WASHINGTON - Amid mounting public and congressional interest in the issue-and even some pressure within the CU movement itself-CUNA has released a set of home equity-based "lending standards and ethical guidelines" for CUs that it hopes will not only help preserve an enviable CU record in the area but also show that government intervention in the matter is unnecessary for cooperative, not-for-profit financial institutions. "Credit unions are pretty much universally acknowledged (as having) the cleanest record of any (financial services) industry when it comes to predatory lending," CUNA General Counsel Eric Richard said in a May 31 teleconference unveiling the lending standards. "Therefore, we strongly believe that no regulation is necessary for credit unions in this field....What credit unions have done all these years is essentially to regulate themselves. What we're doing here is simply collecting and putting on the record a statement of how credit unions have always regulated themselves, and how they continue to do so." Richard added that the standards-which have been vetted by CUNA's Federal Credit Union Subcommittee, its Governmental Affairs Committee and the CUNA Board-were systematically culled from the "best practices" of state and federal law as well as from Fannie Mae and Freddie Mac guidelines "for credit unions to look at and hopefully adopt as a code of conduct for...their own business." The guidelines were written, CUNA Senior Vice President, Regulatory Advocacy Mary Dunn added, to distinguish between legitimate "risk-based" and other regulated sub-prime lending practices and a recent spate of unscrupulous "home equity-stripping" and foreclosure schemes that: * use false advertising or sham qualifying methods; * impose exorbitant interest rates or costly refinancing schemes ("flipping"), excessive prepayment penalties, or balloon payment-induced, higher-rate refinancings on consumers; or * include hidden insurance premiums and fees in the amount to be financed. "We do have plans as to how we're going to distribute these guidelines...," Dunn said. "So we're going to share them with the House Banking Committee, which just recently held hearings on predatory lending....The Department of Housing and Urban Development has been calling us, wanting us to weigh in with them on predatory lending....Treasury has taken a leading role in this area. We definitely want to talk to them, as well as the White House. And then, of course also we want to sit down with the board members of NCUA...." "But in no stretch of the imagination do we feel that a regulation is called for for credit unions...," Dunn added as her conversation turned to NCUA whose chairman wants to impose community service requirements on CUs, in part to offset possible predatory lending conditions in the larger community. The guidelines, however, which essentially relate to practices associated with a type of home equity loan (where the property is already owned outright), do not extend to an area only recently identified with indirect but possibly questionable CU lending practices: the charge that some credit unions may be collecting fees from mortgage referral agreements with lenders who do engage in predatory lending. But despite the prevailing furor over predatory lending and the introduction of several bills on the subject (which do not involve CUs), CUNA Senior Legislative Counsel Gary Kohn said he does not expect passage of predatory lending legislation in this legislative term. "But, I think from our perspective," Kohn said, "(it's necessary) to work to make sure that the appropriate members of Congress are aware-not only of what our practices are or are not-but also the steps that we're taking to ensure that we remain as the good guys here.....We'll probably also use these guideline to judge any future legislation that's introduced to make sure...that our perspective here is taken into consideration." Variously, the guidelines, which point out that credit unions are statutorily encumbered from engaging in most predatory lending practices, encourage CUs to: * educate members in the CU difference in the lending arena; * inform members of the dangers and characteristics of common predatory lending practices; * meet members borrowing needs as well as explain the "small print" requirements of CU lending agreements to members; * exclude loan terms and conditions that are not justified by lending risk; * prohibit refinancing of balloon payments at an unjustifiably higher rate than on the original note; and * avoid charging for or financing insurance products or unrelated goods or services without the consent of the borrower. -
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