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Washington Archive

Washington

Compliance Who can request a loan mod

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WASHINGTON (4/27/09)—For loan modifications under the Obama "Making Home Affordable" plan, credit unions cannot solicit borrowers who are current or less than 31 days delinquent on their mortgage payments,note the compliance experts at the Credit Union National Association (CUNA). However, they remind credit unions that such members can contact the credit union to request modification of their mortgage payments if they are at risk of “imminent default”. The Obama administration program will then require the credit union to determine that the borrower is in fact “in danger of imminent default and underwrite the mortgage to program terms” using either the stated-income or income-documentation processes. For more compliance information, use the resource link below to visit the CUNA Compliance Challenge.

NCUA steps in to ensure Fla. CU service

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ALEXANDRIA, Va. (4/27/09)—Temporary control of the daily operations of Eastern Financial Florida CU was assumed Friday by the National Credit Union Administration (NCUA). After the Florida Office of Financial Regulations, Bureau of Credit Union Regulation placed the credit union into conservatorship, the NCUA took over to assure continued service to the Miramar credit union’s 193,000 members and to ensure safe and sound operations of its 22 branches. “The federal regulator’s decision to step in and takeover the daily operation of Eastern Financial Florida Credit Union demonstrates that the regulatory system put in place to protect the members of our nation’s credit unions really works,” Credit Union National Association (CUNA) President/CEO Dan Mica declared Friday. CUNA statistics show that Eastern’s approximately $1.6 billion in assets places it as the 64th largest in the country—down from 48th in 2007. NCUA year-end figures show:
* Total equity is down to $10,096, nearly a 100% drop from previous quarter; and * Net income is negative -$133.4 million, a 143.4% decline from previous quarter.
The credit union also had significantly higher delinquency ratio (5.18%) and net charge-offs (4.18%) than its peer averages of 1.22% and 0.79% respectively. ROA is negative 6.54%. "Eastern’s takeover and the factors that precipitated it are not typical to the credit union industry as a whole. As a group, credit unions are conservatively managed, particularly as it pertains to their lending practices and the oversight of their loan portfolios,” Mica pointed out. He added: “As an industry our loan delinquency and charge off rates are climbing somewhat due to the difficult economy, but they are still well below those of commercial banks. In addition, as an industry the average capital-to-assets ratio of credit unions is about 10%, well above the industry standard of 7% for being “well capitalized." He also underscored that even in the current difficult economy, the country’s 8,000 credit unions are actively making loans to America’s consumers and small businesses. Federally insured credit union accounts are covered to at least $250,000 by the National Credit Union Share Insurance Fund, a federal fund backed by the full faith and credit of the U.S. government.

Senators urge card rate freeze

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WASHINGTON (4/27/09)—Sens. Charles Schumer (D-N.Y.) and Christopher Dodd (D-Conn.) called on federal regulators to implement an emergency freeze on interest rates tied to existing credit cards balances. In a letter to Federal Reserve Chairman Ben Bernanke and other regulators, the senators noted that the Fed already has issued a rule to ban the practice of retroactively raising the interest rates on existing credit-card balances. But they urged the Fed not to wait until July 2010 to make it effective, as the rule states. Senators noted that the rule is not scheduled to take effect until July 2010, giving companies more than a year to hike rates on consumers preemptively to get under the deadline. Both Senators said they have heard complaints from constituents who have seen their rates double or even triple almost overnight and without explanation.

Inside Washington (04/24/2009)

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* WASHINGTON (4/27/09)--The Federal Deposit Insurance Corp. (FDIC) plans to offer loan packages to investors starting in June that would serve as the first phase of the agency’s Legacy Loans Program. The phase will be a pilot sale of loans to test the program, FDIC Chairman Sheila Bair said (American Banker April 24). Some banks already have committed to participating and the test will help to create a larger program, she added. The Legacy Loans Program aims to attract private capital through an FDIC debt guarantee and Treasury equity co-investment (News Now April 10) ... * WASHINGTON (4/27/09)--On Friday, federal regulators detailed the criteria used to stress-test the nation’s 19 largest banks but did not provide much new information for investors to determine which banks are stronger than others (The New York Times April 24). The report suggested that regulators are concerned about the amount of capital they want banks to hold in common stock to cushion them against future losses. Using the information from Friday’s report, Wall Street is already using the information to make bets on which bank stocks may rise or fall. Final results will be made public May 4. Regulators plan to inform banks that need more capital ...

NCUA advisory addresses changes to Corporate CU Share Guarantee Program

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ALEXANDRIA, Va. (4/27/09)--The National Credit Union Administration (NCUA) Board Friday issued another media advisory to provide information on recent changes to the Temporary Corporate Credit Union Share Guarantee Program. In its Weekly Corporate Credit Union Update, NCUA said it would permit corporate credit unions to use the capital level as reported on their Nov. 30, 2008, NCUA 5310 Call Report to determine regulatory compliance with capital-based requirements and regulations in the corporate rule. “We believe this will allow corporate credit unions to continue to meet members’ needs while also ensuring corporates do not take additional undue risk,” said NCUA Chairman Michael Fryzel. However, the Office of Corporate Credit Unions (OCCU) director has the authority to restrict or modify this general waiver for a particular corporate credit union based on safety and soundness considerations. The update states that NCUA anticipates the March 2009 call reports of “some corporate credit unions will reflect losses that will be absorbed by capital." The Credit Union National Association is working to obtain information from NCUA on this assessment. The NCUA board also authorized extensions of the program through December 2012, which was set to expire Dec. 31, 2010. “There is concern that a significant amount of shares may be scheduled to mature on the Program expiration date--leading to an unintended negative impact on liquidity. Going forward, there will be a quarterly reassessment of the liquidity needs in the corporate system, and if it is determined the need exists, the program will be extended,” NCUA said. If the extensions are granted, the final guarantee will expire on Dec. 31, 2014. All corporate credit unions can participate in the modified program.