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Arrowhead Central CU placed into conservatorship

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ALEXANDRIA, Va. (6/28/10)--Arrowhead Central CU, an $876 million asset credit union based in San Bernardino, Calif., has been placed into conservatorship "due to declining financial condition," announced the National Credit Union Administration (NCUA) Friday. By assuming control, the agency will continue credit union service to Arrowhead's 152,000 members and ensure safe and sound credit union operations, NCUA said in the announcement. Service to members continues uninterrupted, and member funds are federally insured up to $250,000 per account by the National Credit Union Share Insurance Fund. Arrowhead, a full-service credit union has provided financial service to people residing in the counties of San Bernardino and Riverside, Calif. The decision to conserve a credit union enables the credit union to continue normal operations with expert management in place correcting previous service and operational weaknesses, NCUA said. According to local media, Arrowhead was set to sell four branches this weekend to Alaska USA FCU, a transaction designed to bolster Arrowhead's financial condition. Beginning today, branches in Victorville, Barstow, Hesperia and Big Bear Lake were to switch ownership to Alaska FCU. Members served by those branches would have until Aug. 31 to decide whether to transfer their accounts to Alaska USA ( San Bernardino County Sun (June 25). The Barstow branch confirmed its sale was complete ( June 25). In addition, the Apple Valley Branch was to close, effective today. The branch was located in a grocery store, which did not agree to transfer a lease to Alaska USA. The sale would put Arrowhead's total branches at 19 and was expected to bolster Arrowhead's capital ratio to 4.3%, said the report. In March, Arrowhead sold its Sawyer Cook Insurance subsidiary for an undisclosed amount (News Now March 3). Arrowhead took several measures last year to raise its capitalization ratio, including closing four branches and laying off 60 employees (News Now Jan. 8, 2009). At that time Arrowhead CEO Larry Sharp told News Now that San Bernardino and Riverside counties had the largest foreclosure rate in the country. "Our credit union was not impacted by the subprime issues, but rather by the downturn in the economy that resulted from the subprime problems," he said at the time. There is 10% unemployment in our area that could reach 12% by year-end. Also the bankruptcy rate is up 125% now in our area. We don't know how deep this thing is."

Inside Washington (06/25/2010)

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* WASHINGTON (6/28/10)--A recent Treasury Department inspection of the Office of Thrift Supervision found that that organization failed to properly regulate the now-failed $13-billion-in-assets BankUnited and specifically " did not impose limits or restrict BankUnited's concentration and growth in high-risk option" adjustable-rate mortgages. The report also found that the OTS did not accurately assess BankUnited’s underwriting or risk-weighting practices and allowed the thrift to improperly backdate a capital infusion, American Banker reported…

NCUA staff covers SAFE Act finalization registration

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WASHINGTON (6/28/10)--National Credit Union Administration (NCUA) attorney Regina Metz updated credit unions on the status of implementing the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act during a recent Credit Union National Association (CUNA) audio conference. During the conference, Metz explained that there are two steps that have yet to be completed: Finalizing SAFE regulations and creating the national registration procedures. The NCUA and all of the federal banking agencies except the Office of Thrift Supervision (OTS) have approved the interagency SAFE regulations. The NCUA Board approved the regulations in April, and once the Office of Management and Budget approves the OTS rule, the agencies will publish a final rule in the Federal Register. The rule will be come effective the first date of the calendar quarter 60 days after publication. Metz, who represents NCUA on the interagency SAFE working group, indicated that the agencies hope to publish a final rule by the end of July, which would mean an October 1 effective date; otherwise, the rules are expected to become effective Jan. 1. However, as Metz explained, credit union employees still can’t actually register until the Nationwide Mortgage Licensing System and Registry is structured to accept registrations from bank and credit union employees. The NCUA and the federal banking agencies are working with the Conference of State Bank Supervisors on the registry, which they hope to have ready early next year. Employees will have 180 days after the agencies provide a public notice announcing that the registry is accepting initial registrations. Metz indicated that once the first round of registrations is completed, the agencies envision annual renewals would occur between Nov. 1 and Dec. 31 of each year. The SAFE regulations will require that credit unions adopt policies to assure that their employees who originate residential mortgages provide the required information (such as fingerprints and employment history), obtain a unique identifying number, and register. A key question is who will be required to register. Metz discussed the information found in the regulation’s Appendix A, which provides examples of which employees are considered to originate mortgage loans and therefore will need to register, once the system is up and running. Only bank and credit union employees are subject to the registration procedures, Metz said. Others engaged in residential mortgage lending, including employees of credit union service organization (CUSOs), as Metz explained, are subject to more extensive state licensing procedures that include not only registration and having a unique identifier number, but also periodic testing. In response to an audience question, Metz noted that the cost of registration has yet to be determined. “The regulation’s expected fall ‘effective date’ would only mean that credit unions have to start developing their written polices and procedures to ensure compliance with the new rule and can start identifying which employees will be subject to SAFE registration,” explained Valerie Moss, CUNA’s Director of Compliance Information. “Based on what we’re hearing, credit unions should assume that registration will occur the first half of 2011. And remember, employees engaged in home equity lending and refinancings are covered by SAFE,” she added. Moss also noted that participants in CUNA’s audio-conference raised some practical issues that CUNA will pursue with NCUA, such as how to report if more than one registered person is involved in a mortgage loan decision. “As credit unions review the regulatory requirements, please continue to feed us your operational questions so we can raise them with NCUA,” said Moss. In addition to the SAFE Act update, CUNA staff covered other areas that currently require special attention by credit unions, including:
* Last minutes details credit unions should be sure to take care of before the Regulation Z open-end rules go into effect on July 1; * A brief overview of the new Regulation Z Credit Card Act rules that go into effect on Aug. 22; * A quick rundown of the Federal Reserve Board's clarifications to the Regulations E overdraft rules that are effective July 1 (Aug.15 for accounts opened prior to July 1); * A reminder for credit unions to get ready to start receiving direct disputes from members regarding information in their consumer reports on July 1; * A heads up regarding available information that credit union mortgage lenders should consider during lapses in the National Flood Insurance program (NFIP); * A brief overview of what the garnishment of federal benefit payments requirements might look like; and * An update on the provisions in the financial reform bill that are of interest to credit unions.
For an archived version of the audio conference, use the resource link.

CUNA asks Senate to pass NFIP extension

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WASHINGTON (6/28/10)--Saying that “every day of delay” adds to “confusion and risk for families in the real world,” the Credit Union National Association (CUNA) joined several other associations in asking the Senate to “take immediate action” and pass legislation that would reauthorize and extend the National Flood Insurance Program (NFIP). H.R. 5569, which passed the House of Representatives last Thursday, would reauthorize and extend the NFIP through Sept. 30. In the release, the associations said that while they agreed that the NFIP needs substantial reform, “America’s property owners depend on this important federal program administered with the help of the property casualty insurance industry.” “Since the program expired, those who need insurance can’t get it. Those who have it can’t increase coverage. And anyone trying to buy property that requires federal flood insurance is out of luck — creating yet another disruption in a struggling real estate market,” the letter added. Members of Congress have tried several times to extend the NFIP and other government-backed programs, with no luck. The NFIP has been lapsed since June 1. The NFIP is vital to many credit unions, as the mortgages they write for properties in a floodplain are required to have flood insurance, CUNA said. The NCUA last week provided credit unions with guidance on how best to deal with the lapse, stating that credit unions may continue to make loans without flood insurance. (See related story: NCUA guides CUs through NFIP lapse) For the full letter, use the resource link.

CUNA disappointed by reg reform bills interchange treatment

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WASHINGTON (6/28/10)--Credit Union National Association (CUNA) President/CEO Dan Mica on Friday said that he was “disappointed” that House and Senate regulatory reform conferees allowed legislation that would enable government intervention in interchange fee negotiations to remain in the final version of financial regulatory reform. “Although the amendment limiting interchange for credit unions remains in the final bill, credit unions did an extraordinary job in not only expressing the shortcomings of the amendment, but also making changes to it,” Mica added Changes made to the legislation include a requirement that would force the Federal Reserve to account for fraud prevention costs when it determines interchange fees, an exemption for government pre-paid cards, and the removal of a provision that would have allowed merchants to discount between payment card networks. A provision that will force merchants that accept payment from one payment network to accept all debit cards that operate under that network was also added. The House-Senate conference committee staff is expected to release a final report early this week, and the final version of the reform bill should move on to the House and Senate floors this week. "The major upheaval this legislation will cause to the present debit interchange system contravenes the broader reform bill's stated goal of consumer protection," Mica noted. "Millions of consumers will very likely face higher fees as credit unions cope with the lost interchange revenue that has helped underwrite the cost of their card services," he added. CUNA, along with credit unions, will continue urging lawmakers to oppose the final reform bill as long as it contains costly revisions to the current system for processing debit payments. “If the interchange provision does become law, our efforts will turn to the rulemaking process, once it begins with the Federal Reserve, where we intend to fully represent the interests and concerns of credit unions,” Mica said. CUNA also plans to focus its efforts on ensuring that the carveout, which exempts credit unions and other financial institutions with under $10 billion in assets from the interchange restrictions, works under the Fed’s rule. The Fed will also be required to report on the impact that its interchange rules are having on credit unions and other small issuers in its yearly report to Congress. Another victory for credit unions is the inclusion of the National Credit Union Administration chairman on a proposed financial stability oversight council. The broader financial reform bill would also create a new Consumer Financial Protection Bureau within the Federal Reserve. Credit unions with assets under $10 billion would not be examined by the new bureau. Late in negotiations, conferees also agreed to exempt auto dealers from the bureau's purview.