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News Now: August 27, 2014

NEW: McWatters: Reg. relief, rulemaking analysis among top priorities

Washington
ALEXANDRIA, Va. (8/27/14, UPDATED 10:30 a.m. ET)--J. Mark McWatters, the newest National Credit Union Administration board member, wasted no time in releasing his top priorities for the agency. One day after his swearing-in ceremony, he names regulatory relief, transparency, accountability, supporting low-income credit union members and promoting greater industry diversity as among items high on his list.

"In discharging my duties, I will always welcome advice and counsel from the broader credit union industry, as well as from the management and members of individual credit unions," McWatters said today in a statement.

"I assure you that I will thoughtfully and respectfully consider your perspectives as I independently analyze the issues presented. While we may differ from time to time in our analysis and conclusions regarding the structure and scope of specific regulatory and administrative actions, I assure you that your voice will be heard and considered."

McWatters said his initial focus as a member of the NCUA board would be in five areas:
  • Providing regulatory relief for credit unions;

  • Incorporating a robust, objective, transparent and fully accountable cost-benefit analysis into NCUA's rulemaking and vetting process;

  • Recognizing the critical role and expanding the scope and financial viability of low-income credit unions within the financial services industry;

  • Enhancing the availability of affordable and readily understandable financial services to credit union members who are economically challenged; and

  • Promoting the role of women and persons of color within the credit union industry.

"Paying close attention to these and other critical issues affecting the credit union industry and providing a fresh, transparent and fully accountable approach toward NCUA's internal and external operations reflects my commitment to ensuring the safety and soundness of the credit union industry and protecting the Share Insurance Fund from losses while allowing credit unions to best serve their members and conduct their affairs through their exercise of prudent, fair-minded and autonomous business judgment," McWatters said.

Credit Union National Association interim President/CEO Bill Hampel said Tuesday that the association looks forward to meeting with McWatters once he is settled to discuss the agency's risk-based capital proposal, examination concerns, the need for regulatory relief and the agency's budget.  Regulatory relief for credit unions is among CUNA's top priorities.

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CUNA congratulates McWatters on taking his NCUA board seat

Washington
WASHINGTON (8/27/14)--With J. Mark McWatters having been sworn in as the newest member of the National Credit Union Administration board Tuesday, the Credit Union National Association immediately welcomed him and outlined a number of credit union system developments it hopes to work on with him.

Click to view larger image From left, Rep. Jeb Hensarling (R-Texas), outoging NCUA board member Michael Fryzel and incoming board member J. Mark McWatters. McWatters was sworn in by Fryzel at Hensarling's Dallas office Tuesday. (NCUA Photo)
Outgoing board member Michael Fryzel performed the swearing-in ceremony held in at Rep. Jeb Hensarling's (R-Texas) Dallas office. McWatters joins NCUA Chair Debbie Matz and Vice Chair Rick Metsger to form the three-person board.

In a letter sent to McWatters Tuesday directly after the new board member's swearing in, CUNA interim President/CEO Bill Hampel noted that credit unions are facing a "bourgeoning array of regulations."

"We look forward to working with you in the development of a regulatory process that is transparent and accountable and a regulatory environment that will enable credit unions to continue meeting the needs of their members, while ensuring safety and soundness," Hampel wrote.

"We are also hopeful that you will deploy your expertise and background to scrutinize agency decisions particularly regarding the need for new rules, issues relating to examination fairness, and continual NCUA budget increases."

Hampel also expressed his wish that CUNA could meet with McWatters soon to discuss the agency's risk-based capital proposal and other issues.

McWatters previously served as the assistant dean for Graduate Programs and as a professor of practice at the Southern Methodist University Dedman School of Law in Dallas and as an adjunct professor at the university's Cox School of Business. He also served on the governing board of the Texas Department of Housing and Community Affairs and the advisory committee of the Texas Emerging Technology Fund.

Prior to that, McWatters was a member of the Troubled Asset Relief Program Congressional Oversight Panel and as counsel to Rep. Jeb Hensarling (R-Texas). He also practiced law as a partner with three large cross-border law firms and as counsel to an international hedge and private equity firm where he specialized in taxation, corporate finance, and mergers and acquisitions.

Immediately after graduating from law school, McWatters served as a judicial clerk to Judge Walter Ely in the Ninth Circuit of the U.S. Court of Appeals in Los Angeles.

McWatters is licensed to practice law in Texas and New York and is a certified public accountant in Texas. He earned a J.D. from the University of Texas at Austin School of Law and LL.M. degrees from Columbia University School of Law and New York University School of Law.

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'Minnesota Minded:' Membership message hits the road

CU System
ST. PAUL, Minn. (8/27/14)--The Minnesota Credit Union Network (MnCUN) Monday introduced "Minnesota Minded," a report about the growth Minnesota credit unions have experienced since the financial crisis.
 
Click to view larger image Click to enlarge.
That growth includes the addition of more than 100,000 new members in two years and an increase in nearly every measurement of credit union strength.
 
Nationally, the Credit Union National Association announced that credit unions had surpassed 100 million memberships in June.
 
"Minnesota Minded" is designed to illustrate the significant trust that consumers have placed in Minnesota credit unions, which hold over $19 billion in assets and serve more 1.6 million Minnesotans at over 400 locations.
 
To roll out "Minnesota Minded," MnCUN held a press event on Monday, featuring the community involvement and financial education initiatives led by Affinity Plus FCU, St. Paul, with $1.7 billion in assets, and Wings Financial FCU, Apple Valley, with $4 billion in assets.
 
"Affinity Plus and Wings are two great examples of the many ways that credit unions throughout the state work within their communities to build a stronger Minnesota," said Mark D. Cummins, MnCUN president/CEO. "Every day credit unions help create a brighter financial future for their members and their communities."
 
Financial education for youth is a vital component of credit unions' commitment to serving members and communities. "It's important for youth to build financial skills," said Frank Weidner, Wings Financial FCU president/CEO. "In 2014, Wings is partnering with schools throughout Minnesota to teach more than 5,000 students about the basics of financial education, along with the impact that social media and identity theft can have on their future higher education and employment opportunities."
 
"Minnesota Minded" showcases which illustrates that credit unions are Minnesotans' trusted, local financial partner and that credit unions are closely connected to the communities they serve.
 
Affinity Plus makes a difference in its community with "Plus it Forward," a program designed to inspire people to perform intentional acts of kindness.
 
"Being involved in communities is a top priority, and we engage with our 181,000 members to assist in giving back to Minnesota charities," said Dave Larson, Affinity Plus president/CEO. "A great example is our Plus it Forward initiative. On Columbus Day (Oct. 13) Affinity Plus will be out in our communities spreading kindness by doing things like raking leaves for senior citizens and supporting military members and their families."

Additional "Minnesota Minded" press events are scheduled for Brainerd and Rochester in  upcoming weeks.

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Bankrate cites Schenk on 100M membership reach

CU System
NEW YORK (8/27/14)--A Bankrate.com article published online Monday cited credit unions' 100 million membership milestone and highlighted the growth of cooperative financial institutions since the financial crisis. Credit Union National Association interim Chief Economist Mike Schenk was interviewed for the article.
 
"Credit unions are today in a better place than they were four to six years ago,"  Schenk noted. "Credit unions have come through in better shape, relatively speaking, than the banking industry (after the economic downturn)."
 
Much of that momentum was gained in 2011 through the Bank Transfer Day campaign, which urged consumers to ditch their banks in light of moves by some institutions to add new bank fees.
 
"Since that time, it has not only maintained itself but accelerated," Schenk told Bankrate.com of recent credit union growth. "In the wake of the downturn, as banks were hunkering down and licking their wounds and turning people away, credit unions were actually refinancing some of those unfriendly loans that banks made."
 
That relative health has enabled some credit unions to purchase struggling bank branches, the article said. The article noted six instances in which credit unions purchased banks or branch facilities in the past several years.
 
Former customers of those banks may welcome the chance to become credit union members. The article also referenced a February Consumer Banking Insights Study that found lingering resentment among consumers toward big banks over their role in the financial crisis. Two-thirds of Americans say they're still angry at big banks.

Castro seeks improved quality assurance for FHA programs

Washington
WASHINGTON (8/27/14)--U.S. Housing and Urban Development (HUD) Secretary Julian Castro addressed ways to balance serving homebuyers while managing risk for the Federal Housing Administration (FHA). Castro, who officially took office at the end of July, spoke during a National Association of Realtors webinar Tuesday.

Castro provided insight into the FHA's Homeowners Armed With Knowledge (HAWK) program. HAWK is a pilot program meant to help borrowers make better choices when it comes to housing finance.

The four-year voluntary program offers mortgage insurance premium reductions to first-time homebuyers with an FHA loan, in return for completing three phases of housing counseling.

At the invitation of HUD and FHA, Credit Union National Association regulatory advocacy staff has attended advance briefings on the HAWK program, as well as other housing finance reform measures, in recent months.

To receive the maximum benefit, a borrower must complete three phases of counseling--pre-purchase, pre-closing and post-closing--and have two years of timely mortgage payments. In exchange, the borrower can see a premium reduction, both up front and on annual premiums.

"At the end of the day, a borrower with an average size loan, say $180,000, will see $10,000 in savings over the life of the loan," Castro said. "By incentivizing responsible decision making we're trying to build a stronger foundation for middle class home ownership and at the same time reduce the exposure to risk by the FHA, while creating a more stable housing market."

The HAWK program falls under the FHA's renewed interest in housing counseling, which is part of the agency's overall ramping up of quality assurance measures. Castro mentioned a few other measures, designed to create more certainty and clarity for FHA lending partners.

These include:
  • Development of the single-family handbook, which Castro called a "definitive guide for doing business with FHA." The agency posted three sections of the handbook, "Applications Through Endorsement," "Doing Business with FHA" and "Quality Control, Oversight and Compliance" to solicit feedback and input. Final publication of the first section is expected within a few weeks;

  • Improved loan quality assessment. Castro said the goal is to create more descriptive and transparent ways to identify and classify loan defects;

  • Sampling in a way that more accurately reflects overall underwriting quality; and

  • Introducing a supplemental performance metric based on credit score groups rather than geography.

FHA to ban prepayment 'penalties' beginning next year

Washington
WASHINGTON (8/27/14)--Starting with mortgages insured by the Federal Housing Administration on Jan. 21, 2015, and beyond, borrowers who prepay their FHA mortgages will not have to make interest payments beyond the date their loan is paid in full. 

The FHA approved a rule Tuesday called "Handling Prepayment: Eliminating Post-Payment Interest Charges" (see resource link), and it bans interest charges typically imposed on a borrower who pays off a mortgage ahead of term, sometimes by selling the home or refinancing into another loan with a lower interest rate.

FHA also announced a second new rule intended to ensure borrowers have early access to information when making decisions about their FHA mortgages. It requires that borrowers get at least 60 days--but no more than 120 days--notice before any change is made to their monthly payment for adjustable-rate mortgages(ARMs) that are FHA-insured. It applies to FHA-insured ARMs originated on or after Jan. 10, 2015.

The rule also requires lenders to base an adjustment to the interest rate on the most recent index value available 45 days before the change is set to take place. FHA extended this so-called "look back" period from 30 days.

FHA said in a release that together, the new rules are responsive to the regulations implementing the Truth in Lending Act (Regulation Z) as revised last year by the Consumer Financial Protection Bureau.

NACHA passes 2 rules to increase ACH Network quality

Washington
HERNDON, Va. (8/27/14)--The voting membership of NACHA, the Electronic Payments Association has approved ballots for two upcoming rules for the Automated Clearing House (ACH) Network.

According to NACHA, the two rules are designed to improve ACH Network quality by reducing the incidence of ACH transactions that result in exceptions and returns.

The ACH Network Risk and Enforcement Rule aims to improve NACHA's ability to identify and enforce the rules against "outlier" originators that may be responsible for the highest, most disproportionate levels of exceptions and returns. Such returns impose costs on Receiving Depository Financial Institutions (RDFI) and can impact consumers.

The rule:
  • Establishes an inquiry process that allows NACHA to research the facts behind an originator's ACH activity;
     
  • Lowers the existing return threshold for unauthorized transactions and expands NACHA's authority to enforce rules related to unauthorized transactions; and
     
  • Defines permissible practices for use of the ACH Network to collect transactions returned for insufficient funds and other reasons.
The amendments related to NACHA's enforcement authority will become effective Jan. 1, 2015, and the amendments related to return rate levels and reinitiated transactions will become effective Sept. 18, 2015.

The ACH Network Quality Rule defines the methodology for establishing an unauthorized entry fee to be paid by an Originating Depository Financial Institution (ODFI) to a RDFI for the return of an unauthorized transaction. It goes into effect Oct. 3, 2016.

The fee is meant to provide an incentive for ODFIs to implement processes and tools to reduce the number of unauthorized transactions, as well as provide partial cost recovery to RDFIs for handling unauthorized transactions costs.

The Credit Union National Association has submitted comments to NACHA, urging it to minimize costs on credit unions that may be affected and minimize unintended consequences, due to the fact that credit unions generally originate higher quality transactions.

Use the resource link below to access the updates on rules, as well as CUNA's comment letters.

21 CUs part of $195M in CDFI awards for low-income communities

Washington
WASHINGTON (8/27/14)--Twenty-one credit unions received $27,906,027 in grants Tuesday from the U.S. Treasury Department's Community Development Financial Institutions (CDFI) program.

The credit unions represent part of 185 total organizations that received approximately $195.4 million from the CDFI Fund for the fiscal year 2014. The funds are meant to enable CDFIs around the country to increase lending and investments in low-income and economically distressed communities.

The credit unions were awarded $24,906,037 in financial assistance and technical assistance grants. Financial assistance awards are up to $2 million and are meant to allow CDFIs to sustain and expand lending capital, loan loss reserves, capital reserves, financial services and development services.

Technical assistance awards are available up to $125,000 for capacity development for organizational sustainability and success, such as purchasing equipment, hiring consulting or contracting services, paying salaries and benefits, or training staff or board members.

In addition to receiving $2 million in financial assistance awards, Hope FCU, Jackson, Miss., with $187 million in assets, received an additional $3 million from the Healthy Food Financing Initiative Financial Assistance awards. This is a supplemental funding opportunity under the CDFI Program for eligible CDFIs that expressed an interest in expanding their healthy food-focused financing activities.

According to CDFI, awardees use the funds to enhance capacity to make investments in a range of retail and non-retail healthy food projects serving low-income communities. Investments include food production, grocery stores, mobile food retailers, farmers markets, cooperatives, corner stores and bodegas.

In fiscal year 2013, 35 credit unions received $26,886,683 in awards.

In the same year, past CDFI Program awardees reported originating 24,285 loans or investments totaling more than $1.9 billion. Those awardees also reported financing 17,732 affordable housing units and 6,558 businesses, and provided more than 293,000 individuals with financial literacy training and other training.

Use the resource link below for the full list of awardees.

Aug. consumer confidence highest since 2007

Market
NEW YORK (8/27/14)--Experiencing its fourth consecutive monthly increase, the Conference Board Consumer Confidence Index for August hit its highest mark since October 2007.
 
The index rose 2.1 points to 92.4 from a revised 90.3 in July. The present situation index increased to 94.6 from 87.9, while the expectations index edged down to 90.9 from 91.9 in July.
 
"Consumer confidence increased for the fourth consecutive month as improving business conditions and robust job growth helped boost consumers' spirits," said Lynn Franco, director of economic indicators at the Conference Board.
 
"Looking ahead, consumers were marginally less optimistic about the short-term outlook compared to July, primarily due to concerns about their earnings," Franco said, adding, "Overall, however, they remain quite positive about the short-term outlooks for the economy and labor market."
 
Consumers' assessment of the job market was more positive, with an increase to 18.2% from 15.6% of those stating jobs are "plentiful."  Respondents claiming jobs are "hard to get" declined marginally to 30.6% from 30.9%.
 
"Aside from the glowing review offered by consumers of the job market, the share of negative responses is trending at recovery lows in nearly every survey segment," noted Moody's analysts (Economy.com Aug. 26). "Fewer consumers think business conditions are bad, and few think they will get worse."
 
Despite a relatively bright path ahead, consumers are giving a chilly reception to the idea of purchasing homes, major appliances or a car within the next six months. Moody's noted that a "huge upswing in consumer spending" shouldn't be expected.

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Council white paper examines chief lending officer's role

CU System
MADISON, Wis. (8/27/14)--The influence of credit union chief lending officers (CLO) extends beyond lending responsibilities into leadership and business strategy roles, according to a new white paper from the CUNA Lending Council.
 
The CLO helps establish goals in conjunction with the senior leadership team, and those goals are accomplished through the efforts of employees across the organizational chart, according to the white paper, "The Chief Lending Officer: An Examination of the Role and How to Get There." CLOs should be able to get employees excited about their vision, while at the same time, communicate key policy and product details.
 
The paper identifies six reasons why a credit union employee would strive to reach the CLO position.
  • Influence. "If your goal is to be a CLO, make sure you're doing it because of the job itself and not the compensation," said Aaron Bresko, CLO at GTE Financial CU, Tampa, Fla., with $1.6 billion in assets. "I like to protect and develop staff. I'm an advocate for the employees and members, and I really enjoy that. At this level, I have the biggest ability to be able to impact those two things."
  • Salary and benefits. Influence aside, CLOs can can expect a six-figure salary and great benefits. "Salary and benefits are obviously very good," Bresko said. "At this level, the salary is just a given, but what you really need to look at are the retirement plans--the senior executive retirement plans, that have the five-year, seven-year, 10-year buyouts."
  • Challenge. CLOs spend their days working on hard problems without obvious solutions. Leadership decisions are rarely binary. The choices they make have cascading and unanticipated consequences. "I could take a lesser job, have less stress," Bresko said, adding, "I like the challenges. I also like being able to influence all parts of the organization."
  • Professional development. "Something about a role, if it is provocative enough to someone, is going to be developmental," said Bill Lothridge, vice president of human resources at Alliant CU, Chicago, with $8.2 billion in assets. "What the organization needs to be comfortable with is will the foundational expectations and deliverables associated with this role be solidly attended to while talent in the role launches at the developmental stage?"
  • Co-workers. People are the difference between a job you love and a job that's "just a paycheck." Bresko advises, "Make sure you're going to be able to work with the CEO, the board, and that team. You spend a lot of time with them and that can make or break it. Know that you'll be able to make a difference and work well with them."
  • Leadership. "Someone who aspires to be the CLO needs to consider if they would elect to be a leader as a living," Lothridge said. "Most of what they either need to come with or cultivate has, in many respects, and over the long term, little to do with lending."
To download the white paper, use the link.
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