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Regulators to discuss corp. stabilization today

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WASHINGTON (6/18/09)--One of the top items up for discussion at today’s meeting of the National Credit Union Administration (NCUA) is the recently passed corporate credit union stabilization plan, which increases the NCUA’s borrowing authority to $6 billion and will allow credit unions to spread their National Credit Union Share Insurance Fund (NCUSIF) replenishment charges over an eight-year period. The board will also discuss how credit unions that have already expensed their NCUSIF costs can recover or reverse those expenses. A final rule on operating fees and an interim rule on exceptions to the maturity limit on second mortgages are also topics for today’s board meeting. Credit unions may register for this event on the NCUA Web site beginning on June 19. The NCUA will discuss the corporate stabilization issues in an interactive webinar, and credit union representatives who wish to participate may register through the NCUA Web site starting on June 19. The seminar, which is scheduled for 1 pm on June 24, will begin one hour after the Credit Union National Association’s (CUNA) Americas Credit Union Conference & Expo ends, and CUNA will stream the webinar live for all attendees who wish to take part in the discussion.

NCUA describes FCUs investment advice authority

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ALEXANDRIA, Va. (6/18/09)—In a recent National Credit Union Administration (NCUA) legal opinion letter, the agency addressed a query regarding whether federal credit unions can offer investment advice services. NCUA Associate General Counsel Sheila Albin wrote that an employee of such an institution cannot provide investment advice that would subject the employee or the federal credit union to federal or state securities laws. However, she added, the credit union may establish a shared employee arrangement with a third-party registered investment adviser so that an employee can act as an employee of a third-party registered investment adviser. Also, Albin stated, a credit union may also act as a finder or offer investment adviser services through a credit union service organization (CUSO). The NCUA opinion further noted that firms and individuals offering advisory account services must be registered as Registered Investment Advisers,” and that while banks have an exemption from the requirement, federal credit unions do not. To read the complete letter, use the resource link below.

Inside Washington (06/17/2009)

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* WASHINGTON (6/18/09)--Rep. Luis Gutierrez (D-Ill.) has introduced legislation that would change how the Federal Deposit Insurance Corp. can charge assessments. Currently, the FDIC bases the assessments on domestic deposits. Gutierrez’s bill would require the FDIC to charge premiums based on an institution’s assets (American Banker June 17). The bill would retain the increased deposit insurance limit of $250,000 per account. Gutierrez said his legislation aims to end the idea that some institutions are “too big to fail.” The congressman, who chairs the House Financial Services financial institutions subcommittee, said the legislation could be added to the Financial Services Committee’s regulatory restructuring plan ... * WASHINGTON (6/18/09)--A watchdog report released Tuesday by the U.S. Treasury Office of the Inspector General indicates that the Office of Thrift Supervision (OTS) was too lenient in dealing with Downey Financial Corp. The Newport Beach, Calif.-based savings and loan failed in November after significant mortgage losses. The report said the OTS issued warnings from 2002 to 2005 about Downey’s adjustable rate mortgages, but did not order Downey to limit its exposure to them (Reuters June 16). The OTS should have been more “forceful” and limited the mortgages’ concentrations at Downey, according to the report. It also said OTS agrees with the inspector’s recommendations ... * WASHINGTON (6/18/09)--Reverse mortgage lenders say they are preparing for a pullback in the industry as stricter eligibility requirements loom. Shaun Donovan, Department of Housing and Urban Development (HUD) secretary, said the government may need to be tougher on slowing the growth of reserve mortgage loans as home prices drop. Reverse mortgages could be the next subprime mortgage product, said Comptroller of the Currency John Dugan said in a speech at a banking industry conference (American Banker June 16). If HUD changes eligibility requirements, fewer borrowers will qualify for the loans, according to David Cesario, executive vice president of 1st Reverse Financial Services LLC. Last year, a housing bill capped origination fees on the loans at 2% for the first $200,000 and 1% for the balance beyond that amount. Congress approved a higher limit in February--$625,000--which expanded eligibility requirements. That figure is an increase from $417,000. HUD has asked Congress for $798 million to boost its loss reserves for the Federal Housing Administration’s Home Equity Conversion Mortgage program. The program allows borrowers age 62 and older to convert their home equity into monthly payments or a line of credit. The loan is repaid when the home is sold ...

Hyland rejects No future for small CUs

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WASHINGTON (6/18/09)--The National Credit Union Administration (NCUA) is planning to update a supervisory letter to ensure that its examiners understand the unique situations that low-income credit unions and community development credit unions (CDCUs) face, NCUA Board Member Gigi Hyland said in a recent interview with National Federation of Community Development Credit Unions President/CEO Cliff Rosenthal. The NCUA is also focusing on training its examiners to ensure that they “have a better understanding of the uniqueness of low-income designated credit unions” and fully understand how best to examine their financial status. Though current NCUA guidelines mandate that Prompt Corrective Actions (PCAs) must be taken against CDCU’s with a net worth below 6%, Hyland said that some changes in accounting that are triggered by the extended deadlines provided under the corporate stabilization proposal could help some credit unions avoid undertaking a net worth restoration plan. Hyland also encouraged examiners to sympathize with the situation that credit unions are facing, adding that credit unions that may be in trouble should be given “more time” than they would be afforded under an “immediate or six month requirement” to “get back up to the appropriate levels.” Credit unions should also advocate for their own positions through “specific dialogues” about their “sustainability” and their own plans going forward. While more pressing issues, such as the corporate credit union situation, have kept this part of the overall Community Development Revolving Loan Fund discussion off of the board’s agenda, Hyland said that the NCUA could see if there is any impetus “to address this issue from a regulatory standpoint” when a new agency chairman is in place. Deborah Matz has been nominated by the Obama administration for that position, but a date for a confirmation hearing has not yet been set. Hyland said that a recently released legal opinion from NCUA staff concluded that the board could use funds from its $16 million CDRLF as a source of secondary capital for struggling CDCUs. If this CDRLF issue returns to the fore, Hyland said that one issue the board would have to grapple with is whether or not Congress intended the CDRLF to be used for something more than loans to credit unions serving low-income communities. More generally, Hyland said that future NCUA discussions could address the overall structure of the share insurance fund and whether or not that fund should “be a deposit based fund or a premium based fund” similar to that of the Federal Deposit Insurance Corporation. The NCUA could also debate whether a separate share insurance fund for the corporates is needed, and look into exactly who uses corporates and what they use them for, she added.

Treasury wants NCUA independent

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WASHINGTON (6/18/09)—The U.S. Treasury’s report on financial regulatory reform, released to the public on Wednesday, would allow the National Credit Union Administration (NCUA) to maintain its safety and soundness authority over credit unions.
In front of an executive mansion gate, CUNA President/CEO Dan Mica answers a reporter’s question on the Obama administration’s financial regulatory restructuring plan directly after Mica left the president’s briefing at the White House. Mica says CUNA will "take a very close look at the details surrounding this proposal" and will “represent credit unions throughout the reform process." (CUNA Photo)
This confirms what Treasury officials told Credit Union National Association (CUNA) President/CEO Dan Mica and other senior CUNA staff last week. Noting that the ongoing economic uncertainty provides an “opportunity for restructuring that will genuinely produce improved regulation,” NCUA Chair Michael Fryzel said that the Obama administration's proposal “merits serious consideration.” The continued independence of the NCUA and the proposal’s plan to create a consumer protection council will “serve to ultimately improve the safe and sound operations of the U.S. financial system,” he added. CUNA Senior Vice President of Legislative Affairs John Magill said that the report's lack of recommendation for substantive changes in the safety and soundness of regulations for credit unions affirms that "credit unions were not the cause of nor a contributor to the financial crisis." "I am not sure they could be clearer in their intent that NCUA remain an independent regulator than to say at least twice in the document," Magill said. But he also advised credit unions that the administration's proposal would not be "the last word on regulatory restructuring." Magill noted, "Congress is going to have its say over the next weeks and months, and we will continue to monitor this very closely." Ryan Donovan, vice president of legislative affairs for CUNA, said that the potential consolidation of some existing regulations could reduce costs and lessen the regulatory complexity faced by many
Click for videoDan Mica on intial reactions to the Financial Regulatory Reform proposal. Click for video. (Photo provided by CUNA)
credit unions. However, CUNA has not fully analyzed these proposals, and an official statement on these portions of the Treasury proposal has not yet been released. CUNA will also solicit input from its member institutions in the coming days, and and will work to ensure that any of the resulting regulations are not duplicative, Donovan added. To help launch what is sure to be a thorough vetting of the plan's intricacies, the Senate Banking Committee and the House Financial Services Committee have scheduled Treasury Secretary Timothy Geithner to appear before them in separate hearings today to discuss the Obama plan. Following an afternoon briefing at the White House, CUNA President and CEO Dan Mica said that while CUNA is “grateful” for the administration’s decision to grant continued independence to the NCUA, CUNA will “take a very close look at the details surrounding this proposal” and will represent credit unions throughout the reform process “after discussing the proposal fully” with CUNA members. CUNA's Governmental Affairs Committee is scheduled to review aspects of the proposal later today. For video of Mica’s statement following the White House briefing, use the resource link.