WASHINGTON (3/14/14, UPDATED 9:59 a.m. ET)--Voting 55-0, the House Financial Services Committee passed a bill to broaden credit unions' ability to apply for Federal Home Loan Bank membership.
The bill is strongly supported by the Credit Union National Association to put the country's privately insured credit unions on the same footing as their federally insured counterparts where it come to membership in the Federal Home Loan Bank system.
The bill was one of three passed over two days, all strongly supported by CUNA, the state credit union leagues and credit unions across the country, that--when they become law--will potentially provide significant relief for credit unions from their regulatory burden.
Together with National Flood Insurance Program reforms passed Thursday by the Senate and a bill to make changes to the operating structure of the Consumer Financial Protection Bureau also approved this morning by House Financial Services--CUNA says the bills will help credit unions by cutting costs, increasing their voice in the regulatory process, and giving credit unions more flexibility to fund mortgage lending.
In a markup session Thursday for the FHLB bill, House Financial Services Committee Chairman Jeb Hensarling said approval of the bill (H.R. 3584) would correct a "drafting oversight" that occurred years ago.
The new bill, introduced by Rep. Steve Stivers' (R-Ohio), amends the Federal Home Loan Bank Act to authorize privately insured credit unions to become members of an FHLB.
CUNA urged committee leaders in a letter Wednesday to vote in favor of the Stivers' bill.
CUNA noted that the bill would create no additional risk of loss to any FHLB or to taxpayers. In the Thursday committee markup session Stivers underscored that there is only $11 billion total in privately insured credit union assets. And Rep. Joyce Beatty (D-Ohio), a bill co-sponsor, noted that the bill only affects credit unions in nine states and they represent less than 2% of all credit unions in the U.S.
The bill states that a privately insured credit union will be considered to have met the eligibility criteria for federal home loan bank membership if, six months after its application date, the state supervisor has failed to act upon the application.
If H.R. 3584 is approved by the full House, it would then move to the Senate for consideration.
WASHINGTON (3/14/14)--National Credit Union Administration board member nominee J. Mark McWatters said at his confirmation hearing Thursday that a risk-based capital approach
NCUA nominee J. Mark McWatters (far right) greets Sen. Mike Crapo of Idaho, who is the ranking Republican member of the Senate Banking Committee, before that panel begins its confirmation hearing for McWatters and four other Obama nominees. Sen. Bob Corker (R-Tenn.) is in the background. (CUNA Photo)
"makes sense" for credit unions, but warned the "devil is in the details" of any proposal.
He told Senate Banking Committee members that examining the overall issue in general and the NCUA's proposal specifically would be high on his list of priorities if he is confirmed to join the NCUA board.
That proposal, issued in January, was one of many regulatory issues the potential NCUA board member brought up in response to a question from the committee's chairman, Sen. Tim Johnson (D-S.D.). Overregulation of small credit unions is another challenge, he said, adding that the NCUA has made some progress in this area, but more needs to be done.
The principle challenge for credit unions and the credit union system, McWatters stated, is to look to the future and anticipate the next systemic shock. This applies to both credit unions and banks, he noted, and said that while regulators look for future problems, they must also exercise judgment. "If you are always crying wolf, you'll be considered a flake," he said.
The greatest opportunity for credit unions, the NCUA nominee asserted, is to continue doing what they are doing now. Credit unions' membership and loan base are growing, and many low-income credit unions have the chance to expand their mandate to those who are underbanked and unbanked. Underbanked and unbanked Americans need financial services at a reasonable rate, McWatters added.
In his opening remarks, he briefly previewed his overall approach to regulation in his opening statement, saying his focus as a regulator "will remain straightforward: Don't neglect the fundamentals of capital, liquidity, and transparency, and always remember that the greatest threat to a financial system may reside where you least expect it--hidden within plain view."
McWatters also pledged to "work diligently to ensure the continued integrity and safety and
McWatters testifies that his approach to regulating credit unions will be "straightforward." (CUNA Photo)
soundness of our nation's credit union system in an ever-evolving marketplace...I will aim to balance competing viewpoints while maintaining the safety and soundness of the credit union system, safeguarding the Share Insurance Fund, enforcing consumer protection rules, and protecting taxpayers and credit union members from losses," he said.
Johnson said McWatters will hit the ground running with an eagerness to learn more about credit unions. He called for all nominees at Thursday's hearing to be confirmed quickly. Sen. Elizabeth Warren (D-Mass.) also commented on her work alongside McWatters on the TARP Congressional Oversight Panel. She commended McWatters as "smart, thoughtful and principled."
McWatters said he intends to work with NCUA board members, agency staff and external stakeholders "in an open and respectful manner, with the goal of finding a common ground and working cooperatively through any differences." This approach has worked for him in past positions, he said. In addition to his work on the TARP panel, McWatters has served as counsel for Rep. Jeb Hensarling (R-Texas) and as dean for graduate programs at Southern Methodist University's School of Law.
If confirmed, McWatters would replace board member Michael Fryzel, whose term ended Aug. 2. Fryzel will continue to serve until McWatters is confirmed.
The committee also reviewed the qualifications for Stanley Fischer, as a member and vice chairman of the Federal Reserve Board; Jerome Powell, as Federal Reserve Board governor; Lael Brainard, as a Fed governor; and Gustavo Aguilar, to be an assistant secretary for the U.S. Department of Housing and Urban Development.
WASHINGTON (3/14/14)--Credit unions and their members continue to contact federal
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lawmakers about preserving the credit union tax status--and this time it was to thank House Ways and Means Committee members for not touching credit unions in the committee's draft tax code reforms.
More than one-quarter of a million Twitter users were potentially exposed to the credit union message yesterday through the Credit Union National Association's latest social media blitz, "Thank You Thursday." It was the latest innovation launched under CUNA's successful "DontTaxMyCreditUnion" campaign, which started in 2013.
CUNA created the "DontTaxMyCreditUnion" effort in anticipation of this year's release of a tax reform draft. More than one million contacts to the U.S. Congress were generated under that program, first on July 23, then on Sept. 10--and then on the eve of Rep. Dave Camp's release of his tax reform discussion draft last month.
Maintaining the exemption in the Camp proposal was proclaimed a "big win" for credit unions by the press. Nevertheless, CUNA continues to urge credit union advocates to educate lawmakers and consumers alike about the good public policy reasons behind the credit union tax status. Even though the credit union federal tax exemption remained untouched, bank trades are pressing House Ways and Means Committee Chairman Camp to reconsider taxing credit unions.
To quickly send a Twitter message, credit union advocates can got to www.DontTaxMyCreditUnion.org
and click on the "Tweet Your Legislators
" icon at the top. A tweet to a member of the House Ways and Means Committee will automatically populate, or an advocate can create a personal message to legislators on Facebook or Twitter using the hashtag #DontTaxMyCU.
WASHINGTON (3/13/14)--Rep. Ed Royce (R-Calif.), as expected, introduced a credit union relief bill Thursday that would exempt loans for one- to four-unit non-occupied dwellings from the member business lending cap.
The "Credit Union Residential Loan Parity Act"--now also known as H.R. 4226-- is co-sponsored by Rep. Jared Huffman (D-Calif.).
Royce unveiled his intention to introduce the MBL-related bill when he addressed the 4,400 credit union advocates attending the Credit Union National Association's Governmental Affairs Conference late last month.
Royce has explained that his bill fixes a disparity between how credit unions and banks can account for certain loans.
"When a bank makes a loan to finance the purchase of a small apartment building it is called a residential real estate loan. When a credit union makes the same loan it is called a business loan," and thereby falls under the low 12.25%-of-assets MBL cap, Royce has noted.
He's estimated that enactment of his bill would allow credit unions to lend an estimated additional $11 billion to small businesses, and would free up "much needed private sector financing for commercial businesses and rental housing without costing taxpayers a dime."
The bill also authorizes the National Credit Union Administration to apply strict underwriting and servicing requirements for the loans.
WASHINGTON (3/14/14)--The Homeowner Flood Insurance Affordability Act (H.R. 3370) can now move on to President Barack Obama's desk to be signed into law after the Senate approved the bill on Thursday.
The Senate approved the bill on a 72-22 vote. The bill passed the House earlier this month by a 306-91 vote.
The bill, in part, would delay planned increases in National Flood Insurance Program (NFIP) premiums until the Federal Emergency Management Agency puts in place a plan to ensure they are implemented affordably.
A range of other NFIP fixes has been discussed in recent months. The National Credit Union Administration joined the Federal Reserve, the Farm Credit Administration, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to ask whether federal financial regulatory agencies should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers.
The joint agency proposal would:
Require regulated lending institutions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential improved real estate or a mobile home, not including business, agricultural and commercial loans, unless the institutions qualify for a statutory exception;
Result in new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement;
Clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage after a homeowner's private insurance lapses or becomes insufficient; and
Outline the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.
MADISON, Wis. (3/14/14)--For new-car buyers conforming to the growing trend in auto sales, it might be six years--or 72 months of car payments--before they own their vehicles outright.
As USA Today
reported Wednesday, consumers have been selecting lengthier lease terms at a higher clip lately, with six-year loans--or longer--jumping 19% in the fourth quarter, to about 20% of all new vehicle loans.
Just last month about one-third of all new vehicle sales fell into the long-term loan category of 72 months or longer.
"Longer-term loans, coupled with the current low-interest rate environment, increases the affordability of new vehicles for consumers," said J.D. Power in a statement to ABA Banking Journal
. "This is resulting in strong demand for new vehicles and also record transaction prices."
Auto loans in general have surged at credit unions recently as well, according to Steve Rick, Credit Union National Association senior economist. While overall loans rose 6% last year, new car loans almost doubled that number at 11.4%.
Leasing also has ramped up, as 26.5% of new car transactions last month were leases, according to J.D. Power's Power Information Network.
One explanation for this new trend in buyer preference could be the rising costs of new cars. The average amount a customer actually paid for a new vehicle last month was $32,319--2% more than last year, according to numbers reported by Kelley Blue Book.
But while these longer-term loans repackage higher price tags into what seem like more affordable deals, in the end, the longer terms leave buyers paying much more for their new rides than they're worth.
Car dealers, meanwhile, are directing the attention of consumers to the monthly payments, rather than total cost, so they can sell the most expensive vehicles possible, Mike Sante, managing editor of Interest.com
, told USA Today.
Sante recommends limiting loan terms to four years and saving enough cash to put 20% down on new vehicle purchases.
NEW YORK (3/14/14)--A team of security specialists. A $1.6 million malware detection tool. Compliance with payment card industry (PCI) standards. With these tools in place, retail giant Target still suffered one of the biggest data security breaches late last year.
According to a report in Thursday's Bloomberg Businessweek
, Target didn't react to the red flags that went up--resulting in the compromise of more than 40 million credit and debit card numbers and 70 million addresses, phone numbers and other personally identifiable information.
The hackers' activity was detected Nov. 30 not only by the malware detection tool from FireEye but by security specialists in Bangalore. "Had the company's security team responded when it was supposed to, the theft that has since engulfed Target, touched as many as one in three American consumers, and led to an international manhunt for the hackers never would have happed at all," Businessweek
The Target data breach cost credit unions an estimated $30.6 million, according to a survey by the Credit Union National Association (CUNA), and future fraud could increase these costs. Credit unions are among the plaintiffs in more than 90 lawsuits that have been filed against Target.
In an email to Businessweek,
Target Chairman/President/CEO Gregg Steinhafel stated, "Target was certified as meeting the standard for the payment card industry in September 2013. Nonetheless, we suffered a data breach ... we have already taken significant steps, including beginning the overhaul of our information security structure and the acceleration of our transition to chip-enabled cards."
CUNA has asked Congress to address data security relative to merchants, who are not held to the same standards of security as financial institutions. In particular, CUNA suggests all payment system participants are held to comparable levels of federal data security requirements; those responsible for the data breach are responsible for the costs of helping consumers; and ensuring consumers know where their information was breached.
The stream of consumer data continues to flow from companies that hold the information of millions of people. Earlier this week, KrebsOnSecurity
reported that 200 million consumer records held by Experian had been compromised (March 10).
The information was siphoned from Experian, one of the three major U.S. credit bureaus, through a company it had purchased in 2012. That company--Court Ventures--had an agreement to share consumer information with US Info Search and vice versa.
Through his connection with Court Ventures, Hieu Minh Ngo, a 24-year-old Vietnamese national, allegedly allowed customers of his identity-theft service to access the data.
In the transcript of Ngo's guilty plea in New Hampshire District Court, investigators found that his customers made about 3.1 million inquiries on American consumers over 18 months.
wrote, "At this point the government does not know how many U.S. citizens' [personally identifiable information] was compromised, although that information will be available in the near future," according to U.S. Attorney Arnold Huftalen.
POTTSVILLE, Pa. (3/14/14)--You won't find credit unions listed on any stock exchange. That was among the ways that John H. Murga, president/CEO of $109 million-asset Hidden River CU, Pottsville, Pa., distinguished credit unions from banks in an op-ed piece that appeared in the March 12 issue of the Republican Herald.
"Banks...have full access to the capital markets and may sell stock or debt (bonds) in order to raise the capital they need to fund growth," Murga wrote in his commentary, "Tax exemption status warranted."
Credit unions are democratically controlled, not-for-profit financial institutions, Murga explained. Unlike shareholders of corporations, member share equally in the credit union. "That's why you're called a member," Murga wrote. "You own it and have a voice in how things are run, no matter how much you have on deposit. There are no customers and certainly no stockholders. As an owner, your opinion matters every time you come through the front door."
Capital is returned to members as owners in the form of better rates on products and services, Murga wrote. At a bank, capital and profits are owned exclusively by stockholders.
A credit union's board of directors is made up entirely of volunteers elected by the membership. They are leaders who serve the interests of the members, help manage the credit union and are willing to commit hundreds of hours of sincere, dedicated service without pay, Murga noted.
It was also banks that asked Congress for taxpayer-funded bailouts during the 2008 financial crisis. "As a movement, we paid for any credit union losses from within the system and from amongst our fellow credit unions with not one cent of taxpayer funds," Murga wrote. "Banks believed then it was the taxpayers' turn to pay their 'fair share.'"
IRVINE, Calif. (3/14/14)--An improvement in foreclosure numbers unseen in seven years was reported this week by RealtyTrac in its U.S. Foreclosure Market Report for February.
Filings for foreclosures--default notices, scheduled auctions or bank repossessions--last month dropped by 10%, or down to 112,498. The recent decline also reflects a 27% decrease from levels in February of last year (RealtyTrac
But despite the positive numbers, a new trend in foreclosures appears to be creeping up as of late.
"Zombie" foreclosures--or uncared-for, owner-vacated properties--have started to grip the housing market, as 21% of all foreclosures, or about 152,000, fall into this category.
On average, zombie foreclosures dwell in the foreclosure process for 1,031 days, or almost three years.
"The biggest threat from foreclosures going forward is properties that have been lingering in the foreclosure process for years, many of them vacant with neither the distressed homeowner or the foreclosing lender taking responsibility for maintenance and upkeep of the home," said Daren Blomquist, RealtyTrac vice president.
"These properties drag down home values in the surrounding neighborhood and contribute to a climate of uncertainty and low inventory in local housing markets," Blomquist added.
Blomquist also has written that before lending institutions repossess these properties, houses are left to deteriorate, attracting vandalism and other crime to the area.
While several solutions to the zombie foreclosure problem exist that could lead to the retention of these homes, studies show the most viable way to cure housing markets replete with "the undead" is demolition.
Cleveland, for example, a rust-belt city like many others grappling with a spate of zombie foreclosures, has demolished more than 1,000 homes so far (CNN.com
However, if a new homeowner is interested in buying the vacated home and rehabbing and revitalizing it, Blomquist said, the new owner can improve the value of the property, which can spill over to other parts of the surrounding neighborhood.