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Mass. court ruling props up MBS suits says NCUA

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LOS ANGELES, Calif. (2/22/12)--The National Credit Union Administration (NCUA) Friday filed notices to inform the U.S. District Court in Central California of a new Massachusetts court ruling that NCUA says supports its arguments in its mortgage backed securities (MBS) lawsuits against RBS Securities and Goldman Sachs & Co.

The case NCUA cited is Mass. Mutual Life Ins. Co. v. Residential Funding. On Feb. 14, the U.S. District Court in Massachusetts denied motions to dismiss similar MBS lawsuits against RBS Securities and Goldman Sachs  and rejected the same arguments that RBS and Goldman Sachs have presented in the lawsuits NCUA brought against them  involving MBS they sold to Western Corporate FCU (WesCorp) and U.S. Central FCU.

"The Mass Mutual court rejected arguments raised by underwriters Goldman Sachs and RBS that are virtually identical to the ones they have raised in this court," said NCUA's motion filed Friday in the California court.

NCUA is awaiting the written ruling of the U.S. District Court in Los Angeles in its lawsuits.  There, U.S. District Judge George Wu has indicated in two earlier tentative rulings that he would dismiss NCUA's case against the two companies.

NCUA, in its most recent filing before the California court, said that the Massachusetts court held that all nine complaints, including two that cited to internal documents and witness testimony satisfied the Securities Exchange Act's Rule 8(a)s notice pleading standard because each alleged "specific practices of abandoning [underwriting] guidelines and …link[ed] such practices with specific lending banks, including with allegations of poor loan performance.

"NCUA's complaint here plausibly alleges the same types of facts and links the alleged systematic disregard of underwriting standards to specific originators," the filing in California said. 

In addition, the Massachusetts court said that the banks' claim that poor loan performance was "due solely to the economic downturn" presented "a question of fact that cannot be resolved on a motion to dismiss."

It also rejected the banks' reliance on certain disclosures of loan risks in the offering documents, saying that the "warnings and disclosures cannot defeat…the claims here…based on wholesale abandonment of underwriting standards."

That court also ruled:

  • That the mere allegation that the banks knew of the appraisals' inaccuracy…is not enough to constitute an allegation of fraud and does not require pleading. NCUA said this is similar to its claims.
  • That inquiry notice was not created by "newspaper articles, industry publications and government reports that were publicly available before early 2007." The publications "provided only generalized reports on the industry, did not discuss [the banks'] practices specifically, and did not alert Plaintiff to potential fraud in any specific securitization it had purchased."
  • That the banks' claim that inquiry notice arose by virtue of post-sale data showing poor loan performance combined with warnings in the offering documents "did not put Plaintiff on notice that the specific underwriting and appraisal practices represented in the offering materials were false."
At the crux of NCUA's arguments  in its cases against the two banks is that the securities documents materially represented compliance with the stated underwriting standards and that its allegations in the Goldman case are stronger than those upheld in numerous RMBS cases. The agency alleges actionable misrepresentations and omissions regarding loan-to-value ratios and credit enhancement, and said the credit unions could not reasonably have discovered the falsehoods before March 20, 2008.

NCUA maintains that the two tentative rulings by the court in California on the RBS case are "erroneous, in light of the persuasive reasoning of numerous other courts." (News Now Feb. 14).

Still time to submit DSA nominations to WOCCU

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MADISON, Wis. (2/22/12)--Nominations for recipients of the World Council of Credit Unions'  (WOCCU) Distinguished Service Award (DSA) must be made by March 30 to be considered for the 2012 DSA, which will be presented in July at WOCCU's World Credit Union Conference in Gdansk, Poland.

The award, first presented in 1986, is bestowed only in years in which WOCCU's awards committee believes there are worthy candidates. To date, WOCCU has recognized 67 individuals and organizations through the award and hopes to add more names to the list during this year's conference, said WOCCU Director Ron Hance.  Hance is president/CEO of Heritage Family CU, Rutland, Va., and chair of World Council's awards committee.

"The global credit union movement is built on the contributions and sacrifice of those committed to financial cooperatives," Hance said, noting that the DSA "recognizes the best of the best."

The award honors exceptional achievements of individuals and organizations whose activities have furthered WOCCU's vision of "improving people's lives through credit unions." Individual recipients may be WOCCU member organization officers, directors or representatives; international credit union pioneers; field technicians with long and outstanding service records; or individuals whose actions have benefitted global credit union development.WOCCU presents up to three individual awards in a single year.

Institutional recipients may be organizations or agencies that have assisted with developing international credit union movements and service infrastructures over an extended time. Only one institutional award is presented each year.

Nominations must be made by a WOCCU member organization.

CU employees discover body in repossessed truck

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EVANSVILLE, Ind. (2/22/12)--Employees at a credit union in Evansville, Ind., got a shock Thursday when they opened a repossessed truck's hardshell cover and found the body of the truck's owner.

The truck had been in the parking lot of the Sterling United FCU since being towed there on Feb. 3 (The Tribune-Star Feb. 18 and Feb. 17).

The dead man, Richard A. Fulkerson II, 38, of Evansville, had been sought by police in connection with a Jan. 10 attack on an Evansville woman. His truck was found apparently abandoned in Henderson, Ky., on Jan. 11. Officers did not search the bed of the truck because Fulkerson had not been listed as missing. They had it towed back to Evansville before being repossessed and taken to the credit union earlier this month.

Police said it looked like Fulkerson slept in the back of the truck. An autopsy will be performed to determine whether the cause of death was an overdose, said Evansville Police Chief Billy Bolin.

First deadline on Wegner Awards dinner tickets is Friday

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MADISON, Wis. (2/22/12)--Credit union leaders and supporters have two weeks left to purchase tickets for the National Credit Union Foundation (NCUF) Dinner presenting the Herb Wegner Memorial Awards. The deadline for purchasing tickets online is Friday.

The event will be held March 19 at the Grand Hyatt Washington during the Credit Union National Association's 2012 Governmental Affairs Conference. The final deadline to purchase tickets via mail or fax is March 2.

The awards ceremony will celebrate the highest national honors in the credit union movement, specifically:

  • Lifetime Achievement: Bill Eckhardt, president/CEO of Alaska USA FCU, Anchorage, Alaska;
  • Lifetime Achievement: Tom Dorety, president/CEO of Suncoast Schools FCU, Tampa, Fla.; and
  • Outstanding Organization: Invest in America.
"Whether you are attending the dinner or not, members of the credit union movement and other affiliated organizations have the opportunity to recognize and congratulate award-winners through a  congratulatory message to be shown on the video screens during dinner," said Josie Collins, NCUF director of resource development & donor relations.

Individual tickets for the three-course dinner are priced at $275 each. Tables of 10 are priced at $2,750. For details on ordering the tickets, use the links.

For any questions pertaining to the dinner, please contact Josie Collins at or 800-356-9655, Ext. 4397.

NWCUA members overwhelmingly OK redistricting

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FEDERAL WAY, Wash. (2/22/12)--The Northwest Credit Union Association's (NWCUA) proposed redistricting plan was approved Feb. 13 by a significant majority. NWCUA represents credit unions in Washington and Oregon.

The final vote tally was 98.7% in favor of the plan, and 1.3% opposed (Anthem Feb. 14).

The new district boundaries are the culmination of months of research and planning conducted by the NWCUA Redistricting Task Force, consisting of nine credit union CEOs from Washington and Oregon who were appointed by the NWCUA board in early 2011.

The task force co-chairs were Diane Owen, president /CEO of Clackamas FCU, Oregon City, Ore., and Mina Worthington, president/CEO of Solarity CU, Yakima, Wash.

"The most important element was that every credit union, whether small, medium-sized or large, felt they were supported," Owen said. "So, even if you're a small credit union in a remote part of the state, you still have a connection--someone that is responsible to you that you can turn to for support. I think that was the main goal for all of us."

Nowhere in the process did the task force struggle with a division between state lines in establishing the new district boundaries, Owen noted in the newsletter.

"I believe the process went very well," she added. "The committee was made up of both Oregon and Washington CEOs, and I thought the two groups worked very well together. We were not only merging geographic areas but also merging different cultures, which can be difficult. I was very impressed with the group's ability to focus on the same collective goal."

CUs back burgeoning growth in food co-ops

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MADISON, Wis. (2/22/12)--Several credit unions have put the idea of cooperatives helping other cooperatives into direct action by helping finance start-up food cooperatives--reportedly one of the fastest-growing cooperative sectors in the U.S.

Hoosier Hills FCU in Bedford, Ind., started meeting in fall of 2006 with a group of citizens at the Lost River Community Co-op in south-central Indiana. The co-op was formed as a vehicle to run a couple of farmers markets--one in Orleans and one in French Lick--Doug Pittman, Hoosier Hills senior commercial lender for Orange County, told News Now.

However, the co-op wanted to take things a step further and consequently opened a retail co-op food store --Lost River Market & Deli--in Paoli on May 27, 2008.

The $361 million asset Hoosier Hills provided a loan in 2008 to the co-op to help start the business with money for its facility, equipment and inventory.

"We were the primary lenders but also participated with North Country Cooperative Development Fund in Minneapolis to make the loan," Pittman said. "The co-op also had help from Blooming Foods--a food co-op in Indiana, which provided advice. So it was a neat situation for everyone, all these co-ops, helping each other," he added.

Also, people in the community helped through a member loan program in which co-op members pledged funds, much like promissory notes, Pittman added.

Did the co-op have special needs and challenges?

"Yes, because food co-ops starting in a rural area--not a metropolitan area--are a tough nut to crack," Pittman explained. "They take up challenges that chains and large franchises don't.  Co-ops don't have a high level of national support from corporations.

"They see a need in the community and decide to do something about it. They are the ones that will solve those challenges," he concluded.

On the East Coast, a second credit union is working cooperatively with a co-op. Several members of Park View FCU in Harrisonburg, Va., were part of an initial group, or task force, that tested the idea of a food co-op in the area, so the credit union automatically had a relationship with the task force from the beginning, John Beiler, Park View CEO, told News Now.

As momentum for the project picked up steam, the group filed papers to begin a co-op and opened accounts with Park View. The task force selected a location for the co-op but needed money for the "build-out" of the store and improvements to it. The task force went to Park View, but "we were up against our member business lending cap," Beiler said.

The task force then went to banks but couldn't secure satisfactory options. The group returned to Park View and the $100 million asset credit union gave Friendly City Food Co-op terms for guaranteed government loans. The co-op task force members didn't like the terms of the government loans, so they decided to raise the money themselves, Beiler explained.

"One individual said he would put up one-third of the necessary funding for the co-op if members put up the other two thirds," Beiler said. "After he issued the challenge, about 40 members put in the money in the form of loans to get it off the ground to help with the build-out of the store. Some members have five-year terms and some have 10-year terms. The co-op has Park View service those member loans on its behalf. So the credit union is not the loaner, just the servicer," he added.

The co-op opened in Harrisonburg in May. It took five years from the formation of the initial task force for the co-op to open its doors, Beiler said.

Each member of the co-op pays a $200 membership fee. Any member of Friendly City Food Co-op can be a member of Park View FCU.

The credit union put an ATM in the co-op store, which helps to cross-promote service between Friendly City and Park View. The credit union also offers loan specials to co-op members, Beiler said.

Friendly City Co-op is a grocery store that specializes in locally grown food, leaning toward organic, he explained. "They have a cooler where you can get a sandwich, salad, coffee and soft drinks and then sit indoors or outdoors, with seating for 20 people.

"I think credit unions can learn a lot from the structure of a more typical co-op because members truly own a food co-op--they have a stock certificate," Belier said. "I am a member of Friendly City Co-op and want it to succeed personally. I paid the $200 membership fee.  So I have a personal stake in it. My money is a risk."

The food co-op faces a challenge similar to what credit unions confront--helping people understand what they are, Beiler said.

"Our role at the credit union is to help the public recognize what the co-op is," he added. "We have to promote its uniqueness and what the value proposition is. For example, the food co-op is open to the public, not just members."

A third credit union works with a food cooperative in New Orleans. About one year ago, ASI FCU was contacted by a real estate developer named Pres Kabacoff, who is well-known locally. He had a vision--in the aftermath of Hurricane Katrina--of a place designed for spiritual, physical and mental well-being.

Kabacoff was looking for a building for all, but especially for people of limited means, Sarah Taylor, ASI senior vice president, told News Now. The anchor tenant of the building--located in New Orleans' Ninth Ward, which was hard hit by flooding from Katrina--was going to be New Orleans Food Co-op, but the financing was falling through, Kabacoff told ASI at the time.

So, ASI FCU used $500,000 from a $3 million Healthy Food Financing Initiative (HFFI) from the Treasury's Community Development Financial Institution Fund for the New Orleans Food Co-op. "We were committed to the project no matter what, but the HFFI funding really helped out a lot," Taylor said.

On Aug. 29, the healing center opened and the food co-op and the rest of the tenants in the 60,000 square-foot three-story building--a former furniture warehouse--conducted a soft opening, with a grand opening a couple of months later in October. The co-op occupies about one-third of the space on the first floor.

In addition to the anchor of the New Orleans Food Co-op, the building contains affordable healing arts with acupuncture and massage; an athletic club; "Sweet Home New Orleans," which helps struggling musicians; an arts bazaar of local artisans; an athletic club; a restaurant with Turkish food and a juice bar; a performance theatre; a travel agency; tenants devoted to green energy; and five or six other smaller tenants.

Last fall, ASI opened a micro-branch (350 square feet) of the credit union in the building because people asked for it, Taylor said.

"The New Orleans Food Co-op is helping people with limited income purchase groceries at discounted prices or get them free by volunteering to work at the co-op," Taylor said. "The co-op also accepts state of Louisiana food stamps.

"This is the first food co-op in New Orleans, with most of the products locally grown, and a lot of them are organic," she added.

ACUC announcesThought Leader speakers

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MADISON, Wis. (2/22/12)--The Credit Union National Association (CUNA) has announced its speaker lineup for Thought Leader sessions at the 2012 America's Credit Union Conference (ACUC), to be held June 17-20 in San Diego.

Designed to connect credit union executives with big league experts, this year's sessions will focus on leadership, growing loans, streamlining efficiencies, staff dynamics, tapping into new markets, the upcoming elections and more.

ACUC also will feature keynote sessions with business innovator and renowed author, Tom Peters; U.S. Air Force pilot and philanthropist Major Dan Rooney; brand guru Sally Hogshead; and bestselling author on business, technology and media, Chris Brogan.

Thought Leaders and their topics include:

  • John Lass, "Building the Credit Union of the Future." Building upon the sustainable growth framework, Lass will lead a deeper dive into key revenue and expense challenges and opportunities facing credit unions, with a particular focus on changes in consumer channel prefers, demographics, economic events, competition and regulation.
  • Anna Liotta, "What Makes the Generations Tick and What Ticks Them Off." For the first time in history, four generations meet in the work force and marketplace. Liotta will help attendees understand their own generation's values, and the values of their colleagues, to break down communication barriers in the workplace and leverage the personality of each generation for greater success.
  • Dave Horsager, "The Trust Edge: What Top Leaders Have and Eight Pillars to Build It Yourself."  Without trust, leaders lose teams and organizations lose reputation, good people, relationships, new business and revenue. Horsager will show attendees how to gain "The Trust Edge" and list concrete steps to help credit union professionals improve their life and their career.
  • Panel, "2012 Elections: What's the Implication for Credit Unions?" CUNA panelists Bill Hampel, Mike Schenk, and Richard Gose with moderator Ryan Donovan. The election year is underway, and credit unions should be thinking about how the potential results are likely to impact the consumer psyche, economy, and, ultimately, credit unions. This discussion between economic and political experts will reveal what is at stake for credit unions at the polls.
  • John Izzo, Ph.D., "The Five Secrets You Must Discover Before You Die." What must we discover about life before it is too late?  Izzo asked seniors from the age of 60 to 106 to reflect back on their lives and pick out the memories that truly mattered. He will share these life lessons at this year's  ACUC to help credit union professionals make positive changes in their career and personal lives.
  • Kelly McDonald, "How to Market to People Not Like You." Diversity marketing is now the new norm. McDonald will detail the benefit of embracing differences and equip attendees with take-home ideas to identify and capture high potential prospects.
Additional details about ACUC, including the final keynoter, its Executive Series for CEOs and CUNA Mutual Group's popular Discovery sessions will be announced in weeks to come. For more information or to register, use the link.

Minn. advocacy day touts CUs as smarter choice

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ST. PAUL, Minn. (2/22/12)--Credit union representatives, state leaders and legislators proclaimed credit unions as a smarter choice during the Minnesota Credit Union Network's (MnCUN's) Credit Union Day at the Capitol on Feb. 16.

Minnesota Secretary of State Mark Ritchie encouraged credit unions attending the Minnesota Credit Union Network's Credit Union Day at the state Capitol in St. Paul on Feb. 16 to share with the public and legislators the advantages of being a credit union member. (Photo provided by the Minnesota Credit Union Network)
The event welcomed more than 125 credit union professionals and volunteers, and reminded state elected officials that Minnesota credit unions are trusted, hometown financial institutions with a stake in, and commitment to, the communities and the members they serve, MnCUN said.

With the theme "Credit Unions: A Smarter Choice," this year's Credit Union Day at the Capitol stressed to elected officials that credit unions are locally based financial institutions that provide consumers a better financial option, said MnCUN. Throughout the day, professionals and volunteers met with their elected officials to discuss how credit unions help Minnesota consumers improve their financial health and well-being.

The event offered sessions that discussed redistricting, 2012 legislative priorities, advocacy basics and how to effectively communicate with legislators.

"Credit Union Day at the Capitol provided us the opportunity to once again bring our stories to the State Capitol," said MnCUN President/CEO Mark D. Cummins. "Through this annual event, we are able to remind legislators that credit unions offer Minnesota consumers a unique financial service option--one that is focused on benefiting Minnesotans rather than profiting from them."

During the annual advocacy event, credit unions received political insight from state leaders, including Secretary of State Mark Ritchie, Department of Commerce Commissioner Mike Rothman, Attorney General Lori Swanson, and State Sen. Geoff Michel (R-Edina). They recognized credit unions for their unique cooperative structure and not-for-profit business model and praised them for their dedication to serving members.

"Credit unions know how to develop value for their membership," Rothman said. "Your structure is unique, and it is important to have [credit unions] in the financial services sector."

He commended attendees for their involvement in legislative advocacy activities and stressed the importance of maintaining open communications with both legislators and regulators. Citing his commitment to financial literacy, Rothman invited credit unions to join him in teaching the public about money management and other aspects of personal finance.

Swanson recognized the credit union industry as an "honest trade" that offers friendly service to members. She also outlined her office's initiatives to combat predatory and payday lenders, unnecessary foreclosures, and fraud, asking credit unions to join her in this fight. "You are close to your customers and know how to bring value to them," Swanson said. "The state needs more of that type of service."

Also, Ritchie, who classified himself as "a longtime credit union member, saver and borrower," distinguished credit unions as an important and "driving force" in the state economy. He also encouraged attendees to use the International Year of Cooperatives as an opportunity to educate the public about the cooperative sector.

"In this special year of the United Nations' International Year of Cooperatives, it is an ideal opportunity to tell all Minnesotans about the many advantages of being a member of credit unions," he said.

Ritchie urged credit unions to tell their stories to legislators and the public as part of their efforts to "lift credit unions into the consciousness of society."


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WASHINGTON (2/16/12)--Members of the Federal Reserve's monetary policymaking group were split on whether to introduce another round of qualitative easing through bond purchases, according to the minutes of the Federal Open Market Committee's (FOMC) Jan. 24-25 meeting.

"A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the committee's objective--could warrant the initiation of additional securities purchases before long," said the minutes.

However, others indicated that "such a policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2% over the medium run," the minutes continued.  One committee member anticipated that a pre-emptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2%.

For most committee members, the "current outlook--for a moderate pace of economic recovery with the unemployment rate declining only gradually and inflation subdued--warranted exceptionally low levels of the federal funds rate at least until 2014," said the minutes. Five participants viewed the appropriate policy firming as beginning during 2015, while six indicated that "first increase in the federal funds rate would not be warranted until 2015 or 2016. As a result, those 11 participants anticipated that the appropriate federal funds rate at the end of 2014 would be 1% or lower. Those who saw the first increase occurring in 2015 reported that they anticipated the appropriate federal funds rate would be 1/2% at the end of that year."

Some assessments of appropriate monetary policy incorporated additional purchases of longer-term securities in 2012, and a number of participants indicated that they remained open to a consideration of additional asset purchases if the economic outlook deteriorated. "All but one of the committee members continued to expect the FOMC would carry out the normalization of the balance sheet according to the principles approved at the June 2011 FOM meeting, said the minutes.

At that meeting,  the committee had decided  that "prior to the first increase in the federal funds rate, the committee would likely cease investing some or all payments on securities holdings in the System Open Market Account (SOMA), and it would likely begin sales of agency securities from SOMA sometime after the first rate increase," the minutes said.

CU System briefs (02/21/2012)

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  • LONGVIEW, Wash. (2/22/12)--A former employee who was in charge of the vault at Longview, Wash.-based Cowlitz CU was arrested Feb. 15 on suspicion of money laundering and first-degree theft after $120, 000 disappeared from the vault between July 1, 2010, and last. Dec. 2 ( Feb. 16).  Police charge that Roxane Justine Ramey, 55, allegedly stole the funds and then falsified records to hide the theft  and that the funds were lost while Ramey and her husband gambled at a casino. Her husband has not been charged with a crime.  A forensic audit confirmed that $120,000 was missing from the vault.  Data from a casino indicated that Ramey had lost more than $67,000 and her husband had lost nearly $45,000. The police report said Ramey balanced the vault's cash at the end of each day and, to keep control of the accounts and hide the theft, did not miss a day of work or take vacation. The money was discovered missing when another employee began filling in for Ramey as she prepared to go on vacation, said the report …
  • BEAVER, Pa. (2/22/12)--Shirley A. Howl, a former lead teller at Beaver, Pa.-based West-Aircomm FCU, was sentenced Thursday to two years and three months in prison for embezzling $400,000 from the credit union.  Howl, 56, was also ordered to repay that amount to the credit union and to undergo five years of post-release probation (Pittsburgh Post Gazette Feb. 16). Howl allegedly faked ledger entries for three of the credit union's ATMs so it would appear that the funds from the ATM had been transferred to a vault and back again.  The thefts occurred from August 2007 to November 2009 (Associated Press Feb. 17) …