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CUs suit seeks mortgage-fraud bond coverage

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MEDFORD, N.Y., and MADISON, Wis. (1/8/10)--Suffolk FCU, a New York credit union that incurred losses when the CU National Mortgage/U.S. Mortgage Corp. fraudulently sold 189 of its mortgage loans to Fannie Mae, filed a lawsuit Monday against its insurer, seeking coverage of the losses under a bond policy. Suffolk, of Medford, N.Y., lost nearly $42.4 million when the two mortgage companies sold the loans without authorization to Fannie Mae, the credit union maintains in the complaint, filed against Madison, Wis.-based CUNA Mutual Insurance Society (CUMIS). The suit was filed in the U.S. District Court for the Eastern District of New York. At issue is whether the fraudulent losses are covered by the credit union's bond policy with CUMIS, according to court documents obtained by News Now. It seeks damages for breach of contract and a declaratory judgment that it is entitled to coverage under a fidelity bond issued by the insurer. CU National Mortgage and U.S. Mortgage filed for Chapter 11 bankruptcy in February last year. It listed more than $200 million in debts to Fannie Mae and to 19 credit unions, including Suffolk FCU (News Now May 4). CUNA Mutual told News Now Thursday that there are three cases currently related to the bond coverage: Suffolk's; a similar one filed in December by Educational Systems FCU of Greenbelt, Md.; and a declaratory judgment action sought by CUNA Mutual in a Wisconsin court. CUMIS filed two declaratory judgment actions in June and August in Wisconsin state court asking the court to declare that the surety bonds did not cover the losses from the fraud (News Now Dec. 23). The court served the actions, and the case was moved to federal court in mid-December. "Our desire would be to have the action we filed in Wisconsin determine the coverage issue for all affected credit unions," Phil Tschudy, CUNA Mutual media relations manager, said. In December, Tschudy said that the company believes other entities have liability for the losses credit unions suffered but it was looking for ways to assist the credit unions in seeking compensation for the losses (News Now Dec. 8). The president of CU National Mortgage, Michael McGrath pleaded guilty in June to defrauding the credit unions and Fannie Mae. He admitted to conspiring with others to fraudulent sell credit unions loans and use the proceeds to finance U.S. Mortgage's operations and investments for himself and the company (News Now June 12 and Dec. 23).

CU System briefs (01/07/2010)

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* RANCHO CUCAMONGA, Calif. (1/8/10)--Patelco CU, a $3.6 billion asset San Francisco-based credit union, has taken steps to enable members to deposit checks from their home or office. It selected CO-OP My Deposit from CO-OP Financial Services to provide the service. "Now our members do not have to leave home to make deposits. We have 40 branches in Northern California, but still many of our members are not located near a branch," according to John Shields, Patelco's senior vice president/chief technical officer. The service allows depositors to use their own scanner to send check images to Patelco's online banking website. The service does not require adoption or installation of new hardware, said CO-OP Financial Services. Patelco's use of CO-OP My Deposit will be available by mid-to-late first quarter ... * RALEIGH, N.C. (1/8/10)--State Employees' CU (SECU), based in Raleigh, has introduced the SECU NSF Fee Free Days to enhance its no-cost overdraft protection program. More than 80% of SECU's 800,000 checking accountholders use the program. The new benefit will provide coverage for more than 150,000 members. SECU has one of the lowest nonsufficient fund fees (NSF) in the financial industry, charging $12 to cover handling costs and losses associated with returned checks. Now members can have the fee waived on two separate days during the year, regardless of the number of items marked as NSF. SECU will return the items to the payee but waive the member's credit union fees. SECU also is planning to launch a new controlled-spending account for use with a debit card for members who want to eliminate the possibility of overdrafts. And the $18.5 billion asset credit union is working on a program called "Another Chance," which will provide mobile alerts and an additional day for members to cover inadvertent overdrafts without fee, return or embarrassment. That program is set for introduction in the Spring ... * REDWOOD CITY, Calif. (1/8/10)--San Mateo CU (SMCU), in Redwood City, Calif.--through a special program--is offering members a way to help bring affordable financial services to developing countries. Visitors to any one of the six SMCU branch locations throughout the county have the opportunity to drop their “small change” in a special coin box. The “Small Change, Big Difference” campaign, developed by the World Council of Credit Unions, gives credit union members worldwide a chance to tangibly support international development through credit unions. Donations will be used for the Credit Union Start-up Fund, which helps new and small credit unions in developing countries provide the means by which the working poor can lift themselves from poverty ... * MADISON, Wis. (1/8/10)--UW CU in Madison, Wis., this month is launching its online Money Management Tools, which are integrated into Web Branch--the credit union’s online banking program. The free expense tracking and reporting tool is designed to help consumers better understand their spending. Users can assign categories to transactions and make notes on each transaction. The functions helps users better understand their spending habits by assigning categories to transactions such as home, groceries, utilities, income and other areas. Labels also can be assigned to add further detail--such as different family members or a particular event--to each item …

Mica on Huffington Post Consumers moving to CUs

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WASHINGTON (1/8/10)--A blog by Credit Union National Association President Dan Mica posted Thursday on the front page of The Huffington Post and responding to the Post's "Move Your Money" series, has generated hundreds of online comments, many from consumers praising their credit unions. Earlier in the week the Huffington Post' launched a campaign, telling consumers to "make a New Year's resolution to move your money out of big banks" and put it in community banks. Since then the Post has amended the advice to include credit unions. Mica's blog responded to the campaign with a "Right on!" and pointed readers to CUNA's CU locator tool at creditunion.coop, which helps visitors locate credit unions near them. "Without question, financial consumers are angry at--and have lost their loyalty to--big banks. Late-night comics routinely make fun of the banks; there's even a new iPhone app in which players try to stop 'cash-hungry' bankers from wheedling more bailout money from the U.S. Treasury," Mica wrote. He noted that "consumers are already voting with their wallets in favor of credit unions." CUNA data show credit unions are on pace to post 2% membership growth in 2009--"the fastest rate we have seen since 2001 and double the rate of U.S. population growth," he said. Moving to credit union "makes perfect sense," he wrote, citing credit unions' structure and service orientation, their better rates and lower fees, and the amount consumers have saved by using credit unions--$9.2 million, or $104 per member and $198 per family. "In today's turbulent economy, credit unions' cooperative business model has renewed relevance for American consumers," Mica wrote. He referred to a statement from Rep. Barney Frank (D-Mass.), who said that if other financial institutions behaved like credit unions and small community banks, the mortgage meltdown would never have happened. After the Post's original article, it received a number of comments saying it should add credit unions to its advice. The "updates" page of the Post's "Move Your Money" site now includes this: "CHECK OUT CREDIT UNIONS. Many folks writing us are avid advocates of credit unions. For those who want to do more research, the Credit Union National Association seems like a good resource." By Thursday afternoon, Mica's column had generated 194 comments from online readers and the article had been retweeted 76 times.

Lawrence Mich. again gets an FI--a CU

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KALAMAZOO, Mich. (1/8/10)--The village of Lawrence, Mich., will get a financial institution again after being without one since Fifth Third Bank closed its doors last spring. This time it will be a credit union. The Van Buren Intermediate School District board Wednesday approved a lease agreement with Oshtemo-based Educational Community CU to open a branch in the Junior Special Services Facility on the school district's campus, south of downtown (Kalamazoo News Jan. 7). School Supt. Jeffrey Mills told the newspaper the board's goal was to have the branch open before the end of the school year. He said the credit union would not only provide the village a financial institution but it also would teach students about financial literacy.

Malawi CUs recovering after earthquake

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BLANTYRE, Malawi (1/8/10)--Credit unions in the Karonga district of Malawi are recovering from December earthquakes that have killed three, hospitalized more than 80 and left 300,000 homeless. The World Council of Credit Unions (WOCCU) and the Malawi Union of Savings and Credit Cooperatives (MUSCCO) are helping affected members and staff of the credit unions there. With WOCCU's assistance, MUSCCO will provide aid directly to the credit unions--savings and credit cooperatives, or SACCOS--and its members this weekend. No formal fundraising efforts will be undertaken, but WOCCU is accepting donations at www.woccu.org/give in support of Malawi's rebuilding efforts (Use the resource link to access the site). The Canadian Co-operative Association also will provide financial support for MUSCCO's efforts, said Sylvester Kadzola, MUSCCO chief executive and a WOCCU director.
Click to view larger image A Malawi credit union member examines the rubble of his newly built home hit by a recent earthquake.
Click to view larger image Malawi's December earthquakes left more than 300,000 homeless. (Photos provided by the World Council of Credit Unions)
“Our plan is to give relief straight to the SACCO members,” Kadzola said. “The money will be used to provide general relief and meet the needs of SACCO members whose houses were damaged or destroyed,” he added. Malawi’s SACCOs have performed a critical role in serving the country’s people and helping stabilize families and communities, according to Brian Branch, WOCCU executive vice president and chief operating officer. At least one of MUSCCO's 60 member SACCOs was affected by the earthquake, with more than half of the institution's members were left homeless because of the disaster. The main office of the SACCO, which serves Karonga district teachers, suffered structural damage that will require extensive repair. The SACCO's branch office some 20 miles closer to the earthquake's epicenter was completely destroyed. “We have had severe power disruptions, and it is extremely difficult to communicate," said Kadzola. “We are hearing unpleasant stories that earthquake victims are being asked to pay money if they want to be assisted quickly. It is disheartening that this is happening in the face of such devastation.” The most recent earthquake, which struck Dec. 20, measured 6.0 on the Richter scale, according to the U.S. Geological Survey. The Karonga district, on the Great Rift Valley fault line, was struck by another earthquake earlier in the month. The two seismic events indicate that the fault line may be “realigning” itself and that new fault lines may be forming, making the earthquake-prone region even more unstable, experts said. MUSCCO has been serving Malawi's SACCOs since 1980 and is a member organization of WOCCU. Kadzola has been a member of WOCCU's board of directors since 2001.

Coastal FCU to close Charlotte branch network

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RALEIGH, N.C. (1/8/10)--Coastal FCU announced that it will close a physical branch network in Charlotte, N.C., and an underperforming branch in the Cleveland, N.C., area on Feb. 26. Instead, Raleigh-based Coastal will expand its presence in the Triangle, where Coastal is headquartered and has 15 branches. The Triangle includes Raleigh, Durham, and Chapel Hill. The branches closing are:
* 1835 West W.T. Harris Blvd., Charlotte; * 1605 Galleria Blvd., Charlotte; * 970 Branchview Dr., Concord; and * 5638 NC Highway 42 West, Garner, in the Cleveland area.
While Coastal has had a branch presence in the Charlotte and Triangle markets, most of Coastal’s member and best-performing locations are in the Triangle. Charlotte branches had a smaller membership base, minimal market share and limited branch network, while facing stronger competition from banks and other credit unions, Coastal said. The Cleveland branch has not met performance requirements after five years, and is being combined with Coastal’s nearby White Oak branch. The White Oak location offers extended weekday and Saturday teller hours, Coastal added. The credit union will build upon its Express Teller technology and a new branch strategy to fill gaps in consumer banking coverage in the Triangle market. In 2009, Coastal began upgrading branches to the Express Teller system, which allows tellers in a centralized center in Raleigh to interact with members remotely at branches to conduct transactions. Coastal upgraded 12 branches plus installed a standalone Express Teller unit onsite at the Lenovo campus, and a member services associate to open accounts and make loans. “We actually ended up upgrading three more locations than we had planned to do by the end of 2009, and finished two months ahead of schedule,” said Larry Wilson, Coastal president/CEO. “Because of the Express Teller system, we can now offer extended weekday and Saturday teller hours at 12 locations.” Coastal reiterated previously announced plans to create more branch coverage in the area. It will open several new branches through 2012, and replace or upgrade existing branches to provide extended hours of service. Work is underway at a new Raleigh location, which will replace Coastal's Lynnwood branch later this year. Progress is also being made to upgrade a Durham branch by year-end. Members who use the Charlotte branches are being notified of service alternatives, including Credit Union Service Centers and Coastal's online banking system. The credit union also participates in networks that give members nationwide access to 3,500 shared branches and 50,000 surcharge-free ATMs. Coastal FCU has $2.2 billion in assets.

CUs eager to participate in N.Y. revitalization

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ALBANY, N.Y. (1/8/10)--New York credit unions are eager to participate in New York Gov. David Paterson’s state revitalization plan, said Credit Union Association of New York President/CEO William J. Mellin. Paterson delivered his second State of the State address as governor Wednesday, and outlined his plan to rebuild New York. The association commended Paterson on his address, and said it supports his agenda to build the state economy through fiscal and ethics reform, job development, community reinvestment and modern energy initiatives. New York credit unions will look for ways they can partner with Paterson to achieve his goals, and are ready to help fill a lending void created by commercial banks and other financial institutions because of the subprime crisis, Mellin said. Credit unions have been responsible lenders and will continue to provide capital for small businesses--which will play a larger role in economic revitalization and job creation in the state, he added. “Throughout their history, credit unions have been on the front lines of supporting New York families and communities facing hard times,” Mellin said. “They have taken it upon themselves to move into downtrodden communities that commercial banks have abandoned to make sure the community and its people have access to affordable financial services.” To read Paterson’s address, use the link.

N.Y. CUs exempt from special mortgage recording tax

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ALBANY, N.Y. (1/8/10)--A bill that exempts New York state-chartered credit unions from the state’s special additional mortgage recording tax went into effect Jan. 1. “The bill levels the playing field [for state credit unions] with their federal counterparts,” Bonnie Sklar, Credit Union Association of New York public relations coordinator, told News Now. Federal credit unions in New York are exempt from the tax. The bill, Special Additional Mortgage Recording Tax (SAMRT) bill, was signed into law by New York Gov. David Paterson in September 2008.

Ohio CUs capture record auto loan market share

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COLUMBUS, Ohio (1/8/10)--Total auto lending market share at Ohio credit unions increased to a record 18.2% from September 2008 to September 2009 despite a decline in vehicle sales, said the Ohio Credit Union League. Similarly, first mortgage originations rose 51.9% during the period, totaling $1.37 billion in 2009 versus $904 million in 2008. Credit union membership also grew with more than 53,000 Ohioans joining credit unions. Capital levels at Ohio credit unions remain high at 11.9% of assets, better than capital at Ohio banks and thrifts, and overall U.S. credit unions and banks, the league said. “This is an unprecedented time for credit unions in the state of Ohio,” said Paul Mercer, league president. “Credit unions have money to lend despite the difficult economy, and the response from consumers has been positive, with growth in auto lending, mortgages, and member business lending. We look to continue these trends and be a partner to our members and the communities we serve as we all strive for economic recovery.” During the 12-month period, credit unions witnessed an overall loan growth of 6.64%, with auto loan balances increasing 11.9% and first mortgage balances up 3.9%. Total delinquencies rose to 1.37% in September, up from 1.21% the previous year. While delinquencies are on the rise, they remain below the national credit union average of 1.69% through September, the league said. Despite restrictions imposed by federal law, credit union member business lending (MBL) grew 11.2% to $333 million in outstanding loan balances. The 90 Ohio credit unions that provide MBL reported an average delinquency rate of 3.65%, which is above the national average but down from the previous June rate of 3.84%. Federal law currently caps credit unions’ business lending at 12.25% of assets; however, legislation pending in Congress would raise the cap to 25%. The Credit Union National Association reported that lifting the cap could provide $10 billion in new small business loans and at least 108,000 new jobs nationwide. The number of Ohio credit union members grew by 53,183 from September 2008 to September 2009--to more than 2.65 million. The average credit union in the state has 6,685 members, $50.15 million in assets, and $31.4 million in loans. Ohio credit unions employ more than 6,800 people or staffers and contribute nearly $140 million in compensation to employees annually, according to the league’s most recent quarterly financial report.

West CUNA Management School announces board

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ONTARIO, Calif. (1/8/10)--The newest members of the Western CUNA Management School (WCMS) Board of Trustees have been announced. They are: John Dill, president/CEO of the Credit Union Associations of Colorado and Wyoming; Teresa Freeborn, CEO, Xceed Financial CU, El Segundo, Calif.; Bradley H. (Brad) Harvey, CEO, Horizons North CU, Northglenn, Colo.; and Brett Martinez, CEO, Redwood CU, Santa Rosa, Calif.
Click to view larger image 2010 Western CUNA Management School Board of Trustees are, front row, from left, New board trustees: Horizons North CU CEO Bradley H. (Brad) Harvey, Redwood CU CEO Brett Martinez, Xceed Financial CU CEO Teresa Freeborn, and Credit Union Associations of Colorado and Wyoming President/CEO John Dill. Back row, from left, are: Rogue FCU CEO Eugene L. Pelham, Travis CU CEO Patsy Van Ouwerkerk, California/Nevada Credit Union Leagues Senior Vice President of Professional Development/Chief Operating Officer and WCMS Provost Mark Klinkert, USA FCU CEO and WCMS Board Chairman Mary Cunningham, WCMS President/Dean James D. Likens, and Orange County CU CEO Shruiti Miyashiro. (Photo provided by the California Credit Union League)
The board--made up of nine credit union CEOs, two league presidents, the WCMS president and WCMS provost--is responsible for operating of one of four advanced regional schools for credit union management professionals. The schools are sponsored by the Credit Union National Association (CUNA) and leagues. Dill has served as president/CEO of the Credit Union Association of Colorado since 2004. He serves on the Credit Union National Association’s Government Affairs Committee. Dill will assume the board seat of Washington Credit Union League President/CEO John Annaloro, whose term in the three-year rotating league president spot ended. Freeborn has more than 30 years experience in the credit union system. She is assuming the seat of Vince Rojas, who recently retired as CEO of Kern Schools FCU in Bakersfield, Calif. Harvey is the chairman of the Rocky Mountain CUES Council. He has also served on various committees and task forces at the state level, and is on the Government Affairs Committee. Harvey is assuming the seat of Colorado United CU CEO Branda Abbott, who is moving to a chief operating officer position at her recently merged credit union. Martinez has more than 24 years of credit union experience and has served as a senior executive for both the California Credit Union League and Arrowhead CU in San Bernardino, Calif., prior to joining Redwood CU in 2002. He replaces San Mateo CU CEO Barry Jolette, recently named the new World Council of Credit Unions board chairman. WCMS is sponsored by the leagues of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming in cooperation with Pomona College in Claremont, Calif.

A-K Valley branch--a robbery magnet--closes

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PITTSBURGH (1/8/10)--A credit union branch that was robbed four times in the past two years and was burglarized on New Year's Day has closed permanently. The board of A-K Valley FCU, based in Lower Burrell, Pa., met Wednesday and decided to close permanently the Homewood branch, which served an underserved area for more than five years, said the Pennsylvania Credit Union Association (PCUA) (Life is a Highway Jan. 7). The branch had not reopened since the burglary. A-K Valley President/CEO Janet Horn told PCUA the board made the decision with "very sad hearts" because the board and staff had put much effort into the branch to provide services to members who need help. The deciding factor was the board's concern for the safety of the credit union's employees and members, she said. Police are still investigating the burglary. A surveillance camera captured the burglar rifling through file cabinets. All members' records were safety locked in cabinets, the credit union said. The four robberies involved gunmen wielding assault rifles. The credit union had hired an armed guard to be present in the lobby during branch hours. "Homewood is a dangerous place. We have tried numerous times to work with community leaders and law enforcement to address the situation, but nothing gets done, and the crime problem continues to get worse and worse," Horn said. In one robbery, a member was completing a transaction when a robber entered the credit union and grabbed the cash from her hand. "We have been so fortunate that no one was hurt or killed," Horn said, noting that the constant uneasiness took a toll on employees and it was difficult to adequately staff the branch. "It's an unfortunate situation, because there are good people in the neighborhood who need financial services. But we can't continue the high cost of security and risk the safety and security of our staff and members," she said. A bank branch two blocks from the credit union also has had problems. It allows one customer inside at a time, and several customers have been attacked while using an ATM outside, said PCUA. The A-K Valley Homewood branch was a shared branch outlet. It is advising members to use shared branching services at other locations. The credit union is working with members on an individual basis to continue meeting financial needs.