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Agencies issue guidelines on real estate appraisalsevaluations

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WASHINGTON (12/3/10)—The National Credit Union Administration (NCUA), in conjunction with other federal financial institution regulators, has emphasized that financial institutions are responsible for selecting appraisers and people performing evaluations based on their competence, experience, and knowledge of the market and type of property being valued. The NCUA and the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision in guidance released on Thursday also noted that financial institutions should demonstrate the independence of their processes for obtaining property values, and adopt standards for appropriate communications and information-sharing with appraisers and people performing evaluations. The NCUA and related regulators, who comprise the Federal Financial Instituions Examination Council (FFIEC) also called on financial institutions to maintain strong internal controls to ensure reliable appraisals and evaluations, and added that those institutions are responsible for monitoring and occasionally updating valuations of collateral for existing real estate loans and for transactions, such as modifications and workouts. The FFIEC guidelines, in the works for more then two years, replace guidance that was issued in 1994 and incorporate recent supervisory releases on appraisal practices. The new release also updates the guidance to better reflect changes in technology that have occurred during the last 16 years. “Financial institutions should review their appraisal and evaluation programs to ensure they are consistent with the guidelines,” an FFIEC release said. The new guidance was first proposed by the regulators in 2008, and CUNA in early 2009 said that credit unions were already taking "the necessary safeguards to ensure the integrity of the appraisal process" and were "meeting the expectations outlined in the guidelines." For the guidance, use the resource link.

Fed CUNA continue discussions of credit insurance proposal

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WASHINGTON (12/3/10)--Representatives from the Federal Reserve's Division of Consumer and Community Affairs told the Credit Union National Association on Thursday that they were interested in credit unions' concerns regarding proposed consumer disclosures for credit life insurance and credit disability insurance under the Truth in Lending Act. The Fed representatives during their meeting with CUNA Senior Assistant General Counsel Jeff Bloch, CUNA Counsel for Special Projects Michael Edwards and CUNA Mutual representatives Christopher Roe, Larry Blanchard, and Richard Fischer also expressed interest in possible alternatives to the proposed disclosures that would provide the information in a more clear and objective manner. CUNA and CUNA Mutual have criticized the proposed Fed disclosures, saying that they go well beyond ensuring that consumers are informed about these products, instead casting these products in a strictly negative light, and strongly discouraging consumers from purchasing them. Edwards stressed that the meeting regarding the Fed's credit life and credit disability insurance proposal is part of an ongoing process, and added that the Fed indicated willingness to continue its dialogue with CUNA and CUNA Mutual. The Fed also asked for additional information about credit insurance products and the related credit insurance consumer disclosures that are currently required by State insurance regulations. Bloch added that the credit life provisions are part of a more comprehensive Regulation Z mortgage loan proposal, and CUNA during the meeting stressed to the Fed staff that these provisions are the most problematic within this proposal. Credit insurance will pay a specified amount of a consumer's loans in the event of disability or death. Consumers have received an estimated $2 billion in benefits from credit insurance group products over the past five years, according to industry data. The Fed's proposal is open for comment until Dec. 23, and CUNA has encouraged credit unions to comment to the Fed. To comment to the Fed via CUNA's Operation Comment, use the resource link.

NCUA OIG 2011 plan notes continuing upcoming ML reveiws

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ALEXANDRIA, Va. (12/3/10)—The National Credit Union Administration’s (NCUA) Office of the Inspector General (OIG) released its annual plan for 2011 and announced that it will continue its material loss reviews of the currently conserved Members United Corporate FCU and Southwest Corporate FCU in 2011 to determine the causes of their failures and assess the NCUA’s own supervision of these credit unions. The NCUA earlier this year took control of $9.5 billion in assets Southwest and $7.4 billion in assets Members United has repackaged their legacy assets, along with the legacy assets of other previously conserved corporates, into guaranteed notes that are being sold on the open market. A pair of failed natural person credit unions, Beehive CU and Certified FCU, will also be examined by the OIG during 2011. As many as 12 additional material loss reviews may be undertaken during the year, the OIG said. The OIG plan added that the NCUA may also look into how many credit unions are exceeding the current member business lending cap and whether the NCUA’s current net worth requirements “adequately measure the safety and soundness of natural person credit unions.” The amounts of foreclosures that are retained by credit unions could also be analyzed by the NCUA OIG in 2011. The OIG also plans to examine the NCUA’s own programs in 2011 by reviewing the National Credit Union Share Insurance Fund, the NCUA’s Operating Fund, the Central Liquidity Facility, the Community Development Revolving Loan Fund, and the Temporary Corporate Credit Union Stabilization Fund. For the full OIG plan, use the resource link.

IRS releases small biz healthcare tax credit guidance

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WASHINGTON (12/3/10)--The U.S. Internal Revenue Service (IRS) has released guidance on a small business health care tax credit that “is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have.” The guidance, according to the IRS, “addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multiemployer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.” The IRS said that the tax credit is available to small businesses that pay a minimum of half of the health care premiums for their individual employees. The credit “is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers,” according to the IRS. The credit may be claimed for the 2010 through 2013 tax years “and for any two years after that,” the IRS said. The maximum credit, which totals 35% of premiums paid by an eligible small business and 25% of the premiums paid by an eligible tax exempt organization, will go to employers with 10 or fewer full time employees. The maximum credit will increase to 50% and 35%, respectively, in 2014. Businesses with 25 or more full time employees or that pay an average of $50,000 per year to their employees will not be eligible for the credit, according to the IRS. Credit unions that qualify for the credit will get the refundable tax credit by filing a newly revised Form 990-T, even if they don't file the 990-T for any other reason. CUNA will provide additional guidance in coming weeks on this new tax credit for tax-exempt organizations, which was included in the 2010 Affordable Care Act. For more on the credit and how to apply for the credit, use the resource link.

Inside Washington (12/02/2010)

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* WASHINGTON (12/3/10)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said in an interview last month that the agency will renew efforts to insure new charters, with an emphasis on “traditional” banking,” rather than commercial real estate investments and brokered deposits. Bair’s comments, reported in American Banker’s Editor at Large column Dec. 2, indicating a change in direction by the FDIC, which has approved just two banks for deposit insurance this year. Just nine charters were approved in 2009, a drop from 101 in 2008. Bair indicated the FDIC may not have been as cautious as it should have been in approving charters before the financial crisis. Going forward, she said the agency will look for banks with solid core deposits, diversified business plans and qualified management. In another interview, Christopher Spoth, senior deputy director in the FDIC’s division of supervision and consumer protection, echoed Bair’s thoughts when he said the agency would encourage traditional community bank proposals that focus on lending to local small businesses, and gathering deposits from the community. * WASHINGTON (12/3/10)--What con artists do best is trick consumers into parting with money or divulging personal information that can be used to commit fraud. To help test people's knowledge about financial scams, the Fall 2010 issue of FDIC Consumer News, published by the Federal Deposit Insurance Corp., features a quiz on common frauds and their warning signs. Other timely articles discuss FDIC insurance coverage, solutions to mortgage and other debt problems, “credit protection” offers, student loans, ways to save money at tax time, and automated overdraft payment programs. The Fall 2010 edition can be read or printed at FDIC Consumer News, or to find current and past issues of FDIC Consumer News, or request paper copies by contacting the FDIC's Public Information Center toll-free at 1-877-275-3342, or, or by writing to the FDIC Public Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, VA 22226. * WASHINGTON (12/3/10)--The Federal Reserve Board on Wednesday posted detailed information on its public website about more than 21,000 individual credit and other transactions conducted to stabilize markets during the recent financial crisis between December 2007 and July 2010 (American Banker Dec. 2).The disclosure was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Many of the transactions, conducted through a variety of broad-based lending facilities, provided liquidity to financial institutions and markets through fully secured, mostly short-term loans. Financial institutions of all sizes looked to the Fed for during the height of the financial crisis. For example, to sustain the mortgage and housing markets and lower longer-term interest rates, the Fed bought $1.25 trillion in agency-mortgage-backed securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae between January 2009 and March 2010. Financial firms taking part in this program included Barclays Capital, Merrill Lynch, PNB Paribas and Deutsche Bank Securities. The central bank also approved more than 4,000 transactions through its Term Auction Facility, with big bank such as Wells Fargo & Co., Chase Bank, and Bank of America Corp., taking part. Mid-size community banks Fifth Third Bank, Keybank and Sterling also participated in the program. * WASHINGTON (12/3/10)--Regulators will complete a study by mid-2011 to determine how much additional capital banks will have to hold under Basel III standards (American Banker Dec. 2). At a two-day meeting of the Basel Committee on Banking Supervision, regulators agreed to conduct the study to define how much extra systemically risky capital that banks would have to hold in addition to the capital and liquidity requirements under Basel III. The capital would be loss-absorbing even if the bank was in danger of failing. The committee gathered to finalize the Basel III rules, which were agreed upon in July by the committee’s oversight body, Central Bank Governors and Heads of Supervision. Leaders of the Group of 20 nations approved the Basel III rules at their annual summit in Seoul in last month. The final text of the rules will be published at the end 2010.