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June 19, 2008
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AFSA and Other Mortgage Groups Call for Changes to Senate GSE Reform Bill
New York Credit Scoring Bill Opposed by AFSA
Associate Member Advisory Board Forms New Exhibit/Sponsor Subcommittee
Success of MoneySKILL in New York Celebrated
GMAC Financial Services and Team Focus Partner to Coach Children on Money Management
Countrywide Will Rework $16B in Mortgages
Toyota Financial Services and Toyota Motor Sales Donate $200,000 to the American Red Cross to Aid Cedar Rapids Flood Victims
CIT Elects Alexander T. Mason President and Chief Operating Officer
AIG Names Robert B. Willumstad Chief Executive Officer
Wells Fargo Announces Assistance for Flood Victims
MasterCard Europe Repeals Cross-Border Interchange Fees Temporarily
Debit Card Interchange Rates Increase, But Signature's Is Much Higher Than PIN's
Fading '08 Prospects for Housing, GSE Reform
Push for New Sub-Prime Mortgage Regulations Loses Steam
Bill Promotes Universal College Loans
New Rule Excludes Medical Graduates From Federal Loan Deferment Plan
Fitch Takes AmeriCredit Off Ratings Watch
Fitch Explores Relationship Between Wholesale Values and ABS Loss Rates
AFSA and Other Mortgage Groups Call for Changes to Senate GSE Reform Bill
On June 17, AFSA sent a letter that was signed with five other industry trade groups to Senate Banking Committee Chairman Chris Dodd and Ranking Member Richard Shelby asking for the removal of the GSE Reform Bill’s licensing provisions. AFSA, along with the Consumer Bankers Association, Consumer Mortgage Coalition, Housing Policy Council, The Financial Services Roundtable, Mortgage Bankers Association, and U.S. Chamber of Commerce, stated in the letter that they “support prompt passage of the GSE reform and FHA modernization and FHA refinance components of the legislation.” The six groups provided a detailed list of problems with the provisions on licensing and registration, including the imposition of “a strict suitability standard on lenders that will create uncertainty in the origination and underwriting process and will have the unintended consequence of making less credit available.”
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New York Credit Scoring Bill Opposed by AFSA
AFSA sent an opposition letter to the sponsors of a New York credit scoring bill that would ban the use of credit inquiries in credit scores for mortgage and auto loans. A similar bill was introduced last year, but thanks to AFSA’s and the finance industry’s efforts, then-Governor Spitzer vetoed the bill on grounds that the attempt to eliminate credit inquiries from the calculation of credit scores would take away a predictive tool used by the financial services industry in making important decisions in lending money.
Sent to the sponsors of an assembly bill and companion senate bill on June 13, AFSA’s letter again stressed the serious consequences of its provisions. “Limiting the information that can be used in the compilation of a credit score would affect the ability of those scores to provide an accurate basis upon which a lender can predict consumer behavior. This would force creditors to either limit credit availability, or take on more risk, both of which would raise the price of credit,” wrote AFSA Senior Vice President of State Government Affairs Danielle Fagre Arlowe.
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Associate Member Advisory Board Forms New Exhibit/Sponsor Subcommittee
AFSA’s Associate Member Advisory Board has created an Exhibit/Sponsor Subcommittee to develop ways to enhance the value of the expositions at the AFSA’s Vehicle Finance and Independents Conferences as well as the overall sponsorship program. “AFSA is unique in that it has an advisory board that is dedicated to improving the benefit that the association brings to its associate members,” said Advisory Board chair Marguerite Watanabe, Principal of Connections Insights. “This subcommittee was created to offer the associate members a forum for exploring new exhibit and sponsor opportunities.”
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Success of MoneySKILL in New York Celebrated
Teachers and administrators in New York were recently recognized at a celebration of the success of MoneySKILL® and the partnership between the University at Buffalo School of Management, M&T Bank and the AFSA Education Foundation. Teachers are the key to this partnership as they bring MoneySKILL to their classroom and to their students.
Two years ago, just 16 Western New York high school teachers were using MoneySKILL. In comparison, this academic year, 132 teachers brought the MoneySKILL curriculum to their students. “Each teacher is tremendously committed to developing their students' personal finance skills,” said AFSAEF President/CEO Susie Irvine. “They have enthusiastically embraced the opportunity that MoneySKILL represents by successfully incorporating it, sometimes quite creatively, into their curricula.”
Although the state of New York requires high school students to complete at least one-third of a semester of personal financial management coursework, the state does not provide schools with any resources to meet the requirement not enacts penalties on schools that fail to meet it. However, the opportunity exists for MoneySKILL to be used in the state on a more widespread basis, and events that promote the program go a long way to encouraging students to utilize the curriculum.
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GMAC Financial Services and Team Focus Partner to Coach Children on Money Management
PR Newswire (06/16/08)
GMAC Financial Services has announced it will work with Team Focus as part of an initiative to help improve children's financial literacy. Team Focus provides academic, social, and inspirational community programs for disadvantaged youth. In support of this goal, GMAC SmartEdge will conduct a financial literacy seminar at its 2008 Camp Focus. This year, Camp Focus will hold its first leadership camp in Mobile, Ala. It will also run 10 additional camps throughout Alabama, California, Nevada, Ohio, Tennessee, and Washington, D.C. Each camp will include 75-80 children.
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Countrywide Will Rework $16B in Mortgages
USA Today (06/18/08) Knox, Noelle
Countrywide Financial plans to restructure or refinance $16 billion in adjustable-rate mortgages that have recently reset higher or that will reset by the end of 2009. The program is set up primarily to help borrowers with subprime credit who have continued to pay on time, and they will have an opportunity to refinance into a lower-interest prime loan or a mortgage insured by the FHA, Fannie Mae, or Freddie Mac. About 52,000 borrowers are expected to qualify for a new loan, about 20,000 facing an upcoming rate increase will be able to modify their loan, and another 10,000 who have defaulted due to a reset in recent months will also have an opportunity to modify their loan.
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Toyota Financial Services and Toyota Motor Sales Donate $200,000 to the American Red Cross to Aid Cedar Rapids Flood Victims
PR Newswire (06/16/08)
Toyota Financial Services (TFS) and Toyota Motor Sales are donating $200,000 and two utility vehicles to the American Red Cross. These donations will go toward helping the victims of the severe flooding around Cedar Rapids, Iowa. The TFS call center in Cedar Rapids was closed during the floods and many of its 600 employees were affected. However, the facility itself remained undamaged and reopened on June 16. In addition to making donations, TFS has designed several payment relief programs to aid customers affected by the floods. Programs include extensions and deferrals of lease payments and redirection of billing statements.
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CIT Elects Alexander T. Mason President and Chief Operating Officer
Business Wire (06/16/08)
CIT Group has announced that Alexander Mason has been chosen to be the company's president and COO. Mason will report to CIT Chairman and CEO Jeffery Peek. He will be a member of the Executive Committee and will be responsible for oversight of CIT's technology, sales, and business development operations. Previously, Mason served as vice chairman and COO of Mercantile Bankshares Corp. He also held executive positions at Deutsche Bank and Bankers Trust.
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AIG Names Robert B. Willumstad Chief Executive Officer
AIG News Release (06/15/08)
American International Group (AIG) has announced that Chairman Robert B. Willumstad will now also serve as the company's CEO. Willumstad will succeed Martin J. Sullivan, who is leaving both AIG and its Board of Directors. The Board has named Stephen F. Bollenbach as its lead independent director. When asked to comment on the change, George L. Miles, chairman of AIG's Nominating and Corporate Governance Committee of the Board of Directors, said, "The Board has determined that Bob's broad managerial and financial services experience makes him the right person to lead AIG through today's turbulent markets, drive further organizational change, and rebuild shareholder value in the years ahead."
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Wells Fargo Announces Assistance for Flood Victims
KCRG (Cedar Rapids, IA) (06/12/08)
Wells Fargo has pledged to help customers affected by recent flooding in Iowa. For customers who qualify, Wells Fargo is extending programs and services to small business customers, including loan payment deferrals/skip-a-payments (BREF, Card, Line, and SBA), case-by-case assistance, fee waivers, and Credit Protection Activation. Wells Fargo Home Mortgage/Wells Fargo Home Equity will offer aid to qualified customers with existing home mortgages or home equity lines and loans. Similar assistance is being extended to affected customers with auto loans or personal credit management accounts through Wells Fargo Financial/Wells Fargo Auto Finance. Qualified customers in affected areas may also apply for unsecured loans from $1,000 to $25,000 at a special rate. "We plan to work with each of our customers on an individual basis because we know that there is no one-size-fits-all solution," says Scott Johnson, Wells Fargo Regional Banking president for Iowa and Illinois. Wells Fargo customers are asked to contact their banker or stop by their nearest Wells Fargo branch to review their financial options.
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MasterCard Europe Repeals Cross-Border Interchange Fees Temporarily
Thomson Financial (06/12/08) Zekaria, Simon
MasterCard Europe announced that it will provisionally repeal its current MasterCard and Maestro intra-European Economic Area (EEA) cross-border consumer card interchange fees as of June 21 to comply with a decision by the European Commission (EC) while continuing negotiations with the EC about an interchange fee scheme that would be consistent with the decision. The EC ruled in December 2007 that MasterCard's interchange fee payments network within the EEA is unlawful, and ordered MasterCard to withdraw the fees within six months of the decision. The EC said the card company's multilateral interchange fees (MIF) inflated the cost of card acceptance by retailers without contributing to technical and economic progress or benefiting consumers. "Irrespective of MasterCard's move to temporarily repeal its cross-border MIF, the commission will continue to be open to assess any new proposals from MasterCard concerning systems to ensure both efficient payments and a fair share of the benefits for consumers and retailers," said European Union competition commissioner Neelie Kroes. MasterCard said it will continue to appeal the EC decision to the European Court of First Instance.
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Debit Card Interchange Rates Increase, But Signature's Is Much Higher Than PIN's
ATM & Debit News (06/12/08) P. 4; Boyer, Meghan
Increasing debit card interchange rates are boosting issuers' revenues, but a recent Oliver Wyman Group study found that many industry players are not accurately tracking the fees. The average gross signature-debit interchange revenue per transaction totals about 57 cents and the average network fee amounts to roughly 6 cents, which results in an average net gain of 51 cents per transaction, the study estimates. The average gross revenue per transaction and the average switch fee for PIN debit is 24 cents and 2 cents, respectively, yielding an average net gain of approximately 21 cents per transaction. The study found that debit-interchange fees produce $78 per card yearly, which comes to $12.5 billion for national issuers. Oliver Wyman's Tony Hayes says interchange is trending upward with both debit methods, and financial institutions are undergoing higher gross exchange rates combined with lower network fees or higher rebates and incentives. However, Hayes says more than half of issuers are unaware of the interchange rate on their cards. The study says issuers should theoretically be cognizant of their interchange rates since each network publishes the information, but the rates may differ by volume tier, merchant segment, and authorization mechanism, while some issuers only track their combined signature and PIN rates.
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Fading '08 Prospects for Housing, GSE Reform
American Banker (06/19/08) P. 1; Sloan, Steven; Kaper, Stacy
There are concerns that time is slipping away to pass legislation this year to stabilize home prices and revamp the government-sponsored enterprises (GSEs). The measure has stalled in the Senate due to concerns that it does not include a way to pay for certain tax-related provisions. Additional concerns have been raised about a provision that would implement a foreclosure alternative for lenders and investors as a means of stabilizing home prices. Finally, House Financial Services Committee Chairman Barney Frank (D-Mass.) appears hesitant about the Senate version of the bill, which would immediately give the new GSE regulator authority; the House would allow new regulations to be spelled out over a period of six months before the watchdog takes control.
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Push for New Sub-Prime Mortgage Regulations Loses Steam
Los Angeles Times (06/19/08) Lifsher, Marc
California's Senate Banking, Finance and Insurance Committee has made a package of subprime lending bills more favorable for the mortgage industry. The key Senate committee stripped a ban on stated-income loans and less-than-interest-only loans from AB 1830 and also opposed language that would have limited prepayment penalties; members also failed to support AB 2740, which would have regulated mortgage servicers on posting payments and handling escrow funds. However, the committee did support AB 529, which would force lenders to provide more advance notice of resetting rates for adjustable-rate mortgages. The committee's chairman, Sen. Michael Machado (D-Linden), argued that the package does not align state law with federal regulations and could ultimately make home loans less accessible for consumers.
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Bill Promotes Universal College Loans
New York Times (06/18/08) P. C1; Glater, Jonathan D.
Sens. Patty Murray (D-Wash.) and Christopher Dodd (D-Conn.) recently put forth legislation that would require lenders to extend credit to any qualified student attending a college that participates in the Federal Family Education Loan Program. The government already promises the loans at almost full value. The senators introduced the proposal after a New York Times article revealed that multiple lenders were no longer offering federally guaranteed loans at community colleges and a few four-year colleges. "Lenders offering loans backed by taxpayer dollars shouldn't be able to discriminate against certain schools or students," said Murray. "Denying loans based on school, program length, or income level locks the door for far too many." While some financial aid officials back the legislation, others are concerned that it could force lenders out of the program.
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New Rule Excludes Medical Graduates From Federal Loan Deferment Plan
Amednews.com (06/16/08) Croasdale, Myrle
The Department of Education has decided to restrict access to a popular debt-management plan, which will affect medical graduates. The new rules, modeled after the College Cost Reduction and Access Act of 2007, are open for public comment and could be changed. The Association of American Medical Colleges, however, notes that substantial changes to the financial hardship deferment initiative would not be likely at this point. The new regulations restrict qualifying income to $15,600 annually or less, and debt size is no longer included in the eligibility calculation. If graduates work in public service, their remaining debt will be cancelled following a decade of repayments. The exact stipulations of this loan forgiveness agreement, however, have not been described, and it is not certain what kind of physician practice would qualify. The financial hardship loan deferment plan will continue to honor applicants under its previous regulations until July 1, 2009, offering qualifying residents and new medical school graduates a final year to take part. For those no longer eligible, the Department of Education intends to initiate an income-based repayment initiative July 1, 2009. Through this program, a medical graduate beginning residency at $45,000 annually would be mandated to pay $365 each month.
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Fitch Takes AmeriCredit Off Ratings Watch
Associated Press (06/13/08)
Fitch has affirmed AmeriCredit Corp.'s "BB" long-term issuer default and senior debt ratings and taken the company off its negative ratings watch following the finalization of a $2 billion forward purchase agreement between AmeriCredit and Deutsche Bank AG. The affirmation reflects AmeriCredit's "solid position" in the auto finance market, its diverse portfolio, its experienced management team, and the consistency of its collections and servicing skills, Fitch said.
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Fitch Explores Relationship Between Wholesale Values and ABS Loss Rates
SubPrime Auto Finance News (06/12/2008) Reed, Jennifer
Fitch Ratings is examining a potential connection between auto asset-backed securities' (ABS) loss rates and wholesale values. A new report by the firm suggests there is a correlation between the performance of auto ABS and recovery rates at auction. In the report, Fitch states that its "analysis demonstrates the indirect, inverse relationship between wholesale vehicle values and ANL rates in auto ABS--as wholesale vehicle values rise, ANL (annualized net loss) rates invariably fall and vice versa." According to Fitch, "there is a high degree of correlation between the wholesale vehicle market and the prime and subprime ANL indices." The ratings company says it "observed that at a 95 percent confidence level, a 1 point increase in the Manheim Index would result in a 6.3 plus/minus 1.3 basis-point decrease in the prime ANL index and a 29.4 plus/minus 7.2 basis-point decline in the subprime ANL index." Fitch noticed that the prime ABS ANL index is inclined to display higher correlation to the Manheim Wholesale Index (79.2 percent) than the subprime ABS ANL index (68 percent). For the report, Fitch used data from its subprime and prime ANL indices and Manheim information from January 2003 to March 2008. Separately, ABS prime issuance rose 38 percent from March 2007 to March 2008. As a whole, auto loan, lease/rental, dealer floor plan, and truck/motorcycle loan issuance fell 18.4 percent from March 2007 to 2008, to $12.4 billion.
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Abstract News © Copyright 2008 INFORMATION INC.
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AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. For more information,
please contact newsbriefs@afsamail.org.
AFSA's mission is to protect and improve the consumer credit business, maintain a positive public image, and create a legislative climate in which reasonable credit regulation can and will be enacted. The Association operates in the public interest, encourages and maintains ethical business practices, supports financial education for consumers of all ages, and provides other assistance in related fields on an as-needed basis. The American Financial Services Association has provided services to its members for over ninety years. The Association's officers, board, and staff are dedicated to continuing this impressive legacy of commitment through the addition of new members and programs, and increasing the quality of existing services.
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