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Hood at YES Summit Need young leaders

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WASHINGTON (12/8/08)—At a national conference on strategies to promote credit union membership among the country’s 18-to-30 year-old age group, or “Gen Y,” National Credit Union Administration (NCUA) Vice Chairman Rodney Hood reiterated the details of his own Blueprint 2020 program. Hood was addressing the Credit Union National Association’s (CUNA’s) YES Summit in Tampa, Fla. YES stands for Your Essential Strategies. Hood reminded that his Blueprint 2020 initiative, first announced in June 2007, is meant to encourage strategic partnerships between credit unions and universities and trade schools to provide internship opportunities for young adults. Ultimately the plan is to recruit new leaders to the credit union movement. Students would receive income, academic credit, and the opportunity for permanent employment. In the process, the interns will help sponsoring credit unions attract not only the next generation of members but also the next generation of leaders, Hood told the group. “We have strong credit union leaders and wonderful boards,” said Hood, but added that unless credit unions recruit young leaders, the movement could become stagnant and miss “essential new ideas.” Hood reminded his credit union audience that NCUA makes it possible for low-income credit unions to participate in the enterprise by providing grants of up to $3,000 for paid internships. For full comments and more about the YES Summit, use the resource link below.

NCUA reviews Huron failure causes

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ALEXANDRIA, Va. (12/8/08)—In a study to determine reasons behind the 2007 failure of Huron River Area CU of Ann Arbor, Mich., the National Credit Union Administration’s (NCUA’s) Office of Inspector General (OIG) found blame could be laid at the feet of credit union management, as well as state and federal regulators. In November 2007, the NCUA announced liquidation of Huron River CU saying the action was being taken to protect member assets while addressing operational issues within Huron River. A lawsuit had been filed earlier against the $362 million-asset credit union and a homebuilder, First Home Builder, alleging fraud in the way their home construction loans were set up. The NCUA subsequently tasked its OIG with reviewing Huron to determine causes of the failure, the resultant loss to the National CU Share Insurance Fund, and to assess the NCUA’s and Michigan State Supervisory Authority’s supervision of the credit union. In the report made public last month, the OIG found that on the part of regulators, action could have been more direct and more timely. NCUA Director of Public and Congressional Affairs John McKechnie said Friday that since that time, "The unprecedented volatility and rapid deteriorations in balance sheets experienced by some credit unions during this economic downturn has necessitated changes to NCUA's examination processes.” He added, “Recent steps, such as the 12-month examination program and the increases in the exam staff reflect our recognition of the need to adapt practices in accordance with the times. NCUA is committed to taking every appropriate action to maintain the highest standards in safe and sound regulation of credit unions." Regarding credit union management, the review found that credit risk and strategic risk were major factors in Huron’s failure and that Huron management did not adequately manage and monitor the credit risk within its loan program. In addition, the OIG reported that Huron management made strategic decisions that put Huron’s continued financial viability at significant risk. State and federal examiners found, and OIG concurred, that the credit union’s management:
* Did not exercise due diligence by evaluating the third party relationship held with its lender, the Construction Loan Company (CLC); * Allowed CLC to concentrate a majority of the credit union’s loan portfolio in a speculative Florida real estate construction project; * Allowed CLC to make construction loans to applicants outside the credit union’s approved field of membership; * Misclassified construction loans and violated NCUA’s Member Business Loan (MBL) limits; * Did not have adequate liquidity controls in its ALM Policy; and *Failed to develop or follow adequate plans to guide the direction of the credit union and the Florida construction loan program.
The OIG also said it found that Huron management was “not forthcoming with the Michigan SSA and NCUA examiners about the Florida construction loan program” and may have ignored warnings regarding the “expected decline of housing values, in particular those in the Florida real estate market." As mentioned, the OIG also found that the NCUA and Michigan SSA examiners “may not have adequately monitored or reacted prudently or timely to trends indicating the safe and sound operation of Huron may have been in jeopardy." “Consequently,” the OIG report surmised, “NCUA did not adequately and timely address the credit and strategic risks Huron management caused by entering Huron into an inherently risky and uncontrolled.” The report noted the NCUA recently “reinforced the need for aggressive investigation and protection against perceived risks” in Letter to Credit Unions No.: 08-CU-20 Evaluating Current Risks to Credit Unions. It noted the letter included supervisory guidance given to NCUA examiners “about diligent examination and supervision when potential risk to a credit union is identified.”

Inside Washington (12/05/2008)

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* WASHINGTON (12/8/08)—The Bush administration is taking a new look at helping homeowners, after having poured huge amounts of money into financial institutions, reported the Dec. 5 issues of The New York Times. Ben Bernanke, chairman of the Federal Reserve, warned last week that the soaring number of foreclosures was threatening the U.S. economy. He proposed that the government could begin to engineer loan modifications, and suggested more taxpayer money could be used to help people refinance and keep their homes. And the U.S. Treasury is considering a plan to underwrite tens of billions of dollars worth of 30-year, fixed-rate mortgages at very low rates. However, the article noted that the new focus on helping individuals could create rift of bitter feelings between those who want to buy homes and those who already own them…

2.9 million West Hartford CU is liquidated

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ALEXANDRIA, Va. (12/8/08)—The National Credit Union Administration (NCUA) announced Friday it accepted appointment as receiver/liquidator of $2.9 million-in-assets West Hartford CU, Inc., following the decision of the State of Connecticut Department of Banking to close the credit union. State Banking Commissioner Howard Pitkin declared that the financial condition of the Farmington, Conn. credit union was unsafe and unsound. He petitioned the Superior Court for the Judicial District of Hartford County to name the NCUA as receiver after determining the credit union had inadequate capital and was experiencing significant loan losses. The state regulator attributed the credit union’s elevated risk to poor credit administration practices and recordkeeping. “We are saddened by this development related to the West Hartford Credit Union,” Pitkin commented in a release. “But my primary responsibility is the protection of Connecticut consumers. Therefore, we were forced to close the doors of this institution.” James Heckman, legislative director for the Connecticut regulator, told News Now Friday that the credit union had been having difficulties for some time and current economic conditions “added to the level of financial burden to the organization.” At the time of liquidation, the credit union—chartered in 1959 and serving Litchfield, Hartford, Middlesex, and New Haven counties--served 1,206 members. The NCUA Asset Management and Assistance Center will issue checks to members holding verified share accounts in the credit union within one week. The NCUA National Credit Union Share Insurance Fund insures credit union member deposits to at least $250,000 on regular accounts and $250,000 on certain retirement accounts.