Any forecast for 2008 would be incomplete without considering the events of this past year. Without question, 2007 will be remembered as the year of the subprime meltdown.
The subprime crisis swept in like a tidal wave, resulting in a groundswell of activity in Washington — from the White House, Congress and the Treasury — to address the situation. The Federal Reserve has also acted to stem a possible recession by cutting interest rates several times. At NAFCU, we have been actively involved, working with Congress and the regulatory agencies on a solution while ensuring that policymakers and the media understand that credit unions are doing their part to help fix a problem they did not create.
In fact, NAFCU worked day and night to help broker a compromise along with consumer groups and Congress on the mortgage bankruptcy bill (H.R. 3609) in the hopes of limiting its scope to just subprime, non-traditional loans. Though we continue to have reservations about other aspects of the bill, NAFCU's goal has been to ensure that in the process of helping consumers stay above water, credit unions are recognized as a solution and not swept up in a maelstrom of new regulatory burdens.
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What is truly commendable are the many outreach efforts of credit unions during this challenging time. Whether through letters and phone calls to members, financial education seminars or training frontline employees to recognize members in need, credit unions are helping their members weather the subprime storm.
It is the personal service and responsiveness to member needs that has enabled credit unions to continue to thrive. The silver lining in these chaotic economic times is that credit unions have a unique opportunity to go "back to basics" and redouble their efforts to help buoy consumer confidence, promote the value of credit unions and even increase their share of the mortgage market.
Building on the solid foundation of good member service, credit unions can leverage the current marketplace to their advantage. This is particularly true given credit unions' outstanding record in serving minorities and low-income borrowers based on recent HMDA data. If credit unions reach out to more minorities and low-income borrowers, they can also make a significant difference in the subprime market.
While the subprime issue is extremely important, NAFCU's No. 1 legislative priority remains passage of the Credit Union Regulatory Improvements Act (H.R. 1537). Our 2007 Congressional Caucus brought us record support for CURIA, including securing the co-sponsorship of Congressman Neil Abercrombie, (D-Hawaii) by our Hawaiian members. We are also very pleased that House Financial Services Committee Chairman Barney Frank (D-Mass.) has agreed to hold a hearing on this important legislation in the next session (see page 20).
Other positive developments on the legislative front in 2007 included NAFCU's work to introduce the Affordable Financial Services Enhancement Act (H.R. 3113) by House Appropriations Financial Services Subcommittee Chairman Jos?(C) E. Serrano (D-N.Y.). It authorizes the NCUA to permit federal credit unions of all charter types to serve underserved areas. NAFCU also worked with House Small Business Committee Chairwoman Nydia Vel??zquez (D-N.Y.) who introduced the Credit Union Small Business Lending Act, a bill that would make it easier for credit unions to offer SBA loans.
Some of the other issues under review in 2007 included payday lending, data security, bankruptcy reform, overdraft protection and credit card practices. NAFCU Chair John Milazzo provided the only voice of financial institutions in testimony before a House Small Business subcommittee hearing on data breaches. We worked diligently to safeguard credit union interests in all these areas and will continue to do so in 2008.
Of course, the bankers continued to rally to extend the Community Reinvestment Act to credit unions. Our demonstrated efforts in serving people of modest means, which are showcased in the recent Home Mortgage Disclosure Act data, give the bankers little leverage to advance their case. However, Chairman Frank has expressed interest in expanding CRA coverage to all members of the financial services community, including credit unions. So our work on this issue will continue in earnest in 2008.
The regulatory front proved equally active this year. In December, the Financial Accounting Standards Board issued its business combination rule, which requires credit unions to use the acquisition method of accounting with respect to mergers. This change would create a significant regulatory burden on credit unions if it weren't for the Regulatory Relief Act of 2006. NAFCU is proud that we took the lead in crafting a legislative solution in 2005. We worked with Congressman Spencer Bachus (R-Ala.) to introduce the net worth amendment, which later got folded into the regulatory relief bill.
Additionally, we were pleased to see the Department of Defense's final regulation on anti-predatory lending to military service members. The final regulation represents a very thoughtful and deliberative approach to addressing the predatory lending issue by focusing on three key products: vehicle title loans, payday loans and refund anticipation loans. Moreover, we were especially pleased with the department's recognition of credit unions' positive contribution in developing credit products designed to assist service members.
The NCUA has now completed its town hall meetings on data collection and CEO compensation. We have met with NCUA Board Member Gigi Hyland, who chairs the NCUA Oversight Task Force, and expressed our concerns about further data collection and the disclosure of salaries. As is the case with respect to CRA, the recently released 2006 HMDA data clearly show the exemplary work of credit unions in serving their members who are financially challenged.
With all these issues, even if Congress passes subprime reform measures in 2007, there will still be plenty to tackle in the coming year, especially in a presidential election year.
Looking forward to 2008, I am confident that neither NAFCU nor credit unions will be daunted by the challenges we face, but emboldened by the opportunities and ready to chart a new course for success.
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