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MBL appraisal addressed in NCUA legal opinion

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ALEXANDRIA, Va. (4/20/12)--In response to an inquiry from an Oregon-based credit union LLC, the National Credit Union Administration has issued a legal opinion letter stating it is unnecessary for a credit union to obtain an appraisal when it sells a participation interest in a member business loan (MBL)  under the Interagency Appraisal and Evaluation Guidelines.

The LLC said it works with credit unions that offer to sell participations in commercial real estate secured MBLs to other credit unions from the originating credit union's MBL portfolio.  The loans have been held by the originating credit union for several years, are in current repayment status, and have a loan-to-value ratio of less than 80%, with no deterioration in the subject property.  Also, according to the LLC's description, the terms, conditions and pricing of the loan at origination remain the same at the time of the participation sale.

"The (g)uidelines do not require that an appraisal be obtained under the facts you have presented, " wrote Hattie M. Ulan, NCUA associate general counsel.  She added, however, that a purchasing credit union should continue to perform its risk assessment and due diligence consistent with agency guidance on real estate lending and loan participation programs.

Use the resource link to read the complete letter.

Inside Washington (04/19/2012)

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  • ALEXANDRIA, Va. (4/20/12)--The National Credit Union Administration (NCUA) changed the Orlando, Fla. meeting of its "Listening Sessions" by one day: It is now scheduled for June 13 instead of June 12. The time and location remain the same: 1:00–4:00 p.m. at the Rosen Centre Hotel. The Florida event is the fourth of the agency's series of six sessions intended to provide opportunities for credit union officials and volunteers to suggest how the NCUA can improve the examination process, regulations, and any other initiatives to protect credit union safety and soundness… 
  • WASHINGTON (4/20/12)—In a mostly party-line vote, the House Financial Services Committee this week approved a legislative package that would bring funding for the Consumer Financial Protection Bureau under the Congressional appropriations process and end government-funded bank bailouts, among other things. The legislative package would also eliminate the Home Affordable Modification Program and extend the National Flood Insurance Program for an additional five years, and reform elements of that program. A recent House budget resolution asked the committee to identify cuts and legislative changes that would save around $30 billion in taxpayer funds over a 10 year period. These changes would cut the national deficit by more than $35 billion, according to a committee release. The proposals are not expected to pass the Senate…
  • WASHINGTON (4/20/12)--U.S. Treasury Secretary Tim Geithner restated his support for writing down some of the mortgages held by government-sponsored entities Fannie Mae and Freddie Mac this week, saying that mortgage principal forgiveness would help a "significant" number of families. (American Banker April 19) Geithner said the mortgage reductions would almost certainly improve taxpayer returns in Fannie and Freddie. Mortgage modifications for those that can afford their homes, refinancing assistance, and renting out now-vacant foreclosed on properties would also aid the housing market recovery, he added…
  • WASHINGTON (4/20/12)--As the U.S. Congress considers the Financial Institutions Examination Fairness Act, which in part would create a new appeals process with an outside ombudsman for all federal financial institution regulators, the American Banker ran an interview with the ombudsman of the Office of the Comptroller of the Currency, Larry Hattix, to address such areas of banks' regulatory concerns as: What is the role of the ombudsman? How does the OCC assure banks that its ombudsman is independent? How does the OCC view the plan to reform the examination appeals process? Hattix responded that it is the ombudsman's role to operate independently from the agency's bank supervision division and to report directly to the Comptroller, and reminded that the ombudsman's authority over the agency includes ability to overrule supervisory office decisions. His office conducts outreach meetings with banks and savings association to inform on the appeals process, and also maintains a Web site to provide additional resources about its dispute resolution process. Regarding the proposed statutory reforms, Hattix said his office has concern that creating an outside appeals bureaucracy could gum up the works and delay the exam process and corrective actions. In response to another question, Hattix noted that the most common appeals the OCC ombudsman receives generally involve composite or component ratings of a bank's financial condition and law violations, but he added that within those broad categories, specifics vary greatly… .

IRS changes add to CU compliance burden CUNA

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WASHINGTON (4/20/12)--Changes to the Internal Revenue Service's (IRS) 1042-S reporting requirements will create a new compliance burden for credit unions, Credit Union National Association (CUNA) Deputy General Counsel Mary Mitchell Dunn has warned.

The IRS this month approved new tax reporting requirements that will impact credit unions, banks, savings institutions, securities brokerages, and insurance companies that pay interest on deposits. Under the IRS rule, credit unions and other financial institutions will be required to report on their forms 1042-S interest of $10 or more earned annually on deposit accounts held by nonresident aliens who are residents of any foreign country. The current nonresident reporting requirement only applies to Canadian expatriates.

The IRS rule change is an attempt to combat tax evasion.

Dunn said some credit unions may not have the data processing abilities needed to identify affected accounts and prepare the required IRS forms.

Overall, Dunn said, the costs that the rule change would create for financial institutions and consumers would far outweigh any benefit to the IRS, and CUNA last year said the IRS has not proven that the new regulation is needed.

Business coalition joins MBL push

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WASHINGTON (4/20/12)--A group that identifies itself as a coalition of conservative, libertarian and free-market organizations voiced support Thursday for increased member business lending for credit unions and encouraged lawmakers to vote in favor of legislation that would achieve that end.  The group called Sen.  Mark Udall's (D-Colo.) Small Business Lending Enhancement Act of 2012 (S. 2231) "a sound, free-market, deregulatory action that will create jobs, help small business, and assist veterans."

S. 2231 would increase the MBL cap to 27.5% of assets from 12.25% of assets. The Credit Union National Association (CUNA) has estimated that lifting the MBL cap in this manner would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers. The legislation is expected to come up for a Senate vote soon.

The coalition said they support S. 2231 or "any similar measure lifting the arbitrary cap on member business lending by credit unions."

"As the economy is struggling to kick-start, this bill would give businesses much-needed capital to expand by simply raising the arbitrarily low lending cap," said the group's letter, that was widely distributed to lawmakers' offices on Capitol Hill.

The big winners, the letter said, will be small business owning job creators; but the group also noted that military veterans and their families would also be helped by the measure, as two of the largest credit unions in the credit union system work primarily with servicemen, servicewomen and their families.

The bill "would allow many well-capitalized smaller credit unions to expand business lending," and would not harm the banking industry, the coalition noted.,

"Most of the new credit loans will almost certainly go to businesses that wouldn't get any loans at all today, and credit unions would specialize in serving the types of businesses of their member populations," the letter said.

The letter was cosigned by Heartland Institute Vice President Eli Lehrer, Competitive Enterprise Institute Senior Fellow for Finance and Access to Capital John Berlau, Americans for Tax Reform President Grover Norquist, Less Government President Seton Motley, Citizen Outreach President Chuck Muth, Institute for Liberty President Andrew Langer, American Commitment President Phil Kerpen, Freedom Research Foundation President Jack Wheeler, Freedom Action President Myron Ebell, 60 Plus Association Chairman Jim Martin, and Council for Citizens Against Government Waste President Thomas Schatz.

The Consumer Federation of America (CFA) this week also spoke out in support of an MBL cap increase. CFA Executive Director Stephen Brobeck in a letter sent Wednesday to members of the Senate said MBL cap increase legislation "would be particularly beneficial at this time," and would "benefit consumers both by promoting competition and innovation in local marketplaces and by strengthening credit unions."

The CFA said MBL legislation would "expand access to affordable credit for small businesses and help strengthen local marketplaces that serve consumers well." (See related April 19 News Now story: CFA asks senators to support MBL cap increase.)

A vote is expected soon in the Senate, with a House vote to follow.

For the full letter, use the resource link.

CU remittance concerns aired at D.C. symposium

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WASHINGTON (4/20/12)--Credit union concerns regarding the Consumer Financial Protection Bureau's (CFPB) remittance transfer regulations were laid out at a symposium held this week in Washington, as the Credit Union National Association (CUNA) underscored that credit unions continue to have many compliance concerns regarding the remittance transfers final rule, especially with "open network" transfers.

CUNA also raised its continuing opposition to the rule with senior CFPB staff in a meeting at CUNA April 18.

The day-long symposium was hosted by Appleseed Network, a public interest group that advocated for strong consumer protections on remittance transfers. Staff from CUNA, the World Council of Credit Unions and the National Federation of Community Development Credit Unions were among those in attendance. Representatives from other financial associations, payment companies, law firms, non-profits, and consumer groups also took part in the symposium.

A new remittance rule that was adopted by the CFPB earlier this year would require remittance transfer providers to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes. The rule will become effective on Feb. 7, 2013, and will impact U.S.-based credit unions that provide consumers with international electronic funds transfer services.

During the symposium, CUNA Regulatory Counsel Dennis Tsang said CUNA continues to support regulatory flexibility that would allow credit unions to continue to offer remittances and complement the many financial services and financial literacy programs that credit unions provide to consumers and communities.

Tsang added that the final remittance rule would impose unsustainably high compliance costs and legal liabilities on credit unions that provide transfers through "open networks," such as international wire transfers and international automated clearing house transfers through unrelated correspondent institutions. CUNA has called for "meaningful relief" from the remittance rules, and continues to discuss this and other remittance issues with CFPB staff. (See related April 10 News Now story: Some CUs could be forced out of remittances: CUNA)

The meeting also featured discussions on the final rule's requirements with CFPB staff, compliance and new disclosure changes, and future developments on remittance transfers and research.

NCUA responds to CUNA Agency can improve exam process

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WASHINGTON (4/20/12)--National Credit Union Administration (NCUA) Chairman Debbie Matz identified regulatory relief measures her agency is pursuing, in a letter this week to Credit Union National Association (CUNA) President/CEO Bill Cheney. Matz's letter was in response to a follow-up letter Cheney sent to the chairman after she appeared at the CUNA Governmental Affairs Conference in March.

The CUNA Executive Committee met with Matz during the GAC. "I believe those present would agree that the meeting produced useful discussions," Cheney said Monday, "although we all realize that there are many issues yet to be resolved regarding regulatory burdens, examination concerns and others."

Matz's letter indicates the NCUA will be pursuing a number of actions that CUNA urged on behalf of credit unions. They  include:

  • The agency is moving ahead with its proposal on troubled debt restructurings. Matz's letter acknowledged that CUNA's Examination and Supervision Subcommittee, and Accounting Subcommittee, along with leagues, played an important role in urging the development of the proposal.  A TDR final rule may be considered by the NCUA as early as May or June.
  • The NCUA is undertaking a review of its examination process.
  • While NCUA declined to issue a moratorium on issuing new regulations, the agency said it will "make every effort to draft rules that are as minimally burdensome as possible."
  • The agency will be reviewing its field of membership regulation.

Regarding the NCUA's review of its examination process, CUNA's Examination and Supervision Subcommittee hopes to meet regularly with NCUA's Director of Examination and Insurance Larry Fazio to develop and pursue recommendations for improvements. Also, CUNA will be closely monitoring developments in the areas addressed by the NCUA chairman's letter.

"I believe the letter from the NCUA board chairman overall reflects an increased awareness on the part of the agency to the merits of the issues and concerns that CUNA, leagues, and credit unions have raised,"  Cheney said.  He added that CUNA welcomes the steps the chairman has laid out.

In its meeting and communications with the NCUA, CUNA has urged the agency to direct examiners to take a number of actions that would result in a more effective and productive exam for credit unions as well as for the agency. Such steps include providing the authority that an examiner directive is based on and ensuring examiners refrain from aggressive tactics in their dealings with credit unions, which CUNA will continue to pursue.

CFPB clarifies state reciprocity in MLO licensing

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WASHINGTON (4/20/12)--Consistent with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), a state may grant a transitional mortgage loan originator (MLO) license to an individual who holds a valid loan originator license from another state, according to a clarification issued by the Consumer Financial Protection Bureau (CFPB) Thursday.

However, the CFPB also clarified that its regulations do not allow states to provide transitional licensing for registered but unlicensed loan originators who leave a credit union or bank to act as loan originators for a non-depository institution while pursuing a state license. 

The CFPB inherited authority to enforce and implement the SAFE Act from the U.S. Department of Housing and Urban Development under the Dodd-Frank Wall Street Reform Act.  CFPB Director Richard Cordray said the Bureau is committed to working with states and the industry to make interstate transitions as smooth as possible for loan originators.