Compliance Blog

A few days ago, the NAFCU Board of Directors revisited the mortgage bankruptcy issue, and voted unanimously to oppose broad cramdown of mortgage loans, and suggested a compromise solution.

The NAFCU Board’s position is stated in a letter that NAFCU sent Senator Richard Durbin this morning.  Specifically, the letter addresses the principles that are being discussed regarding the mortgage bankruptcy title as part of the Senate response to the House-passed version of H.R. 1106.  Of note, NAFCU does not believe that enough information has been presented on how second mortgages and PMI would be treated in bankruptcy under the Senate compromise. At this juncture, the Board felt that any compromise without additional information was premature.  In addition:

*NAFCU is continuing its efforts to work towards a compromise agreement. Credit unions did not cause this crisis, and we continue to support a bill that would be limited in scope to subprime or Alt-A (nontraditional) mortgages, an approach that the credit union industry and others had agreed to last year.

*We could also support a broader package of bankruptcy relief that provides a carve-out for loans made by not-for-profit lenders such as credit unions, housing associations and others who did not contribute to this current crisis.

The entire text of NAFCU’s letter is set out below. 

April 22, 2009

The Honorable Richard Durbin
United States Senate
309 Hart Senate Office Building
Washington, D.C.  20510

Dear Senator Durbin:

I am writing on behalf of the National Association of Federal Credit Unions (NAFCU), the only national trade association that exclusively represents the interests of our nation’s federal credit unions, to share our comments regarding the principles that are being discussed regarding the mortgage bankruptcy title as part of the Senate response to the House-passed version of H.R. 1106, the “Helping Families Save Their Homes Act of 2009.”

NAFCU sincerely appreciates all of the hard work you and your staff have done on this important issue. As discussions continue regarding how to address current problems in the housing market, we commend you for your efforts in seeking to provide relief for distressed home owners. We recognize and applaud your leadership efforts in dealing with issues related to the continued fall-out from the subprime crisis and the need to mitigate foreclosures.

NAFCU, however, remains concerned about any legislation that includes broad cram-downs of all mortgages in bankruptcy. We believe that a more targeted approach is better suited to address the issue, and are pleased that the discussions with your staff on this matter have proceeded along such lines. We believe that these discussions have been very productive in moving this legislation forward. Our Board of Directors, however, believes it is important to understand the impact of this critical legislation, and have asked questions about the Administration’s modification and work-out plans for subordinate liens, as well as how this legislation and new bankruptcy authority would impact existing Private Mortgage Insurance contracts. Unfortunately, at this time, there do not appear to be details available on these important issues. Without this information, the NAFCU Board of Directors does not believe that they can fully and fairly evaluate how this legislation will impact credit unions. Consequently and very unfortunately, at this juncture, we cannot “support and defend”, as your staff has requested of us.

I should note that this does not mean we oppose your efforts to get to a compromise agreement; rather, the NAFCU Board of Directors cannot endorse it in its current form without additional information and details. In particular, we would continue to support the compromise we endorsed last year, that would have bankruptcy modification apply only to subprime or Alt-A (or non-traditional) mortgage loans. Additionally, we would also currently support a broader package of bankruptcy relief that provided a carve-out for loans made by not-for-profit lenders, such as credit unions, housing associations and others, who did not contribute to this current crisis.

As always, we very much appreciate the opportunity to continue to work with you and your staff on this matter and other critical legislation, and we thank you for your continued efforts in addressing our nation’s mortgage crisis.

If you or your staff should have any questions on this matter, please do not hesitate to contact NAFCU’s Director of Legislative Affairs, Brad Thaler or me at (703) 522-4770. Thank you for your leadership on this very important matter.

Sincerely,

Fred R. Becker, Jr.
President/CEO

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Yesterday was Earth Day.  Read all about it here.  With that in mind, I wonder how many NAFCU members know that you can receive our Compliance Newsletter and BSA Blast electronically.  If you want to receive them electronically, let us know.  When they are available, we'll send you an email with a link where you can log-in and read.  If you are interested in ditching the paper for electrons, send us an email at compliance @ nafcu.org, and include the following information:

• Name
• Credit Union
• Title

• Email address

We'll save stamps.  A few trees will breath a bit longer.  And you won't have to wait as long to read long-winded, regulatory explanations.   Also, as many folks as you want can sign up at your credit union for this.  Forward this post to whomever you want.

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And you thought BSA was going away?  FinCEN and the OCC recently announced a $5 million civil money penalty for alleged BSA violations.  Read all about it here.  Things of note:

• This bank had been under a Cease and Desist order.  I guess they weren't fixing things quickly enough.
• The usual problems were there: lack of testing and appropriate internal controls.
• While this bank may not have a lot in common with your credit union's location, size, international nature, etc., the penalty still is worth noting.  Pay attention to NCUA demands.  And remember that regulators can swing a big stick if they get frustrated.

• If you wanted to add a little punch to your next BSA training program, this might be what the Doctor ordered.