Action on Legislation

Financial Modernization

The House Banking Committee is scheduled to vote Tuesday on financial reform legislation.

Committee members have been negotiating this week with Rep. Jim Leach, R-Iowa, to come up with a compromise bill. No prevote agreement is expected to be worked out, however, on such contentious issues as whether to allow mergers between banks and commercial firms and how much power states should have to regulate bank insurance sales.

Treasury Secretary Robert E. Rubin outlined the Clinton administration's reform plan May 21 and proposed two options for mixing banking and commerce. One would let banks own a limited amount of nonfinancial businesses, though they would be prohibited from buying commercial firms with assets totaling more than $750 million. The other option would preserve the current system, which lets commercial firms enter banking only by owning a single thrift.Interstate Branching

The House on May 22 approved a bill that would make it easier for state- chartered banks to branch across state lines.

The bill, sponsored by Rep. Marge Roukema, R-N.J., would let state banks exercise powers allowed by their home state regulators when they branch into other states. However, these activities would be limited to those also permitted to national banks.

Senate Banking Committee Chairman Alfonse M. D'Amato said he wants to move the legislation to the Senate floor quickly. But Sen. Paul Sarbanes, D-Md., has blocked a vote. The banking committee's top Democrat has complained that the bill doesn't give state officials enough say over banking activities within their own borders.

The legislation is supported by the Conference of State Bank Supervisors, which argues that because the Riegle-Neal interstate branching law took full effect June 1 state banks will increasingly switch to national charters to avoid the hassle of conflicting state laws. New Legistation Limited-Purpose Banks

Rep. Mike Castle, R-Del., has introduced legislation to give new powers to limited-purpose banks, such as selling corporate credit cards and marketing via the Internet. The banks would also be able to cross-market products with their corporate parents, borrow from the Federal Reserve on the same basis as commercial banks, and acquire undercapitalized depository institutions.

Rep. Castle is pushing to tack his proposal to the larger financial modernization legislation. Pending Legislation

ATM Fees

Sen. D'Amato was expected Wednesday to introduce legislation prohibiting banks from charging noncustomers for using the banks' ATMs. The GAO reported that the number of banks charging the fees increased more than 300% in 1996.

Rep. Bernard Sanders, Independent-Vt., introduced legislation Feb. 13 to prohibit ATM surcharges. Banks would be forced to post surcharge fees on ATM screens and give customers the option of canceling a transaction under a bill introduced by Rep. Roukema.Reverse Mortgages

The Senate approved legislation April 25 that would let the Department of Housing and Urban Development prohibit "excessive" fees on reverse mortgages.

Sen. D'Amato, who sponsored the bill, said the legislation would prevent "scam artists" from charging senior citizens for information on reverse mortgages that HUD provides for free.

If the bill is enacted, HUD Secretary Andrew Cuomo has said, lenders that do business with lawbreakers will be banned from all agency programs.

Similar legislation has been introduced in the House by Rep. Rick Lazio, R-N.Y.

Reverse mortgages are available through a federally guaranteed program that lets people 62 or older get payments based on the equity in their homes.Private Mortgage Insurance

Senate Banking Committee members are trying to reach a deal on legislation that would automatically cancel private mortgage insurance.

Sen. D'Amato called off his panel's March 17 vote on his legislation after Sen. Lauch Faircloth, R-N.C., and other committee Republicans told him they wouldn't support it. Currently his plan would require lenders to cancel mortgage insurance automatically when equity in a home reaches 20%.

Under a House bill passed April 16, insurance would be canceled when a borrower's equity in a home reaches 25%. The bill, introduced by Rep. James V. Hansen, R-Utah, also would require lenders to make annual disclosures showing how much a borrower would have to pay on the loan to avoid mortgage insurance.

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