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Loan mods dip for 4th straight quarter

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WASHINGTON (9/2/11)--The total number of home loan modifications fell in the second quarter, the fourth straight quarter they have done so, the Federal Housing Finance Agency (FHFA) reported on Thursday. A total of 81,200 loan modifications were completed during the most recent quarter, down from 86,200 in the first quarter of 2011. Fannie Mae and Freddie Mac have completed just under 1.8 million foreclosure prevention actions since late 2008, and more than half of these actions have resulted in loan modifications, the FHFA said. The number of refinancings made through the Home Affordable Refinance Program (HARP) increased 11%, and now total 838,400, the agency added. The FHFA also noted that the number of new foreclosures dropped during the quarter, while completed third-party and foreclosure sales increased. For the full FHFA report, use the resource link. Federal Reserve Governor Elizabeth Duke on Thursday called on the Obama administration to modify HARP, saying that “given the potential savings to households, the relatively low take-up on this program warrants another look at the frictions that may be impeding these refinancing transactions.” Duke suggested limiting up-front fees that are added to borrowers’ refinancing costs as one way to increase the number of government-aided mortgage refinancings. “The fees can increase the cost of refinancing by thousands of dollars and thus discourage borrowers from participating in the HARP program,” she noted. Reuters has reported that the Obama administration may announce a mortgage relief program next week. Portions of the plan could allow some borrowers to refinance even if they owe more than their property’s value. (See related story: Inside Washington)

Slow growth for CUs in 2Q NCUA reports

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ALEXANDRIA, Va. (9/2/11)--The results of call reports from 7,239 federally insured credit unions “generally show stabilization and continued improvement,” but a weak economy continues to challenge credit unions, the National Credit Union Administration (NCUA) reported in its quarterly update on the credit union system. The year-to-date return on assets (ROA) ratio grew by three basis points (bp) during the quarter, totaling 77 bp. ROA totaled 51 bp at the end of 2010, and the NCUA said the 26 bp increase since that time “could be construed as a positive sign that credit unions are on the road to recovery from the recent recession.” Credit union membership is also improving, totaling 91 million, a 200,000 member increase from the prior quarter’s total. NCUA Chairman Debbie Matz said the second quarter financials “demonstrate the continued resilience of the credit union industry.” The NCUA also reported that:
• Net income increased by 10.7% over last quarter’s number, and totals $3.58 billion so far this year; • Net worth increased to $95.6 billion, a 2% increase over the $93.7 billion total reported last quarter; • Assets increased 0.3% to $942.5 billion; • Shares increased 0.1% to $812.2 billion; and • Investments, not including cash on deposit or cash equivalents, increased 0.8%, totaling $255.8 billion during the second quarter.
Loans also rose to $564 billion, a 0.7% increase over the first quarter total of $559.9 billion. Demand for short-term, small loans increased by 52% during the quarter, and credit cards and first mortgage real estate loans also “remain popular.” However, the agency noted that the number of new auto loans and other real estate loans fell during the quarter. Asset quality also continued to improve, with declines in both delinquency and net chargeoff ratios in the second quarter. Overall, 60-plus-day dollar delinquencies stood at 1.58% at mid-year--a five- basis-point improvement compared to previous-quarter results and net chargeoffs dropped by an identical amount to average 0.95% in that quarter. “The last time the net chargeoff rate was reported below 1% was the third quarter of 2008,” Credit Union National Association (CUNA) Vice President of Economics Mike Schenk said. Schenk added that balance sheet trends “continue to reflect developments in the macro economy. With a backdrop of uncertainty, slowly improving labor markets, and weak housing activity consumers continue to be cautious and remain focused on paying down debt. This translated into weak loan growth--with credit unions collectively logging only a 2.8% annualized increase in loan balances in the second quarter. “Of course the weak loan growth makes the movement’s asset quality improvements even more impressive,” as weak loan growth and fast payoffs can “tend to put upward pressure on delinquency and chargeoff ratios because they cause the denominator of these asset quality metrics to increase very slowly, or decline,” Schenk added. He noted that CUNA economists expect the total dollar amount of loans outstanding at credit unions to grow by just 2% this year, with improvements in asset quality coming “as labor markets slowly heal and incomes rise. “Further, NCUA’s recently announced plans for corporate stabilization charges suggest that the movement’s full-year earnings for 2011 will likely be in the neighborhood of 60 bp,” he said. For the NCUA release, use the resource link.

Inside Washington (09/01/2011)

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* WASHINGTON (9/2/11)--The Obama administration may announce a mortgage relief program next week, according to sources. The plan could include an initiative that allows some borrowers to refinance even if they owe more than their property’s value (Reuters Sept. 1). The administration’s aim is to help troubled homeowners take advantage of current low interest rates, which in turn would spur overall economic activity. The average rate of a 30-year fixed mortgage was 4.22% last week, a historically low level, according to Freddie Mac. Borrowers who are current with their mortgages would refinance through Fannie Mae, Freddie Mac and the Federal Housing Authority, which together account for more than 90% of the U.S. mortgage market … * WASHINGTON (9/2/11)--The Securities and Exchange Commission said Wednesday it will seek public comment on the use of derivatives by mutual funds and other investment companies regulated under the Investment Company Act. “The derivatives markets have undergone significant changes in recent years, and the commission is taking this opportunity to seek public comment and ensure that our regulatory approach and interpretations under the Investment Company Act remain current, relevant, and consistent with investor protection,” said SEC Chairman Mary L. Schapiro. The SEC is seeking public input through a concept release, which is a document that poses an idea or ideas to the public to get its views. The concept release is a continuation of the SEC’s ongoing review of mutual funds’ use of derivatives announced last year …

NCUA describes nominal in volunteer awards

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ALEXANDRIA, Va. (9/2/11)--A Volunteer Service Award recognizing an individual director’s or committee member’s substantial length of service is permissible under the National Credit Union Administration’s (NCUA) rule limiting compensation of officials (12 C.F.R. 701.33); just make sure the award is nominal in value and in proportion to the period of service it recognizes. So says an NCUA legal opinion letter (No. 11-0805) made public yesterday. The letter was written in response to a query by Patricia O’ Connell of Quartararo & Lois, PLLC in Fishkill, N.Y., asking if Hudson Valley FCU’s policy of awarding a $250 gift card is permissible under the rule. The compensation rule provides that only one board officer, if any, may be compensated as an officer of the board and that no other official may receive compensation for performing the duties or responsibilities of the board or committee position he or she holds, the opinion letter says in part. “Our view,” the letter signed by Hattie Ulan of the office of general counsel goes on to say, “is that a monetary award to individually recognize an official’s multiple years of volunteer service--as opposed to an award periodically given (e.g., annually or bi-annually) to all volunteers or to a class of volunteers (e.g., all directors) then-serving--would constitute an incentive to volunteerism, rather than proscribed ‘compensation,’ provided that the amount per year of service is nominal. “Based on our prior opinions, and adjusted for inflation, we would consider a maximum of $50 per year of service to be ‘nominal,’ Ulan wrote. Use the resource link to read the letter.