth in Lending Act (TILA), and Regulation X, Real Estate Settlement Procedures Act (RESPA), to combine certain home mortgage disclosures.

The CFPB proposed new mortgage disclosure form and the RESPA and TILA proposed changes last month.

The mortgage proposal 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.

The Credit Union National Association (CUNA) continues to review the 1,099 page proposal, and is concerned by a CFPB claim that the proposed mortgage changes would not increase the cost of mortgage lending. "A dollar spent on regulatory compliance is a dollar diverted from lending. So, in fact, some mortgage reforms in the Dodd-Frank Act do negatively impact access to mortgage credit for consumers," CUNA has said.

CUNA is also focusing on how the rule's proposed revision of the finance charge definition could impact credit unions.

CUNA has received credit union comments on how elements of the CFPB proposals, including a section that would require lenders to include most up-front costs associated with a mortgage in their finance charge, could be improved.

Additional CUNA comment calls and surveys on other aspects of the proposed mortgage rule are still under development.

The mortgage form and proposed rules are scheduled to be finalized in January.

However, CUNA has encouraged members of the U.S. Congress to support extending the compliance date for these pending mortgage rules, and to urge the CFPB to exempt credit unions from the mortgage rules where possible.

For the full CFPB release, as published in the Federal Register, use the resource link.

IRS responds to exemption revocation issues CUNA

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WASHINGTON (8/24/12)--In a letter from its national headquarters to the Credit Union National Association (CUNA) and other system players, the U.S. Internal Revenue Service (IRS) has spelled out the steps that state- and federally chartered credit unions whose tax exemptions have erroneously been revoked should take to reassert their exempt status.

CUNA, the National Association of State Credit Union Supervisors, CUNA Mutual and the American Association of Credit Union Leagues contacted the IRS after the agency last year notified several state-chartered credit unions, and some federally chartered credit unions, that they would lose their tax-exempt status for their alleged failure to file Form 990 tax returns for three consecutive years.

The letter addresses three separate groups of credit unions: State-chartered credit unions that previously had group Form 990 returns filed on their behalf, federal credit unions that recently converted from state charters, and federal credit unions that file Forms 990-T to claim health insurance premium tax credits.

"While individual credit unions have in some cases received similar responses from IRS regional officials, this letter is more authoritative because it comes from the top official of the IRS Exempt Oganizations Division. In that sense, this is a step forward," CUNA General Counsel Eric Richard said.

In a letter, IRS Director of Exempt Organizations Lois Lerner said the agency was wrong to revoke the beneficial tax status of some state-chartered credit unions it had contacted because their group filings had ceased. "Individual state credit unions in each state may continue to hold themselves out as a tax exempt under section 501(c)(14), as long as they continue to file required Forms 990 and otherwise comply with the applicable requirements for tax exemption under the Internal Revenue Code," Lerner said.

These credit unions will not need to apply for recognition of their exemptions with the IRS, but may "choose to do so," Lerner added.

Lerner in the letter said the tax exemptions of some federal credit unions may have also been wrongly revoked due to IRS recordkeeping discrepancies.

First, credit unions that have shifted from state to federal charters may also have similar tax exemption issues because the IRS was not notified of the conversion, and may have been contacted by the IRS, Lerner said. While some credit unions have moved to a federal charter, they are still listed on IRS records as state credit unions, and, thus, are being penalized for failing to file their Forms 990.

These federal credit unions should notify the IRS of their changed status by sending a request detailing:

  • The organization's name, address, and employer identification number;
  • Evidence that the credit union is supervised by the National Credit Union Administration; and
  • The name and title of the credit union officer signing the request.
Correspondence should be faxed to the IRS at 513-263-4330 or mailed to: IRS – TE/GE, Attn: Correspondence Unit, P.O. Box 2508, Cincinnati, OH 45021.

Second, federal credit unions that wish to claim health insurance premium tax credits are required to file Forms 990-T, but federal credit unions are exempt from filing Forms 990.  In some cases, the 990-T filings have resulted in an automated search for past Forms 990. When the IRS did not find previous Form 990 filings in their records, the credit union filing the Form 990-T was contacted and informed that its tax exempt status was in danger of being revoked.

Lerner said the agency is working to address this issue internally, and, in the meantime, said impacted credit unions could contact the agency directly by using the address and other contact information listed above. Credit unions in this situation should supply their name, employer identification number (EIN), and a letter detailing the problem.

Inside Washington (08/23/2012)

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  • WASHINGTON (8/24/12)--A whistleblower who helped the Securities and Exchange Commission (SEC) stop a multi-million dollar fraud attempt will receive nearly $50,000--the first payout from a new SEC program to reward people who provide evidence of securities fraud. The award represents 30% of the amount collected in an SEC enforcement action against the perpetrators of the scheme, the maximum percentage payout allowed by the whistleblower law. The award recipient, who does not wish to be identified, provided documents and other information that allowed the SEC to expedite the investigation and prevent the fraud from ensnaring additional victims. The whistleblower's assistance led to a court ordering more than $1 million in sanctions, of which about $150,000 has been collected so far. The court is considering whether to issue a final judgment against other defendants in the matter. Any increase in the sanctions ordered and collected will increase payments to the whistleblower …
  • WASHINGTON (8/24/12)--The Treasury Department is selling its holdings in preferred stock in banks rescued through the Troubled Asset Relief Program (TARP) at discounted prices--at the expense of American taxpayers, according to The New York Times (Aug. 23). For example, MetroCorp Bancshares of Houston bought back its own shares during a Fed auction this month at 98 cents on the dollar. Wilshire Bancorp of Los Angeles bought back its shares at 94 cents on the dollar. American taxpayers will bear the difference when the government doesn't get full price. But the government doesn't need to sell the shares now, or settle for less than full share price, the Times said. The TARP program has been profitable for taxpayers. The Treasury Department estimates that it will make nearly $22 billion from the program. The Obama administration appears willing to unwind the TARP program as quickly as possible, despite diminishing returns, according to Compass Point Research and Trading, a broker dealer firm …

Fixed mortgage rates continue to creep up

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WASHINGTON (8/24/12)--Average fixed mortgage rates have increased for the fourth consecutive week, with thirty-year fixed rate mortgages averaging 3.66% and fifteen-year fixed rate mortgages averaging 2.89% for the week ended Aug. 23, Freddie Mac reported Thursday.

Thirty-year fixed rate mortgages averaged 3.62% last week and 4.22% this time last year. Fifteen-year fixed rate mortgages averaged 2.88% last week and 3.44% this time last year.

Freddie Mac Vice President and Chief Economist Frank Nothaft said the fixed rate increases mirrored increases seen in other long-term yields.

Five-year adjustable rate mortgages averaged 2.80% this week, compared with 2.76% the previous week and 3.07% the same week last year.

The average one-year adjustable rate mortgage was 2.66%, down slightly from the 2.69% average reported last week. One-year adjustable rate mortgages averaged 2.93% this week last year.