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Washington Archive

Washington

BITS unveils mortgage fraud toolkit for consumers

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WASHINGTON (2/1/08)—BITS Financial Services Roundtable, a financial service industry consortium, has unveiled a new mortgage fraud prevention toolkit for consumers, an educational packet developed through the input of the Credit Union National Association (CUNA) and other BITS members. The toolkit was developed by the BITS Mortgage Fraud Reduction project group to help financial institutions educate consumers about mortgage fraud and how to protect themselves against the most common schemes. The materials include details about a variety of mortgage fraud schemes, including foreclosure bailouts, "dos and don'ts" that consumers should consider when getting a mortgage, and resources that consumers can refer to for more information. BITS is encouraging all financial institutions to incorporate the information into their own consumer education materials and programs on preventing mortgage fraud. Entitled the "Mortgage Fraud Prevention: An Education and Awareness Toolkit for Consumers," the packet is available on the BITS Web site. (Use the resource link below to access that site.)

Inside Washington (01/31/2008)

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* WASHINGTON (2/1/08)--The Office of the Comptroller of the Currency could cut national bank exam fees for the first time in a decade (American Banker Jan. 31). The reduction amount is not known, but observers said reasons for the change include the credit crisis, national bank conversions and excess revenue. Industry officials expect the cut to be announced this month. The reduction would be the first since 1996, when former comptroller Eugene Ludwig dropped the rates by 12% for 600 national banks ... * WASHINGTON (2/1/08)--The Senate Banking Committee is scheduled to consider government-sponsored enterprise reform legislation at a hearing Feb. 7 (American Banker Jan. 31). James Lockhart, director of the Office of Federal Housing Enterprise Oversight; Ronald Rosenfeld, chairman of the Federal Housing Finance Board; and Robert Steel, Treasury Department undersecretary for domestic finance, are expected to testify ... * WASHINGTON (2/1/08)--Fannie Mae CEO Daniel Mudd took a 15% pay cut in 2007. He received $12.2 million in compensation, with a $990,000 salary, $9 million long-term incentive award and a $2.23 million bonus (Reuters Jan. 31). Fannie Mae has been hit by the credit crisis and mortgage delinquencies, which increased its expenses in the first nine months of 2007 to $2 billion from $400 million ... * WASHINGTON (2/1/08)--Senate Democrats said they were 60 votes short of advancing their $157 billion economic stimulus package and would have to accept the less expensive House plan (The New York Times Jan. 31). However, they said they would try to make some changes to the House plan before next week’s vote. Democratic amendments include extension of unemployment benefits, food stamp increases, funds for mortgage counseling and subsidies for low-income families’ heating and energy costs. The Democrats also have yet to agree on extending the Bush administration’s terrorism surveillance program, which the Republicans are using as leverage to push the stimulus bill to the floor ... * WASHINGTON (2/1/08)—Sen. Hillary Clinton (D-N.Y.) said this week that she will be seeking to crack down on certain abusive credit card practices and vowed to create an independent regulator to oversee consumer protections in financial services (American Banker Jan. 31). Clinton—who is running a tough and tight race for the Democratic presidential nomination—said she would seek, among other things, a 30% cap on annual interest rates for credit cards, payday loans, and refund anticipation loans. The cap would include penalty fees. Clinton told her audience at a campaign stop in North Little Rock, Ark., that the cap would be lowered over time. The article noted that in December, Sen. Barack Obama ( D-Ill.), Clinton’s rival for the Democratic nomination, introduced a bill that would press the Federal Reserve Board to create a five-star rating system for credit card safety ... * WASHINGTON (2/1/08)—Sen. Christopher Dodd’s plan to create a temporary government agency to purchase troubled subprime loans was criticized by Senate Banking Committee Republicans during a hearing on the proposal Thursday. Critics of the proposal said they did not believe that the country’s housing problems were bad enough to justify a $20 billion price tag for refinancing at-risk mortgages through the Federal Housing Administration's mortgage insurance program or secured under Fannie Mae or Freddie Mac. Sen. Robert Bennett (R-Utah), said he did not want the federal government to "become an enabler," bailing out borrowers who speculated in the real estate market while home prices escalated. Dodd, a Democrat from Connecticut, noted his frustrations with current attempts to address the housing crisis, which he said are not working. (CongressDailyPM Jan. 31) …

NCUA clarifies Reg Z definition of open-end credit

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ALEXANDRIA, Va. (2/1/08)—The National Credit Union Administration (NCUA), in a recent legal opinion letter, clarified that an extension of consumer credit by a federal credit union (FCU) meeting the definition of “open-end credit” under Regulation Z is a "line of credit" under the NCUA’s regulations. What that means, the letter said, is that such credit would not be subject to a maturity limit. The Jan. 16 letter also acknowledge that an earlier legal opinion, OGC Op. 92-0232, has created confusion in its discussion of a particular loan product as a “hybrid or bifurcated loan.” It added that this new communication supersedes the older one, and is intended to clarify the agency’s interpretation regarding application of the Regulation Z definition of open-end credit in determining if a loan product is a line of credit for purposes of NCUA regulations. “Upon reconsideration, we believe OGC Op. 92-0232 is incorrect in concluding that a loan could be neither open-end credit nor closed-end credit; in the 15 years since it was issued, the opinion has created some confusion.” wrote Michael J. McKenna , NCUA deputy general counsel. “NCUA’s interpretation of Regulation Z, confirmed as correct by legal staff at the Federal Reserve Board), is that any extension of consumer credit is either open-end credit or closed-end credit. “Accordingly, an extension of consumer credit by an FCU meeting the Regulation Z definition of open-end credit is, for NCUA’s purposes, a line of credit and not subject to maturity limits. An extension of consumer credit by an FCU that does not meet the Regulation Z definition of open-end credit is, therefore, closed-end credit and subject to applicable maturity limits under the FCU Act and NCUA’s regulations,” the letter clarified. Use the resource link below for more on the NCUA letter.

Treasury seeks comment on CDFI definition

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WASHINGTON (2/1/08)—The Treasury Department’s Community Development Financial Institution (CDFI) Fund is asking for public comment on whether it should change its criteria for certifying organizations as CDFIs. Under current rules, CDFIs must meet seven criteria to be eligible for certification. That certification allows qualified entities to apply for funding through a variety of CDFI Fund programs, and potentially access benefits from other agencies and organizations. The CDFI comment request encourages evaluation of such things as:
* Should the primary mission criteria differ by organization type? If so, how? * Should the CDFI Fund consider the types of financial products offered by an entity as relevant to the primary mission criteria? Specifically, should the CDFI Fund review, as part of the certification process, evidence of the affordability of an entity’s Financial Products to the intended customers? * How else might the CDFI Fund ensure that CDFI certification is not given to entities that engage in what are commonly called “predatory lending practices” or include so-called “predatory lending terms” in their lending products? * Should the CDFI Fund require entities to provide products and services at a cost that is at least comparable to market rates or at some minimum level of affordability to their target markets in order to satisfy the primary mission criteria? If yes, how should market rates or minimum levels of affordability be determined?
For more detail of the CDFI request for public comment, use the resource link below.

NCUA announce 2008 small CU workshops

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ALEXANDRIA, Va. (1/31/07)-- The National Credit Union Administration's (NCUA’s) Office of Small Credit Union Initiatives Wednesday announced a series of credit union events including free training sessions to be held around the country. Those sessions are scheduled to address the following subjects:
* Updates from Regional management; * The future of NCUA 5300 call reports; * Common Bank Secrecy Act violations ; * How to evaluate third party relationships, and related due diligence topics; * Modifications to the NCUA’s CAMEL rating system; * Attracting and recruiting volunteers; and * Expanding credit union services through partnerships
“NCUA’s goal in hosting our free workshops is to convey useful information that helps answer questions and address relevant issues,” NCUA Chairman JoAnn Johnson said in a release announcing the workshops. “ I encourage credit unions to sign-up and actively participate in a local workshop. Each is designed to provide regulatory guidance and to promote open discussion of important initiatives that affect credit union operation and membership,” she added. The first event is scheduled for March 15 in Raleigh-Durham, N.C. Use the resource link below to see all 20 dates and locations. Credit unions can visit NCUA’s website to register and view the agenda and most current information available. The NCUA notes that dates and locations could be subject to change based on hotel availability.

Inside Washington (01/30/2008)

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* ALEXANDRIA, Va. (1/31/08)—The National Credit Union Administration (NCUA) has approved the first nationwide Trade, Industry or Profession (TIP) charter for the grocery and supermarket industry, saying yes to an application from $210 million-asset TruGrocer FCU, Boise, Idaho. The field of membership includes employees who work regularly in the grocery and supermarket industry, but does not include employees of such places as “super warehouse” stores, “free-standing” convenience stores, or pharmacies, whether or not attached to a grocery store. The NCUA amended its field of membership rules in 2003 to allow TIP charters ... * WASHINGTON (1/31/08)--Senate Democrats said they are committed to keeping conforming loan limits for government-sponsored enterprises (GSEs) and Federal Housing Administration (FHA) reform provisions in the economic stimulus package passed Tuesday by the House (American Banker Jan. 29). Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Charles Schumer (D-N.Y.) said the package must include the loan limits. Others, including Sen. Richard Shelby (R-Ala.) and Sen. Mel Martinez (R-Fla.), said they would oppose raising the loan limits without comprehensive GSE reform. Other senators are pushing for FHA reform, even though Treasury Secretary Henry Paulson indicated earlier this week that he wanted to scrap it. The FHA reform could be put in a second stimulus package, if needed, said Sen. Sherrod Brown (D-Ohio). Schumer and Sen. Robert Casey (D-Pa.) said they hoped to add $500 million to the package for foreclosure counseling, and Dodd also suggested adding $10 billion so local governments could resell foreclosed homes ... * WASHINGTON (1/31/08)--Reforms to improve insurance claim processing for wind and water-related hurricane damage were proposed in a report requested by House Financial Services Ranking Member Spencer Bachus (R-Ala.). The report also calls for Congress to give the Federal Emergency Management Agency the power to collect wind and flood damage claims from insurers so it can better assess the accuracy of flood payments on damaged properties. Some entities may have improperly shifted costs or charged higher reimbursement rates to the federal government, Bachus said. The report contains recommendations that will clarify the process, and its findings warrant discussion in the Financial Services Committee, he added ...

FTC merger fee increase

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WASHINGTON (1/31/07)—The Federal Trade Commission (FTC) has announced that it is increasing fees for businesses, including credit unions, that are planning a merger or other business combination, but the fee will apply to few, if any, credit unions, according to the Credit Union National Association (CUNA). As of Feb. 28, the pre-merger filing fees will be as follows: for entities with assets between $63.1 million and $126.2, the fee is $45,000; for assets between $126.2 million and $630.8 million , the fee is $125,000, and for assets above $630.8 million, the fee is $280,000. However, most types of credit union assets are excluded from the asset threshold test. According to a written exchange between CUNA and the FTC in 2001 the following credit union assets do not count towards the asset threshold for the FTC fee: cash on hand (coin and currency); cash on deposit; cash equivalents; assets listed as "Investments" on NCUA 5300 call reports; first mortgage real estate loans or lines of credit; other real estate loans or lines of credit; and leases receivable. Credit union land, buildings, and other real estate are also excluded from the asset threshold to the extent provided by the FTC's rules codified at 16 C.F.R. sec. 802.2. "For the fee to apply to a natural person credit union, it would have to have over $63.1 million in non-exempt assets which are, generally speaking, credit cards, unsecured signature loans, and auto loans," said Michael Edwards, CUNA counsel for special projects. Bank and thrift holding companies are generally exempt from the FTC fee and reporting requirements. Section 309 of the Credit Union Regulatory Improvement Act of 2007 (CURIA, H.R. 1537) would extend this exemption to credit unions if it becomes law. Use the resource link below to read the CUNA-FTC exchange on the fee’s asset threshold in CUNA's e-guide on mergers.

Comments due March 31 on board fiduciary duties

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ALEXANDRIA, Va. (1/31/08)—Credit unions and others interested in commenting on possible changes to federal regulations defining a credit union board's fiduciary duties in the face of major decisions, such as mergers or conversions to mutual thrifts, must do so by March 31. The National Credit Union Administration (NCUA), at its open board meeting last week, agreed to seek comment on an advanced noticed of proposed rulemaking (ANPR), the focus of which the agency said is to protect members’ interests in transactions that involve fundamental changes in their ownership or in the structure of their credit union. The ANPR addresses six types of transactions: merger of a federally insured credit union (FICU) into another FICU; merger of such an institution into a privately insured credit union (PICU); conversion of a federally insured state-chartered credit union into a PICU; conversion of a FICU into a mutual savings bank (MSB) merger of a FICU into a financial institution other than a MSB; and conversion of a FICU into a financial institution other than a MSB. The transactions noted above are all legally permissible. However, the NCUA believes its current regulations may not adequately address the issues raised by the various forms of business deals The comment deadline was announced in a Federal Register document published Wednesday. Use the resource link below to access that document. The Credit Union National Association is drafting a credit union comment call, which will be posted soon on its Regulatory Advocacy Web site. Also, CUNA's Federal and Examinational and Supervisor Subcommittees will review the proposal and help develop a CUNA comment letter.

Inside Washington (01/29/2008)

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* WASHINGTON (1/30/08)--The House Tuesday approved a $146 billion economic stimulus package, which “will inject money into our economy in time to create more than 500,000 jobs before the end of the year,” said Treasury Secretary Henry Paulson. Meanwhile, Senate Democrats moved ahead with their own plan, introduced by Sen. Max Baucus (Mont.) and which would cost $160.5 billion (The New York Times Jan. 29). Though the Senate bill is more expensive, some senators indicated that they would add more to the bill, the newspaper stated. Both plans offer tax incentives and rebates but they possess several key differences. The Senate’s would provide Americans on Social Security and over the age of 62 up to $500 in rebates, whereas the House plan would afford them nothing. The Senate proposal also lengthens unemployment benefits to 39 weeks. But it provides some with less in rebates than the House plan. A family of two working parents and two children would be provided with $1,600 in rebates under the Senate plan and $1,800 in rebates under the House proposal. The Senate plan is expected to be discussed today, and a vote could be taken today or Thursday, according to Senate Majority Leader Harry Reid (D-Nev.) ... * WASHINGTON (1/30/08)--Treasury Secretary Henry Paulson’s plan to streamline loan modifications of distressed mortgages would help only 3% of at-risk homes, the Center for Responsible Lending announced Monday. “The Treasury plan will be a welcome relief for those it helps, but won’t help nearly enough to avoid further widespread economic damage from foreclosures,” the center said. “The most effective way to handle the crisis is to permit court-supervised modifications of distressed mortgages,” said Eric Stein, senior vice president of the center. Homeowners are excluded from such relief under law, but legislation to remove the barrier is moving through the House and Senate, he added. “Congress has the power to prevent 600,000 homes from being lost to foreclosure at no cost to the Treasury,” Stein said ... * WASHINGTON (1/30/08)—Treasury Secretary Henry Paulson Jr. is scheduled to deliver remarks on the economy today at a state of the industry meeting sponsored by the Real Estate Roundtable in Washington, D.C. According to a Treasury Department announcement, Paulson will discuss the state of the economy and the proposed fiscal growth package… * WASHINGTON (1/30/08)—The Treasury Department has issued interim guidance to insurers, policyholders, state insurance regulators and the public concerning recent statutory amendments to the Terrorism Risk Insurance Act of 2002. The Terrorism Risk Insurance Program Reauthorization Act of 2007, signed into law on Dec. 26, 2007, extends the program through Dec. 31, 2014, and made other changes. The interim guidance, published in the Jan. 29 Federal Register, is intended to assist insurers in complying with certain new statutory requirements pending the issuance of implementing regulations. The guidance is effective immediately and will remain in effect until superseded by regulations or by subsequent notice …

NCUA warns of sophisticated fraud schemes

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WASHINGTON (1/30/08)—The National Credit Union Administration (NCUA) is sounding the alarm about a new scam in which fraudulent wire transfers have been performed on home equity lines of credit (HELOC) at several financial institutions, including credit unions. The alert, issued Monday, advises credit unions to be diligent in protecting access to member accounts and to ensure credit union staff receive adequate training to recognize fraudulent activity. In instances of the HELOC scam, the NCUA said, an imposter typically obtained publicly available HELOC information from filings with state and local government entities and, combined with social engineering tactics, obtained access to member accounts. The imposter then initiated a draw on the member’s HELOC account, and subsequently initiated a wire transfer from the account. The regulator’s alert noted that some of the scams involved a high level of sophistication, which enabled the fraudster to bypass certain authentication controls. For instance, in some cases the imposter had the ability to fool Caller ID software by making it appear that the call initiated from the account holder’s valid phone number. In others, the imposter was knowledgeable of recent account activity--such as deposit or withdrawal amounts--and used such information to authenticate himself/herself as the account holder to the credit union representative. In the warning signed by David M. Marquis, NCUA’s director of examination and insurance, credit union management was advised that there may be variants to the scam described in the alert, such as similar fraudulent activities being launched for accounts other then HELOCs. The NCUA said it will continue to follow the issue and provide additional information as warranted. It also reminded that, where appropriate, management must file a Suspicious Activity Report in accordance with established regulation.

CUs advised on 2008 top exams issues

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ALEXANDRIA, Va. (1/30/08)—Third-party vendor relationships and strategic planning were the topics of a Tuesday National Credit Union Administration (NCUA) Webinar on key credit union examination issues for 2008, moderated by board member Gigi Hyland. Dominick Nigro, information systems officer of the NCUA’s Office of Examination and Insurance, noted that credit unions find vendor relationships in many areas or operations, such as lending services, auditing and management consulting services, asset liability management, Bank Secrecy Act and Office of Foreign Asset Control compliance, data processing and internet banking services. Nigro noted that although the NCUA recognizes the value that can come from third-party relationships, NCUA examiners are increasingly identifying problem areas associated with such arrangements. He discussed two key elements of an effective program, which he identified as good risk assessment and planning and effective due diligence work. Nigro also indicated that an effective program must address the different levels of risks that may be associated with different vendors. The more critical the service, the deeper the credit union’s review of the relationship must be, he advised. Effective due diligence must also include background checks, review of the vendor's business model, and the vendor's financial condition. Board member Hyland specifically highlighted the need to review the legal agreement with the vendor and to ensure compliance with all applicable state and federal laws. The other important element discussed was the need for written policies and procedures for measuring, monitoring, and controlling risk. Although credit unions may refer to samples that other credit unions use, they are cautioned to use them as a starting point and to adjust them, as necessary. However, credit unions may not need to perform a risk assessment for current vendor relationships, but should review these relationships if circumstances change. On the topic of credit union strategic planning, Debra Tobin, and NCUA supervisory examiner and economic development specialist, said that the focus away from the CAMEL matrix to a risk assessment approach means that strategic planning is more important than ever. Tobin said that planning documents should include a strategic plan, business plan and budget, and should vary in complexity with the size and complexity of the credit union. She also discussed a planning process that credit union may use and that performance measurement should include a method to measure, monitor, and report results as well as make changes as necessary. An inadequate planning process, she said, can result in material losses to the credit union’s earnings and/or net worth. NCUA’s Hyland also stressed that evaluation and making adjustments to these plans is a critical part of the process. The benefit of using a "facilitator" was also highlighted. The webinar will be posted on the NCUA website in about a month and will include a "frequently asked questions" section that will address all the questions that were raised by credit unions during this webinar.

Inside Washington (01/28/2008)

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* WASHINGTON (1/29/08)--Lawmakers are debating Federal Housing Administration (FHA) reform and government-sponsored enterprise loan limits as part of an economic stimulus package (American Banker Jan. 28). Treasury Secretary Henry Paulson is pressuring lawmakers to eliminate the FHA reform and the conforming loan limits from the package so they do not slow down the legislation’s passage. House Financial Services Committee Chairman Barney Frank (D-Mass.) announced last week a plan to raise the enterprises’ limits to 125%, with caps of $729,750. The House is scheduled to vote on the plan today ... * WASHINGTON (1/29/08)--A National Credit Union Administration (NCUA) webinar on key examination issues for 2008 is scheduled for today at 1 p.m. EST. NCUA board member Gigi Hyland will host. The free webinar will focus on practical implications of the recently released Letter to Credit Unions on Evaluation Third Party Relationships and strategic planning considerations for management and boards of directors. The webinar also will include an interactive question and answer session ... * WASHINGTON (1/29/08)--Treasury Secretary Henry Paulson will hold a press conference Thursday with U.S. Treasurer Anna Escobedo Cabral, Acting Internal Revenue Service Commissioner Linda Stiff, Sen. Max Baucus (D-Mont.) and Sen. Charles Grassley (R-Iowa) to mark Earned Income Tax Credit Awareness Day. The press conference also will be Webcast on the Treasury Department’s website ...

CUNA CUs may find BSA lessons in Justice Dept. agreement

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WASHINGTON (1/29/08)—The Credit Union National Association (CUNA) says credit unions should be aware of a recent Justice Department agreement involving a money services business and its handling of Bank Secrecy Act (BSA) Anti -Money Laundering requirements. “Credit unions should take a look at the issues highlighted in the Justice Department agreement,” said Nichole Seabron, CUNA federal compliance counsel, Monday. “ This agreement should be seen as a cautionary tale for any financial institution subject to BSA requirements It shows that regulators are taking a deeper look at areas that would trigger enhanced anti-money laundering procedures.” According to court documents, Justice has accused a California money services business of failing to prevent laundering or investigate suspicious activity for which it had filed reports. Seabron said apparently the California entity engaged in high-risk activities and had an AML system that would identify the high risk activities, but then did nothing to follow up on the activities it identified in Suspicious Activity Reports. According to the Jan. 28 American Banker, until this case the Justice Department has only fined companies for failing to have an effective anti-laundering program. “This case can serve as a reminder to credit unions to make sure their BSA/AML policies and procedures are commensurate with their business risk profiles. “It appears that this entity did not have a strong enough program in place considering the higher risk business transactions it engaged in.” For more details on the Justice Dept. action, use the resource link below.

MBL provisions could be long shot for stimulus bill

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WASHINGTON (1/29/08)—The Credit Union National Association (CUNA) continues its work on Capitol Hill to encourage lawmakers to include two credit union-specific provisions in a new economic stimulus package, provisions which could add $5.7 billion to the economy at no cost to taxpayers. CUNA has presented information to both House and Senate leaders explaining how provisions to raise credit unions’ current member business lending ceilings and increase the minimum threshold for a qualifying member business loan could bring $5.7 billion of reasonably priced credit to borrowers. In a recent letter to lawmakers (see News Now, Jan. 25), CUNA outlined how adding the MBL provisions as written in the Credit Union Regulatory Improvements Act (CURIA< H.R> 1537) would “provide immediate stimulus for a targeted segment of the economy that may need assistance the most, specifically small business owners, at no cost to taxpayers." CURIA would raise credit unions' current member business lending (MBL) ceiling from 12.25% of assets to 20% of assets and increase the minimum threshold for a qualifying member business loan from $50,000 to $100,000. The bill has 142 co-sponsors in the House and has not yet been introduced in the Senate. “We continue to have conversations with legislative staffers on the Hill, especially on the Senate side,” Ryan Donovan, CUNA vice president of legislative affairs, said Monday. He noted that thousands of requests for inclusion in the stimulus package flooded Congress last week, but said that the fact that CUNA’s proposal to help the economy is revenue neutral makes it an exception among the many. “So far the House version of a stimulus package contains only six provisions--none of which are specific to credit unions. We continue to work on the House side, but are focusing our efforts in the Senate right now to see if that body is willing to work with a broader package of initiatives to help the economy,” Donovan said. Use the link below to access CUNA’s Jan. 23 letter to House and Senate leaders.

Accounting group defers FIN 48

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WASHINGTON (1/28/08)--The Financial Accounting Standards Board (FASB) voted to allow a deferral of FIN 48 for nonpublic entities unless they have issued a full set of annual financial statements incorporating the recognition, measurement and disclosure requirements of FIN 48. FIN 48 is applicable to unrelated business income taxation (UBIT) for state-chartered credit unions and provides direction on how to financially recognize such tax when there is a question regarding the amount of the tax liability. It is also important to many credit union service organizations (CUSOs), which are subject to state and federal tax. Fin 48 applies for the reporting of tax liabilities when there is uncertainty as to the extent of the liability, such as with the application of unrelated business income taxation to state credit unions. Under the deferral, FIN 48 would apply for years beginning after December 15, 2007. "This is a good development," said CUNA's Accounting Task Force Chairman Scott Waite who noted that CUNA, the UBIT Steering Committee, and others filed comments with FASB on Jan. 18 to support the deferral. However, some remaining uses need clarification, such as how first quarter 2008 call report filings might impact the deferral, noted Waite, who also is senior vice president and chief financial officer of Patelco CU, in San Francisco. Waite, CUNA, CUNA Mutual Group and other organizations represented on the UBIT Steering Committee will continue working with FASB to provide as much clarification on these issues as possible, according to CUNA Deputy General Counsel Mary Dunn. Use the resource link below to review the comment letters.

Missouri bank failure is first of 2008

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WASHINGTON (1/28/08)—Federal regulators late Friday closed the $58.5 million-asset Douglass National Bank of Kansas City, Mo.—this year’s first bank failure. The Federal Deposit Insurance Corp. (FDIC) approved the assumption of the failed institution’s deposits by Liberty Bank and Trust Company of New Orleans, La. In addition to assuming all of the failed bank’s $53.8 million in deposits, the FDIC said Liberty Bank and Trust will purchase approximately $55.7 million of Douglass National's assets at book value, less a discount of $6.1 million. The FDIC will retain approximately $2.8 million in assets for later disposition. The regulator estimated that the cost to its Deposit Insurance Fund is approximately $5.6 million. Three FDIC-insured institutions failed during 2007.

NCUA announces CDRLF application period

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ALEXANDRIA, Va. (1/228/08)--The National Credit Union Administration (NCUA) has announced it will accept applications for participation in the Community Development Revolving Loan Fund's (CDRLF’s) loan program beginning in September, subject to the availability of funds. The CDRLF provides assistance to credit unions with an official “low-income” designation to provide basic financial services to residents in their communities. The assistance is in the form of low-interest loans and is intended to stimulate income levels, home ownership, and employment. Applications can be submitted from Sept. 1 to Nov. 30, according to a Federal Register document submitted by the NCUA. The Fund's total appropriation is $13.4 million. As of Dec. 31, 2007, the Fund's loan portfolio totaled to $13.3, according to the document. Application procedures for the 2008 Fund Loan Program will be posted to the NCUA Web site. Or applications for participation may be obtained from and should be submitted to: NCUA, Office of Small Credit Union Initiatives, 1775 Duke Street, Alexandria, VA 22314-3428.

ABA CUs are No. 3 super priority for 08

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WASHINGTON (1/28/08)--A prioritized list of goals outlined by the American Bankers Association (ABA) places credit unions No. 3 on the list--behind terrorism and security concerns, and regulatory burden--but well ahead of the mortgage crisis. Those priorities are "out of whack," says Credit Union National Association (CUNA) President/CEO Dan Mica. "Just as they did several years ago when they ranked attacking credit unions higher than safeguarding the U.S. from terrorism, the bankers again have their priorities way out of whack," said Mica. "The mortgage crisis--to which more than a few banks contributed--is at the root of the economic problems now facing the country, yet it too now falls below attacking credit unions on the bankers' wish list." "Housing and Mortgage Markets" are No. 6 on the bankers' list. ABA Chairman Bradley E. Rock outlined ABA's "super priorities" for 2008 in ABA Banking Journal (Jan. 1). The priorities are the result of meetings of ABA's board, the Government Relations Council and America's Community Bankers Council, he said. On the list, the language related to credit unions has changed. Instead of the "level the playing field" language of the past, ABA uses a new term: "government-advantaged institution." And it is more specific in its goals of ending credit unions' Congress-mandated tax-exempt status. The No. 3 priority is: "Unfair Competition from Government-Advantaged Institutions." ABA says it will "strongly oppose efforts by credit unions and Farm Credit System to abandon their core missions and to use government advantages to expand into the banking business." ABA also would "Encourage IRS (Internal Revenue Service) to continue to re-evaluate whether tax benefits for these institutions should be retained and to ensure that unrelated business income is taxed fairly." "Banks should put their own house in order and recognize that, now more than ever, 90 million hard-working Americans need and trust their credit unions," Mica said. Other ABA priorities include:
* Banking and Commerce--Work with Congress and regulators to strengthen statutory restrictions on the ownership of banks by nonfinancial firms; * Payments System--Pursue legislation allowing banks to sustain leadership of the system. Insist that nonbank firms operating elements of the system be subject to comparable requirements for protecting its integrity. * Housing and Mortgage Markets--Support policies that strengthen primary and secondary mortgage markets and set clear national standards for all mortgage originations. * Mutual Charter--Support the mutual and mutual holding company charter options, and work with banking agencies to achieve more flexible and tailored rulemaking and supervisory guidance for mutual charters. * Regulatory depth--Preserve choice by advocating the retention of a variety of financial charters and the banking agencies that support them. Advocate enhanced coordination among agencies rather than agency consolidation. * Federal Home Loan Bank System--Encourage reforms that enhance the utility of the FHLB System and oppose proposals that would harm its operations. Begin efforts to ensure FHLB payments to fund REFCorp are not continued once REFCorp obligations are met (possibly in 2010).
Rock is CEO of Smithtown (N.Y.) Bancorp.

Inside Washington (01/25/2008)

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* WASHINGTON (1/28/08)—The Senate Committee on Banking, Housing, and Urban Affairs has announced a Jan. 31 hearing on “Strengthening our Economy: Foreclosure Prevention and Neighborhood Preservation.” A witness list has not yet been made publicly available … * WASHINGTON (1/28/08)--After spending the last year focusing on his presidential campaign, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has unveiled his 2008 agenda (American Banker Jan. 24). Dodd plans to tackle mortgage reform, the credit crisis, government-sponsored enterprise reform, industrial loan companies and regulation for hedge funds. Dodd also said he wants to take the lead in developing short- and long-term economic stimulus proposals for the subprime mortgage crisis. He also is working on a plan that would create a government corporation to purchase delinquent mortgages at discounted values. The discounts would be passed along to homeowners through more affordable mortgages. The program would receive funding of $10 billion to $20 billion and the loans would consist of 30-year, fixed-rate mortgages ... * WASHINGTON (1/28/08)--Home Depot has decided to drop its bid to buy EnerBank USA, a Salt Lake City industrial loan company (ILC). Home Depot applied for the ILC in May 2006, but its application was frozen in two moratoriums after a debate over ILC ownership (American Banker Jan. 25). If the Home Depot application had been approved, the ILC ownership issue would likely come up in the Senate again, according to George Sutton, a lawyer and former financial institutions commissioner. The second application freeze expires this week. Other pending ILC applications include Blackstone Group and Chrysler Financial ... * WASHINGTON (1/28/08)--President Bush’s plan to stimulate the economy by sending checks to households could put stress on the Internal Revenue Service (IRS) and delay tax rebates (The New York Times Jan. 25). Under Bush’s plan, the checks would be sent out two months after he authorizes the payments, with the first checks scheduled to arrive in early May. But the Congressional Joint Committee on Taxation noted that the checks could snag the tax-filing season and delay distribution until June. The checks will be based on income and other factors, and many may receive checks who don’t owe income tax. The IRS also must update outdated computer systems as the estimated 135 million tax returns arrive now and through April 15. Treasury Secretary Henry Paulson said Thursday he didn’t think the payments would affect the tax rebates ... * WASHINGTON (1/28/08)--House Financial Services Committee Chairman Barney Frank (D-Mass.) released a statement regarding legislation passed by the House on environmental standards for new public housing in the U.S. ... * WASHINGTON (1/28/08)--Anthony W. Ryan, Treasury assistant secretary for financial markets, will speak at the World Research Group’s annual conference on market liquidity in New York City today. His speech will focus on the importance of liquidity in capital markets and risk management ...

Compliance The dog ate my ATM receipt

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WASHINGTON (1/28/08)—The Federal Reserve Board’s Regulation E, governing electronic funds transfers, requires that a receipt be made available for each transaction at an electronic terminal, unless the consumer declines the receipt. So, what happens when there is an honest mistake? While it’s clear the “dog ate my receipt” excuse doesn’t quite fit the situation, the “dog ate my ATM’s receipt paper roll” might. The Credit Union National Association’s January Compliance Challenge asks, would a credit union have violated the Reg E requirement if its ATM runs out of paper and fails to give someone a receipt? And the answer is no. Comment 205.9(a)(5) in the regulation clarifies that if a receipt is not provided to the consumer because of a bona fide unintentional error, such as when a terminal runs out of paper, or the mechanism jams, no violation results if the financial institution maintains procedures reasonably adapted to avoid such occurrences. So, having procedures in place to prevent this from happening on a routine basis is the key to avoiding a Regulation E violation in these instances, the Challenge advises.

Public Service CU chosen to absorb Norlarco

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WASHINGTON (1/25/08)--During yesterday’s closed board meeting, the National Credit Union Administration (NCUA) selected Public Service CU’s bid to purchase the assets and assume the shares of Norlarco CU of Ft. Collins, Colo. Public Service CU (PSCU) of Denver, Colorado, will provide Norlarco members with uninterrupted credit union service following consolidation of the two credit unions, said the agency. Norlarco was placed into conservatorship by Colorado state regulators in May after a number of its construction loans issued in Lee County, Fla., became delinquent. In July, the NCUA took control of the credit union and removed its board of directors. With assets purchased and assumed by PSCU following the liquidation, Norlarco members are guaranteed full member-owner rights at PSCU, said NCUA. PSCU was chartered in 1938, and has $623 million in assets with more than 76,000 members primarily located in the Denver and Colorado Springs areas. Chartered in 1959, Norlarco has assets of more than $290 million, and serves over 42,000 members. NCUA never identified the bidding organizations. However, Ent FCU, a $2.292 billion-asset Colorado Springs-based institution, confirmed it is one of three credit unions interested in purchasing Norlarco. The other was identified by the Nov. 27 issue of The Coloradoan newspaper as Bellco CU, Greenwood Village, Colo.

Inside Washington (01/24/2008)

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* WASHINGTON (1/25/08)--Mortgage fraud drove a 15% increase in suspicious activity reports (SARs) last year, observers said. The Financial Crimes Enforcement Network (FinCEN) is scheduled to release a report showing that 650,000 reports were filed in 2007, compared with 567,000 in 2006 (American Banker Jan. 24). About 46,700 filings were related to mortgages in the fiscal year ending Sept. 30, according to the Federal Bureau of Investigation. The FBI also estimated that about 15,000 SARs related to mortgage fraud have already been filed this year ... * WASHINGTON (1/25/08)--Comptroller of the Currency John Dugan announced Wednesday he has named agency veteran Tim Long to serve as senior deputy comptroller for Bank Supervision Policy. Jennifer Kelly will succeed Long as senior deputy comptroller for Mid-Size and Community Bank Supervision. Long also will serve as chief national bank examiner and as chairman of the Committee on Bank Supervision. Long succeeds Wayne Rushton, who will retire in April. Long joined the OCC in 1979 ...

CU MBL provisions urged for stimulus bill

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WASHINGTON (1/25/08)--As the House pared its economic stimulus package to focus on “timely, targeted and temporary” provisions, the Credit Union National Association (CUNA) yesterday continued efforts to include two that would allow credit unions to make more business loans to members in need of affordable capital. On Wednesday, CUNA President/CEO Dan Mica in a letter to House and Senate leaders pointed out the two related provisions together would provide $5.7 billion in economic stimulus at no cost to taxpayers. The provisions would raise credit unions' current member business lending (MBL) ceiling from 12.25% of assets to 20% of assets and increase the minimum threshold for a qualifying member business loan from $50,000 to $100,000. Both provisions are currently part of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537) which so far has amassed 141 cosponsors. According to CUNA Legislative Affairs Vice President Ryan Donovan, thousands of requests for inclusion in the stimulus package flooded Congress this week. So far the House version contains only six provisions--none of which are specific to credit unions. “The leadership remains focused on provisions that are ‘timely, targeted and temporary,’” said Donovan. In its letter, CUNA explained that adding CURIA's MBL provisions to the economic stimulus package "will provide immediate stimulus for a targeted segment of the economy that may need assistance the most, specifically small business owners, at no cost to taxpayers." CUNA estimates these provisions will make about $5.7 billion in new, reasonably priced credit available to borrowers. Such relief would be well-timed, CUNA added, pointing to a Jan. 22 front-page article in the Wall Street Journal about how--in the current credit crunch--banks are making it harder and more expensive for some small businesses to borrow. CUNA's letter was sent to Senate Majority Leader Harry Reid (D-Nev.), Minority Leader Mitch McConnell (R-Ky.), House Speaker Nancy Pelosi (D-Calif.) and Minority Leader John Boehner (R-Ohio). Use the link below to access the complete letter.

NCUA seeks comment on CU board fiduciary duties

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ALEXANDRIA, Va. (1/25/08)--The National Credit Union Administration (NCUA) is seeking comment as it considers amending its rules to more clearly define a credit union board’s fiduciary duties in the face of major decisions, such as mergers or conversions to mutual thrifts.
Click for slide show[CLICK TO VIEW SLIDESHOW] NCUA Office of General Counsel Staff Attorney Frank Kressman, right, told the three member NCUA board it’s clear that a credit union’s board has a fiduciary duty to members. “What’s not entirely clear is how to measure that duty,” he said. “We don’t have a benchmark.” (Photo provide by CUNA)
At its monthly open board meeting Thursday, the three-member NCUA board agreed to receive comments for 60 days after its advanced noticed of proposed rulemaking (ANPR) is published in the Federal Register, a process which often takes about a week. According to a staff document presented at the meeting, the primary focus of the agency’s possible action is protection of members/ interests in transactions that involve fundamental changes in their ownership or in the structure of their credit union. The ANPR addresses six types of transactions: merger of a federally insured credit union (FICU) into another FICU; merger of such an institution into a privately insured credit union (PICU); conversion of a federally insured state-chartered credit union into a PICU; conversion of a FICU into a mutual savings bank (MSB) merger of a FICU into a financial institution other than a MSB; and conversion of a FICU into a financial institution other than a MSB. The transactions noted above are all legally permissible. However, the NCUA believes its current regulations may not adequately address the issues raised by the various forms of business deals. In its ANPR, the NCUA asks for comment in the following areas:
* Credit union conversion into a financial institution other than an MSB. The agency said it is considering establishing an administrative framework and procedures rather than continue its case-by-case approach, and asks for comment on such things as whether such conversions are beneficial to credit union members; * Issues that affect member interests in restructuring transactions; * Is there a need for a regulation to address the fiduciary obligations a credit union director owes members and/or a need for additional regulatory provisions to guard against insider enrichment; * Communications to members. The NCUA is considering, for instance, a need to specifically state a prohibition against credit union officials stating or implying that the NCUA has endorsed the charter change or accompanying credit union materials; and * Member voting rights, such as the right to request a recount and the use of interim tallies
The Credit Union National Association (CUNA) will be reviewing the ANPR with several of its subcommittees during its Governmental Affairs Conference here in March. Use the resource link below to read the NCUA request for comments.

House Financial Services set 08 priorities

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WASHINGTON (1/25/08)—Chairman Barney Frank (D-Mass.) of the House Financial Services Committee unveiled his panel’s 2008 agenda Thursday, although he warned that the issues noted comprise a partial list. Frank opened his press conference by reiterating his view that the country’s current financial crisis was spurred by irresponsible lending and securitization, but noted that some securitization activities are beneficial to the economy. He added that deregulation will be a subject before his committee this year, but that the current problems in the housing market drive home his position that some regulation is necessary to avoid abuses. He said his committee will look at the history of Suspicious Activity Report filing to study whether the number of filed reports are overwhelming law enforcement officials and hampering law enforcement efforts. The chairman also said that housing issues, such as the lack of subsidized public housing and affordable rental housing, will come before his committee this year. He added that a proposed Housing Trust Fund contained in the House-passed FHA bill is still on his radar. Credit card practices will have the panel’s attention in 2008, Frank said. He did not support setting card rates, but did favor regulating practices such as universal default. Other issues on the front burner include the Community Reinvestment Act (CRA) and Home Mortgage Disclosure Act data that has indicated racial disparities in lending. The topics raised by Frank also included data security, and he said he continues to believe that those who are responsible for the data breach should pay for the costs. John Hildreth, senior legislative representative of the Credit Union National Association, said after the briefing that Frank made it clear that he was addressing only some of the issues that will come before the committee and that there were many others on the horizon.

Federal CU rate set for 18 months

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ALEXANDRIA, Va. (1/25/08)--The National Credit Union Administration (NCUA) voted Thursday to continue the 18% interest rate ceiling for loans and lines of credit advances made by federal credit unions. The ceiling is set for an 18-month period from March 10 through Sept. 10, 2009.
Click for slide show[CLICK TO VIEW SLIDESHOW] On the agency’s interest rate ceiling, NCUA Director of the Office of Capital Markets and Planning J. Owen Cole Jr. (right) recommended the board leave the permissible maximum interest rate for federal credit unions at 18% for the next 18 months. As part the agency’s analysis of the rate, it solicits input from Congress and the U.S. Treasury. “We received no specific feed and view that to mean they’re comfortable with our economic rationale and justification,” he said. (Photo provided by CUNA)
The agency will issue a Letter to Federal Credit Unions to notify those institutions of the rate decision. The current 18% ceiling was due to revert to 15% on March 10 absent NCUA’s action. As required by Congress, the NCUA will review this rule again in 18 months or sooner if economic conditions warrant. Prior to the vote, the board emphasized the benefits of a higher interest rate ceiling to credit union members and their communities. A higher rate can enable credit unions to provide affordable capital through risk-based lending, according to agency staff.

NCUA to look at fiduciary clarifications more

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ALEXANDRIA, Va. (1/24/08)--The National Credit Union Administration (NCUA) is scheduled today to take up its rules related to credit union board fiduciary responsibilities at its monthly board meeting. The federal regulator is expected to issue an advance notice of proposed rulemaking intended to more clearly define a board’s fiduciary duties in the face of major decisions, such as mergers or conversions to mutual thrifts. The proposal would seek to amend Parts 708a and 708b of NCUA's "Rules and Regulations--Mergers, Conversion from Credit Union Charter, and Account Insurance Termination." The agency will seek comments. Also on the agenda, the board will evaluate credit unions' federal usury rate ceiling, which the Federal Credit Union Act requires every 18 months. The rate currently is set at 18%. As is routine, the open board meeting will be followed by a closed session. Observers of acquisition efforts by three Colorado credit unions for Norlarco CU of Fort Collins will be watching to see if the agency uses the session to act on bids. John McKechnie, NCUA director of public and congressional affairs, would not confirm a date for a bid decision and would not identify items to be addressed at the closed NCUA meeting. Norlarco was placed into conservatorship by Colorado state regulators in May after a number of its construction loans issued in Lee County, Fla., became delinquent. In July, the NCUA took control of the credit union and removed its board of directors. The NCUA has never identified the bidding organizations. However, Ent FCU, a $2.292 billion-asset Colorado Springs-based institution, has confirmed it is one of three credit unions interested in purchasing Norlarco. The others were identified by the Nov. 27 issue of The Coloradoan newspaper as Bellco CU, Greenwood Village; and Public Service Employees CU, Denver. The NCUA had expected to approve a purchase-and-assumption agreement for Norlarco by the end of last year, according to a letter to credit union members posted in November on the Norlarco website. However, despite the agency’s desire to approve a successful resolution as soon as possible, broader market conditions have made it a longer process than at first expected, according to a source close to the situation. Service to Norlarco members has continued uninterrupted.

Dodd wants housing measures in stimulus package

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WASHINGTON (1/24/08)—Senate Banking Committee Chairman and former presidential hopeful Chris Dodd (D-Conn.) sent a letter to the Senate majority leader this week saying he wants to create a new government corporation to buy troubled mortgages and refinance them mostly into Federal Housing Authority (FHA) loans. Dodd told Majority Leader Harry Reid (D-Nev) that his plan would need up to $20 billion of President George W. Bush’s proposed economic stimulus package to act as seed money. Dodd said the primary cause of the nation’s current economic woes is the collapse of its housing market and added he believes a stimulus package must address “the problems that confront the housing market, distressed homeowners and their communities.” “I also believe that a stimulus package should address some of the labor market problems caused by the massive layoffs and downturn in the housing market. One way to stimulate this vital sector of our economy is to invest in targeted infrastructure projects,” Dodd wrote in his Jan 22 letter. He said that an additional $2 billion invested into existing transit projects would create almost 100,000 jobs. Dodd said he is currently drafting a proposal to create a Federal Homeownership Preservation Corporation to purchase outstanding mortgages at steep discounts. He said his plan would ensure that lenders and investors “take a ‘haircut’” and are not being bailed out. The senator proposed $10 billion to $20 billion in initial capitalization. He also asked that a stimulus package include $10 billion for the purchase and rehabilitation of foreclosed properties by local governments through community development block grants (CDBG). He added that FHA modernization should be included in a stimulus package to provide distressed borrowers with new sources of mortgage capital thereby, he said, helping many save their homes. He said that raising Fannie Mae and Freddie Mac conforming loan limits temporarily would also start to bring liquidity back to mortgage lending and would help restore housing markets.

CUNA financial literacy partner tapped by Bush

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WASHINGTON (1/24/08)--The National Endowment for Financial Education (NEFE)--CUNA’s partner in expanding financial literacy education throughout U.S. schools--was named to President George W. Bush’s newly established President’s Advisory Council on Financial Literacy. NEFE President/CEO Ted Beck will represent the organization on the president’s council. The White House said the 19-member council will focus exclusively on economic empowerment issues. It will operate under the guidance of the U.S. Treasury Department with the specific charge of “keeping America competitive and assisting citizens in understanding and addressing financial matters." Charles R. Schwab, chairman/CEO of the Charles Schwab Corp., will serve as the council's chairman. Operation HOPE Founder, Chairman/CEO John Hope Bryant was named vice-chairman. Cutler Dawson, president/CEO of Navy Federal CU in Merrifield, Va., also will serve on the council.

Inside Washington (01/23/2008)

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* WASHINGTON (1/24/08)--On Tuesday, Steven Preston, head of the Small Business Administration (SBA), said that loan volume for SBA’s signature loan program has decreased, and that originations dropped to 20,000 in the fourth quarter (American Banker Jan. 23). The agency is attempting to expand participation in its loan guarantee program, but Preston noted several roadblocks: slow loan turnaround times, a lack of support services for lenders, complex rules and paperwork. Because of these roadblocks, the SBA has lost 368 financial institutions the past two years--a 7% decline, Preston said. In November, the agency started a program to speed up payments of loan guarantees, but it faces challenges such as inefficient workflows and information technology systems. It could take until April or May to streamline the program, he said ... * WASHINGTON (1/24/08)--Rev. Jesse Jackson met with three Department of Housing and Urban Development (HUD) officials Tuesday after his Rainbow Push Coalition met at HUD’s offices to rally for action on the foreclosure crisis (American Banker Jan. 23). The coalition was briefed on Federal Housing Administration loans and a Hope Now alliance plan that would freeze starter interest rates on certain subprime mortgages. Meeting participants included FHA Commissioner Brian Montgomery, HUD Secretary Alphonso Jackson and Deputy Secretary Roy A. Bernardi ...

Mica says its no time for partisanship on the Hill

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WASHINGTON (1/24/08)—Nothing can bring out partisan politics quite like a presidential election year, says Credit Union National Association (CUNA) President/CEO Dan Mica, but 2008 is just the time to put divisiveness aside so Congress can successfully take up the challenges it faces. Mica, in his most recent appearance as guest columnist in The Hill, said CUNA and other groups that traditionally work in a bipartisan fashion have an advantage—and this year particularly. “Any legislative or lobbying effort that falls along party lines is likely dead from the start. There simply is not the time to hash out differences,” Mica said, pointing to the greatly abbreviated time Congress will be in session this year because of elections. Noting that there will be a scant 100 days to conduct real legislative business, Mica says what also will die out fast will be bills addressing divisive issues. It is almost certain, for example, that any effort designed to tackle immigration will not survive this session. Controversial presidential nominations and judicial appointments will come to a standstill. The CUNA leader says he remains an optimist about what can be accomplished this year, particularly as members of Congress conclude early that they need to find common ground to move quickly on certain issues. However, Mica adds, “Bottom line, 2008 is a challenge, and it may be difficult for anyone to call this a landmark year in Congress.” Mica appears regularly in the Capitol Hill publication The Hill’s as a guest columnist for its K Street Insiders feature. "K Street" refers to an area in Washington, D.C. known as a base for influential lobbyists, think tanks and advocacy groups stationed in the nation's capital. Use the resource link below to read more Mica comments.

Election 08 Whats new for CU advocacy

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WASHINGTON (1/23/07)—The Credit Union National Association (CUNA) announced Wednesday that it soon will be offering four new online courses for credit union representatives interested in political advocacy. The fist two sessions will instruct credit unions on how to communicate the credit union difference to their public officials and communities and effective ways to initiate direct lobbying efforts on a grassroots level. Joann Sordellini, political communications manager for CUNA, said those initial courses will be available online to CUNA members now and will be quickly followed by two additional offerings. One of those will address campaign involvement and what credit unions can do to support credit union-friendly candidates and to get out the vote among their members. The other will explore public affairs and communications strategies and will provide how-to tips for communicating credit union issues to local public official. The courses are free and certificates will be awarded by CUNA upon successful completion of each segment. Richard Gose, CUNA senior vice president of political affairs, said, “The more educated a credit union member we have, the better it is for credit unions. “ Also in the political affairs arena, CUNA is about to launch a new round of its campaign schools, seminars that are intended to encourage credit union professionals and volunteers to run for office in any political race, from local school board to state legislature. In February, CUNA will return to Montana and conduct four sessions across the state with an expected 50 participants in each. Later in the year, CUNA will offer the schools for the first time in Ohio and New Mexico. Also for the first time, CUNA will run a demonstration campaign school at its Government Affairs Conference in Washington, scheduled from March 2-6. The abbreviated session will be presented over three days and is intended to give participants an idea of what it is like to organize a campaign.

House Financial Services to list years agenda

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WASHINGTON (1/24/08)—The chairman of the House Financial Services Committee, Rep. Barney Frank (D-Mass.), has scheduled a news conference for 10:30 a.m. (ET) today to reveal his committee’s 2008 agenda. Ryan Donovan, vice president of legislative affairs for the Credit Union National Association (CUNA), said Wednesday that almost certainly President George W. Bush's propopsed economic stimulus package and actions to contain the sub-prime mortgage credit crisis will be at the top of the Chairman's priorities. “In the atmosphere in Washington right now is a sense of urgency for dealing with what appears to be a steep economic downturn and may even be a recession. There's no doubt that Congress wants to do something, and do it quickly,” Donovan said. After those issues, Donovan said, the committee’s agenda for 2008 can only be made clear by the chairman. “It is a volatile time right now and it is a very short legislative year because of the federal elections--with Congress expected to be in session just under 100 days,” Donovan added. (See related story, “MICA says it's no time for partisanship on the Hill.”) While CUNA views it as a short legislative year, Donovan said he was not short sighted about the importance of the committee's hearings and mark-ups this year. "I think much of what the committee will do over the next several months will be as much as about getting legislation enacted in the short-term as it will be about laying the groundwork for Congress to take more comprehensive legislative action over the next several years," he said. “Based on what the chairman has said previously, I think it is reasonable to expect that Rep. Frank will take up some form of credit card legislation early in the year," Donovan said. "I wouldn't be surprised to see overdraft protection legislation back on the committee's agenda. We expect a hearing on credit union issues in the first quarter of the year. And, Chairman Frank has said previously he would like to hold a hearing on the Community Reinvestment Act. There are certainly a lot of ways he could go." CUNA will be very active in its efforts to work with committee staff on the key issues, reiterated Donovan, and it remains very positive about the prospects for important credit union legislation, including the Credit Union Regulatory Improvements Act. "But we also are very cognizant that Congress has megalithic issues before it just now, issues that will influence much of the legislative session,“ Donovan said.

Inside Washington (01/22/2008)

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* WASHINGTON (1/23/08)--Although Federal Housing Administration and mortgage reform legislation is a priority for the Bush administration, it will not likely be a part of an economic stimulus plan Congress is working on, Treasury Secretary Henry Paulson said Friday (American Banker Jan. 22). The administration is working to help the economy more broadly in light of the housing price decline, he said. Sen. Charles Schumer (D-N.Y.) confirmed that the Bush administration supports increasing Fannie Mae’s and Freddie Mac’s loan limits temporarily, but not without comprehensive reform, he said. Paulson may support raising loan limits without comprehensive reform, but “it’s not worth slowing down the package,” Schumer said ... * WASHINGTON (1/23/08)--House Oversight and Government Reform Committee Chairman Henry Waxman is asking former chief executives of Citigroup Inc., Merrill Lynch and Co., and Countrywide Financial Corp. to justify their compensation at a Feb. 7 hearing (American Banker Jan. 22). Waxman charges that the executives pocketed large sums while the companies they ran lost money. None of the witnesses have agreed to show at the hearing. The executives include Charles Prince, E. Stanley O’Neal and Angelo Mozilo, respectively ... * WASHINGTON (1/23/08)--The U.S. Supreme Court Tuesday rejected an appeal for a $40 billion lawsuit brought against Wall Street firms that engaged in business with Enron Corp. The appeal rejection comes shortly after the Stoneridge ruling, which asserted that third parties are not liable for securities fraud unless they were involved with making investment decisions (The Wall Street Journal Jan. 22). Lower courts, using the Stoneridge precedent, will decide if the Enron case should be revived. The involved firms include Merrill Lynch and Co., Credit Suisse Group, Barclays PLC and Pershing LLC ... * WASHINGTON (1/23/08)—The Federal Deposit Insurance Corp. (FDIC) Tuesday named two long-time agency staffers to senior positions within its division of supervision and consumer protection. Robert W. Mooney, who joined the FDIC in 1989, was named deputy director for consumer protection and community affairs. Kathleen G. Nagle, who has 33 years of experience in the consumer protection field, was named associate director for consumer protection … * WASHINGTON (1/23/08)--National Credit Union Administration Board Chairman JoAnn Johnson highlighted the importance of financial education while volunteering at an elementary school branch of State Department FCU in Alexandria, Va., on Martin Luther King Jr. Day. She commended the credit union and other credit unions for their commitment to financial literacy. “[Volunteering] is a higher calling and for credit unions, it comes naturally,” she said ...

CUNA supports delay in UBIT accounting guidance

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WASHINGTON (1/23/07)—There is too much confusion surrounding the Financial Accounting Standards Board’s (FASB’s) Interpretation 48 (FIN 48) for nonpublic entities and the issues involved to proceed with an original effective date, said the Credit Union National Association (CUNA) in a comment letter. FIN 48 is applicable to unrelated business income taxation (UBIT) for state-chartered credit unions and provides direction on how to financially recognize such tax when there is a question regarding the amount of the tax liability. It is also important to many CUSOs, which are subject to state and federal tax. The CUNA letter was in support of a recommendation by FASB’s own Private Company Financial Reporting Committee (PCFRC) that the effective date be delayed. Scott Waite, chairman of CUNA’s Accounting Task Force, noted a recent PCFRC survey on how FIN 48 would apply in situations in which the UBIT tax liability has not fully been determined. CUNA publicized the survey through its online news service, News Now, and encouraged affected credit unions nationwide to respond to the survey by a January 31st deadline. “In light of the FASB's own questions regarding the application of FIN 48 as well as the uncertainty of credit unions and accounting professionals, we strongly support the proposed delay in the effective date of FIN 48,” wrote Waite in the Jan. 18 letter. Waite is SVP/CFO of Patelco CU, in San Francisco, as well as a member of FASB’s Financial Accounting Standards Advisory Council and its Small Business Advisory Committee. Waite highlighted credit union concerns that the qualifications for a deferral in FSP 48-b were not very clear. For instance, he said, FSP 48-b assumes the adoption of FIN 48 if previously prepared GAAP financial statements have been provided to third parties. “We believe FASB has not provided sufficient guidance regarding which entities are included in the term, ‘third parties.’ For example, we believe that if a credit union has provided required statements that conform to GAAP to its regulator but has not adopted FIN 48, then it should, as a result, be entitled to the deferral," Waite told News Now Tuesday. The UBIT issue was in the news spotlight last week when Community First CU filed a complaint in federal court challenging the Internal Revenue Service (IRS) on its determinations that certain insurance products offered to members fall outside the credit union's main mission and are subject to the tax. Community First, based in Appleton, Wisc., seeks a refund of taxes paid on income from several insurance products. The credit union said at issue is about $54,000 in taxes it paid in 2006 on income from the sale of credit life and credit disability insurance, and guaranteed auto protection (GAP) insurance. Use the resource link below to access CUNA’s complete comment letter.

Policymakers must know CUs remain strong says Mica

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WASHINGTON (1/23/08)--Credit union loan quality will continue to feel the strain from the turmoil in today’s economy but remains strong by historical standards, Credit Union National Association (CUNA) President/CEO Dan Mica noted following yesterday’s market activity. “Yes, we will probably see a rise in delinquencies and charge-offs, but nothing like other sectors are experiencing,” said Mica. “It’s important for policy makers, the media and others to view our situation in its proper perspective.” Mica noted, for example, that the credit union delinquency rate remains under 1% and the net charge-off rate is still less than half a percent. First-mortgage charge-offs at CUs in the third quarter were almost zero (0.02%). While these levels are expected to rise later this year and will eat into credit union net income, Mica sees the credit quality issues are manageable, especially given credit unions’ high levels of capital. “In the mortgage market, we’ve said that credit unions are part of the solution, not the problem, and that continues to be the case,” he added. Mica agreed yesterday’s 75 basis-point rate cut by the Federal Reserve would likely help mitigate the effects of the slowing economy (see related story).

IRS wants Form 1099-C on home debt forgiveness

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WASHINGTON (1/22/08)—-The Internal Revenue Service (IRS) says lenders should continue to file Form 1099-C on all debt forgiven, even on those amounts no longer subject to taxation because of the passage of the Mortgage Forgiveness Debt Relief Act of 2007. This new development is contrary to what CUNA reported to credit unions in December. That’s when President George W. Bush signed the bill that provides temporary tax relief to homeowners who lose their home to foreclosure or who negotiate a loan modification. “IRS says to still file the 2007 form, due to the debtor by Jan. 31, 2008 and to the IRS by the end of February, on debt modification or forgiveness involving the person’s principal residence,” reports Kathy Thompson, CUNA’s senior vice president of compliance. “It will be up to the taxpayer to straighten out with the IRS what is taxable and what’s not.” Since the bill was passed so late in the year, the IRS won’t have time to change its 1099-C form to include a box similar to the one to check regarding debt discharged in bankruptcy or provide explanatory information for the debtor about the mortgage relief act, said Thompson. “Revising the 1099-C form is impossible at this point, but the IRS still wants the information,” she added. “What this means is, unfortunately, a taxpayer due relief under the 2007 mortgage debt forgiveness law will have the IRS electronic tax system record the 1099-C information as taxes due and will undoubtedly get a few computer-generated dunning notices--probably involving a hefty dollar figure--before getting a real person at IRS, perhaps with the help of a lawyer, to straighten this out,” says Thompson. “But the credit union’s only responsibility continues to be to comply with the IRS reporting rules and get all 1099-C ‘Cancellation of Debt’ forms–-including those involving home mortgage loans--filed with the IRS on time,” she reminded.

Jurisdictional spat lingers over Farm Credit Lending

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WASHINGTON (1/17/08)—Jurisdictional feuding in Congress over possibly expanding the Farm Credit System’s lending authority continued this week in advance of a House-Senate conference on the 2007 farm bill. House Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.), along with Senate Banking, Housing, and Urban Affairs Committee Chairman Christopher Dodd (D-Conn.) and Ranking Member Richard Shelby (R-Ala.), sent a letter Tuesday to House Agriculture Committee Chairman Collin Peterson (D-Minn.), Ranking Member Bob Goodlatte (R-Va.), Senate Agriculture, Nutrition and Forestry Committee Chairman Tom Harkin (D-Iowa), and Ranking Member Saxby Chambliss (R-Ga.). The letter acknowledged House and Senate rules provide the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition and Forestry, respectively, with jurisdiction over farm credit matters. “However, jurisdiction over credit more generally is within the jurisdiction of the House Committee on Financial Services and the Senate Committee on Banking, Housing and Urban Affairs,” wrote the banking committees’ leaders. Neither House nor Senate farm bills currently contain proposals to expand the Farm Credit System’s lending authority, acknowledged the lawmakers, who reminded their colleagues of jurisdictional boundaries. “If you are pressed to consider such proposals during conference, however, we urge you to consult with the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs prior to taking any such action,” they wrote.

Fiduciary clarifications on NCUA board agenda

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ALEXANDRIA, Va. (1/18/08)--The National Credit Union Administration (NCUA) during its monthly board meeting on Thursday will consider clarifying its rules related to credit union board fiduciary responsibilities. While the agency has no specific proposal, it continues to consider how to better define a credit union board’s fiduciary duties in the face of major decisions, such as mergers or conversions to mutual thrifts. The Advanced Notice of Proposed Rulemaking is related to Parts 708a and 708b of NCUA’s “Rules and Regulations--Mergers, Conversion from Credit Union Charter, and Account Insurance Termination.” The agency will seek comments. Also on the agenda, the board will evaluate credit unions’ federal usury rate ceiling, which the Federal Credit Union Act requires every 18 months. The rate currently is set at 18%.

Inside Washington (01/17/2008)

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* WASHINGTON (1/18/08)--States should have been included in negotiations with the Treasury Department, Hope Now, servicers, lenders and investors regarding a fast-track loan modification program, said Richard Neiman, New York State banking superintendent, in a Dec. 11 letter to the Treasury (American Banker Jan. 17). The states should not be overlooked, because all market participants have a share of responsibility in the current situation, he wrote ... * WASHINGTON (1/18/08)—The House voted Thursday to reauthorize the HOPE VI housing program and to make a number of changes to the program meant to prevent the loss of affordable housing for those who need it. The HOPE VI Improvement and Reauthorization Act of 2007 (H.R. 3524) requires, for instance, that all public housing units in existence as of January 2005 that are proposed for demolition must be replaced on a one-for-one basis. The bill also, among other things, requires public housing agencies to provide a mixed-income housing development on the site of the original public housing location in a manner resulting in a decrease in the concentration of poverty. In addition, public housing agencies must ensure that replacement units are provided in a manner that affirmatively furthers fair housing …

NCUA drops BSA cease and desist against CU

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ALEXANDRIA, Va. (1/18/08)--The National Credit Union Administration (NCUA) Board said yesterday it has terminated a cease and desist order issued in July against Garden Savings FCU for violations of the Bank Secrecy Act (BSA). “The violations have been resolved and the credit union is now BSA compliant,” said the agency in a statement. Garden Savings, with $159 million in assets, was chartered in 1968 and has approximately 15,500 members in Parsippany, Whippany and Newark, according to the NCUA. The NCUA enforcement order issued July 3, 2007 detailed 20 areas demanding immediate attention by all directors, committee members, officers and employees. Garden Savings was ordered to engage "an individual or firm" that is a BSA/AML specialist as a consultant to help the credit union correct its deficiencies. The order also demanded that all required Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs) for past reportable activities be filed within 30 days of the NCUA's order. The credit union also was required to obtain Office of Foreign Asset Control (OFAC) training for all officials "including, but not limited to, operation management, staff, and board members. It was required to hire a "competent, full-time BSA compliance officer with the delegated authority and necessary resources to implement and enforce BSA policies and procedures.

Inside Washington (01/16/2008)

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* WASHINGTON (1/17/08)--At least 10 states are pushing mortgage reform legislation as the foreclosure crisis continues. They include California, Maine, Indiana, Utah, Illinois, Maryland, New Hampshire, West Virginia, New York and Kentucky (American Banker Jan. 16). California’s Assembly could pass three mortgage bills by February, and the state’s Senate Banking Committee was scheduled to question several major lenders on loan modifications Wednesday. The committee also was expected to approve a bill that would give borrowers the opportunity to work out loan problems with lenders before foreclosure, lengthening the notification period and assessing fines of $1,000 per day to lenders who do not maintain foreclosed homes. Maine’s legislature also has amended a predatory lending bill this month that the state passed last year. State action is necessary, said Kevin Stein, associate director at the California Reinvestment Coalition. He said that his organization receives daily complaints from agencies and borrowers who cannot successfully deal with loan servicers ... * WASHINGTON (1/17/08)--Third parties are not liable for fraud claims if investors did not rely on those parties’ statements, the Supreme Court ruled Tuesday. The case involved Stoneridge Investment Partners, which claimed that Scientific Atlanta and Motorola Inc. inflated prices for Charter Communications cable boxes so that suppliers could use the extra money to buy advertising from Charter. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) criticized the court’s decision, stating that the decision would protect “wrongdoers.” Conversely, Rich Whiting, executive director of the Financial Services Roundtable, supported the ruling, saying that its rejection would have triggered other allegations ... * WASHINGTON (1/17/08)--National Credit Union Administration Chairman JoAnn Johnson announced that the HOPE NOW hotline is featured on MyMoney.gov. The hotline gives homeowners access to Department of Housing and Urban Development-approved credit counselors ... * WASHINGTON (1/17/08)--Credit Union Development Educators (CUDE) volunteers will pack 15,000 meals on March 2 from 9 a.m. to noon at the Credit Union National Association (CUNA) Governmental Affairs Conference in Washington, D.C. as a part of “Stop Hunger Now.” The project is seeking donations to cover the cost of the meals. The program is presented by the National Credit Union Foundation with support from World Council of Credit Unions, CUNA and CUNA Mutual Group ...

Compliance CTRs and joint account withdrawals

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WASHINGTON (1/17/08)--A credit union member withdraws $15,000 in cash from the joint account he shares with his wife. In completing a currency transaction report (CTR), must the credit union list only the individual who made the withdrawal or all of the owners on the account? This question currently is the subject of much debate, according to the Credit Union National Association's (CUNA) Compliance Challenge. For years, financial institutions--both credit unions and banks--were advised to complete CTRs for withdrawals on joint accounts with only the information of the individual completing the transaction, unless there is reason to believe that the other joint owners on the account will benefit from the withdrawal. However, some institutions are being advised to assume all joint owners are benefiting from the withdrawal, which means all should be listed on the CTR form. This latter position appears to be based on an older piece of Financial Crimes Enforcement Network (FinCEN) guidance, which is embedded in an inactive FDIC Financial Institution letter, according to the Challenge. CUNA recently received clarification that the FinCEN guidance remains active and is considered standing authority on this particular issue. The association said FinCEN is expected to issue clarification on this issue in the near future.

CUs rally behind UBIT tax challenge to IRS

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WASHINGTON (1/16/07)—Community First CU filed a complaint Tuesday in federal court challenging the Internal Revenue Service (IRS) on its determinations that certain insurance products offered to members fall outside the credit union’s main mission and are subject to unrelated business income tax (UBIT). Community First, based in Appleton, Wisc., is seeking a refund of taxes paid on income from several insurance products. The credit union said at issue is about $54,000 in taxes it paid in 2006 on income from the sale of credit life and credit disability insurance, and guaranteed auto protection (GAP) insurance. While no outside parties are expected to be allowed to join the case, Community First’s decision to sue the IRS received the support of the Credit Union National Association (CUNA), the American Association of CU Leagues, the National Association of State CU Supervisors and CUNA Mutual Group, which comprise the UBIT Steering Committee. CUNA EVP and General Counsel Eric Richard said at a press conference Tuesday that the entire credit union movement owes Community First “a debt of gratitude’ for taking on the UBIT issue in federal district court. “The IRS position is untenable,” Richard said, “They say credit unions should pay taxes even on some financial services products offered to their own members on a cooperative, not-for-profit basis. That’s just wrong--and we think the court will agree with us. “We believe Community First Credit Union has a strong case to make to the court and we want to compel IRS to adopt a more reasonable position. This is an important policy issue for the entire credit union movement, as well as specifically for Community First. Our role at CUNA, and with the other system players, is to ensure the movement understands we are working together to address this issue and get it fixed.” Larry Blanchard, CUNA Mutual Group senior vice president, noted that the UBIT Steering Committee has been trying to work out UBIT issues with the IRS for more than ten years. He said the UBIT challenge ranks high in importance for the credit union movement, and added that it is close to H.R. 1151, the Credit Union Membership Access Act, and establishing an independent regulator for credit unions. In its petition to the United States District Court for the Eastern District of Wisconsin, Community First requested a trial by jury for its UBIT challenge. Naming the United States of America as defendant, the credit union charged that the defendant, through the Commissioner of Internal Revenue, “has aggressively sought to characterize income from certain activities of state-chartered credit unions to be unrelated business income and therefore subject to UBIT.” “Community First fundamentally disagrees with the Defendant’s position that such income is unrelated business taxable income subject to UBIT,” the court document added and explained that the credit union seeks through its lawsuit to obtain a legal determination binding on the United States that income derived from the credit union activities identified in the complaint does not constitute unrelated business taxable income. NASCUS President/CEO Mary Martha Fortney, voicing her group’s support of the credit union’s legal action, said, “State regulators and state legislators have long recognized that credit unions must evolve their products and services to meet the needs of their members. The IRS must understand that credit unions offer certain products to their members in an effort to promote thrift and savings, as a part of the credit union’s purpose.” Catherine J. Tierney, Community First’s president and CEO, called the decision to sue the IRS “daunting,” but said it was made because her credit union believes “unequivocally that these products are integral to our services to members.” “It is daunting to stand up to the IRS—but we do it for our members who would have to bear the cost of this tax ultimately.” Also speaking at the press conference, Brett Thompson, Wisconsin CU League president/CEO, said Community First “acted in the best interest of its members.” He added that his league and all the state leagues support the credit union in its effort. CUNA’s Richard said that it “would be reasonable to expect” the case to be resolved at the district court level in a year’s time.

Examiner Issues O8 webinar open for sign-up

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ALEXANDRIA, Va. (1/16/08)—The National Credit Union Administration (NCUA) issued a notice Tuesday that it has opened registration for its Jan. 29 webinar on key examination issues for 2008, which will focus particularly on evaluations of third-party relationships and strategic planning. NCUA board member Gigi Hyland will moderate the informational session, which will follow up on the agency's recently released Letter to CUs (07-CU-13) on the topic. (see News Now 12/28/07, "CU examiners schooled on third-party relationships.") That letter recognized that credit unions use third parties for many types of services, including lending programs, regulatory compliance and electronic delivery. The agency endorsed the value of such relationships, and stated that it does not intend to stifle innovative use of the arrangements to meet members' needs. However, the guidance also advised that even with proper due diligence, a credit union can only mitigate risks associated with outsourcing, rarely eliminate them. It stated that examiners who evaluate third-party arrangements should ensure a credit union has addressed the following areas in a way that is commensurate with their size, complexity and risk profile:
* Risk assessment and planning; *Due diligence; and * Risk management, monitoring and control.
The Webinar will be held from 1:00-2:30 p.m. (EDT). Additional information and registration details are be posted on the NCUA website. Use the resource links below to access the agency website and to register for the webinar.

Inside Washington (01/15/2008)

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* WASHINGTON (1/16/08)--Federal Reserve Board Chairman Ben Bernanke will discuss the housing crisis during a meeting with the House Budget Committee Thursday. On Monday, he met with Speaker of the House Nancy Pelosi (D-Calif.) to talk about how the Fed and Congress can work together to help the economy. No specifics were released about the meeting (American Banker Jan. 15) ... * WASHINGTON (1/16/08)—Rep. Richard Baker (R-La.), former chairman of the House Financial Services subcommittee on capital markes, announced Tuesday that he will leave Congress no later than Feb. 7. (The Daily Report by Businessreport.com) It has been reported that Baker has been in talks with the Managed Funds Association to become its president. CongressDaily reported Jan. 8 that Baker has been in talks with the group regarding a $1 million annual salary. His departure from the House will result in a special election to fill his 6th District seat ... * WASHINGTON (1/16/08)--A bill that would allow bankruptcy judges to restructure mortgages could trigger higher costs for lenders and borrowers by 1.5% or more, according to the Mortgage Bankers Association (American Banker Jan. 15). The Credit Union National Association (CUNA) has stated that provisions of the mortgage bill could adversely affect credit unions and encouraged lawmakers to tailor the bill’s broad definition of “non-traditional” mortgages so that carefully underwritten credit union loans are not treated the same as the questionable subprime loans that have caused an upheaval in the subprime and mortgage markets. (News Now Dec. 13)...

Senate returns with Fryzel nomination on its plate

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WASHINGTON (1/15/08)—Although JoAnn Johnson’s term as chairman of the National Credit Union Administration ended in August and the White House has officially nominated Michael E. Fryzel to succeed her, it is still unclear when the Senate may consider Fryzel's nomination, according to the Credit Union National Association (CUNA). President George W. Bush has sent Fryzel's name to the Senate for confirmation, but the Senate Banking Committee has not yet scheduled a hearing on his nomination, which is a necessary step to securing the position. John Magill, senior vice president of legislative affairs for CUNA, said Monday that the chairman of the banking committee, Sen. Christopher Dodd (D-Conn.) has said he is not of a mind to act on many of the nominations forwarded by the Bush administration. However, Magill noted, with critical vacancies at the Federal Elections Commission and the Securities and Exchange Commission, the banking committee may not be able to wait out the federal election in November to fill long-hanging vacancies. Chairman Johnson, in welcoming the nomination of Fryzel, said she would continue in her capacity as chairman “during this interim period,” and the NCUA confirmed Monday that the chairman’s plans have not altered. Fryzel is an Illinois real estate lawyer and former director of the state's Department of Financial Institutions. Integral to that position, according to Fryzel’s resume, was the licensing and regulation of more than 700 state-chartered credit unions with assets exceeding $4.3 billion.

CUNA offers free membervoter materials

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Click to view larger image Shane Singh, CUNA political affairs accounting coordinator (left) and Gretchen Drobnyk, CUNA political affairs vice president, test the new voter resources on CUNA’s website. (Photo provided by CUNA)
WASHINGTON (1/15/08)—-Forty-four percent of registered voters are credit union members, according to the Credit Union National Association (CUNA), which gears up get-out-the-vote (GOTV) efforts again this election year. “We want to make it easy for credit unions engage members with a turnkey approach to voter activism,” said CUNA Political Affairs Senior Vice President Richard Gose. The new offerings include:
* Online voter registration; * Request an early or absentee ballot; * Polling place locator; * Election schedules; * Get-Out-The-Vote posters; * A Guide to Election Year activities; and * A free election year electronic newsletter.
GOTV statement stuffers will be available soon. The new resources are integrated with other political offerings, such as Project Zip Code, said Gose. CUNA’s online materials can be linked from credit unions’ websites. "If credit unions don't vote, credit unions don't count,” said Gose. “It's time to be counted."

Light agenda for Congress first days

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WASHINGTON (1/15/08)—The House is back in session this week and the Senate next week, but Ryan Donovan, VP of legislative affairs for the Credit Union National Association (CUNA), said Monday that things will remain subdued on Capitol Hill for the first few weeks of the new year. Donovan said that until the President’s State of the Union address has been delivered later in January, the House and Senate both are likely to maintain “light legislative agendas.” That lighter agenda could extend, Donovan said, until the White House budget proposal has been submitted to Congress in early February. Likely to get the House’s immediate attention, however, are procedural issues in anticipation of an effort to override President George W. Bush’s veto of a Defense authorization bill. The House, Donovan said, is also expected to act this week on resolutions involving slain Pakistani political leader, Benazir Bhutto, and a reauthorization of the Hope VI housing program. “We don’t expect the House Financial Services Committee to meet this week, but in the next weeks expect that panel to take up Internet gambling rules and credit card issues,” Donovan said. Recently, sixteen House Republicans wrote to the Treasury Department and Federal Reserve Board warning that their joint proposal to implement a 2006 ban against most forms of Internet gambling could have major unintended consequences for financial institutions and credit card companies. CUNA has also expressed reservations about the joint agency proposal, warning it threatens to impose "unforeseen regulatory burdens" on credit unions and other financial institutions. CUNA President/CEO Dan Mica wrote House Financial Services Chairman Barney Frank (D-Mass.) in December asking for a moratorium on the law's implementation until "a more reasonable approach can be considered by Congress and the regulators." CUNA also expects to see action soon on one of two bills that have been floating on Capitol Hill that would prohibit several ways credit card companies charge fees and raise rates. House Financial Institutions Subcommittee Chair Carolyn Maloney (D-N.Y.) is expected to introduce a bill that would protect consumers from double-cycle billing and any rate or fee adjustments not covered in the contract. That bill is also expected to propose a ban on universal default on outstanding debt. CUNA also continues to work with Hill staffers to increase support for the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537), which already has 142 supporters in the House. A hearing is expected on the measure early in 2008. “It is reasonable to expect a hearing in the first part of this year,” Donovan said, noting that the chairman and other members of House Financial Services have indicated that timing for a formal vetting of the legislation.

Marie Osmond joins CUNA AGM cast

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WASHINGTON (1/15/08)--Children's Miracle Network (CMN) co-founder Marie Osmond will speak during the Credit Union National Association's (CUNA's) Annual General Meeting on March 3, held in conjunction with the Governmental Affairs Conference (GAC) in Washington, D.C. As a guest speaker, Osmond will highlight credit union support this past year of Children's Miracle Network and its Credit Unions for Kids program. Osmond appeared this season on ABC's Dancing with the Stars, finishing third in the competition. As a singer and actress, Osmond was co-host of the popular variety program, The Donny & Marie Show. She has since starred in several made for television movies, co-hosted Ripley's Believe It or Not, performed on Broadway, made the New York Times bestselling authors list, and established herself as an entrepreneur with her Marie Osmond Collectible Doll line. Use the resource link to learn more about CUNA's AGM and GAC.

Inside Washington (01/14/2008)

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* WASHINGTON (1/15/08)--The Office of Federal Housing Enterprise Oversight released a mortgage market note Friday stating that if a bill passed last May by the House is enacted, it could create credit risk for Fannie Mae and Freddie Mac. The bill, which stalled in the Senate, would raise the conforming loan limit to 150%. Because of the increase, the GSEs would have to charge higher fees. In addition, most of the eligible mortgages would not count toward affordable housing goals set by the Department of Housing and Urban Development ... * WASHINGTON (1/15/08)--Foreign state-run investment funds that have given capital to major U.S. banks are under investigation as lawmakers continue to scrutinize foreign investments by U.S. companies (American Banker Jan. 14). The Senate Banking, Housing and Urban Affairs Committee ordered the investigation to see if the infusions have caused security or economic concerns. The committee also will examine U.S. and international authorities’ oversight. The funds have received recent attention due to their acquisition of stakes in companies such as Citigroup Inc. and Merrill Lynch and Co. ... * WASHINGTON (1/15/08)--The Federal Deposit Insurance Corp. (FDIC) has issued a financial institution letter of proposed rulemaking regarding the potential failure of FDIC-insured depository institutions. The first part would govern how and when deposit account balances would be determined; the second part proposes requirements to facilitate the process for determining the insurance status of deposits of large insured depository institutions. Comments on the notice are due April 14 ...

Inside Washington (01/11/2008)

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* WASHINGTON (1/14/08)--The Federal Deposit Insurance Corp. (FDIC) has expressed uncertainty regarding the need for voluntary excess coverage for deposits by private or public entities. The FDIC Quarterly published a study Thursday indicating that increasing profits have lowered demand for the coverage (American Banker Jan. 11). Though the study recognized that the FDIC could provide the coverage, it also pointed out that the agency would face several complications in doing so. If the agency were to offer excess coverage, it could offer its own form and charge financial institutions higher premiums or focus on the private market. If the FDIC offered coverage, it could limit well-capitalized institutions, cap available coverage and create a new pricing system, said the study’s authors. Other excess options for financial institutions exist outside of an FDIC plan, including a service that would divide larger deposits into smaller ones among several banks, the study stated. The study’s findings were originally reported last February to Congress ... * WASHINGTON (1/14/08)--The Department of Labor is suing Fifth Third Bancorp, alleging mismanagement of a pension fund in 2004 (Dow Jones Jan. 11). According to the lawsuit, Fifth Third created an investment strategy to develop a property in Detroit. After Operating Engineer Local 324 Pension Fund invested $28 million in the property, Fifth Third sold the property for $4.5 million to Cavaliere Group. Fifth Third created the strategy after receiving advice from co-defendant Carey Milestone Advisors LLC ...

Conversion group to appeal court dismissal

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WASHINGTON (1/14/08)—-The Coalition for CU Charter Options (CCUCO) will appeal a U.S. District Court ruling which dismissed its suit against the National Credit Union Administration (NCUA) over the agency’s conversion rules. CCUCO filed its notice of appeal Jan. 7 in the U.S. Court of Appeals for the Fourth Circuit, located in Richmond, Va. A federal district court ruled Dec. 7 that the Coalition for CU Charter Options lacked standing to bring suit against NCUA and dismissed the case challenging the agency's rules on credit union conversions to banks. CCUCO has until Jan. 17 to request portions of the trial court's transcript that it plans to use in its arguments to the appeals court. It then has 40 days from when it files the record with the appeals court's clerk in which to file its appellate brief. NCUA, which is represented by the Department of Justice, will then have 30 days from the time CCUCO files its brief to file a brief of its own. In its Dec. 7 ruling, the U.S. District Court for the Eastern District of Virginia found that the coalition failed to show that any of its members were directly damaged or affected by the NCUA's new conversion rules and thereby the group had no "standing" to bring a lawsuit challenging the agency's actions. The CCUCO lawsuit was brought against the NCUA in July and the plaintiff sought to have the court overturn the agency's conversion rule as invalid and arbitrary. The coalition challenged the rule on the grounds that it was inconsistent with the Federal Credit Union Act which requires that the NCUA's conversion regulation to be consistent with that of other financial regulators, such as the Office of Thrift Supervision and the Office of the Comptroller of the Currency. In its short published opinion, the court concluded that NCUA has authority to regulate conversions. It also stated that the Coalition had not shown that any of its members were harmed by the regulations or that any of its members have immediate plans to come under the rules through a conversion application. Credit Union National Association (CUNA) General Counsel Eric Richard said the court's decision "good news for consumers" and said his group expects the conversion group will fare no better in its appeal.

Frank We-told-you-so speech on subprime other issues

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WASHINGTON (1/11/08)--The chairman of the House Financial Services Committee has announced he will, in a speech, present an argument that the country’s subprime mortgage problems are a case in point against a “widely held belief” that deregulated markets perform better. Rep. Barney Frank (D-Mass.) is scheduled to make his remarks to the Kennedy School of Government, at Harvard College, in Cambridge, Mass. on Jan. 14. Frank’s office announced Thursday that the chairman will present a speech entitled “We Told You So: A Liberal Perspective on 21st Century Capitalism.” The subprime mortgage problems and the associated financial crisis that started last summer is a case in point, Frank will argue, in which financial innovation--coupled with the lack of regulation and government oversight--now threatens the overall economy. More broadly, Frank is expected to discuss his view of the role of regulation in the modern economy. This event is cosponsored by the Institute of Politics, the Mossavar-Rahmani Center for Business and Government, the Rappaport Institute for Greater Boston, the Regulatory Policy Program, and the Taubman Center for State and Local Government. Congress adjourned for a winter recess on Dec. 20. The House is scheduled to return to session on Jan. 15, the Senate on Jan. 22.

VISA stock accounting tips offered for CUs

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WASHINGTON (1/11/08)—Credit unions currently sorting through the complex accounting issues associated with treatment of VISA Class B stock may find value in an analysis being released today by the Credit Union National Association’s (CUNA’s) Accounting Task Force. Noting an absence to date of guidance from either the Financial Accounting Standards Board or the American Institute of Certified Public Accountants, Task Force Chairman Scott Waite , working with CUNA and in consultation with accounting regulators and practitioners, has developed tips for credit unions. However, Waite and CUNA urge all credit unions affected by the stock offering ultimately to consult their own accountants for specific guidance for their situations. “Although there is yet to be complete consensus, here is how a number (of practioners) are accounting for the Visa stock,” said Waite, who is also SVP-CFO of Patelco CU, San Francisco. “It takes into account Visa's restructuring agreement plan under which some of the proceeds of the IPO will be used to fund an escrow account to pay for certain litigation and settlement costs.” The CUNA analysis states:
* Financial Institutions should record their investment in VISA USA common stock received at its historical cost (carryover basis) which is most likely $0 (per SEC); * When and if recognized in 2008, the stock exchanged from VISA USA common stock to CLASS B common stock should be recorded at its carryover basis, in other words $0 (per SEC); * A liability should be established in 2007 for both the Amex settlement and the Discover estimate per FIN 45 and FAS 5: * The amounts are $2.065 billion for AMEX and $650 million for Discover – as disclosed, recorded, and SEC filed by VISA with the SEC; * Technically a FIN 45 liability should also be established for the remaining pending litigation; * A charge should be taken through earnings; * The amount is an estimate but should be generally based on an institution’s membership proportion of interest in VISA USA times the AMEX and Discover amounts; * Despite the outcome of the IPO and its potential stock value, the restructuring agreement (already in effect in 2007) contains an indemnification clause (see VISA SEC filings S4 page 96 and VISA SEC filing 10K, item 3, page 49) that is now being considered the member’s guarantee to pay as its liability, not VISA’s; * The escrow will be funded when and if the IPO is completed by calculating a pro rata reduction of the stock held by financial institutions that may be converted to CLASS A stock so that the escrow account will have a balance to pay the litigation settlement. We understand that the SEC has indicated that the pro rata value of stock deposited in the escrow account should be considered “as if sold” and a gain recorded when the IPO is complete but only to the extent that a FIN 45 and FAS 5 liability was previously recorded. Or course this makes a timing difference in the recognition of the litigation indemnification and the gain of the conversion ratio of the shares used to fund the litigation escrow; and * The payment of the litigation costs by VISA members in the form of receiving less stock (net proceeds) still constitutes a payment by the members regardless of any exchange of cash.
This CUNA information is based on the the general conclusion that there will be carryover basis in the stock in 2008 and a liability for the fourth quarter of 2007 for the indemnification of litigation losses, Waite stated. He added that the analysis is based on FAS 5 for settled cases and FASB's FIN 45 for the pending litigation . He reiterated that affected credit unions should work with their accountants to ensure they are accounting for the stock and related issues properly.

C-SPAN airs live CUNA-sponsored election chat

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WASHINGTON (1/11/08)—-C-SPAN television yesterday gave political junkies nationwide access to a presidential election discussion organized by the National Journal and MSNBC and co-sponsored by the Credit Union National Association (CUNA).
Click to view larger image During yesterday's "Power Lunch" in Washington, D.C., from left: Chuck Todd, political director, NBC News; David Morris, executive editor, CongressDaily; Scott Reed, GOP strategist and former campaign manager for Bob Dole's 1996 presidential campaign; Tad Devine, senior advisor to Al Gore (2000) and John Kerry (2004); and president, Devine Mulvey - Media/Message; and Jim Barnes, political correspondent, National Journal. (Photo provided by CUNA)
More than 100 Capitol Hill staffers, news media representatives, political analysts and lobbyists attended the lunchtime event held at Union Station in Washington, D.C. Discussion centered on the Democrat and Republican candidates running for president and the Iowa caucuses and New Hamphire primary results. CUNA Political Affairs Senior Vice President Richard Gose said by participating in Thursday's event, “insiders from Capitol Hill and in the Washington lobbying community will see credit unions actively engaged in the political process."

Inside Washington (01/10/2008)

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* WASHINGTON (1/11/08)--California Assemblyman Ted Lieu (D-Calif.), chairman of the state Banking and Finance Committee, is working to pass a state bill that would require lenders with state licenses to fill out monthly reports with their loan modification data. The information would then be publicly available (American Banker Jan. 10). The bill is scheduled to be voted on Monday. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has introduced legislation that would require loan servicers to report their data to the Federal Reserve Board. Though some lawmakers are pushing for reports, Federal Deposit Insurance Corp. Chairman Sheila Bair has stated that the requirements in legislation are unnecessary. The industry is willing to file the reports voluntarily, she stated, noting that the Hope Now alliance could be enough. Hope Now is a group that aims to improve outreach to assist struggling borrowers ... * WASHINGTON (1/11/08)--The Office of Federal Housing Enterprise Oversight (OFHEO) has issued revised policy guidance on the examination of mortgage fraud programs for Fannie Mae and Freddie Mac. The guidance details standards for overseeing the programs the government-sponsored enterprises have created to minimize fraud. The new guidance permits the enterprises to designate scenarios that rise to a pattern of reportable cases of mortgage fraud or possible mortgage fraud; expands the immediate notification requirements to the OFEHO to include situations involving insider fraud; revises the timeframe and format for reporting to follow the Department of Treasury’s Financial Crimes Enforcement Network requirements; and adds clarification to the definition of mortgage fraud ... * WASHINGTON (1/11/08)—A regulatory outlook in the Jan. 10 issue of American Banker noted the following: The Internal Revenue Service is thinking about new restrictions on tax preparation companies that offer refund anticipation loans to ensure that selling the loans and preparing the returns are completely separate functions; the Federal Reserve Board is expected to soon offer a rule to define unfair and deceptive practices for the mortgage and credit card industries; and the Department of Housing and Urban Development may soon release a new, scaled-back Real Estate Settlement Procedures Act overhaul plan, which would set standards for good-faith estimates for borrowers and provide more disclosure of loan terms …

Inside Washington (01/09/2008)

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* WASHINGTON (1/10/08)--Daniel Mudd, Fannie Mae’s chief executive, expressed his concerns with how some might respond to the Bush administration’s loan modification plan, saying that it could “spook investors” (American Banker Jan. 9). In a speech Tuesday before the U.S. Chamber of Commerce, Mudd said that investors left with loan losses would not be able to re-enter the market easily, thus shrinking the credit pool. Legislation should not affect the credit markets by inflicting losses onto them, he said. Bank regulators could give financial institutions credit under the Community Reinvestment Act for helping borrowers facing foreclosure, Mudd suggested, while encouraging a unified industry approach ... * WASHINGTON (1/10/08)--The Office of the Comptroller of the Currency (OCC) announced Wednesday that John K. Hardage has been named director for congressional liaison. Hardage, who joined the agency in 1997, has served as deputy director. Hardage succeeds Carolyn Z. McFarlane, who retired last year ... * WASHINGTON (1/10/08)--Rep. Richard Baker (R-La.) could announce Friday whether he will become president of the Managed Funds Association (CongressDaily PM Jan. 8). Baker has been in talks with the group regarding a $1 million annual salary. Baker said he could resign within one month if he takes the position. His absence would result in a special election to fill his 6th District seat ...

NCUA names Woodson new CFO

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ALEXANDRIA, Va. (1/10/08)—Mary Ann Woodson will become the chief financial officer of the National Credit Union Administration (NCUA) Jan. 14, taking the spot vacated by the retirement of Dennis Winans at the end of 2007. Woodson has served most recently as deputy CFO at the Department of Homeland Security (DHS), which includes 22 agencies that merged when DHS was established. Before joining DHS in 2004, Woodson was the budget director for the Federal Bureau of Investigation, where her federal career began in 1979. As CFO of the NCUA, Woodson will become responsible for the daily operations of the National Credit Union Share Insurance Fund (NCUSIF) and the NCUA Operating Fund, including the accounting and financial reporting functions for both funds. She will over take over agency administrative functions, such as travel policies and programs, budget preparation and management, finance and accounting functions, accounts payable, payroll, and the administration of credit union operating fees and NCUSIF capitalization deposits and operations. Winans was NCUA CFO since 1995 and had been with the agency since 1979.

Reg Z comments due in April

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WASHINGTON (1/10/08)—Credit unions and other interested parties have until April 8 to comment on the Federal Reserve Board’s proposed Regulation Z changes intended, in part, to address certain subprime lending practices. The proposed revisions spanned 141 pages in the Jan. 9 Federal Register, which set the deadline for public comment. The proposed rules changes are meant to better protect consumers from unfair or deceptive home mortgage lending practices and related advertising under the Truth in Lending and Home Ownership and Equity Protection Acts. The Fed’s plan would apply four protections to a newly defined category of “higher-priced mortgages,” which would include those with annual percentage rates (APRs) that exceed the yield on Treasury securities of comparable maturity by at least three percentage points for first-lien loans, or five percentage points for subordinate-lien loans. This threshold should include nearly all subprime loans. For these higher-priced mortgages:
* Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers' ability to repay the loan; * Creditors would be required to verify the income and assets they rely upon in making a loan; * Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase; and * Creditors would have to establish escrow accounts for taxes and insurance.
For most other mortgages, including the “higher-priced” mortgages, the proposal would:
* Prohibit lenders from paying mortgage brokers “yield spread premiums” that exceed the amount the consumer had agreed in advance that the broker would receive. A yield spread premium is the fee paid by a lender to a broker for higher-rate loans. *Prohibit certain servicing practices, such as failing to credit a payment to a consumer’s account when the servicer receives it, failing to provide a payoff statement within a reasonable period of time, failing to provide a schedule of fees upon request, and imposing late fees under certain circumstances. *Prohibit a creditor or broker from coercing or encouraging an appraiser to misrepresent the value of a home. *Prohibit seven misleading or deceptive advertising practices for closed-end loans, such as using the term “fixed” to describe a rate that is not truly fixed. It would also require that all applicable rates or payments be disclosed in advertisements with equal prominence as introductory or “teaser” rates; and * Provide Truth-in-Lending disclosures to borrowers within three days of application so it is early enough to use while shopping for a mortgage. Lenders could not charge fees until after the consumer receives the disclosures, except a fee to obtain a credit report.
The Credit Union National Association will soon issue a comment call to credit unions on the Reg Z revisions.

Idaho league president named to Fed advisory board

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WASHINGTON (1/10/08)—The Federal Reserve Board Wednesday named 10 new members to its Consumer Advisory Council (CAC), including the head of the Idaho CU League who was nominated by the Credit Union National Association (CUNA). Alan Cameron, president/CEO of the league, will serve a three-year term on the CAC, which advises the Fed on its responsibilities under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. Members are appointed by the Board of Governors to the 30-member panel to serve staggered three-year terms. The council meets three times a year in Washington, D.C. Cameron has served as chair of CUNA's Consumer Protection Subcommittee and as chair of the State Issues Advocacy Committee of the American Association of Credit Union Leagues. Previously, he was an attorney in private practice, during which he focused on the representation of credit unions in state and federal courts. Cameron has also been involved in a variety of community affairs related to consumer financial services. He serves as treasurer of the Hispanic Financial Education Coalition, a Jump$tart Coalition partner, as well as treasurer of the Consumer Information Council, an industry partnership dedicated to educating the public about identity theft and financial privacy issues. He was also on the board of the Consumer Credit Counseling Service of Idaho for more than twenty years. Also named for a three-year term is Michael Calhoun, president of the Center for Responsible Lending (CRL) in Durham, N.C. The CRL is a nonprofit, non-partisan research and policy organization focusing on consumer lending issues. CUNA Deputy General Counsel Mary Dunn said Wednesday: "It's very important for credit unions as consumer-owned co-ops to have representation on the Consumer Advisory Council because it does have the ear of the Federal Reserve Board on consumer regulatory issues. "CUNA recommended Alan Cameron and as head of our Consumer Protection Subcommittee he will do an outstanding job on the Fed's advisory council, and we also look forward to working with Michael Calhoun, who certainly knows credit unions given his association with Self Help." Faith Anderson, of American Airlines FCU in Fort Worth, Tex., completed her three-year CAC term at the end of 2007. The Fed also designated a new chair and cive chair for the advisory group: President/CEO Tony Brown of Uptown Consortium, Inc., whose term runs through December 2008, was designated chair; amd Managing Director Edna Sawady Market Innovations, Inc., whose term end December 2009, was named vice chair. Use the resource link below to see the complete list of CAC members.

SBA to seek larger disaster role for financials

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WASHINGTON (1/9/08)—If the Small Business Administration (SBA) proceeds with reported plans to give financial institutions a larger role when disaster strikes a community, the Credit Union National Association (CUNA) will press to ensure credit unions are included. The SBA will ask Congress for authority to give financial institutions a more prominent lending role in disaster situations, according to American Banker (Dec. 28). Under one plan, financial institutions would be able to act as agents of the SBA and process disaster loans for a fee. A second initiative would provide an SBA government guarantee to some credit card purchases made by disaster victims. According to the report, both proposals are in early stages of development but at this point the plan to allow financial institutions to act as agents is expected to track a plan passed by the House in April. The House bill did not give direct lending authority, but instead would let banks process, approve, close, and service disaster loans for a fee of 2% of the loan amount. The Senate passed quite a different SBA proposal, one which would give banks the power to make emergency loans with an 85% guarantee, similar to that of an SBA 7(a) loan. Mary Dunn, CUNA SVP and deputy general counsel, said that as the SBA’s plan becomes public, CUNA will be working to ensure that credit unions are included in any new authorities.

Inside Washington (01/08/2008)

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* WASHINGTON (1/9/08)--Small banks are unhappy about the elimination of the Merit program, a Federal Deposit Insurance Corp. (FDIC) initiative that was designed to reduce examination costs while bettering relationships between examiners and banks. The agency announced last month that the program would be discontinued, and the news worries some financial institutions (American Banker Jan. 8). The program has worked well, said Terry Frydenlund, president/CEO at 1st Bank Yuma, a unit of Western Arizona Bancorp Inc. He also stated that without the program, bank examiners will “overshoot.” Both the FDIC and its examiners argue that the program is not necessary because exams can focus on risk without Merit guidelines. FDIC employees also indicated in a recent survey that they were dissatisfied with Merit ... * WASHINGTON (1/9/08)--In a few weeks, some borrowers in danger of foreclosure will be able to get help fast-tracking their subprime loans, said Treasury Secretary Henry Paulson Monday. The plan could extend to other types of loans, he added (MarketWatch Jan. 7). Hope Now, an alliance of servicers and lenders, will implement the plan to freeze the interest rates on certain subprime hybrid adjustable-rate mortgages (CNNMoney.com Jan. 8). About 45,000 of 1.8 million at-risk borrowers have asked for help, Paulson noted. He also encouraged financial institutions to increase their capital ... * WASHINGTON (1/9/08)--The Community Reinvestment Act (CRA) prevented many banks from engaging in risky, high-cost loans that triggered the foreclosure crisis, according to a study by Traiger and Hinckley LLP (BusinessWire Jan. 7) The study analyzed mortgage lending in the nation’s top metropolitan areas. CRA banks were 66% less likely to originate high-cost loans were more than twice as likely compared with other lenders to originate loans from their own portfolios. The study also indicated that foreclosures were lower in areas where the number of bank branches was higher....

CUNA urges examiner training on loan workouts

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WASHINGTON (1/9/08)--The Credit Union National Association (CUNA) Tuesday urged federal regulators to ensure that credit union examiners are well-versed in identifying how much latitude credit unions have in helping members restructure or refinance problematic mortgage loans. In a letter sent to each member of the National Credit Union Administration (NCUA) board, CUNA referenced NCUA Letter No. 07-CU-09, which transmitted a joint statement on subprime mortgage lending adopted by the agency and other federal financial regulators last summer. That statement contains a number of important directives, including provisions on “Workout Arrangements.” “These provisions reflect prudence and sound financial management while leaving latitude for institutions to actually help mortgage borrowers in need. Our concern, however, is there has been no guidance to examiners that the agency has shared with credit unions on how this letter is being implemented,” wrote CUNA President/CEO Dan Mica. Mica noted that credit unions, for the most part, have avoided the kinds of adjustable-rate subprime mortgage loans that banks and others initiated “to the detriment of so many consumers, our economy and the global financial marketplace. “ “While credit unions have generally not been involved in making such nontraditional loans, we anticipate that borrowers will increasingly be seeking help from their credit unions to restructure mortgage loans they obtained elsewhere. “They may also be turning to their credit union to refinance traditional mortgages the credit union or other lender originated but which have become problematic due, for example, to the decreasing value of homes in the borrower’s area,” Mica wrote. He said that well-managed credit unions can be an important source of home financing for borrowers caught in the subprime morass, particularly for members with an acceptable payment history who are able to document income that is sufficient to service a new, more favorable loan or handle restructured terms such as payment agreements. “We urge NCUA to ensure examiners are well-versed in the provisions of the Statement regarding workout arrangements and are provided adequate training to recognize reasonable plans and the sufficiency of risk mitigation efforts. Guidelines and training information provided to examiners on this matter should be shared with credit unions as soon as possible,” urged the CUNA leader. A copy of the letter was also sent to House Financial Services Committee Chairman Barney Frank (D-Mass.).

Treasury to offer electronic SS fund access to unbanked

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WASHINGTON (1/9/08)—In an ongoing effort to become an “all-electronic Treasury,” that department has announced it will launch the Direct Express card as a means to distribute checkless government aid funds to unbanked consumers. The Direct Express card will be introduced in the spring and is scheduled to be phased into national distribution by the end of the summer. The Treasury estimates that four million Social Security and Supplemental Security Income (SSI) check recipients do not have bank accounts. The department maintains that paper checks place recipients at greater risk of delivery delays due to poor weather or national or local emergencies. Also, that they are subject to other check-related problems, such as lost or stolen checks. American taxpayers would save, the Treasury’s Financial Management Service (FMS) estimates, about $44 million annually if every unbanked federal check recipient signed up to use the new card. "The explosive growth in the prepaid card industry offers an important opportunity for Treasury to give unbanked payment recipients secure, easy access to their funds, at low or no cost to the cardholder,” FMS Commissioner Judy Tillman said in a release. “We ultimately would like to see an all-electronic Treasury - with all the security, efficiency and cost savings that would entail. This card takes us closer to that goal by combining the best in payment innovation with sound public policy,” she added. Under the new program, payments each month will be automatically deposited on the Direct Express card account on the federal beneficiary's designated payment day. The arrangement will provide faster access to the funds than would a paper check that would be sent through the U.S. Postal Service. Also, card holders will be able to access their money at ATMs and financial institutions nationwide. They will be able to use their card to get cash back and make purchases at retail locations, as well as pay bills and make purchases online. In addition, the accounts will be PIN-protected, federally insured, and subject to federal consumer protection regulations, the FMS announcement said. The Treasury in recent years has been promoting direct deposit of SS and SSI funds through its Go Direct campaign, and claims 1.6 million direct deposit conversions through its efforts. The Credit Union National Association is a Go Direct partner.

FASB uses online survey to garner CU input

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WASHINGTON (1/8/08)--After the Financial Accounting Standards Board (FASB) in November deferred the effective date of Interpretation 48 (FIN 48) for nonpublic entities, one of its committees now is asking for input via an online survey. FIN 48 is applicable to unrelated business income taxation (UBIT) for state-chartered credit unions and provides direction on how to financially recognize such tax when there is a question regarding the amount of the tax liability. It is also important to many CUSOs which are subject to state and federal tax. Credit unions who are subject to UBIT and who made not have filed or paid would have had to record a liability on their financial statements anyway. According to Scott Waite, chairman of the Credit Union National Association (CUNA) Accounting Task Force, the survey would help determine just how to apply FIN 48 in the sometimes uncertain world of not-for-profit organizations. This is particularly true in the case of UBIT where there is still some uncertainty as to exactly what is and is not subject to the tax. Waite, who is also SVP-CFO of Patelco CU, San Francisco, said great strides have been made in soliciting input to the standards setting process from small and private companies—including credit unions. “The FASB representation of the credit union industry has afforded us high visibility and we should take the opportunity to participate whenever we can,” he said. “We really do make a difference in many financial reporting outcomes.” Use the resource link below to access the survey. The deadline is Jan. 31.

Inside Washington (01/07/2008)

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* WASHINGTON (1/8/08)—-The National Park Service tapped Credit Union House state flower artist Margaret Huddy to paint one of the 2007 White House Christmas tree ornaments, reports the Mount Vernon Gazette (Dec. 20-26). Huddy’s assignment was to paint the White House and its grounds--which are part of the U.S. National Park System—-on the surface of an 18 inch diameter sphere. The theme of the 2007 White House Christmas Tree was “Our National Parks and Monuments.” Read more on the Mount Vernon Gazette website... * WASHINGTON (1/8/08)--The Internal Revenue Service (IRS) announced Thursday that it is considering new restrictions on refund anticipation loans (RALS), but the agency does not intend to ban the loans, according to David Williams, IRS director of electronic tax administration (American Banker Jan. 7). Rather, the agency wants to ensure that tax preparers aren’t encouraged to provide false information, he said. Williams also stated that the agency has uncovered “anecdotal evidence” indicating that some loan providers encourage consumers to inflate their returns, but has not confirmed it. The proposed restrictions could impact Pacific Capital, which receives half of its business from funding RALS, according to a research note by Brent Christ, an analyst with Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC. John Hewitt, chief executive of Liberty Tax Service and Jackson Hewitt co-founder, said the IRS cannot prevent banks from offering RALS ...

Election featured during Power Lunch hosted by CUNA

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WASHINGTON (1/8/08)--Credit unions will gain broad exposure before a vital audience in the nation's capital during another presidential election discussion organized by the National Journal and MSNBC. The Credit Union National Association (CUNA) co-sponsors the series. Panelists for Thursday’s “Power Lunch” include:
* Chuck Todd, political director, NBC News; * Jim Barnes, political correspondent, National Journal; * David Morris, executive editor, CongressDaily; * Tad Devine, senior advisor to Al Gore (2000) and John Kerry (2004); and president, Devine Mulvey - Media/Message; and * Scott Reed, GOP strategist and former campaign manager for Bob Dole’s 1996 presidential campaign.
CUNA Political Affairs Senior Vice President Richard Gose said by participating in Thursday's event, “insiders from Capitol Hill and in the Washington lobbying community will see credit unions actively engaged in the political process."

Market conditions dictate pace of Norlarco bid approval

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ALEXANDRIA, Va. (1/7/08)—Despite the National Credit union Administration’s (NCUA’s) desire to approve a successful resolution for the troubled Norlarco CU of Fort Collins, Colo., as soon as possible, broader market conditions are making that a longer process than at first expected, according to a source close to the situation. The agency continues to seek ways to preserve the assets of the credit union, but the condition of the real estate market is not cooperating with those efforts, the source noted. In a letter to members posted by the NCUA in November on the Norlarco Website, the agency indicated it expected to approve a purchase-and-assumption agreement by yearend. However, some observers now question whether January will witness a successful resolution of the conservatorship, although that timing is still possible. Three Colorado credit unions have submitted bids to acquire Norlarco, which was placed into conservatorship by Colorado state regulators in May after a number its construction loans issued in Lee County, Fla., became delinquent. In July, the NCUA took control of the credit union and removed its board of directors. Norlarco's delinquent loans total more than $65 million, according to reports. The interested credit union bidders are Bellco CU, Greenwood Village; Ent CU, Colorado Springs; and Public Service Employees CU, Denver, according to the The Coloradoan newspaper published Nov. 27. In December, John McKechnie, NCUA director of public and congressional affairs, acknowledged the bid process was taking longer than expected, but said the delay didn’t indicate a problem with the acquisition, but rather a "problem of timing." "We are making sure the acquirer gets a clean balance sheet," McKechnie said, restating the agency's goal of protecting the members' assets, keeping the acquisition costs down, and avoiding lawsuits. NCUA continues to negotiate with Norlarco creditors. McKechnie said Friday that the agency would not comment on Norlarco nor on the possible timing of a resolution of the conservatorship.

Dodds decision could spur legislative action

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WASHINGTON (1/7/08)--Sen. Christopher Dodd’s (D-Conn.) decision to step off the presidential campaign trail after a smashing loss in the Iowa primary may boost the prospects of legislation of interest to credit unions. Dodd, who is chairman of the Senate Banking Committee, introduced a bill Dec. 12 to affect a major change in the country’s mortgage regulations, in part by establishing minimum standards for subprime mortgages and adding some liability for investors who bought securities backed by the problem subprime loans. With his bid for the Presidency behind him, Dodd now has about two weeks to rest and then redirect attention and energy to such pending business in the Senate, which reconvenes Jan. 22 (CQ Midday Update Jan. 4). Dodd’s top priority, the article said, will be to complete enactment of a bill to modernize the Federal Housing Administration, a measure that has White House backing. The House and Senate have passed very different versions of the legislation, indicating a difficult conference negotiation process that will likely benefit from Dodd’s closer involvement and attention. The article also mentioned that Sen. Joe Biden’s exit from the race for the Democratic Presidential nomination will have a similar beneficial effect on legislation under the purview of the Foreign Relations Committee, which the Democrat from Delaware chairs.

NCUA rules trump California auto repo law

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ALEXANDRIA, Va. (1/7/08)—In its last legal opinion posted in 2007, the National Credit Union Administration (NCUA) declared that its lending regulations expressly preempt state laws affecting the terms of repayment for all loans. The opinion specifically addressed a California law that requires a notice of intent when a creditor acts to dispose of a repossessed vehicle. “The California law at issue affects the terms of repayment by placing additional burdens on lenders before they may recover deficiency balances owed by borrowers. NCUA’s long-standing position is that state laws affecting terms of repayment are preempted,” wrote NCUA Associate General Counsel Sheila Albin. Also, Albin wrote, the NCUA has exclusive authority to take enforcement actions against a federal credit union. Therefore, the letter said, the NCUA views the California statute’s effect of eliminating a right to collect deficiencies for failure to comply with the notice provisions as an enforcement tool and, therefore, its application to FCUs would be “inappropriate.” A footnote in the letter noted that a recent ruling by a California court of appeals found that the notice requirement if preempted by Office of Thrift Supervision regulations for federally chartered thrifts.

Inside Washington (01/04/2008)

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* WASHINGTON (1/7/08)--The Nationwide Mortgage Licensing System, which provides license applications and information on mortgage originators, has been launched by state regulators (American Banker Jan. 4). The system was created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The goals of the system are to create a more efficient licensing system, improved consumer protection and better state regulators’ supervision. Individuals and companies can enter their state mortgage license information into the system and use it to apply for other state licenses. Seven states have signed onto the system already, with eight more expected by the end of the year. About 23 other states also have expressed interest. The system is not open to the public yet … * WASHINGTON (1/7/08)--The Federal Reserve will conduct two auctions of 28-day credit through its Term Auction Facility. Each auction will offer $30 billion, scheduled for Jan. 14 and Jan. 28. The minimum bid rate will be announced at noon EST the Friday before each auction, and the results will be announced on Tuesday following each auction. Final settlement will take place on Thursday after each auction. The Fed plans to conduct auctions for as long as necessary to address elevated pressure in short-term funding markets. The Fed held an auction for $20 billion in 28-day credit Dec. 17 (News Now Dec. 17) …

CUNA analysis New FTC ceiling on disclosure charge

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WASHINGTON (1/7/08)—The Credit Union National Association (CUNA) has issued a final rule analysis of the Federal Trade Commission notice regarding charges permitted under the Fair Credit Reporting Act (FCRA). FCRA allows a credit bureau to charge a reasonable fee for making a disclosure to a consumer, up to a certain amount. Under the new FTC rule, the maximum amount will be increased from $10.00 to $10.50. The fee was originally set at $8 and is required to be adjusted periodically based on the Consumer Price Index. Adjustments are rounded to the nearest fifty cents. The higher ceiling went into effect on Jan. 1. However, CUNA notes, this fee will not apply to consumers’ requests for a free annual credit report under the provisions of the Fair and Accurate Credit Transactions Act (FACTA) of 2003. Use the resource links below for more information.

Compliance Is a declined transaction a blocked one

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WASHINGTON (1/4/08)—What is a credit union to do when asked by a member to make a wire transfer to a country under U.S. sanctions? For instance, if a credit union declines a request to wire, say, $500 to a member’s aunt in Cuba, does it have to follow its action with a report to the Office of Foreign Assets Control (OFAC)? The Credit Union National Association’s (CUNA’s) Compliance Challenge advises credit unions that no OFAC reporting is triggered in situations like the one described. “There’s a big difference between responding to a person’s inquiry and blocking or rejecting a prohibited transaction under (OFAC) regulations,” says the Challenge. CUNA’s compliance experts point out that OFAC’s blocking provisions require financial institutions to block all "property" in which a target has an interest. The term "property" is very broadly defined, including present, future or contingent interests. However, in the case above, the credit union wouldn’t be holding blocked property until it received actual payment instructions from the member to send the funds. Had things gone that far, the funds would have to be blocked and reported to OFAC within 10 days. But for a inquiry, a credit union simply can say “no” to the request or direct the individual to OFAC to apply for a license to conduct the otherwise prohibited transaction. For more on this topic and additional Compliance Challenge questions, use the resource link below.

Inside Washington (01/03/2008)

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* WASHINGTON (1/4/08)--The Credit Union National Association (CUNA) issued its analysis of the final rule on the Home Mortgage Disclosure Act (HMDA) Asset-Size Exemption Threshold. The Federal Reserve Board has increased the asset size to $37 million from $36 million. According to the rule, financial institutions with assets of $37 million or less as of Dec. 31, 2007, will be exempt from data collection requirements. CUNA member credit unions may access the analysis … * WASHINGTON (1/4/08)--The Federal Deposit Insurance Corp. (FDIC) is moving to eliminate the bank examiners’ Merit Program after an examiner survey indicated the program is not working. About 54% of survey respondents said they were not satisfied with the way examiner issues were handled and about half stated that the program negatively impacted their job satisfaction. The survey also indicated that the program doesn’t give agency employees enough time to conduct “proper” reviews of financial institutions. The banking industry’s reaction to Merit’s removal likely will be mixed, according to Nicholas Ketcha Jr., former FDIC director of supervision. Merit applies to reviews of financial institutions with assets of $1 billion or less (American Banker Jan. 3). The program was designed to help examiners spend less time reviewing individual loan transactions with Camel ratings of 1 or 2 … * WASHINGTON (1/4/08)--The number of complaints regarding credit card issuers imposing maximum default rates of 30% or more on customers with credit scores of 700 or higher are growing. Lawmakers fear that in the coming months, issuers will participate in “hair-trigger repricing” and increase rates more (Dow Jones Jan. 3). Rep. Carolyn Maloney (D-N.Y.), House Subcommittee on Financial Institutions and Consumer Credit chairman, said Congress’ hands-off approach has spurred the practice. The New York State Banking Department reported that it receives more than 50 complaints a day about high interest rates, according to Jacqueline McCormack, agency spokesman. Some industry representatives said the high rates are the issuers’ way of protecting themselves, although JP Morgan Chase and Co. and Citigroup Inc. said they would no longer practice universal default. The Federal Reserve suggested that issuers provide a 45-day notice to cardholders if the rates will change …

Mica blogs in Hill publication Need positives in 08

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WASHINGTON (1/3/08)—The country needs a year of positives and it is everyone’s job to see that positives multiply in 2008, wrote Credit union National Association (CUNA) President/CEO Dan Mica when invited to post a blog entry on The Hill’s CongressBlog. Mica said that a solid step in the right direction would be to eliminate bickering over petty issues, in favor of “some real results on major issues.” “The public has to insist that their elected leaders forego nitpicking and maneuvering, and instead take action where it is needed. Elected leaders, for their part, have to accept their responsibility in the process by practicing their political skills, rather than than voicing their sound bites, in working for solid results,” Mica wrote. Use the resource link below to read more.

Advicelivecoming on NCUA examination issues

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ALEXANDRIA, Va. (1/3/08)—The National Credit Union Administration (NCUA) will offer a Webinar this month on key examination issues for 2008 that will focus particularly on evaluations of third-party relationships and strategic planning. NCUA board member Gigi Hyland announced Wednesday that she will moderate the informational session that is scheduled for Jan. 29. It is a follow-up to the agency’s recently released Letter to CUs (07-CU-13) on the topic. (see News Now 12/28/07, “CU examiners schooled on third-party relationships.”) That letter recognized that credit unions use third parties for many types of services, including lending programs, regulatory compliance and electronic delivery. The agency endorsed the value of such relationships, and stated that it does not intend to stifle innovative use of the arrangements to meet members' needs. However, the guidance also stated that even with proper due diligence procedures, a credit union can only mitigate, rarely eliminate, risks associated with outsourcing. It stated that when examiners evaluate third-party arrangements, they should ensure a credit union has addressed the following areas in a way that is commensurate with their size, complexity and risk profile:
* Risk assessment and planning; * Due diligence; and * Risk management, monitoring and control.
The Webinar will be held from 1:00-2:30 p.m. (EDT). Additional information and registration details will be posted on the NCUA website, www.ncua.gov, next week, according to the agency.

Six tutorials coming for New Market Tax Credit participation

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WASHINGTON (1/3/08)—The Treasury Department’s Community Development Financial Institution (CDFI) Fund Wednesday announced six upcoming workshops to help those interested in applying for tax credits under the New Market Tax Credit (NMTC) program. The NMTC Program is intended to spur the investment of new private sector capital into low-income communities by permitting individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs) in designated Community Development Entities (CDEs). The CDFI Fund allocates the tax credits annually through a competitive application process. The NMTC workshops are slated to address processes for both the application of tax credits and for certification as a CDE. The half-day workshops are planned in the following cities:
* Detroit, Mich., on Jan. 7 at the Sheraton Detroit Riverside Hotel; * Portland, Ore., on Jan. 8 at the Crowne Plaza; * Oklahoma City, Ok., on Jan. 9 at the Sheraton Oklahoma City; * Sioux Falls, S.D., on Jan. 10 at the Holiday Inn Sioux Falls City Centre; * Charleston, W.V., Jan. 15 at The Summit Conference Center ; and * Miami, Fla., on Jan. 18 at the InterContinental Miami.
For interested parties unable to attend a workshop, the CDFI Fund will broadcast a session live via its website on Jan. 16 at 1:00 p.m. (ET). Just last week, the Treasury announced that it had kicked off its sixth round of competition for the NMTC program, making $3.5 billion of equity investments available to qualified credit unions and other applicants.

Inside Washington (01/02/2008)

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* WASHINGTON (1/3/08)--Treasury Secretary Henry Paulson Jr. is scheduled to deliver a speech Jan. 7 on recent events in the capital markets and their impact on the economy. He will make his remarks in New York City at an event hosted by the New York Society of Security Analysts. The Credit Union National Association’s (CUNA) regulatory affairs experts will monitor the event, particularly to determine if the Treasury secretary directly or indirectly addresses the topic of financial institution regulatory restructuring. The Treasury Department recently sought public comment on the regulatory structure of the country's financial institutions and whether changes are needed to improve regulation. The Treasury request came on the heels of a Government Accountability Office (GAO) that examined federal financial institution oversight and recommended consolidation of the regulators. In its comment letter, CUNA warned the Treasury that consolidating federal financial institution regulatory agencies would have dire consequences for credit unions because credit unions are "distinctive and exceptional financial organizations" that require their own regulatory framework. Mary Dunn, CUNA senior vice president and deputy general counsel, has said that comprehensive restructuring is not an imminent threat to credit unions, but noted that CUNA is scrutinizing any activity that may be related to ongoing discussions ... * WASHINGTON (1/3/08)--The Federal Reserve Board has approved amendments to Appendix A of Regulation CC that reflect the restructuring of the check processing operations of the Federal Reserve Banks of New York, Philadelphia, and Cleveland. Appendix A provides a routing symbol guide that helps depository institutions determine the maximum permissible hold periods for most deposited checks …