July 13, 2012
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Horizon Relief on the Horizon:
ATM Bill Passes House

The U.S. House of Representatives, by a unanimous vote, passed a bill to eliminate the requirement for duplicate fee-disclosure notices on ATMs.

  Strategy for MBL Success
Credit unions are enlisting small businesses in the effort to encourage Congress to pass legislation that would raise the credit union member business lending cap, and other advocacy groups are getting involved as well.

  Another Reason for Congress to Pass the MBL Legislation?
A study by the National Small Business Association found that nearly half of small-business owners say they had trouble finding anyone willing to lend them needed capital in the past four years.

  Five-Year Flood Protection Extension Signed Into Law
President Obama signed into law a five-year extension of the National Flood Insurance Program, which would have expired on July 31 after a series of short-term extensions.

  ElectionWatch Video Sparks Rallying Cry: VOTE!
A new video promo on CUBETV features Georgia credit union leaders encouraging staff and members to vote this election season, and refers them to the Affiliates' ElectionWatch website for nonpartisan election resources.

  Ambassadors of Knowledge
Credit union advocates from Emory Alliance CU, MembersFirst CU and Mutual Savings CU were among those promoting the credit union message during a recent Hike at Home session with state Sen. Jason Carter.

  Foreshadowing of Legislative Efforts? Foreclosure Articles Paint Picture for Judicial Process
A series of articles in an Atlanta newspaper described "foreclosure nightmares" and presented a case why, according to borrower advocates, Georgia should change to a judicial process for foreclosure.

  Untangling a Tax Lien Web
A Washington Post article detailed the process by which the elderly and other vulnerable homeowners in some states are losing their homes over unpaid taxes in amounts as small as a few hundred dollars.

  Price Drop Yet? We Didn’t Think So.
An Atlanta Journal-Constitution article reported on the interchange issue, saying promised savings to consumers that were to have resulted from the interchange-fee cap have yet to materialize.

  Paranoia or Predictor?
A Washington Post blog reported that auto loans, unlike other kinds of consumer and business credit, remain easy to get, and that investors are buying up billions of dollars' worth of securities backed by such loans.

  Resource Spotlight: Legislative Profiles
Those wondering where their legislators at the federal and state levels stand on issues of importance to credit unions can find out by checking documents available on the Affiliates' website.

  CFPB Proposes New Mortgage Disclosure Rule, Forms
The Consumer Financial Protection Bureau proposed a new rule on mortage disclosures, and two new forms that would provide details on costs associated with mortgage loans.

  CFPB Issues Proposed High-Cost Mortgage Rule
The CFPB issued a new proposed rule that would expand the definition of what is considered a "high-cost mortgage" to loans whose fees and points exceed 5 percent of the loan amount, down from the current threshold of 8 percent.

  More from CFPB: Other Mortgage Proposals to Be Issued This Summer
The CFPB announced that it plans to issue, later this summer, several other proposed rules on mortgage-related matters such as points and fees, interest-rate adjustments, recordkeeping and other topics.

Relief on the Horizon: ATM Bill Passes House

HorizonThere is positive news for credit unions seeking some regulatory (and unnecessary litigation) relief. The House returned from recess on July 9th and promptly passed H.R. 4367 unanimously (371-0) before adjourning for the day. Credit unions in Georgia are very familiar with this bill, which will amend the Electronic Fund Transfer Act to limit the fee disclosure requirement for an automatic teller machine to the screen of that machine.

Since last year, Georgia credit unions have expressed strong support for this bill, discussing it during Hill visits and at Hikes at Home, and because of these efforts the Georgia delegation overwhelmingly supported the bill. H.R. 4367 was introduced by Rep. Blaine Luetkemeyer (R-MO) and by Rep. David Scott (D-13), and 12 of Georgia’s 13 U.S. Representatives – including all Georgia members of the House Financial Services Committee – are co-sponsors. Both Georgia Senators Saxby Chambliss (R) and Johnny Isakson (R) have already signed on in support of the Senate version, S. 3204.

This legislation will alleviate regulatory duplication and eliminate the class action lawsuits that have sprung out of the outdated regulation. There has been a growing wave of lawsuits filed where litigants have removed the physical disclosure notices, photographed the ATMs and then promptly sued (current regs allow the lesser of $500,000 or 1 percent of the ATM operator’s net worth plus attorney fees/costs).

 CUNA has already sent a letter of support to the Senate urging them to pass this bill as soon as possible, as on-screen disclosures have eliminated the need for a physical notice... and this bill will remove a compliance burden on credit unions. Stay tuned!
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ChessStrategy for MBL Success

As highlighted in the e-mails sent to affiliated credit union CEOs by both CUNA and GCUA in the first week of July, the credit union push for an MBL increase continues. Credit unions across the country are engaging small businesses – who in turn are engaging their legislators – on the Credit Union Small Business Jobs Act, S. 2231 and the House version, H.R. 1418 to build support for the legislation in those states where the Senators are on the fence.

Georgia credit union grassroots activists were engaged in the call to action to push for a Senate vote, and Senate Majority Leader Reid stands by his promise to bring the MBL bill to the Senate floor. The strategy to secure the needed votes is to put the bill into a larger legislative package with provisions that the banks not only want, but need – blunting their opposition and making it easier for those Senators on the fence to vote in favor. When the time arises for this compromise bill to come to the floor for a vote, credit unions in Georgia will be alerted. In the meantime, the steps towards success continue.

Credit union efforts got a boost in June when the U.S. Conference of Mayors endorsed the bill, and D.C. ads directed at the Senate were featured last week highlighting the growing roster of third-party coalition support (now also including the U.S. Hispanic Chamber of Commerce, the National Association of Home Builders and the National Rural Electric Cooperatives Association). To see information on the MBL efforts, please click here.
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Another Reason for Congress to Pass the MBL Legislation?

According to a new survey released July 11th by the National Small Business Association (NSBA), the 2012 Small Business Access to Capital Survey, cash flow issues continue to plague a significant number of America’s small businesses. Among the findings: nearly half (43 percent) of small-business owners report that they needed funds at one point in the last four years and were unable to find any willing sources.

Cash flow“Not only have small-business owners been unable to find new credit over the last four years, nearly a third had their existing credit slashed and one in ten had their loans called in early,” stated NSBA President and CEO Todd McCracken. “What’s worse, 19 percent of those whose loans were called in early were given less than 15 days to pay the full balance of their loans.” Among the small-business owners who reported some change to their credit, 60 percent stated that the reason given was the bank’s internal risk assessment. Underscoring the relatively negative impression many survey respondents expressed with lending institutions, 15 percent said they were given no explanation for changes to their credit.

Small businesses were asked to rate various lending institutions and only small community banks and credit unions received a majority overall positive rating. More than one quarter of small-business respondents said they changed banking institutions in the last four years, with feelings of mistreatment the most common cause. In addition to traditional financing issues, respondents reported a notable increase in client payment times, and 55 percent of small subcontractors reported late payments from a prime contractor.
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President Barack Obama signs the flood-insurance bill
Five-Year Flood Protection Extension
Signed Into Law

More positive news on the legislative front: A long-term extension of the National Flood Insurance Program (NFIP) was signed into law on July 6th as a part of a combined package bill, and as such the flood insurance program has received an extension through 2017. CUNA has strongly supported the extension, which was set to expire by July 31st if a bill had not passed. CUNA and credit unions have been encouraging Congress to approve a multi-year authorization for several years for this important program. This comes in the wake of the NFIP being subject to almost a dozen short-term extensions since the last time it enjoyed a long-term extension.

On behalf of credit unions, CUNA urged Senate lawmakers to include language addressing force-placed flood insurance in its final version of NFIP legislation. Force-placed insurance is an insurance policy taken out by a lender or creditor when a customer does not carry insurance on an asset. The charges for this insurance are passed on to the customer. The House bill includes language that would allow lenders to charge borrowers for costs of premiums and fees incurred by the lender after borrowers required to have flood insurance either cancel or let the required policy lapse – and then fail to purchase flood insurance within 45 days after notification of that lapse. The final version of the Senate NFIP adopted the CUNA-sought provision.
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ElectionWatch Video Sparks Rallying Cry: VOTE!

ElectionWatchCredit unions across Georgia are encouraging their members to get out the vote through a variety of ways. Newsletter articles, web areas dedicated to member education, lobby posters, statement stuffers... you name it, credit unions are getting involved. Not sure why? Click here to see fellow credit union leaders Keith Pritchard from GA FL United Methodist FCU, Carl Blouin from Fulton Teachers’ CU and Tina Burkhalter from Nashville CU tell you EXACTLY why they are educating and encouraging staff and members to vote. What better time to rally the credit union troops than during this pivotal election season? To encourage credit union staff, volunteers and members to get out the vote, this new high-energy video sends a loud and clear message: “Vote!”

If your credit union hasn’t taken advantage of the tools available to provide a nonpartisan resource to your members, do so today with ElectionWatch. Join your fellow credit unions today by linking this resource to your website.

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Hike at Home - Carter
From left: Brandee Bickle, GCUA; Mike Culbertson, GCUA; Tammie Zeigler, Emory Alliance CU; Mike Bryan, Mutual Savings CU; State Sen. Jason Carter; Terry Hardy, MembersFirst CU
Ambassadors of Knowledge

Educating legislators on the unique nature of credit unions and the differences our industry has from the rest of the financial sector is a powerful activity that takes both the opportunity to share and the willingness to learn from the legislator’s perspective. Credit union advocates from Emory Alliance CU, MembersFirst CU and Mutual Savings CU had just such an opportunity on July 10th when they sat down with rising leader State Sen. Jason Carter (D-Decatur) at the most recent Hike at Home meeting.

During the meeting, Sen. Carter asked a deluge of questions about our industry – from operational procedures to regulatory framework, from charter options to membership, from the organizational to the practical – from an important perspective, how legislation impacts our industry. The knowledge and time that these Hike at Home participants shared made an immediate difference with the understanding and relationship Sen. Carter has with the credit union industry. Thank you to these credit unions for sharing their time, as well as all the credit unions who have participated in previous hikes.

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Georgia CapitolForeshadowing of Legislative Efforts?
Foreclosure Articles Paint Picture for Judicial Process

On July 6th, The Atlanta Journal-Constitution ran a series of articles on “foreclosure nightmares”: instances where homes were foreclosed upon by banks that did not hold a valid mortgage on the property. The articles presented the case of why, according to borrower advocates, Georgia should change its foreclosure process to be a judicial foreclosure state. Almost half of the states are judicial foreclosure states, which is where a court would hear evidence confirming a borrower’s default and the lender must establish a right to foreclosure on the property. This process adds a considerable amount of consternation to the already regulated process.

What does this mean for credit unions? Over the past few years there have been attempts to change the foreclosure laws in Georgia from that of a non-judicial to a judicial process, which would lengthen the time period that a financial institution is allowed to foreclose on a piece of property. Articles such as these are windows into the probable resurgence of issues for the 2013 state legislative session, which factor in to the talking points of state-level Hike at Home meetings to protect credit unions and illustrate why building relationships with area legislators is vital for credit unions. Legislators are much less apt to hurt an industry that they have a connection with, so the time spent reaching out to elected leaders is an investment in future legislative successes.

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WebUntangling a Tax Lien Web

The Washington Post reported on July 9th that the elderly and other vulnerable homeowners are losing their homes because they owe as little as a few hundred dollars in back taxes. Outdated state laws allow big banks and other investors to reap windfall profits by buying the houses for a pittance and reselling them. This information is from the National Consumer Law Center’s July 10th report on how local governments can seize and sell a home if the owner falls behind on property taxes and fees. The process is designed to help governments make ends meet at a time when low property values and the weak economy are squeezing tax revenue. However, tax debts as small as $400 can cause people to lose their homes, according to the article.

How does this work?

  • Step 1: The government files a public document called a tax lien explaining that it can seize the property if the taxes remain unpaid.
  • Step 2: If the taxes are not paid, the government auctions the lien to investors. Past investors include JPMorgan Chase, Bank of America and people who respond to Internet get-rich schemes, the report said.
  • Step 3: For a limited time, the homeowner may buy back the home by paying to the investors the purchase price of the lien, plus interest, fees and other costs. This is possible because investors have not bought the home. Instead, they have purchased the tax lien, which gives them the right to seize the home later.
  • Step 4: If the owner fails to pay all the costs, investors can sell the home at a big profit compared with the cost of buying the tax lien.

Tax lien sales differ from most foreclosures. In many states, homes sold because of tax debts can be sold for only the amount of back taxes owed. That means a $200,000 home might fetch only $1,200, the report said. In the process, homeowners can lose thousands of dollars in home equity that they have built up by making monthly payments. A JPMorgan unit estimated in 2009 that about $5 billion worth of tax liens are sold to investors each year, according to a transcript of remarks made at a government meeting in Kansas City, Kan. JPMorgan and Bank of America both said they have stopped buying, bundling and reselling tax liens, but still hold tax liens that they already owned and manage them for others.

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Price Drop Yet? We Didn’t Think So.

DiscountThe interchange battle rages on, in the press, in the courts and in the consumers’ financial accounts. Credit unions are all too aware of retailers’ efforts to push off their cost of doing business with debit cards onto financial institutions. On July 8th The Atlanta Journal-Constitution reported on the ongoing issue of interchange, citing that retailers who lobbied for the interchange cap said it would save the consumers money, but financial institutions say the savings hasn’t happened.

In another effort to push the cost of doing business onto others, The Wall Street Journal reported on July 9th that merchants may soon begin to impose a surcharge each time a customer pays with a credit card. Stay tuned!

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MoodsParanoia or Predictor?

The Washington Post’s WonkBlog topic for July 6th posed the question that auto loans may be the next subprime market to cause strain to the economy. The blog cites that credit is hard to find for ordinary consumers and businesses (it is safe to assume the author is not a credit union member!) with one exception: autos.

Some interesting points from the blog:

  • New bank loans for autos totaled $47.5 billion in the first quarter of 2012, higher than at any point in the past seven years, according to Equifax.
  • The average person financing a new-car purchase had a credit score of 760, down six points from the previous quarter, according to new data from Experian.
  • For a used car, the average credit score was down to 659.

But another factor: Investors and private-equity firms are buying up securities made of bundles of car loans, seeing these assets as both safe and lucrative. In the first six months of this year, the nation’s largest auto lenders, such as GM Financial and Santander Consumer USA, sold $10 billion of their subprime auto loans to investors, a 20 percent increase over the same period last year. It may seem surprising that private-equity firms and other investors are willing to pour billions into auto-backed securities after getting burned by similar mortgage-backed securities when the housing bubble burst. But, analysts say, the auto market is different from housing in several key respects. For one, Americans appear to be less willing to default on their car payments than to walk away from their houses – even in the depths of the recession, auto loans performed better than most. And, in the event of a default, it’s easier for a lender to repossess a car and sell it off, especially right now, when prices for used cars are so high.

In the end it all comes down to the R word: regulation. The article points to the subprime auto market expanding rapidly, with some buyers paying interest rates in excess of 10 percent. Some concerns over this include:

  • The auto loan market, which involves many smaller independent operators, remains lightly regulated.
  • The CFPB has not yet stated any plans to oversee nonbank lenders in auto finance.
  • Car dealerships, which frequently offer credit, were explicitly exempt from the new agency’s oversight in the 2010 Dodd-Frank financial regulation bill.
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SpotlightResource Spotlight: Legislative Profiles

Curious about where your elected officials stand on issues of credit union importance? Look no further. A broad overview of the previous stance of federal and state legislators is provided in a quick, easy-to-read format. Please click here for the Congressional Profile, here for the State House Voting Scorecard, and here for the State Senate Voting Scorecard.

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CFPB logoCFPB Proposes New Mortgage Disclosure Rule, Forms

On July 9th, the Consumer Financial Protection Bureau issued a proposed rule and two accompanying proposed forms intended to combine and simplify mortgage disclosure requirements under the Truth in Lending Act and Real Estate Settlement Procedures Act. The 1,097-page proposed rule, among other things, would require lenders to give consumers a new, three-page “Loan Estimate” form within three business days of applying for a loan. The form includes information on the mortgage’s key features, costs and risks.

At least three business days before closing on the loan, consumers would be required to receive a new, five-page “Closing Disclosure” form that would provide details on all costs associated with the loan. The CFPB has created a new website that provides a side-by-side comparison of the two new proposed mortgage forms and the old ones, an illustration of how the proposed rule relates to the forms, and a timeline of the CFPB’s “Know Before You Owe” mortgage project. The comment deadline on certain provisions in the proposed rule is September 7. The comment deadline for the remainder of the proposed rule is November 6.

Read more.
Read the proposed rule.
View the proposed “Loan Estimate” form.
View the proposed “Closing Disclosure” form.
View the website comparing the proposed new forms with the old ones.

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CFPB Issues Proposed High-Cost Mortgage Rule

Consumer protectionOn July 9th, the Consumer Financial Protection Bureau issued a proposed rule that would expand what is considered a “high-cost mortgage” and also provide more protection for consumers who take out such loans. Under the current rules, a mortgage is considered high-cost if the points and fees charged to the consumer exceed 8 percent of the loan amount. The proposed rule would lower that threshold to 5 percent for most loans.

The proposal also would generally ban balloon payments for such loans, completely ban prepayment penalties and loan modification fees, cap late fees, and restrict fees charged when consumers ask for a payoff statement. The proposed rule also would require consumers to receive housing counseling before taking out a high-cost mortgage. The comment deadline for the proposal is September 7, and the CFPB plans to issue a final rule in January 2013. Read the proposed rule.

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ScreamMore from CFPB: Other Mortgage Proposals to Be Issued This Summer

The CFPB issued a fact sheet accompanying the mortgage-disclosure and high-cost mortgage proposals that shows the agency intends to issue several other mortgage market-related proposed rules this summer.

The upcoming proposals will address points and fees, interest-rate adjustments and unexpected insurance charges, and mortgage-servicers recordkeeping. The CFPB’s goal is to finalize those proposals in January 2013. Read the fact sheet.

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