Spotlight on Capitol Hill - An Update from NASCUS' Legislative Affairs Department
September 10 Congress returned from its summer recess this week, and both houses are expected to resume work on several financial regulatory reform initiatives that could affect credit unions.
In the House of Representatives, the Protecting American Taxpayers and Homeowners Act (PATH Act) cleared the House Financial Services Committee and was sent to the full House for consideration this past July 24, 2013. The PATH Act’s primary focus is on ending the bailout of Fannie Mae and Freddy Mac and reforming the housing finance market, but it also features provisions that will impact credit unions.
Most notably, the bill incorporates the Financial Institutions Examination Fairness and Reform Act (H.R. 1553), which creates an Office of Examination Ombudsman, and establishes an independent appellate process by which financial institutions can challenge material supervisory determinations contained in final reports of examination before an administrative law judge. The NCUA has expressed its opposition to the bill, citing increased administrative costs, decreased examiner flexibility, and what the agency considers to be an already robust appeals system. The NASCUS L&R Committee and management are studying the bill's impact on state credit unions.
The bill also integrates the Common Sense Economic Recovery Act of 2013 (H.R. 927), which is intended to prevent regulators from adversely impacting the measurement of capital in insured depository institutions by erroneously designating healthy loans as non-accrual. The bill must now pass both Houses before it can be signed into law by the President.
The Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Securities, Insurance and Investment was also focused on Housing Finance Reform before the August recess. On July 23, 2013, the Subcommittee held hearings on the Housing Finance Reform and Taxpayer Protection Act of 2013 (S. 1217), which included testimony from Bill Hampel, Senior Vice President and Chief Economist at CUNA.
Mr. Hampel highlighted the counter-cyclical role that credit unions play as portfolio lenders in the first mortgage lending market, and stressed the importance of a well-regulated secondary market that will protect the long-term fixed-rate mortgage products that most credit union members favor. Mr. Hampel also advocated for “equal and unbiased access to the secondary market for lenders of all sizes,” the elimination of risk retention requirements for credit unions under the Qualified Residential Mortgage standards, and the establishment of the recommended “Mutual Securitization Company (MSC),” which would “develop, securitize, sell and meet the issuing needs of credit unions and community and mid-size banks with respect to covered securities.”
Mr. Hampel suggested that the unique position of credit unions would be best protected by reserving a seat on the proposed Federal Mortgage Insurance Corporation (FMIC) Board of Directors for a representative of the credit union system. FMIC would operate under a federal charter and would be charged with nurturing liquidity in the secondary mortgage market, while protecting taxpayers from losses. The Senate Subcommittee has not yet provided its recommendation on the bill, and is expected to return to their deliberations once they are back in session.
As always, NASCUS will actively monitor the progress of all proposed legislation that could affect the credit union system generally, or the state-charter specifically. If you have any questions, please contact Sabrina Cotter, NASCUS' Regulatory & Public Policy Counsel, at Sabrina@nascus.org.