WASHINGTON (6/19/13)--Credit Union National Association witness Jerry Reed testified yesterday that credit unions worry that the Consumer Financial Protection Bureau's Qualified Mortgage (QM) rule will make it all but impossible for credit unions to write non-QM loans.
 
Reed, who is chief lending officer at Alaska USA FCU, said that the QM

Rep. Shelly Moore Capito (R-W.Va.)  shakes the hand of Jerry Reed, the CUNA witness who testified Tuesday on behalf of credit unions regarding concerns about the CFPB's QM rule. Reed is chief lending officer at Alaska USA FCU. (CUNA Photo)

standard "designed to be an instrument of consumer protection, may serve as an instrument of prudential regulation, effectively setting a bureaucratic standard for loan quality."
 
Reed was representing credit unions at a House Financial Services subcommittee on financial institutions and consumer credit hearing on "Examining How the Dodd-Frank Act Hampers Home Ownership."

Reed told lawmakers that credit unions commend the CFPB for listening to their concerns and for incorporating many of their concerns into amendments to the mortgage rules. However, he underscored that credit unions continue to have serious apprehensions about how the QM rule will be implemented and believe that it could have the unintended effect of reducing credit union members' access to credit.
 
"Credit unions were created to promote thrift and provide access to credit for provident purposes to their members. The credit union structure and historical performance of credit union mortgage loan portfolios strongly support a full credit union exemption from the QM rule," Reed testified.
 
As not-for-profit financial cooperatives, Reed reminded, credit unions are owned by the members that they serve. This fundamental difference between the for-profit and not-for-profit sector of the financial services industry provides a significantly different incentive structure for those managing the institutions, Reed noted.
 
In addition, credit unions are primarily portfolio lenders, typically selling less than a third of their new originations. The fact that most of the loans they make will be held in their own portfolios is further incentive for them to be particularly attentive to the applicant's potential ability to repay.
 
"While we appreciate the fact that the bureau has provided a modest exemption for small volume originators, we question the need to apply this rule to credit unions in the first place, and urge the bureau to consider exempting credit unions from the rule entirely," Reed said.
 
Opening her subcommittee's hearing, Rep. Shelly Moore Capito (R-W.Va.) said it could be the very consumers that are meant to be protected by the CFPB's Ability-to-Repay mortgage rule, issued in conjunction with the QM rule,  that could be harmed by unintended consequences of the rule.

She said low-income consumers, and those in rural areas with low property values, could find the ability-to-repay rule eliminates mortgage lenders' ability to engage in "relationship lending." She said "case-by-case, local lending" could disappear because of "rigid mortgage lending rules" proposed by the CFPB.

Rep. Sean Duffy (R-Wis.) said there appears to be a bipartisan agreement on the need to fix some parts of  the Dodd-Frank Act, though other members spoke in favor of that law's provisions. For instance, Rep. Carolyn Maloney (D-N.Y.) said Dodd-Frank is intended to show "we learn from our mistakes." (See related story: FHFA QM Proposal Could Harm Credit Access, CUNA Warns.)

ALEXANDRIA, Va. (6/19/13)--A final rule on loan participations has been added to the National Credit Union Administration's June open board meeting agenda.

While the details of the final rule will not be available until the board meeting, the Credit Union National Association has raised serious concerns about the proposal as it was issued December 2011 and is hopeful important changes will be included in the final rule.

In its comment letter and subsequent advocacy efforts on the proposal, the CUNA urged the agency to withdraw it, as the net worth limitations on loan originations from one originator and one borrower in particular would be very problematic. CUNA also urged the agency to provide a waiver process.

CUNA also raised concerns about the impact of the proposal, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.

A proposed Illinois Member Business Loan rule is the other item on the open board meeting agenda. Supervisory activity considerations will be considered during the closed board meeting.

The open meeting is scheduled to being at 10 a.m. (ET) on Thursday. The closed meeting will follow shortly thereafter.

For more on the NCUA agenda, use the resource link.

SAN JOSE, Calif., and NEW YORK (6/19/13)--New accounts have the highest rate of cyberattacks, with takeover attempts nearly twice that of accounts that are at least six months old, according to Web fraud data compiled by ThreatMetrix Inc.
 
The data were collected from 1,500 consumers, 9,000 websites and more than 1.7 billion cyberevents from ThreatMetrix's TrustDefender Cybercrime Prevention Platform and ThreatMetrix Global Trust Intelligence Network. The data included new account registration fraud, payment fraud and account takeovers.
 
Roughly one in every 10 user accounts opened online are originated by cybercriminals applying for new lines of credit, creating profiles on social networking or marketplace sites, and enrolling in authentication schemes, Metrix found. In a recent six-month snapshot ending March 31, attacks on new account registrations using spoofed or synthetic identities had the highest rate of attacks.  Next highest was account logins and payment fraud.
 
"Account registrations saw the highest rate of attack among the key customer engagement use cases," said Alisdair Faulkner, ThreatMetrix chief products officer.
 
"This isn't surprising in light of large scale data breaches recently highlighted by Symnatec in its Internet Security Threat Report 2013 and Verizon in its 2013 Data Breach Investigations Report.  These breaches underscore the relative ease of obtaining a person's full identity information sufficient enough to bypass most identity verification capabilities," Faulkner said in a ThreatMetrix blog.
 
Using botnets and malware, the cybercrooks bypass address-based filters. "The economic impact of these attacks varies by industry," he said, noting that the "common thread is that without automated visibility in the true device, persona, relationship and global behavior, the only alternative is additional verification roadblocks put in front of legitimate customers and extended review and hold-out periods."
 
What does this mean for credit unions? Take extra precautions with new accounts, especially new online banking accounts and step up verification procedures. And advise members to be extra cautious when making purchases or opening new accounts at vendor over the Internet.
 
Payments fraud attempts, including online credit card transactions and money transfers, rose to 6.4% from 3.1% during the six months studied, said ThreatMetrix. Faulkner cited these trends as factors:

• Sophisticated credit card cybergangs adopting banking malware, normally used to hijack banking accounts, to steal full credit card information from consumers as a fake verification step when attempting to log into a bank or credit union account;

• An increase in the percentage of digital goods sold within the company's customers and expansion of their businesses into new areas, including worldwide business; and

• An increase in the adoption of Virtual Private Network (VPN) and platform-as-a-service services, which provide "ad hoc tunneling protocols." Cybercriminals favor VPNs because they can bypass blacklisted Internet provider blacklists on these networks.

Account takeover attempts during the period studied nearly doubled (168%). Although these attacks traditionally focused on banking and brokerage sites, they recently have escalated at e-commerce and software-as-a-service companies that store customer data, including credit card details.
 
ThreatMetrix also noted a rise in account takeovers using more sophisticated "blended" or multi-stage attacks to exploit companies without an integrated solution for malware, device identification and bot protection.

MADISON, Wis. (6/19/13)--How credit unions are reaching out to serve the underserved is the focus of a new Web Exclusives special report from Credit Union Magazine, released Monday.
 
The report features six articles, including coverage of sessions at the National Federation of Community Development Credit Unions' 2013 Annual Conference in Baltimore and at the Center for Financial Services Innovation's Eighth Annual Underbanked Financial Services Forum in Miami, Fla.
 
The articles include:

• "Serving Low-Income Populations Requires Innovation."  Community development innovator William Bynum said low-income communities need credit unions to be creative.

• "Reach the Underserved." Tips for credit unions from Jonathan Mintz, New York City commissioner for consumer affairs.

• "How to Build Community Partners." A panel's advice: "The only ones that work are those where everybody gets value."

• "Why Financial Empowerment Matters." Consumer financial education amplifies the impact of other social programs.

• "Prepare for the 'Tidal Shift' Shaping Financial Services." Mobile banking and hybrid cards are among the changes in services to the unbanked.

• Scenes from the Federation's 2013 Annual Conference. Speakers urge credit unions: Don't wait for immigration reform to reach out to immigrant community.

Use the links for more information.

WASHINGTON (6/19/13)--The Federal Housing Finance Agency's (FHFA) decision to prohibit government-sponsored enterprises Fannie Mae and Freddie Mac from purchasing mortgages that do not meet the definition of qualified mortgages (QM) could prevent credit unions from working with their members to customize financial products that meet their individual needs, Credit Union National Association President/CEO Bill Cheney wrote in a Tuesday letter to FHFA Acting Director Ed DeMarco.

"The ability of credit unions to customize their products is important because, as member-owned, democratically controlled financial institutions, credit unions understand that every member brings different circumstances to a home purchase transaction...And always look to exhaust every option in order to satisfy a member's needs," Cheney explained. These circumstances may lead to the creation of loans that fall outside the QM box, he added.

"The FHFA decision leaves the impression in the minds of many credit unions that this kind of individualization is no longer welcomed," Cheney wrote.

The Consumer Financial Protection Bureau issued standards to define QMs under the agency's "ability to repay" rules, and mortgage servicing rules, in January. The FHFA's purchasing prohibition would become effective at the same time as the CFPB's ability to repay rules: January 2014.

Loans with terms that do not exactly match certain CFPB QM requirements, such as 40-year loans, or loans with points and fees exceeding the thresholds established by the rule, will not be purchased by the GSEs.

The FHFA will allow the GSEs to continue to purchase loans that meet the underwriting requirements stated in their respective selling guides, including loans with debt-to-income ratios above 43%. Cheney in the letter commended this decision.

However, he wrote, the FHFA's decision could adversely impact "Americans who need the flexibility credit unions provide to their members the most." (See related story: CUNA Tells Lawmakers CUs Merit Full QM Exemption.)

SIOUX FALLS, S.D. (6/19/13)--Mobile/contactless payments was identified as the area with the most expected future growth by respondents to the 2013 global ATM Innovation Industry Survey.
 
About 55% of respondents cited mobile payments as the top area of growth in the ATM Industry Association survey.
 
"There seems to be no indication of a lack of satisfaction with basic ATM operation and function," the white paper accompanying the survey said. "However, there is definitely an awareness of the need to modernize the connection to mobile devices."
 
Bill payments, ATM advertising, person-to-person payments, and prepaid cards were all selected by more than 25% of the respondents as other areas of future growth.
 
Deposit automation was ranked as the top non-core function by respondents, with about 48% of respondents saying it was the No. 1 innovation. Bill payments came in a distant second with 15% listing it as the top innovation.
 
More than 50% of respondents said that rules and mandates by the primary global card brands are the biggest obstacle to innovation in the ATM industry. "This consensus may continue to rise in the U.S., given current debates about Europay, Mastercard, VISA liability shift and routing choice issues in that country," the white paper said.
 
Respondents say the area most in need of improvement/modernization is security surrounding the ATM, with 43% selecting that area.

WASHINGTON (6/19/13)--"Credit unions strongly support efforts to simplify their compliance obligations," including a proposed U.S. Department of Housing and Urban Development (HUD) rule that would streamline Federal Housing Administration (FHA) financial statement reporting requirements, Credit Union National Association Deputy General Counsel Mary Dunn said in a comment letter filed this week.

Under the HUD proposal, small credit unions and other financial institutions with less than $500 million in assets would not be required to submit separate annual audited financial statements as a condition of FHA lender approval and recertification. Unaudited statements that are submitted to the National Credit Union Administration or other prudential regulators would suffice.

Audited financial statements would only be required if HUD determines an institution poses heightened risk to the FHA insurance fund.

"We believe the proposed rule makes sense," Dunn wrote. "By aligning the FHA financial reporting requirements with those credit unions are already required to undertake, FHA will permit credit unions to avoid redundant compliance obligations and minimize compliance costs," she said.

"Credit unions currently face substantial regulatory burdens related to mortgage lending in light of the large volume of recently issued regulations coming from regulators with jurisdiction in this area," Dunn added.

For the full comment letter, use the resource link.

MADISON, Wis. (6/19/13)--Credit Union Magazine is seeking credit union rock stars: Unique individuals who demonstrate outstanding innovation in their areas of expertise--and by doing so make the credit union movement a better, more interesting place.
 
The Credit Union National Association wants to recognize and celebrate the movement's rock stars in a special issue of Credit Union Magazine.
 
Among the questions to consider in nominating credit union rock stars:

• How has this person raised the bar on creativity, strategy and execution?
• What makes this rock star unique?
• What are the most admirable qualities about this rock star?

To nominate a credit union rock star, use the link.