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SAFE Act, cybersecurity bill to see House floor votes

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WASHINGTON (7/29/14)--Several matters of interest are on the schedule this week before members of teh U.S. Congress leave for their August recess.

Two Credit Union National Association-supported bills will he heard on the House floor this week. The SAFE Act Confidentiality and Privilege Enhancement Act (H.R. 4626) would amend the SAFE Mortgaging Licensing Act of 2008 to allow state and federal regulatory officials with financial oversight authority access to any information given to the Nationwide Mortgage Licensing System and Registry without loss of privilege or confidentiality protections.

Currently the bill only allows officials with mortgage oversight authority to access the database.

The National Cybersecurity and Critical Infrastructure Protection Act of 2014 (H.R. 3696) would amend 2002's Homeland Security Act to require the Secretary of Homeland Security to conduct cybersecurity activities, including shared situational awareness among federal entities.

Both bills are expected to be heard on the House floor this week under suspension of the rules.

Today, the House Financial Services Committee will being markup of a series of regulatory bills, including two that have strong support from the Credit Union National Association. CUNA has testified in favor of the Regulation D Study Act (H.R. 3240) and the Access to Affordable Mortgages Act of 2014 (H.R. 5148), and plans to send a letter of support to the committee this week. (See related story:  CUNA supports House panel markup of CU relief bill.)

On Wednesday, the House Ways and Means subcommittee on select revenue measures will conduct a hearing to on dynamic analysis of the discussion draft of the Tax Reform Act of 2014, which was released in February. The hearing will begin at 10 a.m. (ET).

On Thursday, the  Senate Banking Committee full committee hearing, titled "Financial Products for Students: Issues and Challenges." Witnesses will include representatives from education policy groups, financial aid administrators and financial institution trade organizations. The hearing is scheduled to being at 10 a.m. (ET).

NCUA gives examiners FinCEN guidance for marijuana biz

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WASHINGTON (7/29/14)--The Washington Department of Financial Institutions has offered information to credit unions in that state that wish to provide financial services to marijuana-based businesses. Washington voted in 2012 to legalize the sale or marijuana and related products to individuals over the age of 21 for recreational purposes. The state began issuing licenses to those businesses this month, and 20 other states have legalized some form of medical or recreational marijuana-related activity.

In a letter to the Washington DFI last week, Larry Fazio, director of the NCUA's Office of Examination Insurance, said the agency has provided the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) guidance to agency examiners, who are responsible for determining the compliance of financial institutions that provide service to marijuana-related businesses.

"Credit unions have been struggling with what we consider to be overreaching due diligence requirements in FinCEN's guidance for marijuana-related businesses," said Colleen Kelly, senior assistant general counsel for federal compliance for the Credit Union National Association.

"We have been hoping NCUA would provide definitive guidance to credit unions to relieve these ongoing due diligence concerns. I'm afraid this letter doesn't do it. CUNA will continue to encourage NCUA to provide additional compliance assistance for servicing these businesses."

FinCEN's guidance notes that U.S. Department of Justice Attorneys and law enforcement will devote enforcement resources to businesses that are distributing marijuana to minors, criminal enterprises, states where it is not legal, as well as several other scenarios.

In addition, the guidance warns financial institutions serving marijuana-related businesses to conduct due diligence by:
  • Verifying with the appropriate state authorities whether the business is duly licensed and registered;

  • Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business;

  • Requesting from state licensing and enforcement authorities available information about the business and related parties

  • Developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers);

  • Ongoing monitoring of publicly available sources for adverse information about the business and related parties;

  • Ongoing monitoring for suspicious activity, including for any of the red flags described in the guidance; and

  • Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.
Financial institutions who suspect illicit activity are required to file a suspicious activity report (SAR). This obligation is unaffected by any state law legalizing marijuana-related activity, according to FinCEN's guidance.

Use the resource link below for more information.

CUNA supports House panel markup of CU relief bills

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WASHINGTON (7/29/14)--The House Financial Services Committee is voting a series of bills today, two of which are strongly supported by the Credit Union National Association for the regulatory relief they would provide credit unions.  Those bills are  the Regulation D Study Act (H.R. 3240) and the Access to Affordable Mortgages Act of 2014 (H.R. 5148).

CUNA also strongly backs a possible amendment to The Community Bank Mortgage Servicing Asset Capital Requirements Study Act (H.R. 4042), which also will be voted on today. That bill would direct the federal banking agencies to conduct a study of appropriate capital mortgage requirements for mortgage servicing assets.

The amendment to that bill would require the National Credit Union Administration to similarly "stop and study" a provision of its proposed risk-based capital plan that would assign a 250% risk weight for mortgage servicing rights (MSR).

CUNA testified before the House Financial Services subcommittee on financial institutions and consumer credit last week that the MSR weight would be both "punitive and unnecessary" and should be reduced to 100%. That would place it at a level similar to what is required of small banks in Basel III requirements.

If the amendment is adopted today it would result in a delay in the implementation of the NCUA's RBC final rule until "an appropriate period of time "after the agency's study is completed.

Also in its testimony last week and in its letter of support sent Monday, CUNA strongly backed the Regulation D Study Act, which directs the Government Accountability Office to study the impact of the Federal Reserve Board's monetary reserve requirements.

Reg D limits the number of automatic withdrawals from a member's share account to six transactions per month and CUNA warns that this can cause consumers to overdraft if their checking account falls below $0 and the six transactions already have been made for the month.

CUNA supports an increase in the transaction cap, or for it to be eliminated altogether

CUNA also provided testimony on three discussion drafts, most notably the Access to Affordable Mortgages Act, which amends the Truth in Lending Act to exempt higher-risk mortgages from property appraisal requirements as long as the loan is held on portfolio for at least three years. In its support letter Monday, CUNA said the exemption would both provide regulatory relief for credit unions and other mortgage lenders, as well as increase access to mortgage credit for borrowers purchasing lower-cost dwellings costing $250,000 or less.

"The bill would allow credit unions that offer mortgage loans secured by covered properties to serve their middle- to lower-income members better," CUNA wrote. The letter went to House Financial Services Committee Chair Jeb Hensarling (R-Texas) and the committee's ranking Democrat, Rep. Maxine Waters of California.

For more on what is happening this week in Congress, see "This week in Congress: CUNA-backed bills to see House floor votes."

Sen. Toomey seeks NCUA justifications for higher RBC requirement

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ALEXANDRIA, Va. (7/29/14)--Sens. Patrick Toomey (R-Pa.), Mike Johanns (R-Neb.) and Deb Fischer (R-Neb.) have written to the National Credit Union Administration, asking for justification for the agency's risk-based capital proposal.

Toomey, the ranking member of the Senate Banking subcommittee on financial institutions and consumer protection, said the matter is of great interest to him given its "potential impact on credit unions, their members and the communities they serve." He is also a member of the Joint Economic Committee and the Senate Finance Committee.

"I would be concerned with any proposal that exceeds the authority of the board and imposes undue regulatory burden on credit unions and potentially hampers access to credit in local economies," he wrote.

Among several requests, Toomey asks the agency where the statutory authority for the proposal comes from. He cited a section of the Federal Credit Union Act that limits the NCUA board's authority to impose risk-based capital requirements on well-capitalized credit unions.

He also requested information as to why the NCUA claims authority to impose individual capital requirements, saying that while the Federal Deposit Insurance Corp. has that authority, it is not given in the Federal Credit Union Act.

Toomey also expresses concern about adding capital requirements to institutions rather than relying on a case-by-case basis.

"Regulation of concentration and interest rate risk is generally a matter that is supervised on a case-by-case basis as part of credit unions' examinations," he wrote. "Please explain why the board believed that regulating concentration and interest rate risk through new capital requirements is better than relying on NCUA examiners to monitor concentration risk of individual credit unions."

Johanns and Fischer, in a joint letter sent Monday, also expressed concerns that the rule is too stringent, and urged the NCUA to take into account the more than 2,000 comments sent when making a final decision.

"Commuity financial institutions are the lifeblood of our small towns and our small businesses," they wrote. "The new proposed risk weights may be unduly burdensome on credit unions that have high concentrations of business and agricultural lending."

NCUA Chair Debbie Matz said last week that the agency would re-examine several aspects of the plan, in response to comments received. This includes reducing the risk weights on investments, mortgages, member business loans, credit union service organizations and corporate credit unions, as well as additional time for implementation.

FHFA seeks input on draft PMI requirements

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WASHINNGTON (7/28/14)--The Federal Housing Finance Agency (FHFA) is seeking comments on draft requirements for private mortgage insurance (PMI) companies that insure mortgages owned or guaranteed by Fannie Mae and Freddie Mac.

These requirements would apply to private mortgage insurers currently approved to do business with Fannie Mae or Freddie Mac, as well as those who wish to do so in the future.  

"Mortgage insurance counterparties must be able to fulfill their intended role of providing private capital, even in adverse market conditions," said FHFA Director Mel Watt. "FHFA's Strategic Plan calls on Fannie Mae and Freddie Mac to strengthen the requirements for private mortgage insurance companies that do business with them in order to reduce Fannie Mae's and Freddie Mac's overall risk exposure and protect taxpayers."

Fannie and Freddie are required to obtain PMI or another acceptable form of credit enhancement for loans that have loan-to-value ratios of more than 80%. According to the FHFA, PMI from a sound counterparty helps reduce the credit risk exposure to Fannie and Freddie, while shifting the first-loss exposure to the private market from taxpayers.

The updated financial requirements incorporate a new risk-based framework designed to ensure approved insurers have a sufficient level of liquid assets from which to pay claims. The draft requirements also include enhanced operational performance expectations and define remedial actions that would apply should an approved insurer fail to comply with the proposed revised requirements.

According to the FHFA, the draft requirements are the result of a multiyear, collaborative process among Fannie, Freddie, state insurance commissioners and private mortgage insurers to produce a comprehensive set of standards.

Comments are due by Sept. 8. Use the resource links below for more information.

McCaskill: RBC proposal means downgrade of 79% of Mo. CUs

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WASHINGTON (7/28/14)--Missouri credit unions have raised several issues with the National Credit Union Administration's risk-based capital proposal, prompting Sen. Claire McCaskill (D-Mo.) to write to the agency.

McCaskill, chair of the Senate Commerce, Science and Transportation subcommittee on consumer protection, product safety and insurance, expressed her concern that the new rules will have a negative affect on credit unions in her state and around the country.

"There is concern that the new risk weights are not each set at appropriate levels to best reflect the risks present in the market. These new calculations will result in a downgrade of 79% of Missouri credit unions covered by the new rules," she wrote. "With this drastic impact, credit unions should have confidence that these numbers were achieved with careful study. I urge NCUA to conduct further examination of the risk weights applied to each form of capital to ensure they are appropriate."

McCaskill also raised concerns about the proposed implementation period, citing the unique difficulties faced by credit unions when it comes to raising capital.

NCUA Chair Debbie Matz said during the agency's series of Listening Sessions that the implementation period would be more than the originally proposed 18 months. The agency has since stated that risk weights would be adjusted, particularly in the areas of mortgages, member business loans, investments, credit unions service organizations and corporate credit unions.

McCaskill is a proponent of several regulatory relief measures. In February she introduced a bill that is designed to require minimum disclosures from entities that send abusive patent demand letters, known as "patent trolls."

House FSC markup of Reg D Study Act set for Tuesday

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WASHINGTON (7/28/14)--The House Financial Services Committee will begin a markup of the Regulation D Study Act (H.R. 3240) Tuesday, a bill supported by the Credit Union National Association.
The bill, introduced by Rep. Robert Pittenger (R-N.C.), requires the Government Accountability Office (GAO), in consultation with credit unions and community banks, to study the Federal Reserve's Regulation D minimum reserve requirements.
The bill calls for the study to report:
  • A review of how the Fed has used reserve requirements to conduct U.S. monetary policy;

  • The impact of the maintenance of reserves on depository institutions;

  • The impact upon consumers in managing their accounts; and

  • Alternatives available to the Federal Reserve Board to maintain reserves to effect monetary policy.
Regulation D affects credit union members by limiting the number of automatic withdrawals from a member's savings account to six per month. This can cause members to overdraw checking accounts when a debit draws the account balance below $0 and the number of transfers for the month has already happened. Members who might have the funds in a savings account are unable to automatically transfer the funds, which could lead to a nonsufficient funds fee.
"We would like to see this cap increased or eliminated altogether, but we understand that one of the reasons the regulation is in place is because the Federal Reserve uses it as a tool to conduct monetary policy," said Doug Fecher, president/CEO of Wright-Patt CU, Beavercreek, Ohio, with $2.8 billion in assets, on behalf of CUNA to the House Financial Services Committee earlier this month.
CUNA's testimony referenced a quote from former Fed Chair Ben Bernanke, who said reserve balances far exceed requirements, and play only a "minor role" in the daily implementation of modern monetary policy.
"A GAO study will allow an objective assessment of whether the rarely changed monetary reserves imposed on depository institutions and consumers are necessary in order for the Fed to implement monetary policy in the 21st century," Fecher said.
The committee will also mark up another bill CUNA testified in support of--the Access to Affordable Mortgages Act of 2014 (H.R. 5148). The bill would amend legislation including the Truth in Lending Act to provide regulatory relief to institutions originating mortgages of $250,000 or less from appraisal requirements listed in the Dodd-Frank Act.
"The bill would provide both regulatory relief to mortgage lenders as well as increase access to mortgage credit availability for borrowers purchasing lower cost dwellings," Fecher said. "The bill would allow credit unions that offer mortgage loans secured by covered properties to better serve their middle to lower income members."
The markup is scheduled to begin at 10 a.m. (ET) Tuesday in the Rayburn House Office Building.