Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive


Compliance Can loan mod program help this woman

 Permanent link
WASHINGTON (4/15/09)—The current economic climate may be causing problems for an unprecedented number of mortgage holders, but for some it will not be the first time they have faced difficulties making mortgage payments. Are they still qualified for help under the Obama administration’s loan modification plan? That’s what Martha Member, featured in the April Credit Union National Association (CUNA) Compliance Challenge wants to know. She asks her federal credit union if she can apply for a mortgage modification under “Making Home Affordable” program, even though six years ago she requested modifications to her loan due to temporary job loss. Compliance Challenge says, Go ahead, Martha. The administration’s plan does not bar individuals whose mortgages have been previously modified under another program. Any mortgage holder, of course, must meet eligibility and verification requirements. They include such things as: the mortgage involved was originated on or before Jan. 1, 2009, and it’s first-lien loan for an owner-occupied property. However, a mortgage borrower can apply for assistance under this program only once. “If a member needs additional mortgage assistance at a later date, then the credit union should attempt to address those needs with other loss mitigation alternatives,” the Challenge advises. Use the resource links below for more information.

NCUA says guidance coming on extinguishment

 Permanent link
ALEXANDRIA, Va. (4/16/09)—The National Credit Union Administration (NCUA) intends to issue its next accounting guidance on corporate credit union issues Friday as part of its weekly release of information on the corporate situation. NCUA Deputy Executive Director Larry Fazio, on a conference call with reporters Wednesday, said the guidance will address the impairment—what the agency is now terming ”extinguishment”—of any OTTI statement that U.S. Central FCU or Western Corporate FCU (WesCorp) make on their March 31 financial reports. The two corporates were place in conservatorship in March. Fazio said that to the extent either entity has to execute an OTTI—or other-than-temporarily-impaired--charge for the March statement, it will be realized as a loss that will “eat through” their retained earnings, and then their paid-in capital accounts, and, to a varying extent, their membership capital accounts. “So that will extinguish those portions of the membership capital and paid-in capital,” Fazio said. “Therefore credit unions that are members will have to write down on their financial statements those instruments, and realize a loss on those.” Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn noted Wednesday that credit unions have raised serious concerns about the implications of the extinguishment of capital in the two corporates. CUNA, she said, is pursuing these concerns with NCUA board members.

Inside Washington (04/15/2009)

 Permanent link
* WASHINGTON (4/16/09)--Several watchdog reports indicate that banking agencies are not using their power effectively. The reports come as policymakers consider giving regulators more power. The Federal Deposit Insurance Corp. and the Treasury’s inspectors general have written eight reports on bank failures since April 2008. The reports suggest that regulators did not crack down enough on lenders taking risks during the housing boom (American Banker April 15). Some former regulators have discounted the reports, but other financial industry observers perceive the reports as a guide to help figure out what went wrong. The reports are required from a bank when its failure will cost the Deposit Insurance Fund more than $25 million. As the number of bank failures has increased, the number of reports also has increased... * WASHINGTON (4/16/09)--The Obama administration plans to reveal the results of stress tests conducted at 19 of the nation’s biggest banks (The New York Times April 15). The banks are all expected to pass the tests. Releasing the results could give investors a better idea of which institutions are strong or weak, clearing up rumors, observers say. The administration’s decision also may have been triggered by Goldman Sach’s announcement that it would repay the $10 billion it received from the Troubled Asset Relief Program (TARP). Goldman sold $5 billion in stock on Tuesday and said it would use the profits to repay the TARP funds. Treasury officials this week said they would encourage banks to reveal their information, although critics have said that the hypothetical situations under which the banks are tested may not be realistic. Concern about stress tests in general has been high. Last week, the Federal Reserve warned banks undergoing the tests not to divulge the results during the earning season ... * WASHINGTON (4/16/09)--President Barack Obama said during a speech at Georgetown University Tuesday that he does not support nationalizing the nation’s largest banks. Government takeovers will likely cost taxpayers more in the end, he said (American Banker April 15). He also noted that governments should practice “first do no harm,” a doctor’s principle ... * WASHINGTON (4/16/09)--If Herbert Allison moves from his post as Fannie Mae CEO to director of the Troubled Asset Relief Program (TARP), it will send a message that the CEO position at Fannie Mae and Freddie Mac is irrelevant, financial observers say (American Banker April 15). From the White House’s perspective, Federal Housing Finance Agency (FHFA) Director James Lockhart runs the enterprises, said Tom Stanton, National Academy of Public Administration fellow. Freddie’s former CEO, David Moffett, left his post because he said he didn’t have enough control over the company. Allison said last month that he controls Fannie's operations but he views FHFA as the controlling shareholder (News Now March 25) ... * WASHINGTON (4/16/09)--Next week, Congress will return from recess, and Sen. Tom Harkin (D-Iowa) plans to place stronger requirements on derivatives trading than those the House Agriculture Committee already has approved. The requirements would essentially ban over-the-counter (OTC) trading. OTC trading uses specialized contracts drawn up for individual counterparties, which prevents the contracts from being brought to a central clearing platform. The trades are recorded and counterparties post capital to the clearing party instead of to each other (American Banker April 15). Some observers say Harkin’s measure is too harsh, noting that other efforts to ban OTC trading already have died in the House. Kathryn Dick, deputy comptroller for credit and market risk at the Office of the Comptroller of the Currency, said there is still a role for customized contracts. She noted that if all contracts had to be cleared, novel products could be constrained. However, Harkin’s spokesman said he would proceed with pushing for the ban ...

Fryzel urges CU action on bill

 Permanent link
ALEXANDRIA, Va. (4/16/09)—National Credit Union Administration (NCUA) Chairman Michael Fryzel Wednesday urged credit unions to support the agency’s legislative plan to replenish the National Credit Union Share Insurance Fund (NCUSIF) over time. In his first speech since the agency placed U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp) into conservatorship in March, Fryzel said he wants credit unions to “roll up their sleeves” and use grassroots activism to promote passage of the NCUA bill. The legislation would allow credit unions to spread the cost of the NCUSIF replenishment over as many as seven years. At issue is the cost to natural person credit unions of recent actions by the NCUA to stabilize the corporate credit union system. Fryzel was addressing the Texas CU League’s annual meeting in Austin. Meanwhile, in Washington, D.C., an NCUA spokesman said the agency is “optimistic” the bill could be passed this spring as part of a broader measure addressing an extension of the higher share and deposit insurance limits approved as part of a stimulus package. In his speech, Fryzel said legislative relief is just part of the agency’s current job right now. “When this stabilization proposal becomes law, our job will not be finished. I have made a commitment to the administration, to Congress, and to you in the industry that NCUA would undertake a broad and comprehensive reform of the corporate system. We have initiated a rulemaking process that I promise will yield results,” he said. Agency staff addressing press questions in Washington reflected their chairman’s remarks. David Marquis, when asked, said the agency’s immediate plans for the corporate credit union system is to maintain liquidity so loans don’t have to be sold and “so we can maintain a level of losses” that are less of a burden on the credit union community. Marquis is NCUA executive director. He said beyond that, NCUA continues work to develop “rule and regulation” for the corporate system that takes on issues “we will have to address going forward.” The agency recently received approximately 450 comment letters responding to its ANPR on corporate credit unions issues. Marquis said the agency is now working to determine what the credit union system in the future will want from the corporate credit unions. He added that beyond that, the NCUA is addressing what needs to be done to address “supervision and safety and soundness changes going forward.”

Interchange interference hits small merchants--CU

 Permanent link
WASHINGTON (4/16/09)—A former chapter director of the Massachusetts Credit Union League told the Boston Herald this week that government intervention in interchange fees would disproportionately harm the nation’s small businesses. Citing conclusions by the Small Business and Entrepreneurship Council, Nicole James said in a letter to the editor that if the government lowers the fees, it would result in lower sales and increased costs for merchants, especially smaller ones. At issue are the fees charged merchants by credit card companies each time a consumer uses the card for a purchase. Opponents of government regulation argue that the fees assist the growth of universal acceptance of cards and the innovation of super-fast authorization technology and enhanced security measures. James, who is president/CEO of MAFCU FCU, Brookline, Mass., was responding in her April 14 letter to a local merchant who complained interchange fees represented “undue profiteering.” She wrote that interchange revenue is gauged, in part, to cover the risk taken on for a transaction and protection from fraud. “If we were not able to cover these costs, we'd be forced to either raise prices for our members or stop offering credit products altogether,” she wrote. Small business owners and elected officials “should not be fooled by the lobbying campaign by big-box retailers who don't want to pay their fair share of the electronic payments system that serves them so well,” James argued.