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Filed on September 10, 2009, published the first business day after.
- NCUA: Foreclosed-property tenants have 90 days to relocate
- GAO analyzes Fannie, Freddie options
- TARP accountability hearing next week
- Inside Washington
- CUNA says NCRC report on CU lending flawed
- MACUA CEO resigns
- Michigan CU loan business fueled by autos
- Federation graduates 13 students at CDCU Institute
- Business checking survey says CUs have lower costs
- SECU gives $250,000 challenge grant to library
- Today is the last day for early-bird ICU Day pricing
- Market News
- News of the Competition
- Expert gives homeowners tips for hurricane season
- CUNA Mutual introduces new liability insurance
- Connexus CU offers debt management tool
NCUA: Foreclosed-property tenants have 90 days to relocate
WASHINGTON (9/11/09)--Credit unions that take control of foreclosed real estate must grant tenants of the property 90 days of notice before those tenants can be made to move, the National Credit Union Administration has advised.
Under the terms outlined in the Helping Families Save Their Homes Act of 2009, financial institutions must also allow so-called "bona fide" tenants to occupy the foreclosed property until their existing lease expires. However, the 90-day eviction rule would still apply once the foreclosed property is purchased.
According to the NCUA, a "bona fide" tenant is one that does not own the property nor is a parent, spouse or child of the property owner.
According to the NCUA, the law "does not cover tenants facing eviction in a non-foreclosed property, tenants with a fraudulent lease, tenants who enter in lease agreements after a foreclosure sale, or homeowners in foreclosure."
The law also does not impact state or local laws aimed at protecting the rights of tenants.
For the full NCUA release, use the resource link.
GAO analyzes Fannie, Freddie options
WASHINGTON (9/11/09)—The Government Accountability Office (GAO) released a study Thursday that analyzes options for revising the long-term structure of the government-sponsored enterprises, Fannie Mae and Freddie Mac.
Just over a year ago, on Sept. 8, the Federal Housing Finance Agency (FHFA) placed the GSEs into conservatorship due to concern that their deteriorating financial condition—identified as $5.4 trillion in outstanding obligations-- would destabilize the financial system.
"With estimates that the conservatorship will cost taxpayers nearly $400 billion, GAO initiated this report under the Comptroller General's authority to help inform the forthcoming congressional debate on the enterprises' future structures," the report explains.
The report discusses the enterprises' performance in meeting mission requirements, identifies and analyzes options to revise their structures, and discusses key transition issues.
It concludes that it will be necessary for Congress to "reevaluate the roles, structures, and performance of the enterprises, and to consider options to facilitate mortgage finance while mitigating safety and soundness and systemic risk concerns."
Among the options noted by GAO are the following:
- Reconstitute the enterprises as for-profit corporations with government sponsorship, but place additional restrictions on them. While restoring the enterprises to their previous status, this option would add controls to minimize risk;
- Establish the enterprises as government corporations or agencies that would focus on purchasing qualifying mortgages and issuing mortgage-backed securities, but eliminate their mortgage portfolios. The Federal Housing Administration (FHA), which insures mortgages for low-income and first-time borrowers, could assume additional responsibilities for promoting homeownership for targeted groups; and
- Privatize or terminate them. This option would abolish the enterprises in their current form and disperse mortgage lending and risk management throughout the private sector. Some proposals involve the establishment of a federal mortgage insurer to help protect mortgage lenders against catastrophic mortgage losses.
GAO, as is its practice, took no position on whether to privatize the GSEs or make them fully public, but the report did indicate that both options could have their problems and inefficiencies--like increasing mortgage rates.
To read more, use the resource link below.
TARP accountability hearing next week
WASHINGTON (9/11/09)--There will be a TARP accountability hearing next week, scheduled by the House Financial Services oversight and investigations subcommittee.
The hearing is titled "Utilizing Technology to Improve TARP and Financial Oversight." According to a release from Chairman Dennis Moore (D-Kan.) of the subcommittee the session will focus on the role of technology in efforts to provide transparency and accountability for programs, such as the U.S. Treasury Department's TARP – or Troubled Asset Relief Program.
The subcommittee will also be taking a look at the use of technology to ensure federal agencies provide strong, coordinated oversight of financial services activity.
Witnesses are to be announced at a later date.
Inside Washington
- WASHINGTON (9/11/09)--National Credit Union Administration (NCUA)
board member Michael E. Fryzel welcomed representatives from FirstCorp CU, Phoenix, to the NCUA headquarters in Alexandria, Va., Wednesday. Fryzel stressed the importance of continuing credit union support for the corporate system. "It is important that natural person credit unions maintain a high degree of support for the corporate system," he said. This system was created, managed and directed by credit unions, and the future form and function of the corporates is directly dependent on involvement by member credit unions." From left are: Dave Doss, chairman, FirstCorp CU; Fryzel; Stacy Glidden, FirstCorp Chief Operating Officer, and Pete Pritts,
FirstCorp CU chairman and Arizona State CU CEO. (Photo provided by the National Credit Union Administration) ...
- WASHINGTON (9/11/09)--Sen. Christopher Dodd (D-Conn.) has said he will remain chairman of the Senate Banking Committee, and financial observers predict that his commitment to that and health care reform could slow financial regulatory reform. Some industry observers speculated that Dodd would succeed the late Sen. Edward Kennedy (D-Mass.) as chairman of the Health, Education, Labor and Pensions Committee (American Banker Sept. 10). Jaret Seiberg, financial services policy analyst for the Washington Research Group, commented that it would have been tough for the Senate to pass a financial reform bill this year even if Dodd had no other commitments. Brian Gardner, KBW Inc. analyst, said the timeline for financial services legislation is "up in the air" and will keep Washington and Wall Street guessing for the next couple months ...
- WASHINGTON (9/11/09)--The Internal Revenue Service has released guidance for employer comparable contributions to Health Savings Accounts (HSAs). The guidance relates to the manner and method of reporting and paying the excise tax. The regulations affect employers contributing to employees' HSAs and Archer MSAs, employers or employee organizations that sponsor a group health plan and certain third parties ...
- WASHINGTON (9/11/09)--On Wednesday, the Federal Deposit Insurance Corp. (FDIC) approved a rule that would extend the temporary increase in the standard maximum deposit insurance amount to $250,000 through Dec. 31, 2013 and the 2008 interim rules regarding revocable trust accounts and mortgage servicing accounts ...
CUNA says NCRC report on CU lending flawed
MADISON, Wis. (9/11/09)--The Credit Union National Association (CUNA) says a National Community Reinvestment Coalition (NCRC) report unfavorably comparing credit union lending practices to that of banks is flawed and should be dismissed by policymakers.
The NCRC analyzed Home Mortgage Disclosure Act (HMDA) data for credit unions and banks. The report claims that credit unions lag behind banks on 64% of the fair lending indicators examined and concludes that credit unions should therefore be placed under Community Reinvestment Act (CRA) rules.
"While we haven't concluded our evaluation, it's clear that the NCRC report isn't worth the paper it's printed on," Mike Schenk, CUNA vice president of economics and statistics, told News Now.
There are a handful of obvious fatal flaws in the NCRC analysis, Schenk said.
First, NCRC acknowledges but makes no attempt to statistically adjust for the fact that credit unions and banks--from a legal standpoint--cannot serve the same groups of people. "Banks and thrifts can serve anyone. But one-third of credit unions serving 20% of all credit union members have single-group occupational charters," Schenk explained.
"By definition, credit union membership fields cannot and will not perfectly reflect the income or racial make-up of the geographic community in which they are located," he added. "While it's true that about one-quarter of credit unions have community charters, many of these institutions have just recently converted to the wider charter. What does the NCRC analysis do to account for these fundamental differences? Nothing."
A second flaw in the NCRC analysis is that it focuses only on "prime" loans--a glaring oversight for a study that presumes to gauge the effectiveness of lending to lower-income individuals, Schenk said.
A third flaw is that the NCRC study uses "disparity ratios" to measure lender effectiveness, he said. Disparity ratios are esentially statistics that are attained by dividing a denial (or approval) rate for a target group (e.g., low-income people) by the denial (or approval) rate for all other applicants.
"But disparity ratios are a horrible metric--they simply do not measure lender effectiveness," Schenk added.
"For example, using disparity ratios, NCRC's 2007 analysis finds that banks outperform credit unions in 23 of 42 disparity metrics they published," he said. "But, the underlying data NCRC used to produce these disparity ratios clearly shows that credit unions outperform banks: it shows that credit unions approve mortgage loan applications at higher rates--usually much higher rates--and they deny applications at lower rates-- usually much lower rates--compared to banks.
"This is true in almost every single demographic group analyzed, among every loan type analyzed and across each of the three years of data it analyzed," Schenk added.
Specifically, looking at 2007 approval and denial rates, NCRC data shows that credit unions outperform banks in 64 out of 72 of these metrics--89% of the total, Schenk said.
"Of course, NCRC benefits directly and indirectly when it increases the number of institutions that are subject to CRA," Schenk explained. "Many of its member organizations receive significant funding from banks as part of the banks' CRA investment obligations. In addition, the NCRC has formed a strategic partnership with the nation's ‘top banks.'
"It would not surprise me if these considerations influenced the study's methods and conclusions," he added.
MACUA CEO resigns
BISMARCK, N.D. (9/11/09)--Tony Richards, president/CEO of Mid-America Credit Union Association (MACUA), has resigned, effective immediately.
The MACUA board plans to explore a full range of options in searching for a successor. In the interim, Stephanie Merrill, vice president of human resources and administration; Karla Clark, chief financial officer; and Jeff Olson, political affairs and public relations director; will assist in overseeing the operations of the association.
Headquartered in Bismarck, N.D., MACUA serves 86 credit unions in North and South Dakota, with 422,000 members and assets of more than $3.8 billion.
Michigan CU loan business fueled by autos
LANSING, Mich. (9/11/09)--Michigan credit unions experienced growth in the auto-lending market with an 8.5% increase in new loans in the second quarter, which equates to $2.2 billion in auto-loan balances as of June 30, according to the Michigan Credit Union League (MCUL).
This represents a record 32% increase in new-vehicle loans from June 2008 to June 2009. The growth coincides with the launch of the "Invest in America" program in December, which offers credit union members discounts on select General Motors (GM) and Chrysler products, and low-cost financing.
The "Invest in America" member discounts are helping the domestic automakers during a critical time when credit is tight. It's also helping to promote "buy American" which is on the minds of most Americans right now, MCUL said.
"More than 200 credit unions statewide have stepped in to fill the void in auto lending," said David Adams, MCUL CEO. "Credit unions are financially stable, increasing members' savings deposits, and supporting their members and Michigan's auto companies by making the loans that put new and used cars on the road.
"The ‘Invest in America' program has strengthened credit union relationships with auto dealers and shown the importance of buying American," he added. "This is not just about market share; it's about credit unions helping the auto industry, jobs and our economy."
"Invest in America" has facilitated more than 190,000 new-vehicle purchases for GM and Chrysler nationwide since January. The program has resonated with Michigan car buyers as the Detroit automakers work to reestablish market share, the league said. By offering a discount on a new GM or Chrysler vehicle, the program encourages Michigan's 4.4 million credit union members to buy American-made products and support local jobs.
By offering lower rates than competing lenders, the program prompts members to finance their purchase through their credit union. The average new-car loan rate from a credit union is lower--at 5.8%--than bank rates at 7%, according to Datatrac July 2009 data.
Used-car loans increased 14% from June 2008 to June 2009, and small-business loans grew 17% over the same time period. The momentum continued into the third quarter of 2009, as Michigan credit unions increased their market share of new- and used-car loans to 36% on July 31 from 23% on July 31, 2008. This is the highest market-share increase of the 20 most populous states, the league said.
Reflecting the trend in the broader economy, credit union savings deposits grew by 2.5% in the second quarter. This represents the strongest growth rate in six years. Overall credit union loans also are on the rise with an increase of 1.6% in the second quarter. This represents a 12-month growth rate of 5.8%--the highest since 2005.
Federation graduates 13 students at CDCU Institute
MADISON, Wis. (9/11/09)--The National Federation of Community Development Credit Unions recently celebrated the 10th anniversary of its Community Development Credit Union (CDCU) Institute with the graduation of 13 students in the Institute's ninth graduating class Aug. 14, in Madison, Wis.
Developed in partnership with Southern New Hampshire University's School of Community Economic Development and with support from the Credit Union National Association (CUNA), the CDCU Institute is a training program for the board and staff of CDCUs and other credit unions interested in serving low-income and underserved communities more effectively.
"The current economic environment has been especially challenging for credit unions serving low- and moderate-income people," said Pamela Owens, Federation director of education and training. "With credit union resources stretched to the limit, it will be the best trained credit unions that are able to take advantage of the growth opportunities around them."
This year's graduates include:
- Cecil Anderson, Central Oklahoma FCU, Davenport, Okla.;
- Kathie Black, Inspire Community Development FCU, Battle Creek, Mich.;
- Winston Brumfield, AME Church FCU, Baton Rouge, La.;
- Thom Dellwo, Cooperative Federal CU, Syracuse, N.Y.;
- Nathan Farrior, Generations Community CU, Durham, N.C.;
- Cindy Harrison, Straits Area FCU, Cheboygan, Mich.;
- Brenda Kyser, Triumph Baptist FCU, Philadelphia, Pa.;
- Vanessa Lowe, National Credit Union Administration, Alexandria, Va.;
- Regina Martin, AME Church FCU, New Orleans, La.;
- Frances Morris, Citizens Choice FCU, Natchez, Miss.;
- Permelia Murphy, Citizens Choice FCU, Natchez, Miss.;
- Stacey Woiderski, Straits Area FCU, Cheboygan, Mich.; and
- DeAndre L. Zachery, Shreveport FCU, Shreveport, La.
Business checking survey says CUs have lower costs
CHICAGO (9/11/09)--Small businesses will find lower checking account costs at credit unions and community banks, according to a national survey conducted by Moebs Services, an economic research firm, based in Lake Forest, Ill.
"... Large banks try to protect loss of business, especially small business, and community banks and credit unions try to take as much market share as they can get," Moebs said (Business Wire via Reuters Sept. 9).
Evidence of a potential market move is reflected in the minimum balance to avoid a fee, with the large banks almost doubling from $1,250 in 2008 to $2,250 in 2009, while credit unions and community banks stayed the same at $500 and $1,000 respectively, the Moebs survey indicated.
"Main Street institutions definitely offer a better pricing deal than the big Wall Street banks," Moebs said. "In these hard economic times, businesses should seek the better deal."
For more information, use the link.
SECU gives $250,000 challenge grant to library
RALEIGH, N.C. (9/11/09)--State Employees' Credit Union (SECU) members via the SECU Foundation have given a $250,000 challenge grant to a library in Jackson County, N.C.
The grant will allow the Friends of the Library to complete the fundraising goal needed for the construction of the 20,000-square-foot library, which will be located next to the recently restored, historical Jackson County Courthouse.
The SECU Foundation partnered with the non-profit Friends of the Jackson County Main Library to provide services to citizens in Macon, Swain and Haywood counties. The complex also will benefit the local university and community college and other regional libraries.
"The $250,000 challenge grant is a strong incentive for our community to reach the $1.6 million we need to complete the new library complex," said June Smith, Friends president. "For every dollar given to the New Library Fund, the SECU Foundation will match it up to $250,000."
SECU, located in Raleigh, N.C., has $18 billion in assets.
Today is the last day for early-bird ICU Day pricing
MADISON, Wis. (9/11/09)--Today is the last day for credit unions to receive early-bird pricing on International Credit Union (ICU) Day materials.
ICU Day, which will take place Oct. 15, was established by the Credit Union National Association (CUNA) in 1948 to celebrate the international credit union movement. This year's theme is "Your Money, Your Choice, Your Credit Union."
Credit unions can order materials such as posters, balloons, pens, buttons and shirts to celebrate ICU Day.
Several credit unions have shared their ICU Day plans:
- Ever-Green CU in Liberia, West Africa, will celebrate ICU Day with a membership drive, clean-up stress campaign, and a lecture on what makes credit unions different from other financial institutions at local schools;
- Seattle Metropolitan CU in Washington will hand out "Intentionally Left Bank" shirts for its "Intentionally Left Bank" marketing campaign;
- Wichita FCU, Kan., will have its annual picnic. Employees will wear ICU Day buttons and give away Skittles candy; and
- Good Shepherd Parish CU in Ghana, Africa, will host an educational campaign to attract more members. The credit union also will have clean-up activities in conjunction with the youth of Good Shepherd Catholic Church in Ghana.
Market News
MADISON, Wis. (9/11/09)
- Signaling a slower pace of labor market deterioration, first-time claims for U.S. jobless benefits declined last week to the lowest level since July. For the week ended Sept. 5, applications declined by 26,000 to 550,000--lower than economists' forecasts--from a revised 576,000 the week before, according to Labor Department data released Thursday. Also, the total number of people collecting unemployment fell to the lowest level since April. After 20 consecutive months of job losses, the economy may be beginning to stabilize, economists said. However, a return to job growth is likely many months away, because many companies are delaying the hiring of new workers, analysts said (Bloomberg.com Sept. 10) ...
- With demand increasing for cars, computers and oil, the U.S trade deficit grew in July, and imports gained by a record percentage, analysts said. The gap between imports and exports rose 16%--the most in 10 years--to $32 billion, which is up from a revised $27.5 billion in June--larger than previously forecast, the Commerce Department said. Imports jumped 4.7%--outpacing a 2.2% rise in exports. Exports are beginning to grow as the worldwide economy comes out of its worst slump since World War II, which is resulting in increased demand for U.S.-made goods, analysts said (Bloomberg.com Sept. 10) ...
News of the Competition
MADISON, Wis. (9/11/09)
- The Beige Book--a compilation of information on economic conditions for each of the 12 Federal Reserve Banks in the U.S.--indicates that while residential real estate markets remained weak, there were indications of improvement. Over the past six weeks, Chicago, Richmond, Boston and San Francisco experienced an uptick in sales. Overall U.S. consumer spending, retail sales, loan demand and labor market conditions were flat or weak, the report indicated. For Summary of Commentary on Current Economic Conditions by Federal Reserve District (Beige Book), use the link ...
- U.S. chain store sales increased 0.6% for the week ended Sept. 5--which continues a see-saw pattern of growth that was recently established, according to the International Council of Shopping Centers (ICSC) Sales Index. Consumer spending remains lethargic, analysts said. Year-ago growth is continuing to trend nearly flat. Also, sales were 0.1% lower than their year-ago level--the eighth year-ago decline in the past nine weeks. However, the decline was smaller than most, analysts said. Customer traffic and sales for the week reportedly got a boost from cooler weather (Moody's Economy.com Sept. 9) ...
Expert gives homeowners tips for hurricane season
WASHINGTON (9/11/09)--One of the experts on Sunday's H&FF Radio show has important, timely insurance tips for hurricane-affected homeowners.
Home & Family Finance airs Sundays at 3 p.m. EDT on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is sponsored by America's credit unions and their 90 million members, and is presented by CO-OP Network.
The Credit Union National Association (CUNA) and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites.
Sunday's show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:
- "Groupon: What Is It and How Does It Work?" with Andrew Mason, founder and CEO, Groupon.com, Los Angeles, Calif.;
- "Hurricane Season: Homeowners Insurance and Catastrophes," with Michael Barry, vice president of media relations, Insurance Information Institute, New York;
- "How to Avoid Auto Warranty Scams," with Steven Baker, director, Midwest Region Federal Trade Commission, Chicago, Ill.;
- "The BBB Goes ABC: New Grading System Helps Consumers," with Steve Cox, vice president of communications, Council of Better Business Bureaus, Arlington, Va.; and
- Your Questions Answered: How to identify "secure" websites; monitoring accounts for identity theft; saving money on groceries.
Home & Family Finance is a resource center for personal finance information at CUNA. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; Western Corporate FCU, also known as WesCorp, and its member credit unions; and the Defense Credit Union Council and member credit unions, serving those who serve our country worldwide.
For more information, read "Compile Your Financial Notebook" in Plan It: Retire Ready Toolkit.
CUNA Mutual introduces new liability insurance
MADISON, Wis. (9/11/09)--CUNA Mutual Group has introduced Management and Professional Liability (MPL) insurance, a new policy designed to protect credit unions and the personal assets of their directors, officers, volunteers and employees from a growing number of litigation exposures related to operating a credit union.
"Credit unions and their directors and officers face new risks in today's economic environment that can ultimately lead to increased lawsuits and significant losses," said Chad Nitschke, CUNA Mutual vice president of Credit Union Protection. "In fact, legal defense costs can often exceed $100,000 before a trial even begins--an expense that could be devastating to an uninsured credit union in today's economy, not to mention the financial impact to those who could be personally named in the lawsuit."
In 2009, the number of management liability claims reported to CUNA Mutual rose 72% compared with the same time period last year.
Some of the key areas of expanding litigation risks for credit unions include:
- Collateral repossessions, loan defaults and foreclosures, all of which often lead to lender liability losses and potential suits against the board;
- Credit union mergers, increasing exposure to lawsuits brought against the board;
- Unemployment, historically an early indicator of employment practice suits; and
- Focus on corporate governance, forcing the bar to be raised and making lawsuits against boards more likely.
The new MPL policy is offered as an alternative for credit unions renewing their Special Insurance Package on or after Jan. 1 in most states. MPL insurance provides protection from lawsuits arising from errors, omissions, misleading statements, breach of fiduciary duty and other management and services-related issues. The MPL coverages include:
- Management Liability--Protects the credit union and the personal assets of directors, officers, volunteers and employees against lawsuits related to management of the credit union;
- Fiduciary Liability--Protects against breach of fiduciary duties including ERISA and errors in administering employee benefit plans including 401(k), pension, life insurance and heath insurance plans;
- Professional Liability--Coverage for claims related to professional services and specified perils that are unique to credit unions such as shared branching, unfair or deceptive trade practices and deposit errors;
- Lender Liability--Covers the credit union and staff against claims brought by borrowers for errors, misstatements, omissions, neglect or breach of duty connected with lending activities; and
- Employment Practices Liability--Protects against alleged violations of federal, state, local or common law related to past, present or prospective employment by the credit union, such as allegations of discrimination, wrongful termination or workplace harassment.
MPL is part of CUNA Mutual's Credit Union Protection insurance and risk management portfolio designed exclusively for credit unions to manage their financial, operational and personal risk exposures.
The Credit Union Protection program includes:
- Bond;
- Plastic Card;
- Management and Professional Liability;
- Property and Business Liability;
- Business Auto;
- Workers Compensation; and
- Additional policies.
Connexus CU offers debt management tool
WAUSAU, Wis. (9/11/09)--Connexus CU is offering its members access to a new, free online "Debt in Focus" tool.
Users can enter their financial information into "Debt in Focus" anonymously and receive a summary of their debt totals, ratios, an estimated budget and a personal action plan to improve their credit profile and reduce debt.
Connexus also is providing its members with their credit score range, and information about how the score is calculated, what it means and how to improve it.
Connexus, Wausau, Wis., has more than $289 million in assets.
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