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CU emails to agency grassroots at work says Hyland

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ALEXANDRIA, Va. (3/30/09)—Credit union response to a Credit Unions National Association (CUNA) call to action on the on the need to spread out share insurance fund replenishment was “credit union grassroots at work,” said National Credit Union Administration (NCUA) board member Gigi Hyland Friday. CUNA specifically urged credit unions to contact the agency about the need to spread the costs of the NCUA’s corporate stabilization efforts over a longer period of time and to request enhanced transparency on information underlying the board’s corporate stabilization efforts. CUNA launched the action alert in advance of a special closed NCUA meeting Thursday morning scheduled to discuss possible actions to mitigate the costs to natural person credit unions of the agency's actions to stabilize the corporate credit union system. After the meeting, the NCUA announced a legislative proposal, which if enacted by Congress would create the Corporate Stabilization Fund. Through the fund, the costs of premiums and assessments could be spread over a period of up to 7 years. In her release, Hyland also pledged to continue reviewing other available alternatives to further mitigate the cost to credit unions. “These are difficult and challenging times for credit unions. While the agency must take appropriate supervisory action to assure the National Credit Union Share Insurance Fund is protected, we must also explore alternatives that alleviate the impact on credit unions,” she said.

NCUA starts stakeholder reports on corporate CUs

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ALEXANDRIA, Va. (3/30/09)--The National Credit Union Administration (NCUA) Friday began what it said would be periodic reporting to stakeholders on the status of the corporate credit union system. In its inaugural communication, the agency said normal operations and transactions have continued uninterrupted and liquidity remains stable at f U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp), after being placed in conservatorships last Friday. The update recapped the agency’s recent actions, such as the release of the two corporates’ boards of directors, CEOs, and one senior staff member have been released. It also said cross analysis of the value of held securities continues and that the release of specific comparisons can be expected soon. NCUA Chairman Michael Fryzel defended his agency’s action to place U.S. Central and WesCorp under conservatorships, an action that has been questioned as unnecessary by some. “(T)he cost of the corporate credit union stabilization program would have increased even if NCUA had not placed U.S. Central and WesCorp into conservatorship. “Barring a deepening of the recession beyond what was incorporated into the loss projections, and economic uncertainties do remain, the $5.9 billion reserve should be sufficient to cover expected credit losses of holding the distressed assets to maturity,” Fryzel said in the release. Highlighting another point of controversy, Fryzel said that while analysis by Pacific Investment Management Company LLC (PIMCO) was one factor in arriving at this reserve, it served to refine and supplement NCUA’s own calculations. Fryzel stated that NCUA selected PIMCO partly because it had not sold any of the bonds being analyzed and was not engaged in providing any other services to corporate credit unions. Fryzel noted that any firm with expertise to evaluate the bonds is a potential purchaser. However, he said there is not conflict of interest in PIMCO’s involvement because the NCUA intend to hold the securities to maturity, an action the chairman said was recommended by PIMCO. The Credit Union National Association (CUNA) has urged the NCUA to make public more information on PIMCO and any analysis that lead to the agency's actions to conserve two corporate credit unions last week.

Inside Washington (03/27/2009)

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* WASHINGTON (3/30/09)--A letter from the Credit Union National Association (CUNA) to federal regulators to request more information on corporate credit unions drew the attention of the Wall Street Journal last week. CUNA President/CEO Dan Mica wrote to the National Credit Union Administration (NCUA) requesting records of the securities held by the two corporate credit unions placed into conservatorships recently--U.S. Central FCU and Western Corporate FCU, known as WesCorp. The article noted CUNA welcomed the agency’s recent legislative proposal to spread out over seven years costs associated with the NCUA’s corporate stabilizations actions. But it also noted that Mica told the NCUA that credit unions are concerned about a lack of transparency, including how the NCUA arrived at estimates of losses and its decision to take control of the two corporates. The March 27 article noted CUNA’s willingness to “do everything possible to avoid a legal battle” with the regulator while still looking at all options. Affected parties must decide by today whether to legally challenge the conservatorships of the two wholesale credit unions… * WASHINGTON (3/30/09)--Sen. Christopher Dodd’s (D-Conn.) legislation to crack down on abusive credit card practices could come up for a committee vote Tuesday. His bill would define universal default and double-cycle billing as unfair (American Banker March 27). It also would require that credit cardholders under 21 take a credit course or have a parent co-sign on the account and ban interest on fees. The Federal Reserve Board has proposed similar card regulations, but Dodd’s proposal would be effective immediately, whereas the Fed’s would take effect in 2010. Consumer groups said the bill is overdue, while the banking industry said they would fight it ... * WASHINGTON (3/30/09)--An independent investigator of the Treasury Department indicated that it found cases where a bank regulator may have “ignored questionable backdating of capital injections” (Reuters March 27). The investigator found backdating while reviewing the IndyMac case, and indicated that an OTS official may have allowed the backdating to happen. On Thursday, the Office of Thrift Supervision (OTS) announced that Treasury Secretary Tim Geithner had removed Scott Polakoff, OTS acting director, and appointed John E. Bownman, deputy director and chief counsel, effective immediately. Polakoff is on leave pending a review by the Treasury of the OTS’ August 2008 actions related to post-period capital contributions, OTS said ... * WASHINGTON (3/30/09)--Though Treasury Secretary Timothy Geithner detailed his ideas for regulatory reform Thursday, he did not indicate which agency he thinks should oversee systemically significant institutions (American Banker March 27). Financial industry observers anticipate that the Federal Reserve Board would fill this role, but Geithner said there may be danger in giving one agency all of the power. The Treasury is looking at a range of suggestions, he added. Some lawmakers have said a new regulator should be created to oversee the institutions, but others, such as Rep. Barney Frank (D-Mass.), said doing so would take up too much time. The Treasury has introduced a bill that would place the Fed over systemically significant institutions, thought the Federal Deposit Insurance Corp. (FDIC) must consult with it before taking over an institution ... * WASHINGTON (3/30/09)--The Financial Services Committee Thursday approved H.R. 1664, the Grayson-Himes Pay for Performance Act of 2009, which would prohibit certain compensation payments by companies that received money under the Troubled Asset Relief Program (TARP). The bill prohibits compensation payments that are unreasonable or excessive, restricts all non-performance based bonuses, and repeals a provision in the American Recovery and Reinvestment Act that would prevent employees from receiving bonuses if their company has not paid back TARP money. Financial institutions subject to the requirements also would have to submit a report the Treasury Secretary annually showing how many employees would or will receive compensation above specific dollar amounts during the fiscal year. The House could take up the bill this week ...

Community development CUs oppose CRA for all CUs

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WASHINGTON (3/30/09)—The National Federation of Community Development Credit Unions (Federation) reiterated its decade-long opposition to extending the Community Reinvest Act (CRA) to credit unions, while backing its application to mortgage banks, securities firms, insurance companies, and other entities. Proposed legislation to expand the reach of CRA requirements specifically exempts low-income designated credit unions, such as community development credit unions (CDCUs), from coming under CRA, a fact the Federation noted in its position statement. However, the group underscored the exemption is appropriate for all credit unions because of financial cooperatives’ fundamental differences from other mortgage lenders, which include:
* Credit unions are non-profit, member-owned cooperatives. * They have no outside shareholders who demand ever-increasing quarter-over-quarter profits. * Excessive executive compensation has not been an issue with credit unions. * Credit unions have, for the most part, maintained a direct relationship with their borrowers, enabling many to rapidly restructure and modify mortgage loans.
“This contrasts markedly with institutions which are intimately and inextricably bound in the complex chain of securitization that has greatly hindered efforts to untangle the foreclosure crisis,” the Federation position paper said. It added, “In short, we believe that the basic philosophic and structural principles of the credit union movement can well serve as a template for the restructuring of the entire financial system.” The position paper emphatically endorsed CRA, saying it has been “immensely important to the revitalization of our nation’s distressed areas.” “We believe that CRA must, indeed, be expanded and modernized so that it reflects the migration of vast amounts of money to entities that are not subject to reinvestment regulations,” the Federation said. The Federation represents more than 200 credit unions in 46 states that serve low-income urban, rural, and reservation-based communities. They range from the smallest of depositories, with less than $1 million in assets, to credit unions with more than $1 billion in assets, which—the Federation noted--nonetheless serve predominantly low-income communities. The legislation referred to by the Federation is a bill introduced March 12 by Rep. Eddie Bernice Johnson (D-Tex.). The Credit Union National Association (CUNA) strongly opposes the application of CRA requirements to credit unions. CUNA Senior Vice President of Legislative Affairs John Magill has said: "CRA was enacted because banks were redlining—drawing circles around communities to which they would not lend. All available data suggests that credit unions, on the other hand, are out there lending to their members—even and especially in these tough times."

Predatory lending bill introduced in House

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WASHINGTON (3/30/09)—Co-sponsors of a new bill to crack down on predatory lending say H.R. 1728 is a tougher version of a bill in the last Congress designed to overhaul mortgage regulations. The new Mortgage Reform and Anti-Predatory Lending Act of 2009 is was scheduled for a vote tomorrow by the House Financial Services Committee, but that vote has been postponed. The bill is modeled after North Carolina’s predatory lending statute. In 1999, North Carolina passed the nation's first anti-predatory mortgage lending law. It is considered by many to be a model for preventing abusive lending practices, while preserving consumer access to credit. The Credit Union National Association (CUNA) strongly supports congressional action to protect consumers from abusive and deceptive lending practices. Yet, CUNA earlier has advised federal lawmakers that credit unions’ long history of favorable lending practices, and the range of regulation under which the movement operates, makes some provisions of such legislation more appropriate for the mortgage brokerage industry. The bill is sponsored by Reps. Barney Frank (D-Mass.), chairman of House Financial Services, Brad Miller (D-N.C.) and Mel Watts (D-N.C.). In a release announcing the bill, Watt said, “This bill represents an important step toward preventing the predatory and questionable practices that took hold in the mortgage lending industry in the past several years and undoubtedly contributed to our current housing crisis.” Specifically, according to the co-sponsors, the new measure will strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan’s interest rate and terms—known as yield-spread premiums. It also includes stronger language on “assignee liability,” intended to make mortgage securitizers, who package home loans into securities, more liable for fraudulent loans. A key element of the legislation prohibits lenders from underwriting loans that consumers do not have a reasonable ability to repay and prohibits practices that increase the risk of foreclosure for consumers. The bill also encourages the mortgage market to make it the norm to write 30-year, fixed-rate, fully documented loans, and move away from growth of “exotic” mortgages, which were a major factor in the current housing and foreclosure crisis. Use the resource link below to read legislation details.

Webcast on due diligence April 7 28

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WASHINGTON (3/30/09)--Credit unions and vendors seeking more information about due diligence can tune into a free webcast offered by VendorTrack April 7 or April 28. The webcast will be held both days at 1 p.m. CT. VendorTrack was created by CUNA Strategic Services. Under National Credit Union Administration requirements, credit unions must conduct due diligence on all third-party relationships. The webcast will discuss:
* How to increase exposure to credit unions that are potential customers; * Ways to help credit unions meet their due diligence requirements; * Methods to provide an efficient approach to request for proposals; and * How to upload and store sensitive due diligence-related documents on a single, secure site.
For more information, use the link.