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CUNA-back bills pass House Financial Services Committee
(July 30, 2014) — The House Financial Services Committee passed regulatory relief legislation today that the Credit Union National Association (CUNA) strongly supports: H.R. 3240, the Regulation D Study Act; H.R. 5148, the Access to Affordable Mortgages Act of 2014; and H.R. 4042, the Community Bank Mortgage Servicing Asset Capital Requirements Study Act of 2014.
“CUNA testified and sent letters of support on behalf of several of these issues and is pleased that the Regulation D Study Act and the Access to Affordable Mortgages Act of 2014 will work to provide much needed financial regulatory relief,” said Sam Whitfield, vice president of legislative affairs. “CUNA testified before the committee and worked closely with Representative Luetkemeyer, the sponsor of the Community Bank Mortgage Servicing Asset Capital Requirements Study Act, to contend that the bill give parity to credit unions. If enacted into law, the bill would “stop and study” the appropriate capital requirements for mortgage servicing assets for nonsystemic financial institutions. During the markup Chairman Hensarling (R-Texas), Rep. Luetkemeyer(R-Mo.) and Rep. Heck (D-Wash.) committed to work to ensure credit union parity in the bill before it sees action on the House floor.”
CUNA sent a letter of support for these bills to the House Financial Services Committee Chair Jeb Hensarling and the committee’s ranking Democrat, Representative Maxine Waters of California, before the hearing.
See the full letter below:
July 28, 2014
Chairman Jeb Hensarling
Committee on Financial Services
U.S. House of Representatives
Washington, D.C. 20515
Ranking Member Maxine Waters
Committee on Financial Services
U.S. House of Representatives
Washington, D.C. 20515
Dear Chairman Hensarling and Ranking Member Waters:
On behalf of the Credit Union National Association (CUNA), I am writing in advance of the markup to be held in the Financial Services Committee on July 29, 2014. CUNA is the largest credit union advocacy organization in the United States, representing America’s state and federally chartered credit unions and their 99 million members. We appreciate the opportunity to share our views on these bills.
The Committee is considering several bills that we support. These bills include H.R. 4042, the Community Bank Mortgage Servicing Asset Capital Requirements Study Act of 2014 and the accompanying manager’s amendment; H.R. 3240, the Regulation D Study Act; and, H.R. 5148, the Access to Affordable Mortgages Act of 2014.
H.R. 4042, the Community Bank Mortgage Servicing Asset Capital Requirements Study Act of 2014
The Committee is holding a markup today on several bills. Included in those is H.R. 4042, the Community Bank Mortgage Servicing Asset Capital Requirements Study Act of 2014, which has been introduced by Representatives Luetkemeyer (R-MO), Perlmutter (D-CO), Cotton (R-AR), Lucas (R-OK) and Womack (R-AR), and directs the Federal banking agencies to conduct a study of appropriate capital requirements for mortgage servicing assets for nonsystemic banking institutions.
In February 2014, the NCUA’s proposal revising risk-based capital standards for credit unions was published in the Federal Register. The proposed rule would implement Basel-style capital standards on credit unions with assets over $50 million. Credit unions have significant concerns with the proposed rule and have either asked the NCUA to withdraw it or make significant modifications to lessen the impact. Of specific relevance to H.R. 4042, NCUA has proposed a 250% risk weight for mortgage servicing rights (MSRs) that we believe would be punitive and unnecessary. CUNA recommends it be reduced to 100%, which is similar to the level in the Basel III requirements for small banks.
An active market exists for MSRs, which allows for the establishment of current market values of such rights during changing economic and interest rate environments. This allows for frequent “marking-to-market” of servicing rights, which prevent losses from accumulating.
H.R. 4042 was introduced prior to the publication of NCUA’s proposed rule in the Federal Register, therefore, the sponsors could not have contemplated the need to include NCUA as part of this legislation. We truly appreciate the bill’s sponsor for acknowledging similar, but more stringent, requirements that NCUA has proposed when compared to the Basel III rule.
We are strongly in support of the bill’s sponsor to offer a manager’s amendment that would include NCUA as an agency participating in the study and to delay the implementation of the NCUA’s proposed rule until an appropriate period of time after the study has been completed.
H.R. 3240, the Regulation D Study Act
H.R. 3240, bipartisan legislation introduced by Representatives Robert Pittenger (R-NC) and Carolyn Maloney (D-NY), directs the Government Accountability Office (GAO) to study the impact of the Federal Reserve Board’s monetary reserve requirements, implemented through Regulation D, on depository institutions, consumers and monetary policy. Credit unions became subject to monetary reserves in 1980.
Regulation D impacts credit union members by limiting the number of automatic withdrawals from a member’s savings account to six transactions per month. The impact of this limit is to unnecessarily cause credit union members to overdraft their checking accounts when a debit draws the checking account balance below zero and the member has already had six automatic transfers during the month. When this happens, members who may have the funds in a savings account to cover the debit are hit with nonsufficient fund fees (NSF) from their financial institution and, when a check is involved, a returned check fee from the merchant. This is not a result of an overdraft protection program – this happens because of a regulatory cap on automatic transfers. It is difficult for credit union members affected by the cap to understand that this is out of the control of the credit union when the funds to cover the debit are sitting in their account at the credit union.
We believe the cap should be increased or eliminated, but we understand that one of the reasons the regulation is in place is because the Federal Reserve Board is authorized to use it as a tool to conduct monetary policy. So, as a first step toward the possible change in this cap, the legislation directs the Government Accountability Office (GAO) to study the issue. This effort will make more information available for Congress to determine whether an increase in or the elimination of this cap would substantially affect the Federal Reserve Board’s ability to conduct monetary policy.
Specifically, H.R. 3240 directs the GAO to examine and report within one year of enactment on the following topics: an historic overview of how the Federal Reserve Board has used reserve requirements to conduct monetary policy; the impact of the maintenance of reserves on depository institutions, including the operations requirements and associated costs; the impact on consumers in managing their accounts, including the costs and benefits of the reserving system; and, alternatives to required reserves the Federal Reserve Board may have to effect monetary policy. The bill also directs the GAO to consult with credit unions and community banks.
This bill is timely. According to former Federal Reserve Board Chairman Ben Bernanke, “…reserve balances far exceed the level of reserve requirements and the level of reserve requirements thus plays only a minor role in the daily implementation of monetary policy.”1 A GAO study will allow an objective assessment of whether the rarely changed monetary reserves imposed on depository institutions and consumers are necessary in order for the Federal Reserve Board to implement monetary policy in the 21st century. CUNA strongly supports this bill.
H.R. 5148, the Access to Affordable Mortgages Act of 2014
CUNA supports the goal of the “Access to Affordable Mortgages Act of 2014,” which would amend the Truth in Lending Act (TILA) to exempt certain higher-risk mortgages from property appraisal requirements. By providing an exemption from the Truth in Lending Act appraisal requirements for properties with transaction values of $250,000 or less for loans held on portfolio for at least three years, the bill would provide both regulatory relief to mortgage lenders as well as increase access to mortgage credit availability for borrowers purchasing lower cost dwellings. The bill would also amend the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to exempt this same category of higher-risk mortgages from the standards prescribed by the federal interagency appraisal requirements, as long as such mortgage loans are held on a lender’s portfolio for at least three years. Again, the bill would allow credit unions that offer mortgage loans secured by covered properties to serve their middle to lower income members better.
On behalf of America’s credit unions and their over 99 million members, thank you very much for considering our views as you review these bills.
Sincerely,
Bill Hampel
President & CEO
Credit Union National Association