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Inside Washington (09/09/2009)

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* WASHINGTON (9/10/09)--The Treasury is planning to encourage short sales and deeds with financial incentives, including a $1,000 success fee for servicers after a short sale is finished. The home seller would receive up to $1,500 for relocation expenses (American Banker Sept. 9). The plan, expected to be announced this month, aims to help troubled homeowners who are not eligible for the Obama administration’s loan modification program. Short sales allow homeowners to sell for less than what is owed on the mortgage and are viewed as less expensive than foreclosures ... * WASHINGTON (9/10/09)--The Federal Deposit Insurance Corp. (FDIC) Board adopted a notice of proposed rulemaking that phases out the debt guarantee component of the Temporary Liquidity Guarantee Program on Oct. 31. The FDIC seeks comment on whether a temporary, emergency facility should be left in place after the program expires. The FDIC has collected more than $9 billion in fees with the program and will use the money to offset resolution costs associated with bank failures, said FDIC Chairman Sheila Bair. The program was adopted by FDIC in October ... * WASHINGTON (9/10/09)--An analysis of the Home Mortgage Disclosure Act (HMDA), which could be released this week, is expected to bolster the case for a consumer financial protection agency, according to financial observers (American Banker Sept. 9). They expect the data will indicate a wide discrepancy in loans to minorities because of the financial crisis. The discrepancy could be used by consumer advocates to push for a consumer agency. Past data has indicated that minorities receive higher cost loans than white borrowers. Rep. Brad Miller (D-N.C.) has said banks haven’t used the HMDA data to improve lending, which is “proof” an agency is needed. However, Gil Schwartz, partner at Schwartz and Ballen LLP, said the data is often overstated ... * WASHINGTON (9/10/09)--The Senate Tuesday confirmed George W. Madison as Treasury general counsel, where Madison will serve as a senior legal and policy adviser to the secretary and other officials. He also will lead the Treasury’s legal division. Madison formerly served as executive vice president and general counsel of Teachers Insurance and Annuity Association, College Retirement Equities Fund ... * WASHINGTON (9/10/09)--Vice President Joe Biden held a meeting Wednesday with The White House Task Force on Middle Class Families at Syracuse University in New York to discuss ways to help families save and pay for college. At the meeting, Biden asked Treasury to look into 529 plans and find ways to make them more effective for middle-class families. A 529 plan functions like a ROTH Individual Retirement Account and helps families save for college. Contributions are made with after-tax income. The task force also released a report diagnosing the existing barriers to higher education and ways for families to access higher education ...

Mortgage cramdown issue rises from ashes in House

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WASHINGTON (9/10/09)—As recent reports predicted, House Financial Services Committee Chairman Barney Frank (D-Mass.) Wednesday announced his intention to get a mortgage “cramdown” bill through Congress next year. In March, the House passed a bill that would have, in part, allowed bankruptcy court judges to force modifications in existing home loans, an action known as a “cramdown,” but the Senate voted it down 51-45 in April. To protect credit union interests, the Credit Union National Association (CUNA) strongly opposed the legislation, while concurrently working with supporters of the measure to ensure credit unions were not adversely affected if the legislation became law. At a House Financial Services subcommittee hearing yesterday on the progress of the Obama administration's Making Home Affordable (MHA) loan modification program, Frank said, “The best lobbyists we have for (bankruptcy changes are) servicers that are not doing their job in trying to modify mortgages.” In outlining his plans for legislation, Frank said its reach would be limited to existing mortgages. In an interview with The Huffington Post news website, posted Sept. 9, Frank said he intends to include bankruptcy provisions in the financial industry regulatory reform measure. He added that in a recent meeting in Boston with Senate Majority Leader Harry Reid (D-Nev.), and Sens. Charles Schumer (D-N.Y.), Jack Reed (D-R.I.) and Tim Johnson (D-S.D.), the senators said they were ready for a major push to accomplish financial regulatory reform before the year ends.

Vibrant CU community recognized by House

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WASHINGTON (9/10/09)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday thanked the House for its recognition of the 75th anniversary of Federal Credit Union Act and the “vibrant” credit union community. Mica said, “The House resolution is a fitting reminder that America’s state- and federally chartered credit unions have a long and proud history of helping members improve their financial well being, especially in hard economic times whether during the Great Depression or in today’s recessionary environment. “The Federal Credit Union Act was instrumental in making this possible by opening the door to the development of a credit union movement that is truly national in scope. We are honored to have the House recognize all that this vitally important law enabled credit unions to achieve.” The House passed H Res. 556 by voice vote Wednesday. The commemorative bill recognizes both credit unions’ past and present service to the country through their service to credit union members. The resolution notably commends credit unions for their “instrumental role in helping hard-working people in the United States recover after the Great Depression,” as well as their continued exemplification of “the American values of thrift, self-help, and volunteerism, carving out a special place for themselves among the Nation’s financial institutions.” In his statement, Mica extended CUNA’s specials thanks to Reps. Jim Himes (D-Conn.), Rick Larson (D-Wash.), and Paul Kanjorski (D-Pa.) for offering the credit union resolution. Reps. Scott Garrett (R-N.J.), Earl Blumenauer (D-Ore.) and Ed Royce (R-Calif.) also spoke on the House floor in favor of the recognition. The national recognition precedes CUNA's 75th anniversary celebration, which will be held in Estes Park, Colo. Sept. 14-17. A number of CUNA committee and board meetings will also take place during the celebration. National Credit Union Administration board member Gigi Hyland is also scheduled to speak during a meeting of board members.

FinCEN plan could reduce confusion about MSBs CUNA says

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WASHINGTON (9/10/09)--There is significant confusion within the financial sector and in the marketplace regarding the types of businesses and activities that fall under the Financial Crimes Enforcement Network’s (FinCEN’s) money services business (MSB) rule and the Credit Union National Association (CUNA) supports FinCEN’s attempts to minimize the confusion. FinCEN has proposed an update to its MSB regulations and definitions to reflect its past guidance, rulings, current business operations, and evolving technologies, as well as to bring certain foreign-located MSBs with a U.S. presence under the purview of the regulations. The proposal also incorporates a minor change to the stored-value product rules and seeks comments for substantive changes envisioned for a later time. In a Sept. 9 comment letter, CUNA said it generally agrees that FinCEN’s proposed amendments to the MSB definitions will improve financial institutions’ ability to determine what individuals and business activities are covered. The clarifications, CUNA added, will also help credit union and other financial institutions to manage risks involved in serving those individuals or businesses. CUNA also generally supported FinCEN’s review of a $1000 per-person, per-day threshold that is applied to certain categories of MSBs, but CUNA warned that substantially lowering the threshold could result in additional burdens for institutions. “Lowering the threshold would increase the number of businesses and individuals designated as MSBs and thus increase the risk management burden for financial institutions. In most cases, MSBs would be classified in a higher risk category than most consumers and would require a more stringent level of risk management,” the letter noted. About the stored-value rules, CUNA said that it supports the agency’s efforts to get financial institution comment, but believes the issue is more appropriately addressed in separate rulemaking. To read CUNA’s complete comments, use the resource link below.

CRA hearing set for next Wednesday

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WASHINGTON (9/10/09)—The House Financial Services Committee set next Wednesday as the date for its exploration of Community Reinvestment Act (CRA) issues. The committee Wednesday announced its hearing, titled “Proposals to Enhance the Community Reinvestment Act,” will start at 10. a.m. (ET) Sept. 16. Congress enacted the CRA in 1977 in response to banks’ and thrifts’ “redlining,” or denying credit to lower-income and minority neighborhoods during the 1960s and early 1970s. The purpose was to ensure that federal and state-chartered commercial and savings banks were adequately meeting the financial service needs of all parts of the communities from which they draw deposits. There have been past efforts to include credit unions under CRA, such asduring the passage of the Credit Union Membership Access Act (H.R. 1151). The Credit Union National Association (CUNA) is opposed to any effort to include credit unions under CRA requirements. “Credit unions, by their nature and mission of 'people helping people, already meet the financial needs of a broad spectrum of people that fall within their fields of membership, and play an active role in community development and growth,” John Magill, CUNA senior vice president of legislative affairs, said Wednesday. “Therefore, credit unions should not be subject to burdensome regulatory requirements when they are already meeting and exceeding the intent behind CRA,” he added.