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WASHINGTON-Financial regulators are expected to introduce rules soon that would require mortgage borrowers to have down payments of at least 20% in order to qualify for a federal guarantee, that is have their loans sold to Fannie Mae or Freddie Mac.

The rules will establish standards for Qualified Residential Mortgages, which would be exempt from new requirements that loan originators retain at least 5% of risky loans-so-called skin in the game-they sell on the secondary market. The aim of the rules are to prevent a repeat of some of the havoc caused on the secondary market when lenders sold poor quality loans as part of securitizations with little or nor care of how the loans performed. The original lenders were therefore off the hook if the loans went bad.

The original legislation said loans backed by the Federal Housing Administration would not be subject to the risk-retention rules. The new proposal will go beyond that to exempt any loans guaranteed by the federal government, including those backed by Fannie Mae and Freddie Mac, according to several sources. Loans that meet the 20% down payment threshhold would not be considered risky, so they would be exempt from the 5% skin in the game requirement.

The rules are being set by the Securities and Exchange Commission, which has jurisdiction over the securitization markets, as well as the Treasury and Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. CUNA officials said last week they have discussed their concerns with the SEC on how the rules may affect credit unions.



WASHINGTON-The House Financial Services Committee has approved bills to repeal two Obama administration programs aimed at helping refinance troubled homeowners, including the Home Affordable Modification Program, which has subsidized more than two dozen mortgage refis through CUs.

The bills are expected to be approved by the full House in the next few weeks, but are expected to face more difficulty in the Senate. In addition, President Obama has threatened to veto the bills. HAMP was originally projected to help as many as 4 million homeowners refinance their mortgages, but by the end of 2010 only 522,000 homeowners had received permanent modifications under HAMP. HAMP pays mortgage-servicing firms to modify mortgages and find other ways to keep people in their homes.

The other mortgage assistance program eyed for elimination are the Neighborhood Stabilization Program, the FHA Refinance Program, the Emergency Homeowner Relief Fund.



WASHINGTON-Visa and MasterCard are telling credit union and bank owners the uncertainty they will face over litigation costs for a pending antitrust case over the networks' anti-steering provisions will continue indefinitely, even as the controversy escalates over the Federal Reserve's proposed rules on debit fees.

The two cards networks are awaiting final approval by a federal court on a settlement with the Department of Justice that will open the cards markets to new competition. The settlement will expose Visa and MasterCard-and their credit union and bank owners-to huge financial claims by merchants who have launched a parallel civil suit.

The two card networks told investors recently the uncertainty over a massive litigation reserve funded by Visa and MasterCard stock owned by the credit unions and banks, will not expire later this month, as planned under the terms of the two company's initial public offerings, but will extend into the future to a date unknown.

Credit unions hold stock in both Visa and MasterCard-the only two common stocks credit unions are permitted to own-which pay a healthy dividend, but is also on call for use by the two networks to pay litigation costs. The credit union and bank shares, for example, were used to pay a $3-billion antitrust settlement in the Walmart antitrust suit in which merchants challenged Visa's and MasterCard's exclusionary clauses barring issuers from offering competitors' cards.

Meantime, the Justice Department is reviewing public comments submitted on the terms of the settlement before sending the antitrust case for final approval by a federal judge.

The terms of the settlement will require Visa and MasterCard to eliminate bylaws that prevent merchants from steering transactions to cheaper cards or other forms of payment, like cash. American Express, which is also being sued by the Justice Department, is contesting the antitrust charges.

It will prevent the two networks from preventing merchants from: offering consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment; or expressing a preference for the use of a particular credit card network, low-cost card within that network or other form of payment.

It will also prevent Visa and MasterCard from preventing the promotion a particular credit card network, low-cost card within that network or other form of payment through posted information or other communications to consumers' or communicating to consumers the cost incurred by the merchant when a consumer uses a particular credit card network, type of card within that network, or other form of payment.

Both networks have said they have already implemented the changes. The antitrust settlement comes as Visa, MasterCard and their CU and bank owners, are fighting to block final implementation of the Fed's interchange rule that would open the cards market to even more competition, while capping fees on debit transactions.

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