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Ruling allows bond insurers reorganization

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NEW YORK (1/13/11)--The appellate division of the New York Supreme Court Tuesday upheld the dismissal of banks' lawsuit against bond insurer MBIA Insurance Corp.'s over its reorganization, which split its business into a mortgage-backed securities (MBS) company and a municipal bond insurance company. It is not known yet what the impact, if any, would be to the National Credit Union Administration's temporary corporate stabilization fund or how it would affect losses of corporate credit unions. Corporates aren't part of the lawsuit filed in May 2009 by about 20 banks, including JPMorgan Chase, Bank of America, Morgan Stanley, Canadian Imperial Bank of Commerce, Barclays PLC, and UBS AG. The lawsuit, ABN AMRO Bank, N.V. v. MBIA Inc., challenged the restructuring plan approved in February 2009 by the Superintendent of New York State Insurance Department. It alleged that the bond insurer's decision to split its businesses amounted to a "fraudulent conveyance that left MBIA Insurance undercapitalized and potentially unable to pay out" on future claims on their policies. The suit claimed the split was "an unlawful attempt to escape" its contractual obligations to cover losses from bad mortgage securities. Corporate credit unions were among the institutions that suffered other-than-temporary-impairment losses from MBS investments insured by bond insurers such as New York-based MBIA and Wisconsin-based Ambac. Both insurers had promised some payment on the securities. However, as losses mounted during the financial crisis, both companies took steps to reorganize. "The impact of the ruling on credit unions is unclear at this time," said Credit Union National Association spokesman Pat Keefe. It was not known whether NCUA considered possible decisions when it put together its corporate stabilization plan. "Had it ruled differently, or if a higher court reverses the ruling, it would be a big recovery in MBIA mortgage backed securities and result in fewer losses for corporates," said Michael Edwards, CUNA counsel on special projects. He added the current decision means "MBIA would pay less in theory" to investors who have experienced the MBS losses. Very few natural person credit unions have private label MBSs. Federal credit unions are allowed up to one-fourth of their investments. How much would be picked up by the NCUA guarantee notes in the corporate stabilization fund is unknown, Edwards told News Now. NCUA did not respond to News Now's requests for comments as of press time.

NCUA considers new allegations in WesCorp case

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WASHINGTON (1/13/11)--The National Credit Union Administration (NCUA) has asked the U.S. District Court for the Central District of California for permission to modify its complaint against directors and officers of the conserved Western Corporate FCU (WesCorp). The court had previously stated that it planned to dismiss the complaint against the directors, but gave NCUA one final opportunity to state its case. The NCUA request for permission to amend its allegations follows a recent tentative ruling by the court that the agency could not do so. The former directors named in the agency’s suit will file a rebuttal to the NCUA’s request on Jan. 24. There is a hearing set for Jan. 31.

Three NCUA small CU workshops coming in March

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ALEXANDRIA, Va. (1/13/11)--The National Credit Union Administration is offering three Office of Small Credit Union Initiatives workshops in March, one in Richmond, Va., another in Philadelphia, Pa., and the third in Phoenix, Ariz. The topics scheduled for discussion include:
* Issues facing credit unions; * NCUA--Consumer Protection Office--What It Means To You; * Duties of federal credit union boards of directors (NCUA Regulations 701.4). Attendees will receive an attendance certificate after completing this two-hour session; * Basic financial literacy requirements; * Due diligence and evaluating payment system service providers; and * Examination issues.
The free training program in Phoenix is March 5, the Richmond session is scheduled for March 10, and the one in Philadelphia is March 17. Use the resource links for registration information.

Fed unveils risk-pricing consumer handbook

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WASHINGTON (1/13/11)--The Federal Reserve Board has unveiled an online consumer handbook to help borrowers better understand new notices they may receive from lenders when credit reports or credit scores affect a credit decision. The new publication is called “What You Need to Know: New Rules about Credit Decisions and Notices.” It describes the types of notices a potential borrower might receive, as well as provides illustrations of what those notices might look like. It also gives advice on what a consumer should do upon receiving a notice and includes instructions on how to dispute credit report errors. The notices described in the new handbook are required by new rules issued by the Fed and the Federal Trade Commission on a practice known as “risk-based pricing,” where, based on a consumer's credit report, a lender provides credit to a borrower on terms less favorable than those provided to other consumers. The rule took effect Jan. 11. In announcing the new online consumer resource, the Fed reminded that as an alternative to providing risk-based pricing notices, creditors can choose to provide consumers who apply for credit with a free credit score and information about their score.

Compliance How many background checks are enough

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WASHINGTON (1/13/11)--As credit unions and other mortgage loan originators (MLOs) await final notice from federal regulators that the SAFE Act national mortgage registry is open for registration, they may be pondering many variables, some of which are visited by this month’s Credit Union National Association Compliance Challenge. For instance, credit union compliance folks--always alert to find ways to comply with rules in the most cost- and time-efficient manner possible--may be wondering whether a little recycling may be in order. Can a credit union that already has obtained fingerprints and background checks on prospective employees simply upload this information into the Nationwide Mortgage Licensing System & Registry (NMLS), or do employees have to be re-fingerprinted and go through another background check? Compliance Challenge advises that there is no chance for recycling here: A credit union’s employees who are identified as MLOs will have to be fingerprinted again and go through another background check. The SAFE Act requires MLOs to submit fingerprints to the NMLS for the purpose of conducting a criminal background check. Fingerprints will be submitted to the FBI, which will return any information resulting from the background check to the credit union through the NMLS. So, the NMLS will manage the entire process, from fingerprint capture to the return of the criminal background check to the credit union through the new system once it’s up and running. Fingerprints will be taken at an NMLS-authorized fingerprint vendor. Information will be forthcoming, but to see how this process works on the state licensing side, see the resource link. Note that the initial period for federal registration of residential mortgage loan originators is expected to begin on or around Jan. 31, and end on or around July 29. The National Credit Union Administration and the federal banking regulators will publish an announcement on their respective websites confirming the start date of the registration period shortly before the period begins. Then credit unions and their MLOs will have 180 days from the date indicated in the notice to register on the new system. To see more on the SAFE Act and to take the CUNA Compliance Challenge, use the resource link below.

Inside Washington (01/12/2011)

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* WASHINGTON (1/13/11)--The National Council on Aging (NCOA) is conducting a pilot project with U.S. Department of Housing and Urban Development (HUD) and the National Reverse Mortgage Lenders Association (NRMLA) to help reverse mortgage borrowers struggling to pay property taxes and homeowners insurance. “While reverse mortgages can help seniors to stay at home, these funds may be depleted over time,” said Barbara Stucki, vice president for home equity initiatives at NCOA. “With economic conditions putting pressure on many of these borrowers, we want to assess the services and supports to help them remedy their delinquencies and stay at home.” By partnering with senior service agencies in Miami, Houston, Detroit and Los Angeles, NCOA, HUD, and NRMLA will identify ways to assist seniors with reverse mortgages who are most at-risk for foreclosure by not keeping up with their borrower obligations. Case managers from the community partner agencies will work with reverse mortgage borrowers to pursue local tax relief options and identify other financial, legal, and housing solutions to resolve delinquencies. If appropriate, case managers will also help borrowers who need to move to other housing options, such as affordable housing or supportive-housing developments … * WASHINGTON (1/13/11)--Four U.S. House Democrats are raising questions about bad loans sold to Fannie Mae and Freddie Mac (American Banker Jan. 12). The two government-controlled mortgage companies have recovered $3.3 billion for taxpayers by reaching settlements in recent weeks with Bank of America Corp. and Ally Financial Inc. Rep. Maxine Waters (D-Calif.) questioned in a letter whether the settlements “represent the real liability [Fannie and Freddie] bear as a result of the misrepresentations and breaches of warranty” made by Bank of America and Ally Financial. The letter was addressed to Edward DeMarco, the acting director of the Federal Housing Finance Agency, which oversees Fannie and Freddie. The letter was also signed by three other members of the House Financial Services Committee--Reps. Brad Miller (D-N.C.), Keith Ellison, (D-Minn.) and Stephen Lynch, (D-Mass.) … * WASHINGTON (1/13/11)--The U.S. Small Business Administration announced the appointment of Patricia Brown-Dixon to be regional administrator for Region VII, which encompasses Iowa, Kansas, Missouri, and Nebraska. Brown-Dixon has worked for the U.S. General Services Administration (GSA) for more than 25 years. Currently, she serves as director of the Heartland Office of Small Business Utilization, where she is responsible for managing the agency’s efforts to support small businesses in the region. As Region VII administrator, Brown-Dixon will oversee SBA operations throughout its district offices in Des Moines, Iowa; St. Louis and Kansas City, Mo.; Omaha, Neb.; and Wichita, Kan…

CUNA to FDIC Increased MBLs can address bank credit gap

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WASHINGTON (1/13/11)--The Federal Deposit Insurance Corp. (FDIC) is conducting a forum today to explore ways in which credit can be made more accessible to the small business sector. The session will bring together policymakers, regulators, small business owners, lenders and other stakeholders to identify key issues and focus on solutions, according to an agency announcement. The Credit Union National Association (CUNA), in its advocacy efforts in favor of increasing the credit union member business lending (MBL) cap to 27.5%, up from the current 12.25%, has noted to policymakers that such a change could infuse $10 billion of new credit into the nation’s small businesses. The benefits to the economy of the cap increase go even further than that infusion, CUNA underscores, and could add more than 100,000 jobs to a struggling jobs market. Both economic improvements would occur at no cost to the taxpayer. “Credit unions were not asked to be on the forum’s panels, but we will be reiterating to FDIC that given the lack of bank credit to small businesses, solutions should include the administration-supported MBL increase,” said John Magill, CUNA senior vice president of legislative affairs. The FDIC forum, which is open to the public and will be webcast live (see resource link), will kick off with remarks from Rep. Spencer Bachus (R-Ala.), who became chairman of the House Financial Services Committee in the new Congress. It will also feature a panel discussion lead by FDIC Chairman Sheila C. Bair, Federal Reserve Chairman Ben S. Bernanke, Sen. Mark Warner (D-Va.), and Thomas D. Bell, Jr., chairman of the U.S. Chamber of Commerce. A second panel will present additional government and private sector leaders whose focus will be to identify issues that are constraining the availability of credit to small businesses and “articulate ideas for overcoming these obstacles.” Administrator Karen Mills, of the Small Business Administration, is scheduled to provide remarks at the conclusion of the forum.