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CUNA Backs NCUA Charitable Donation Proposal

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ALEXANDRIA, Va. (9/13/13)--The Credit Union National Association on Thursday said it strongly supports the concepts contained in the National Credit Union Administration's charitable donation accounts proposal, which was unveiled during the September open board meeting.

Click to view larger image Speaking at his first agency board meeting Thursday, National Credit Union Administration board member Richard Metsger, right, questions NCUA staff on the charitable donation accounts proposal. (CUNA Photo)
The proposed rule is intended to allow federal credit unions to invest in charitable donation accounts (CDA) while creating safeguards to ensure the donations are used for their intended charitable purposes.

"We want federal credit unions to have the ability to make charitable investments in a way that supports charitable work and is not used to prop up an income statement with potentially risky investments," NCUA Chairman Debbie Matz said as the agency board considered the rule.

The proposed rule would limit total investment in CDAs to 3% of a credit union's net worth for the full term of the accounts. A minimum of 51% of the total return from such an account would be required to be distributed to one or more qualified charities.  Distributions must be made to qualified charities no less frequently than every five years.  The National Credit Union Foundation is one of these approved charities.

The agency will accept comment on the proposal for 30 days after it is published in the Federal Register.

CUNA on Thursday noted the NCUA's willingness to create a novel structure to facilitate credit unions engaging in charitable activities, which benefits the credit union system and their local communities.

However, CUNA also noted some initial concerns regarding the proposal, including the 3% net worth limitation, which as currently worded would apply against the total value of the account, not the initial investment amount.

CUNA said that this could cause a credit union to need to prematurely reduce its holdings in its CDA in years in which the investments generate large gains, which would reduce the amount of benefit both to the charity and the credit union.

Thursday's open board meeting was new NCUA board member Richard Metsger's first. Following the meeting, Metsger responded to a News Now question, saying, "I would hope they would all go this well."

He said he was pleased with all the work done by agency staff ahead of the meeting, and noted the staff briefings clarified that all bases had all been covered on Thursday's issues. "That's what I would expect going forward as well," he said.

As for his own future plans for the NCUA board, Metsger told News Now there's a lot on the plate that he needs to continue to study up on right now. "I will certainly develop an agenda of items that I will then discuss with the chairman, and we'll see how those come forward. That will happen in the few months ahead," he said.

NEW: CFPB Readies Mortgage Final Rule Changes

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WASHINGTON (9/13/13, UPDATED: 2 P.M. ET)--The Consumer Financial Protection Bureau this afternoon released some details of yet another final rule amending its Ability-to-Repay, Mortgage Servicing and Mortgage Loan Originator Rules, which were originally finalized in January of this year.

The CFPB in a release said the changes made today answer questions that have been identified during the implementation process. "Today's rule amends and clarifies parts of our mortgage rules to ensure a smoother implementation process, which is helpful to both businesses and consumers," CFPB Director Richard Cordray said. The full final rule is scheduled to be released this afternoon. The Credit Union National Association will update this report and provide more details when the rule has been released.

A number of changes CUNA sought were addressed by the CFPB.  The agency said that the final rule changes:
  • Exempt all small creditors, even those that do not operate predominantly in rural or underserved counties, from the ban on high-cost balloon mortgages, as long as the loan meets certain restrictions;
  • Make it easier for certain small creditors to continue qualifying for an exemption from a requirement to maintain escrows on certain higher-priced mortgage loans;
  • Clarify that credit insurance premiums are "financed" by a creditor when the creditor allows the consumer to defer payment of the premium past the month in which it is due;
  • Explain how the rule applies to "level" or "levelized" premiums, where the monthly premium is the same each month rather than decreasing along with the loan balance;
  • State that servicers will be allowed to send certain early delinquency notices required under state law to borrowers that may provide beneficial information about legal aid, counseling, or other resources;
  • Outline specific procedures for servicers to follow if they fail to identify and inform a borrower upon an initial review that certain information is missing from a borrower's loss mitigation application;
  • Detail modifications that make it easier for servicers to offer short-term forbearance plans for delinquent borrowers who need only temporary relief without going through a full loss mitigation evaluation process.¬†Servicers, upon reviewing an incomplete loss mitigation application, may provide a 6-month forbearance to a borrower who is suffering a short-term, temporary hardship;
  • Provide more specific details on how to inform borrowers about the address for error resolution documents by listing it on certain documents, such as an initial notice and a periodic statement or coupon book, if applicable;
  • Clarify the circumstances under which a loan originator's or creditor's administrative staff acts as loan originators;
  • Clarify what compensation must be included in certain thresholds for points and fees under the Ability-to-Repay and high-cost mortgage rules for retailers of manufactured homes and their employees, and when such employees may be considered loan originators; and
  • Move the effective date for certain provisions of the Mortgage Loan Originator Compensation final rule from Jan. 10, 2014 to Jan. 1, 2014, in order to simplify compliance since compensation plans, training, and licensing and registration are often structured on an annual basis.
For a CFPB release on the final rule, use the resource link.

Employers On Notice About Forcing Payroll Cards On Workers

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WASHINGTON (9/13/13)--Employers cannot mandate that their employees receive wages on payroll cards, and employees that do receive their wages on a payroll card are entitled to certain federal protections, Consumer Financial Protection Bureau Director Richard Cordray emphasized in a Thursday agency release.

The CFPB payroll card bulletin outlines federal consumer protections for payroll card recipients, including the right to fee disclosure, account history access and error resolution rights. Payroll card recipients also have limited liability for unauthorized use of their cards, the CFPB said.

The bulletin follows reports that employers in the retail, food service, and other industries have in some cases paid their workers solely through payroll cards. Some employees receiving wages on employer-sponsored payroll cards have complained of unexpected ATM, teller withdrawal and balance inquiry fees, the CFPB release added.

The bureau said it intends to use its enforcement authority to stop violations before they grow into systemic problems. The CFPB noted it will also maximize remediation to consumers and work to deter future payroll card violations, and will examine regulated entities that provide these cards to ensure they are in compliance with federal law.

For the full CFPB release, use the resource link.

FHA Letter Informs Of Changes To Reverse Mortgage Program

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WASHINGTON (9/ 13/13)--The Federal Housing Administration (FHA) has sent out Mortgagee Letter 2013-27 informing lenders of changes to the Home Equity Conversion Mortgage (HECM) program required under the Reverse Mortgage Stabilization Act signed into law Aug. 9.
The new law is intended to help the FHA make quicker changes to its reverse mortgage program and reduce the lengthy 18-month regulatory process that has been in place to finalize a rule. HECMs are federally insured reverse mortgages backed by the FHA's parent agency, the U.S. Department of Housing and Urban Development.
In a 2012 report to Congress, the FHA reported substantial stress in the HECM program and projected the economic value of the program's portfolio to be negative $2.8 billion. That sparked Congress to enact the new law that authorizes the secretary of HUD to "establish, by notice or mortgagee letter, any additional or alternative requirements that the Secretary, in the Secretary's discretion determines are necessary to improve the fiscal safety and soundness of the program."
In a Federal Register document published Thursday, which mentions the mortgagee letter, HUD notes the new HECM requirements will take effect for case numbers assigned on or after Sept. 30, with the exception of new financial assessment requirements and funding requirements.  Those changes will take effect for case numbers assigned on or after Jan. 13, 2014.

The Federal Register notice solicits comment for a period of 30 days--ending Oct. 15--on the financial assessment requirements to be applied on or after Jan. 13, 2014.

The purpose of the financial assessment is to evaluate a mortgagor's willingness and capacity to meet their financial obligations and comply with the mortgage requirements.

The letter requires FHA-approved lenders to perform a financial assessment of all prospective mortgagors on all HECM transactions including traditional, refinance and purchase transactions. Key components of underwriting HECM loans include an analysis of  credit history, a cash flow/residual income analysis, an analysis of compensating factors and extenuating circumstances and finally a determination of whether the HECM applicant is eligible for the loan.

Use the resource link to access the Federal Register document.

CFPB Chief Plans To Aid Privacy Notification Progress

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WASHINGTON (9/13/13)--The Consumer Financial Protection Bureau will work with legislators to address privacy notification issues through the regulatory process, CFPB Director Richard Cordray said during testimony delivered on Thursday.

Cordray made his remarks as he presented his agency's semiannual report before a House Financial Services Committee hearing.

During that hearing, Reps. Blaine Luetkemeyer (R-Mo.) and Brad Sherman (D-Calif.) asked Cordray to urge the Senate to pass its own version of privacy notice legislation.

Leutkemeyer and Sherman are co-sponsors of a privacy notification bill (H.R. 749) that passed the U.S. House in March.

A Senate privacy notification bill (S. 635) was introduced by Senate Banking subcommittee on financial institutions Chairman Sherrod Brown (D-Ohio) and committee member Sen. Jerry Moran (R-Kan.). It has 28 co-sponsors.

Both the House and Senate bills would both eliminate a requirement that privacy notices be sent on an annual basis. The bills would allow the notices to be sent only when the privacy policy of a financial institution has changed.

However, there are some key differences between the bills: For instance, only the Senate bill would require credit unions and other financial institutions to make their privacy policy always accessible in some form in order to qualify for the bill's exemption from sending annual privacy notices.

The Credit Union National Association supports the privacy notification bills because they would streamline the regulatory burden on credit unions by reducing the amount of diverted time and resources that a credit union's staff could be using for more important services to its members. The bills would ensure that when a consumer receives a privacy notification, it has significance and is not redundant, CUNA has noted.

Rep. Bustos Offers Public Endorsement Of CU Tax Status

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WASHINGTON (9/13/13)--Rep. Cheri Bustos (D-Ill.) this week became the latest member of the U.S. Congress to support preserving the credit union tax exemption, noting that "taxing credit unions would do more harm than good to consumers who voluntarily join not-for-profit credit unions.

"As a 21-year credit union member, I believe credit unions should continue to operate as member-owned, not-for-profit cooperative financial institutions. A tax hike on credit unions could result in higher loan rates, lower dividend rates and perhaps a reduction in the basic services credit unions offer their members," Bustos said in an Illinois Credit Union League (ICUL) release.

Through her work experience and as a member of a local Illinois credit union, Bustos has gained a considerable appreciation for the not-for-profit industry, including credit unions, said the league. Bustos believes in the movement's "people helping people" philosophy and strongly supports maintaining the credit union member-owned, not-for-profit, cooperative structure, the league added.

The legislator, whose 17th congressional district contains more than 218,000 credit union members and 35 credit unions holding about $8.2 billion in assets, said credit unions are critical to the growth of communities. Bustos was elected to her seat for the first time in the 2012 election cycle, and she enjoyed strong support from ICUL, credit unions in Illinois, and CULAC.
Keith Sias, ICUL vice president of governmental affairs, said, "Illinois' credit unions are very appreciative of Congresswoman Bustos' support of maintaining the tax exempt status of credit unions. Her on-going public recognition of the key role credit unions play in the financial marketplace is very important as Congress considers the issues around tax reform."
On Sept. 10, CUNA and the state credit union leagues' Don't Tax Tuesday II directed thousands of pro-credit union messages to members of Congress. This major social media push used Twitter, Facebook, as well as CUNA's own websites--in Spanish and English--to generate over 5,000 tweets, 600 Facebook posts and 8,000 e-mails to lawmakers.

Overall, more than one million Twitter users were potentially exposed to the #DontTaxMyCU campaign on Tuesday. (See Sept. 12 News Now story: CUs' 'Don't Tax Tuesday II' Ups Message Total To 850,000.)

In Texas, 38 House and Senate members have said they support credit unions, with 32 members specifically mentioning their support for credit unions' tax-exempt status. See News Now story: Texas 'Don't Tax' Efforts Put Advocacy In Limelight.)

NCUA OKs Fixed-asset Reg Changes, Community Charter

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ALEXANDRIA, Va. (9/13/13)--The National Credit Union Administration on Thursday approved a final version of fixed-asset regulation changes that does not make any substantive changes to regulatory requirements. Rather, the revisions are intended to clarify the rule by improving its organization, structure, and "ease of use."

The changes include plain language revisions, new definitions and rewordings that impact the current fixed-assets rule, Section 701.36. That rule allows federal credit unions to purchase, hold and dispose of property necessary or incidental to their operations. These fixed assets include office buildings, branch facilities, furniture, computer hardware and software, and ATMs.

The regulation changes will become effective 60 days after they are published in the Federal Register.

The Credit Union National Association has spoken in support of these proposed fixed-asset rule changes and said on Thursday that the changes "may help with compliance."

The NCUA said the rule will also offer greater flexibility to federal credit unions. "Those that receive a waiver from the 5% fixed-assets limit will have the ability to make multiple purchases of fixed assets within a 1% buffer above their approved waiver limit. This change is intended to eliminate the need for a federal credit union to make repeated waiver requests for minor acquisitions," the agency wrote.

NCUA board member Michael Fryzel first suggested streamlining the fixed-assets regulations. "Through the changes approved today, credit unions should find the regulation easier to follow," NCUA Chairman Debbie Matz said during the open board meeting.

CUNA and other commenters encouraged the NCUA to eliminate the current regulatory limit imposed on the ownership of fixed assets, which is 5% of a federal credit union's shares. Others suggested the NCUA could eliminate the current requirement to fully occupy premises acquired for future expansion.

The NCUA said these changes were beyond the scope of the current rule, but could be taken up at a later date.

A community charter expansion request filed by Peoples Advantage FCU, Chester, Va., was also approved during the Thursday meeting.

Peoples Advantage FCU currently serves Prince George, Dinwiddie, Chesterfield, and Sussex Counties, and the cities of Petersburg, Hopewell, and Colonial Heights, Va., and holds $53.5 million in assets. The credit union has 7,491 members, but is looking to expand that membership base by serving persons "who live, work, worship or attend school in, and businesses and other legal entities in the Richmond, Va., Metropolitan Statistical Area."

Fryzel asked NCUA staff to report on the progress of the credit union, post-expansion, within the next year.

A proposed charitable donation regulation was the other item on the open agenda. See News Now for coverage.

The closed portion of the agency's board meeting followed the open session. NCUA supervisory activities were the lone item on the closed meeting agenda.