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NEW: FHLBs ask NCUA to name them as an emergency liquidity provider

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WASHINGTON (2/1/13, UPDATE 2 p.m. ET)--As the National Credit Union Administration considers its emergency liquidity proposal for credit unions, the twelve Federal Home Loan Bank (FHLB) presidents have sent a joint letter asking the agency to name their system specifically within the plan as a source of backup liquidity.

The NCUA proposal, issued last summer, would require federally insured credit unions with assets of $10 million or more to develop contingency funding plans describing how their credit union would address liquidity shortfalls in emergency situations. The Credit Union National Association opposes the plan as written and urged the agency last September not to go forward with a final rule without changes.

In its proposal, the NCUA said credit unions can ensure access to backup liquidity by:

  • Becoming a member of the Central Liquidity Facility (CLF);
  • Becoming a CLF member through a CLF agent; or
  • Establishing direct borrowing access to the Federal Reserve's Discount Window.
CUNA noted in a comment letter to the agency that a major issue of concern for a number of credit unions is the exclusion of the Federal Home Loan Banks as a permissible source of emergency liquidity.

In their Jan. 31 letter to NCUA Chairman Debbie Matz and board member Michael Fryzel, the FHLB presidents wrote, "The FHLBanks serve as a reliable source of liquidity for all of their members during all economic cycles, and we urge the NCUA to include the FHLBanks among the eligible sources of emergency liquidity.

"Such action would encourage and facilitate a stable source of funding to assist credit unions of all sizes in meeting their business, community, and member needs."  The letter was a follow up to earlier comments to the agency on the issue.

The FHLB presidents wrote that they appreciate that the NCUA recognized in its notice of proposed rulemaking the importance of the FHLBanks in providing liquidity and other services to credit unions.

"We also agree with your recommendation that credit unions of all sizes should consider the merits of membership in their local FHLBank, but we believe that the FHLBanks are and should be included as a reliable source of emergency liquidity."

The FHLBs were created by Congress in 1932 f to provide liquidity support to the nation's mortgage lenders. Credit unions and other financial institutions can access the FHLB liquidity system by becoming FHLB members.

Student financial services are a new CFPB focus

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WASHINGTON (2/1/13)--Students, families, educators and financial institutions can help the Consumer Financial Protection Bureau gather information for its latest project: Examining the impact of financial products that are marketed to students through their colleges and universities.

"We have seen many colleges establish relationships with financial institutions to offer banking services to their students," CFPB Director Richard Cordray said. "The [CFPB] wants to find out whether students using college-endorsed banking products are getting a good deal," he added.

The CFPB is asking for details on:

  • What information schools share with financial institutions when they establish these relationships;
  • How campus financial products are marketed to students;
  • What fees students are being charged to use these products;
  • How schools set up marketing agreements with financial institutions; and
  • Student experiences using campus financial products in their day to day lives.
Student identification cards with debit card features, cards tied to scholarship and student loan funds, and school-affiliated bank accounts are among the items the CFPB is researching.

Credit unions in many states offer the benefits of credit union membership to students through on-campus branches or college- or university-affiliated credit unions that serve students and employees of the school.

One credit union, Orlando-based Fairwinds CU, became the official campus financial institution of the University of Central Florida (UCF) late last year. The credit union replaced SunTrust Bank, and university officials said it was clear that the credit union sought to be more than a business partner and recognized it would be investing in students who are future community leaders. Fairwinds offers university ID debit cards, free checking accounts, free money orders and financial education resources to UCF students.

Current law prevents card issuers from opening new credit card accounts for students under age 21, unless they can prove sufficient income to repay the card balance or have a co-signer over the age of 21 who has sufficient income to repay the debt. Certain marketing practices, including mail solicitations and gift offers on or near a college campus, are also prohibited. Credit card companies can still contact students and offer gifts in exchange for signing up for credit cards so long as it is done electronically, and students can open checking accounts, which may lead to taking out a credit card.

For more on the CFPB's latest endeavor, use the resource link.

NCUA letter to CUs cites 2013 exam goals

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ALEXANDRIA, Va. (2/1/13)--Increased clarity in its guidance to its examiners and more consistency in its examination practices are a key supervisory focus of the National Credit Union Administration this year, said NCUA Chairman Debbie Matz in a Letter to Federally Insured Credit Unions released Thursday.

"As a regulator and insurer, NCUA's goal is a strong, safe credit union system. To that end, NCUA continues to incorporate lessons learned and feedback from credit unions into our

examination approach," Matz said to open her letter to credit union directors and CEOs.

The Credit Union National Association often has encouraged the NCUA to provide this "increased clarity" on its examination process and called the NCUA supervisory focus a positive development.

Areas in which NCUA will strive to enhance the clarity of examiners include member business lending (MBL), credit rating, and troubled debt restructurings (TDRs).

Matz said credit unions can expect a supervisory letter to add clarity to the process and expectations for MBL rule waiver requests. The letter will address, in particular, waivers for personal guarantees and blanket waivers versus individual loan waivers for aspects of the MBL rule. The guidance will also focus on appropriate underwriting and credit monitoring systems for MBLs, Matz said.

The agency also will issue follow-on guidance for examiners and credit unions on complying with the final rule, required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, replacing the use of credit ratings with alternative standards to assess the creditworthiness of securities and money-market instruments.

Also, based on the final NCUA rule on TDRs, the NCUA will provide additional guidance for examiners on examining for compliance with the rule's requirements and the credit union's accounting practices related to TDRs.

Matz indicated that examiners will combine an awareness that federally insured credit unions continue to exhibit positive trends in most key while also continuing to evolve and face various economic and operational challenges.

The letter said examiners will evaluate a credit union's capacity to manage risk in the following areas:

  • Operational risk involving technology and internal controls; and,
  • Balance sheet management, including interest rate and liquidity risk, concentration risk--where a credit union might offer "too much of a good thing," and risk that can be associated with offering less established or complex products.
Use the resource link below to read the NCUA letter.

CUNA also is honing in on exam issues this year. In fact, 1,300 respondents took the time to detail their experiences--good, bad and in-between--on this key topic in a recent CUNA survey.

The CUNA survey asked credit unions to detail their experiences with on-site NCUA and state regulatory examinations, and to describe their satisfaction level with both the federal and state examinations process. Credit unions also described the strengths and weaknesses of the examination system.

Later this month, CUNA will provide summaries of the information garnered; one with nationwide information, and a second that breaks the results down on a state-by-state basis.

Results of the survey will be released in time for this year's CUNA Governmental Affairs Conference. The conference is scheduled for Feb. 24-28 in Washington, D.C.

CUNA releases high-priced mortgage rule analysis

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WASHINGTON (2/1/13)--New regulations that will require lenders offering higher-priced mortgages to use licensed or certified appraisers are the subject of a Credit Union National Association final rule analysis.

The regulations were approved by the National Credit Union Administration and other federal financial regulators this month. Under the terms of the new regulations, mortgage lenders will need to hire licensed appraisers to perform a physical inspection of a home's interior before making a loan that falls within the definition of a higher-priced mortgage loan. Lenders will need to provide homebuyers with a free copy of the resulting home appraisal report.

High-priced mortgages will be considered non-qualified residential mortgages that are secured by a principal dwelling with annual percentage rates that exceed the average prime offer rate by 1.5% for first-lien loans, 2.5% for first-lien jumbo loans, and 3.5% for junior lien loans.

The rule provides a safe harbor for compliance purposes, as well as exemptions for several types of transactions, including "qualified mortgages" and reverse mortgages. The higher-risk mortgage appraisal requirements will go into effect on Jan. 18, 2014. The CUNA analysis notes that the final rule narrows from the proposal the scope of a requirement for obtaining a second appraisal for certain "flipped" properties. Under the final rule, creditors are required to obtain a second written appraisal, at no cost to the borrower, if the property is being resold within a 180-day period, and:
  • For a property being resold within 90 days of acquisition, the sale price exceeds the price the property was acquired for by more than 10%; or
  • For a property being resold within 91 to 180 days of acquisition, the sale price exceeds the price the property was acquired for by more than 20%.
For the final rule analysis, use the resource link.

CUNA also plans to report on the details of other mortgage issues addressed by recent CFPB regulatory releases, including:
  • Mortgage servicing;
  • Mortgage loan originator compensation;
  • Ability-to-repay requirements;
  • Escrow accounts; and
  • "High-cost" mortgages.

Antonakes named to CFPB acting deputy director spot

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WASHINGTON (2/1/13)--Steve Antonakes is now the Consumer Financial Protection Bureau's acting deputy director, replacing Raj Date, who left the agency on Thursday.

In past meetings with the Credit Union National Association, Antonakes noted that credit unions did not cause the financial crisis, and said credit unions served as a source of strength for their members during the economic recovery.

CUNA Deputy General Counsel Mary Dunn said CUNA plans soon to meet Antonakes again on credit union topics.

Antonakes will serve as deputy director while the agency searches for a permanent replacement for Date. He will also maintain his role as associate director for supervision, enforcement, and fair lending at the CFPB, a position he has held since June 2012. Antonakes first joined the CFPB in November 2010, taking on the role of assistant director of large bank supervision.

"Steve's knowledge, expertise, and judgment will continue to be invaluable as we move forward with our important work--making markets work for consumers and responsible businesses," CFPB Director Richard Cordray said. Cordray also thanked Date "for his tremendous work to protect American consumers."

Date was the first CFPB deputy director, and helped build the agency over his two-year stint. He also served as special advisor to the secretary of the U.S. Treasury Department and as the CFPB's associate director for research, markets, and regulations.

Former AEA exec among those prohibited from future CU work

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ALEXANDRIA, Va. (2/1/13)--William Liddle, the former vice president of business lending at AEA FCU who was charged with taking part in a $50 million fraudulent business loan scheme, is one of nine individuals banned from future credit union work by the National Credit Union Administration.

The former AEA executive last February was convicted on 54 counts of fraud, conspiracy and money laundering in connection with accepting more than $1 million in bribes in exchange for approving business loans. The loan scheme nearly collapsed the Yuma, Ariz. credit union.

Liddle in June was sentenced to 15 years in prison, plus five years of supervised release, for his role in the scheme. The NCUA said he will also be ordered to pay $25,389,425 in restitution.

Others named in the NCUA prohibition order include:

  • Former Medical Area FCU, Brookline, Mass., vice president of finance Paul Amato. Amato consented to the issuance of a prohibition order to avoid the time, cost and expense of administrative litigation;
  • Former Credit Union of America, Wichita, Kan., employee Aimee Lyn Bailey. Bailey was sentenced to 24 months of probation, one year of supervised release and ordered to pay $51,773.14 in restitution following a theft conviction;
  • Former Alliance Blackstone Valley FCU, Pawtucket, R.I., CEO Joseph Cicione, III, who consented to the issuance of a prohibition order to avoid the time, cost and expense of administrative litigation;
  • Former Envision CU, Tallahassee, Fla., employee Raymond Cordero, who pleaded no contest to bank fraud and other related charges. He was sentenced to 45 days in prison and four years of probation, and ordered to pay $11,887 in restitution;
  • Former Russell Country FCU, Great Falls, Mont., employee Kristi Lynn Hunter, who was convicted of embezzlement;
  • Former SAFE FCU, Sumter, S.C., employee Teresa Johnson, who pleaded guilty to embezzlement charges. She was sentenced to 21 months in prison and five years of supervised release, and ordered to pay $241,272.90 in restitution;
  • Former Clara Barton FCU, Washington, D.C., employee Tiffany Samuells, who pleaded guilty to the charge of conspiracy to commit bank fraud. She was sentenced to 15 months in prison and five years of supervised release, and ordered to pay $497,150 in restitution;
  • Former East Kentucky Employees FCU, Winchester, Ky., employee Brian Tyler, who was convicted of embezzlement. He was sentenced to one year in prison and five years of supervised release, and ordered to pay $104,684.81 in restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For the full NCUA release, use the resource link.