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Washington Archive

Washington

CUNA keeps MBL heat on as Obama plans session to talk jobs

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WASHINGTON (9/1/11)--Strengthening small businesses will be at the center of President Barack Obama’s planned economic speech, which is tentatively scheduled to take place next week before a joint session of Congress, and the Credit Union National Association (CUNA) continues to speak out on how expanding credit union member business lending (MBL) authority would help small businesses and the economy at large. The president requested that his speech take place at 8 p.m. ET on Sept. 7, but House Speaker John Boehner (R-Ohio) suggested Obama move the speech to Sept. 8. A Republican presidential candidate debate is set to take place on Sept. 7. Obama previewed portions of his speech in a letter to members of Congress saying he planned to “lay out a series of bipartisan proposals” that can be taken on immediately “to continue to rebuild the American economy by strengthening small businesses.” The proposals will also focus on “helping Americans get back to work, and putting more money in the paychecks of the Middle Class and working Americans, while still reducing our deficit and getting our fiscal house in order,” Obama added. CUNA President/CEO Bill Cheney made the case for increasing the MBL cap this week in an interview on CNN Money, noting that while banks claim there is low demand for small business credit, credit unions have witnessed a 30% increase in their MBLs. Cheney also reached out directly to the president in August, urging Obama in a letter to encourage Congress to pass MBL cap lift legislation in the fall legislative session. "As the economy continues to recover from the financial crisis, Americans need credit unions now more than ever," Cheney wrote. Legislation to allow increased credit union MBL is "job-creation legislation that costs the taxpayers nothing and could help employ over 140,000 Americans in the next year, and many more in years to come," Cheney added. The MBL cap increase would also provide $13 billion in new credit for small businesses in the first year of enactment, according to CUNA figures. Obama also heard the call to lift the cap face to face from The University of Iowa Community CU CEO Jeff Disterhoft. Disterhoft addressed the MBL issue with Obama during a White House Rural Economic Forum at Northeast Iowa Community College in Peosta, Iowa, last month, and he reported that the president “promised to go back to Washington and look further into it." Among many other efforts to promote an MBL cap lift, CUNA will launch its Hike the Hill effort this month, and high on the list of topics that credit unions will discuss with their federal lawmakers are bills pending in the House and Senate that would lift the MBL cap to 27.5% of assets, up from 12.25%. About 450 credit union advocates are expected to visit Capitol Hill lawmakers in September and October alone.

CDFI Fund advisory board sets Sept. 13 meeting

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WASHINGTON (9/1/11)--The Community Development Advisory Board of the U.S. Department of the Treasury's Community Development Financial Institutions (CDFI) Fund will hold its next meeting on Sept. 13 in Washington. The meeting is scheduled to take place between 9 a.m. and 5 p.m. ET, and will be open to the public. Fifty seats are available. However, the CDFI Fund in its release noted that discussions at the meeting would be “limited to Advisory Board members, Department of the Treasury staff, and certain invited guests.” The Advisory Board makes broad policy recommendations to CDFI Fund Director Donna Gambrell, but the CDFI Fund notes that “the granting or denial of any particular application for monetary or non-monetary awards” is not discussed during the meetings. The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. The number of certified CDFIs reached 960 last month, and the fund eclipsed $1 billion in total awards this year. The CDFI Fund has also scheduled a national listening session on its potential CDFI Bond Guarantee Program. The listening session is set to take place on Friday at 12:30 p.m. ET in Newark, N.J. The Credit Union National Association (CUNA) has recommended that credit unions that are designated Community Development Financial Institutions (CDFIs) be eligible for this program, which would provide guarantees on notes that could be used as secondary capital. For more on the CDFI Fund, use the resource link.

Weak economy keeps CU member focus on debts not new loans

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WASHINGTON (9/1/11)--While labor market weakness, a lackluster housing market and stock market jitters are seemingly keeping consumers focused on paying down their debts, the number of loans taken out by credit union members increased for the fourth straight month in July, rising by 0.23%, CUNA Senior Economist Mike Schenk told News Now. The 0.23% uptick in loans is consistent with last month’s numbers. Overall, the increase in loans remains very weak, sticking at a 2.7% annualized, but not seasonally adjusted, rate, Schenk noted in his analysis of July's monthly estimates of credit unions.
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Adjustable-rate mortgages led loan growth in July, increasing by 1.9%, with personal unsecured loans increasing by 0.9% and used-auto loans and credit cards each increasing by 0.7%. New-auto balances, fixed-rate mortgages, and home equity Lines of credit/second mortgages declined. Current economic conditions “are apt to keep many consumers focused on paying down debt rather than acquiring more--and that suggests that annual loan increases will continue to be far below those normally seen in economic recoveries,” Schenk said, adding that CUNA’s baseline forecast for credit union loan growth in 2011 remains at 2%. Savings growth was even slower than loan growth, totaling 0.13% during the month. The fastest growth was seen in individual retirement accounts (IRAs) (4.1%); share drafts (2.1%) and money market accounts (0.48%), but regular share and certificate account balances declined in the month.
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“Because loans grew and savings declined credit union loan-to-savings ratios increased slightly from 69.6% to 69.7% --the third consecutive increase,” Schenk added. “ Nevertheless, credit unions continue to reflect large liquidity buffers and their large and low-yielding investment portfolios are likely to continue to put a significant drag on earnings,” he said. Credit union asset quality improved slightly for the third consecutive month, and Schenk said that “slowly improving labor markets should help to buoy incomes and fuel further improvement in asset quality as the tepid but sustainable U.S. economic recovery continues.” Credit unions’ 60-plus-day delinquency rate declined to 1.56% in July, down from 1.6% in June. That rate stood at 1.75% at the start of 2011, and 1.79% in July 2010. The movement’s overall capital-to-asset ratio increased for the fourth consecutive month, totaling 10.19% at the end of July. Credit unions’ capital-to-asset ratio totaled 9.97% as of Dec. 31, 2010, and was 9.9% in July of 2010.

Ryan Donovan promoted as CUNAs svp of legislative affairs

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WASHINGTON (9/1/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney announced Wednesday the promotion of Ryan Donovan to senior vice president, legislative affairs, effective today. Donovan, who joined CUNA in September 2007, has previously been the association’s vice president of legislative affairs. In his new position, he will lead CUNA’s on-the-ground lobbying team and manage CUNA’s legislative affairs department. “Ryan is an outstanding lobbyist and advocate for credit unions, well-known and highly regarded on Capitol Hill,” said Cheney. “CUNA continues to benefit enormously from his experience, energy and insight.” Before joining CUNA, Donovan was director of federal government affairs for the California and Nevada Credit Union Leagues, establishing the league’s office in Washington. On Capitol Hill, Donovan has worked for Rep. Brad Sherman (D-Calif.), handling his financial services committee issues before becoming legislative director and then chief of staff. Donovan first came to Washington to work for then-House Democratic leader Richard Gephardt (D-Mo). Donovan’s promotion comes after Cheney in July announced he was expanding the Washington office roles of John Magill, who was named executive vice president of government affairs and special assistant to the president, and Susan Newton, who became executive vice president of system relations. Magill and Newton also assume their new duties today. Donovan will reporting to Magill, who also took note of his accomplishments and abilities. “Ryan has been deeply involved and has had a major impact on virtually every legislative issue we’ve taken on, and we have been in some very tough battles,” Magill said. “Credit unions are in a better position as a direct result of his tireless efforts and legislative skill.” Earlier this year, CEO Update newsletter named Donovan one of 2011's top lobbyists. CEO Update is a widely read, twice-monthly print publication for executives in the association and non-profit fields.

Inside Washington (08/31/2011)

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* WASHINGTON (9/1/11)--The U.S. Treasury Department announced Wednesday that it has awarded an additional 50 community banks across the country a total of $767 million as part of the newest wave of funding provided through the Small Business Lending Fund (SBLF), established as part of the Small Business Jobs Act. With this newest allotment of funds, a total of 130 community banks have now received more than $1.8 billion in SBLF funding. Additional SBLF funding announcements will be made on a rolling basis in the weeks ahead … * WASHINGTON (9/1/11)--Federal Reserve officials considered possible actions to stabilize financial markets if Congress did not lift the debt ceiling by its Aug. 2 deadline, according to minutes released Tuesday by the Federal Open Market Committee of its Aug. 9 meeting. Officials met via videoconferencing Aug. 1 (American Banker Aug. 31). The Fed did not specify what actions it would have taken to stabilize markets. Meeting participants agreed any response would have to be considered against unfolding events. “With respect to potential policy actions, participants agreed that the appropriate response would depend importantly on the actual conditions in markets and should generally consist of standard operations,” the minutes said …

Fannie Mae settles CU mortgage lawsuits

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WASHINGTON (8/31/11)--Fannie Mae has settled a pair of lawsuits brought by Medford, N.Y.'s Suffolk FCU and Dover, N.J.-based Picatinny FCU after those credit unions sought compensation for mortgages that were improperly sold to the government-sponsored mortgage firm. The terms of the settlements were not disclosed. Fannie Mae is also involved in separate cases brought by Garden City Park, N.Y.'s Sperry Associates FCU and Nutley, N.J.'s Proponent FCU, and those cases are still being litigated. Both cases are still in the discovery phase of compiling information. These and over 20 credit unions incurred a combined $160 million in losses when mortgage servicer CU National Mortgage fraudulently sold 189 of their mortgage loans to Fannie Mae and pocketed the money. The fraudulent sales were made between 2004 and 2009. Suffolk, Sperry Associates and Proponent are seeking a combined $60 million in damages from Fannie Mae. CU National Mortgage sold 58 of Picatinny’s mortgages, resulting in $14 million in losses, and Suffolk lost nearly $42.4 million when its mortgages were sold to Fannie Mae. CU National Mortgage and its parent U.S. Mortgage, based in Pine Brook, N.J., listed more than $200 million in debts to Fannie Mae and 19 credit unions when it filed for Chapter 11 bankruptcy in early 2009. Michael McGrath, president of the former mortgage companies, pleaded guilty in 2009 to stealing $139.6 million from 28 credit unions, and is currently serving a 14 year sentence. McGrath fraudulently conveyed the mortgages to Fannie Mae by forging allonges that he endorsed in his own name. His endorsement also included the initials "AVP," which may have been taken to mean associate vice president. An “allonge” is an attachment to a note that a party can add on for “endorsements,” such as signatures for transferring the note. One can make endorsements on the note itself, but McGrath used allonges instead to help hide his fraud. While CU National Mortgage's non-fraudulent transfers to Fannie Mae were made using Fannie Mae's electronic mortgage note transfer system, the fraudulent transfers were made using paper copies, with the attached allonges. The credit unions and Fannie Mae accused each other of failing to sufficiently scrutinize McGrath before the fraudulent mortgage transactions were made. Fannie Mae claimed that-–because of its size-–it was “commercially reasonable” for Fannie Mae not to conduct due diligence regarding the fraudulent transactions, and also that the credit unions should have warned the mortgage firm that McGrath, who was a member of a Fannie Mae advisory panel, was not an associate vice president of over two dozen different credit unions.

Cheney touts CU issues on iCNN Moneyi

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WASHINGTON (8/31/11)--In a CNN Money interview segment titled “Credit unions keep perks, banks won't,” Credit Union National Association (CUNA) President/CEO Bill Cheney underscored the differences between credit unions and banks and why credit unions continue to offer consumers the best deal in financial services. Anchor Poppy Harlow, noting that banks “across the board” are raising fees and cutting benefits to customers while credit unions are not doing the same to members, asked Cheney if the credit union approach is “a sustainable model.” The CUNA CEO answered “absolutely,” and explained that while banks are driven to deliver profits to stockholders, credit unions are responsible to their member-owners. Noting that he headed a credit union before he became a trade group CEO, Cheney said he knows first-hand that a credit union will do anything it can to help its members, especially in hard economic times. Cheney dispelled a notion that banks are hindered from providing consumer benefits because of their high capital standards. Cheney explained that, in fact, credit unions have higher capital requirements than banks, and fewer avenues to fulfill those requirements. While banks have alternative sources of capital, credit unions must rely on retained earnings to meet their higher requirements. Asked about the impact on credit unions of the Dodd-Frank financial reform law, Cheney responded that CUNA is concerned about and working to reduce the regulatory burden on credit unions. “We’ve been very vocal with the CFPB (Consumer Financial Protection Bureau) and leaders here in Washington,” he said. “If you want to simplify, you have to peel back the onion and get rid of old and conflicting regulations…so we’re not simply layering new regulation on top of old.” Also during the segment, Cheney made the case for an increase in the credit union member business lending (MBL) cap. He noted that, while banks claim there is low demand for small business credit, credit unions have witnessed a 30% increase in their MBLs. Cheney warned, however, that credit unions that are most successful in small business lending are coming up against an arbitrary MBL cap set in 1998. Cheney touted bills currently pending in the House and Senate that would increase the MBL cap to 27.5% of assets, up from 12.25%. If the higher cap becomes law, Cheney noted, credit unions—at no cost to the taxpayer—could infuse more than $13 billion in new funds into the U.S. economy and create up to 140,000 new jobs in the first year. Cheney concluded the interview by emphasizing that “credit unions really are a better deal.” Use the resource link below, to access the CNN Money video clip.

Compliance New employee rights notices needed soon

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WASHINGTON (8/31/11)--The majority of private-sector employers will need to publicly post notices of employee rights as detailed under the National Labor Relations Act (NLRA) in their offices beginning on Nov. 14 under a new rule announced by the National Labor Relations Board (NLRB) Tuesday. Although there was significant opposition from the business community, the NLRB finalized the rule, noting that “many employees protected by the NLRA are unaware of their rights under the statute” and adding that the rule “will increase knowledge of the NLRA among employees, in order to better enable the exercise of rights under the statute.” The new notice is similar to one required by the U.S. Department of Labor (DOL) for federal contractors. The NLRA notice must be posted “in conspicuous places where they are readily seen by employees, including all places where notices to employees concerning personnel rules or policies are customarily posted,” and a similar notice must be posted online in some cases. Translated versions of the poster are required in workplaces where 20% or more of employees speak a language other than English. Credit Union National Association (CUNA) compliance staff noted that since credit unions that are not specifically excluded from the NLRA’s definition of “employer” they will be subject to the rules. However, the notification requirement would not apply to agricultural, railroad and airline workplaces, and U.S. Postal Service outlets are also exempt from the requirements for the time being. CUNA noted that credit unions that already comply with DOL posting requirements will be in compliance with the new NLRB rule. For more on the new requirement, use the resource link.

Rep. Sherman CU issues high on priorities list

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WASHINGTON (8/31/11)--In a message sent to credit union representatives this week, Rep. Brad Sherman (D-Calif.) expressed his continued support for credit unions’ legislative priorities, including maintaining their not-for-profit tax status, relieving regulatory burdens, increasing the member business lending (MBL) cap, and easing access to supplemental capital. Sherman highlighted his continued support for the Small Business Lending Enhancement Act of 2011 (H.R. 1418), which would, in part, lift the MBL cap to 27.5% of assets, up from the current 12.25% limit. He underscored that the U.S. economy “needs more business loans, particularly to small businesses,” and that credit union representatives in his district tell him they “are ready to expand their member business lending.” He cited Credit Union National Association (CUNA) projections that the MBL cap increase 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. Increasing the credit union member business lending cap would not require an outlay of taxpayer money, CUNA said. Legislation to increase credit union MBL authority has been introduced both in the House and Senate, and Sherman pledged to “continue advocating for the government to simply get out of the way” of credit unions that are “eager to put their capital to work to help sustain” economic recovery. The legislator also said that credit unions “are too heavily regulated and unnecessarily restricted in the services that they may offer,” and added that he will continue his work to “ease the regulatory burden and other constraints on credit unions” to “enhance their ability to serve their members and their communities.” The National Credit Union Administration (NCUA) must “submit a proposal to congress that would allow credit unions to raise capital from alternative sources,” Sherman added, saying that credit unions “must be part of the discussion” as new capital standards for other financial institutions are developed. Sherman in his message also said he would “continue to work to preserve the credit union charter and will vigorously resist efforts to tax credit unions,” adding that he strongly believes “the not-for-profit, cooperative nature of credit unions and the services they provide to their members and communities amply justify their continued tax-exempt status.” “Credit unions have a special mission, and they play a unique role in meeting the credit and savings needs of consumers – especially those persons with low and moderate income,” he noted. For the full message to credit unions, use the resource link.

Inside Washington (08/30/2011)

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* WASHINGTON (8/31/11)--President Barack Obama will nominate Alan B. Krueger as a member of the Council of Economic Advisers (CEA). If Krueger is confirmed, he will be designated as chairman of the council, the White House said. Krueger is the Bendheim Professor of Economics and Public Affairs at Princeton University, where he has held faculty appointments in the Economics Department and Woodrow Wilson School since 1987. He is also the founding director of the Princeton University Survey Research Center. Krueger previously served as assistant secretary for economic policy and chief economist at the U.S. Department of the Treasury (2009-10) and as chief economist at the U.S. Department of Labor (1994-95). He was the chief economist for the National Council on Economic Education from 2003 to 2009 … * WASHINGTON (8/31/11)--A consumer credit-card complaint website created by the Consumer Financial Protection Bureau is not routing complaints properly. Jen Howard, a CFPB spokesperson, said some card issuers did not receive complaints filed through the agency’s website because of “browser compatibility issues” (Bloomberg Aug. 30). Howard said the CFPB will resolve the issue within weeks, though she did not say how many complaints were held up. The complaint system, required by the Dodd-Frank Act, was launched on July 21. Banks are concerned they will be blamed for unanswered complaints, said Richard Hunt, president of the Consumer Bankers Association …

NCUA approves new NGN committee technical changes

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ALEXANDRIA, Va. (8/30/11)--Management and oversight of the National Credit Union Administration’s (NCUA) NCUA Guaranteed Notes (NGN) program will soon be handled by the NGN Securities Management and Oversight Committee, which was approved by NCUA board members during Monday’s August board meeting. The committee’s duties include monitoring the performance of the NGNs and their underlying collateral, ensuring the program’s compliance with legal and accounting requirements, and maintaining the NGN Program’s transparency to credit unions and other key stakeholders. The agency said the new committee is being established to minimize the NGN Program’s long-term costs. A total of $200,000 in 2011 funding was approved to set up the committee, which will consist of the directors of the NCUA’s Asset Management and Assistance Center, Office of Examination and Insurance, and Office of the Chief Financial Officer. Five NCUA staff members and various outside consultants will also work with the committee. NCUA Deputy Executive Director Larry Fazio will lead the committee at first. A total of $12.3 million will be spent on the committee in 2012, with $1.3 million going to cover employee pay and benefits costs, $6.5 million paying for consulting fees, and $2.75 million being used for vendor payments. A total of $815,000 will be spent on software and $730,000 will cover legal expenses. The agency stressed that the committee will not need approval for new funding, and that a separate assessment will not be needed to fund the group. All costs will be handled through the Temporary Corporate Credit Union Stabilization Fund, and committee funding has already been figured into the NCUA’s corporate resolution cost estimates. The NCUA said that the committee will perform its work for a minimum of 10 years. The agency during Monday’s august board meeting also proposed amendments and clarifying changes to its corporate credit union rule, Part 704. The proposed changes, which will be open for public comment for 30 days, amend NCUA regulations to exclude Central Liquidity Facility (CLF) stock subscriptions from the definition of net assets. The proposal also clarifies that violations of the weighted average life of a corporate’s assets are not subject to capital category reclassification. The proposal would require the preparation of investment action plans for such violations. These changes were made to “relieve regulatory burden where warranted” and ease access to liquidity, the NCUA said. For more on the NCUA’s August board meeting, use the resource link.

Corp. assessment set at 25 bp 2012 NCUSIF premium unlikely

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ALEXANDRIA, Va. (8/30/11)— Credit Union National Association (CUNA) President/CEO Bill Cheney said that the National Credit Union Administration’s (NCUA) 25 basis point (bp) Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment “came as no surprise” to credit unions, but nonetheless “represents a substantial hit” to their otherwise improving bottom lines. However, the news was not all bad for credit unions on Monday, as the agency also said that there is “no anticipated need” for a National Credit Union Share Insurance Fund (NCUSIF) premium to be charged in 2011, and an NCUSIF premium “will not be necessary in 2012” if the number of credit union failures maintains its current pace. NCUA board members during the NCUA’s August meeting approved a 2011 TCCUSF assessment of 25 bp of member shares as of the end of June, which would bring in $1.96 billion in funds to help cover the costs of corporate credit union stabilization. The 2011 TCCUSF assessment payment is due Sept. 27, and the NCUA said that credit unions should expense the assessment in September and report the full expense on their Sept. 30 call reports. Revenues from the 2011 TCCUSF assessment, along with money that the agency borrowed from the U.S. Treasury, will be used to pay off maturing medium-term notes principal and interest, the NCUA said. As a result of the TCCUSF assessment, about 800 credit unions will go from reporting positive net income to having net negative income. The net worth of 81 credit unions will fall below 7%, and 24 credit unions may have to prepare a prompt corrective action net worth restoration plan as a result of the assessment. However, on average, the net worth ratio of federally insured credit unions will drop only from 10.14% to 9.99%, the NCUA said. NCUA Chairman Debbie Matz said that the agency is mindful of the burden that these assessments place on credit unions, and NCUA staff said that while some credit unions would be negatively impacted, the NCUA felt it better to impose this size of assessment in 2011 when most credit unions are in a position to absorb the hit. The NCUA board emphasized that examiners will be directed to be flexible in determining the real safety and soundness impact of this corporate assessment on individual credit unions. NCUSIF and TCCUSF assessments for 2012 would likely total between 8 and 18 bp, the NCUA said. NCUA staff estimated that the 2012 TCCUSF assessment would need to collect $700 million, and anticipated an assessment of around 9 bp. NCUA analysts forecast that a 2012 NCSUIF assessment, if needed, would be a maximum of 7 bp, bringing in $607 million in NCUSIF funding. NCUA staff stressed that this projection is based on its most pessimistic estimate of NCUSIF losses. The total cost of remaining assessments has been reduced to between $1.9 billion and $6.2 billion after asset management firm BlackRock examined the financial status of the corporate stabilization fund, legacy assets held by the NCUA, and other data. The previous NCUA estimate for total corporate resolution assessments charged after 2011 was between $5 billion and $7.2 billion. BlackRock will also produce quarterly models detailing losses and cash flows of securitized assets held in NCUA Guaranteed Notes, and the agency said that these quarterly models would soon be reported on the NCUA’s homepage. For more on the NCUA board meeting, use the resource link.

NCUA addresses CU disruptions caused by Irene

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ALEXANDRIA, Va. (8/30/11)—In response to Hurricane Irene’s drawn-out crawl up the east coast over the weekend, the National Credit Union Administration (NCUA) has activated its disaster relief policy, and also has assured credit union members of the safety of their federally insured shares. The agency encouraged credit unions to do what they prudently can to recognize financial disruptions for both individuals and businesses in their areas. Actions to ensure credit is available or to adjust or alter terms on existing loans for customers affected by the storm may include:
* Extending the terms of loan repayments; * Restructuring a borrower’s debt obligations; and * Easing credit terms for new loans to certain borrowers, consistent with prudent practices.
The agency alert also reminds federal credit unions that they may also provide assistance to other credit unions, their members, and non-members in areas affected by the disaster, under certain conditions. They include:
* Emergency financial services for non-members, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals. These services can be provided under the authority to engage in charitable activities. Federal credit unions providing services on this charitable basis may not impose charges for services that exceed their direct costs; and, * Services to other credit unions that a credit union is authorized to perform for its own members or as part of its operations. This activity is part of a federal credit union’s incidental powers, so it may impose charges for these services.
The NCUA also reminded that its National Credit Union Share Insurance Fund (NCUSIF) is always backed by the full faith and credit of the U.S. government. The agency said that under its disaster policy, it will, where necessary, guarantee lines of credit for credit unions through the NCUSIF. The agency notice assured that its examiners will survey all credit unions and reschedule routine examinations where necessary. The agency’s examiners will also remain in close contact with credit unions to offer advice and assistance. “It is important for credit unions to report their status to NCUA in times such as this,” the agency reminded. Use the resource link below to read more of the NCUA’s disaster statement. Also, see related stories in this issue of News Now: CU movement takes stock of Irene's impact and Southeastern CUs reporting power outages from Irene.

Former CU worker in Mo. subject of prohibition order

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ALEXANDRIA, Va. (8/30/11)—Sandra Ann Jeffers, a former employee of P.C. Glassworks CU, in Sedalia, Mo. who has been convicted of embezzlement, has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA). Jeffers was sentenced to six months in prison, three years of supervised probation and ordered to pay restitution in the amount of $42,838.78, according to an NCUA prohibition order released Monday. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link below to access NCUA enforcement orders online.

Inside Washington (08/29/2011)

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* WASHINGTON (8/30/11)--The Government National Mortgage Association announced Friday it will expand the parameters for loans to be repurchased from its trusts. They will include loans that have successfully completed a three-month trial payment period. The move was made to support the loss mitigation efforts of the Department of Veterans Affairs, Rural Development, and the Office of Public and Indian Housing, Ginnie Mae said. Modified loans that have successfully completed the modification process according to the insuring agencies’ requirements and have been permanently modified may be re-pooled. To be eligible for re-pooling, the permanently modified loan must be current as of the issuance date of the related security … * WASHINGTON (8/30/11)--The Federal Reserve Board will hold three public meetings on Capital One proposed acquisition of ING Direct, the Fed announced Friday. The Fed also announced that it is extending the period for public comment on the proposal through Oct. 12. The meetings will be held Sept. 20 in Washington, D.C., Sept. 27 in Chicago, and Oct. 5 in San Francisco. Lawmakers, including Rep. Barney Frank (D-Mass.), the lead Democrat on the House Financial Services Committee, had called for further exploration of the deal, which consumer advocates say could create another large bank whose failure could disrupt the financial system (News Now Aug. 19.) The original comment period expired Aug. 22 … * WASHINGTON (8/30/11)--A new Federal Reserve Board report disputes the claim that federal housing policy, embodied by the Community Reinvestment Act (CRA) and the affordable housing goals of the government sponsored enterprises (GSEs), may have caused the subprime crisis. The report, “The Subprime Crisis: Is Government Housing Policy to Blame?” was written by senior Fed economists Robert B. Avery and Kenneth P. Brevoort. “We find little evidence that either the CRA or the GSE goals played a significant role in the subprime crisis,” the report says. “Our lender tests indicate that areas disproportionately served by lenders covered by the CRA experienced lower delinquency rates and less risky lending. Similarly, the threshold tests show no evidence that either program had a significantly negative effect on outcomes.” Researchers compared mortgages between CRA-covered and non-CRA-covered institutions. It also compared certain geographic areas known to benefit from the CRA and GSEs housing goals with other areas. In both tests, no link was found between the two initiatives and higher proportions of troubled loans … * WASHINGTON (8/30/11)--New York Attorney General Eric Schneiderman has been removed from the negotiations by several states’ attorneys general with the largest mortgage servicers, raising doubts about a possible settlement. Andrew Sandler, a partner with BuckleySandler LLP, said state attorneys general are split in the negotiations American Banker Aug. 29). Without New York--and possibly other states not participating in a settlement--any deal has considerably less value to servicers, Sandler said. New York was among the states particularly hard hit by foreclosures. Any settlement that does not include New York would likely be much lower. The attorneys general are already considering settlement options that do not include New York …

NEW NCUA addresses CU disruptions caused by Irene

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ALEXANDRIA, Va. (8/30/11)—In response to Hurricane Irene’s drawn-out crawl up the east coast over the weekend, the National Credit Union Administration (NCUA) has activated its disaster relief policy, and also has assured credit union members of the safety of their federally insured shares. The agency encouraged credit unions to do what they prudently can to recognize financial disruptions for both individuals and businesses in their areas. Actions to ensure credit is available or to adjust or alter terms on existing loans for customers affected by the storm may include:
* Extending the terms of loan repayments; * Restructuring a borrower’s debt obligations; and * Easing credit terms for new loans to certain borrowers, consistent with prudent practices.
The agency alert also reminds federal credit unions that they may also provide assistance to other credit unions, their members, and non-members in areas affected by the disaster, under certain conditions. They include:
* Emergency financial services for non-members, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals. These services can be provided under the authority to engage in charitable activities. Federal credit unions providing services on this charitable basis may not impose charges for services that exceed their direct costs; and, * Services to other credit unions that a credit union is authorized to perform for its own members or as part of its operations. This activity is part of a federal credit union’s incidental powers, so it may impose charges for these services.
The NCUA also reminded that its National Credit Union Share Insurance Fund (NCUSIF) is always backed by the full faith and credit of the U.S. government. The agency said that under its disaster policy, it will, where necessary, guarantee lines of credit for credit unions through the NCUSIF. The agency notice assured that its examiners will survey all credit unions and reschedule routine examinations where necessary. The agency’s examiners will also remain in close contact with credit unions to offer advice and assistance. “It is important for credit unions to report their status to NCUA in times such as this,” the agency reminded. Use the resource link below to read more of the NCUA’s disaster statement.

NEW NCUA votes to assess 25bp for corporate fund

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ALEXANDRIA, Va. (8/29/11 UPDATED: 2:25 P.M. ET)--Credit unions will be assessed 25 basis points (bp) of their total insured shares to help cover corporate credit union stabilization costs, the National Credit Union Administration voted today. The agency expects it to bring $1.96 billion into the fund. The NCUA also noted that there will not be a National Credit Union Share Insurance Fund premium assessed this year. The 2011 Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment was approved at the NCUA’s board meeting that started at 1 p.m. (ET). Payment is due Sept. 27. NCUA Deputy Executive Director Larry Fazio reported that the total remaining cost of the corporate resolution has been recalculated, with a new estimate lowering those costs to between $3.9 and $8.2 billion. Fazio earlier this year said the agency would have to charge between $7 billion and $9 billion in future assessments to pay for the remaining losses from troubled assets at corporates. He added, however, that he could not predict how long the NCUA would need to continue charging TCCUSF assessments. At the meeting today, the NCUA said it will soon provide quarterly reports on the loss projections through a new webpage on its website. Credit Union National Association (CUNA) Chief Economist Bill Hampel said the agency would likely need to collect about $1 billion a year until the full costs of corporate stabilization are paid off. That would represent an assessment next year of around 12 bp of insured shares. At the the NCUA’s August meeting today the three-member board also approved a 30-day comment period for proposed technical changes related to Part 704 on corporate credit unions, as well as maintenance of the NCUA Guaranteed Notes (NGNs). See tomorrow’s News Now for more.

TCCUSF assessment is likely 25 bp

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ALEXANDRIA, Va. (8/29/11)--The National Credit Union Administration’s (NCUA) 2011 Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment, which is set to be announced at an NCUA board meeting later today, will likely be around 25 basis points (bp) of total insured shares, Credit Union National Association (CUNA) Chief Economist Bill Hampel has said. The 25 bp assessment, which would be consistent with prior NCUA assessment projections, would bring in around $2 billion in revenue. NCUA Deputy Executive Director Larry Fazio earlier this year said the agency would need to charge between $7 billion and $9 billion in future assessments to pay for the remaining losses from troubled assets at corporates, and added that he could not predict how long the NCUA would need to continue charging TCCUSF assessments. Hampel said after this year’s $2 billion assessment, the agency is likely to collect about $1 billion a year until the full costs of corporate stabilization are paid off. That would represent an assessment next year of around 12 bp of insured shares. The agency has not yet said whether an NCUSIF assessment will be charged this year. However agency officials have indicated that a premium this year is unlikely. Hampel has predicted that because of the gradually improving condition of troubled credit unions and the substantial funding of NCUSIF’s reserves, a premium is unlikely for the foreseeable future. The NCUSIF held $1.2 billion in reserves as of June, and NCUA board member Gigi Hyland this summer suggested that the agency could consider lowering its NCUSIF reserve level. The NCUA's Office of Examination and Insurance was scheduled to complete an analysis of the NCUSIF's reserve levels earlier this summer. The condition of the Federal Deposit Insurance Corp.’s (FDIC) Bank Insurance Fund has also improved, leading some banks to call for a return of their prepaid premium assessments for 2010 through 2012. However, Hampel said those prepayments were for liquidity rather than equity reasons. He added, “because of FDIC’s new policy to increase the Bank Insurance Fund to at least 2% of insured deposits, banks are likely to see FDIC premiums for at least a decade.” The agency at today’s meeting will also address a proposed rule related to Part 704 on corporate credit unions and discuss maintenance of the NCUA Guaranteed Notes (NGNs).

Two CU CEOs appointed to Fed district panel on community depository institutions

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SAN FRANCISCO, Calif. (8/29/11)--The Federal Reserve Bank of San Francisco last week appointed Advantis CU, Milwaukie, Oregon, president/CEO Ronald Barrick as vice chairman of its 12th District Community Depository Institutions Advisory Council (CDIAC), and named Utah First FCU, Salt Lake City, Utah, president/CEO Darin Moody as the newest member of the CDIAC. Moody will serve a three-year term on the advisory council. His credit union, Utah First, holds around $240 million in assets from more than 21,000 members. Vice chairman Barrick’s credit union, Advantis CU, holds around $756 million in assets from 43,500 members. The 12th District CDIAC is one of 12 district bank-based councils. The chairmen from each of these 12 councils serves on the Fed’s larger CDIAC, which meets twice a year in Washington, D.C. and provides the Fed with input on the economy, lending conditions, and other issues. The Fed’s CDIAC will replace the Thrift Institutions Advisory Council, which was established by the Fed in 1980 and advised the Fed on thrift institutions, mortgage finance, and regulations. The 12th district CDIAC is chaired by John Evans, Jr., CEO of Burley, Idaho-based DL Evans Bank. The other members of the 12th district CDIAC are:
*William Castle, President/CEO of Klamath Falls, Oregon’s South Valley Bank and Trust; *James Christensen, President/CEO of Mesa, Arizona’s Gateway Commercial Bank; *Daniel Doyle, President/CEO of Fresno, California’s Central Valley Community Bank; *Constance Lau, Chairman of Honolulu, Hawaii’s American Savings Bank; *Arvind Menon, President/CEO of Las Vegas, Nevada’s Meadows Bank; and *James Woolwine, Chairman of San Francisco, California’s Presidio Bank.
For the full Fed release, use the resource link.

NCUA broadens education outreach with bilingual website

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ALEXANDRIA, Va. (8/29/11)--The National Credit Union Administration (NCUA) on Friday released a new version of its MyCreditUnion.gov website, revising its existing online credit union information source to offer a "one-stop toolbox of educational information and personal finance tips” en español. The site can be found at http://espanol.mycreditunion.gov . The NCUA’s lone Hispanic Board Member, Gigi Hyland, said she is “particularly pleased” by the launch of the Spanish-language site, which will provide “critical information for Hispanic consumers to understand the nature of credit unions and the services they offer.” NCUA Board Chairman Debbie Matz added: “Whether it’s a car loan, a mortgage, a credit card, or a short-term alternative loan, smart consumers need to do their financial homework. Now, consumers can do that research in English or in Spanish.” Like the English-language site that was launched earlier this year, the new NCUA site contains background information on the credit union system and tells interested parties how they can start their own credit union. The site also addresses the needs of consumers by helping users locate local credit unions and reminding existing and potential members that up to $250,000 worth of funds placed in a credit union are covered by the NCUA's deposit insurance fund. More general information on key financial concepts like saving, borrowing, managing credit, and obtaining free credit reports are covered by the site, and important pointers for resolving credit union member complaints are also covered. For more on the new NCUA site, use the resource link.

House Financial Services Committee sets Sept. hearings

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WASHINGTON (8/29/11)--A pair of New York, N.Y.-based field hearings on terrorist financing and the mortgage system will kick off a seven-day slate of 11 House Financial Services Committee hearings once Congress returns for its fall work period next week. The first of these hearings will take place when the Oversight and Investigations Subcommittee discusses fighting terrorist financing in the post-9/11 world. That hearing will be held at the National Museum of the American Indian’s George Gustav Heye Center on Sept. 6 at 10 a.m. ET. The committee’s second New York-based hearing will also be held in the Heye Center at 10 a.m. ET on Sept. 7. That hearing, before the Capital Markets and Government Sponsored Enterprises Subcommittee, is entitled “Facilitating Continued Investor Demand in the U.S. Mortgage Market Without a Government Guarantee.” Assorted subcommittee hearings on housing, the impact of the European Union’s debt crisis on U.S. banks, broker-dealers and investment adviser oversight, and combating cybercriminals have been planned. Also on the schedule are:
* A Sept. 13 Domestic Monetary Policy and Technology Subcommittee hearing on H.R. 1098, the Free Competition in Currency Act; * A Sept. 14 Insurance, Housing and Community Opportunity Subcommittee oversight hearing on the Department of Housing and Urban Development’s housing counseling program; * A Sept. 15 committee hearing on potential Securities and Exchange Commission reforms; and * A Sept. 15 International Monetary Policy and Trade Subcommittee hearing on the impact of multi-lateral development banks on national security.
The committee said that witnesses for these hearings would be announced at later dates. For a release on the committee schedule, use the resource link.

Inside Washington (08/26/2011)

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* WASHINGTON (8/29/11)--JP Morgan Chase & Co. has reached an $88.3 million settlement for alleged violations of international sanctions programs, including Cuban assets control and anti-terrorism regulations (American Banker Aug. 26). The violations include more than 1,700 wire transfers, totaling about $178.5 million, involving Cuban nationals who were processed in apparent violation of the Cuban Assets Control Regulations. The settlement represents the largest civil penalty against a U.S. bank for sanctions violations … * WASHINGTON (8/29/11)--The Obama administration’s plan to ease criteria for refinancing Fannie Mae or Freddie Mac mortgages could strengthen the economy and help troubled homeowners--without requiring the approval of Republicans (American Banker Aug. 26). The plan would allow homeowners to reduce their monthly mortgage payments, giving borrowers more money to spend and possibly stimulating the economy. It also would reduce the chance that taxpayers would have to pay for defaulted mortgage loans. The plan would not necessarily require the approval of Congress, where Obama’s proposals have met opposition from Republicans …

NEW NCUA to send preparedness dispatch to CUs in Irenes path

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ALEXANDRIA, Va, (8/26/11 UPDATE 10:00 a.m. ET)—Federally insured credit unions in 16 states and the District of Columbia, in the potential path of oncoming Hurricane Irene, will receive a National Credit Union Administration (NCUA) Dispatch today urging them to undertake a thorough review of their business continuity and disaster preparedness, response, and recovery plans in preparation for potential incidents related to this storm. The states targeted—perhaps by Irene and therefore by the Dispatch—are Florida—though mostly out of danger at this point--Georgia, South Carolina, North Carolina, Virginia, D.C., Maryland, Delaware, Pennsylvania, New Jersey, New York, Massachusetts, Connecticut, Rhode Island, Maine, New Hamsphsire, and Vermont. The alert is expected to say:
*Credit unions potentially in the path of the storm should take action now to ensure they are prepared for any events resulting from the hurricane. Events related to a hurricane may have a significant effect on the operation of your credit union and your members. * Management’s action should be commensurate with the complexity of the credit union’s operations and focus on minimizing interruptions of service to members and maintaining member confidence if the credit union is affected by the hurricane.
The following lessons, the Dispatch will note, have been learned from previous disasters:
* Implement pre-disaster actions to ensure a constant state of readiness, and take steps to ensure assets and vital records are preserved if an early warning is received and until the event has passed. This includes:
*Ensuring current backup files of critical data are created and the backup files are maintained in a location an appropriate geographic distance from the potential areas Hurricane Irene may impact. *Identify critical staff for continuity of operations and if necessary relocated staff an appropriate geographic distance from the potential areas Hurricane Irene may impact.
* Update the credit union’s NCUA Credit Union Online profile if for some reason there have been any recent contact information changes. *Communicate disaster preparedness and response efforts before, during, and after an emergency to keep members, volunteers, employees, and regulators fully aware of the situation; * Utilize a cross-section of people to develop, test, and implement disaster preparedness and response plans before the hurricane hits or related events occur; * Ensure back-ups are available not only for data but also personnel, worksites, equipment, vendors, and other resources; and *Treat disaster preparedness and response plans as “living documents” and update the plans as circumstances related to this event change.
NCUA says management’s action should be commensurate with the complexity of the credit union’s operations and focus on minimizing interruptions of service to members and maintaining member confidence if the credit union is affected by the hurricane. In the event of a disaster or other emergency, NCUA works with affected credit unions, state credit union organizations, and state regulators to ensure federally insured credit unions are aware of assistance available from NCUA. If necessary, NCUA will reschedule routine examinations of effected credit unions. Depending on the nature of the event, NCUA also encourages an extra level of credit union assistance to impacted members, such as special loan terms and reduced documentation requirements. If necessary, credit unions can reach NCUA at: (703) 518-6300 or NCUA.gov.

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.

CUNA brings CU reg burden and more to CFPB

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WASHINGTON (8/25/11)—While Washington has remained quiet for most of August, the Credit Union National Association (CUNA) has continued its work on the regulatory front, meeting this week to discuss the credit union regulatory burden with Consumer Financial Protection Bureau (CFPB) Assistant Director for Community Banks and Credit Unions Elizabeth Vale.
Click to view larger image CFPB Assistant Director for Community Banks and Credit Unions Elizabeth Vale, right, was joined by CUNA Deputy General Counsel Mary Dunn, CFPB Assistant Director for Card Markets David Silberman, and NCUF Executive Director Bucky Sebastian during a Wednesday meeting in Washington. (CUNA photo)
CUNA Deputy General Counsel Mary Dunn, accompanied by National Credit Union Foundation Executive Director Bucky Sebastian, met with Vale and others at the agency’s offices in Washington. During the discussions, they again called on the CFPB to consider ways to help minimize regulatory burden for credit unions. CUNA continues to advocate that the agency establish an Office of Regulatory Burden Monitoring to help track, consider, and mitigate the cumulative regulatory burden under which credit unions and others must operate. Financial literacy, the pending Truth-in-Lending proposal on the ability of the borrower to repay, as well as issues with the Qualified Residential Mortgage (QRM) rule under the credit risk retention proposal were discussed. Regarding the QRM proposal, CUNA has strongly criticized provisions that would set a 20% minimum down payment threshold for mortgages that would be exempt from certain credit risk retention requirements, stating it could create unnecessary barriers for qualified borrowers, limit credit unions' ability to tailor loans to their members' needs, and could potentially make it difficult for small financial institutions like credit unions to make non-QRM loans. CUNA has also criticized the proposed 20% down payment threshold as “too high,” adding that high minimum down payments alone “are not always a significant factor in reducing defaults compared to underwriting and other mortgage product features." CUNA representatives also participated in a call yesterday with the CFPB on its project to combine Truth-in-Lending and Real Estate Settlement Procedures Act mortgage disclosure forms. In this call, the CFPB indicated that it is continuing its efforts to draft the “right” disclosure for consumers, adding that it is the agency’s intent to ensure that consumers can understand the forms and make informed decisions concerning mortgage lending. CFPB representatives indicated that a fourth round of draft disclosure forms will be issued in September, and that additional roundtable calls would be held to further discuss and revise the forms at this time, as well. Vale continues to encourage credit unions to submit comments and concerns regarding these future drafts via the agency’s Web site as the CFPB moves forward with the disclosure revision process, and CUNA plans to remain an active party in this and other CFPB initiatives. CUNA is also working with credit unions to compile a comprehensive list of credit unions' regulatory burdens to send to federal regulators. For more on this regulatory effort, use the resource link.

FHFA sees quarterly home value slide continue

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WASHINGTON (8/25/11)--U.S. home prices fell by 0.6% between the first and second quarters of 2011, continuing a trend that has seen home prices fall by 5.9% over the past four quarters, the Federal Housing Finance Agency (FHFA) reported. The 0.6% drop is based on the FHFA’s seasonally adjusted purchase-only house price index (HPI), which the FHFA said is calculated from home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages. When adjusted for inflation, the average price of a home fell by 10% over the past year, the FHFA added. Home-price declines were not consistent nationwide, however, as the New England and West South Central regional census divisions saw 0.7% increases in home values. The FHFA said that the Mountain census division saw the largest decline in home values during the quarter, with prices declining by 2.3%. The Mountain region covers Arizona, Colorado, Idaho, New Mexico, Montana, Utah, Nevada and Wyoming. The greater Atlanta, Ga.-area showed the greatest decline in home values among major metropolitan areas, with prices dropping by 14.1% over the past year. Home prices increased by 3.7% in Pittsburgh, Pa., over that same time period. This was the largest increase among top 25 metropolitan areas. A piece of relatively good news came earlier this week when Standard & Poor's Rating Services reduced its estimate of the time needed to sell off the housing market’s “shadow housing inventory” to just under four years. The ratings agency last quarter estimated it would take around 52 months to sell off these homes. S&P defines these so-called “shadow inventory” homes as foreclosed properties, real-estate owned properties, or homes with mortgages that are 90 days or more in arrears. S&P's Diane Westerback added that home prices “are likely to fall further as servicers clear the shadow inventory backlog and the properties under the distressed loans crowd the already weak housing market." (American Banker, August 24). For more from the FHFA, use the resource link.

Native CUs related group awarded CDFI program funds

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WASHINGTON (8/25/11)—Three credit unions and one credit union-affiliated organization were among the recipients of the $11.8 million in funds distributed in the 2011 round of the Community Development Financial Institution (CDFI) Fund’s Native American CDFI Assistance (NACA) Program. The CDFI Fund this year awarded:
* $150,000 in technical assistance grants to Honolulu, Hawaii’s Aloha FCU; * $279,000 in financial assistance to Naalehu, Hawaii’s Ka’u FCU; * $149,560 in technical assistance grants to Kyle, South Dakota’s Lakota FCU Steering Committee; and * $24,950 in technical assistance grants to Honolulu, Hawaii’s The Queens FCU.
The Lakota FCU Steering Committee is working to establish a credit union to serve the more than 40,000 members of the Sioux tribe living on South Dakota’s Pine Ridge Reservation. The Queens FCU was approved as a CDFI Fund-eligible institution last month. The NACA program is designed to encourage the creation and strengthening of certified CDFIs that primarily serve Native American, Alaskan Native and Native Hawaiian communities. NACA funds may be used to finance capital or may be provided to financial institutions in the form of technical assistance grants. CDFI Fund Director Donna Gambrell said that the 2011 awards “clearly demonstrate the successful growth of the Native CDFI movement across the country." A total of 31 Native CDFIs received funding this year, and the NACA program saw an application increase of nearly 50% between 2011 and 2010. The amount of funds requested also increased by nearly 50%. Credit unions represented 13% of the total number of NACA applications for this round, the highest rate of any group of financial institutions. The CDFI Fund has provided more than $58 million in funds through this program since 2004. For more on the 2011 round of the CDFI Fund’s NACA program, use the resource link.

Military CU virtues overlap Fryzel tells DCUC

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NEW YORK, N.Y. (8/25/11)--The shared military and credit union values of discipline, cooperation, and long-term planning are among the reasons that defense credit unions remain some of the most successful credit unions in the country, National Credit Union Administration (NCUA) board member Michael Fryzel said before the Defense Credit Union Council’s annual conference in New York, N.Y. this week. “Credit unions take only enough money to stay in business and thereby assure that they are delivering the best products and services to their members at the lowest possible prices,” he added, also thanking defense credit unions for supporting their communities through hardship and deployment. Military families “should not have to worry about high fees, or high loan rates, or lenders looking to enrich themselves at military families’ expense” while their loved ones are in harm’s way or simply dealing with “the daily struggles of military life,” Fryzel said. While the nation, and credit unions, have faced unprecedented economic issues in recent years, Fryzel said that “we need to remember not a single credit union member lost a penny of insured funds, credit unions took care of their problems without a taxpayer bailout, and every wire transaction, payment and transfer was accomplished without interruption.” Fryzel in his remarks also credited defense-based credit unions, and credit unions in general, for working “with members to help them stay in their homes, hold onto their cars, and keep paying their loans.” For the full speech, use the resource link.

Derivatives a good rate-risk tool CUNA says

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WASHINGTON (8/25/11)—The Credit Union National Association (CUNA) commended the National Credit Union Administration (NCUA) for its plan to allow credit unions to hedge their interest-rate risk (IRR) with financial derivatives saying credit unions need many tools to facilitate their operations as possible, provided they are consistent with vigilant risk management on the credit union’s part and reasonable supervision from regulators. CUNA SVP and Deputy General Counsel Mary Dunn, in CUNA’s comment letter on the agency’s advance notice of proposed rulemaking on derivatives, wrote that CUNA agrees that products, such as derivatives, can allow credit unions to maintain margins on their fixed-rate loan portfolios and, therefore, facilitate credit unions’ ability to continue making loans to their members. “We support this proposal and offer some recommendations concerning issues to be addressed in a subsequent proposed regulation,” Dunn wrote. Currently, the NCUA allows a limited number federal credit unions to engage in derivatives to hedge IRR through an investment pilot program. “Should NCUA choose to regulate in this area, which we would support, we believe the existing investment pilot program, either through a third-party or if the credit union has independent authority, should be grandfathered,” CUNA recommended. (Use the resource link to read CUNA’s more extensive comments regarding the pilot program.) CUNA also suggested the following:
* A final derivatives rules should provide a sufficient number of eligible derivatives counterparties to provide credit unions with greater access to products and more competitive pricing; * Derivative products used by credit unions should include access to over-the-counter (OTC) derivatives that are currently allowed under the investment pilot program. In addition, certain exchange-traded derivatives may be appropriate for well-managed credit unions as long as they comply with any counterparty requirements, as applicable, as addressed in a regulation; * Credit unions should be allowed to seek independent authority to engage in derivatives that do not involve a third-party, subject to meaningful but not overly burdensome qualifications the credit union would be required to meet.
CUNA also recommended that credit union size should not be the determining factor to gauge a credit union’s eligibility to participate in the derivatives markets. “We do not think that small credit unions should be eliminated from participation as access to third-parties and aggregation of smaller contracts could be very beneficial to their operations, when managed properly, and consistent with safety and soundness,” Dunn wrote. Also, the CUNA letter noted that if federally insured, state-chartered credit unions have legal authority for derivatives activities based on state laws and regulations, then NCUA’s regulations should not seek to generally override such authority. A federal preemption should apply only, the CUNA letter suggests, if there are material, demonstrable safety and soundness concerns. In the absence of state requirements, federally insured, state-chartered credit unions should be allowed to conduct their derivatives activities consistent with NCUA’s regulation, according to CUNA. Use the resource link for CUNA’s complete comments.

Inside Washington (08/24/2011)

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* WASHINGTON (8/25/11)--The Federal Deposit Insurance Corp. (FDIC) will face a $10 billion lawsuit brought by the Deutsche Bank National Trust Co. over bad mortgages and the failure of Washington Mutual Bank (Reuters Aug. 24). A federal judge refused the FDIC’s motion to dismiss the lawsuit Tuesday. The Office of Thrift Supervision seized WaMu in September 2008 in the biggest bank failure in U.S. history. After being named receiver of WaMu, the FDIC sold the bank to JPMorgan Chase & Co for $1.9 billion. Deutsche Bank National Trust Co. filed its lawsuit in 2009, claiming the securitized mortgages failed to meet the promised underwriting standards, causing huge losses for investors … * WASHINGTON (8/25/11)--Federal Deposit Insurance Corp. (FDIC) in a lawsuit filed Tuesday alleged that executives at a failed Georgia bank bought two airplanes, built a hangar in which to store them and hired eight private pilots to transport directors and prospective clients to corporate retreats (American Banker Aug. 24). The FDIC is seeking $71 million in losses from the former executives of Silverton Bank. The bank’s failure, the largest in Georgia history, cost the FDIC $386 million. The lawsuit charges Silverton’s board, made up of CEOs or presidents of other community banks, with gross negligence, breach of fiduciary duty and waste … * WASHINGTON (8/25/11)--While loans grew during the second quarter for the first time since 2008, loss provisions continued to drive earnings, and lower revenue indicated that banks remain risk-averse in the midst of the sluggish economy, according to the the Federal Deposit Insurance Corp.’s Quarterly Banking Profile (American Banker Aug. 24). “Recent events have reminded us that the U.S. economy and U.S. banks still face serious challenges ahead,” said Acting FDIC Chairman Martin J. Gruenberg. Overall, banks and thrifts reported a $28.8 billion profit in the second quarter, a $7.9 billion improvement from the $20.9 billion in net income the industry reported for the same period in 2010. It was the eighth consecutive quarter that earnings registered a year-over-year increase. The profits were primarily a result of lower reserves for loan losses. Second-quarter loss provisions totaled $19 billion, less than half the $40.4 billion that insured institutions set aside for losses in the second quarter of 2010. However, net operating revenue (net interest income plus total noninterest income) was $3 billion or 1.8% lower than a year earlier, and realized gains on securities declined by $1.3 billion, or 61.1% …

Inside Washington (08/23/2011)

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* WASHINGTON (8/24/11)--The Consumer Financial Protection Bureau (CFPB) has adopted a policy to disclose all correspondence with the public about pending rules, including communication made outside the comment-letter process. The policy is primarily applicable when the CFPB publishes an interim final rule with a request for comment. The primary way the bureau collects public input is through written comments posted on the public rulemaking docket. Members of the public may also provide oral or written comments directly to CFPB staff or CFPB staff may seek information directly from members of the public outside of the public-comment process. “The CFPB’s policy requires that these ex parte presentations be summarized and disclosed on the public docket,” wrote Leonard Kennedy, the bureau’s general counsel in a blog post Monday describing the new policy. “In this way, members of the public can be informed of the input CFPB is receiving” … * WASHINGTON (8/24/11)--New rules issued by the Federal Reserve would require more stringent disclosures from mutual holding companies (MHCs) wishing waive dividends. Critics say the new rules could hurt mutual companies’ ability to attract investors and raise capital (American Banker Aug. 23). Thrifts are regulated by either the Office of the Comptroller of the Currency or the states, but the Fed oversees their parent companies. Waiving dividends is one of the few attractions MHCs hold for investors, said Richard Lashley, a principal at PL Capital. The restriction mean that MHCs will hold less value for investors, said Eric Luse, a partner at Luse Gorman Pomerenk & Schick … * WASHINGTON (8/24/11)--Two economists being considered by the Obama administration as nominees for the Federal Reserve Board have publicly aired opinions on several financial services issues. Jeremy Stein, a Democrat, is a Harvard University finance professor. Richard Clarida, a Republican, teaches economics and international affairs at Columbia University and is an executive vice president at the money manager PIMCO. Both have held senior positions at the Treasury Department. Stein has been a critic of Basel capital rules, arguing that global regulators gave large banks too much time to comply with new capital and liquidity requirements written in response to the recent financial crisis. Writing with a colleague in a Financial Times op-ed piece, Stein argued banks should be forced to go to the market to raise capital. Stein wrote in a research paper earlier this year that regulators should make it standard practice to give banks incentives to raise incremental dollars of new capital. Clarida’s opinions have focused mainly on the struggling economy. He indicated his support for the Fed’s bond-buying policy known as “quantitative easing.” The Fed may need to purchase more assets if the second round--known as QE2--does not boost growth, Clarida said in a November 2010 Bloomberg News article … * WASHINGTON (8/24/11)--The Federal Reserve Board is proposing a two-year phase-in period for most savings and loan holding companies (SLHCs) to file regulatory reports with the board and an exemption for some SLHCs from initially filing reports (American Banker Aug. 23). Under the Dodd-Frank Act, supervisory and rulemaking authority for SLHCs and their nondepository subsidiaries transferred from the Office of Thrift Supervision to the board on July 21. On Feb. 3, the Federal Reserve Board sought comment its intent to require SLHCs to submit the same reports as bank holding companies, starting March 31, 2012. The Fed said it would take a phased-in approach to allow the SLHCs to develop reporting systems and reduce the risk of data quality concerns. Some thrift holding companies would not initially have to transition to the Fed’s reporting format. Companies with thrift subsidiaries holding less than 5% of a parent's assets and top-tier insurance companies that rely on a different format for submitting financial statements would be exempt …

FDIC-insured institutions earnings up for eighth straight quarter

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WASHINGTON (8/24/11)--The Federal Deposit Insurance Corp. (FDIC) reported Tuesday that earnings for its insured commercial banks and savings institutions for the second quarter of this year improved $7.9 billion from a year ago. The FDIC noted it is the eighth consecutive quarter that earnings registered a year-over-year increase. The FDIC also noted that lower provisions for loan losses were responsible for most of the year-over-year improvement in earnings, as has been the case in each of the past seven quarters. FDIC acting Chairman Martin J. Gruenberg said in a release accompanying the agency’s “Quarterly Banking Profile,” "Banks have continued to make gradual but steady progress in recovering from the financial market turmoil and severe recession that unfolded from 2007 through 2009." The improvement trend, he added, has expanded to include a growing proportion of FDIC-insured institutions. The FDIC report quarterly also notes:
* A majority of FIDC-institutions (60%) reported improvements in their quarterly net income from a year ago. The share of institutions reporting net losses for the quarter fell to 15.2% down from 20.8% a year earlier. The average return on assets (ROA), generally regarded as a basic yardstick of profitability, rose to 0.85%, from 0.63% a year ago; * Second-quarter loss provisions totaled $19 billion, less than half the $40.4 billion that insured institutions set aside for losses in the second quarter of 2010. However, net operating revenue (net interest income plus total noninterest income) was $3 billion (1.8%) lower than a year earlier, and realized gains on securities declined by $1.3 billion (61.1%); and * Asset quality showed further improvement as noncurrent loans and leases (those 90 days or more past due or in nonaccrual status) fell for a fifth consecutive quarter. Insured banks and thrifts charged off $28.8 billion in uncollectible loans during the quarter, down $20.9 billion (42.1%) from a year earlier.
Use the resource link below to read the FDIC's second-quarter 2011 Quarterly Banking Profile.

Visa begins circulating debit interchange fee structure

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WASHINGTON (8/24/11)--After teaming up Friday for a conference call with the Credit Union National Association (CUNA) on debit card interchange fee issues concerning credit unions--and announcing its new rates for institutions with under $10 billion in assets would soon be released--Visa began sending--to credit unions at least--its new debit card fee structure. Earlier last week, MasterCard participated in a CUNA call with credit unions and reiterated its pledge to implement a two-tiered debit interchange fee structure, and added the company currently plans to keep its existing market-based rate structure in place for credit unions and other financial institutions with under $10 billion in assets. Visa appears also to have created a two-tiered system, although some changes have been made to the Visa rates. Credit unions within the Visa network who have not yet received rate information should contact their Visa representative. As background, the Dodd-Frank Wall Street Reform and Consumer Protection Act required the Federal Reserve Board to cap debit interchange fees for issuers with assets of $10 billion or more. The Fed final rule set a cap of 21 cents, and allows an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with Fed-established fraud prevention standards. Credit unions and other institutions with under $10 billion in assets are exempt from the rule.

Rulemaking transparency via websites needs improvement says study

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WASHIINGTON (8/24/11)--Eighty-nine federal agency websites, including that of the National Credit Union Administration (NCUA), were recently ranked in a study of how effective the sponsoring agency is in their efforts to use electronic media, such as websites and social media, to provide information on their rulemaking processes. “Federal Agency Use of Electronic Media in the Rulemaking Process,” by Cary Coglianese of the University of Pennsylvania, was commissioned by the Administrative Conference of the U.S. (ACUS). In a nutshell, the study found that many agencies are missing the mark when it comes to effective electronic communications. For instance, the study found that a mere 14% of the most frequent rule-writing agencies host a Web page that displays all the rules that currently are open for public comment. Only 30%, the study found, contain a link dedicated to soliciting public comments. Also notable according to the study report was that agency websites had infrequent links to Regulations.gov, the government-sponsored online source for regulations from nearly 300 federal agencies, or to other regulatory information. This finding, the report said, shows virtually no improvement from results of an earlier study executed in 2005. Under Coglianese’s ranking system, a federal agency’s electronic media use could earn a maximum score of 49 points across three categories: general characteristics (up to 11 points), specific features related to rulemaking (up to 25 points), and visible use of social media (up to 13 points). A study disclaimer notes: (A) higher score does not necessarily mean a website is “better” in some absolute sense, as some of the coded features may not serve all agencies’ purposes equally well. The U.S. Food and Drug Administration came in with the highest cumulative score with a 27. The NCUA placed seven spots below with a 20. The Credit Union National Association (CUNA) works to recommend best practices to federal agencies regarding their websites on rulemaking. CUNA has recommended, for instance, that the NCUA work to improve access to regulatory information on its website. In a 2011 Regulatory Review comment letter, CUNA noted that “the notice for the Regulatory Review is difficult to find on NCUA's website. As a result, we are not certain whether very many credit unions are aware that the Regulatory Review is underway and that they can comment.” CUNA said it would be beneficial to credit unions if NCUA provided a report on its website each year on how it plans to address the recommendations it receives through this regulatory review comment process and a summary of the recommendations it did not pursue.” The study recommends certain best practices regarding agency websites on rulemaking. Administrative agencies should:
* Manage their use of the Internet with rulemaking participation by the general public in mind; * Provide a one-stop location on their home pages for all rulemakings currently open for comment; * Consider, in appropriate rulemakings, retaining facilitator services to manage discussion with respect to the rulemaking on social media sites; * Strive further to improve the accessibility of their websites to all members of the public (including non-English, low bandwidth, and disability access); * Display comment policies in accessible locations or provide links to the comment policy in multiple, accessible locations, especially on webpages that elicit comments from the public; * Develop systematic protocols for the retrieval of old material online; and, * Conduct ongoing evaluations of their use of the Internet against the goals of e-rulemaking.
Use the resource link below for more on the University of Pennsylvania study.

Faulty controlsindependent testing cited in banks 10M BSA penalty

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WASHINGTON (8/24/11)--The alleged failure of a Miami bank to implement effective Bank Secrecy Act/anti-money laundering (BSA/AML) with internal controls “reasonably designed to detect and report money laundering and other suspicious activity in a timely manner” has, in part, spurred a walloping $10.9 million civil money penalty for violations of federal and state BSA and AML laws and regulations. The Florida bank involved, Ocean Bank, without admitting or denying the allegations, consented to payment of the penalties, which the bank satisfied with a single payment to the U.S. government. The Federal Deposit Insurance Corporation (FDIC), the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN), and the State of Florida Office of Financial Regulation (OFR)--the agencies making the charges against Ocean--said the bank failed to conduct adequate independent testing, particularly with respect to suspicious activity reporting requirements. In addition, the agencies alleged, the bank failed to sufficiently staff the BSA compliance function with appropriately trained staff to ensure compliance with BSA requirements. "Effective Bank Secrecy Act/anti-money laundering programs commensurate with the risk profile of the institution is paramount in protecting our financial system and individual banks from harm," said Sandra L. Thompson, director of the FDIC’s division of risk management supervision, in a release. "This penalty underscores the significance for banks to have strong internal systems and controls to detect and report suspicious activity and ensure compliance with Bank Secrecy Act requirements." Tom Cardwell, commissioner of the Florida OFR, added, “The OFR will continue to monitor Ocean Bank's efforts to enhance its BSA/AML program. We are confident the bank is committed to be in full compliance with the letter and spirit of the Consent Order and Agreement." In a recent BSA/AML webinar hosted by the Credit Union National Association (CUNA), Judy Graham of the National Credit Union Administration's (NCUA) Office of Examination and Insurance, said NCUA examiners identify risk assessments and staff training as two top areas of compliance problems (News Now Aug. 23). On a related issue, Graham also noted that some suspicious activity monitoring programs being implemented are found to be insufficient to manage the risks involved in the credit union's business. Use the resource links below to access information on an archived version of the CUNA webinar and to read the BSA penalty release.

Inside Washington (08/22/2011)

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* ALEXANDRIA, Va. (8/23/11)--As noted Friday in the Credit Union National Association’s News Now LiveWire Twitter feed, the National Credit Union Administration issued revised guidance to credit unions explaining the impact on credit unions of the Standard and Poor’s downgrade of long-term, U.S. debt. The new guidance clarifies how examiners assign risk weights to government securities held by credit unions, and specifically notes that the agency assigns a zero risk weight to U.S. Treasury securities held by corporate credit unions Sign up for News Now LiveWire here… * WASHINGTON (8/23/11)--The Consumer Financial Protection Bureau (CFPB) is developing a working relationship with state attorneys general (AGs). In April, the CFPB and state AGs released a joint statement of principles to coordinate investigations and identify mutual enforcement priorities (American Banker Aug. 22). Richard Cordray, the Obama administration’s nomination to be the CFPB’s first director, is a former Ohio attorney general. Observers say Cordray was an aggressive AG who pursued mortgage servicers for their foreclosure practices before “robo-signing” was a national issue. The first indication of a partnership between the CFBP and state AGs was the bureau’s involvement in the mortgage-servicer-settlement negotiations. Critics say the CFPB and Elizabeth Warren, who organized the bureau, improperly influenced the negotiations. The bureau has claimed that it provided advice only upon request …

Training risk calculations continue to be BSA challenges

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WASHINGTON (8/23/11)—During a Bank Secrecy Act (BSA) webinar hosted by the Credit Union National Association (CUNA) Friday, Judy Graham, of the National Credit Union Administration’s (NCUA) office of examination and insurance, said examiners identify risk assessments and staff training as two top areas of compliance problems. According to Graham, examiners continue to find that some credit unions do not have a written assessment, or have inadequate assessments, of their risks to exposure to BSA and money laundering activities. She noted that risk assessments should be reviewed for appropriateness when there is a merger or expansion of products, services or membership. On a related issue, Graham also noted that some suspicious activity monitoring programs being implemented are being found to be insufficient to manage the risks involved in the credit union's business. Regarding staff training for BSA requirements, Graham said examiners are finding that training is often dated or hasn't been documented. Although the timing of training will vary based on the risks of the credit union's business, NCUA expects training to be done at least annually. Riskier, more complex credit unions may find it appropriate to train more frequently. Also, training should incorporate regulatory changes and relevant guidance. Thomas Lawler, of the Financial Crimes Enforcement Network FinCEN),and Michael Dondarski, of the Office of Foreign Asset Control, also participated in the CUNA webinar. Lawler provided insight into FinCEN's role in implementing the BSA statute and outlined several recent regulations and guidance documents FinCEN has issued over the last year, such as a Suspicious Activity Report (SAR) Confidentiality Rule and the Money Services Business rule. OFAC’s Dondarski provided an overview of OFAC's economic sanction programs and an Executive Order that was issued on Aug. 18, which extensively broadened the scope of OFAC's Syria program. Credit unions were encouraged to contact the OFAC compliance hotline at 800-540-6322 and the OFAC licensing division at 202-622-2480 with any questions. And, credit unions were encouraged to have members contact OFAC directly with any questions regarding blocked property or rejected transactions. An archived version of the CUNA webinar is available via the resource link below.

CUNA seeks CUs lists of top regulatory burdens

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WASHINGTON (8/23/11)—As the Credit Union National Association (CUNA) works to compile a comprehensive list of credit unions’ regulatory burdens to send to federal regulators and continue to seek their aid to provide relief, CUNA is asking credit unions to send their views on what rules unnecessarily encumber operations. CUNA intends to provide the National Credit Union Administration (NCUA) with the catalog of credit unions’ pressing regulatory concerns by the end of this month. The action is a follow up to a number of other initiatives CUNA has undertaken to seek a targeted and more effective regulatory approach for credit unions. For instance, early this month CUNA used the opportunity to comment on NCUA regulations that are up for review this year to make a broader statement on regulatory burden. CUNA sent a comment letter to NCUA urging the agency to avoid broad-based regulatory requirements in favor of more targeted actions and to refrain from adding to the burden caused by current credit union regulatory requirements. The CUNA comment letter, spurred by NCUA's 2011 regulatory review of such rules as those addressing security programs, Bank Secrecy Act compliance, and crime reporting, also noted that "the cumulative regulatory burden is at an all-time high" due to the activities of the NCUA and Dodd-Frank Act regulations. Also this month, CUNA President/CEO Bill Cheney sent a letter to Richard Cordray as he prepares for his Sept. 6 nomination hearing before the Senate Banking Committee for the position of Consumer Financial Protection Bureau (CFPB) director. Cheney asked Cordray to "consider ways in which the bureau can help minimize regulatory requirements for credit unions and other financial institutions." Cordray, who has been serving as the CFPB's assistant director for enforcement, was announced as President Barack Obama's nominee for CFPB director last month. CUNA has also backed legislation (H.R. 1315) to reduce the voting threshold needed for the Financial Stability Oversight Council (FSOC) to stay or set aside rules finalized by the CFPB from a two-thirds vote to a majority vote. The CFPB director would not be part of that vote. CUNA said that the change would make it easier for FSOC to stay or set aside potentially burdensome CFPB rules and, therefore, would balance consumer protection with safety and soundness concerns. CUNA sent a letter of support to Speaker of the House John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.) in July. Credit unions may send their lists of burdensome regulations to CUNA at mdunn@cuna.coop. For more on CUNA’s actions, use the resource links below.

VisaCUNA interchange call Debit rates out soon

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WASHINGTON (8/24/11)—After teaming up Friday for a conference call with the Credit Union National Association (CUNA) on debit card interchange fee issues concerning credit unions--and announcing its new rates for institutions with under $10 billion in assets would soon be released--Visa began sending to credit unions its new debit card fee structure. Earlier last week, MasterCard participated in a CUNA call with credit unions and reiterated its pledge to implement a two-tiered debit interchange fee structure, and added the company currently plans to keep its existing market-based rate structure in place for credit unions and other financial institutions with under $10 billion in assets. Visa also created a two-tiered system, although some changes were in the works. Credit unions within the Visa network that have not yet received rate information should contact their Visa representative. As background, the Dodd-Frank Wall Street Reform and Consumer Protection Act required the Federal Reserve Board to regulate debit interchange fees for issuers with assets of $10 billion or more. The Fed final rule set a cap of 21 cents, and allows an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with Fed-established fraud prevention standards. Credit unions and other institutions with under $10 billion in assets are exempt from the rate cap provisions of the rule.

CUNA concerned with ACH compliance implementation costs

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WASHINGTON (8/22/11)—The Credit Union National Association (CUNA) is concerned by potential increases in ACH system compliance and implementation costs, and has offered several recommendations on how NACHA, the electronic payments association, can improve the network. NACHA has proposed several changes to its operating rules that would eliminate some so-called "pain points," areas of misunderstanding, and other problems that it identified during a rules simplification initiative that it completed earlier this year. Among those changes are requiring written authorization for debit entries to a business account if there is no existing contract or relationship. The association is also considering providing a new return reason code to stop all future payments and removing the current requirement of separate Web Initiated-Entry exposure limits for originating depository financial institutions (ODFIs). NACHA may also remove a current requirement which states that an ODFI must suffer a loss to dishonor an untimely return. For CUNA’s comment on these issues, use the resource link.

Bank fraud conviction brings NCUA prohibition order

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ALEXANDRIA, Va. (8/22/11)—Former Fairwinds CU, Orlando, Fla., employee Nazreen Mohammed has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration. Mohammed was recently convicted of bank fraud and aggravated identity theft, and was sentenced to 60 months in prison and a further three years of supervised probation. The former credit union employee will also pay $83,236.12 in restitution. The agency noted that violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. The Ocala Star-Banner reported that the 47-year old Mohammed plead guilty to two counts of bank fraud and one count of identity theft last November. Mohammed used account withdrawals and loans to steal around $127,000 from living and deceased Fairwinds members between April and July of 2009, and used similar tactics to steal from Royal Bank of Canada customers later that year, the Star-Banner said. Fairwinds holds more than $1.5 billion in assets from around 143,000 members. For the full NCUA release, use the resource link.

Inside Washington (08/19/2011)

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* WASHINGTON (8/22/11)--The Credit Union National Association (CUNA) has issued a final rule analysis for a rule adopted by the U.S. Department of Housing and Urban Development (HUD) that establishes minimum mortgage loan originator licensing standards states must follow in implementing the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act. Currently, all states’ SAFE Act rules meet or exceed these minimum standards. The final rule also establishes federal oversight of state SAFE Act standards, and sets forth enforcement options that could apply if a state’s SAFE Act standards ceased to comply with this rule. Jurisdiction over this regulation transferred to the Consumer Financial Protection Bureau July 21 under the Dodd-Frank Wall Street Reform and Consumer Protection Act. This final rule does not apply to credit unions or, to date, any other mortgage originators; rather, the rule sets minimum standards for states’ SAFE Act standards. CUNA’s offers members e-Guide compliance resources. … * WASHINGTON (8/22/11)--National Futures Association (NFA) is likely to have a larger influence in overseeing the role of major banks in the swaps and futures markets as regulators continue to implement the Dodd-Frank Act and determine funding for the Commodity Futures Trading Commission (CFTC) (American Banker Aug 19). The CFTC has requested $308 million for its 2012 budget. But Republican budget-cutting efforts may limit funding. The CFTC’s responsibilities will increase with the implementation of Dodd-Frank while resources may be limited, said NFA President Daniel Roth. The less allocations the agency receives, the more responsibility it may try to shift toward self-regulation, increasing the NFA’s role, Roth said. The NFA recently hired two employees to design data tracking and surveillance systems, develop industry for trading and plan registrations … * WASHINGTON (8/22/11)--Elizabeth Warren, the former Obama administration official who shaped the formation of the Consumer Protection Financial Bureau, announced that she’s starting an exploratory committee for a potential U.S. Senate run in Massachusetts (American Banker Aug 19). Warren, a Democrat, filed papers Thursday and launched a website where visitors can make donations and sign up for updates. Warren has been traveling around Massachusetts last week on a “listening tour.” She said she will make her final decision on running around Labor Day (WBUR.orgAug. 15). If Warren runs, her opponent will be Sen. Scott Brown (R-Mass.), who won his seat in a special election last year to succeed the late Sen. Edward Kennedy …

Inside Washington (08/18/2011)

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* WASHINGTON (8/19/11)--U.S. Rep. Barney Frank (D-Mass.) requested in a letter to Fed Chairman Ben Bernanke that the Federal Reserve extend its review of Capital One Financial Corp.’s purchase of ING Direct USA (The New York Times Aug 18). In the letter, Frank said the ING acquisition would create the fifth-largest bank in the U.S. and its impact should be examined to ensure compliance with the Community Reinvestment Act. Frank, the senior Democrat on the House Financial Services Committee, asked the Fed to extend the public comment period on the acquisition for at least 60 days and hold public hearings on its economic impact. Consumer rights advocates have raised objections to the deal. The National Community Reinvestment Coalition (NCRC) said Capital One’s acquisition of ING Direct may create another large bank whose failure could disrupt the financial system. In a statement issued Aug. 12, the NCRC also called for the public comment period to be extended for at least 60 days … * WASHINGTON (8/19/11)--A federal appeals court decision in July blocking a Securities and Exchange Commission (SEC) rule that would have made it easier for shareholders to nominate company directors has created hope for industry groups seeking legal challenges to the Dodd-Frank Act (The New York Times Aug 18). While the SEC is considering an appeal of the ruling, industry groups have met in Washington to discuss other possible cases that could challenge Dodd-Frank. Among the cases under consideration are the SEC’s new corporate whistle-blower program and a provision related to the extraction of oil and natural gas from foreign countries. The Commodity Futures Trading Commission’s plan to curb speculative trading also has been discussed. A single lawsuit contesting the constitutionality of Dodd-Frank would be cost prohibitive, take years to adjudicate and have little chance of succeeding, according to legal experts …

Loans for musical instruments may qualify as MBLs NCUA

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ALEXANDRIA, Va. (8/19/11)--Loans in excess of $50,000 that are used by members to purchase musical instruments may be considered member business loans (MBL), the National Credit Union Administration said in a legal opinion. Responding to a letter from Houston Musicians FCU manager Bob McGrew, NCUA Associate General Counsel Hattie Ulan said that these types of loans provide “a means for your professional musician members to purchase a musical instrument for use in their trade as paid musicians.” She added that the musical instruments that are purchased with the loan are “tool(s) of the musician’s trade” and are “acquired for use in a business capacity. “Therefore, where a loan to a member for this purpose totals $50,000 or more when aggregated with other such loans to the member, the loan is an MBL,” Ulan wrote. While McGrew noted that the U.S. Internal Revenue Service (IRS) has previously said these loans should be considered personal loans and would not consider any interest on these loans to be a business deduction for the member, Ulan said that the NCUA “(does) not consider IRS treatment of an expense to be determinative of whether a loan qualifies for MBL treatment.” Ulan also encouraged the credit union to discuss extending its aggregate MBL limit with regional credit union authorities. For the full letter, use the resource link.

CUSO as landlord NCUA says yes

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ALEXANDRIA, Va. (8/19/11)--Federal credit unions that own a building where their home office, branch, or other offices are located may form their own credit union service organization (CUSO), sell the building to that CUSO, and proceed to rent part of the building out to their credit union, under certain circumstances. The National Credit Union Administration (NCUA) in a legal opinion told Guy Messick, of Media, Pa.-based Messick & Weber, P.C., that this practice is permissible under NCUA regulations as long as the majority of the building is leased out to a credit union and credit union-affiliated members. The NCUA has previously said that CUSOs that lease their fixed assets must primarily lease those properties to credit unions and members of affiliated credit unions.” “Primarily,” in some cases, meant leasing more than 50% of the property to a credit union or related entities. However, NCUA Associate General Counsel Hattie Ulan warned in the most recent letter that “a majority is not the only definition of ‘primarily’ and will not be sufficient to meet the ‘primarily’ serves requirement in all circumstances.” Ulan also noted that CUSO leasing arrangements “should not be used as a means for (a credit union) to circumvent the fixed-assets rule.” The NCUA’s fixed-assets rule states that federal credit unions with $1 million or more in assets cannot invest in fixed assets if the investment would cause the aggregate of all that credit union’s fixed assets to exceed 5% of it’s shares and retained earnings. For the full NCUA legal opinion letter, use the resource link.

NCUA addresses garnishment of accounts with federal benefits

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ALEXANDRIA, Va. (8/19/11)—In a recent Regulatory Alert (11-RA-04), the National Credit Union Administration offers guidance intended to help credit unions comply with an joint interim final rule that addresses garnishment of accounts that include federal benefits payments. The joint rule was issued by the U.S. Treasury, the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board, and the Office of Personnel Management and pertains to the following benefit payments:
* Social Security and Supplemental Security Income benefits; * Veterans benefits; * Federal Railroad retirement, unemployment and sickness benefits; * Civil Service Retirement System benefits; and * Federal Employees Retirement System benefits.
The rule covers all financial institutions that receive certain directly deposited federal benefit payments, including federal and state-chartered credit unions, and requires financial institutions that receive a garnishment order for an account to determine whether any federal benefit payments were deposited to the account within 60 days prior to receipt of the order. The rule aims to "ensure that benefit recipients have access to exempt funds" while garnishment orders are being resolved. The NCUA guidance advises that a credit union, within two days of receiving a garnishment order, must first determine whether the order was obtained by the United States or a state child support enforcement agency. To make this determination, the credit union may rely on the “Notice of Right to Garnish Federal Benefits” it receives. For these kinds of orders, all money in the account is subject to garnishment. The NCUA letter also discusses matters of account review, notice requirements, and other provisions, such as the correct way to handle a statutory lien. Use the resource link below to read the complete guidance.

Inside Washington (08/17/2011)

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* WASHINGTON (8/18/11)--The U.S. Chamber of Commerce in a comment letter issued Monday has challenged the Consumer Financial Protection Bureau (CFPB) authority to oversee large nonbanks. The chamber cited a “notice and request for comment” the CFPB issued in June. The CFPB notice requested feedback on how the bureau should determine which large nonbanks should be subject to supervision. Because the bureau does not have a permanent director, it lacks the authority to provide such oversight, the chamber said in its comment letter. “The secretary and the bureau should therefore cease all development of the ‘larger participants’ rule until a director has been confirmed,” the letter stated.

MasterCard tells CUs of interchange structure plans

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WASHINGTON (8/18/11)--MasterCard plans to implement a two-tiered debit interchange fee structure, and currently plans to keep its existing market-based rate structure in place for credit unions and other financial institutions with under $10 billion in assets, MasterCard Global Head of Public Policy Shawn Miles said during a Wednesday conference call. Miles added, however, the rates are subject to change based on market forces and will be finalized in a few weeks and announced prior to Oct. 1. The call was presented by MasterCard and the Credit Union National Association (CUNA) and featured input from CUNA Chief Economist Bill Hampel and CUNA Deputy General Counsel Mary Dunn. The Fed's final debit interchange rule caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents, and allows an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with Fed-established fraud prevention standards. Credit unions and other institutions with under $10 billion in assets are exempt from the rule. MasterCard plans to establish its own online debit interchange registration system for its member institutions to denote if they are above or below the $10 billion-asset threshold. The card processor is planning to include in the registry the ability for institutions above $10 billion in assets to certify that they qualify to receive the extra penny for complying with fraud prevention standards. CUNA and MasterCard will both monitor merchants for any signs that they are steering consumers away from using debit cards issued by institutions that are not subject to the cap. CUNA is developing a mechanism for credit unions to report illegal merchant steering behavior. The MasterCard representative also thanked credit unions and CUNA for their efforts to delay and change the debit interchange fee cap legislation, and said that the final rule was significantly improved due to this work. Miles added that MasterCard looks forward to working with CUNA on any future threats to interchange fees. However, CUNA has noted that members of Congress are reticent to take up the interchange debate any time soon, given the controversy that surrounded the issue.

Treasury clears air on housing finance reform

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WASHINGTON (8/18/11)—U.S. Treasury Deputy Secretary Neal Wolin this week said that the Obama Administration is still considering a range of options for mortgage market reform, adding that the administration “believes that the private sector – subject to strong oversight and consumer protection – should be the dominant provider of mortgage credit.” Wolin in a treasury.gov blog post responded to a recent Washington Post story that claimed the Obama administration is working on a proposal that would maintain a large government role in the mortgage market by subsidizing federal loans for most home buyers. The administration’s approach, the Post reported, could possibly preserve Fannie Mae and Freddie Mac, “although under different names and with significant new constraints.” The deputy secretary reminded both the paper and citizens that the Obama administration has proposed a trio of potential outcomes for Fannie Mae and Freddie Mac, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Wolin said that the administration is still considering all three of these options. “In each of the three options we outlined in our report to Congress, the government's footprint in the housing finance market will shrink substantially,” Wolin said, adding that “any government support for housing finance will be targeted and limited. “This will help ensure that taxpayers are protected and the private sector bears the burden for losses,” he said. For the blog post and the Washington Post story, use the resource links.

Cheney MBL cap lift has greater benefits than loan fund

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WASHINGTON (8/18/11)—Following the U.S. Treasury’s decision to provide $418 million in Small Business Lending Fund (SBLF) cash to community banks, Credit Union National Association (CUNA) President/CEO Bill Cheney noted that lifting the business lending cap is “a more effective way of helping the economy grow and creating jobs." The SBLF is the $30 billion fund authorized by the Small Business Jobs and Credit Act that provides low-cost capital to small and mid-sized banks as incentives to increase lending. The Treasury noted that the latest round of SBLF awards brings the total amount of funds given to community banks through the SBLF program to more than $1 billion. The Treasury added that additional SBLF funding announcements will be made in the near future. Lifting the MBL cap, which currently stands at 12.25% of total assets, to 27.5% of assets would inject more than $13 billion in new funds into the economy, creating up to 140,000 new jobs in the first year of the cap lift. “Unlike the taxpayer-funded SBLF, this wouldn’t cost taxpayers anything,” Cheney said. The case for MBLs was given a boost on Tuesday when Jeff Disterhoft, president/CEO of University of Iowa Community CU, Iowa City, Iowa, shared the potential benefits of an MBL cap lift with President Barack Obama during the White House Rural Economic Forum at Northeast Iowa Community College in Peosta, Iowa. (News Now, 8/17) Disterhoft told News Now the president appeared attentive to his concerns, adding that Obama said he would "go back to Washington and look further” into the issue. Disterhoft’s MBL exchange with President Obama also received coverage in The Wall Street Journal’s FINS Finance web site and the Iowa City Press Citizen. (See related story: WSJ Web page covers CU’s MBL pitch to Obama.) For the Treasury release, use the resource link.

NFIP escrow changes could harm CUs CUNA

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WASHINGTON (8/17/11)--Draft National Flood Insurance Plan (NFIP) reforms could have the unintended effect of driving some small mortgage lenders, including credit unions, out of the mortgage business, the Credit Union National Association (CUNA) and related trade groups have warned. At issue is Section 111 of an NFIP reform discussion draft, which would require all mortgage lenders to escrow for NFIP premiums. Current law only requires lenders that escrow for taxes and insurance to also escrow for NFIP premiums. CUNA, the American Bankers Association, the Independent Community Bankers of America, the Mortgage Bankers Association, and the National Association of Federal Credit Unions co-signed a Tuesday letter that was sent to Senate Banking Committee chairman Sen. Tim Johnson (D-S.D.), leading minority member Richard Shelby (R-Ala.), and all other members of the committee. The trades noted that “there is a significant cost involved with establishing escrow accounts, particularly for community banks, credit unions, and community-based lenders that have small lending volumes. “These lenders must outsource their escrow services, and they are not eligible for volume discounts,” and financial institutions in rural and underserved areas are concerned by the costs that outsourcing escrow services would create. “A reduction in the number of loan originators would lead to more consolidation of the mortgage market, thereby reducing credit options in an already troubled market,” the letter added. NFIP reforms are expected to be discussed by the committee when congress returns in early September. The U.S. House last month overwhelmingly supported legislation that would continue the NFIP for a further five years. The NFIP was set to expire on Sept. 30. The legislation (H.R. 1309) preserves the rights of credit unions and others to protect their collateral from flood hazards and would clarify that flood insurance purchases "would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period." CUNA has backed these changes. Legislators from both bodies of Congress and both sides of the aisle, including Sens. Johnson and Shelby, have called for reforms to the NFIP. The U.S. Government Accountability Office (GAO) in recent months said that Congress should act to increase the financial stability of NFIP and limit taxpayer exposure. The NFIP provides more than $1.2 trillion in coverage to Americans in flood-prone areas, but it is an estimated $18 billion in debt to the U.S. Treasury.

CDCUs should be eligible for CDFI bond program

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WASHINGTON (8/17/11)--The Credit Union National Association (CUNA) has recommended that credit unions that are designated Community Development Financial Institutions (CDFIs) be eligible for guarantees on notes that could be used as secondary capital. Specifically, CUNA said in a comment letter, CDCUs that are CDFIs should be eligible for the U.S. Treasury Deparment's CDFI Fund's developing Bond Guarantee Program. Under the CDFI Fund’s bond program, notes or bonds of up to 30 years duration issued by CDFIs would have full guarantees from the U.S. Treasury. The bond program, which is still being developed, would “support CDFI lending and investment by providing a source of long-term, patient capital to CDFIs,” the CDFI Fund said. The bond guarantee program was enacted by the Small Business Jobs Act of 2010. CUNA added that credit unions should be allowed to count any proceeds from these bonds as supplemental capital. CUNA also suggested that some types of CDCU subordinated notes should be eligible to be considered as supplemental capital for low-income credit unions, consistent with the National Credit Union Administration’s net worth regulations. Allowing credit unions to count bond proceed as supplemental capital would help them “leverage their net worth to add deposits and generate loans for a range of credit needs in low-income communities, including but not limited to microenterprise, providing working capital for small businesses, education, and other essential needs of their members,” CUNA added. The CDFI Fund should also consider revising its definitions of "low-Income," "underserved." and "rural area" to better conform to those of the National Credit Union Administration, CUNA said. CDCUs are among the financial institutions that may apply for membership in CDFI Fund programs. The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. A total of 960 financial institutions are certified CDFIs. For the full CUNA comment letter, use the resource link.

Former CU manager banned from further work

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ALEXANDRIA, Va. (8/17/11)--The National Credit Union Administration (NCUA) on Tuesday prohibited Brian Zimmerman, a former manager and treasurer of Lebanon, Pa.-based LEBCO Educators FCU, from future work at any federally insured financial institution. The agency noted that violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. The prohibition order did not list Zimmerman’s offense. Zimmerman denied guilt, but agreed to the prohibition order to “avoid the time and expense of litigation,” according to the NCUA. LEBCO, which served its nearly 1,300 members through a single branch, was merged into $360 million-asset Belco Community CU in June.

Base large participant definition on market share CUNA says

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WASHINGTON (8/17/11)--The Consumer Financial Protection Bureau (CFPB) should base its definition of non-depository-institution “larger participants” on the relative, local market share of those participants, the Credit Union National Association (CUNA) suggested in a comment letter. CUNA warned that using something other than the local, state-wide or metropolitan-area-based market share to define what type of firm is considered a “larger participant” could result in the CFPB “only regulating the largest nationally-active non-depository financial service providers.” Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to supervise all sizes of nonbank payday lenders, private student lenders, and mortgage companies. The CFPB is considering regulating non-financial institution auto lenders, debt collection agencies, credit reporting agencies, prepaid credit card firms, debt relief firms, and money transfer firms. CUNA encouraged the CFPB to subject non-depository institutions to the same level of consumer protection regulations as credit unions and other depository institutions. Specifically, the CUNA letter encouraged the CFPB to regulate companies that provide check cashing, money transfers, and other services in the same manner that it plans to regulate payday lenders. The CFPB should also examine debt relief services that are provided outside of the traditional, court-based bankruptcy process to determine if these services actually benefit consumers, and should require these companies to “fairly disclose” the costs and limitations of their services. CUNA noted that debt relief services “often make misleading claims to consumers about the benefits they provide in order to collect large, upfront fees.” CUNA was among several groups that recently met with the CFPB to discuss the agency’s approach to regulating non-bank/non-credit union "larger participants" in consumer financial services. The CFPB is expected to issue an initial rule on large non-bank firm regulation no later than July 21, 2012. For the CUNA comment letter, use the resource link.

Inside Washington (08/16/2011)

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* WASHINGTON (8/17/11)--Federal regulators had planned in July to adopt a rule describing how large financial institutions would unwind themselves in a crisis without disrupting the financial system (Dow Jones Aug 16). But adoption of the rule, which affects roughly 124 financial institutions, has been delayed until later this month, because banks that don’t get their “living wills” approved by regulators must raise capital or divest assets. How to divide a big failing global bank’s assets and what parts of a financial institution’s structure and investments should be publicly disclosed are among the issues facing the Federal Reserve and Federal Deposit Insurance Corp. (FDIC) as they craft rules for the living wills. Some observers believe the plans will create more streamlined and smaller financial institutions. With transparent organizational divisions, the Fed and FDIC will know the value of different units and which assets can be sold off when an institution is failing …

iCompBlogi covers share insurance credit score disclosures

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WASHINGTON (8/16/11)--Information on terms and conditions, loan rates, member privacy, and other issues must be included in the brochures that are given to new credit union members. However, the Credit Union National Association (CUNA) has noted, details on share insurance coverage are not required to be provided in membership packets. CUNA in a recent CompBlog post noted that while National Credit Union Administration regulations require credit unions to inform members of share insurance coverage, that disclosure may be provided by posting the NCUA’s “Your Insured Funds” brochure or Part 745 of the regulations in branches and offices. Individual copies of National Credit Union Share Insurance Fund details must be provided upon request. CUNA in a recent CompBlog post noted that while National Credit Union Administration regulations require credit unions to inform members of share insurance coverage, that disclosure may be provided by posting the NCUA’s “Your Insured Funds” brochure or Part 745 of the regulations in branches and offices. Individual copies of National Credit Union Share Insurance Fund details are also available by request. Credit Score Disclosures to current members were also covered by CompBlog this month. In a separate blog post, CUNA said that credit unions are required to provide an adverse action notice with credit score information when they deny a member’s loan application based on a credit score, even if they have previously disclosed that members credit scores to them via a credit score exception notice. CUNA clarified that creditors may not use these exception notices in place of adverse action notices, as the two notices satisfy different Fair Credit Reporting Act (FCRA) requirements. Portions of the Dodd-Frank Act require creditors to disclose credit scores and related information to consumers in risk-based pricing (RBP) notices and adverse action notices under the FCRA if a credit score was used in setting the credit terms or in taking adverse action against a consumer. For more of CUNA’s CompBlog, use the resource link.

Call-in info available for MasterCard interchange call

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WASHINGTON (8/16/11)--Call-in information is now available for Credit Union National Association (CUNA) members wanting to participate in a free, hour-long call with MasterCard regarding its plans for a two-tiered debit interchange fee rate structure, how that rate structure will impact credit unions, and the anticipated time table for implementation. The call is scheduled for Aug. 17 at 2 p.m. (ET). A Q&A session will follow the prepared portion of the presentation. CUNA Chief Economist Bill Hampel, CUNA Deputy General Counsel Mary Dunn, and MasterCard Global Head of Public Policy Shawn Miles will lead the call. A similar call with VISA representatives is being planned. A Federal Reserve Board rule, implementing the interchange provisions of the Dodd-Frank Wall Street Reform Act, caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents, and allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Use the resource links below to access the call-in information (CUNA members only) for the MasterCard call, review the Fed rule, and to see the Fed lists of names of card issuers that are and are not exempt from the interchange rule.

Consider CU burden CUNA to CFPB nominee

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WASHINGTON (8/16/11)--As Richard Cordray prepares for his Sept. 6 nomination hearing before the Senate Banking Committee, Credit Union National Association (CUNA) President/CEO Bill Cheney urged the candidate for Consumer Financial Protection Bureau (CFPB) director to “consider ways in which the Bureau can help minimize regulatory requirements for credit unions and other financial institutions.” Cordray, who has been serving as the CFPB's assistant director for enforcement and has also served as the attorney general of Ohio and that state's treasurer, was announced as President Barack Obama’s nominee for CFPB director last month. Ohio Credit Union League representatives told News Now that the league worked closely with Cordray at the county and state levels as he developed a financial literacy campaign and encouraged younger Ohioans to plan for their financial futures through the "small savers" campaign. CFPB architect Elizabeth Warren recommended Cordray for the post, noting last month that he "has a proven track record of fighting for families during his time as head of the CFPB enforcement division, as attorney general of Ohio, and throughout his career" and will be "a strong leader" for the CFPB. Cheney in the letter also encouraged the CFPB to establish an Office of Regulatory Burden Monitoring to help the agency “track, consider, and help mitigate the cumulative regulatory burden under which credit unions and others must operate. “ The CFPB’s process for revising and combining Truth-in-Lending-Act and Real Estate Settlement Procedures Act forms in to a single mortgage disclosure reflects a “positive, useful approach” to working with stakeholders, and Cheney said that the CFPB should use similar processes in its future rulemaking projects. The CFPB last week completed the third of five separate mortgage disclosure comment rounds. The agency is planning to release a final version of its single draft disclosure later in the year. CUNA has met with the CFPB on this and other issues, and further meetings are planned.

Inside Washington (08/15/2011)

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* WASHINGTON (8/16/11)--President Barack Obama’s administration has identified two economists, one Republican and one Democrat, as the top candidates for two empty seats on the seven-member Federal Reserve Board (The Wall Street Journal Aug. 15). Jeremy Stein, a Harvard University specialist in finance, worked at the White House at the beginning of the Obama administration. Richard Clarida, an executive vice president at the money management firm Pimco, and professor of economics and international affairs at Columbia University, was a Treasury official early in the George W. Bush administration. The administration hopes that matching a Republican with a Democrat will ease the path to Senate confirmation, according to the Journal. The White House has yet to formally nominate either and could change course. Stein has a Ph.D. from M.I.T. and has been a professor of economics at Harvard for 10 years. Clarida, who earned his Ph.D. at Harvard, has been at Pimco since 2006, where he is co-head of the official-institutions channel, which oversees coverage of the firm’s central-bank and sovereign-wealth-fund clients. He was assistant Treasury secretary for economic policy under Bush from February 2002 to May 2003 … * WASHINGTON (8/16/11)--Fannie Mae and Freddie Mac should renegotiate their agreements with the Treasury Department to manage President Barack Obama’s anti-foreclosure efforts, according to a report released by the Federal Housing Finance Agency’s (FHFA) inspector general (The Wall Street Journal Aug. 15). The report said the current contracts didn’t define the scope of work or how much the companies would be paid, and should be reworked to hold down expenses and establish a process for dispute resolution. The report acknowledges conflict between the FHFA, the regulator in charge of protecting the companies’ financial interests, and the Treasury, which assumed ownership of many mortgage companies after bailing them out during the 2008 financial crisis. Since the financial crisis, Fannie Mae and Freddie Mac have received $170 billion in Treasury aid, making them currently the biggest beneficiaries of federal aid …

CUNA campaign school kicks off in Albuquerque

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WASHINGTON (8/15/11)--More than 20 potential candidates, including local credit union representatives, joined the Credit Union National Association (CUNA) and the Credit Union Association of New Mexico (CUANM) as they presented 2011’s first CUNA campaign school in Albuquerque, N.M., last week.
Click to view larger image CUNA Senior Vice President of Political Affairs Richard Gose discusses campaign strategy with attendees of CUNA's Albuquerque campaign school, the first to be held this year. (Credit Union Association of New Mexico photo)
The 2011 campaign school was the third held in New Mexico. Topics covered in last week's session included campaign management, fundraising, message development, and get-out-the-vote planning. Potential candidates at the state's sessions planned to contend for a broad swath of positions in both local and state races, and represented candidates of both parties. Current mayor of Albuquerque Richard Berry (R) attended the first New Mexico campaign school before he defeated longtime incumbent Democratic Mayor Martin Chavez in 2009. The campaign school was led by CUNA Senior Vice President of Political Affairs Richard Gose and CUNA Vice President of Political Affairs Trey Hawkins, and also featured the advice of Washington, D.C.-based political communications consultant Michael Hook and Portland, Ore.-based political consultant Jon Isaacs. “We offer these campaign schools a service to first-time candidates, regardless of affiliation,” said Hawkins. “But our ultimate goal is to help more credit union professionals and volunteers run for and win elective office.” CUNA is scheduling a number of other campaign schools in anticipation of the upcoming 2012 elections.

Cheney sums up first year at CUNA looks to future

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WASHINGTON (8/15/11)--Debit interchange fee cap legislation, and the debate surrounding it, immediately became his predominant issue as Credit Union National Association (CUNA) President/CEO Bill Cheney succeeded former CUNA chief Dan Mica last year. Cheney recently reflected on his first year in charge of CUNA, which officially began on July 5, 2010. Stepping up to deal with the interchange issue presented quite a challenge, but Cheney told CUNA’s Credit Union NewsWatch that CUNA’s early work with legislators, and additional work after financial regulatory reform legislation was passed in July 2010, substantially improved the final Fed rule from what was first offered. “Our work had an influence on the Senate and we improved the situation for credit unions… and our job now is to make sure the two-tiered system is effective and make sure that we hold senators who voted against us on the delay, but assured us that the two-tiered system would work, accountable,” Cheney said. Other focuses of the past year were member business lending legislation, reducing credit unions’ regulatory burden, and further building credit unions’ grassroots muscle. Cheney traveled the country to hear directly from CUNA members on these and other issues. A major surprise was the amount of work CUNA has done this past year with the U.S. Treasury and the Consumer Financial Protection Bureau (CFPB). Cheney said that this groundwork will pay dividends going forward. “There’s a lot the Treasury and CFPB can do to help credit unions,” he added. CUNA has developed a close working relationship with the CFPB. CFPB seems to understand that eliminating and amending some regulations, rather than simply creating new regulations, is key to reducing the regulatory burden, Cheney said. Regulatory burden has been a key complaint of credit unions coast to coast. Cheney noted that the level of concern grows stronger in areas where economic troubles have hit hardest. His numerous meetings with credit unions, which are set to continue following the interview, have helped the CUNA CEO focus on what is important: improving the operating environment for credit unions. While the 2,500-mile move from California to Washington is a big change, Cheney said that he likes the change and the city of Washington. For more of Cheney’s interview, see the latest issue of CUNA’s Credit Union NewsWatch(member's only).

MasterCard CUNA team up for Aug. 17 interchange call

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WASHINGTON (8/15/11)--MasterCard's plans for a two-tiered debit interchange fee rate structure, how that rate structure will impact credit unions, and the anticipated time table for implementation will be covered during an Aug. 17 Credit Union National Association (CUNA) audio conference call. The hour-long call will be free for CUNA members and is scheduled to begin at 2 p.m. ET. A Q&A session will follow the prepared portion of the presentation. CUNA members will be able to register for the call beginning later today. CUNA Chief Economist Bill Hampel, CUNA Deputy General Counsel Mary Dunn, and MasterCard Global Head of Public Policy Shawn Miles will lead the call. CUNA President/CEO Bill Cheney noted that “credit unions offering debit cards to their members have many questions in the wake of the Federal Reserve Board's final rule on debit interchange,” and thanked MasterCard for working with CUNA on the audio conference. A similar call with VISA representatives is being planned. The Fed's final rule caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents, and allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with Fed-established fraud prevention standards. CUNA also recently covered the interchange rule from a compliance perspective with a now-archived Aug. 3 webinar. For that webinar, use the resource link.

Alert on RSA security issues sent by NCUA

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ALEXANDRIA, Va. (8/15/11)--The National Credit Union Administration (NCUA) warned credit unions that RSA SecurID tokens that were issued before April 2011 should be replaced, adding that additional steps should be taken "to safeguard the servers that support the RSA authentication process." The NCUA said that RSA's SecurID authentication process may have been compromised during a March 18 security breach of that company's systems. The NCUA security alert was released late last week following a National Security Agency risk alert. RSA is the security division of EMC Corp. RSA's SecurID process provides two-factor authentication for online and internal network computer systems. One of those factors is an individual, separately generated password or personal identification number, paired with a second form of authentication. According to RSA, this two-step authentication provides "a much more reliable level of user authentication than reusable passwords." RSA security services are used by many high value companies. For the full NCUA alert, use the resource link.

NCUA will disclose CAMEL ratings to FISCUs

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ALEXANDRIA, Va. (8/15/11)--CAMEL ratings will soon be disclosed to federally insured state credit unions “during all insurance reviews and supervision contacts in which NCUA examiners are on-site,” the National Credit Union Administration (NCUA) said in a recent letter to credit unions (11-CU-12). NCUA examiners that are performing joint examinations with state credit union regulators will discuss, and attempt to resolve, any differences in the CAMEL scores of a given credit union. If differences cannot be resolved, NCUA examiners will disclose their CAMEL ratings "simultaneously and on schedule" with the state regulator--"but in no case later than the final meeting with credit union management and officials,” the NCUA said. The NCUA added that its examiners will disclose CAMEL ratings using guidance published in a December 2007 letter to credit unions (07-CU-12). The examiners also will provide “sufficient information supporting the basis for the assignment of individual component and composite ratings,” the agency added. CAMEL ratings will remain “sensitive and confidential” and will not be shared with third parties, the agency added. NCUA staff during last month’s July open board meeting reported that 19% of total credit union assets are held in CAMEL code 3, 4 and 5 credit unions. They added that the total number of CAMEL code 3 credit unions decreased by 16 between May and June. The total percentage of shares held in CAMEL Code 3 and CAMEL Code 4/5 credit unions also declined, dropping nearly 1 percentage point and 0.24 percentage points, respectively. For the full NCUA letter, use the resource link.

Inside Washington (08/12/2011)

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* WASHINGTON (8/15/11)--The House financial institutions and consumer credit subcommittee will meet in Georgia next week to ask community bankers and regulators if federal bank examination standards have become too stringent. The hearing in Newnan, Ga., will include testimony from three bankers--Chuck Copeland, CEO of First National Bank of Griffin; Jim Edwards, CEO of United Bank; and Gary Fox, former CEO of Barton County Bank, based in Cartersville, Ga., which failed in April (American BankerAug. 12). Also scheduled are witnesses from the Federal Deposit Insurance Corp., the Federal Reserve Board, and the Office of the Comptroller of the Currency. “With a struggling economy and high unemployment, small businesses and small-town banks need some relief from the growing regulatory burdens that block the creation of new jobs,” said Financial Services Committee Chairman Spencer Bachus (R-Ala.). “We cannot allow regulatory micromanagement of community banks to stifle prudent lending. Bank examiners must recognize the risks of over-regulation, and particularly avoid subjecting smaller financial institutions to undue regulatory burdens” … * WASHINGTON (8/15/11)--Federal Home Loan Banks (FHLB) are seeking an exemption from proposed risk-retention rules. About eight of the 12 banks in the FHLB system purchase mortgages from member banks, thrifts and credit unions (American Banker Aug. 12). The mortgages require credit enhancements, which are included in their purchase price. On average, the credit enhancement is similar to a 2%- to 3%-risk-retention requirement, the banks say. A proposed federal rule could include a 5% risk-retention requirement on the loans that the banks hold in portfolio and other underwriting restrictions on down payments and debt-to-income ratios. The FHLBs claim the additional retention requirements would make their loans too expensive, while the underwriting requirements will reduce their demand …

NEW NCUA warns of RSA security issues

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ALEXANDRIA, Va. (UPDATED: 11:10 A.M. ET, 8/12/11)—The National Credit Union Administration (NCUA) has warned credit unions that RSA SecurID tokens that were issued before April 2011 should be replaced, adding that additional steps should be taken “to safeguard the servers that support the RSA authentication process.” The NCUA said that RSA’s SecurID authentication process may have been compromised during a March 18 security breach of that company’s systems. The NCUA security alert was prompted after a National Security Agency risk alert was released late on Thursday. RSA is the security division of EMC Corp. RSA’s SecurID process provides two-factor authentication for online and internal network computer systems. One of those factors is an individual, separately generated password or personal identification number, paired with a second form of authentication. According to RSA, this two-step authentication provides “a much more reliable level of user authentication than reusable passwords.” RSA security services are used by many high value companies. For the full NCUA alert, use the resource link.

Inside Washington (08/11/2011)

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* WASHINGTON (8/12/11)--Rules being drafted by U.S. regulators for the largest U.S. banks won’t be more restrictive than global capital standards agreed to in Basel, Switzerland, according to Federal Reserve Gov. Daniel Tarullo (Bloomberg Aug 11). In a June 3 speech, Tarullo said the board will seek congruence with the Basel standards while it rewrites banking regulations as mandated by the Dodd-Frank Act. The Basel Committee on Banking Supervision, which includes regulators from the U.S. and Europe, set a supplemental capital standard for the largest international banks. The buffer will range from 1 percentage point to 2.5 percentage points of risk-weighted assets--on top of a required 7% common equity for all banks … * WASHINGTON (8/12/11)--Three Federal Reserve regional bank presidents formally dissented from Fed Chairman Ben Bernanke’s decision to open the door to easier monetary policy Tuesday during the Federal Open Market Committee meeting The Wall Street Journal Aug. 11). It was first time in the chairman’s five-and-half-year tenure that so many colleagues had dissented from a formal Fed decision, a sign of opposition that contrasts with Bernanke’s desire for consensus, said the Journal. How the dissent shapes future Fed moves is a key question moving forward for Bernanke and the board. One of the dissenters, Dallas Fed President Richard Fisher, declined comment on Fed policymakers’ discussions Tuesday, but offered praise for Bernanke’s leadership. Another dissenter, Narayana Kocherlakota, president of the Minneapolis Fed, said Bernanke cultivates the expression of disparate views, which leads to better monetary policy …

15-year fixed ARMs reach record lows

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WASHINGTON (8/12/11)—Average rates on 15-year fixed, five-year adjustable- and one-year adjustable-rate mortgages (ARM) all fell to all-time lows this week as economic issues and worldwide stock market troubles ruled the news, Freddie Mac reported. Fifteen-year fixed mortgage rates averaged 3.5%, while five-year ARMs averaged 3.13% and one-year ARMs averaged 2.89%. Thirty-year mortgage rates reached their lowest point this year, averaging 4.32%. Last year at this time, 30-year mortgages averaged 4.44%, and 15-year mortgages averaged 3.92%. Five-year ARMs averaged 3.56% this time last year, and one-year Treasury-indexed ARMs averaged 3.53% at that time. Freddie Mac Chief Economist Frank Nothaft said that developments in European debt markets, as well as the Federal Reserve’s decision to hold interest rates at between 0% and 0.25% and keep the rate at "exceptionally low levels" at least through mid-2013, were among the many factors leading to lowered rates. Nothaft said that the lower mortgage rates “will help to maintain the high degree of home-buyer affordability in the market.” For the full release, use the resource link.

CUNA releases RESPA rule analysis

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WASHINGTON (8/12/11)--The Credit Union National Association has released its analysis of the U.S. Department of Housing and Urban Development’s (HUD) final rule that makes technical corrections and clarifies amendments to HUD’s Real Estate Settlement Procedures Act (RESPA) regulations. The corrections and amendments regard RESPA's Good Faith Estimate form and Appendix A to the regulations. The changes made by this final rule are effective Aug. 10. For the final rule analysis, use the resource link.

CDFI Fund reaching new heights director says

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WASHINGTON (8/12/11)--The U.S. Department of the Treasury's Community Development Financial Institutions (CDFI) Fund eclipsed $1 billion in total awards this year and is "reaching new heights" in 2011, said CDFI Fund Director Donna J. Gambrell in a Thursday release. The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. The number of certified CDFIs reached 960 this year, the highest number since the fund began in 1994 and an increase of nearly 20% since last year, Gambrell noted, adding that the list of CDFIs will grow “as more organizations recognize the benefits of certification. “We also recognize that, as it does grow, we must continue to work closely with new and existing CDFIs to ensure that they fully appreciate the responsibilities that come with being a certified CDFI,” Gambrell added. The fund earlier this year awarded $142,302,667 to 155 institutions, including 25 credit unions, in the largest single round of monetary awards in it's history. The fund’s New Market Tax Credits (NMTC) program also grew during 2011, receiving a record 314 applications for $26.6 billion in NMTC allocation authority. 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. Gambrell also previewed some upcoming CDFI Fund projects, including its developing CDFI Bond Guarantee Program and a potential project that would aid low-income individuals living along the U.S.-Mexico border. For the full CDFI Fund release, use the resource link.

Pelosi names final trio to debt reduction super committee

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WASHINGTON (8/12/11)--The full 12-member Congressional Joint Select Committee on Deficit Reduction was completed on Thursday when House Minority Leader Nancy Pelosi (D-Calif.) named Reps. Xavier Becerra (D-Calif.), Chris Van Hollen (D-Md.) and James Clyburn (D-S.C.) as her selections for the panel. Clyburn and his family have been involved in the credit union movement for years, and the congressman publicly appealed for credit unions to be exempted from portions of the Dodd-Frank Act during the Credit Union National Association’s (CUNA) 2010 Governmental Affairs Conference. Van Hollen was one of many co-sponsors of the Credit Union Regulatory Improvements Act and has backed credit unions in other capacities during his time in Congress. Other members of the committee include:
*Republican senators Jon Kyl (Ariz.), Pat Toomey (Pa.) and Rob Portman (Ohio); *Democratic senators Patty Murray (Wash.), Max Baucus (Mont.) and John Kerry (Mass.); and *Republican House members Jeb Hensarling (Texas), Dave Camp (Mich.) and Fred Upton (Mich.).
Murray and Hensarling will serve as committee co-chairs. The committee, which was created as part of the recently approved debt ceiling lift/deficit reduction agreement, has been charged with creating more than $1 trillion in deficit reductions. Committee recommendations will be subject to votes in the House and Senate. If both congressional bodies fail to approve the cuts, automatic spending cuts will be made. CUNA Vice President of Legislative Affairs Ryan Donovan said CUNA will be following the activity of this joint select committee closely because of the possibility, currently viewed as remote, that the credit union tax status could come under scrutiny. "CUNA will continue to emphasize the positive impact that the credit unions have on the members and communities that they serve," he added.

FHFA may convert GSE-held homes to rentals affordable homes

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WASHINGTON (8/11/11)--The Federal Housing Finance Agency (FHFA) is seeking outside opinion on how best to maximize value to taxpayers and increase private investment in the housing market while disposing of single-family real estate owned (REO) properties held by Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac and the Federal Housing Administration (FHA). The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) are also participating in the initiative. FHFA Acting Director Edward DeMarco in a release said that the GSEs will still market REOs for sale for the time being, but will investigate other opportunities that would reduce GSE credit losses and help stabilize home prices and neighborhoods. HUD Secretary Shaun Donovan added that with “half of all renters spending more than a third of their income on housing and a quarter spending more than half,” the government must “find and promote new ways to alleviate the strain on the affordable rental market.” Among the approaches being considered are converting government-held homes into rental units or affordable housing. The FHFA calls for approaches that achieve the following objectives:
* Reduce the REO portfolios of the GSEs and FHA in a cost-effective manner; * Reduce average loan loss severities to the GSEs and FHA relative to individual distressed property sales; * Address property repair and rehabilitation needs; * Respond to economic and real estate conditions in specific geographies; * Assist in neighborhood and home price stabilization efforts; and * Suggest analytic approaches to determine the appropriate disposition strategy for individual properties, whether sale, rental, or, in certain instances, demolition.
For the full FHFA release, use the resource link.

Nine of 12 debt reduction committee members named

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WASHINGTON (8/11/11)--Six senators and three Republican House members have been appointed to a 12-member Congressional Joint Select Committee on Deficit Reduction charged with creating more than $1 trillion in deficit reductions. The so-called “super committee” was created as part of the debt ceiling lift/deficit reduction agreement that was signed into law last week. It will examine tax policy and government spending priorities in a bid to reduce the national deficit. The super committee’s recommendations will be subject to votes in the House and Senate. If both congressional bodies fail to approve the cuts, automatic spending cuts will be made. The Republican Senate picks for the super committee, which were announced by Senate Minority Leader Mitch McConnell (R-Ky.) on Wednesday, are Jon Kyl (R-Ariz.), Pat Toomey (R-Pa.) and Rob Portman (R-Ohio). Senate Democratic Leader Harry Reid (Nev.) appointed Sens. Patty Murray (D-Wash.), Max Baucus (D-Mont.) and John Kerry (D-Mass.). Murray will serve as co-chairman of the committee, Reid said. House Speaker John Boehner (R-Ohio) has named Jeb Hensarling (R-Texas) as the other co-chairman. House Ways and Means Committee Chairman Dave Camp (R-Mich.) and energy and commerce committee Chairman Fred Upton (R-Mich.) have also been appointed. House Minority Leader Nancy Pelosi had not announced her selections at press time. Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan has said that CUNA will closely follow events surrounding the super committee and continue to emphasize the positive impact that the credit unions have on the members and communities that they serve. Donovan has said that debate could ensue over whether the Joint Committee has the ability to look at tax expenditures as part of its role. He added that Boehner recently said there is "no appetite" among House lawmakers to look at increasing tax revenues. "We'll keep a close eye on this and will engage with the Joint Committee as appropriate," Donovan said, adding that "preserving the credit union tax status is absolutely the most critical issue CUNA works on."

NCUA to CUs Ease member downgrade fears

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ALEXANDRIA, Va. (8/11/11)--The National Credit Union Administration (NCUA) has encouraged credit unions to assure their members that Standard & Poor's recent U.S. credit rating downgrade will have no impact on federal credit union deposit insurance, adding that the credit union system remains “strong and well capitalized.” In a development Wednesday night, NCUA learned that S&P's has also downgraded the NCUA Guaranteed Notes (NGNs) to AA+ status from AAA as a direct result of the S&P's downgrade of U.S. long-term sovereign debt. NCUA reassured that this would involve no new negative impact on Corporate Stabilization costs. The agency in a letter to credit unions (11-CU-11) added that member concerns related to the U.S. credit downgrades “may lead to unusually large deposit inflows or draws on existing lines of credit.” The NCUA recommended that credit unions contact the agency or state credit union regulators “if significant balance sheet growth leads to a temporary decline in regulatory capital levels.” Credit unions should also “consider all reasonable and prudent actions” to aid members who are enduring financial troubles, and should “maintain a dialogue with their examiners as they assess risk management challenges,” the NCUA added. As was also reported in Wednesday’s News Now, the agency advised credit unions that the downgrades of credit ratings of the U.S. government and a number of government programs this past week will have little effect on credit unions and the Corporate Stabilization program. According to the NCUA, the current risk-weights for Treasury securities will not change. This includes other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored enterprises. However, the NCUA noted, if a credit union or other entity bought NGNs and wants to sell them in the marketplace now rather than hold to maturity, the price or value may or may not be affected by S&P's action. While S&P did downgrade four NCUA unsecured debt guaranteed issues from two corporate credit unions the agency had guaranteed under the Temporary Corporate Credit Union Liquidity Guarantee Program from AAA to AA+, the downgrade does not affect the costs to NCUA of these debt obligations. There will be no increase in corporate credit union debt obligation costs for the NCUA or credit unions, the agency added.

CUNA seeks comment on possible NCUA derivatives proposal

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WASHINGTON (8/11/11)--Should the National Credit Union Administration (NCUA) allow federal credit unions to use derivatives--such as interest-rate swaps--on a case-by-case basis, or invest in derivatives independently or via a third party? The Credit Union National Association (CUNA) is seeking credit union comment on these and other derivatives-related issues. CUNA has asked for recommendations regarding NCUA‘s Advanced Notice of Proposed Rulemaking on derivatives regulations, including the accounting and financial reporting of derivatives. CUNA is also asking credit unions if current investment pilot programs that allow credit unions to engage in derivatives purchases for interest rate risk (IRR) management should be continued. The NCUA currently allows federal credit unions that meet certain net worth ratio and earnings requirements to invest in derivatives through an investment pilot program. These transactions typically involve interest rate swaps and caps to hedge IRR on fixed-rate investments such as mortgages. Using interest rate swaps and caps in this manner can effectively convert a fixed-rate loan into a variable-rate loan for the duration of the swap or cap contract, and reduce IRR. According to the NCUA, nine credit unions had outstanding derivatives contracts at the end of 2010. Two additional credit unions are approved to independently engage in derivatives for IRR. State-chartered credit unions may have derivatives authority based on state laws and regulations, although the number of state-chartered credit unions that invest in derivatives is unknown. CUNA is accepting comments until Aug. 16. For the full comment call, use the resource link.

Go Direct reminds Direct deposit prevents theft

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WASHINGTON (8/10/11)--The U.S. Treasury’s Go Direct program this week reminded partners that reducing the risk of benefit check theft was one of the reasons behind the switch to all-electronic federal benefit payments, and encouraged benefit recipients to switch to electronic benefit payments well ahead of the March 1, 2013 deadline. The U.S. Treasury began its Go Direct program, which encourages Americans to switch to direct deposit, in 2004. The Go Direct campaign notes that direct deposit enhances safety and convenience. The Treasury officially ended the use of paper checks for the payment of newly filed Social Security and other federal benefit payments on May 1. All federal benefit payments will be made electronically beginning on March 1, 2013. “Criminals can steal checks out of mailboxes, leaving people who rely on that money for essentials--such as medicine, rent or groceries--in a difficult situation,” the Treasury said. Credit unions and other Go Direct partners can use provided news copy, fliers and posters to promote direct deposit. Go Direct suggested that these educational materials could be used during October’s Crime Prevention Month activities. Go Direct also reminded organizations with employees that are close to retirement that National Save for Retirement Week, which will take place from Oct. 16 until Oct. 22, is the perfect time to inform them of the coming changes in federal benefit payments distribution. Go Direct is providing newsletter copy, social media tips, and a direct deposit checklist to ease the federal benefits enrollment process. The Credit Union National Association is a Go Direct national partner and supports the check-safety and cost-savings goals for the program. For more information on Go Direct, use the resource link.

Downgrades will have little effect says NCUA

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WASHINGTON (8/10/11)--Standard & Poor's (S&P) downgrades of credit ratings of the U.S. government and a number of government programs this past week will have little effect on credit unions and the Corporate Stabilization program, said the National Credit Union Administration (NCUA) Tuesday. Buddy Gill, NCUA's senior strategic communications and external relations advisor, cited three reasons why: First, all federal banking agencies, including NCUA, affirm the current risk-weights for Treasury securities will not change. This includes other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored enterprises. "Credit unions do not have to worry about examiners treating NGNs (NCUA Guaranteed Notes) or Treasuries any differently for risk purposes," said Gill, who added NCUA will send a letter to credit unions to affirm "things don't change." Second, the NGNs retain their current AAA rating. Although they were placed on S&P's negative credit watch list Monday, their rating has not changed. "All the NGNs have been sold already and are collateralized so the negative watch status does not affect the costs to NCUA of these debt obligations," NCUA said. In other words, there is "no negative effect on NCUA's Corporate Stabilization Program costs." However, if a credit union or other entity bought NGNs and wants to sell them in the marketplace now rather than hold to maturity, the price or value may or may not be affected by S&P's action, said NCUA. Third, S&P did downgrade four NCUA unsecured debt guaranteed issues from two corporate credit unions the agency had guaranteed under the Temporary Corporate CU Liquidity Guarantee Program from AAA to AA+. However, the downgrade does not affect the costs to NCUA of these debt obligations. "This should be a "non-event" since these are not traded in the secondary market," Gill said. "Bottom line: the S&P downgrade has no negative impact on Corporate Stabilization costs," he said.

NCUA seeking nearly 2B in corporate CU damages

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ALEXANDRIA, Va. (8/10/11)--The National Credit Union Administration (NCUA) is seeking $491 million in damages from Goldman Sachs & Co., alleging that the firm violated federal and state securities laws when it sold securities to U.S. Central FCU and Western Corporate FCU. Added to other lawsuits, that brings the total damages the agency is seeking to nearly $2 billion. The agency has requested nearly $2 billion in combined damages from Goldman Sachs, RBS Securities and J.P. Morgan Securities, LLC. This is the fourth suit of its kind, and the agency said it expects to take an additional five to 10 actions. The NCUA's suit claims that Goldman Sachs sellers and underwriters made several material misrepresentations in the offering documents, leading the corporates to believe the risk of loss associated with their investments was minimal, when in fact the risk was substantial. “The mortgage-backed securities experienced dramatic, unprecedented declines in value,” effectively rendering the corporates insolvent, the agency added. The NCUA’s latest published estimates are that the total eventual losses on these investments will be around $15 billion. “While the credit union industry generally fared better than the rest of the financial world over the last few years, the corporate credit union collapse remains the largest crisis ever faced by credit unions,” NCUA Chairman Debbie Matz said. “Fortunately, given the liquidity in the system, the average consumer is insulated from these past losses. However, it remains our statutory duty to replenish the insurance fund that protects consumer deposits by seeking recoveries.” Any recoveries from these actions will reduce the total losses resulting from the failure of five corporate credit unions and would help to reduce the amount of future corporate credit union stabilization fund assessments on credit unions, the NCUA has said. The Credit Union National Association has encouraged the NCUA to take "all reasonable actions" available to pursue effective restitution from securities firms that "share the culpability for the events that led to the corporate failures." For the full NCUA release, use the resource link.

Hawaiian CU now CDFI approved

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WASHINGTON (8/10/11)--Honolulu, Hawaii’s The Queen’s FCU is one of three new financial institutions that were added to the U.S. Treasury’s list of approved Community Development Financial Institutions (CDFI) in July. The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. Credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding to help maintain their credit union's presence in the community. CDFI Fund distributions are merit-based. There are now 957 approved CDFIs, according to the Treasury. The credit union also was added to the list of institutions approved under the CDFI Fund’s Native American CDFI Assistance (NACA) Program, which addresses a lack of economic opportunity in Native communities by increasing access to capital and financial services. The credit union works with native Hawaiian healthcare workers and is a designated a low-income credit union. The CDFI Fund in a release noted that development services provided by the credit union include mortgage loan seminars, loan counseling, and overdraft and payday lender education. The CDFI Fund last month awarded $25.7 million in funds to 25 credit unions under the fiscal year 2011 round of the CDFI Fund's cornerstone program, the Community Development Financial Institutions Program. The awards will help the specialized, community-based financial institutions spur local economic growth and recovery, and expand access to affordable financial products and services. Credit union awards represented 18.06% of the number of CDFI Fund awards granted in this round. For the CDFI Fund’s release, use the resource link.

Inside Washington (08/09/2011)

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* WASHINGTON (8/10/11)--The IRS’s Volunteer Income Tax Assistance (VITA) Return Preparation Adjusted Gross Income (AGI) threshold will stand at $50,000 for the 2011 tax year. As reported in the Pennsylvania Credit Union League’s Life is a Highway (Aug. 9), this threshold is based on 2011 tax year EITC AGI limits. The IRS has determined that earned income and adjusted gross income (AGI) must each be less than:
*$43,998 ($49,078 married filing jointly) with three or more qualifying children; *$40,964 ($46,044 married filing jointly) with two qualifying children; *$36,052 ($41,132 married filing jointly) with one qualifying child; and *$13,660 ($18,740 married filing jointly) with no qualifying children.
The maximum EITC for 2011 will be $5,751 for households with three or more qualifying children, $5,112 for households with two qualifying children, $3,094 for households with one qualifying child, and $464 for households with no qualifying children. Investment income must be $3,150 or less for the year, the IRS said … * WASHINGTON (8/10/11)--About 31,600 homeowners received a permanent modification through the Treasury Department’s Home Affordable Modification Program (HAMP) in June, according to the monthly HAMP report. More than 760,000 homeowners nationwide have received a HAMP permanent modification to date, with a median payment reduction of 37%, according to the Treasury Department. About 115,500 borrowers are in payment trials, with 18,200 receiving a trial principal reduction. Roughly 7,000 homeowners have received a permanent principal reduction under HAMP. The median principal amount reduced is nearly $67,500, or 30% of the loan amount …

Inside Washington (08/08/2011)

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* WASHINGTON (8/9/11)--The Credit Union National Association will monitor the proceedings of a new congressional “supercommittee” charged with recommending a deficit-reduction package. After Standard & Poor’s downgrade of the U.S. government credit rating, the committee will be under pressure to come up with a deficit-reduction package that exceeds the original goal of $1.5 trillion, lawmakers say (The New York TimesAug. 8). Although, the committee has not yet been appointed, it’s mission expanded with the downgrade. Not only must it cut the annual federal budget deficit and slow the growth of federal debit, it must settle uneasy markets and help restore a AAA credit rating for the U.S. In its report on Friday, S&P cited the inability of the two political parties to bridge their gulf on fiscal policy among the reason for removing long-term Treasury debt from its AAA rating. The 12 members of the committee will be appointed Aug. 16 by congressional leaders of the Republican and Democrat parties ... * WASHINGTON (8/9/11)--Federal Reserve international finance director D. Nathan Sheets, an 18-year veteran of the regulator, has announced that he will leave his position. Sheets has served as international finance director for the past four years. His work during that time included representing the Fed at international meetings and meetings with foreign central banks. He has also advised the Federal Open Market Committee on foreign economic and financial developments. Fed Chairman Ben Bernanke praised Sheets for providing “invaluable insight and stellar leadership at a time of great volatility in the world economy.” The Fed said that Deputy International Finance Director Steven Kamin will serve as acting director of the division until a replacement is found ...

SandP drops Fannie Freddie ratings NCUA issues to AA

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WASHINGTON (8/9/11)--Credit rating agency Standard & Poor's on Monday downgraded the credit rating for government-sponsored enterprises Fannie Mae and Freddie Mac, as well as the ratings applied to four National Credit Union Administration-guaranteed debt issues from the corporates. The rating agency specifically downgraded debt issued by two corporate credit unions under the Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) to AA+ from AAA. S&P said that the downgrades on the TCCUSGP issues "reflect their direct credit support from the U.S. Treasury for timely and ultimate repayment." S&P also cut the U.S. government's credit rating to AA+ Friday, saying that the recently approved deficit reduction plan didn't do enough to re-insert stability in the country's debt situation. Government debts and securities were downgraded. S&P said that the GSE downgrade was tied to Fannie and Freddie’s "direct reliance" on the U.S. government. The GSEs have been held under U.S. government conservatorship since 2008. Another credit rating agency, Fitch Inc., late last month said that Fannie Mae and Freddie Mac will require continued capital injections from the Treasury Department to avoid being unwound. Credit Union National Association (CUNA) Chief Economist Bill Hampel said that the downgrade on U.S. Treasury securities has had no impact on Treasury interest rates, "and as long as that is the case, there would appear to be little if any impact on Fannie, Freddie or other agency debt." Finance industry representatives recently urged the government to transition away from Fannie Mae and Freddie Mac during a Senate subcommittee hearing, but legislation to create a new mortgage finance system is unlikely. However, legislation that would require the director of the Federal Housing Finance Agency to determine which valuable assets held by the GSEs are critical to their mission and to force them to sell or dispose of non-critical assets, has been discussed. That bill, known as the Market Transparency and Taxpayer Protection Act (H.R. 2440), was introduced by Rep. Robert Hurt (R-Va.) and passed out of the House Financial Services subcommittee on capital markets and government GSEs via a voice vote early last month. The subcommittee during that hearing also voted to approve the Fannie Mae and Freddie Mac Transparency Act (H.R. 463); The Fannie Mae and Freddie Mac Taxpayer Payback Act (H.R. 2436); The Housing Trust Fund Elimination Act (H.R. 2441); Cap the GSE Bailout Act (H.R. 2462); Eliminate the GSE Charter During Receivership (H.R. 2439); and The GSE Legal Fee Reduction Act (H.R. 2428). Fannie Mae late last week reported $2.9 billion in losses during the recently ended second quarter of 2011. For prior coverage of S&P’s recent rate cut, use the resource link.

CUNA to NCUA Limit new regs to substantiated problem areas

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WASHINGTON (8/9/11)--The National Credit Union Administration (NCUA) should avoid broad-based regulatory requirements in favor of more targeted actions and should refrain from adding to the burden caused by current credit union regulatory requirements, the Credit Union National Association (CUNA) said in a comment letter. The agency should add new regulations or expand existing regulations “only if there is a well-documented and compelling need to do so,” CUNA added. The comment letter, in response to the NCUA’s 2011 regulatory review, noted that “the cumulative regulatory burden is at an all-time high” due to the activities of the NCUA and Dodd-Frank Act regulations. CUNA’s letter focused on portions of the regulatory review addressing security programs, Bank Secrecy Act (BSA) compliance, and crime reporting, as well as requests for agency action. In the letter, CUNA specifically urged the NCUA to minimize BSA-related compliance burdens by encouraging regulators and legislators to help “minimize the costs and problems institutions encounter to meet BSA requirements and to satisfy examiners.” CUNA also suggested some specific BSA changes that would take Congressional action, such as increasing the dollar threshold for filing currency transaction reports to $20,000 from $10,000. CUNA also suggested increasing the threshold for filing Suspicious Activity Reports to $5,000 and at least doubling triggers for reporting wire transfers and money laundering activities. Credit unions are concerned that some of the work of the NCUA’s Office of Consumer Protection could overlap with the priorities of the Consumer Financial Protection Bureau, CUNA added. The NCUA should also work with the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) to minimize areas where NCUA and FinCEN regulations overlap. CUNA said that it would discuss the office with the NCUA soon. CUNA said it plans to comment on other 2011 NCUA regulatory review items later. The NCUA has also targeted rules addressing records preservation programs, appendices-record retention guidelines, catastrophic-act preparedness guidelines, and post-employment restrictions for some NCUA examiners during its 2011 regulatory review. The NCUA reviews its full regulatory catalogue every three years, and schedules reviews of portions of its regulations on a rotating basis. For the CUNA letter, use the resource link.

Mass. league veteran added to BITS Liaisons Task Force

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WASHINGTON (8/9/11)--John Morawski, Massachusetts Credit Union League chief technology officer, has agreed to join the Credit Union National Association (CUNA) BITS Liaisons Task Force. Morawski is a long-time credit union movement veteran and has worked with the league since 1998. He has performed technology consulting work on behalf of the league by helping credit unions research data processing systems and negotiate technology vendor contracts. He has also conducted on-site Gramm-Leach-Bliley audits and used his skills as a certified ethical hacker to help credit unions address weaknesses in their computer networks. BITS is a financial services trade group that aides growth of electronic financial services for financial institutions and consumers. It represents the 100 largest U.S. financial institutions. The Credit Union National Association (CUNA) takes part in BITS’ committees and working groups related to fraud, regulation, security, and other issues. CUNA is currently participating in BITS’ Fraud Reduction Steering Committee, Security and Risk Assessment Working Group, and Vendor Council. CUNA is the only trade group that is a BITS member. For more on CUNA’s work with BITS, use the resource link.

Agencies explain impact of SandP action on risk-based capital

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WASHINGTON (8/8/11)--After Standard & Poor’s (S&P) rating agency lowered the long-term rating of the U.S. government and federal agencies to AA+ from AAA, the federal credit union, bank, and thrift agencies issued guidance to their regulated financial institutions. The National Credit Union Administration, Federal Reserve Board, Federal Deposit Insurance Corp., and Office of the Comptroller of the Currency said:
* For risk-based capital purposes, the risk weights for U.S. Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change. * The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities under other federal banking agency regulations, including, for example, the Federal Reserve Board’s Regulation W, will also be unaffected.
The joint-agency announcement was spurred by the widely reported action by S&P, which cut the long-term U.S. credit rating by one rank. The agency said it made the cut because the recently approved deficit reduction plan didn’t do enough to re-insert stability in the country’s debt situation. MSNBC reported that while U.S. Treasury securities were once regarded as the safest investment in the world, they now will be rated lower than bonds issued by such countries as the United Kingdom, Germany, France and Canada. The deflated rating also could increase borrowing costs across the spectrum—for the U.S. government, for companies and for consumers.

Fannie Mae loses 2.9B in 2011 second quarter

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WASHINGTON (8/8/11)—Loan modifications contributed, in part, to Fannie Mae’s reported $2.9 billion in losses for the second quarter of 2011, but Chief Financial Officer (CFO) Susan McFarland said that the government-sponsored mortgage entity would continue to work with borrowers. Noting that the modifications should “benefit the housing market and reduce long-term credit losses,” the Fannie Mae CFO added that “while modifications contribute to credit related expenses, successful modifications reduce foreclosures and keep families in homes.” Modifications, repayment plans, and other foreclosure-avoidance measures have been worked out with more than 874,000 homeowners between Jan. 1, 2009 and June 30, 2011, Fannie Mae said. Fannie Mae in a Friday release said that the second quarter losses reflected $6.1 billion in credit-related expenses, the majority of which were related to assets that the company has held since before 2009. Continued weakness in housing and mortgage markets also contributed to the loss, Fannie Mae added. Fannie Mae purchased or guaranteed $306 billion in loans during the first half of 2011, helping to finance 1.238 million single-family conventional mortgages. It issued 43.2% of all mortgage-related securities in the secondary market during the second quarter, remaining the largest issuer of those types of securities. The mortgage entity said plans to borrow $5.1 billion from the U.S. Treasury to eliminate its net worth deficit. It has borrowed nearly $104 billion from the Treasury since the fourth quarter of 2008. For Fannie Mae’s full results for the second quarter of 2011, use the resource link.

CFPB nomination hearing mortgage comment due date rescheduled

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WASHINGTON (8/8/11)--Events surrounding two key Consumer Financial Protection Bureau (CFPB) issues, the congressional hearings on establishment of a director and the online comment period for a combined mortgage disclosure form, were both rescheduled last week. The Senate Banking Committee’s nomination hearing for Richard Cordray for the position of CFPB director is scheduled to take place the week of Sept. 6, possibly on Sept. 9. It was previously scheduled for Aug. 4. That nomination hearing, along with other Senate Banking and House Financial Services Committee hearings, was delayed last week as members of Congress left for their August recess. Some members of Congress returned for a late week vote to reauthorize funding for the Federal Aviation Administration, but the hearings were not rescheduled. The CFPB also extended the comment deadline for on the latest draft of its combined mortgage disclosure form to Aug. 10, from Aug. 8. This draft is the third of five planned versions of a combined form for Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures. The CFPB plans to continue its revisions and release a single draft disclosure later in the year. The CFPB has specifically asked for comment on whether the form will help consumers understand closing costs associated with their loans. Credit unions can also comment on whether lenders and brokers will be able to clearly and easily explain the form to their customers, and can recommend any improvements that would clarify the form. The Credit Union National Association (CUNA), the leagues and credit unions have worked with the CFPB during the revision process, and CUNA has encouraged the CFPB to consider the needs of credit unions as it continues its work. For the latest CFPB release, use the resource link.

Bill would extend FHA max loan limit through 2013

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WASHINGTON (8/8/11)--A bill introduced last week would allow the Federal Housing Administration (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. Congress increased the loan limit for the FHA, Fannie, Freddie and the VA to its current amount in 2008. This extension is set to expire for the FHA, Fannie Mae and Freddie Mac on Sept. 30 and for the VA on Dec. 31. The new legislation is known as the Homeownership Affordability Act of 2011 and introduced by Sens. Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.). The bill is also co-sponsored by Sen. Dianne Feinstein (D-Calif.). A recent release said that if the higher limit is not extended, loans would be affected in 669 counties across 42 states, reducing loan limits by an average of more than $68,000 per county. The maximum guaranteed loan amountwould drop to $625,500, or 115% of local median home prices, the release added. “Allowing these limits to expire would be bad medicine for our economy at a time when we need a booster shot,” Menendez said. Isakson said 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.” Members of Congress are scheduled to return to Washington when the August recess ends on Sept. 6.

2Q personal bankruptcies up 3.9

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WASHINGTON (8/8/11)--The amount of personal bankruptcy filings increased by 3.9% during the second quarter of 2011, the U.S. Court’s administrative office has reported. Moody's Economy.com said that the second quarter personal filing increase is “consistent with seasonal norms” and noted that those filings “have not fallen in any second quarter since 1992.” Personal bankruptcy filings fell by 0.9% during the first quarter of 2011, but rose by 9.1% in the second quarter of 2010. Just over 1.47 million of the nearly 1.53 million bankruptcy petitions filed in the 12 months leading up to June 30 were personal filings. The June 30 total represents a 2.7% drop from the 1.57 million filings that were received during the previous year. The administrative office noted that this drop was not universal, as bankruptcy filings increased in 19 of 94 court districts, with the largest increases over the past year coming in southern Florida, as well as portions of Utah and California. Chapter 7 and Chapter 11 filings both fell during the year ended June 30. News Now last week reported that U.S. consumer bankruptcy filings decreased 18% nationwide between July 2010 and July 2011, representing the seventh consecutive month for which there were fewer bankruptcies in 2011 than during the previous year. For more details and News Now's prior coverage, use the resource links.

Inside Washington (08/05/2011)

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* WASHINGTON (8/8/11)--Treasury Secretary Timothy Geithner told President Barack Obama he will remain in his position, ending speculation he would step down (The New York Times Aug. 8). Geithner told White House officials several weeks ago he was considering stepping down following the debt-ceiling debate to spend more time with his family. Geithner said he would decide on his future after the administration reached a deal with Congress on the raising the U.S. debt ceiling. Obama signed the deb-ceiling legislation into law on Tuesday. The White House urged Geithner to stay on as Treasury secretary, citing the need for stability during a difficult economy and the prospect of a confrontation with Senate Republicans over the nomination of a new secretary …

Reid says FAA deal set but CUs were ready

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MADISON, Wis. (8/5/11)--As U.S. Senate Majority Leader Harry Reid (D-Nev.) and Congress reached an agreement to fund the Federal Aviation Administration (FAA) Thursday afternoon, credit unions serving FAA employees had already begun offering financial assistance for work disruptions caused by the funding stalemate. The agreement ended a partial shutdown of the FAA that left 74,000 transportation and construction employees out of work and 40 safety inspectors working without pay The New York Times Aug. 4). At FAA FCU, Oklahoma City, Okla., furloughed employees with delayed paychecks were offered 60-day, 0% interest rate loans for 100% of their last paycheck up to $6,000. The $502 million FAA FCU offered overdraft forgiveness and skip-a-payment on up to two monthly loan payments, excluding mortgages, to furloughed members up to 60 days from the furlough date. The credit union also offered to waive its $40 overdraft fee. SkyOne FCU, with $339 million in assets, Hawthorne, Calif., offered a Crisis Co-Pilot signature loan up to $5,000 with a 0% annual percentage rate for the first six months and terms as long as 48 months, with no payments the first 90 days. SkyOne FCU also offered reversals on select fees for six months if needed, extensions on loan payments and free credit counseling.

Inside Washington (08/04/2011)

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* WASHINGTON (8/5/11)--The Department of Housing and Urban Development and Bank of America (BofA) have reached a settlement that releases the bank from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent mortgages insured by the Federal Housing Authority. The agreement was reached separately from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures. Under the settlement, BofA will waive a minimum of $10 million in unpaid mortgage payments and reach out to each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative. In agreeing to the settlement, HUD decided not to pursue steep monetary damages or admissions of error from BofA. Instead, BofA agreed to implement steps that in most cases it was supposed to have already taken under the terms of its government-guaranteed loans… * WASHINGTON (8/5/11)--The U.S. Small Business Administration (SBA) has announced the first 20 non-profit community organizations to receive financing under a new program. The Small Business Jobs Act of 2010 created The Intermediary Lending Program, which is intended to support businesses in underserved markets. The three-year pilot program provides direct loans to eligible non-profit intermediaries for the purpose of making small business loans of up to $200,000. The SBA said a goal over the next two years is to assess the intermediary model as an effective tool for increasing lower-dollar lending to small businesses and startups, particularly those in traditionally underserved communities … * WASHINGTON (8/5/11)--Although legislation to create a new mortgage finance system is unlikely, some industry representatives continued to urge the government to transition away from Fannie Mae and Freddie Mac at a Senate subcommittee hearing Wednesday (American Banker Aug. 3). Under one proposal, Fannie and Freddie would develop a subordinated bond structure, where private investors would take the first-loss position on the two government-sponsored enterprises’ bonds, either side-by-side or ahead of Fannie and Freddie. That approach likely would require the approval of the Federal Housing Finance Agency, which regulates Fannie and Freddie. Thomas Hamilton, managing director at Barclays Capital, said that he would like to see the size of mortgages that Fannie and Freddie guarantee lowered significantly over the next year and a half … * WASHINGTON (8/5/11)--“Too big to fail” financial players continue to harm the U.S. economy, according to several prominent economists who testified at a Senate Banking financial institutions subcommittee hearing Wednesday (American Banker Aug. 3). The presence of the largest players creates a “distorted economy” because small- and medium-sized lenders are starved for funds relative to big banks engaged in more speculative activities, said Joseph Stiglitz, an economist and professor at Columbia University Business School. As a result, larger institutions are able to get access to capital at lower costs, especially compared with community financially institution, said Stiglitz. With less government involvement, the private sector would bear the risk that U.S. taxpayers currently hold, said Paul Pfleiderer, a finance professor at Stanford University’s Graduate School of Business. With an implicit government guarantee, big financial players are more likely to take on more risk, with taxpayers inevitably left to bear the losses, according to economists …

CFPB setup continues director awaits confirmation

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WASHINGTON (8/5/11)--The Consumer Financial Protection Bureau (CFPB) remains without an official leader after a Senate Banking Committee nomination hearing for potential director Richard Cordray was postponed until September earlier this week, but the agency has continued to take initial steps in recent weeks to set the stage for its future work. Rules that authorize CFPB officials to begin civil investigations, demand investigation-related materials and documents from individuals and businesses, and hold investigational hearings are among those released. The CFPB has also set forth rules covering adjudication proceedings related to these investigations. Groups or individuals that are involved in adjudication proceedings will have standard legal rights during the hearings, and would ultimately have the right to appeal a CFPB ruling if the agency rules against them. The agency has published rules that codify how state government officials will notify the agency of any of their own regulatory or enforcement actions. Specifically, the CFPB has said that state officials must notify the CFPB of these types of actions within 10 days of the action. Additionally, rules addressing how citizens and others can obtain CFPB-related information under the Freedom of Information Act have been released. CFPB recordkeeping practices were also covered in a release. All of these rules are effective as of July 28, and all are open to public comment. The CFPB has said it will accept comment until Sept. 26. The CFPB also continues to set up specialized consumer offices. For instance, it announced earlier this week that Holly Petraeus would lead its Office of Servicemember Affairs. Petraeus has previously served as the director of the Better Business Bureau (BBB) Military Line, a joint BBB/Department of Defense project that provides consumer education and advocacy for military families. She is the wife of General David Petraeus and the daughter of a former West Point superintendent. The CFPB office will work to shield U.S. servicemembers and their families from abusive financial practices and will generally monitor servicemember questions and complaints regarding consumer financial products and services. It will also coordinate responses with CFPB staff and other federal and state agencies. For more on this CFPB initiative, and the CFPB’s other recent actions, use the links below to read information published in the Federal Register.

CU views sought on CUSO reporting plan

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WASHINGTON (8/5/11)--The National Credit Union Administration (NCUA) last month said its proposed regulation to require credit union service organizations (CUSOs) to directly file their financial statements to the agency would be “controversial,” and credit unions can forward their own comments to the Credit Union National Association (CUNA) through a comment call released this week. The NCUA late last month released its CUSO reporting proposal, which would also subject subsidiaries of CUSOs to the same financial reporting standards. Financial reports would also need to be forwarded to appropriate state supervisors. The agency previously had the statutory authority to examine CUSOs, but that authority expired in 2001, and Congress has not moved to reinstate that authority. In releasing the proposal, the NCUA noted that its current CUSO information gathering system, which partly relies on natural person credit unions that obtain services from the CUSOs to provide the majority of financial information on CUSOs to the NCUA, is inefficient. This system, and the overall lack of detailed CUSO information, "restricts NCUA's ability to conduct offsite monitoring and evaluate systemic risks posed by CUSOs," the agency added. The NCUA does currently have the authority to inspect the books and records of some CUSOs, but that authority is not universal. Agency leaders in a release said that the proposal, if enacted, would "enhance protections to consumers, credit unions and the National Credit Union Share Insurance Fund." CUNA’s comment call asks credit unions to also comment on whether CUSO subsidiaries should be covered under this rule, and whether less than adequately capitalized credit unions should be required to seek NCUA approval before they can make any investments in CUSOs. CUNA will receive comments until Sept. 16. The NCUA has requested that all comments be submitted by Sept. 26. For the full comment letter, use the resource link.

Interchange CUNA webinar addresses compliance concerns

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WASHINGTON (8/4/11)--Credit unions that do not have agreements with two unaffiliated payment networks should begin shopping for a new network now instead of waiting for the April 1, 2012 compliance date to draw closer, PayFusion CEO TJ Riha said in a Wednesday Credit Union National Association (CUNA) webinar on pending interchange debit fee cap regulations. Riha noted that it can take between 90 and 120 days for a financial institution to come to an agreement, do the necessary testing, and begin working with a payment network. This "exclusivity" -- or better put, nonexclusivity -- provision of the Federal Reserve Board's new interchange debit fee cap regulation is a key compliance requirement that CUNA notes all credit unions issuing debit cards have to address. Any new branding requirements, and associated network and processor fees, should be evaluated before going forward, Riha said. PolicyWorks Vice President Andrea Stritzke added that credit unions should take other due diligence steps before selecting a new processor, including requirements that the network operates nationally and can support anticipated merchant demand. Riha also noted some of the key "unknowns" surrounding the interchange regulation. One key unknown, Rhia said, is that although the major networks have said that they will create two-tiered fee systems, credit unions don’t know what actual fees will be established for smaller issuers exempted from the Federal Reserve Board’s 21-cent debit interchange fee. Moreover, since merchants will have some choice on how a transaction is routed, credit unions need to evaluate potential fee income from different networks and can’t assume the debit income they currently receive will remain at the same level, he added. Stritzke noted that while many credit unions are marketing free checking accounts as big banks increase their fees, credit unions that advertise free checking must make sure that they are truly providing free checking to their members and not imposing any maintenance or activity fee on the account. She also reminded credit unions that seek additional revenue from deposit services to determine what their account agreements allow and to review the disclosure requirements of the Truth in Savings Act. Stritzke also cautioned about trying to change terms of open and closed-end loans when looking for ways to make up lost revenue, and said that debit card rewards program agreements have to be carefully reviewed before instituting changes in those programs. Kathy Thompson, CUNA’s senior vice president for compliance, addressed a recurring question of what the Fed is going to do to make sure that the two-tiered system works. She noted that the Fed has made clear that the law doesn’t require any private payment network to maintain a two-tiered system and that the Fed has no authority to oversee any two-tiered system. The Fed is, however, taking steps to gather information after the interchange regulation is implemented to compare the interchange fees provided to small and large debit card issuers and whether merchants are discriminating in the debit cards they will accept. Thompson emphasized that, regardless of what the Fed learns in the next two years about whether there is actually a two-tiered system that benefits smaller financial institutions as envisioned in the Dodd-Frank Wall Street Reform and Consumer Protection Act, no one in Washington expects Congress to be willing to reopen the contentious issue of restrictions on debit interchange income. The webinar, which also covered portions of the new regulation that are effective Oct. 1 on how the “reasonable and proportional” fee cap will be calculated for debit card issuers over $10 billion in assets, will soon be archived by CUNA’s Center for Professional Development and available online. For more on the webinar, use the resource link.

CU v. appraiser suit becomes a federal case

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WASHINGTON (8/4/11)--A lawsuit filed early this year in state court, which claims the faulty work of a real estate appraiser cost a credit union hundreds of thousands of dollars when a borrower defaulted on a mortgage loan, has now become a federal case. The lawsuit was originally filed by Utah Central CU early this year. The credit union alleged it would not have provided a $584,000 mortgage in 2007 if Blaine Park, a licensed appraiser, had not provided an appraisal of $730,000 for the property involved. When the loan defaulted, the credit union sold the property for just over $170,000. The credit union suit charged that the appraiser violated Uniform Standards of Professional Appraisal Practice and claimed that under those standards the appraisal should have been closer to $520,000. The National Credit Union Administration (NCUA) liquidated Utah Central in April due to what the agency called the credit union’s “declining financial condition.” The agency arranged an assisted purchase and assumption with Chartway FCU, of Virginia Beach, Va., and under the arrangement the NCUA assumed millions of dollars of Utah Central’s losses—and succeeded to the credit union’s position as plaintiff in the appraiser lawsuit. Most recently in suit, the U.S. District Court District of Utah, Central Division granted NCUA’s request to move the case to federal court. Also, defendant Park filed a response to charges, including an argument that the plaintiff has fail to state a claim for which relief could be granted.

CUNA calls on Obama to urge MBL passage

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WASHINGTON (8/4/11)--Noting its appreciation for the Obama administration’s support for expanded credit union member business lending (MBL) authority, the Credit Union National Association (CUNA) Wednesday urged President Obama to call upon the U.S. Congress to pass legislation to that effect when it returns from the August recess. In a letter to Obama, CUNA President/CEO Bill Cheney noted that credit unions have been around for more than 100 years to serve their members and some of the earliest credit union members were small entrepreneurs in need of credit to start or run small businesses. “As the economy continues to recover from the financial crisis, Americans need credit unions now more than ever,” Cheney wrote. Legislation to allow increased credit union member business lending is “job-creation legislation that costs the taxpayers nothing and could help employ over 140,000 Americans in the next year, and many more in years to come,” Cheney said. 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, up from the current 12.25%. “On behalf of America’s credit unions and their 93 million members, we appreciate your administration’s support for this legislation and we encourage you to build that support by calling on Congress to pass this bill when it returns from the August recess,” the CUNA letter said. The letter was sent a day after the president signed a bill to increase the nation’s debt ceiling into law and made remarks that Washington must now turn its focus to “what matters most to the American people”—things such as job creation and economic growth. In addition to stimulating job growth, the MBL cap increase would also provide $13 billion in new credit for small businesses in the first year of enactment, CUNA figures show.

Inside Washington (08/03/2011)

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* WASHINGTON (8/4/11)--A recent federal appeals court decision could delay the implementation of several Dodd-Frank Wall Street Reform and Consumer Protection Act regulations. The U. S. Court of Appeals for D.C. Circuit Court ruled last month that the Securities and Exchange Commission did not properly conduct a cost-benefit analysis before finalizing a proxy rule required by the regulatory reform law (American Banker Aug. 3). Financial industry observers say the ruling will cause regulators to carefully justify their decisions for the implementation of new rules moving forward. The entire implementation of Dodd-Frank is at risk if the rules do not withstand court challenges, said Hal Scott, Nomura Professor and director of the Program on International Financial Systems at Harvard Law School. Republicans who opposed Dodd-Frank and have fought many of its regulations said the ruling supports their arguments that the new rules would be costly and burdensome to banks and the financial system …

House Senate financial hearings postponed

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WASHINGTON (8/3/11)--With debt ceiling lift legislation gaining final approval from President Barack Obama on Tuesday, Congress is set to leave for August recess once its work is complete this week. Senate Banking Committee and House Financial Services Committee hearings that were scheduled for this week are among those that have been postponed ahead of the August recess. The recess is scheduled to last until Sept. 6. Most notably, the Senate committee’s confirmation hearing for potential Consumer Financial Protection Bureau (CFPB) director Richard Cordray has been pushed back to September. A House Financial Services subcommittee on insurance, housing and community opportunity hearing on the future roles of the Federal Housing Administration, the Rural Housing Service and the Government National Mortgage Association in single- and multi-family mortgage markets is also among the hearings that have been postponed. The deficit reduction and debt ceiling lift package, which will lift the debt ceiling by $2.4 trillion and cut an estimated $2.1 trillion in government spending between 2012 and 2021, was approved by the Senate by a 74 to 26 vote count on Tuesday.

Inside Washington (08/02/2011)

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* WASHINGTON (8/3/11)--Debt issuers with procedures “reasonably designed” to prevent debit-card fraud may be eligible for a one-cent increase in their debit interchange fees, according to the final rules issued by the Federal Reserve in June (American Banker Aug. 2). The new rules take effect Oct. 1. But many issuers fail to meet best-practice fraud protection standards, and meeting the demands that risk presents may not cover debt issuers’ costs, according to Beth Robertson, director of payments research for Javelin Strategy & Research. The Fed has not provided specifics on the level of fraud protection debit issuers will be required to provide. The board is gathering industry comments on its final rule--including the fraud-prevention allowance--through Sept. 30. The financial institutions with the most efficient fraud prevention procedures may be compensated for the one-cent allowance, but other operators could be left out, according to Mahesh Makhija, head of the cards and payments practice at Infosys Ltd.’s Infosys Technologies unit … * WASHINGTON (8/3/11)--The Obama administration has targeted banks for alleged redlining and other fair lending violations. Bankers claim the government is abusing its authority and contradicting findings by other federal regulators (American Banker Aug. 2). Among the key issues is last year’s launch of a special fair-lending unit within the Justice Department’s civil rights division. The unit is charged with enforcing laws such as the Fair Housing Act and Equal Credit Opportunity Act and investigating claims of discrimination in lending practices. The department has said such referrals increased drastically in the wake of the financial crisis. In 2010, the civil-rights division received 49 referrals, which was more than in the prior 20 years combined. Assistant Attorney General Thomas Perez, who leads the civil rights division, has indicated the department’s fair-lending authority had been previously underused … * WASHINGTON (8/3/11)--A federal court has stopped an online operation that allegedly made withdrawals from consumers’ bank accounts without their consent when consumers visited the defendants’ web sites to inquire about payday loans (American Banker Aug. 1). The court also froze the assets of the defendants. The Federal Trade Commission (FTC) seeks to permanently cease the illegal practices and require the defendants to refund the consumers’ money. The defendants’ web sites, which include mypaydayangel.com and juniperloans.com, request consumers’ personal and financial information, such as Social Security, driver license and bank account numbers, according to the FTC’s complaint. Consumers are offered programs unrelated to the loan for food, travel and merchandise discounts, or for long distance calling and Internet access. Many consumers who submitted a payday loan application were enrolled into the programs without their knowledge, and their bank accounts were charged up to $59.90 per month, or later charged $99.90 per year. Some people who declined the offers were charged for the programs anyway, the FTC alleged …

Low minimum hindered prepay plan CUNA

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WASHINGTON (8/3/11)--A higher minimum size for the National Credit Union Administration’s (NCUA) proposed prepayment program for corporate credit union stabilization assessments would have attracted more credit union participation, the Credit Union National Association (CUNA) noted when the agency announced Tuesday it had not received sufficient credit union pledges to go forward with the plan. The NCUA had set a threshold of $500 million in credit union pledges to prepay their assessment in order to trigger a prepayment plan. Last Friday was the deadline for credit unions to commit to the program, and the NCUA announced yesterday that 799 federally insured credit unions pledged a total of $369.9 million. CUNA President/CEO Bill Cheney said of the news, “It’s unfortunate that the minimum size of the program could not have been larger, as CUNA had recommended, so that the prepayment would have provided for a greater decrease in this year’s assessment.” He cited, by way of example, if the minimum size had been set at $1 billion, this year's assessment could have been reduced to about 12 basis points. “Had that been the case, credit unions may well have found that the program would be more attractive, and they might have committed substantially more to the program,” Cheney said Tuesday. NCUA Chairman Debbie Matz noted in her announcement of the pledge figures, “While the pledges fell short of meeting the required threshold to move forward, the NCUA board remains open, perhaps, to reconsidering this issue next year.” Having missed the $500 million trigger, the NCUA noted it will not debit any voluntarily pledged amount from any credit union. CUNA’s Cheney also said, “For the many credit unions experiencing improved earnings in 2011, this year’s higher assessment will be manageable. However, for a number of hard-hit credit unions still recovering from the recession, even a modest reduction in this year’s assessment would have been welcomed. Nevertheless, the very fact that the prepayment plan is not going forward means that next year’s assessment should be about half of this year’s projected rate of 25 basis points.”

QRM could limit tailoring loans to member needs CUNA warns

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WASHINGTON (8/3/11)--The proposed definition of a Qualified Residential Mortgage(QRM) could create unnecessary barriers for qualified borrowers, limit credit unions’ ability to tailor loans to their members’ needs, and could potentially make it difficult for small financial institutions like credit unions to make non-QRM loans, the Credit Union National Association (CUNA) said in a recent comment letter. The comment letter addressed the QRM defintion contained in a proposed joint agency credit risk retention rule. The proposed QRM definition would set a 20% minimum down payment threshold for mortgages that would be exempt from the credit risk retention requirements contained within the rule. CUNA in a comment letter said that the 20% down payment threshold is too high, adding that “there is credible evidence that high minimum down payments alone are not always a significant factor in reducing defaults compared to underwriting and other mortgage product features.” The CUNA comment letter on the proposed rule and the QRM definition was sent to the Securities and Exchange Commission, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Federal Housing Finance Agency, and the Department of Housing and Urban Development. While the proposed credit risk retention rule was not aimed directly at the practices of credit unions, CUNA said that many credit unions are “seriously concerned” about the proposal. CUNA noted that the QRM, as proposed, could “become a template that regulators will seek to impose on all home mortgage loans, whether they are securitized or not.” Such an action “would severely limit the ability of credit unions to tailor mortgage loans to meet their members’ needs” and could “effectively shut out an entire class of otherwise qualified borrowers from the market for low-cost financing” and dry up mortgage liquidity for small lenders. CUNA in the comment letter noted that credit unions frequently structure very low-risk loans to meet the needs of members that are reliable borrowers, but cannot provide a 20% down payment. “Indeed, with delinquency rates at a fraction of those of the major banks, credit unions have demonstrated an ability to safely originate high loan-to-value mortgages,” the letter said, adding that credit unions must retain the ability to tailor their mortgages to member needs. For the full comment letter, use the resource link.

CUs can comment on new CFPB TILARESPA draft

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WASHINGTON (8/3/11)--Credit unions that wish to comment on the latest draft of the Consumer Financial Protection Bureau’s (CFPB) combined mortgage disclosure form must do so by Aug. 8. The agency is working on a combined form for Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures. The most recent draft is the third of five planned draft disclosure releases. Two additional forms will be released between now and September, and a single draft disclosure will be developed later in the year. The CFPB has specifically asked for comment on whether the form will help consumers understand closing costs associated with their loans. Credit unions can also comment on whether lenders and brokers will be able to clearly and easily explain the form to their customers, and can recommend any improvements that would clarify the form. The Credit Union National Association (CUNA) has discussed previous disclosure drafts with the CFPB, and will soon discuss CUNA members’ reactions to this draft of the form with CFPB as well. The leagues and credit unions also been active members in this revision process, and CUNA has encouraged the CFPB to consider the needs of credit unions as it continues its work. The CFPB has repeatedly noted that it is "committed to remaining attentive" to the concerns of credit unions and other small financial institutions, and looks forward to addressing the concerns of credit unions and community banks throughout the development of CFPB priorities. For the latest CFPB release, use the resource link.

AEA FCU finances improve under NCUA conservatorship

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ALEXANDRIA, Va. (8/3/11)--The financial condition of Yuma, Ariz.-based AEA FCU has improved dramatically during its National Credit Union Administration (NCUA) conservatorship, with the agency reporting year-to-date net income of $2.2 million and $229 million in total assets as of June 30. Streamlined operations, improved facility management practices, and positive progress in business loan delinquency and recoveries helped the once troubled credit union regain its financial feet, as AEA FCU’s net income increased by $3.6 million in 2011, the NCUA said in a Tuesday release. The credit union’s total expenses dropped 41% since January. Provisions for loan losses expenses fell by 68% and occupancy expenses dropped by 30%. The credit union also made cuts in miscellaneous operating expenses and compensation expenses. NCUA Region V Director Elizabeth Whitehead said that the NCUA’s priority was “to restore the credit union’s net worth” and to ensure that the credit union remained operational for its 44,000 members. The NCUA placed the credit union into conservatorship in late December, saying that it was not adequately capitalized under standards set forth in the Federal Credit Union Act and had earnings "insufficient to enable it to continue under present management." The agency at that time said the credit union's difficulties sprang from problems in its loan portfolio.

NEW NCUA wont launch corporate assessment prepay plan

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ALEXANDRIA, Va. (UPDATE 8/2/11, 2:40 p.m. ET)—The proposed prepayment program for corporate credit union stabilization assessments failed to attract the required $500 million in pledges that the National Credit Union Administration (NCUA) set as the requirement to launch the plan. However, the agency’s chairman said the board is open to reconsidering the issue in 2012. Credit Union National Association (CUNA) President/CEO Bill Cheney said of the news, “It’s unfortunate that the minimum size of the program could not have been larger, as CUNA had recommended, so that the prepayment would have provided for a greater decrease in this year’s assessment.” He cited, by way of example, if the minimum size had been set at $1 billion, this year's assessment could have been reduced to about 12 basis points. “Had that been the case, credit unions may well have found that the program would be more attractive, in which case they might have committed substantially more to the program,” Cheney said Tuesday. Credit unions that wished to take part in the assessment prepayment plan had to notify the agency of their intent by last Friday. The NCUA said today that of the nation’s nearly 7,300 federally insured credit unions, 799 pledged $369.9 million to voluntarily prepay assessments. Having missed the $500 million trigger that would have launched the program, the NCUA noted it will not debit any voluntarily pledged amount from any credit union. NCUA Chairman Debbie Matz commented, “NCUA responded to credit union requests and created a viable alternative to offer prepayments as a way to manage assessments in the long run. She added, “While the pledges fell short of meeting the required threshold to move forward, the NCUA board remains open, perhaps, to reconsidering this issue next year.”

Changes to Form 990 rule could cut reg burden CUNA

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WASHINGTON (8/2/11)--The Credit Union National Association (CUNA) has urged the Internal Revenue Service to consider a number of options for reducing credit unions’ compliance burden under IRS Form 990. State-chartered credit unions are required to file Form 990 with the IRS annually, although a few states still permit group 990 filings. Federal credit unions are not required to file, since they are not subject to unrelated business income taxes. The IRS requires Form 990 filers to disclose the names and compensation of certain key employees such as directors, their 20 highest compensated non-executive employees, any independent contractors that work for the firm, and former high ranking or key employees. However, the reporting thresholds for these positions differ somewhat from position to position. In a comment letter, CUNA suggested that the IRS increase the Form 990 reporting threshold for former directors that received over $10,000 in compensation for their services to $100,000. The $10,000 reporting threshold “is much too low,” and complying with this threshold can strain the often limited resources of smaller credit unions and create a recordkeeping burden for those institutions, CUNA added. The IRS could also consider lowering the number of high-earning, non-director employees that would be covered under Form 990 reporting from 20 to five. Reports detailing the compensation of these and other “key” former employees should also be limited to data from the last two years, rather than the previous five years, CUNA added. CUNA also asked the IRS to consider developing separate Form 990s, one for 501(c)(3) tax-exempt organizations and one for all other tax-exempt organizations under 501(c) of the Internal Revenue Code. For the full comment letter, use the resource link.

Corporates announce NCUA prepay participation

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WASHINGTON (8/2/11)—As the National Credit Union Administration (NCUA) tallies credit union pledges to its voluntary Corporate Stabilization Fund assessment prepayment plan, two corporate credit unions announced their involvement in the program Monday. Volunteer Corporate CU (VolCorp), of Nashville, Tenn., announced that it plans to contribute 48 basis points (bp), the maximum amount permitted by the NCUA, into the prepayment plan. The credit union’s contribution would total $221,392. The NCUA has said it would move forward with the prepayment plan if credit unions pledge a total of $500 million. In the VolCorp announcement, CEO Rick Veach said that the payment “is one tangible way we can not only reduce our members’ expense, but also help with the financial burden of the Corporate Stabilization Fund for all credit unions.” In Columbus, Ohio's, Corporate One FCU President/CEO Lee Butke echoed those comments, saying that his board of directors "was resolute in the fact that since Corporate One is in a strong financial condition, we should absolutely do what we can to help our member credit unions manage their 2011 and 2012 assessments, especially at a time when so many are experiencing challenging economic times." Butke added that the credit union supports the NCUA’s efforts to help credit unions better manage these assessments, and is "proud" to help the agency smooth out those costs. The deadline for NCUA prepayment plan applications was Friday, and the agency said it would tally the total amount of credit union commitments by Aug. 9, If it moves forward with the plan, the NCUA will debit the pro-rated amounts that have been pledged from credit union accounts on Aug. 18. The prepayment plan could reduce the 2011 regular assessment from about 25 bp to about 18.5 bp. The NCUA is expected to set its 2011 Temporary Corporate Credit Union Stabilization Fund assessment at an Aug. 29 meeting.

As debt bill moves CUNA vigilant on tax status

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WASHINGTON (8/2/11)--The compromise debt ceiling bill expected to clear Congress before Tuesday’s default deadline would lift the debt ceiling by $2.4 trillion and would a create Congressional Joint Select Committee on Deficit Reduction to identify future debt-reduction measures. To date, the credit union tax exemption has not been a focus of the formal debt ceiling talks. President Barack Obama and congressional leaders worked out the debt deal over the weekend. According to the Congressional Budget Office, the plan would cut $2.1 trillion in spending between 2012 and 2021. The plan would cut discretionary spending until 2021. A House vote Monday night of 269-161 sends the package on to the Senate for a vote. Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan said that CUNA will closely follow events surrounding the deficit reduction committee and continue to emphasize the positive impact that the credit unions have on the members and communities that they serve. Donovan predicted that debate will ensue over whether the Joint Committee has the ability to look at tax expenditures as part of its role. He also reminded that Speaker of the House John Boehner, of Ohio, has said there is “no appetite” among House lawmakers to look at increasing tax revenues. “We’ll keep a close eye on this and will engage with the Joint Committee as appropriate,” Donovan said, and added that “preserving the credit union tax status is absolutely the most critical issue CUNA works on.” While the debt ceiling debate continues to keep Washington’s attention, several hearings are also scheduled to take place this week. Hearings schedules always can be subject to change. However, after the drawn out debate on the debt ceiling, it should be noted that hearings may be postponed if Congress leaves town, as expected, after the vote. The Senate Banking Committee on Tuesday is scheduled to address national mortgage servicing standards during a 10:00 a.m. (ET) hearing. That panel also has a slated hearing for 2 p.m. (ET) Thursday to consider the nomination of Richard Cordray for the position of director for the Consumer Financial Protection Bureau. The House Financial Services subcommittee on insurance, housing and community opportunity has set a hearing to look at the future roles of the Federal Housing Administration, the Rural Housing Service and the Government National Mortgage Association in single- and multi-family mortgage markets. That hearing is scheduled for 10:00 a.m. (ET) Wednesday. Congress will leave Washington until Sept. 6 once its work for the week is complete.

Inside Washington (08/01/2011)

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* WASHINGTON (8/2/11)--On her final day with the Consumer Financial Protection Bureau (CFPB), Elizabeth Warren vowed to continue her fight for consumers of financials services. In an e-mail to agency staffers Friday, Warren thanked employees for their efforts and outlined the accomplishments of the bureau since its formation (American Banker July 29). Warren was President Barack Obama’s choice to set up the CFPB. The agency’s formation was mandated by the Dodd-Frank Act. “I leave this agency, but not this fight,” Warren wrote in the e-mail. “The issues we deal with--a middle class that has been squeezed and business models built on tricks and traps--are deeply personal to me, and they always will be” …