The liquidity situation at corporate credit unions will be the NCUA's focus when it examines possible changes in the Temporary Corporate Credit Union Liquidity Guarantee Program at its meeting on May 20.
Agency officials declined to reveal the nature of changes being considered but said they will focus on longer term funding options. The program, which was created by the NCUA in January as part of its rescue plan for the corporates, guarantees all deposits in corporates.
NCUA Director of Public and Congressional Affairs John McKechnie said the changes are needed to accommodate seasonal withdrawals from corporate credit unions during the spring and summer because of higher demand for consumer loans for purchases such as vacations following several months of increased savings in the beginning of the year.
From May 2008 to December 2008, shares in the corporates declined from $113.3 billion to $80.8 billion.
At the end of January, after the program was created, there were $86.3 billion in shares and $102 billion at the end of February.
According to data compiled by CUNA, system wide the loan-to-savings ratio decreased from 79.9% in February to 78.8% in March. The liquidity ratio remained at 20%.
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House Close on Mortgage Measure
The U.S. House at press time was moving toward passing a measure to place additional restrictions on mortgage lending, including a controversial provision requiring lenders to keep a 5% stake in nontraditional mortgages.
Under the measure, lenders would be banned from making loans to those whom they don't think have a reasonable chance of being able to repay. The bill focuses mostly on nontraditional mortgages, which were a key cause of the housing meltdown that triggered the current financial crisis.
Lenders making loans other than 30-year, fixed-rate mortgages would have to verify a borrower's credit history and make a "good faith" determination that it could be repaid. Those lenders would be required to keep a 5% stake in nontraditional mortgages until they are paid off, which supporters of the measure say will encourage more cautious lending decisions.
CUNA maintained that the 5% rule would make refinancing more complicated and limit the ability of mortgage lenders to make more loans.
NAFCU said it would make it harder to make loans to people on the margins, while NASCUS argued that the measure preempts the ability of states to regulate certain types of predatory lending.
House Financial Services Committee Chairman Barney Frank (D-Mass.) said the goal of the measure was to create a more stable mortgage finance system and provide consumer protection.
Some Republicans said the measure could have the opposite effect. "Now is not the time to limit choices, raise costs, disrupt the secondary mortgage market," said Rep. Spencer Bachus (R-Ala.), the committee's top Republican.
Before the House took up the measure, it was approved 49-21 by the
committee.
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Frank Reintroduces Gambling Bill
House Financial Services Committee Chairman Barney Frank (D-Mass.) has reintroduced his bill to prevent the implementation of rules mandating that credit unions and other financial institutions identify and block transactions that fund Internet gambling.
The measure would delay implementation of final rules of the Unlawful Internet Gambling Enforcement Act of 2006, which financial service providers contend forces them to do things for which they are not prepared.
"The 2006 measure puts our members into a law enforcement role, and that's not their role," said NAFCU Senior Vice President for Government Affairs Dan Berger.
One of the chief complaints from credit unions and other financial institutions was that, unlike other similar laws, the proposed regulations did not include or seem to contemplate the provision of a list of companies or entities involved in Internet gambling for which transactions would be blocked. The lack of such a list would leave the burden of investigating and identifying such transactions to financial institutions.
Frank is actually introducing two bills. One would delay implementation of the 2006 law, and the other would remove the ban on Internet gambling.
The bill to legalize Internet gambling would regulate the practice as well as tax it. It would require the Treasury Department to issue a definition of what constitutes illegal Internet gambling and issue a list of companies for which transactions would be blocked.
The prospects for passage are unclear.
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