WASHINGTON-Credit union trade associations and NCUA appear to be stalling on the subject of predatory mortgage lending, some prominent CU leaders are charging. The heat is on in the House Banking Committee, where ranking member Rep. John LaFalce (D-N.Y.) will shortly introduce legislation aimed at stemming the excesses of the industry's seamy underbelly. HUD Secretary Andrew Cuomo will convene a task force to "eliminate the nightmare of predatory lending from the American Dream of homeownership" and hold public hearings in at least four cities. The city of Chicago has banned doing business with companies that do it. So where is the CU sense of outrage? Banking regulatory agencies are threatening to craft regulations. The mortgage banker/broker associations are distancing themselves and large multi-national banks have had to examine their referrals to affiliates classified as predatory because their CRA credits may be disallowed and their "branding" and public relations campaigns discredited. The OCC will soon issue an advisory letter to examiners, said director John Hawke. FDIC Chairwoman Donna Tanoue and OTS Director Ellen Seidman have railed against it. (At press time, OTS announced it would review its mortgage lending rules with an eye toward reining in predatory lenders). Recently, Fed Chairman Alan Greenspan weighed in against "abusive lending practices that target specific neighborhoods or vulnerable segments of the population..." Headlines in the Washington Post and the New York Times and TV news shows like 20/20 and 60 Minutes have focused the public awareness on the subject and at least one such company has declared bankruptcy (see related story, opposite page). Yet credit unions, the not-for-profit alternative to the opportunistic gouging of moderate and low-income mortgage borrowers-many of whom may be CU members-have been too silent on the subject, say critics. The silence may be buoyed by the claim that credit unions do not engage in such heinous practices as front loading of single premium credit life insurance or "flipping" loans by refinancing them with up front fees that strip the equity of the homeowner's investment or by misrepresenting the interest rate or any of the other "predatory" techniques (see related story, opposite page) that abound. But some are not so sure that CUs are entirely without taint, wittingly or not. And if credit unions are to fulfill the vision embraced by CUNA President Dan Mica as the premier advocate for American consumers-not just 72 million CU members- then they should play a more meaningful role, they say. The North Carolina CU Network has been a thorn in CUNA and NAFCU's side on this very topic for weeks now and CU advocates there complain that all parties are stalling on what should be a "no-brainer" positioning of credit unions against the worst practices of predatory lenders. The law that North Carolina passed last year in only a four-month period is being used as a possible model for legislation in at least seven other states. The CU league and CUs there are credited with hammering it through, (it was virtually unanimous in both houses) and they want national movement on the issue. But the trades are hedging over the need for an NCUA regulation; are sharply divided over one that would apply to state charters as well as federal charters, and disinclined to even use the expression "predatory lending" and credit unions in the same breath. Larry Johnson, president of the N.C. league feels that a federal regulation would pose no burden on conforming credit unions. And the league would not seek or support one "unless it imposes little burden or is responsive to a great need." "We must be assured that the credit union movement is completely clean before approaching Congress and/or mounting any PR campaigns," said Johnson. "We are not as confident as CUNA that there are no credit unions participating in predatory lending. Further, we are lacking a clear definition of what one means when one says `predatory lending.' Self-regulation would defuse any argument that we are seeking a competitive advantage. A legislative solution is not something that can be accomplished in the short term," said Johnson. That's why Martin Eakes, president of Self Help CU, and Jim Blaine, president of State Employees CU are papering the CU trades with letters and faxes on a daily basis. "CUNA has had this issue on the table for 12 months without any sense of urgency," said Blaine. "Add my vote of despair over CUNA's inattention to a movement-sponsored rule prohibiting predatory lending in credit unions. We seem to be all talk and no action." Not so fast, counters CUNA President/CEO Dan Mica. "It was CUNA and NASCUS that passed the first resolutions against predatory mortgage lending, and those efforts led to NCUA's passage of a resolution. And we are definitely not sitting on the fence." CUNA must consider a possible regulation from every angle, he said, acknowledging the conundrum of coming out foursquare against something that CUs aren't typically doing as opposed to stalling while others wonder what there is to hide. It's a very touchy subject, he admitted, but the subcommittee of CUNA's governmental affairs committee has been working in earnest and no one is trying to avoid it. Given the state of affairs at NCUA and the recent history of Chairman's Norman D'Amours failed effort to pass a low income service proposal, there may be precious little support to take on an issue with which the Chairman has been so closely tied. "Shame on us if we don't get behind this just because folks are all ticked off at Norm D'Amours," said one source who asked not to be named. "The politics of this thing is just sickening. People are losing their homes. Some, if not many of them, are credit union members. Some credit unions are referring their own members to these lenders that are ripping them off. This is a credit union safety and soundness issue. We can't hide from it, or we shouldn't. Bergengren and Filene would spin in their graves to hear that kind of talk." Even NCUA's resolution (passed in December, 1999) seeks to explore more deeply "what, if any, regulations may be warranted at the state or federal level to more effectively regulate the possibility of predatory mortgage lending by credit unions..." while allowing they are more of a solution than a source. There is even a hesitancy on the part of Jerrie Lattimore, the N.C. regulator and member of the joint NASCUS/NCUA task force in search of a consensus. "We'd oppose an NCUA regulation that applies to state charters," said Lattimore. "What we envision is a parallel track; one for the states, followed by NCUA action to cover federal credit unions." But the Chair of NAFCU's Regulatory Committee, Brian McDonnell, (president of Navy FCU) wrote the NCUA Board that they should "resist drafting regulations that would apply only to federal credit unions." So state regulators don't want NCUA to preempt state law (even where it doesn't exist); only seven states have pending statutes in consideration (New York's session just closed without dealing with it); no one seems to want a `hodgepodge' of state laws and NCUA and the CU trades are trying to reach an agreement to which all involved do not seemed inclined to agree. "No financial institution likes imposed regulation," said Eakes. "But I think that once credit union people get past that hurdle and are exposed to the suffering these practices cause; once CU folks are exposed to the extent of the problem, that knee-jerk reaction against it will fade and they will be true to their roots. I sure hope they listen, that's all. I'd like for credit unions to be leading the charge because it's the right thing to do. Let's not be afraid to do the right thing." -
caburger@cutimes.com
