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NCUA seeks 72.5M in payments from CUMIS

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ALEXANDRIA, Va. (8/26/11)--The National Credit Union Administration (NCUA) has enlisted the aid of federal courts as it seeks to recoup $72.5 million in fidelity bonds from CUMIS Insurance Society Inc. The NCUA’s action against CUMIS was filed in the U.S. District Court for the Northern District of Ohio on Aug. 18. CUMIS provides employee fidelity insurance to credit unions, and is also a part of CUNA Mutual Group. The insurer provided insurance to the credit union in the form of a fidelity bond. The NCUA filed a $72.5 million loss claim with the insurer last October after St. Paul Croatian FCU, which held $238.8 million in funds from 5,400 members, was placed into conservatorship and ultimately liquidated. The former-COO of the now defunct credit union, Anthony Raguz, has been charged with issuing more than 1,000 fraudulent loans totaling more than $70 million to about 300 account holders from 2000 to April 2010. Several members also allegedly committed financial fraud in the case. The NCUA's Office of the Inspector General reported last year that fraudulent loans pushed the credit union into liquidation, and the agency said that this liquidation cost the National Credit Union Share Insurance Fund around $170 million in losses. While CUMIS acknowledged that the NCUA filed a proof of loss claim late last year, the insurer later “attempted to rescind the bond based solely on claimed ‘. . . material misrepresentations and concealment of material facts made [by former credit union COO Anthony Raguz] at the time the credit union [i.e. St. Paul] obtained and renewed the fidelity bond.” CUMIS has denied payment to the NCUA due to this recission. However, the agency in its complaint said that it “timely asserted the claims under the Cumis bond” and noted that the insurer is obligated to pay for losses “resulting directly from dishonest acts committed by an ‘employee’ or ‘director’” of an insured firm under Ohio law. CUNA Mutual Group spokesman Phil Tschudy told News Now that "CUNA Mutual's fidelity bond has a $5 million coverage limit. So the amount of money in dispute is a fraction, less than 7%, of the $72.5 million figure included in the proof of loss claim." However, the NCUA in its complaint alleged that the CUMIS bond must be paid off under Ohio law.

New radio spot touts CU help to small biz in Alabama

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WASHINGTON (8/26/11)--In an ad airing on several Alabama radio stations through Sept. 2, Terry McDaniel, owner of McDaniel Service in Florence, Ala., tells of how his credit union has “been there” for his business in the past, and could help his business now if the member business lending (MBL) cap was lifted.
AL MBL Radio Spot

“I need them again, but the Federal government is limiting the amount they can loan me,” McDaniel adds. In the ad, the Credit Union National Association and the League of Southeastern Credit Unions underscore that Alabama credit unions have money to lend and “are ready to help” small businesses in the state and “put Alabama back to work,” but are hindered by the 12.25% of total assets member business lending cap. The ad begins airing today and will run on seven radio stations in Birmingham, Dothan, Florence-Muscle Shoals, Huntsville, Mobile, Montgomery, and Tuscaloosa, Ala., until Sept. 2. Sen. Mark Udall (D-Colo.) has introduced S. 509 in the Senate and Rep. Ed Royce (R-Calif.) has introduced H.R. 1418 in the House. Both bills would increase the MBL cap to 27.5% of assets. CUNA and the leagues have encouraged credit unions and their members in all states to contact their legislators in their home-state offices during the current congressional District Work Break and urge them to support these bills. CUNA estimates that lifting the MBL cap to 27.5% of assets would inject more than $13 billion in new funds into the U.S. economy, creating up to 140,000 new jobs in the first year of the cap lift. These funds would be provided at no cost to taxpayers. For more of CUNA’s MBL cap lift advocacy efforts, use the resource link.

Inside Washington (08/25/2011)

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* WASHINGTON (8/26/11)--An announcement of further asset purchases or “quantitative easing” by the Federal Reserve is unlikely as consumer prices rise and the economy continues to grow, financial industry observers said (Bloomberg Aug. 25). Gasoline costs are 33% higher and the consumer inflation rate has doubled and inflation expectations are higher since a year ago, when Fed Chairman Ben Bernanke gave indications for more easing at an annual Fed Symposium. Expansion of the U.S. economy remains slow, but the Chicago Fed’s index of 85 economic indicators increased in July for a third consecutive month. Those anticipating an announcement of additional easing will be disappointed, said James Dunigan, chief investment officer for PNC Wealth Management … * WASHINGTON (8/26/11)--The Federal Reserve Board has indicated it will allow more comment on Capital One’s acquisition of ING Direct’s U.S. operation (Politico Aug. 25). Consumer advocates say the $9 billion merger would create another “too-big-to-fail” institution similar to those that triggered the financial crisis in 2008. Consumer groups and Rep. Barney Frank (D-Mass.), the ranking member of the House Financial Services Committee, have urged the Fed to extend the public comment period on the deal. Although the comment period ended this week, the Federal Reserve said a decision on the merger was not imminent …

FHA to drop single-family loan limit Oct. 1

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WASHINGTON (8/26/11)--The Federal Housing Administration (FHA) this week announced that the insurance limit for single-family home loan limits in the highest cost areas of the country will be reduced starting on Oct. 1. Loan limits in most other parts of the nation will remain unchanged. The changes, which are required by the Housing and Economic Recovery Act of 2008 (HERA), will lower the “ceiling” for single-property loans in high-cost areas to $625,500 from $729,750. However, the maximum loan limits in Alaska, Hawaii, Guam and the Virgin Islands may stand at 150% of this ceiling “to account for higher costs of construction,” the FHA said. The current single-unit loan floor for areas where housing costs are relatively low will remain unchanged at $271,050, the FHA added. Two unit dwellings will have a floor of $347,000 and a ceiling of $800,775, while three unit dwellings will have a floor of $419,425 and a ceiling of $967,950. The FHA said that four unit dwellings will have a $521,250 floor and a $1,202,925 ceiling. The FHA said that “only a fraction of borrowers living in the nation’s highest cost areas will be impacted by the new loan limits.” The FHA noted that mortgage loan limit and maximum claim amount for FHA-insured reverse mortgages will remain unchanged, holding at $625,500. The loan limit changes are expected to impact borrowers and lenders in 669 counties throughout the nation. The Homeownership Affordability Act of 2011, which was introduced early this month by Sens. Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.), and co-sponsored by Sen. Dianne Feinstein (D-Calif.), would allow the FHA, Fannie Mae, Freddie Mac, and the Veterans Administration (VA) to guarantee mortgages up to $729,750, or 125% of local median prices for single family homes, through Dec. 31, 2013. Loan limits could be reduced by an average of more than $68,000 per county if the higher limit is not extended, the legislators noted. Menendez in a release said that "allowing these limits to expire would be bad medicine for our economy at a time when we need a booster shot," and Isakson added that he is "concerned that failing to extend these limits would make it even more difficult for the average homebuyer get a mortgage and buy a home when credit is already tight." For the FHA release, and more on the loan limit legislation, use the resource links.