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Inside Washington (04/30/2010)

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* WASHINGTON (5/3/10)--The Financial Crisis Inquiry Commission said it will hold a hearing about America’s “shadow banking system” Wednesday and Thursday, with former Bear Stearns Co. CEO Jimmy Cayne and former Treasury Secretary Henry Paulson testifying (Dow Jones April 30). Cayne will join Bear Stearns’ former chief executive, Alan Schwartz; former president and co-chief operating officer Warren Spector; and former chief financial officer Samuel Molinaro. Treasury Secretary Timothy Geithner, GE Capital’s chairman and CEO Michael Neal, former Securities and Exchange Commission head Christopher Cox and his predecessor, William Donaldson, also will testify. The commission was assembled by Congress to determine the cause of the financial crisis ... * WASHINGTON (5/3/10)--The Federal Reserve Board approved amendments to Regulation D, which addresses reserve requirements of depository institutions, to authorize the Federal Reserve Banks to offer term deposits to institutions eligible to receive earnings on their balances at Reserve Banks. The amendments, according to an announcement released Friday by the Fed, will be effective 30 days after publication in the Federal Register, which is expected shortly ... * WASHINGTON (5/3/10)--The federal bank and thrift regulatory agencies Friday announced final guidance that addresses risks that can come with funding and credit concentrations arising from correspondent relationships. A correspondent relationship is one between one financial organization that provides another financial organization with services related to deposits, lending, or other activities. The regulatory guidance, according to the announcement, emphasizes the need for institutions to identify, monitor, and manage correspondent concentration risk on a stand-alone and organization wide basis. It also stressed the need for financial institutions to execute appropriate due diligence in these relationships…

New NCUA LOU targets loan quality controls

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ALEXANDRIA, Va. (5/3/10)--The National Credit Union Administration (NCUA) last week disclosed another letter of understanding that the agency entered into with both Massachusetts state bank regulators and a credit union. The board of the credit union accepted the regulators’ suggestions to improve its loan quality and internal controls. The credit union should also strengthen its management and end insider abuse and self dealing to “restore” itself “to safe and sound operation,” the letter added. The NCUA added that if these recommendations are not followed, the NCUA could impose “civil money penalties, cease and desist orders, removal and prohibition orders, or orders to liquidate, conserve or merge the credit union” under the Federal Credit Union Act. The NCUA late last year promised to increase public disclosure of its interactions with troubled credit unions, and a pair of similar letters were also released earlier this month. For the full NCUA release, use the resource link.

Reg reform discussion continues with debate amendments

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WASHINGTON (5/3/10)--Movement on regulatory reforms should pick back up this week, with amendments potentially being offered tomorrow. Dozens of amendments are expected to be introduced on Tuesday. The full Senate legislation, which was introduced by Sen. Chris Dodd (D-Conn.) earlier this year, would allow the Federal Reserve to continue to oversee both large banks and smaller state-chartered banks while also adding authority over some non-bank financial firms to the Fed's list of responsibilities. Dodd has also proposed an independent Bureau of Consumer Financial Protection (BCFP) to write and regulate rules for financial firms. While the BCFP would limit the National Credit Union Administration's oversight of credit unions to credit unions with under $10 billion in assets, CUNA has asked that the NCUA be allowed to retain full authority over the credit union system, regardless of asset size. CUNA has also asked legislators to narrow the definition of remittances, as the current definition is "overly broad" and would make it far more difficult for credit unions to continue to offer any form of international electronic fund transfer services to their members. CUNA has stayed in contact with federal authorities, including representatives of the U.S. Treasury, as this financial reform legislation has moved through the House and, now, the Senate, and has advocated for credit unions at every step of the process. Democrats late last week assured their Republican colleagues that the legislation, as currently written, would not provide for future taxpayer-funded bailout of failing financial institutions.

Matz updates status of NCUA financials

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ALEXANDRIA, Va. (5/3/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz last week disclosed that the NCUA “has been working diligently with two independent firms to ensure that the agency’s financial statements will be presented with complete accuracy and transparency.” In remarks delivered before the Illinois CU League’s annual convention, Matz said that the audit information for the NCUA’s 2008 and 2009 fiscal years was delayed due to recently enacted rules “governing the presentation of commercial financial statements.” “To this day, accountants still have differences of opinion about how to interpret the new rules, and about whether or not they apply to federal regulators,” Matz said, adding that, through her comments, she intended to “put an end to unfounded speculation over why NCUA’s audits have been delayed.” Matz said that the delay “is in no way related to the health of the National Credit Union Share Insurance Fund (NCUSIF)” and assured stakeholders that “the federal Share Insurance Fund remains strong and robust.” NCUA Chief Financial Officer Mary Ann Woodson reported on the NCUSIF at the NCUA’s April 29 board meeting. Many of the statistics in the report remained steady, but Woodson noted slight increases in the number of CAMEL Code 3, 4 and 5 credit unions, with the percentage of total insured shares held by those credit unions decreasing slightly since the start of 2010. There are currently 349 CAMEL 4 and 5 credit unions, which represent 5.68% of insured shares. The Credit Union National Association’s senior vice president and deputy general counsel Mary Dunn said that the NCUA’s update on the status of the financials is helpful. CUNA encourages NCUA to provide a through explanation to the system regarding the delay when the financials are actually released.” The NCUA delay also “illustrates that the issue of how to interpret a number of accounting issues is as real for the NCUA as it is for credit unions, and examiners should appreciate that flexibly is as appropriate for credit unions as it is for NCUA,” Dunn added. For the full NCUA release, use the resource link.

FFIEC issues revised BSAAML exam manual

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WASHINGTON (4/30/10)--The Federal Financial Institutions Examination Council (FFIEC) has issued a revised version of its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. The National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the State Liaison Committee, along with the Financial Crimes Enforcement Network, collaborated on the revised manual. The revised manual clarifies supervisory expectations provided since the August 2007 update. The revisions are reflected in the table of contents. The Credit Union National Association (CUNA) has recommended that credit unions pay special attention to updates made to the core examination overview/procedures discussion that deal with basic BSA concepts, as well as the appendices. Those sections have been “streamlined and reorganized” to be “more logical,” according to a FinCEN release. Credit unions should also review the updated discussion in the expanded overview/procedures, which address specialized banking activities, where appropriate, CUNA added. Specifically, sections on currency transaction reporting exemptions, fund transfers, suspicious activity reporting (SAR), and automated clearing house transactions, among others, were amended. The revisions now contain an “enhanced” discussion of “methods to identify, research, and report suspicious activity.” The SAR section has also been reorganized “to reflect current supervisory expectations” and is now more user friendly. For the FFIEC release, use the resource link.

NACHA simplifies reworks operating rules

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SEATTLE, Wash. (4/30/10)--NACHA--the Electronic Payments Association--earlier this week said that it has substantially revised and reorganized its operating rules. NACHA has reorganized its rules “around the rights and responsibilities of participants” in the electronic payment network, “making them more navigable by participants.” The rules have also been rewritten in “clear, understandable, and consistent language,” NACHA added. Overall, NACHA said, the rules are easier to understand and to comply with. NACHA President/CEO Janet Estep said that the association’s goal “is to make the rules more easily understood and the corresponding information easier to find.” According to NACHA, the rules also "explicitly recognize that the originating financial institutions are the entry points into the ACH Network for corporate users and third parties, and that the financial institutions are responsible for those parties' compliance with the Rules." This new version of the NACHA Operating Rules will go into effect on Jan. 1, 2011. NACHA plans to follow up on other portions of its rules simplification initiative later in the year by undertaking a “comprehensive review and overhaul” of its operating guidelines and by enhancing its ACH Rules Online website. For the NACHA release, use the resource link.

Inside Washington (04/29/2010)

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* WASHINGTON (4/30/10)--National Credit Union Administration Chairman Debbie Matz (pictured) visited a student-run credit union branch at T.C. Williams High School in Alexandria, Va., Wednesday. The credit union is open five days a week during the school year and has more than 400 student members. CommonWealth One FCU, Alexandria, has a relationship with seven area schools, including T.C. Williams. “This student-run branch was impressive not only because it gives high school students a firsthand opportunity to manage their own credit union, but also because of practical money-management experience it provides,” Matz said. “Financial literacy is not something to be put on the shelf and read in a classroom setting once or twice a week. It’s an everyday, living activity, and the efforts that the credit union industry is putting into basic financial education are bound to pay dividends far into our future,” Matz said. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (4/30/10)--Rep. Darrell Issa (R-Calif.) is questioning the Federal Deposit Insurance Corp. (FDIC) about why it waited so long to close a bank owned by the family of a U.S. Senate candidate. Issa is referring to the scrutiny involving the closure of Broadway Bank, which cost the Deposit Insurance Fund $394.3 million. Issa said regulators knew long ago the bank had problems. Broadway is a community bank owned by the family of Illinois State Treasurer Alexi Giannoulias, a Democratic candidate for the Senate ... * WASHINGTON (4/30/10)--A Supreme Court ruling this week could help banks fight consumer class-action suits on overdraft fees and other practices, said American Banker (April 29). The court ruled 5-3 Tuesday in Stolt-Nielsen SA v. Animalfeeds International Corp. that Animalfeeds, a shipping firm, was not obliged to face a class arbitration with commercial customers even though it had individual arbitration agreements with them. Some retail finance agreements contain clauses in which customers agree to give up the right to pursue class actions, Banker said. If banks persuade courts that the waivers in consumer contracts are valid, overdraft claims could be pursued only by individuals. The small dollar amounts per person could mean that it’s unlikely many would pursue arbitration. Many suits have recently been filed by banking customers who say they were involuntarily enrolled in predatory overdraft protection plans, the publication said. ... * WASHINGTON (4/30/10)--President Barack Obama nominated Janet L. Yellen Thursday for vice chair of the Federal Reserve Board (The New York Times April 28). Yellen, a former Fed governor and macroeconomist, would replace Donald Kohn. She currently is president of the Federal Reserve Bank of San Francisco. Obama also will nominate Peter A. Diamond, economist at the Massachusetts Institute of Technology, and Sarah Bloom Raskin, Maryland commissioner of financial regulation, to fill two remaining seats on the board of governors ...

NCUA proposes payday loan alternative for CUs

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ALEXANDRIA, Va. (4/30/10)--The number of federal credit unions that provide payday loan alternatives to their membership may increase if the National Credit Union Administration’s (NCUA) proposed changes to its general lending rules are adopted.
Click to view larger imageNCUA Chairman Debbie Matz discusses the short-term loan proposal with NCUA staff
The NCUA proposal, which was approved for 60 days' public comment at Thursday’s open board meeting, would allow credit unions to charge a higher interest rate on short-term, small dollar loans. However, those loans, which would be capped at a maximum interest rate of 10% above the NCUA’s loan ceiling, or 28% based on the current ceiling, would also have a maximum amount of $1,000. The minimum amount for these payday alternative loans would be $200. Loans will not roll over. The NCUA indicated that the proposal is consistent with the Federal Credit Union Act, which allows the agency to permit loan rates above 15% under certain conditions and does not require it to set the same ceiling for all types of federal credit union loans. Members would need to pay off their loans within one to six months, and may take out only one loan from their credit union at a time. Also, federal credit unions would not be authorized to make more than three such loans to a member in any rolling six-month period. Federal credit unions would not be required to run credit checks on their members, but should set loan amounts and terms that are appropriate for each member’s financial circumstance. Under the NCUA proposal, credit unions would be permitted to charge a $20 fee per loan to cover costs, and may also impose late or default fees “that comply with NCUA’s credit practices rule.” Credit unions “should be careful that late fees do not exacerbate a borrower’s financial situation,” the NCUA release added. NCUA Chairman Debbie Matz said that comments on the proposal should focus on safety and soundness concerns, and requested that credit unions currently offering these types of loans provide input on whatever difficulties they may have had. The application fees and interest associated with these loans, according to NCUA staff attorney Justin Anderson, are designed to merely cover the cost of providing these loans. NCUA board member Michael Fryzel added that these are “break even” loans, and are more of a service offered to members than a profit-based proposition. The NCUA also agreed to continue to permit corporate credit unions to use the capital levels disclosed on their Nov. 30, 2008, call reports when determining “their compliance with certain capital-based requirements and limitations” in the NCUA’s corporate guidelines. NCUA board member Gigi Hyland said that this continuation is “essential” to keep the credit union system stable as the NCUA works to resolve some outstanding issues within the corporates. The NCUA's action will extend until one year after the effective date of the new corporate regulation, which should be made final by October. Under the current corporate rule, a number of limitations on corporates are tied to the corporate's capital level. These include earnings retention, concentration limits, lending limits, borrowing limits and others. The extension of the waiver will permit corporates to comply with those limits based on the capital levels they reported in late fall of 2008. The NCUA's Office of Corporate Credit Unions will be able to modify the waiver for any particular corporate, based on safety and soundness issues. NCUA Chief Financial Officer Mary Ann Woodson also addressed the credit union system in her monthly report and updated the NCUA on the status of its National Credit Union Share Insurance Fund. While many statistics in the report remained steady when compared with recent reports, Woodson noted slight increases in the number of CAMEL Code 3, 4 and 5 credit unions, with the percentage of total insured shares held by those credit unions decreasing slightly since the start of 2010. There are currently 349 CAMEL 4 and 5 credit unions, which represent 5.68% of insured shares. NCUA staff also noted that there are currently 1,688 CAMEL 3 credit unions, which represent 13.86% of insured shares. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent approximately 18.5% of insured shares.

Inside Washington (04/28/2010)

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* WASHINGTON (4/29/10)--Allegations that Goldman Sachs Group participated in risky trading activities are bolstering the Volcker Rule, which could now “almost certainly” be enacted as a part of a regulatory reform bill, said American Banker (April 28). The rule, endorsed by the Obama administration and former Federal Reserve Board Chairman Paul Volcker, would ban proprietary trading. The Securities and Exchange Commission filed a suit against Goldman investigating whether it mislead clients about proprietary trading. Lawmakers agreed at a Goldman hearing Tuesday that the current system for trading is flawed. Sen. Susan Collins (R-Maine) said it’s unsettling to read e-mails from Goldman executives that celebrated the collapse of the housing market. The system needs to be reformed, she said. The Goldman investigation provides momentum for the Volcker Rule, added Doug Elliot, Brookings Institution fellow ... * WASHINGTON (4/29/10)--The Treasury Department will offer warrants to purchase equity in PNC Financial Services Group Thursday (Dow Jones April 28). The Treasury announced earlier this month that it intends to sell the warrants, which were received for investments made under the Troubled Asset Relief Program. The proceeds will provide another return to American taxpayers from Treasury’s investment in PNC, the department said ...

CUNA WOCCU detail aid to Haiti CUs

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WASHINGTON (4/29/10)--The Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) detailed for a House subcommittee their involvement in the Haiti Integrated Financing for Value Chains & Enterprises (HIFIVE) program, which “aims to stimulate the Haitian economy, improve the business environment and contribute to the sustainable and lasting development of Haitian enterprises, particularly in rural areas." The groups submitted a statement for the record of a hearing Wednesday on promoting small and micro enterprises in Haiti, conducted by the House Financial Services subcommittee on international monetary policy and trade. The HIFIVE Program supports agricultural development and “the use of technology to improve the efficiency and outreach” of local credit unions and microfinance institutions (MFIs). It provides technical training to micro, small and medium enterprises. HIFIVE also works to "improve the business environment and contribute to the sustainable and lasting development of Haitian enterprises, particularly in rural areas.” WOCCU has worked in Haiti since 2009 and stepped up its efforts following the January earthquake. In the prepared statement that was submitted for the official hearing record, CUNA and WOCCU recommended that legislators “support additional funding to rapidly stabilize and strengthen the microfinance sector” in Haiti by designing a “financial stabilization program that will overcome the financial distress of Haiti’s MFIs and credit unions without making them overly dependent on external aid.” HIFIVE also worked with WOCCU to assess the status of Haitian MFIs and credit unions following the quake. Those assessments found that those institutions were most in need of “increased liquidity and recapitalization.” They were hard hit by the “increased magnitude of individual loan defaults caused by death and loss of jobs/businesses, increased volume of client requests for loans to rebuild homes/businesses over longer periods of time,” and the significant amount of savings that members withdrew to “address immediate short-term household and business needs.” The institutions were also in need of basic construction help to deal with the physical impact of the earthquake, and CUNA and WOCCU in closing said that they would “welcome the opportunity to continue to meet with the committee to explore how to best support microfinance and microenterprise development to promote rebuilding and long-term economic growth” in Haiti. CUNA President/CEO Dan Mica and a number of credit union representatives recently returned from Haiti, where they studied the credit union movement in Haiti and discussed how WOCCU and the global credit union community can best help the country rebuild, using strengths inherent in credit unions' financial cooperative structure. For the full CUNA/WOCCU statement, as presented to the subcommittee on Wednesday, and recent News Now coverage of Mica's Haiti trip, use the resource link.

House Fin. Services approves trio of bills

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WASHINGTON (4/29/10)--The House Financial Services Committee on Tuesday approved a series of legislative proposals that address insurance for floods, other catastrophes, and mortgages. Under legislation introduced by Rep. Maxine Waters (D-Calif.) and approved by the committee, the National Flood Insurance Program (NFIP) will now be extended for a further five years. The NFIP has been recently reliant on temporary month-to-month extensions and will expire on May 31 without congressional action. The NFIP, which, according to a finance committee statement, provides “reliable, affordable flood insurance coverage for millions of American homes and businesses,” is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. Waters also drafted H.R. 5072, the FHA Reform Act of 2010, which “will empower FHA to improve its financial position by allowing the agency to adjust its premium structure for new borrowers, while still providing affordable mortgage insurance to the individuals FHA is intended to serve including low-income and minority borrowers and individuals in traditionally underserved areas.” According to a Finance Services Committee press release, H.R. 5072 “also provides FHA with enhanced authority to terminate lenders’ approval to originate or underwrite loans backed by FHA insurance when FHA finds evidence of fraud or noncompliance” and strengthens the FHA’s own internal reporting systems. The committee also approved H.R. 2555, the Homeowners' Defense Act, on a 39 to 26 vote. The legislation, which was introduced by Rep. Ron Klein (D-Fla.) and currently has 74 House co-sponsors, would create a national catastrophe insurance pool that would be made available to disaster-prone states nationwide. All three bills will now move on to the full House for consideration.

CU rep supports interchange at House hearing

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WASHINGTON (4/29/10)--During a Wednesday House Judiciary Committee hearing on potential interchange fee legislation, John Blum of Chartway FCU said if interchange-related revenues drop, credit unions and small financial institutions would “face an impossible decision of raising rates, eliminating rewards programs, or stopping their card programs altogether.” Blum, testifying on behalf of the Electronic Payments Coalition, said credit unions “typically offer debit and credit card products to their customers at or below margin as a loyalty-building and customer-service tool.” Chartway is based in Virginia Beach, Va. Over one dozen committee members took part in the hearing, including Debbie Wasserman-Schultz (D-Fla.), who asked testifying merchant representatives if they could ensure that consumers would realize savings if, as they are proposing, interchange fees paid by merchants were reduced. The witnesses said that they could not guarantee that their prices would decrease if interchange fees were reduced. Overall, many committee members expressed concern over granting merchants an antitrust exemption and the potential harm it would do to consumers and smaller institutions, including credit unions. In a written statement for the hearing record, the Credit Union National Association (CUNA) said that H.R. 2695, the "Credit Card Fair Fee Act of 2009," could force credit unions and other smaller institutions to “re-evaluate their credit and debit card offerings, and possibly exit the market” if those institutions are forced to accept lower interchange fees. This would result in consumers having fewer credit and debit cards from which to choose, forcing them to rely on only a handful of large issuers for credit and debit cards, CUNA added. While supporters of the legislation say that the savings gained by merchants would be passed on to consumers, CUNA said that “granting merchants an anti-trust exemption on interchange fees is more likely to increase credit and debit cards costs that consumers bear.” H.R. 2695, the "Credit Card Fair Fee Act of 2009," which was introduced by committee chair Rep. John Conyers Jr. (D-Mich.), would permit merchants to negotiate interchange fees with financial institutions via an antitrust exemption. Though House action on interchange fees is not expected to be taken any time soon, legislators are reportedly working to add similar legislation to the Senate financial regulatory reform bill. Rep. Bill Delahunt (D-Mass.) called on Conyers to move to a markup of the legislation quickly, but no commitment was made. CUNA has fiercely opposed merchants' proposals that would affect interchange fees. Interchange reflects a merchant's fair share of the costs of the convenient card system and supports everything from re-issuing cards compromised by merchant data breaches to providing a call center to contact if a card is lost or stolen. CUNA testified at a previous interchange hearing, which was held in October 2009 before the Financial Services Committee. For the CUNA statement, use the resource link.

Tracy FCU liquidated members served by Valley First CU

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ALEXANDRIA, Va, (4/28/10)-- Tracy FCU, of Tracy, Calif., was liquidated by the National Credit Union Administration Tuesday and its $25.4 million in assets, as well as its loans and shares, were purchased and assumed by Valley First CU, of Modesto. In announcing the supervisory actions, the NCUA stated they were taken due to Tracy FCU’s “declining financial condition.” Tracy FCU’s declining financial condition led to its closure and subsequent purchase and assumption. At closure, Tracy FCU had $25.4 million in assets and served 5,973 members. At its closing, Tracy served 5,973 members. The NCUA announcement said Valley First CU is a full service credit union and members have access to a broad array of financial services. With assets of $317.1 million and seven branch locations, the credit union serves approximately 47,273 members who live, work, worship, or attend school in Fresno, Madera, Mariposa, Marced, San Joaquin, Stanislaus, Tuolumne Counties, or work for one of the companies in its field of membership. The NCUA reminds that member accounts are insured to at least $250,000 by the National Credit Union Share Insurance Fund, a federal insurance fund backed by the full faith and credit of the U.S. government. This is the sixth federally insured credit union liquidation in 2010.

NCUA FLEC promote financial literacy

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WASHINGTON (4/28/10)--The 2010 edition of Congressional Financial Literacy Day, which was again backed by the National Credit Union Administration (NCUA), showcased the NCUA’s newly created Office of Consumer Protection while also highlighting NCUA and credit union efforts to strengthen financial education. Senators Daniel Akaka (D-Hawaii) and Michael Enzi (R-Wyo.) both served as co-hosts of the observance of financial literacy day, which was also attended by congressional staffers, media members, and representatives from many federal agencies. “If there’s one clear and obvious bright spot in the recent economic turmoil, it’s the rededication of NCUA and the credit union industry to financial education,” NCUA Chairman Debbie Matz said, adding that “credit unions demonstrate a natural affinity for making real-world, practical and useful financial literacy tools available to their members.” Another outlet for enhanced financial education is the Financial Literacy and Education Commission’s (FLEC) recently redesigned MyMoney.gov website, which was re-launched on Tuesday. The newly redesigned version contains “enhanced interactive features and utility to provide more resources to Americans seeking information that can inform their personal financial decisions.” The new site also includes tailored resources for “teachers, service members, women, parents, youth, employers,” and others and background information on how to financially plan for certain life changes or future plans, such as college. Savings calculators, budget worksheets, and checklists are also included on the site, and the FLEC said that they would continue to improve the site in the future. U.S. Treasury Deputy Secretary Neal Wolin said that the new site will provide consumers with a “critical resource to help Americans find free, reliable and unbiased information that can help inform their daily financial decisions and plan for the future." Financial Literacy Month continues through the end of the month, and the Credit Union National Association took part in National Credit Union Youth Week between April 18 and 24 and also promoted its own National Youth Saving Challenge.

NCUA adds items to closed portion of board meeting

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WASHINGTON (4/28/10)—The National Credit Union Administration (NCUA) has added discussions of supervisory activities and internal personnel matters to the agenda of its next board meeting, which will take place tomorrow. Those topics, which were added on Tuesday, will take place during the closed portion of the meeting. Other items on the NCUA agenda include discussions of short-term payday loans and waivers under certain provisions of its corporate credit union regulation. The NCUA’s monthly report on the status of the National Credit Union Share Insurance Fund will also take place during the meeting. These discussions will take place during the open portion of the meeting.

Reg reform debate again held back by Senate

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WASHINGTON (4/28/10)--Senate debate on H.R. 3217, the Restoring American Financial Stability Act, was again held back on Tuesday after Senate Republicans, along with one Democrat, united to defeat a cloture vote on regulatory reform legislation. A similar measure to begin debate failed by a 57 to 41 vote on Monday. Sixty votes are required to move forward with debate, according to Senate rules. The Senate is expected to continue to work behind the scenes to reach a compromise on the bill, which could then be brought to the Senate floor. Public debate could still take place this week, and Senate Majority Leader Harry Reid (D-Nev.) late Tuesday said that he would continue to reintroduce the bill for cloture votes as the week goes on. The Credit Union National Association (CUNA) has urged the U.S. Congress not to limit the National Credit Union Administration's oversight of credit unions to credit unions with under $10 billion in assets, as the legislation currently sets forth. CUNA has also asked legislators to narrow the legislation's definition of remittances, as the current definition is "overly broad" and would make it far more difficult for credit unions to continue to offer any form of international electronic fund transfer services to their members.

FinCEN warns of home equity conversion fraud schemes

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WASHINGTON (4/28/10)--The Financial Crimes Enforcement Network (FinCEN) has warned of increased incidences of the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program being used to perpetuate financial crimes against senior citizens. Home Equity Conversion Mortgages (HECMs) are federally insured reverse mortgages backed by the U.S. Department of Housing and Urban Development. Specifically, FinCEN has warned financial institutions to be aware of new fraud trends, including “the theft of a senior’s HECM loan proceeds through cross selling of financial products” that violate the rules of the Department of Housing and Urban Development or the outright theft of reverse mortgage proceeds by family members, caretakers, or loan officers. FinCEN has also noted cases where a family member or other individual with power of attorney over the senior’s finances used that power to “apply for and close HECM loans without the full knowledge or participation of the victim.” “The most troubling aspect of HECM fraud is that it takes advantage of senior citizens who have worked hard over their entire lives to own their homes,” FinCEN Director James Freis, Jr. said, adding that FinCEN is “working closely” with HUD and the Secret Service to “proactively identify hot-spots of suspected HECM and other mortgage fraud activity and directly provide to law enforcement a more defined battleground to direct their resources.” FinCEN has also requested that financial institutions “use certain key words” in their Suspicious Activity Reports (SAR) to “assist law enforcement in identifying and prosecuting these crimes.” For the full FinCEN release, use the resource link.

Inside Washington (04/27/2010)

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* WASHINGTON (4/28/10)--Sen. Carl Levin (D-Mich.) Monday pressed for tougher limits on financial institutions’ abilities to participate in proprietary trading. Levin said the issue should be included in Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) regulatory reform bill. Levin said an investigation of Goldman Sachs Group proved the firm bet against the mortgage market even when it encouraged clients to invest in it--indicating why stricter rules are needed. Goldman’s risky trading has been viewed by financial observers as a contributing factor in the housing market’s troubles (American Banker April 27) ... * WASHINGTON (4/28/10)--The National Commission on Fiscal Responsibility and Reform should focus on putting the nation on a path to fiscal sustainability, Federal Reserve Board Chairman Ben Bernanke said in a speech to the commission Tuesday. One criterion for sustainability should be to stabilize the ratio of federal debt held by the public to national income. This can be achieved by bringing spending, excluding interest payments, in line with revenues, he said. “Most projections suggest that we are far from this goal, and that without significant changes to current policy, the ratio of federal debt to national income will continue to rise sharply.” Congress, the Obama administration, and Americans will have to choose among making modifications to entitlement programs such as Medicare or Social Security, restraining federal spending on everything else, accepting higher taxes or some combination thereof, he added. Click to read the full text of Bernanke’s speech ...

Eyes on reg reform debates chances in Senate this week

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WASHINGTON (4/27/10)—While the U.S. Senate on Monday did not approve officially beginning debate on financial regulatory reform, with a cloture vote failing, Senate leaders will continue to negotiate portions of the bill and will push to begin debate this week. S. 3217, the Restoring American Financial Stability Act, would affect the credit union system by limiting the National Credit Union Administration's (NCUA) regulatory authority to credit unions with under $10 billion in assets. The regulatory reform package would also address many issues facing the broader financial services industry. The Credit Union National Association (CUNA) has lobbied Congress not to limit the NCUA’s oversight of credit unions, regardless of asset size. CUNA has also asked legislators to narrow the legislation's definition of remittances. CUNA is concerned that the current "overly broad" definition would essentially make it impossible for credit unions to continue to offer any form of international electronic fund transfer services to their members. The Senate may debate a Food Safety bill if the regulatory measures are not brought to the floor this week. Several hearings are also scheduled this week, with the House Financial Services Committee setting up markups of legislation that would alter the National Flood Insurance Program, among other items. The House Judiciary Committee will also address financial issues on Wednesday by holding a hearing on H.R. 2695, the Credit Card Fair Fee Act of 2009, with the Electronic Payments Coalition, of which CUNA is a member, set to testify. H.R. 2695, which was offered by Reps. John Conyers Jr. (D-Mich.) and Bill Shuster (R-Pa.) last year, would permit merchants to negotiate fees with financial institutions via an antitrust exemption. The House Financial Services Committee will also be busy on Wednesday, with various subcommittees holding hearings on legislative proposals to preserve public housing, reviewing the Financial Crimes Enforcement Network oversight reports, and promoting small enterprises in Haiti. The role of banks and the U.S. Treasury in the housing market will also be discussed in a Senate Committee session this week.

Privacy SAR confidentiality on NCUA semiannual review

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WASHINGTON (4/27/10)—In its latest semiannual regulatory agenda, the National Credit Union Administration (NCUA) said it plans to undertake a routine review of recent changes to the “substantive requirements” of its rule on Unfair or Deceptive Acts and Practices, among other items. The NCUA board earlier this year voted to withdraw its UDAP rule, effective July 1. As a result, federal credit union examiners will not be checking for compliance preparations with the UDAP rule, but instead will be instructed to consider a credit union's compliance with portions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. UDAP rules are being superseded as the various portions of the CARD Act become law. The NCUA will also review “an interagency rule on model privacy notices and ways financial institutions can make them clear and conspicuous” and said that it likely will not take additional regulatory action “concerning the scope of confidentiality applicable to filed Suspicious Activity Reports (SAR) in the next year.” The SAR reporting rules were previously on the NCUA’s regulatory agenda. Overall, the NCUA RegFlex reviews aim to evaluate the impact of NCUA rules on small credit unions that hold under $10 million in assets. The regulatory agenda, published in the Federal Register, details upcoming regulatory developments within the NCUA. For the full release, use the resource link.

CUNA summary Recent UBIT cases could help CUs challenges

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WASHINGTON (4/27/10)--According to a recent memo, state-chartered credit unions that are subject to unrelated business income tax (UBIT) may now "have a good defense against civil tax penalties" that the U.S. Internal Revenue Service (IRS) could try to impose on credit unions that do not declare UBIT due on income from the sale of credit life and disability insurance, Guaranteed Asset Protection coverage, and other financial products. Credit Union National Association (CUNA) executive vice president and general counsel Eric Richard said that the memo, which was prepared at the request of and with the support of the UBIT Steering Committee, “should be helpful to credit unions in having a dialogue with their outside auditors about what, if any, UBIT liabilities need to be accounted for in their financial statements and in their tax filings." The UBIT Steering Committee is comprised of CUNA representatives and members of the American Association of Credit Union Leagues, the National Association of State Credit Union Supervisors, and CUNA Mutual Group. According to the memo from the law firm Foley & Lardner LLP, the recent decisions in federal court cases involving Bellco CU and Community First CU may give other credit unions "substantial authority" sufficient to not pay UBIT on sales of these products without being subject to tax penalties for maintaining a frivolous tax law position. Services such as mutual funds, stocks, and annuities, as well as income qualifying as "royalties," such as from a third-party vendor's sale of accidental death and dismemberment (AD&D) insurance policies to members, are also addressed by this decision. In the U.S District Court for the District of Colorado, Judge Christine M. Arguello earlier this month ruled that Bellco CU's income derived from credit life and disability insurance, sold directly or indirectly, as well as royalty income from AD&D insurance should not be subject to UBIT. Arguello's ruling supplements a 2009 summary judgment ruling which found that Bellco CU's commissions from a vendor's sales of financial products and services such as stocks and annuities to its members were "substantially related" to its tax-exempt purpose and so therefore not subject to UBIT. For a more thorough analysis of the Bellco ruling, use the resource link.

Inside Washington (04/26/2010)

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* WASHINGTON (4/27/10)--The best way to achieve a compromise on a hot topic in the regulatory reform bill is to study it, according to American Banker (April 26). Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) 1,300-page bill contains more than two dozen studies on topics including industrial loan companies and the Volcker Rule. The high number of studies indicates that many of the issues in the bill are intricate, and suggests lawmakers are serious about dealing with them in the future. Because the number of studies could grow before the bill becomes law, there might be a “long process” for regulatory reform, said Cornelius Hurley, Boston University School of Law professor. Some issues--like the Volcker Rule--may need multiple studies. Some financial observers said the studies aren’t a good use of time, but they may prove valuable. The studies are a way to compromise and move toward a consensus, said Jane D’Arista, research associate with the Political Economy Research Institute at the University of Massachusetts Amherst ... * WASHINGTON (4/27/10)--The Federal Deposit Insurance Corp. (FDIC) has reduced the number of projected bank failures for this year, said Chairman Sheila Bair. Things are improving, Bair told a cable news outlet on Friday (American Banker April 26). There will be more than 140 failures this year but there will be fewer than what the agency predicted three months ago, she said. The projection of failures will peak at the end of the year, and it’s likely predominantly smaller banks will be closed. Some institutions that were near insolvency and on the FDIC’s problem list have recovered ...

Friday sees one CU seven banks closed

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ALEXANDRIA, Va. (4/26/10)--The National Credit Union Administration (NCUA) Friday assumed control of the operations of St. Paul Croatian FCU, headquartered in Eastlake, Ohio. The NCUA placed the federally insured credit union into conservatorship because of its declining financial condition, but noted that the decision to conserve the credit union enables the institution to continue normal operations “with expert management in place.” Members can continue to make deposits, access funds, make loan payments and use share drafts. St. Paul Croatian, with almost 5,400 members, is the second federally insured credit union conserved in 2010. Also on Friday, federal regulators closed seven banks, all in Illinois. That moved the number of U.S. bank failures up to 57 for the year. The largest of Friday’s closed banks was Broadway Bank, with $1.2 billion in assets; the smallest was Citizens Bank&Trust Company, with $77.3 million in assets. Both were located in Chicago. St. Paul Croatian, was chartered in 1943 and serves “members of St. Paul’s Croatian Parish in Cleveland, Ohio, spouses of persons who died while in the field of membership of this credit union, employees of the credit union, persons retired as pensioners or annuitants from the credit union, members of their immediate families, and organizations of such persons.” Member accounts are insured to at least $250,000 coverage provided by the National Credit Union Share Insurance Fund, and the NCUA noted that members with questions about their insurance coverage can contact NCUA’s Share Insurance Call Center at 1-800-755-1030, Press 1, Monday through Friday during normal business hours.

April 30 is deadline for CDCI applications

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WASHINGTON (4/26/10)—For credit unions and other Community Development Financial Institutions (CDFIs) interested in the U.S. Treasury Department’s Community Development Capital Initiative (CDCI), there is an April 30 deadline for applications. The CDCI program, announced Feb. 3, is designed to increase lending in low-income communities. It gives Treasury a means to invest low-cost capital in specific financial institutions, including certain certified CDFI credit unions. Qualified CDFIs can obtain up to 3.5% of their assets as secondary capital, which will count toward their regulatory net worth. (CDCI), expected to provide another $200 million to CDFI credit unions and banks. The April 30 deadline is an extension from the original April 2 date set for Low-income credit unions and April 16 cut-off for uncertified low-income credit unions (LICUs). Eligibility for the CDCI program will be determined by the National Credit Union Administration (NCUA) along with Treasury. CDCI funds are only available to CDFI-certified credit unions that are also low-income designated by NCUA. Credit unions without low-income designation are not permitted to accept Secondary Capital. Well-capitalized credit unions are expected to qualify readily, in the absence of material negative trends. Credit unions that fall below that standard may still qualify for funds if they can obtain matching secondary capital from non-governmental sources. For instance, the National Federation of Community Development Credit Unions (Federation) announced in March it would make $1 million in secondary capital available as matching funds for member CDCUs that might not be immediately eligible for CDCI investments. Also of note, the federation has developed a fact sheet covering nine frequently asked questions about the CDCI. The Federation document notes that while the program falls under the government's TARP authority, it is "very different from TARP for banks," which is often referred to as bailout money. CDCI is "not to bail out failing institutions," the Federation underscores. "It is a highly targeted program to enhance lending to low-income communities." Currently, an estimated 100 credit unions have applied for CDCI funds, and the federation estimates that awards will total around $200 million. Use the resource links below for more information.

Fed slates series of summer HMDA hearings

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WASHINGTON (4/26/10)—Starting in July, the Federal Reserve Board will conduct a series of four hearings on possible changes to its rules implementing the Home Mortgage Disclosure Act (HMDA), Regulation C. Mortgage lenders, consumers, and community and consumer organizations, as well as other interested parties, are invited to participate in the hearings involving the law that, in part, requires mortgage lenders to provide detailed annual reports of their mortgage lending activity to regulators and the public. In an announcement Friday, the Fed said the hearings will serve three objectives. First, the Fed board will gather information to evaluate whether the 2002 revisions to Regulation C, which required lenders to report mortgage pricing data, helped provide useful and accurate information about the mortgage market. Second, the hearings will provide information that will help the agency assess the need for additional data and other improvements. Finally, the Fed hopes the hearings will help identify emerging issues in the mortgage market that may warrant additional research. The Credit Union National Association, working with its Consumer Protection Subcommittee, will request to participate and will provide credit union information and recommendations to the Fed. The hearings will take place at:
* The Federal Reserve Bank of Atlanta on July 15; * The Federal Reserve Bank of San Francisco on Aug. 5; * The Federal Reserve Bank of Chicago on Sept. 16, and; * The Federal Reserve Board in Washington, D.C. on Sept. 24.
For more information, use the resource link below periodically as more information about the agenda becomes available.

CUNA New health care extends tax incentives to small CUs

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WASHINGTON (4/26/10)--Thanks to recent changes to national healthcare policy, many small credit unions should be eligible for the “Employee Health Insurance Expenses of Small Employers” tax credit for small, tax-exempt employers provided by the recently passed legislation. In a letter to credit union leagues and other representatives, Credit Union National Association (CUNA) President/CEO Dan Mica said that even though the U.S. Congress’s original bill would not have made tax-exempt employers eligible for any form of healthcare tax credit, the Congress did extend “a portion of the small employer tax incentive to not-for-profit employers, including qualifying credit unions and credit union leagues.” CUNA had advocated changing the legislation, as this provision, as originally written, “would have put credit unions and credit union leagues at a specific disadvantage compared to other similar sized employers.” The Internal Revenue Service last week reminded small business owners of this tax policy change through a series of mailings. To qualify for the tax credit, employers must cover a minimum of 50% of employee healthcare costs, based on the single rate. Those employers “must have less than the equivalent of 25 full-time workers,” and must “pay average annual wages below $50,000,” the IRS added. However, “businesses that use part-time help may qualify even if they employ more than 25 individuals,” the IRS said. Both for-profit and tax-exempt entities that qualify for the credit may claim up to 35% and 25%, respectively, of their 2010 premium costs under most circumstances, and that rate will increase to 50% of premium costs for for-profit entities and 35% of premium costs for non-profit entities in 2014. “The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers,” the IRS added. For more on the tax credit, use the resource link.

Inside Washington (04/23/2010)

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* WASHINGTON (4/23/10)--Credit ratings agencies suspected as early as 2006 that the top ratings given to mortgage-backed securities were flawed, but they failed to take action, according to Sen. Carl Levin (D-Mich.), the chairman of the Senate Permanent Subcommittee on Investigations. Levin told reporters that Standard & Poor’s Rating Services, Moody’s and Fitch Ratings downplayed the riskiness of toxic securities because they failed to reevaluate their ratings--which later worsened the financial crisis (American Banker April 23). Levin was slated to hold a hearing Friday on the topic. He also released a report with e-mails and other documents from the three credit agencies. His report indicates that the agencies suspected as early as 2004 that mortgage fraud, rising housing prices and loose underwriting was undermining their credit models. By 2006, Moody’s and Standard and Poor’s revised their rating models to more accurately account for risk, but didn’t apply those models to existing securities until mid-2007, when thousands were downgraded. The downgrade was likely an “immediate trigger” of the 2008 financial crisis, Levin said ... * WASHINGTON (4/23/10)--The Treasury Department is threatening to cut back incentive payments--or in some cases, deny them--to mortgage servicers who are not modifying loans according to the administration’s guidelines for the Home Affordable Modification Program (HAMP). The department said it has documented cases where servicers wrongly foreclosed on properties or denied modifications before reviewing a borrowers for HAMP (American Banker April 23). HAMP is voluntary, and pays $1,000 for each completed permanent modification for a delinquent borrower and $500 for each modification given to a current borrower. Servicer payments have totaled $68.4 million so far, and 109 servicers are participating. The violations Treasury has found seem to do with communications with borrowers about their rights regarding foreclosure, said Meg Reilly, Treasury spokesperson. By March 31 of this year, about 230,801 borrowers had received permanent modifications, and more than one million were in trial modifications. When HAMP was introduced in 2009, Treasury said it would help three to four million borrowers avoid foreclosure by reducing monthly payments ... * WASHINGTON (4/26/10)--The Supreme Court ruled Wednesday in a 7-2 opinion that makes it easier for consumers to sue collectors who send collection notices in error. The High Court ruled that collectors can’t protect themselves from such lawsuits by simply stating they made an error when issuing the notice. AT issue were the actions of a law firm, Carlisle, McNellie, Rini, Kramer & Ulrich Co. that sent foreclosure proceedings on behalf of Countrywide Home Loans Inc. by mistake. A homeowner sued the firm, saying it violated the Fair Debt Collection Practices Act (American Banker April 23). The case will return to a lower court ...

Payday loan alternatives corporate CU requirements on NCUA agenda

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ALEXANDRIA, Va. (4/23/10)--The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. (ET) next Thursday, is expected to discuss short-term, small dollar, so- called payday loans and waivers under certain provisions of its corporate credit union regulation. Posting its agenda yesterday, the NCUA had the following three items slated:
* Proposed Rule – Section 701.21(c) of NCUA’s Rules and Regulations, Short-term, Small-dollar Loans; * Waiver under Part 704 of NCUA’s Rules and Regulations; and * Insurance Fund Report.
Section 701.21 of the NCUA’s rules address loans made by federal credit unions, and Part 704 regulates corporate credit unions. The Credit Union National Association is aware that some at NCUA have been looking for ways to help credit unions offer alternatives to payday lending. One of the challenges facing federal credit unions is an 18% interest cap on payday loan programs. Under Section 704, some corporate credit union services are tied to the capital of the corporate. The NCUA late last year proposed substantial revisions to its corporate credit union regulations. The NCUA has collected public comments on these regulations, and plans to complete its work on the corporate credit union system later this year. The board will also be updated on the status of the National Credit Union Share Insurance Fund during the meeting. A closed meeting of the board--during which the NCUA will discuss supervisory activities and personnel matters--will follow the session. The NCUA on Thursday also announced a separate closed meeting, scheduled for later today, which will cover NCUA supervisory activities.

NCUA for Earth Day notes green gains

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ALEXANDRIA, Va. (4/23/10)--The National Credit Union Administration (NCUA) celebrated Earth Day by hailing the progress of the Agency’s “greeNCUA” initiative which has “helped reduce the environmental impact of everyday operations and has helped inspire employees to focus on improving environmental protection.” The greeNCUA initiative, which began in late 2009, resulted in new recycling programs, energy-efficiency improvements and increased communication about environmental concerns at the NCUA. These improvements “have helped the agency reduce its consumption of resources, limit its carbon footprint and restrain its operating costs,” according to the release. Specific steps that the NCUA has taken to reach its pro-environmental goals include conducting energy audits, using recycled office materials, turning off NCUA building systems after 6 p.m. on weekdays and throughout the weekend, and recycling much of its office waste, such as light bulbs, paper, glass, aluminum, and toner cartridges. The NCUA received input from both its own Green Committees, which are centered in the agency’s Alexandria-based headquarters and five regional offices, as well as suggestions from individual employees. "Earth Day reminds us of our responsibility to reduce our impact on the environment and to use natural resources wisely," NCUA Chairman Debbie Matz said, adding that "the progress that NCUA has made in adopting environment-friendly policies reflects our employees' public-spirited support for conserving the nation's resources."

Obama urges finance firms to fight for reform

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WASHINGTON (4/23/10)--President Barack Obama has urged Wall Street financial firms to “join” his Administration’s attempts to reform finance regulations “instead of fighting us in this effort,” stating that the reforms “are, in the end, not only in the best interest of our country, but in the best interest of our financial sector.” While many large financial firms, and groups representing their interests, elected to avoid or oppose any discussion with the government as the financial regulatory reform debate began, the Credit Union National Association has met directly with members of Congress and U.S. Treasury officials to lay out credit union concerns. CUNA’s advocacy on behalf of credit unions has continued more recently, with CUNA on Thursday urging legislators to narrow the legislation’s definition of remittances. CUNA has also called for Congress and the Administration to retain the National Credit Union Administration’s regulatory authority over all credit unions rather than limiting it to those with under $10 billion in assets. Senator Harry Reid (D-Nev.) on Thursday said that a vote to proceed with debate on Sen. Chris Dodd’s (D-Conn.) S. 3217, the Restoring American Financial Stability Act, would take place on Monday.

Preserve intl payments through tighter remittance definition CUNA

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WASHINGTON (4/23/10)—The Credit Union National Association ramped up its efforts to affect a change in legislative language addressing remittances and, along with a coalition of financial services groups, sent a letter Thursday to Senate leaders urging a more narrow definition of the service. The letter to Sens. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee, and Daniel Akaka (D-Hawaii), a committee member with longstanding interest in remittance issues, warned that an overly broad definition would reduce financial institutions’ ability to offer cross-border electronic funds transfers, which are not generally thought of as "remittances." Generally, a "remittance" is a transfer of money by a foreign worker located in the United States to relatives in his or her home country. Language included in the Senate’s financial regulatory reform package is currently so broad, CUNA argues, that is would cover payments and payments systems currently consider way outside the remittance system. “We are concerned about Section 1076 of the Restoring American Financial Stability Act that defines ‘remittances’ differently than the internationally accepted standard and that we believe will prevent our members from competitively offering many forms of international electronic fund transfer services because of the burdens that such an overly broad definition will impose on these services,” said the coalition letter. In addition to CUNA, the letter is signed by the National Association of Federal Credit Unions, the American Bankers Association, and the Independent Bankers Association of America. Dodd and Akaka were urged to make the definition of "remittance transfer" close to one adopted by the World Bank and Bank for International Settlements in 2007 in a white paper. The report, signed off on by now-U.S. Treasury Secretary Timothy Geithner, defined remittance transfers as “cross-border person-to-person payments of relatively low value.” “Generally these ‘remittance transfers’ are for the maintenance and support of the recipient and/or other relatives, and are defined to not include payments to businesses, many transfers between bank accounts, or payments made in exchange for goods or services. In order to ensure a competitive and viable product that serves consumers’ needs, it is critical to properly tailor the statutory definition…” the joint letter recommends. Attached to the missive was the trade groups’ endorsed definitional language. Ryan Donovan, CUNA vice president for legislative affairs, said CUNA’s main concern is that the current legislative language would position credit unions so they are liable for actions of correspondent banks, over which they have no control, and which are not subject to U.S. law. He noted that discussions regarding this provision with the Senate proponents have been positive and constructive. Donovan added, "Our concern here is not the requirements under the section as they relate to what everyone generally considers remittances." The Thursday letter follows up an earlier effort by CUNA and the World Council of Credit Unions (WOCCU). In a March 25 letter, CUNA and WOCCU encouraged Dodd to consider exempting credit unions or, more broadly, exempting transactions that are routed through programs administered by the major central banks, including Fedwire, Fed Global ACH, NACHA ACH, and the SWIFT system.

Inside Washington (04/22/2010)

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* WASHINGTON (4/23/10)--The House Financial Services Committee passed the Rural Housing Preservation and Stabilization Act (H.R. 5017) yesterday, a bill intended to ensure that homebuyers in rural America continue to have access to affordable mortgages through the U.S. Department of Agriculture’s (USDA) guaranteed mortgage loan guarantee. The bill was approved unanimously by the committee and the affirmative vote clears the bill for consideration by the full House, perhaps as early as next week. Rep. Paul Kanjorski (D-Penn.), who introduced the bill, said H.R. 5017 is needed because “unprecedented demand” for USDA guarantees, sparked by the financial crisis, created a tripling in the number of loans made as compared with 2006 levels. ““As a result of the unprecedented demand, the program is now unfortunately running out of money. At no cost to taxpayers, my bill will preserve the access of millions of families living in America’s heartland to needed USDA loan guarantees, so that they can continue to buy homes with affordable mortgages,” Kanjorski said in a release announcing the committee vote ... * WASHINGTON (4/23/10)--Federal Reserve supervisors are telling about two dozen big banks in the U.S. that they must end pay practices that encourage risk-taking. They also are telling boards to increase their scrutiny of incentives. Fed officials have met recently with executives and boards of the banks and told them they need to submit plans to repair deficiencies in how they monitor pay. Firms in the Fed’s review include Morgan Stanley, Bank of America, Goldman Sachs, Citigroup and JPMorgan Chase and Co. In October, the Fed released guidelines to encourage big banks to tie pay to long-term performance. The Fed’s actions are similar to those efforts by lawmakers to overhaul policies created by management and corporate boards. The Fed also wants to ensure banks consider how much employees expose the firms to liquidity and reputational risks (Bloomberg.com April 22) ... * WASHINGTON (4/23/10)--Efforts to widen Small Business Administration (SBA) programs took a step back Wednesday when the agency’s inspector general noted fraud concerns. President Obama asked Congress in February to increase caps on 7(a) and 504 loans to $5 million from $2 million, and to allow owner-occupied commercial real estate loans maturing within the year to be refinanced through the 504 program. However, Peggy Gustafson, SBA inspector general, found issues with the programs. A March audit of the 504 program indicated that lenders may not have used good practices for approved 68% of sampled loans worth $8.9 million. About 572 loans worth $254.9 million had weaknesses. For the 7(a) program, the general found an improper payment rate of 0.53%, representing $4.6 million of loans. Gustafson said to manage risk, the SBA needs to have increased oversight over SBA lenders and regular on-site reviews ... * WASHINGTON (4/23/10)—The Federal Deposit Insurance Corp. (FDIC) revised its list known as “Update to Notice of Financial Institutions for Which the Federal Deposit Insurance Corporation Has Been Appointed Either Receiver, Liquidator, or Manager” in the Federal Register. It updates the agency’s failed bank list regarding the FDIC as sole receiver, through March 19…

House Financial Services schedules votes today

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WASHINGTON (4/22/10)—The House Financial Services Committee announced it will conduct a mark up today of a series of bills, including The Flood Insurance Reform Priorities Act of 2010. Also scheduled for a vote:
* H.R. 2336, Green Resources for Energy Efficient Neighborhoods Act, which would amend the Housing and Community Development Act of 1992 to require the director of the Federal Housing Finance Agency to assign an additional housing credit for compliance with Federal Mortgage Insurance Association and Federal Home Loan Mortgage Corporation housing goals for energy-efficient and location-efficient mortgages. It also would require Fannie Mae and Freddie Mac to develop loan products and flexible underwriting guidelines to facilitate a secondary market for energy-efficient and location-efficient mortgages for low and moderate income families, for second and junior mortgages made for purposes of energy efficiency or renewable energy, or both, and amends the Home Mortgage Disclosure Act of 1975 to require the collection of information on energy-efficient and location-efficient mortgages, among other things; * H.R. 5017, Rural Housing Preservation and Stabilization Act, intended to ensure the availability of loan guarantees for rural homeowners; * H.R. 2555, Homeowners’ Defense Act, which would establishe the National Catastrophe Risk Consortium as a nonprofit, nonfederal entity to: maintain an inventory of catastrophe risk obligations held by state reinsurance funds, state residual insurance market entities, and state-sponsored providers of natural catastrophe insurance; issue, on a conduit basis, securities and other financial instruments linked to catastrophe risks insured or reinsured through Consortium members; coordinate reinsurance contracts; act as a centralized repository of state risk information accessible by certain private-market participants; and establish a database to perform research and analysis that encourages standardization of the risk-linked securities market; * The FHA Reform Act, which would amend the National Housing Act to make exceptions to the prohibition against mortgage insurance for mortgages involving a downpayment using funds furnished by: the seller or any party that benefits financially from the transaction (seller-financed downpayment); or any third party that is reimbursed by the seller or any such party; as well as make eligible for mortgage insurance, in spite of a seller-financed downpayment, any mortagors with credit scores equivalent to a FICO score of: 680 or more; at least 620 but less than 680; or 619 or less; and * H.R. 1264, Multiple Peril Insurance Act, to amend the National Flood Insurance Act to require the national flood insurance program to enable the purchase of multi-peril coverage and optional separate windstorm coverage to protect against loss resulting from physical damage or loss of real or related personal property located in the United States.

Senate moves steps closer to financial reform

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WASHINGTON (4/22/10)--The Senate Agriculture Committee's Wednesday passage of "The Wall Street Transparency and Accountability Act of 2010" was "another step towards (sic) comprehensive financial reform," U.S. Treasury Secretary Tim Geithner has said. The derivatives legislation, which had support from both Republican and Democratic committee members, would, according to a committee statement, prohibit the Federal Reserve and the Federal Deposit Insurance Corporation from using federal funds to bail out Wall Street firms that "engage in risky derivative deals." The legislation will also require banks that take part in swaps transactions to "spin off their swap dealer desks." These banks would be "barred from receiving any federal assistance" if they failed to do so. The bill will also create "mandatory clearing and trading requirements" and ensure that all derivatives trades are reported in "real-time," the statement added. In a statement following the committee action, Geithner said that the Treasury would work with Senate Banking Committee Chairman Chris Dodd (D-Conn.) and Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) "to craft strong derivatives provisions that close loopholes, provide necessary transparency, and reduce threats to financial stability as part of a final, comprehensive financial reform bill." Debate on the Senate version of that comprehensive reform bill is expected to begin this week and could continue into next week. The bill language was filed yesterday by the Senate Banking Committee, which means lawmakers can now proceed with a vote on the motion to proceed with the bill, perhaps as early as today. The legislation, which was introduced by Dodd last month, would allow the Federal Reserve to continue to oversee both large banks and smaller state-chartered banks while also adding authority over some non-bank financial firms to the Fed's list of responsibilities. The Credit Union National Association has expressed some concern over portions of the legislation that address remittances and that limit the National Credit Union Administration's examination authority to credit unions with under $10 billion in assets.

Inside Washington (04/21/2010)

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* WASHINGTON (4/22/10)--A bipartisan regulatory reform bill could be in the works, said American Banker (April 21). Sen. Richard Shelby (R-Ala.) said the Senate Banking Committee is making progress, and a consensus could be reached. One concern lawmakers have about the bill is including resolution language so no troubled bank can be propped up. The “overriding issue on too big to fail” is that the language will send the message that no bank is going to be bailed out, Shelby said. Lawmakers also are nearing an agreement on regulating derivatives, he added. Sen. Christopher Dodd (D-Conn.), who authored the regulatory reform bill, said he also was confident that a bipartisan deal could be reached ... * WASHINGTON (4/22/10)--Lawmakers are debating whether a pending regulatory reform bill could have prevented Lehman Brother’s fall if the bill had been enacted two years ago (American Banker April 21). House Democrats, regulators and the Obama administration said the reform would have given regulators the power to detect problems earlier and unwind the bank. However, Republicans said regulators already have a lot of power that they failed to use. Rep. Spencer Bachus (R-Ala.) said regulators did not catch Lehman’s accounting manipulation, and that regulatory reform proposals would have only doubled down the failed policies already in place. Federal Reserve Board Chairman Ben Bernanke said the Fed had few options when Lehman collapsed. If the reform bill were enacted, the Fed would have had more ability to force Lehman into precautionary measures, he said. Tim Geithner argued that under the bill, large firms would have had consolidated oversight by the Fed and would have higher capital and liquidity requirements ... * WASHINGTON (4/22/10)--Lawmakers are divided on whether or not a financial crisis responsibility fee that would be charged to big banks should be included in a regulatory reform bill. Sen. Charles Schumer (D-N.Y.) said Congress should not wait to pass legislation that would assess a 15-basis-point fee on firms with more than $50 billion in assets. The proposal is a common sense way to ensure taxpayer money is repaid, he said. However, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said the tax proposal has merit, but that he wasn’t sure he wanted to add it to the reform bill. It’s unclear how the tax would be levied, and more hearings will likely be held on the topic (American Banker April 21) ... * WASHINGTON (4/22/10)--The Federal Deposit Insurance Corp. (FDIC) announced two bond sales (American Banker April 21). The FDIC said it raised $2 billion by selling failed-bank assets. In one sale, the agency generated $1.3 billion from notes guaranteed by $4.5 billion of assets from Corus Bank in Chicago. In the other sale, FDIC received $652 from selling notes backed by $1.2 billion of assets from Franklin Bank in Houston ...

New 100 bill with security features unveiled

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WASHINGTON (4/22/10)--Federal authorities on Wednesday joined to unveil the new hundred dollar bill, a bill that will combine the usual portrait of Ben Franklin, and some previously added security enhancements, with a pair of brand new, advanced counterfeit-deterrent security features. The bill was introduced by members of the Federal Reserve, the U.S.
Click to view larger image The government's new design of the $100 bill combines a portrait of Benjamin Franklin and some security enhancements.
Treasury, and the U.S. Secret Service, and features a blue three-dimensional security ribbon and an interpretation of the classic liberty bell image which, when tilted, changes colors from copper to green, making the bell appear to disappear and reappear in an inkwell. U.S. Treasurer Rosie Rios said these new security features “come after more than a decade of research and development to protect our currency from counterfeiting.” “To ensure a seamless introduction of the new $100 note into the financial system, we will continue global public education of retailers, financial institutions and industry organizations to ensure that consumers and merchants are aware of the new security features,” she added. A watermark portrait of Ben Franklin, a security thread, and a large, color-shifting “100” have been carried over from the previous design, and the new $100 bill will also includes phrases from the Declaration of Independence and a newly designed, larger image of Independence Hall. The $100 bill “is the most widely circulated and most often counterfeited denomination outside the U.S.,” according to the release. Fed Chairman Ben Bernanke said that the 6.5 billion $100s that are currently in circulation “will remain legal tender,” adding that “U.S. currency users should know they will not have to trade in their old design notes when the new notes begin circulating.” Exactly when the new notes will be circulated has not yet been determined. For more on the new note, use the resource link.

Proposed rule would limit Fed. benefit garnishments

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WASHINGTON (4/22/10)—The U.S. Treasury, the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board, and the Office of Personnel Management this week issued for public comment a proposed rule” to implement statutory restrictions on the garnishment of Federal benefit payments.” The notice, as published in the Federal Register, states that the rule is a response to “recent developments in technology and debt collection practices that have led to an increase in the freezing of accounts containing federal benefit payments.” The proposed rule, which would affect all financial institutions, including federal- and state-chartered credit unions, would “require financial institutions that receive a garnishment order for an account to determine whether any Federal benefit payments were deposited to the account within 60 calendar days prior to receipt of the order and, if so, would require the financial institution to ensure that the account holder has access to an amount equal to the sum of such payments in the account or to the current balance of the account, whichever is lower.” The proposed rule aims to “ensure that benefit recipients have access to exempt funds” while garnishment orders are being resolved. The rule also attempts to protect credit unions and other financial institutions that are involved in cases where accounts that are receiving federal benefit payments have also received garnishment orders. The rule provides “a safe harbor” and protects credit unions and other financial institutions that follow these federally established procedures “from the risk of liability, contempt of court, or civil penalties when they permit account holders to access funds in the account in accordance with the requisite procedures.” However, under the proposal, credit unions and other financial institutions would not be permitted to charge garnishment fees “against protected amounts.” The rule would not limit an account holder’s right to assert any additional protections against garnishment that might be available under Federal or state law,” the agencies added. Comments on the proposed rule must be submitted by June 18. For the proposed rule, as published in the Federal Register, use the resource link. The Credit Union National Association will soon issue a comment call asking for credit union remarks regarding the plan.

CU among those awarded total of 10M for tax advice

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WASHINGTON (4/21/10)--El Paso Credit Union HOAP, Inc., of Texas, was among the 160 organizations that received a total of $10 million in matching grants to Low Income Taxpayer Clinics (LITCs) for the Internal Revenue Service (IRS) 2010 grant cycle. LITCs represent low-income taxpayers in federal tax disputes the IRS for free or for a small charge. The LITCs also may provide tax education and outreach for taxpayers who speak English as a second language. El Paso CU Union HOAP received a grant of $39,787. Through the LITC program, the IRS awards matching grants of up to $100,000 a year to qualifying organizations. Use the resource link below for more information.

NCUA backs tougher enforcement promise

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ALEXANDRIA, Va. (4/21/10)--As promised last November, the National Credit Union Administration (NCUA) is increasing public disclosure of its interactions with troubled credit unions. The NCUA recently disclosed a pair of letters of understanding that the agency entered into with management at a pair of credit unions. These letters were meant to “correct noted adverse conditions” such as “untimely and inaccurate recordkeeping,” inadequate recordkeeping processes, and loan issues that were “of concern” to the NCUA. Specifically, the NCUA after an in-house examination found that outstanding items on one credit union’s reconcilements were over six months old and had not been cleared. In addition, the NCUA said that general ledger account reconciliations were “not consistently performed in a timely manner.” The NCUA also criticized the credit union for failing to base its loan limits on “credit risk and income levels.” In another separate letter released by the Agency, a credit union agreed with NCUA demands to “accurately complete applications for all new members” and offer credit union services only to those members. The NCUA during an examination found that the credit union “took an overly expansive view” of its field of membership and “accepted share accounts from, and extended loans to, individuals otherwise unqualified for membership.” NCUA Chairman Debbie Matz said late last year that while the NCUA did not intend to discourage lending, its examiners would take public administrative actions to ensure compliance by credit unions and could potentially follow up with public letters of understanding and agreement or cease and desist orders if a credit union has not followed NCUA recommendations. For the NCUA letters, use the resource link.

CDFI fund releases NMTC QandA

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WASHINGTON (4/21/10)--Following the opening of its 2010 round of the New Markets Tax Credit (NMTC) program on April 7, the Community Development Financial Institutions (CDFI) Fund released a series of questions and answers. Credit unions are among those eligible to participate in the NMTC, which seeks to spur the investment of new private sector capital into low-income communities by permitting individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments. Those investments must be made in designated Community Development Entities. Organizations that have received credits through the NMTC program, which has been given $5 billion in tax credit authority for 2010, have raised $15.8 billion in equity investments since the program began in 2002, the CDFI recently said. The Q&A covers the basics of the NMTC program, including who may apply for the tax credits and how they may apply for those credits, and also addresses more complex issues such as whether organizations that focus on urban markets and do not intend to invest in non-metropolitan counties will be disadvantaged in the 2010 NMTC application round. A number of more detailed topics are also covered by the Q&A. For the full Q&A, use the resource link.

Inside Washington (04/20/2010)

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* WASHINGTON (4/21/10)-A proposal to charge big banks a 15 basis point fee on their liabilities is gaining ground again. The proposal--intended to cover Troubled Asset Relieve Program (TARP) losses--lost momentum in January when TARP appeared to generate a profit. However, the Senate Finance Committee was scheduled to tackle the issue at a hearing Tuesday, and Rep. Sander Levin (D-Mich.) endorsed the fee Monday. The Group of 20 also could discuss a potential global bank tax as the International Monetary Fund releases a report on its likelihood (American Banker April 20). It’s unknown how the fee would be levied, because the White House proposal only said that companies with $50 billion or more in assets would be charged. However, a Joint Committee on Taxation report suggested several alternatives, including a fee based on income, excess profits, level of risk, or how much TARP money the company took ... * WASHINGTON (4/21/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and several other Democrats said Monday they might be open to elimination a proposed $50 billion resolution fund for systemically significant institutions. Republicans have used the proposal to argue that the bill would perpetuate more taxpayer bailouts. The provision would require banks with more than $50 billion in assets to create a fund that would help unwind a systemically significant institution if it failed. The Federal Deposit Insurance Corp. has supported the fund, saying the banking industry should finance its own risk (American Banker April 20). Dodd said he was hopeful some Republicans would support the bill. Sen. Olympia Snowe (R-Maine) said she would support it if changes are made, including removing the $50 billion find and loopholes that would allow regulators to save an institution. Sen. Susan Collins (R-Maine) said a bipartisan bill could be possible if Republicans had several more weeks to talk about. Collins said removing the $50 billion fund would relieve some of her concerns. She suggested more explicit capital requirements in the legislation so financial institutions don’t get too large ...

Mica thanks legislators for backing fin lit resolution

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WASHINGTON (4/21/10)--The House on Tuesday endorsed H. Res. 1257, a resolution that supports the goals and ideals of Financial Literacy Month, which takes place during April. H. Res. 1257 also contains specific language that backs credit union involvement in National Credit Union Youth Week, which supports increased financial savings by minors. National Credit Union Youth Week concludes on April 25. In a Monday letter, Credit Union National Association President/CEO Dan Mica thanked Reps. Rubén Hinojosa (D-Texas) and Judy Biggert (R-Ill.) for introducing H. Res. 1257. In that letter, Mica said that financial literacy is “vital to the well-being of American families and the overall economic health and prosperity of our nation” and, “given the uncertainty in today’s financial markets… is more important than ever for all Americans.” Mica also detailed many of the financial literacy endeavors that credit unions take part in during the rest of the year, including direct assistance to the National Endowment for Financial Education’s High School Financial Planning Program as it delivers educational materials to over 500,000 students nationwide and funding of the BizKid$ Television Series, a series that promotes financial education for middle and high school students and reaches more than 1,000,000 households per episode. For the full letter, use the resource link.

CUNA iBarronsi story on corporate costs off the mark

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WASHINGTON (4/20/10)--Current corporate credit union loss estimates of $9 billion to $11 billion cited in a Barron's column are actually somewhat lower than earlier forecasts, notes Credit Union National Association (CUNA) Chief Economist Bill Hampel following the column's appearance this week. The Barron’s column recounts corporate investments in high-yielding, mortgage-backed securities as part of a strategy to offer lower-cost services and higher yields to member credit unions. “This wasn’t greed exactly; credit unions offer no stock options. They needed higher rates to subsidize their services and attract more customers,” writes columnist Jim McTague. The column includes loss estimates from CUNA’s Hampel of $9 billion to $11 billion on the portfolios from U.S. Central CU and WesCorp FCU, which were placed into conservatorship last year. Hampel said credit unions should bear in mind that the $9 billion to $11 billion figure in the Barron’s column includes both $5 billion in losses already absorbed by the capital of the corporates, plus current estimates of $4 billion to $6 billion to be covered by the National Credit Union Share Insurance Fund, which credit unions are paying for through premium costs expensed over the next six to seven years. “The Barron’s column should not be read to suggest that the costs to the share insurance fund on the corporate portfolios is rising from an original $6 billion to something between $9 and $11 billion,” Hampel explains. “Rather, the loss estimate to the share insurance fund has actually fallen slightly from $6 billion to something between $4 billion and $6 billion.” Hampel adds that these are estimates on a portfolio whose actual losses may not be known for several years or more.

Treas. digital push could save millions in funds trees

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WASHINGTON (4/20/10)--In a bid to reduce costs, enhance customer service and minimize environmental impact, the U.S. Treasury on Monday announced “a broad new initiative to dramatically increase the number of electronic transactions that involve Treasury and millions of citizens and businesses.” The change, which, according to the treasury, will “increase reliability, safety and security for benefit recipients and taxpayers,” should save over $400 million in funding and 12 million pounds of paper “in the first five years alone,” according to Treasury projections. The Treasury will require individuals that are currently receiving social security, supplemental security income, veterans, railroad retirement and office of personnel management benefits to receive those payments electronically as of March 1, 2013. New enrollees in these programs will receive their benefits electronically beginning on March 1, 2011. The Treasury will require all businesses to make their federal tax deposits electronically and will also “eliminate the option to purchase paper savings bonds through payroll deductions” for members of the private sector beginning in 2011. Federal employees will be required to purchase those savings bonds electronically as of Sept. 30. The Treasury and the administration are strengthening their own direct deposit protections ahead of the electronic deposit turnover. Treasury Secretary Tim Geithner said that the Treasury “must lead the way in developing methods to deliver payments that are safe and secure in a manner that is efficient and reliable," adding that the millions in savings and lessened environmental impact due to the changes make them “a win-win for all Americans."

SEC v. Goldman Sachs could brush against CUs

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WASHINGTON (4/20/10)--The U.S. Securities and Exchange Commission (SEC) late last week charged Goldman, Sachs & Co. and its vice president, Fabrice Tourre, with “defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.” In its complaint, the SEC “alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS)” and “failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.” Specifically the SEC has claimed that hedge fund Paulson & Co. “paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.” Essentially, the SEC is alleging that the financial product produced by Goldman Sachs was designed to fail so that Paulson & Co would benefit by betting against it. According to the SEC, Goldman Sachs told its investors that ACA Management was in charge of the portfolio, while, in fact, Paulson & Co., a hedge fund, was selecting the individual bonds that it was betting against. The end product, which was known as ABACUS, netted Goldman Sachs $15 million in fees from Paulson & Co., while individual investors in ABACUS “are alleged to have lost more than $1 billion,” according to SEC estimates. In a statement, Goldman Sachs said that the SEC charges “are completely unfounded in law and fact” and that the firm will “vigorously contest them and defend the firm and its reputation.” Late last week said that the SEC would look at “deals with similar profiles or any deals where disclosures were not properly made.” It is unclear whether this litigation will have any bearing on the undervalued assets of corporate credit unions, and the Credit Union National Association will be watching the developments closely for implications that could be used to support an increased valuation of the corporates' undervalued assets.

House to back fin lit month CU Youth Savings Week

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WASHINGTON (4/20/10)—The House later today is expected to adopt a resolution supporting the Credit Union National Association’s (CUNA) National Credit Union Youth Week and the goals and ideals of Financial Literacy Month. The theme for this year's Youth Week, which ends on April 25, is "Get in the Savings Game." A total of 395 credit unions have registered for the National Saving Challenge, which takes place throughout April. CUNA also sponsors a National Youth Savings Challenge during the same month. Credit unions are celebrating Youth Week by taking part in community-oriented activities, including donating funds to the Children’s Miracle Network and local food pantries. Financial Literacy Month, which began on April 1, seeks to raise public awareness about financial education. CUNA President/CEO Dan Mica said that CUNA “is proud to carry on the legacy of its member credit unions through its support of Financial Literacy Month," adding that CUNA is looking forward to helping current and future credit union members “become ever more financially literate."

CU issues up in Congress committees this week

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WASHINGTON (4/20/10)—Senate debate on S. 3217, the Restoring American Financial Stability Act, could officially begin later this week if that bill has the 60 votes needed to move forward for full consideration. If Senate debate begins on the bill intended to revise many rules that apply to financial institutions and the financial industry, it could continue into next week. The Credit Union National Association has expressed some concern over portions of the legislation that address remittances and that limit the National Credit Union Administration’s examination authority to credit unions with under $10 billion in assets. Sen. John Tester (D-Mont.) last week told the Helena Independent Record that there would “be an opportunity to change the bill,” adding that “community banks and credit unions didn’t create this financial meltdown we’ve experienced” and should not “be made to jump through the hoops that the mortgage bankers, the investment bankers and Wall Street folks have to.” On the House side, legislative action will likely be concentrated in the committees, with the House Financial Services Committee on Tuesday holding a hearing on the "Public Policy Issues Raised by the Report of the Lehman Brothers' Bankruptcy Examiner." U.S. Treasury Secretary Tim Geithner, Federal Reserve Chairman Ben Bernanke, and Securities and Exchange Commission Chair Mary Schapiro will testify during that hearing. House hearings on corporate governance, national flood insurance program reforms, private student loan bankruptcies, and the federal government's Troubled Asset Relief Program (TARP) will also take place during a busy week. Senate committees will also hold hearings on the U.S. Small Business Administration’s 2011 budget, the debt settlement industry, and the role of credit ratings agencies in the financial crisis.

Inside Washington (04/19/2010)

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* WASHINGTON (4/20/10)--Rep. Paul Kanjorski (D-Pa.), chairman of the Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, announced a hearing to examine legislative proposals to give investors a greater say in corporate affairs. Kanjorski held a similar hearing March 11 focused on corporate governance and campaign finance legislative reforms. The hearing will specifically focus on H.R. 2861, H.R. 3272 and H.R. 3351. “Each of these proposals has the potential to make a public company’s leadership more responsive to investors’ concerns,” Kanjorski said ...

Inside Washington (04/16/2010)

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* WASHINGTON (4/19/10)--The U.S. Securities and Exchange Commission (SEC) broke new ground Friday when it filed suit against Goldman Sachs, charging that the bank devised a mortgage investment--called Abacus 2007-AC1--that was created to fail. The SEC accused Goldman Sachs of securities fraud in a civil suit. It charges that Abacus 2007-AC1 was among a number of deals created to allow the bank and special clients to profit by betting against the housing market. (The New York Times April 16) The case represents the first time a regulator has taken action against a deal that enabled investors to cash in on the housing market collapse, a collapse that sent shock waves through much of the U.S. economy … * WASHINGTON (4/19/10)--The Government Accountability Office (GAO) is questioning regulators’ use of a systemic risk exception as a reason to create government programs to help big banks during the financial crisis. The exception could weaken market participants’ desire to properly manage risk if they rely on emergency action in the future, said GAO (American Banker April 16). Legislation that would allow the government to wind down a large financial company could solve the problem, the GAO said in a report released Thursday. The exception--which needs to be approved by the Federal Deposit Insurance Corp.--was used five times during the financial crisis ... * WASHINGTON (4/19/10)--Sen. Carl Levin (D-Mich.) released a report charging that the Office of Thrift Supervision (OTS) was more focused on blocking the Federal Deposit Insurance Corp. (FDIC) from taking over Washington Mutual than it was regulating the bank (American Banker April 19). The report argues that the agency ignored examiners’ findings about Wamu’s risk-taking. Another report from the inspectors general of the FDIC and Treasury concluded that the FDIC and OTS could have done more to help Wamu. Levin said OTS did not allow the FDIC to access documents and rebuffed the agency’s critical view of the bank’s condition. Instead, the OTS fought a “turf war,” Levin said. The FDIC is less to blame for the poor oversight, but could have acted more “vigorously,” he added...

SBA gets 80M for 7a 504 program enhancements

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WASHINGTON (4/19/10)--President Barack Obama signed legislation late last week authorizing $80 million “to continue enhancements” to two of the U.S. Small Business Administration’s key loan programs. The enhancements, first made available under the American Recovery and Reinvestment Act, include a higher guarantee on some SBA-backed loans and small business fee relief. In a release, the SBA estimated the $80 million will support about $2.8 billion in small business lending under its 7(a) and 504 programs. “The increased guarantees and reduced fees on SBA loans have generated more than $25 billion in new loans to small business owners and brought more than 1,200 lenders back to SBA loan programs,” SBA Administrator Karen Mills said.

CUNA FOM changes could discourage some CUs

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WASHINGTON (4/19/10)--In comments submitted to the National Credit Union Administration (NCUA) on April 15, the Credit Union National Association (CUNA) said that a number of credit unions are “asking whether or not” the NCUA’s proposed field-of-membership changes could “discourage credit unions from seeking community charters” or expanding their service areas. The recommendations in the comment letter were developed by CUNA’s FOM working group, which is headed by Truliant FCU CEO Marc Schaefer. The comment period for the field-of-membership rules ended last week. The NCUA's FOM proposal would set objective and quantifiable criteria to determine the existence of a well-defined local community for areas that encompass multiple group areas. A new, objective definition for rural districts has also been proposed. While CUNA “appreciates NCUA’s efforts to insulate the agency and credit unions from further legal challenges that result from the agency’s field of membership policies and procedures,” CUNA recommended that the NCUA provide more leeway for applications involving multiple political jurisdictions and rural districts. Specifically, CUNA urged the NCUA to “consider whether a statistical area definition for rural district is appropriate or necessary” and asked the NCUA to “reconsider” its proposed specific statistical criteria for multiple political jurisdictions to be considered a community. CUNA also strongly opposed FOM changes that would prevent credit unions from demonstrating a community is present through the use of narrative information, as this change would “impose a burden on the FOM charter process that the FCU Act does not require or intend and would result in fewer applications for community charters or expansions, including for areas that need credit union services.” CUNA is also concerned by new emergency merger definitions that would give NCUA additional latitude to require a credit union that is at or near 4% net worth to be merged, “regardless of whether there are other safety and soundness considerations or whether such a credit union that is not experiencing other supervisory issues wants to remain a separate entity.” CUNA in the letter spoke in support of the NCUA’s treatment of single political jurisdictions, saying that that treatment was “reasonable” and “consistent with NCUA’s authority under the Federal Credit Union Act. CUNA also backed the NCUA’s “grandfathering approach” that would allow future credit union applications “to be approved based on areas NCUA has already permitted.” “This should be allowed for rural and undeserved areas as well as for urban areas,” the letter drafted by CUNA Deputy General Counsel Mary Dunn added.

Reg reform up for Senate vote this week

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WASHINGTON (4/19/10)—The Senate early this week is expected to begin debate on Chris Dodd’s (D-Conn.) financial regulatory reform package, and the Credit Union National Association continues to watch for any developments that may affect credit unions and seek improvements to portions of the bill that would affect credit union business practices. Dodd’s bill, as currently written, would allow the National Credit Union Administration (NCUA) to retain its role as the independent federal safety and soundness regulator for credit unions. The legislation would also create a Bureau of Consumer Financial Protection that would establish consumer protection rules for all providers of financial services. While the BCFP’s rules would apply to all credit unions, the Bureau’s examination authority over credit unions would be limited to credit unions with more than $10 billion in total assets. CUNA has urged Dodd and the Senate to increase the $10 billion threshold or include language in the bill, similar to language in the House-passed version of this legislation, that would permit the Bureau to delegate examination of very large credit unions to the NCUA. CUNA has also held recent discussions with the Committee regarding the remittance and data collection provisions of the bill. While public statements on the bill have been fiercely partisan, it is believed that Dodd and Ranking Republican Richard Shelby (R-Ala.) continue to discuss key issues behind closed doors. When the Senate returns this week, Senators will consider a procedural motion to proceed to consider the regulatory restructuring bill. If that motion passes, debate will begin on the legislation. However, it is unclear what path the bill will take if the procedural motion fails.

New FinCEN brochure pushes BSA e-filing

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VIENNA, Va. (4/19/10)—The Financial Crimes Enforcement Network (FinCEN) is circulating a new brochure as part of its ongoing effort to encourage credit unions and other financial institutions to electronically file Bank Secrecy Act (BSA) reports. The new brochure, with the catchy-sounding title, “How FinCEN’s E-Filing System Can Help Your Organization,” is a two-page pamphlet that highlights such things as the benefits of e-filing over paper filing and recent enhancements FinCEN has executed for its e-filing system. The BSA, the basis of which is the 1970 law known as The Financial Recordkeeping and Reporting of Currency and Foreign Transactions Act, is actually a combination of various statutes that require credit unions and others to record, retain and report certain questionably illegal financial transactions to the federal government. BSA E-Filing, first developed in 2002, is a free, web-based system that is user-ID and password protected. Financial institutions subject to BSA reporting requirements use the system to electronically file a variety of BSA forms, either individually or in batches, through a FinCEN secure network. The following forms are currently available for BSA E-Filing:
* Currency Transaction Reports (CTRs); * Designations of Exempt Persons (DEPs); and * Suspicious Activity Reports (SARs).
Use the resource link below to acces the new brochure.

NFIP extended until May 31

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WASHINGTON (4/19/10)--H.R. 4851, the Continuing Extension Act of 2010, was signed into law by President Barack Obama on Thursday, and, as a result, the authorization for the National Flood Insurance Program (NFIP) has been extended until May 31. The legislation also continues federal subsidies to COBRA health insurance recipients through April 30 and extends federal unemployment insurance until May 5. NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. Since flood insurance is unavailable in many parts of the country, the NFIP is an important resource to credit unions and other lenders. The NFIP, COBRA and unemployment insurance have been lapsed since March 29. The NFIP cannot issue new flood insurance policies, increase coverage on existing policies, or issue renewal policies until the Congress restores NFIP authority. The Congress is currently working on an extenders bill that would extend some tax programs and other programs through the end of the year.

FHFA Mortgage mods rose 75 in 2009 4th quarter

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WASHINGTON (4/16/10)--The volume of trial and permanent loan modifications at Fannie Mae and Freddie Mac increased by nearly 75% in the fourth quarter of 2009, the Federal Housing Finance Agency (FHFA) reported earlier this week. Overall, the FHFA reported that the number of trial and permanent modifications made under the Obama Administration’s Home Affordable Modification Program (HAMP) totaled over 485,000 at the end of 2009. Sixty percent of the loan modifications that were made in the fourth quarter reduced borrowers’ monthly payments by over 20%, and completed loan modifications rose to a total of 57,600 during that same time period, the FHFA reported. The FHFA also reported that refinancings made via the Administration’s Home Affordable Refinance Program (HARP) rose by 63% in the fourth quarter, totaling 190,200. That number continued to rise, totaling 257,100 as of February. Under the HARP program, which began in April of last year, Fannie Mae and Freddie Mac helped refinance a total of 190,810 mortgages in 2009. The FHFA last month extended HARP, which helps borrowers whose loan-to-value ratio is between 80% and 125% refinance without added mortgage insurance requirements, until June 30, 2011. Total foreclosure prevention activities, “driven by increases in all forms of home retention activities and short sales,” increased by 38% in the fourth quarter, the FHFA added. For the full FHFA release, use the resource link.

Texas CU league backs MBL cap lift in iRoll Calli

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WASHINGTON (4/16/10)--The Texas Credit Union League again stepped in to the member business lending (MBL) cap debate on Thursday by publishing a pro-MBL cap lift ad in D.C.-based publication Roll Call. The Texas League ad focuses on the unique story of bagel shop owner Suzanne Herman, who “had problems finding capital” for her business until she worked with her local credit union.
Click to view larger image Click to download pdf
The Independent Community Bankers of America (ICBA) have also chimed in on the financial regulatory reform debate, encouraging legislators to end too big to fail and “cut the giants down to size and make them pay their fair share.” The ICBA ad was also published in the pages of Roll Call. The MBL issue has certainly garnered some attention in the recent weeks, with state credit union leagues and independent backers seeking support for the legislation through district town hall meetings, district office visits, advertising, and pro-MBL editorials. Rep. Paul Kanjorski's (D-Penn.) bill that would lift the member business lending cap from 12.25% to 25% of assets and exclude loans less than $250,000 from being defined as a "business loan" currently has a total of 112 cosponsors. Similar legislation has also been introduced by Sen. Mark Udall (D-Colo.). The Credit Union National Association has estimated that lifting the MBL cap would inject up to $10 billion in new capital into the economy, potentially creating as many as 108,000 jobs, all at no cost to taxpayers.

Hensarling introduces legislation to repeal CRA

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WASHINGTON (4/16/10)--Rep. Jeb Hensarling (R-Texas) on Thursday introduced H.R. 5038, the Fair Access to Credit and Job Creation Act, legislation that would repeal the Community Reinvestment Act (CRA). Hensarling criticized CRA in remarks that were made during a Thursday House subcommittee on financial institutions and consumer credit hearing, asking why legislators would “want to force institutions to do what they are already doing.” In addition to remarks from the attending members of the panel, that hearing featured testimony from National Community Reinvestment Coalition President/CEO John Taylor and representatives from various Washington-based interest groups. CRA was enacted in 1977 in response to a practice known as "redlining," which refers to the failure to lend to lower-income and minority neighborhoods by banks and thrift institutions during the 1960s and early 1970s. The purpose of the law is to ensure that for-profit financial institutions adequately meet the financial service needs of all parts of the communities from which they draw deposits. In his opening statement, subcommittee chairman Rep. Luis Gutierrez (D-Ill.) said that legislators should “talk about how to more effectively combat ‘red-lining’… and not about the ‘red herring’ of CRA allegedly causing the current financial crisis.” However, Rep. Ed Royce (R-Calif.) reiterated the criticism of some that that CRA had potential part in creating the ongoing housing market difficulties, saying that “CRA’s mandate that private institutions offer loans they otherwise would not offer contributed to the erosion of credit standards throughout the market.” He called on legislators to cease “giving private entities public missions.” The Credit Union National Association (CUNA) opposes any effort to include credit unions under CRA requirements. CUNA maintains that by their nature and mission of "people helping people," credit unions already meet the financial needs of a broad spectrum of people that fall within their fields of membership, and play an active role in community development and growth. It is not at this time expected that Congress would take vote on a CRA bill this year.

Privacy notices can be built online FFIEC

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WASHINGTON (4/16/10)--The National Credit Union Administration (NCUA) has joined other federal agencies in announcing a new model consumer privacy notice online form builder that financial institutions can download and use to develop and print customized versions of a model consumer privacy notice. The NCUA worked along with The Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, and the Federal Trade Commission to develop the online form builder and cosigned on the release. The form builder “will guide an institution to select the version of the model form that fits its practices, such as whether the institution provides an opt-out for consumers,” according to the release. The agencies in the release also said that financial institutions “must follow the instructions in the model form regulation when using the online form builder” to obtain legal safe harbor and satisfy disclosure requirements. To see the online form builder, use the resource link.

Inside Washington (04/15/2010)

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* WASHINGTON (4/16/10)--Richard Fisher, Federal Reserve Bank of Dallas president, said Wednesday that financial institutions believed to be “too big to fail” need to be broken up (American Banker April 15). Fisher said he would support measures to bring the financial institutions down to a manageable size. Regulators have debated mechanisms that would make failures at financial institutions more orderly, and while this would be a step forward, Fisher said it falls short. The sound thing to do is to dismantle the institutions over time so they can be “prudently managed and regulated,” he said. He spoke before an event in New York sponsored by the Levy Economics Institute of Bard College ... * WASHINGTON (4/16/10)--Two members of the House have introduced legislation that would save the Department of Agriculture’s Single-Family Housing Guaranteed Loan Program, which is expected to use its funding in the coming weeks. Rep. Shelley Moore Capito (R-W.Va.) introduced a bill Tuesday to increase the guarantee fee to 3% or 4% from the current 2%. Separately, Rep. Paul Kanjorski (D-Pa.) introduced a bill that would have the lender pay a 3.5% upfront fee when the loan is issued, along with an annual assessment of 0.5% of the outstanding balance. Neither programs cost taxpayers. The bills are expected to be discussed in committee before a final bill moves to the House floor (Dow Jones April 15) ...

Administration seeks public input on housing finance reforms

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WASHINGTON (4/15/10)--The Obama administration on Wednesday sought public comment on potential housing finance reforms, asking for direct input on how the current organization of the housing finance system can be improved and how that system can support “sound market practices.” The administration also asked for input on the roles of Fannie Mae and Freddie Mac. "The overall role of the federal government in housing policy,” as well as other questions, which will be published in the Federal Register, “have been designed to generate input from a wide variety of constituents, including market participants, industry groups, academic experts, and consumer and community organizations.” The administration wants constituents to detail what role the federal government could play in “supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives,” and, as the government changes its approach, whether or not that approach should “differ across different segments of the market.” "A well-functioning housing finance system is critical to the long term stability of the housing market," U.S. Treasury Secretary Tim Geithner said . He added that "hearing from a wide variety of perspectives” as the administration moves forward “is an important part of establishing a more stable and sound housing finance system for the American people." In addition to collecting the comments, which will be taken in via an online portal at http://www.regulations.gov/, the administration will hold several public forums nationwide.

CULAC-backed Deutch of Fla. cruises to House victory

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WASHINGTON (4/15/10)—Ted Deutch, a Florida Democrat who has indicated support for credit union issues, was victorious in his special election for the U.S. House seat from the 19th district. Deutch, a former state Senator, will fill the seat vacated by Democrat Robert Wexler, who left Congress earlier this year to become president of the S. Daniel Abraham Center for Middle East Peace. Wexler had served in the House since 1997. Republican Ed Lynch also challenged for Wexler’s seat. CUNA's Credit Union Legislative Action Council (CULAC) and the League of Southeastern Credit Unions supported the new congressman with $10,000 in financial support. Deutch won with over 64% of the vote.

CARD Act safe harbor should reflect fair CU fees CUNA

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WASHINGTON (4/15/10)--The Credit Union National Association (CUNA) on Wednesday told the Federal Reserve that it is “concerned” by the recent proposal that implements the provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) that require penalty fees to be "reasonable." Under the proposal, financial institutions may base these fees on costs, deterrence value, or they may charge a “safe harbor” fee that would be determined at a later time but before the Aug. 22 effective date. According to a CUNA comment letter, credit unions “will most likely only be able to use the safe harbor approach, since the other two alternatives are overly cumbersome for smaller financial institutions.” CUNA in the letter urged the Fed, which would determine these safe harbor fees, “to select a fee that is at the upper range of fees charged by credit unions, since credit union fees are reasonable and have always compared favorable to banks and thrifts” and “to allow credit unions and others to comment on these specific safe harbor fees before they are finalized.” CUNA also expressed concern regarding provisions that would prohibit the imposition of multiple penalty fees based on a single event or transaction in some situations. The proposal also addresses provisions of the CARD Act that require biannual reviews of any account rate increases, and in the letter CUNA requests that these “be limited to the first two years after the initial increase.” CUNA has also asked the Fed to provide additional guidance detailing “what would be considered ‘reasonable’ policies and procedures that credit unions need to develop with regard to this review process.” Credit unions should also be given a 45-day cushion to implement any rate decrease that relates to the results of this review process, according to CUNA. As proposed, the rate must be reduced within thirty days of the review. For the full comment letter, use the resource link.

More LICUs wont have to match funds to apply to CDCI

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WASHINGTON (4/15/10)--The National Credit Union Administration (NCUA) on Wednesday announced that it has “adjusted its evaluation criteria with respect to non performing loans” to allow additional low income credit unions (LICUs) to qualify for the U.S. Treasury’s Community Development Capital Initiative (CDCI) without the need for matching funds. According to the NCUA’s Director of Small Credit Union Initiatives Tawana James, the “new formula will give greater weight to LICUs’ cushion against delinquencies even in worst-case scenarios.” The Treasury late last month extended the CDCI application deadline until April 30, and National Federation of Community Development Credit Unions (Federation) President/CEO Cliff Rosenthal said his group hopes that the new standards “will indeed make it possible for many more credit unions to apply by the April 30 deadline." The NCUA and the Treasury last month also extended the deadline for associated secondary capital plans until May 10. A federation request reportedly precipitated the change by the NCUA. The CDCI program allows LICUs that are certified by Treasury as Community Development Financial Institutions (CDFIs) to obtain up to 3.5% of their assets as secondary capital. The federation recently opted to make $1 million in secondary capital available as matching funds for member community development credit unions (CDCUs) that might not be immediately eligible for CDCI investments in a bid to help more CDCUs qualify for CDCI funds. For the federation release, use the resource link.

Inside Washington (04/14/2010)

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* WASHINGTON (4/15/10)--Democrats and Republicans continue to debate a proposed regulatory reform bill. Republicans say the proposed bill is unacceptable for passage, but the bill’s author, Senate Banking Committee Chairman Christopher Dodd (D-Conn.), said he was optimistic the bill would pass the Senate (American Banker April 14). Dodd said he assumed Republicans would eventually support the bill. Democrats need one Republican to support the bill to ensure its passage, but Dodd said he expects more than one to vote for it. Senate Minority Leader Mitch McConnell (R-Ky.) and Sen. Richard Shelby (R-Ala.) said the bill does not end the “too big to fail” dilemma and would encourage more bailouts of big banks. Shelby said he hopes that lawmakers can reach an agreement on the legislation, but no Republicans would support the bill as drafted. The bill would not passed the Senate, he added ... * WASHINGTON (4/15/10)--The Financial Crisis Inquiry Commission has focused on Citigroup guarantees the company used to trigger sales of mortgage-backed debt that cost the company $14 billion (Bloomberg News April 14). Panelists may conclude that the cause of Citigroup’s bailout was that traders used liquidity to boost sales, according to Phil Angelides, commission chairman. Citigroup had to buy $25 billion of collateralized debt valued at 33 cents per dollar when financial markets tumbled in 2007. American International Group faced a similar situation when it went bankrupt in 2008, Angelides said. Citigroup CEO Charles Prince and executive committee chairman Robert Rubin testified last week before the commission, saying that they did not know the risks posed by using the instruments ... * WASHINGTON (4/15/10)--Treasury’s programs to mitigate foreclosures, even though they are fully operational, will not reach the overwhelming majority of homeowners in trouble, according to a Congressional Oversight Panel report released Tuesday. “Treasury’s response continues to lag well-behind the pace of the crisis,” the panel said in its executive summary. “As of February, only 168,708 homeowners have received final, five-year loan modifications--a small fraction of the six million borrowers who are presently 60 days or more delinquent on their loans.” The panel also raised concerns about the timeliness, sustainability and accountability of the Treasury’s programs. The panel previously noted concerns about Treasury’s foreclosure programs in October ... * WASHINGTON (4/15/10)--Credit union representatives from Kansas City, Mo., encouraged House Financial Services Committee Chairman Barney Frank (D-Mass.), center, to support lifting member business lending limits on credit unions, according to the Missouri Credit Union Association (The Missouri difference April 14). Pat Yokley, CommunityAmerica government affairs consultant (left) and Mazuma CU President/CEO Rob Givens met Frank at an event for Rep. Emanuel Cleaver II (D-5) at the Kansas City Club April 4. Cleaver serves on the House committee with Frank. “I talked with both Cleaver and Frank about our need to lift member business lending limits, and asked for their help in moving this issue forward,” Givens said. “At a time when lawmakers are looking to create jobs and opportunities, it is frustrating that credit unions cannot do more because of an arbitrary limit. (Photo provided by the Missouri Credit Union Association) ...

Flood insurance COBRA extensions lurch toward vote

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WASHINGTON (4/14/10)--Following positive results in a Monday cloture vote, H.R. 4851, the Continuing Extension Act of 2010, needs only Senate approval to be sent to President Barack Obama for full approval. The legislation, if approved, would extend authorization for the National Flood Insurance Program (NFIP) and continue federal subsidies to COBRA health insurance recipients through April 30. Federal unemployment insurance would be extended until May 5. NFIP is important to cedit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. Since flood insurance is unavailable in many parts of the country, the NFIP is an important resource to credit unions and other lenders. Congress did not take any action before its recently concluded spring recess began, and the NFIP and other programs lapsed on March 29. The NFIP cannot issue new flood insurance policies, increase coverage on existing policies, or issue renewal policies until the Congress restores NFIP authority. A full Senate vote on H.R. 4851 is expected to take place later this week. If amended by the Senate, the bill would return to the House for another vote.

House Fin. Committee discusses 2nd lien modifications

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WASHINGTON (4/14/10)--The House Financial Services Committee on Tuesday discussed the Obama administration's 2nd Lien Modification Program, or 2MP, which gives federally based incentives to second lien mortgage holders that write down or extinguish those second liens. Under the plan, homeowners are be required to have their first lien modified through the Administration’s Home Affordable Modification Program (HAMP) before they can become eligible for the 2MP program. During the Tuesday hearing, some members of the committee expressed caution at the potential “moral hazard” that the 2MP legislation creates by allowing some homeowners to voluntarily allow their mortgages to become delinquent to qualify for the Administration’s homeowner assistance programs. Committee Chairman Rep. Barney Frank (D-Mass.) agreed that not every homeowner should receive help, and Rep. Brad Miller (D-N.C.) said he was concerned by the prospect of potential conflicts of interest for financial institutions that hold second liens and service primary liens on the same homes. Credit unions have not been impacted by the current mortgage crisis as much as other types of lenders due to their normally conservative lending practices. However, credit unions have been impacted when they have made second lien loans, according to the Credit Union National Association. The House will hold additional hearings on the Community Reinvestment Act, HAMP revisions, and the housing finance system both today and tomorrow.

Inside Washington (04/13/2010)

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* WASHINGTON (4/14/10)--The Volcker Rule, named after former Federal Reserve Board chairman Paul Volcker, may have some staying power, according to financial observers. The rule aims to ban proprietary trading. Some said the rule wouldn’t be in the Senate regulatory reform bill. Brian Gardner, KBW Inc. analyst, said it was included in the bill as a “negotiating tactic” (American Banker April 13). However, Gregory Lyons, partner at Debevoise and Plimpton LLP, said there was doubt if the rule would make it into the bill at all--and the fact it’s in there is noteworthy. Thomas Hoenig, Kansas City Federal Reserve Bank president, said provisions like the Volcker rule or something similar could help manage risk and give regulators the ability to deal with large financial institutions ... * WASHINGTON (4/14/10)--Misinformation about the regulatory reform bill could slow its approval, according to Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair. There have been some “badly misinformed” criticisms of the legislative reforms that have no purpose but to delay enactment, Bair said (American Banker April 13). She spoke at a conference Monday for the Council of Institutional Investors. Bair also indicated that her agency hopes to tie banks’ compensation structures to the deposit insurance rate. The FDIC should be able to consider risky pay schemes when it decides how much a bank should pay for deposit insurance. The FDIC issued an advance notice of proposed rulemaking in January on how it could do this. The FDIC board planned to meet Tuesday to discuss such a proposal ...

Compliance Challenge Reg E does not cover all accounts

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WASHINGTON (4/14/10)--According to the Credit Union National Association (CUNA), overdraft rules that were issued under Regulation E, the Electronic Fund Transfer Act, only apply to “accounts established primarily for personal, family or household purposes,” not member business accounts. New Reg E rules will become effective on July 1, although accounts that were established before July 1 and have not opted-in to overdraft programs may be charged fees until Aug. 15. These rules prevent financial institutions from assessing overdraft fees on ATM and one-time debit card transactions without prior consumer consent. Credit unions that do not have formal overdraft programs are also covered by this opt-in requirement if they charge any fees for ATM and one-time debit card overdrafts. In this month’s Compliance Challenge, CUNA adds that “trust and estate accounts should also be excluded” from the Reg E requirements, as the rule only applies to “natural persons.” “Therefore, it is a business decision for the credit union to decide how it will handle overdrafts of these accounts,” CUNA said. Credit unions may also decide whether or not they will “provide the opt-in consent option to all members with ATM and debit cards… it’s a business decision of the credit union to whom it wants to provide the overdraft protection service within its membership,” CUNA said. CUNA has recently encouraged the Federal Reserve to alter the Reg E rules to allow credit unions and others to charge members an overdraft fee in instances where intervening transactions reduce the account balance after the debit transaction is authorized, but before it is paid, and when merchants request authorization for a transaction in an amount less than the actual total of the purchase. For the full Compliance Challenge, use the resource link.

Inside Washington (04/12/2010)

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* WASHINGTON (4/13/10)--The Federal Reserve Board Monday announced that William B. English will become the agency's director of the Division of Monetary Affairs, effective July 23. English has served as deputy director of the division since February 2008. He is to succeed Brian F. Madigan, who has been appointed senior adviser to the Fed board, effective upon English's promotion. Madigan plans to retire later this year after more than 30 years of service with the board, including three years as head of this division. As director, English will advise the Fed chairman and other board members, as well as the Federal Open Market Committee, on the conduct of monetary policy, including open market operations and the discount window ... * WASHINGTON (4/13/10)--Chairman Carl Levin (D-Mich.) of the Senate Permanent Subcommittee on Investigations announced hearings this week on the causes of the country’s financial crisis. On Tuesday, the Senate panel will zero in on mortgage lending as it was executed by the failed Washington Mutual. The committee will then broaden its sights and scrutinize the actions of bank regulators. Levin said he wants to use the hearing process to compile a record of the causes of the meltdown, and hoped that information would be used to inform the current legislative debate involving financial regulatory reform (American Banker April 12) … * WASHINGTON (4/13/10)--Some critics of federal lawmakers’ ongoing efforts to reform financial regulations charge those efforts are dodging some very central issues. They say the current Senate bill, about 1300 pages awaiting a vote, ignores too many factors that contributed to the country’s financial crisis, such as inefficient and outdated regulations, an out-of-whack housing finance market, as well as faulty underwriting standards that allowed waves of borrowers to sign up for mortgages they ultimately could not afford. While others argue the bill is complete with many provisions that would have a positive effect on the financial marketplace by providing greater and broader oversight and transparency, and providing better tools to handle the resolution of systemically significant firms, even some of those admit some holes. For instance, while it was the housing and mortgage markets that brought about the economic collapse, the housing finance system is largely ignored in the bill (American Banker April 12) … * WASHINGTON (4/13/10)--The old model for government-sponsored enterprises (GSE) took a beating last week at a hearing conducted by the Financial Crisis Inquiry Commission (American Banker April 12). The hearing featured Fannie Mae’s former executives and regulators and painted a picture of a company embracing unnecessary risks while chasing profits and striving to preserve market share. To add to the negative picture, it seems all this was being done while the GSE was vigorously lobbying lawmakers not to bolster what is now seen by many as a weak and ineffective regulator …

CUNA urges FOM comment before April 15 deadline

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WASHINGTON (4/13/10)—April 15 is the comment deadline for the National Credit Union Administration’s (NCUA) proposed changes to field-of-membership (FOM) rules, and the Credit Union National Association (CUNA) encourages federal credit unions to submit remarks. CUNA supports the objective of the FOM proposal, which is to revise the current FOM process in such a way that it limits--or perhaps completely cuts off--future banker challenges to NCUA's FOM policies and processes. “There is no higher priority in dealing with FOM applications than for the agency to build a solid record that demonstrates its decisions are made on a rational, not arbitrary, basis,” said CUNA Deputy General Counsel Mary Dunn Monday. However, she added, CUNA has identified a number of concerns regarding the agency’s plan and will raise a range of issues and recommendations in its comment letter to improve the proposal before it becomes a final rule. Those concerns, generally, fall under the headings of:
* Well-defined local communities: Placing greater reliance on quantifiable data as opposed to subjective information and review would help limit litigation; * Single political jurisdictional areas: Retaining current treatment of single jurisdictions so that any county, city or smaller political jurisdiction, regardless of size, is considered by NCUA to be a well-defined local community for purposes of chartering new community credit unions or adding areas to an existing charter; * Multiple political jurisdictional areas: To avoid unnecessary exclusions, the NCUA should only require credit unions to meet any two of the agency’s proposed four criteria; * Rural districts: The criteria NCUA has chosen to define a “rural community” are too limiting and do not sufficiently take into account areas where the population is spread out over large areas; * Underserved areas: In CUNA’s view, underserved areas should not have to qualify as well-defined local communities, as that approach is not required by the Federal Credit Union Act; * Marketing plans: CUNA rejects a provision that would require NCUA’s review of marketing plans and business plans after an area has been approved. That review, CUNA maintains, should only occur for purposes of safety and soundness; and * Emergency merger definitions: CUNA is concerned that the new provisions would give the NCUA additional latitude to require a credit union that is at or near 4% net worth to be merged, regardless of whether the credit union wants to remain a separate entity.
Use the resource links below for additional information.

NCUAs Hyland releases supplemental capital report

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ALEXANDRIA, Va. (4/13/10)—A white paper released Monday by the National Credit Union Administration (NCUA) concludes that “affording credit unions the ability to raise supplemental capital that counts towards prompt corrective action (PCA) 'net worth' requirements is an appropriate policy consideration.” The report, prepared by an internal working group at NCUA, explores the NCUA’s existing authority to permit federally insured credit unions to offer supplemental capital. It also attempts to identify key public policy considerations for any expansion of NCUA’s authority to permit additional sources of capital. Credit Union National Association (CUNA) General Counsel Eric Richard said Monday of the white paper, “While the report details a number of limitations that may not be necessary, we plan to study the report in detail and want to continue working with the agency to pursue supplementary capital for credit unions." Within the NCUA report, the working group also offered these additional conclusions:
* PCA regulatory reform including a stronger and more meaningful risk-based capital system, as advanced by the NCUA Board in 2005 and 2007, should continue to be pursued as a priority. The reforms combined with supplemental capital could afford credit unions the opportunity to more effectively manage capital levels; and * Any statutory change that affords credit unions the ability to count supplemental capital towards PCA “net worth” must be accompanied by robust regulatory authority to assure reasonable safeguards and risk parameters are put in place.
The NCUA board must vote to adopt the working group's white paper for it to become agency policy. No board action on the report is scheduled at this time, according to an agency spokesman. When NCUA board member Gigi Hyland announced the release of the agency report Monday, she noted 2008 discussions with state credit union supervisors. “They made a number of compelling arguments that it is time to seriously consider whether credit unions must be given access to some form of supplemental capital to continue providing members the services they need,” she said. Hyland also noted NCUA Chairman Debbie Matz’s letter late last year to House Financial Services Committee Chairman Barney Frank (D-Mass.) outlining “two narrow legislative remedies that would help reverse the disincentive to accept new share deposits.” Hyland said that that letter is “a key starting point for any discussion about supplemental capital,” and added she hoped the new white paper sparks progress to action on “this important issue.” CUNA strongly supports credit union alternative capital authority and has steadily worked to get the Obama administration on board with the idea of alternative sources of capital for credit unions. In part, CUNA has reinforced to key contacts within the U.S. Treasury Department the importance of credit union alternative capital authority. "CUNA is acutely aware that some credit unions need to issue supplemental capital products in order to maintain their net worth ratio requirements," CUNA's Richard has said. "We have long maintained that secondary capital and PCA reform are required for credit unions for the long term. However, that future is here for some.” Use the resource links below to access the NCUA report and CUNA's summary of the white paper.

Senate returns to reform CRA hearings in House

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WASHINGTON (4/13/10)—The U.S. Senate reconvened yesterday and the House does so today, launching what some predict will be the busiest seven congressional weeks of the year in a session that ends with a Memorial Day break. During this past recess, discussions regarding the Financial Regulatory Restructuring bill continued between Senate Banking Committee Chairman Christopher Dodd's (D-Conn.) staff and the staff of the committee’s ranking Republican member, Richard Shelby of Alabama. “Our understanding is that no agreements have been made, though both sides have repeatedly committed to continue talking,” said Ryan Donovan Monday. Donovan is vice president of legislative affairs for the Credit Union National Association (CUNA). CUNA worked with committee staff during the recess to continue discussions about outstanding credit unions concerns with the legislation, including the examination and enforcement language and the remittance provisions. Donovan said April 26 is the earliest the Senate could vote on a financial reform bill; he noted, however, the process could drag on many weeks after that date. On the House side of the U.S. Capitol, where a reform bill--H.R. 4173, the Wall Street Reform and Consumer Protection Act--was passed in December, there are a number of hearings this week of interest to credit unions--although one of key interest involving the Unlawful Internet Gambling Enforcement Act (UIGEA) was cancelled Monday afternoon. Although late last year federal lawmakers pushed the compliance date for the Unlawful Internet Gambling Enforcement Act (UIGEA) back to June 1 from Dec. 1, 2009, things remain unsettled around that law. The Federal Reserve Board and U.S. Treasury Department are tasked with implementing UIGEA, under which credit unions and other financial institutions must establish policies and procedures to identify and block restricted Internet gambling transactions, or rely on procedures established by the payments system. Some, including House Financial Services Committee Chairman Barney Frank (D-Mass.) have called the agencies’ proposed implementation plans “deeply flawed.” On Friday, Frank’s committee was scheduled to conduct hearings on H.R.2266, the Reasonable Prudence in Regulation Act, and H.R.2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act-Governmental Perspectives. The former would establish a one-year moratorium for UIGEA provisions, the latter would re-instate the legality of Internet gambling. The hearings are expected to be rescheduled. On Thursday, House Financial Services, as announced last week, will conduct a hearing entitled, "Perspectives and Proposals on the Community Reinvestment Act." Also on Thursday, the Senate Small Business Committee will hold a hearing entitled, "Assessing Access: Obstacles and Opportunities for Minority Small Business Owners in Today's Capital Markets." Use resource link to see additional House Financial Services Committee hearings.

CU volunteers blanket Cherry Blossom Run (04/09/2010)

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Click to view larger imageGetting there even before the runners arrive, CUNA and credit union volunteers blanket the National Mall before the Cherry Blossom Race to perform key tasks to help the race run smoothly. Shown here just as the sun is lighting the sky are some of the 15 CUNA volunteers who mostly stationed the tents where runners safely stow their gear while running. The two youngest members of the volunteer team are Randy Bloch, the son of Senior Assistant General Counsel Jeffrey Bloch ( who is third from left with his son directly to his right) and a friend, Ben Marcus. Also shown Regulatory Counsel Luke Martone, Alicia Valencia, League Relations Manager and AACUL Corporate Secretary, Richard Dines, Director League Relations, Sue McCue, Manager of Credit Union House, and Kristen Prather, CUNA Grassroots Manager. The photo was taken by fellow volunteer and CUNA senior vice president of communication, Mark Wolff. (CUNA Photo)
WASHINGTON (4/12/10)—As 15,000 runners raced through the city streets on Sunday, the Credit Union National Association (CUNA) again supported Childrens’ Hospitals by serving as a title sponsor of the 2010 edition of the Cherry Blossom Run. CUNA’s 15 volunteers braved the slight Sunday chill, reporting at 6 a.m. to man the race bag check. CUNA vice president of communications and media outreach Pat Keefe said that the volunteer efforts of CUNA and other credit unions demonstrates "the credit union difference" to those running the race. Over 27,000 runners registered for the 15,000 available spots, and the runners include over 700 members and staffers from Capitol Hill, including a record 39 congressional honorary co-chairs. Former record-holding marathoner Bill Rodgers and 1984 gold medalist marathoner Joan Benoit Samuelson, along with 40 Capitol Hill teams of 600-plus runners and 34 credit union teams with 170 runners, took part in the race. The race for the first time was streamed live online on http://www.cherryblossom.org and will air next week locally on WJLA-TV, the local ABC affiliate in Washington DC.

CUNA helps launch 2010 Cherry Blossom Race

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WASHINGTON (4/12/10)—A check presentation at Children's Hospital in Washington, D.C. Friday and distribution of credit union caps to U.S. congressional offices were just two of the ways the Credit Union National Association (CUNA) helped kick off the Credit Union Cherry Blossom 10-Mile Run.
Click for slide show Former CUNA Chairman Juri Valdov (fourth from left), a longtime supporter of the Cherry Blossom Race effort, proudly helps present a check for almost $1 million from funds raised by credit union to support the Children's Miracle Network. About 15,000 runners wended their ways through the streets of Washington and past its iconic cherry blossom trees whose fragile pink blossoms are just now being joined by pale green leaves. (CUNA Photo)
The race coursed through the streets of Washington on Sunday. (See related story: But on Friday things were set in motion when CUNA President/CEO Dan Mica addressed a kickoff press conference, which included presentation of a check for just under $1 million from funds raised by credit unions to support children’s healthcare. The event funds Children's Miracle Network (CMN), which in turn benefits Children’s Hospitals across the nation. In remarks, Mica noted the vital role that the Cherry Blossom Race plays in supporting Children’s Hospitals, and praised the work of Credit Union Miracle Day, the credit union group that organizes fundraising. Former CUNA Chairman Juri Valdov summed up credit union efforts this way: “Why do credit unions do this? We are in the helping people business. It’s a natural progression to be involved in a program like this to help families with a sick child.” Also showing support for the cause, Miss America 2010 Caressa Cameron spoke in support of credit unions’ contributions to the effort to help sick children and their families. “You’re doing an awesome thing,” Cameron told credit unions, “I’m happy you are part of making those miracles.” CUNA, leagues and credit unions well surpassed their goal of passing the $4 million mark in total donations raised for Children's Miracle Network through credit union involvement all year long. When the Miracle Day board handed CMN this year’s contribution of $923,000 it brought the total raised by credit unions to just under $4.6 million. Credit unions became “title sponsors” for the 10-mile race in 2002. World-class runners Bill Rodgers, a former record holder in the marathon, and Joan Benoit Samuelson, who won a gold medal in for the women’s marathon at the 1984 Summer Olympics in Los Angeles, are participating in this year’s race along with about 15,000 other runners. Rodgers and Benoit were at the Friday credit union press conference. Also to kick off the race and promote it on Capitol Hill, CUNA staffers distributed cheery Cherry Blossom 10-Mile Race caps to House and Senate congressional offices. During the race CUNA fielded a team of volunteers who worked the bag check tent where the 15,000 runners deposit and collect their belongings before and after the race. Forty members of Congress are honorary chairs of the credit union race. Also, there will be 40 Capitol Hill running teams with a total of more than 600 runners competing in the "Capitol Hill Competition, a "race within the race," that features teams of runners from the offices of senators and representatives. As CUNA Senior Vice President of Legislative Affairs John Magill explains, one of CUNA’s goals each year is to showcase to Congress and others in the Washington area the work credit unions do in support of their communities. "The Cherry Blossom Run has proven to be an ideal vehicle for this purpose. CUNA proudly supports the Cherry Blossom Run."

Inside Washington (04/09/2010)

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* WASHINGTON (4/12/10)--Federal Reserve Board Gov. Daniel Tarullo Thursday said the Fed needs to be careful when unwinding liquidity facilities so that it does not disrupt fragile markets. Tarullo spoke at a Federal Reserve Bank of New York’s community bankers’ conference (American Banker April 9). He emphasized caution about exit strategies that involve the early sale of assets before a sustainable recovery is grounded. The Fed should come up with a “single game plan” that will be announced before interest rates are raised, he said. The Fed is hoping to use interest on reserves that banks are holding to drain the $1.1 billion now held by institutions at Federal Reserve banks ... * WASHINGTON (4/12/10)--About 44% of respondents are strongly or somewhat in favor of financial regulatory reform, while 30% strongly or somewhat oppose reform, according to a poll by a Republican communications firm (American Banker April 9). Roughly 21% were strongly in favor of reform while 16% said they strongly oppose it. Fifty-two percent said they were significantly concerned that Congress would pass new regulations to raise costs, or reduce loan availability for the average consumers and small businesses ... * WASHINGTON (4/12/10)--The World Council of Credit Unions (WOCCU) is working to expand the number of member-owned Islamic investment and finance cooperatives (IIFC) in Afghanistan, and WOCCU Senior Vice President Barry Lennon told an audience of congressional staffers Thursday that he “expects more growth” as word of the financial cooperatives spreads. Afghanistan’s IIFCs, which WOCCU says are growing by 1,000 new members each month, held $8 million in total assets at the end of 2009. The U.S. Agency for International Development late last year awarded WOCCU $60.5 million to expand financial services in rural southern and eastern Afghanistan, and, in many cases, the IIFCs are the only option for financial services in rural areas ...

NCUAs Matz Proposed corp. CU rules would prevent future crisis

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ALEXANDRIA (4/12/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz last week remarked that the proposed changes to the corporate credit union system, which “will go a long way toward preventing another corporate crisis from ever occurring,” would result in “fewer corporates, but stronger corporates.” The NCUA’s proposed rules for corporate credit unions, which were presented at the NCUA's board meeting in late 2009, would amend Part 704 of the NCUA's rules, adjusting the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio for adequately capitalized corporate credit unions. Corporate credit unions would be required to demonstrate capital ratios of 5%, 6% and 10%, respectively, to be considered well capitalized.
Click to view larger image NCUA Chairman Debbie Matz, right, with Texas Credit Union League President Dick Ensweiler. (Texas Credit Union League photo)
While the capital thresholds proposed by the NCUA “will be attainable for some corporates,” others “will need to find a new business model,” according to Matz. Additionally, a number of corporate credit unions are already discussing mergers. The NCUA corporate proposal would also prevent corporate credit unions from investing in collateralized debt obligations and net interest margin securities. The NCUA rules, if approved, would also limit so-called "golden parachutes" for troubled corporates, would require corporate credit unions to disclose their executive compensation packages, and would attempt to ensure that corporate boards are mainly comprised of natural person credit union employees. Any of these board members would need to hold the position of CEO, CFO, or COO at their member entity to be eligible for corporate credit union executive service, according to the NCUA proposal. The NCUA has also dedicated 20 “top” staff members to work on isolating the “severely impaired securities” that are also known as “legacy assets,” and Matz said that the NCUA may be “close to proposing a plan that would remove the riskiest legacy assets from ongoing corporates, while carrying forward the most valuable pieces of the corporate system.” Overall, the NCUA’s “comprehensive corporate resolution plan,” which Matz said could be presented to credit unions by the end of June, “would empower natural-person credit unions to choose which corporates they will support, would ensure that those corporates begin with clean balance sheets,” and “could even allow credit unions to recover future earnings from legacy assets that out-perform current loss projections.” Matz said that the NCUA is “confident that the new safeguards, when refined and implemented, will provide a framework for safety and soundness that protects America’s 90 million credit union members.” The Credit Union National Association (CUNA) recently called on the NCUA to develop a new business model for corporate credit unions that would require relatively smaller amounts of capital and result in small balance sheets comprised mostly of the settlement balances of natural person credit unions. CUNA last week also announced a 14-member Corporate Credit Union Next Steps Working Group that will provide recommendations to the CUNA board on ways to ensure that natural person credit unions of all sizes continue to have access to key correspondent services including payments, settlement, liquidity and investments. (See related story: CUNA forms Corporate CU Next Steps Working Group.)

Treasury announces first 2010 round of New Markets Tax Credits

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WASHINGTON (4/9/10)--The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund on Thursday announced that the 2010 round of the New Market Tax Credit (NMTC) program has begun. Credit unions are among those eligible to participate in the NMTC, which seeks to spur the investment of new private sector capital into low-income communities by permitting individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs). Those investments must be made in designated Community Development Entities (CDEs). The Treasury's Community Development Financial Institutions (CDFI) Fund allocates the tax credits annually through a competitive application process. “The credit provided to the investor totals 39 percent of the investment in a CDE and is claimed over a seven‐year credit allowance period,” according to the release. In comments accompanying the release, CDFI Fund Director Donna Gambrell said that the NMTC “remains a critical tool” in the CDFI’s “efforts to ensure that economic recovery reaches the hardest-hit communities.” The $5 billion in tax credit authority made available through the NMTC “will help finance small businesses, grocery stores, healthcare centers, charter schools and job-training sites and will help create, save or support local jobs where they are needed most,” Gambrell added. Organizations that have received these credits “have raised $15.8 billion in equity investments” since the program began in 2002, according to the release. Applications for CDE certification must be received by April 26, and applications for the NMTC itself must be received by June 2. For the CDFI Fund release, use the resource link.

WOCCU briefs Hill staff on Afghanistan plan expansion

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WASHINGTON (4/9/10)--The World Council of Credit Unions (WOCCU) is working to expand the number of member-owned Islamic investment and finance cooperatives (IIFC) in Afghanistan, and WOCCU senior vice president Barry Lennon told an audience of congressional staffers on Thursday that he “expects more growth” as word of the financial cooperatives spreads. Afghanistan’s IIFCs, which WOCCU says are growing by 1000 new members each month, held $8 million in total assets at the end of 2009. WOCCU will establish the Afghanistan IIFC Banking Association to oversee those IIFCs and “provide a framework for consolidation.” (See related story: WOCCU expands Islamic CUs in Afghanistan) The U.S. Agency for International Development (USAID) late last year awarded WOCCU $60.5 million to expand financial services in southern and eastern Afghanistan. The IIFCs are, in many cases, the only option for financial services in rural areas of Afghanistan. However, the pending expansion of these IIFCs will bring them to the capital city of Kabul, where several Afghan banks currently operate.

MBL sees grassroots heat during Hill break

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WASHINGTON (4/9/10)--When Congress returns to Washington on Monday, legislation that would lift the current 12.25% asset cap on member business lending (MBL) should be one of many issues up for debate and, possibly, a vote. And while the upcoming seven-week legislative session will undeniably be a busy one, state credit union leagues and independent backers have recently sought support for MBL legislation through district town hall meetings, district office visits, advertising, and pro-MBL editorials in the local press. State credit union leagues have been extremely active as the MBL push nears its conclusion, with the Iowa Credit Union League utilizing its relationship with the office of the U.S. Secretary of Agriculture, Tom Vilsack, to showcase the need for MBL cap increase to help rural areas and encouraging credit union staff to visit district congressional offices. The Iowa League also made the case for an MBL cap increase via print advertisements as well as an editorial in the Des Moines Register. The Michigan Credit Union League, in addition to a Lansing State Journal editorial, will back MBL through an advertisement in the D.C.-based publication Politico, and several other state leagues have actively sought out opportunities to spread the MBL message through their own local news sources. However, the leagues have not been the only ones to publicly back lifting the MBL cap in the press, as San Antonio Express News business columnist David Hendricks spoke up in support of lifting the cap. The leagues, individual credit unions, and, simply, individuals have spoken directly with their representatives. The Arizona credit union league, along with 25 attendees from 6 credit unions throughout the state, met with Ann Kirkpatrick (D-Ariz.), and the Credit Union Association of New Mexico met with Reps. Harry Teague (D) and Martin Heinrich (D) in Albuquerque on March 29. During that meeting, one attendee who was not attending the meeting on behalf of any credit union or organization noted that many small businesses in the area were being turned down by banks, and urged the legislators to lift the MBL cap. Kirkpatrick, Teague and Heinrich are all current supporters of Rep. Paul Kanjorski’s (D-Penn.) bill that would lift the member business lending cap from 12.25% to 25% of assets and exclude loans less than $250,000 from being defined as a "business loan." Similar legislation has also been introduced by Sen. Mark Udall (Colo.). A total of 102 other legislators have currently signed on to support the bill.

Inside Washington (04/08/2010)

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* WASHINGTON (4/9/10)--During a hearing Wednesday before the Financial Crisis Inquiry Commission, former Federal Reserve Board Chairman Alan Greenspan took little blame for the nation’s financial crisis. Instead, he urged banks to hold more capital and require higher collateral (American Banker April 8). More capital and liquidity is the only way to prevent another crisis, Greenspan said. During the hearing, Brooksley Born, panelist and former regulator, asked Greenspan if the Fed failed to meet its responsibilities during the crisis. Greenspan argued the banking system has been undercapitalized for the past 50 years. He also blamed Congress, saying that while some lawmakers criticize him for not creating rules that would curb abusive subprime lending, Congress would have been upset if he had created the rules. Greenspan was the first to testify in a three-day hearing by the commission--which was appointed by Congress to determine the cause of the nation’s financial meltdown. Comptroller of the Currency John Dugan also told the commission that a key factor in the financial crisis was poor credit underwriting, particularly by nonbank lenders that were subject to little or no regulation. “I believe the government should establish minimum, common sense underwriting standards for mortgages that can be effectively applied and enforced for all mortgage lenders, whether they are regulated banks or unregulated mortgage companies,” he said ... * WASHINGTON (4/9/10)--Bank of America Corp. said it will support legislation to create a consumer financial protection agency (CFPA). BoA has remained neutral on the subject until now (American Banker April 8). On Wednesday, the bank said the agency should focus on regulating products--not companies--and cover banks and nonbanks. BoA executives also said states should not impose federal or state standards on national banks. The Credit Union National Association (CUNA), said it could support the creation of a CFPA provided that several concerns are addressed. While CUNA agrees that the CFPA should have complete rulemaking authority on consumer protection issues, the examination, supervision and enforcement of consumer protection should be entrusted to the prudential regulator. Also, the CFPA regulatory structure should not stifle competition or innovation. Credit unions should have the ability to decide what products are appropriate to offer their membership, CUNA said ... * WASHINGTON (4/9/10)--Securities industry advocates say that the Securities and Exchange Commission’s (SEC) proposed risk-retention plan could have unintended consequences, such as driving up rates for consumers (American Banker April 8). However, SEC Chairman Mary Schapiro said Wednesday that securitization led to poor lending practices because it encouraged lenders to shift their risk of loss to investors. SEC’s proposal would require more disclosure of loan-level information such as how losses are divided among investors. Issuers also would be required to wait five business days between filing a prospectus and selling any securities to give investors more time to look at the data. The SEC proposal has a 90-day comment period ...

CUNA forms Corporate CU Next Steps Working Group

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WASHINGTON (4/9/10)--Credit Union National Association (CUNA) Chairman Kris Mecham has appointed 14 members to CUNA’s Corporate Credit Union Next Steps Working Group, CUNA president/CEO Dan Mica announced on Thursday. Following the announcement, Mica said that he looks forward to the recommendations the new group will make to the CUNA board on ways to ensure that natural person credit unions of all sizes continue to have access to key correspondent services including payments, settlement, liquidity and investments. "This working group will provide a comprehensive vision of a reasonable, dependable future for credit union access to these services--one that will not pose undue risk to the credit union system, and which will involve a minimum of cost and service disruption," Mica added. He emphasized that ensuring credit unions have reasonable options for services, preferably from corporates or others within the credit union system that can manage their risks well, is the association's key objective. The working group, which is chaired by Jacksonville, Fla.-based Vystar CU’s CEO Terry West, is comprised of many continuing members of CUNA’s recent Corporate Credit Union Task Force, as well as five new members. The new members are Jim Regan, CEO of Digital CU in Marlborough, Mass., Mark Lau, CEO of Denver Fire Department CU, Gary Parker, CEO of Waco, Texas’s 1st University CU, Dennis Flickinger, president of York, Penn.’s First Capital FCU, and Ohio Credit Union League president Paul Mercer. CUNA Chairman and president/CEO of Salt Lake City’s Deseret First CU Kris Mecham, joins Rich Helber, CEO of Miami, Fla.-based Tropical Financial CU, Tom Dorety, CEO of Tampa, Fla.-based Suncoast Schools FCU, Frank Michael, CEO of Stockton, Calif.’s Allied CU, Jane Watkins, CEO of Richmond, Va.’s Virginia CU, Tennessee Credit Union League president Tom Gaines, GECU CEO Harriet May, and Georgia Credit Union League president Mike Mercer as holdovers from the previous group. While the group will conduct much of its business via teleconference, it is planning to meet in May and should likely have formulated its recommendations by the end of the summer.

2.5 million-asset Conn. CU closed

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ALEXANDRIA, Va. (4/9/10)— Deficiencies in credit administration, lending practices, internal controls and auditing were cited as reasons Connecticut Banking Commissioner Howard F. Pitkin closed a $2.5 million-asset credit union in Bloomfield. The National Credit Union Administration (NCUA) announced Thursday that it accepted appointment as receiver and liquidator of South End Mutual Benefit Association, Inc., a state-chartered credit union that was chartered in 1945, and which served the residents of Hartford County and nearby communities. The credit union served 385 members at the time of its liquidation and the NCUA said its Asset Management and Assistance Center will issue checks within a week to members holding share accounts. Member accounts are insured up to at least $250,000 by the National Credit Union Share Insurance Fund, the federal fund managed by NCUA and backed by the full faith and credit of the United States government. The Connecticut Department of Banking said it took the supervisory action against South End Mutual Benefit Association after discussions with credit union management revealed its difficulty in meeting regulatory requirements and addressing deficiencies. It is the fifth federally insured credit union liquidated in 2010.

Frank schedules hearing on CRA perspectives

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WASHINGTON (4/9/10)—The House Financial Services Committee will take a look at “perspectives and proposals” related to the Community Reinvestment Act (CRA) during an April 15 hearing. The session is scheduled for 10 a.m. (EDT) and a witness list has yet to be announced. In March, during a hearing on community development financial institutions, House Financial Services Committee Chairman Barney Frank (D-Mass.) suggested that he and committee colleague Rep. Maxine Waters (D-Calif.) would soon re-examine and consider expanding the reach of CRA. CRA was enacted in 1977 in response to a practice known as “redlining,” which refers to the failure to lend to lower-income and minority neighborhoods by banks and thrift institutions during the 1960s and early 1970s. The purpose of the law is to ensure that for-profit financial institutions adequately meet the financial service needs of all parts of the communities from which they draw deposits. The Credit Union National Association (CUNA) opposes any effort to include credit unions under CRA requirements. CUNA maintains that by their nature and mission of “people helping people,” credit unions already meet the financial needs of a broad spectrum of people that fall within their fields of membership, and play an active role in community development and growth. By virtue of their membership requirements, credit union products and services are offered within local communities and CRA requirements would add an unnecessary and costly regulatory burden to credit unions that already meet and exceed the intent behind CRA, CUNA says.

NCUACUNA Tech Council set May 5 for online services webinar

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WASHINGTON (4/8/10)--As revealed at the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference in February, the National Credit Union Administration (NCUA) will partner with the CUNA Technology Council to offer a webinar to help credit unions improve online services. The NCUA announced yesterday the date for the co-hosted webinar is May 5. The webinar, slated for 2-3:30 p.m. (EDT), will feature featuring best practices in member technology solutions. It also will offer cutting-edge ideas for credit unions to better serve existing members and to attract new members—with a particular nod to attracting young, tech-savvy consumers. In announcing the webinar date, Matz said credit unions lag behind other financial services providers in offering certain electronic services, especially such things as portfolio management and mobile banking.” Yet, she added, credit unions that provide these services have significantly higher consumer satisfaction ratings than other institutions offering similar services. “Expanding online services will appeal to a new generation of consumers who want to pay bills online and check balances from their iPhones,” said Matz. “This webinar will help credit unions meet the needs of consumers who want a financial institution that’s always open, everywhere, electronically.” CUNA Councils Vice President David Rohn noted that the webinar will be divided into two sections: “First will be an overview of where credit unions are doing well: collaboration, remote deposit capture, channel normalization, image capture and settlement. Second we’ll look at some services and emerging areas that credit unions will need to focus upon in order to stay competitive: personal financial management, mobile banking, user interface, and social media.”

Inside Washington (04/07/2010)

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* WASHINGTON (4/8/10)--Former Federal Reserve Board Chairman Alan Greenspan said Wednesday in prepared remarks that policymakers should place higher collateral and capital requirements on the financial services industry. He also warned that future crises could take place if steps aren’t taken to tackle the “too big to fail” problem (The Wall Street Journal April 7). Greenspan testified before the Financial Crisis Inquiry Commission Wednesday. If capital and collateral requirements are adequate, taxpayers will not be at risk for losses, he said. Only a few good solutions exist to deal with firms that pose systemic risks, and it’s hard to identify those risks in time for the government to react accordingly, he added. Greenspan also defended his work on consumer protection matters, arguing that subprime mortgages did not significantly cause the crisis, and that the Fed was active in pursuing consumer protections for mortgage borrowers during his time at the Fed. He voted in favor of consumer protection initiatives when they were brought before the board, he said. Addressing criticism that the Fed was slow to implement protections for homeowners to address unfair and abusive lending, Greenspan said the Fed worked to ensure the law was implemented and that it monitored the growth of subprime lending ... * WASHINGTON (4/8/10)--The Securities and Exchange Commission (SEC) voted Wednesday on a proposal to require financial firms to retain 5% of each class of an asset-backed security if they want to avoid regulatory obstacles when selling the bonds. Banks would not be allowed to hedge on the securities they retain (Bloomberg.com April 7). “I applaud today’s vote by the SEC to propose new standards under the securities laws for the securitization market,” said Federal Deposit Insurance Corp. Chairman Sheila Bair in a statement. “The SEC’s proposals align with the FDIC initiative to set new standards for a ‘safe harbor’ for future securitizations originated by FDIC-insured institutions. Notably, the SEC’s proposed new standards will extend to the nonbank ‘shadow sector,’ demonstrating a common approach that will further the ultimate goal of ending arbitrage and implementing securitization reforms across the entire market,” Bair said. The Obama administration and lawmakers say Wall Street lacked “skin in the game” when they engaged in risky lending before the housing market collapsed in 2007. The proposal would apply to shelf offerings--which allow firms to register stocks and bonds with the SEC before an offering and then sell securities as needed. Such offerings allow debt sellers to raise money quickly without SEC approval ... * WASHINGTON (4/8/10)--The National Association of Realtors (NAR) said Tuesday that it will urge lawmakers to renew the National Flood Insurance Program, which expired March 28. Congress is on recess and will return Monday. The program provided insurance coverage for homes bought within the 100-year flood map as defined by the Federal Emergency Management Agency. Flood insurance is required by law for home mortgages on properties in the 100-year floodplain areas, which are currently unprotected. Until the program is renewed, worthy buyers will be left without access to mortgages, said NAR President Vicki Cox Golder ... * WASHINGTON (4/8/10)--The Government Accountability Office (GAO) investigated the competitiveness and long-term viability of the domestic auto industry, specifically as it relates to auto companies that were recipients of the Troubled Asset Relief Program (TARP). More than $81 billion of TARP funds were funneled to bolster the car industry, the bulk of which went to General Motors (GM) and Chrysler, sponsors of some of the largest defined benefit pension plans insured by the federal Pension Benefit Guaranty Corporation (PBGC). The GAO is statutorily mandated to oversee TARP expenditures. “Although the pension plans have been maintained, their future remains uncertain. According to current company projections, large contributions may be needed to comply with federal pension funding requirements within the next (five) years,” the GAO reported. The report is titled ”Automaker Pension Funding and Multiple Federal Roles Pose Challenges for the Future”

NCUA opens 2010 CDRLF tech assistance program

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ALEXANDRIA, Va. (4/8/10)—National Credit Union Administration (NCUA) Chairman Debbie Matz this week announced the start of the 2010 round of the Community Development Revolving Loan Fund (CDRLF) Technical Assistance Grant Program. For 2010, Congress appropriated $1.25 million in funds for technical assistance to the NCUA’s CDRLF, which provides loans and technical assistance to federal and state credit unions that are designated as a low-income credit union, as defined by NCUA regulations. State-chartered credit unions must have the equivalent low-income designation from its respective state supervisory authority alongside concurrence from the NCUA. The NCUA has allocated $300,000 each for financial education and partnership and outreach programs, with maximum grants of $15,000. Up to $150,000 will be made available for credit unions that wish to build their internal capacity, with $250,000 in funds being evenly split between volunteer income tax assistance and staff training. Also, $100,000 will be made available for building technology and internship and job creation, respectively, with $50,000 provided for capital planning. The NCUA also has “set aside some funds for Urgent Needs Grants to be used by eligible credit unions in cases of extreme necessity,” according to the release. The financial education, partnership, student internship and capital plan initiatives are new for 2010. Matz strongly encouraged credit unions that serve low-income memberships to “consider the advantages of CDRLF programs and apply for grants.” For the NCUA’s letter to credit unions and background information on the CDRLF program, use the resource links.

Compliance CUs cant relax yet on CARD Act

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WASHINGTON (4/8/10)--While much of the work related to the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act has been completed in the past year, the Credit Union National Association’s Mike McLain warned that credit unions should remain wary of changes the Federal Reserve has made to portions of its Regulation Z. Those changes affect the “format, timing, and content” for “credit and charge card applications and solicitations, account opening disclosures, periodic statement disclosures, change-in-terms disclosures, and advertising provisions,” McLain said. Addressing these changes, which come into effect on July 1, in this month’s edition of Credit Union Magazine, McLain provided further detail on some of the new rules. Portions of the Reg Z changes that affect account opening disclosures will require “a new summary table to be included in the account-opening disclosures for all open-end credit except for home equity lines of credit (HELOCs).” These tables must include data on annual percentage rates and many bits of information related to the terms of the account. Periodic statement disclosures must also be adjusted through changes to the way that interest and fees charged during the billing cycle are displayed. Financial institutions must also show fees and interest totals for the month and year to date on these disclosures, but a previous requirement to “calculate and disclose the effective APR has been eliminated,” McLain added. CUNA has addressed a number of other CARD Act-related questions in a recently published list of Frequently Asked Questions (FAQ).These include questions related to floor rates, change-in-terms notices, increases in variable rates, limitations on increasing annual percentage rates and fees, changes in credit terms, renewal or annual fees, business credit accounts, and expedited payments. The FAQ also addresses portions of the CARD Act that prohibit rate increases in the first year that a credit card account is active, require co-signors for credit card accounts taken out by an individual under 21 years of age, require that creditors obtain the consent of the cardholder before charging over-the-limit fees, and limit many of the fees associated with so-called "subprime" credit cards. CUNA has submitted some of these questions to the Fed for its interpretation. “Even after credit unions implement all of these changes, they’ll have to deal with several additional CARD Act provisions” that become effective on Aug. 22, McLain said, adding that the Fed should soon issue additional final rules on HELOCs and closed-end mortgage loans. For the Credit Union Magazine story and CUNA’s FAQ, use the resource links.

House Committee to take up second liens on April 13

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WASHINGTON (4/8/10)--The House Financial Services Committee on April 13 will hold a full committee hearing entitled “Second Liens and Other Barriers to Principal Reduction as an Effective Foreclosure Mitigation Program.” While an official witness list for the hearing had not been announced at press time, it is thought that representatives from the largest banks, as well as government agencies, will be in attendance. In a letter sent last month to the CEOs of Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, Committee Chairman Rep. Barney Frank (D-Mass.) said that there was “no more important priority” than saving homes on “a large scale” by moving “past temporary modifications in interest rates or terms” to “focus on permanent principal reductions that result in truly sustainable mortgages.” Frank said that “failure to modify” second lien mortgages “has become a major and unnecessary obstacle to thousands of Americans being able to stay in their homes.” He added that he would work to remove any legal obstacles that may impede them from taking “immediate steps to write down these second mortgages and allow principal reduction modifications of the underlying first liens to take place.” Credit union lending practices have historically been conservative and credit unions have not been impacted by the current mortgage crisis as much as other types of lenders, Credit Union National Association Senior Assistant General Counsel Jeffrey Bloch said. “However, credit unions have also been impacted when they have made second lien loans. To the extent property values decline and foreclosure becomes an issue, the second lien becomes worthless in most situations, with or without a loan modification ” Bloch added. The Obama Administration’s Home Affordable Modification Program (HAMP) provides monetary incentives, “but so far these incentives have not proven effective in addressing these problems,” Bloch said.

Inside Washington (04/06/2010)

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* WASHINGTON (4/7/10)--Some provisions of proposed regulatory reform bills would give regulators power they already have, said financial observers. Provisions such as creating higher capital requirements, cracking down on risky activities and boosting leverage limits already have been included in laws Congress passed more than a decade ago. John Douglas, former general counsel for the Federal Deposit Insurance Corp., likened the situation to dealing with a “three-year-old” (American Banker April 6). “It’s like, ‘This time I really mean it,’” he said. Many observers said they were skeptical because the pending legislation only creates an appearance of real reform. Rick Carnell, former Treasury official, said Congress is “recycling” the same provisions that failed once already when regulators didn’t “use their discretion” when they should have, he said. The Banker also noted that the pending regulatory reform bills would require the Federal Reserve Board and a council of regulators to set standards for risk-based capital, leverage, liquidity and credit exposure. However, the bills do not say how the standards should be created, leaving it for regulators to decide--which could preserve the status quo, observers said .. * WASHINGTON (4/7/10)--The Federal Housing Administration (FHA) said Monday it will issue regulations to increase the net worth requirements of FHA-approved lenders, strengthen lender approval criteria, and make lenders liable for the oversight of mortgage brokers. To ensure that FHA lenders are sufficiently capitalized to meet potential need, effective immediately, all new lender applicants for FHA programs must now possess a minimum net worth of $1 million. Since 1993, the agency has required approved lenders to have a net worth of at least $250,000. Current lenders must possess a minimum net worth of $1 million and current FHA-approved small business lenders must have a net worth of $500,000. The changes also require that mortgage brokers or other FHA-approved originators can originate FHA-insured loans through the end of the year without sponsorship of an FHA-approved lender. After Jan. 1, 2011, the origination authority will end. Effective three years following the enactment of the provision: approved lenders and applicants to FHA single-family programs must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million; approved lenders and applicants to FHA multifamily programs must have a minimum net worth of $1 million; multifamily lenders that also engage in mortgage servicing must have an additional 1% of total volume in excess of $25 million; and multifamily lenders that do not perform mortgage servicing must have an additional 0.5% of total loan volume more than $25 million ... * WASHINGTON (4/7/10)--Federal Reserve Board Chairman Ben Bernanke and Governors Elizabeth Duke, Kevin Warsh and Daniel Tarullo met Monday to discuss the interest rate it assesses to banks on emergency loans (American Banker April 6). Analysts had debated whether the rate would be increased, but the Fed did not indicate it was planning to change the rate ... * WASHINGTON (4/7/10)--A panel created by Congress to address the causes of the nation’s financial crisis has been set back by the size of its task--explaining a crisis that still confuses Americans, said The New York Times (April 5). The Financial Crisis Inquiry Commission’s chairman, Phil Angelides, said the panel is working to satisfy its mandate of determining the role of 22 factors in the crisis. It also is working with an $8 million budget--compared with $38 million spent by a federal bankruptcy trustee to analyze the Lehman Brothers collapse, Angelides said in an interview. He said he hopes to come up with some findings to help future policymakers, even though the panel will not give formal recommendations. In interviews with the Times, the 10 commissioners discussed the panel’s work but would not be identified by name. Some said disagreements among panelists signal healthy debate. However, some said Angelides appears to focus on holding hearings instead of selecting a few areas for deep examination. The commission also has not issued subpoenas for bank executives to testify, although it has the power to do so, the newspaper said. Alan Greenspan, former Federal Reserve Board chairman, is slated to testify on Wednesday ...

New credit report ad requirements in effect

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WASHINGTON (4/7/10)--Final rules that prevent deceptive marketing of so-called "free credit reports" by requiring credit report advertisements to contain enhanced disclosures became effective on April 2. Specifically, the new Federal Trade Commission rules, which were required by the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), will clarify the distinction between the free credit reports available to consumers through AnnualCreditReport.com and those "free" reports conditioned on the purchase of products and services. While print and web-based advertisements must contain these disclosures as of April 2, the regulations governing disclosures for television and radio advertisements become effective on Sept. 1. The Credit Union National Association has advised credit unions that are bundling free credit reports with other products and services to pay special attention to these new disclosure requirements. For the FTC release, use the resource link.

FHA changes net worth other rules for lenders

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WASHINGTON (4/7/10)--The Federal Housing Administration (FHA) earlier this week announced that lenders that take part in FHA lending programs will need significantly higher net worth. The new FHA rule, which is effective immediately, will require “all new lender applicants for FHA programs” to “possess a minimum net worth of $1 million” within three years of the provision’s enactment. The previous minimum net worth, established in 1993, was $250,000. Approved lenders and applicants to FHA single-family programs must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million. FHA small business-approved lenders “must possess a minimum net worth of $500,000.” Multifamily lenders that also service mortgages “must have an additional 1% of total volume in excess of $25 million,” while multifamily lenders that do not service mortgages “must have an additional 0.5% of total loan volume in excess of $25 million,” according to the FHA. The FHA proposal also has the “potential to increase the number of mortgage brokers eligible to originate FHA-insured loans while providing for more effective oversight of brokers by FHA-approved lenders,” the release added. While “mortgage brokers or other third-party originators” that are previously approved by the FHA are currently permitted to originate FHA-backed loans “without sponsorship of an FHA-approved lender,” that origination authority will end in 2011. For the full FHA release, use the resource link.

NCUA provides risk-concentration guidance to CUs

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WASHINGTON (4/7/10)--In a supervisory letter (Letter to Credit Unions: 10-CU-03) released on Tuesday, National Credit Union Administration (NCUA) Chairman Debbie Matz encouraged credit union officials “to understand the concentration risk in their credit union’s current balance sheet, as well as how strategic plans may affect the level of concentration risk.” In the letter, which reflects guidance that the NCUA recently provided to its own examiners, Matz also asked credit union officials to “ensure” that “their risk management practices are commensurate with the level of risk” found on their balance sheets. Additionally, credit unions should “open a dialogue with examiners to consider the suitability of existing risk management practices given the risks inherent in any concentration,” and should consult regional, district or state credit union authorities if any other questions arise, Matz said. A recent Federal Financial Institutions Examination Council (FFIEC) advisory on Interest Rate Risk Management can also provide additional guidance, if needed, Matz added. For the NCUA guidance and an NCUA supervisory letter on concentration risk, use the resource link.

Pres. Obama officially declares fin lit month

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WASHINGTON (4/6/10)--President Barack Obama late last week officially announced the beginning of financial literacy month, calling on Americans to “take time to improve our own financial knowledge and share that knowledge with our children.” Obama said that America’s “future prosperity depends on the financial security of all Americans,” adding that improving financial education “can prevent another crisis and rebuild our economy on a stronger, more balanced foundation.” “While our government has a critical role to play in protecting consumers and promoting financial literacy, we are each responsible for understanding basic concepts: how to balance a checkbook, save for a child's education, steer clear of deceptive financial products and practices, plan for retirement, and avoid accumulating excessive debts,” Obama added. Addressing the government’s role in financial literacy, Obama promoted the proposed Consumer Financial Protection Agency, and lauded the Credit Card Accountability Responsibility and Disclosure Act of 2009’s role in “reining in” some “deceptive” financial tactics. Credit unions nationwide are joining in the financial literacy celebration by participating in National Credit Union Youth Week, April 18-24, and the Credit Union National Association sponsors the National Youth Saving Challenge during the entire month to help youth younger than age 18 develop good savings habits. This program has helped young prospective credit union members save $26.5 million in deposits. For more on financial literacy, check CUNA's website (finlit.org) and use the resource links below.

SBA offers money management webinars

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WASHINGTON (4/6/10)--The U.S. Small Business Administration this month will host a series of webinars to teach “basic money management and financial skills for today’s business world” and “highlight the importance of financial education and the opportunity to learn practical money skills and financial wellness.” The webinars, which will take place on April 7, 14 and 21, at 11 a.m. and 3 p.m. E.T. and will feature input from officials from the Federal Deposit Insurance Corporation and the Department of Health and Human Services, among others. For access and more information related to the webinar, use the resource links.

CUNA groups tackle FOM merger issues this week

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WASHINGTON (4/6/10)--WASHINGTON (4/6/10)--The Credit Union National Association’s (CUNA) recently formed mergers and field-of-membership (FOM) working groups will hold meetings this Wednesday. While CUNA has been addressing these issues for some time, the association is developing specific recommendations in these areas that the working groups will help formulate. The working groups are comprised of members of existing CUNA committees and subcommittees. The CUNA FOM working group, headed by Truliant FCU CEO Marc Schaefer, is concerned that some credit unions are asking whether or not the proposed field-of-membership changes from the National Credit Union Administration (NCUA) may discourage credit unions from seeking community charters or expanding their areas. The task force is considering recommending amendments to NCUA that will provide more leeway for applications involving multiple political jurisdictions and rural districts. The NCUA's FOM proposal sets objective and quantifiable criteria to determine the existence of a well-defined local community for areas that encompass multiple group areas. A new, objective definition for rural districts has also been proposed. The comment period for the field-of-membership rules ends on April 15. NCUA is also currently considering its supervisory merger processes, and the CUNA merger working group, headed by Ohio CU League President Paul Mercer, intends to provide its input to NCUA in early May. The merger working group's discussions will focus on identifying the key concerns and issues that credit union and regulator stakeholders have concerning the current supervisory merger process and will offer concrete approaches that address and balance those concerns. The next call will focus on issues relating to emergency mergers. The working group invites comment on credit union concerns and will examine statistical information related to emergency mergers later in the month. Following the completion of its report on emergency mergers, the merger group will turn to the NCUA's proposal regarding bank-related mergers and conversions, with comments due to NCUA scheduled for May 28.

Congress to see busy seven-week session

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WASHINGTON (4/6/10)—While the halls of the U.S. Congress remain relatively quiet this week as members of the House and Senate continue their spring recess, the seven weeks that follow their return next week may be some of the busiest weeks of 2010. In the Senate, financial regulatory reform will return to the fore, with the potential for a full vote on the Senate floor possibly as early as April 26. The Senate Committee on Agriculture will also hold its own markup on derivatives legislation in mid-April, and Sen. Chris Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) recently predicted that comprehensive regulatory reform would be signed by President Obama by Memorial Day. A number of items that were pushed to the back burner of House committees by the recently completed healthcare and regulatory reform debates, including potential changes to the Unlawful Internet Gambling Enforcement Act (UIGEA), will be both taken up in committee sessions and, perhaps, taken up for votes in the near future. Credit unions and other financial institutions on June 1 will be forced to establish and implement policies and procedures to identify and block restricted Internet gambling transactions, or rely on those procedures established by the payments system, if UIGEA is not addressed by the Congress.

Inside Washington (04/05/2010)

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* WASHINGTON (4/6/10)--The Federal Deposit Insurance Corp. (FDIC) is changing the way that it handles failed bank assets (American Banker April 5). To date, its resolutions have involved selling the bank’s assets and deposits to another bank and covering the remaining losses. However, financial observers said the agency is trying new ways to deal with losses. The FDIC has partnered with investors to sell assets after a failure and made agreements--126 since the start of 2009--that force the FDIC to cover 80% of a buyer’s losses up to a stated amount, and 95% beyond the threshold. However, on March 26, the agency said it was dropping the 95% coverage. The move didn’t have much impact, but Kip Weissman, partner at Luse Gorman Pomerenk and Schick, said it shows the agency is moving toward customized transactions instead of a “one size fits all” solution. Michael Krimminger, deputy to the chairman for policy at FDIC, told Banker that the FDIC wants to explore all different transaction structures. The agency also indicated that it will plan to make assets in receivership available to investors through the securitization market, Krimminger said ...

Inside Washington (04/02/2010)

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* WASHINGTON (4/5/10)--Lawmakers on the Senate Agriculture Committee are writing new rules to oversee the derivatives market, which could affect larger regulatory reform for the financial industry. Committee Chairman Blanche Lincoln (D-Ark.) and ranking Republican Saxby Chambliss (Ga.) plan to introduce a bipartisan bill after Congress comes back from its April recess. The effort is noteworthy because Sens. Jack Reed (D-R.I.) and Judd Gregg (R-N.H.) have reached an impasse in negotiations over the reform bill after months of work on a reform bill by Sen. Christopher Dodd (D-Conn.) to overhaul the financial system. If Lincoln and Chambliss reach a deal on derivatives, it could help pass Dodd’s legislation. Reforming the derivatives market remains at the core of how lawmakers plan to change how the government will regulate Wall Street (The Washington Post April 2). Debate continues among lawmakers about how to make the derivatives market more transparent to minimize risk ... * WASHINGTON (4/5/10)--The President’s Economic Recovery Advisory Board (PERAB) will meet April 16 at the White House. The meeting will be open to the public via live webcast (Federal Register April 1). The board invites the public to

Go Direct preps CUs for Financial Literacy Month

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WASHINGTON (4/5/10)—The U.S. Treasury Department's direct deposit program, Go Direct, reminds credit unions and other national campaign partners to use financial literacy month as an opportunity to help members and customers “protect their money and improve their financial health by switching from paper checks to electronic payments for their federal benefits.” Go Direct has also provided additional resources for both financial institutions and community organizations via free materials for their members and customers. These materials include program overviews, newsletters, and other print and web-based resources. Go Direct is also looking ahead to May, when Older Americans Month begins. Financial institutions can use May to follow up on many of the same messages that are sent out during Financial Literacy Month, with a specific emphasis on seniors that currently receive their social security payments and other federal benefits via paper check. Go Direct has also provided a tool kit for financial institutions that wish to take part in Older Americans Month. For the Go Direct program’s April and May resources, use the resource links.

Compliance Challenge Opt-in or no opt-in account terms apply

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WASHINGTON (4/5/10)--While Regulation Z does not currently cover over the phone applications for credit cards, the Credit Union National Association (CUNA) has advised that credit unions that receive all necessary applicant information verbally, while still requiring the applicant to sign a text-version of their application at a later date, will “likely have satisfied the written application requirement” imposed on potential accountholders that are under 21 years of age. CUNA’s latest Compliance Challenge also addresses Regulation E. Responding to another query, CUNA says that in cases where members that have not opted in to the credit unions’ overdraft program but are abusing their debit cards by frequently overdrawing their accounts, the credit union can only suspend that members’ account “if it would do the same for members who have opted-in to the service.” Under Section 205.17(b)(3) of Regulation E , credit unions must “apply the same account terms, conditions, and features,” including interest rates, fees, and minimum balance requirements, “regardless of the consumer’s opt-in choice,” CUNA said. In another example, CUNA said that card issuers must provide 45 days of advance notice “when a discounted rate, such as a 25 basis point reduction in the credit card rate for payroll deduction, is increased to the normal rate.” This must be done whether or not the member still meets the requirements for the discount, according to CUNA. “However, a card issuer that does so cannot subsequently increase the rate unless permitted by one of the exceptions in Section 226.55(b), such as providing a 45-day advance notice of change in terms,” CUNA added. For more of CUNA’s Compliance Challenge, use the resource link.

NCUA will fully back CUs in states affected by recent flooding

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ALEXANDRIA, Va. (4/5/10)--The National Credit Union Administration on Friday encouraged credit unions in Delaware, New Hampshire, Massachusetts, Rhode Island and West Virginia to work with members as they deal with damages and other issues related to the recent flooding and sever weather. Portions of these states have been declared federal disaster areas, and the NCUA has suggested that credit unions in these areas facilitate the recovery of their communities by making loans with “special terms and reduced documentation” for members that have been affected by the recent storms. The NCUA will also “reschedule routine examinations of affected credit unions” as needed. Additionally, the NCUA said it would aid recovery efforts by guaranteeing lines of credit through the National Credit Union Share Insurance Fund and lending to “meet the liquidity needs of member credit unions through the Central Liquidity Facility.” The NCUA release follows a Federal Deposit Insurance Corporation release earlier this week. While the NCUA at first indicated that it would handle the situation in these jurisdictions on a case by case basis, the Agency later elected to produce its own guidance. For the full NCUA guidance, use the resource link.

Financial crisis is subject of federal inquiry

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WASHINGTON (4/2/10)--The Financial Crisis Inquiry Commission on Thursday announced that representatives from the Federal Reserve, Fannie Mae, the Federal Housing Finance Agency, the Federal Housing Finance Board, the Office of Federal Housing, and Citigroup will testify during a hearing entitled "Subprime Lending and Securitization and Government-Sponsored Enterprises." The FCIC was created by Congress last year and is tasked with studying fraud in the financial system and determining the cause of the financial crisis. The hearing will take place on April 7, 8 and 9, and will start at 9 A.M. E.T. on each of those days. The hearing will also be available via webcast. The FCIC conducted an earlier series of hearings which featured testimony from Securities and Exchange Commission (SEC) Chairman Mary Schapiro, Attorney General Eric Holder, and various high ranking executives. Thomas Greene, a lawyer in the California Attorney General's office, is the current executive director of the 10-member commission. The FCIC will issue a final report on the nation's financial crisis to the U.S. Congress by December 2010. Credit unions have seen growth in spite of the below average economic conditions, reporting a 5.7% increase in share drafts, a 3.9% increase in regular shares, and a 1.4% increase in money market accounts during February. (See related story: CU loans down 0.6%, savings up 1.8%) For the FCIC hearing notice, as published in the Federal Register, use the resource link.

Inside Washington (04/01/2010)

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* WASHINGTON (4/2/10)--The Office of Thrift Supervision (OTS) Wednesday offered tips to consumers regarding the Real Estate Settlement Procedures Act (RESPA) in the brochure, “What to Expect When You Apply for a Mortgage Loan.” The brochure discusses how credit scores impact getting a mortgage, new mortgage loan disclosures, the new Good Faith Estimate, and the mortgage loan application process. New RESPA rules took effect Jan. 1 ... * WASHINGTON (4/2/10)--Federal Reserve Board Gov. Elizabeth Duke said she expects bank lending to improve by year-end despite challenges and failures in the financial industry. Duke made the comment at a banking conference in Arizona Wednesday (American Banker April 1). While the nation’s community banks are sound, some firms are under stress from problem loans, particularly in commercial real estate, Duke said ... * WASHINGTON (4/2/10)--State regulators are encouraging Senate Banking Committee Chairman Christopher Dodd (D-Conn.) to revise a provision in his regulatory reform bill that they claim would force large state banks to convert to national charters. The conversions, they argue, would prevent eight states from receiving the funding they need to oversee banks under their jurisdictions. The state banking departments also would have to make up the difference by charging more fees to smaller banks, said Richard Neiman, New York State Superintendent of Banks (American Banker April 1). Exam fees also are expected to rise, the Banker said. Under Dodd’s bill, all state-chartered banks would be regulated by the Federal Deposit Insurance Corp (FDIC). The Federal Reserve Board would oversee holding companies with more than $50 billion in assets. Roughly 15 state-chartered banks belong to companies with that asset size and could end up with three regulators--the Fed, FDIC and the state ...

Obama signs new student loan law

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WASHINGTON (4/2/10)--Federal student lending regulations were officially changed earlier this week when President Barack Obama signed legislation that eliminates government subsidies to credit unions and banks that take part in the Federal Family Education Loan Program. Starting on July 1, education loans will be originated by the government. Obama on Tuesday estimated that this change would save taxpayers $68 billion, and the government is projected to offer $61 billion in funds to active and prospective students in the form of need-based Pell grants. The Credit Union National Association (CUNA) estimates that this change could affect 1,000 credit unions that currently participate in publicly-funded student lending. However, private student lending still provides valuable market share opportunities for credit unions. A recent Fynanz survey revealed that private loans accounted for 10% of the $229 billion total cost of higher education in the 2008-2009 academic year, and cuStudentLoans.org, private student lending cooperative of over 30 credit unions in New Jersey, Pennsylvania, New York, Ohio and Minnesota, handled $90 million in student loans in late 2009. The cuStudentLoans.org network is backed by Fynanz and lends to students at over 700 schools in 47 states. According to Fynanz estimates, 90% of those loans go to new credit union members, “which is welcomed news for credit unions looking to expand their customer base and offer programs that attract younger credit union members.” Earlier this year, CUNA Strategic Services Inc. (CSS) joined with Fynanz Inc. to help credit unions get a piece of the private student loan market, attract new members, and assist borrowers with financing tuition and achieving higher education goals.

CUNA seeks comment on NCUA RegFlex changes

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WASHINGTON (4/2/10)--The Credit Union National Association (CUNA) has issued a regulatory comment call on the National Credit Union Administration’s proposed changes to its Regulatory Flexibility (RegFlex) Program. CUNA has suggested that those who do submit comments address the appropriateness of the 5% of fixed assets limit on investments and stress testing requirements. More generally, CUNA has also sought comment on whether or not changes to the RegFlex rules are necessary. The NCUA last month approved a proposed rule that would rescind some exemptions related to fixed assets, member business lending (MBL), stress testing of securities, and the discretionary control of investments. Specifically, the RegFlex proposal would require RegFlex credit unions to comply with the general limitation of a federal credit union’s investment in fixed assets to no more than 5% of its shares and retained earnings. The proposal would also subject RegFlex credit unions to stress test standards for some types of securities and would saddle RegFlex credit unions with the same 100% net worth limitation on discretionary control of investments that applies to federal credit unions. Member business lending by credit unions would also be affected, with the proposed rule subjecting RegFlex participants to collateral and security provisions that require the personal liability and guarantee of the borrower’s principals. Comments are due to CUNA by May 10. Comments solicited to the NCUA should be submitted by May 24. To view the CUNA comment call, use the link.