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News Now: April 20, 2015

CUNA files RBC2 comment letter, encourages stakeholders to weigh in

WASHINGTON (4/20/15)--CUNA submitted its comment letter Friday on the National Credit union Administration's revised risk-based capital plan (RBC2). While holding firm to the view that the rule is unnecessary and should be tabled, the letter offers a number of constructive suggestions to improve the rule since the agency appears determined to move forward.
"I've said it before. I will keep saying this. A risk-based capital rule is a solution in search of a problem. What's more, the current plan--though vastly improved from the original--is a solution that just won't work in search of a problem that just does not exist," CUNA President/CEO Jim Nussle said.
He added, "To the more than 1,200 of you that have already filed a comment letter, I thank you for participating in this important effort to improve the rule. For those who have not yet written, I encourage you to do so."
CUNA has created a body of resources to support credit unions' RBC letter writing and has produced the video below describing key points of its 15-page comment letter. 

Among the points made in the trade association's letter, Nussle emphasizes that the proposal, as well as other recent NCUA initiatives, goes way too far in treating credit unions like banks: It ignores the importance of the credit union difference as cooperative, not-for-profit, member-owned and directed institutions. 
"There is a real danger," he warns, "that if you are regulated and supervised as banks, you will be forced to act more like banks, which would be a great disservice to your members."
Among other top points in Nussle's letter:
  •  CUNA holds hold firm to its view that NCUA does not have the legal authority to impose a two-tiered RBC system.
  • The strong performance of credit unions and their federally backed share insurance fund during and after the financial crisis demonstrates there is no need for a major overhaul of NCUA capital requirements, and CUNA finds no evidence that had RBC2 been in place before the crisis that it would have reduced National Credit Union Share Insurance Fund losses in any noticeable way;
  • CUNA therefore requests that the rule be withdrawn, but in the event the NCUA moves forward, the association urges a number of changes and further improvements;
  • The new proposed capital adequacy provisions, beyond net worth and RBC ratio requirements, should be dropped;
  • A number of the risk weights should be reduced;
  • The identification of "complex" credit unions should be based on something more than simply asset size, and should include only credit unions of at least $500 million in assets;
  • The conditions under which goodwill could be included in the RBC ratio should be expanded;
  • The NCUA should minimize the burden on credit unions of expanding the Call Report for purposes of RBC2;
  • The agency should allow credit unions to use supplemental capital in meeting RBC requirements;
  • A separate interest-rate risk rule is NOT necessary; and,
  • The implementation of RBC2 should be delayed until 2021, to coincide with expected refunds from the Corporate Stabilization Fund.
"We listened to our members in developing this letter . We heard from CUNA's Governmental Affairs Committee and its Examination and Supervision Subcommittee, from members of CUNA's CFO Council, from many credit union CEOs and volunteers, and from leagues.
"Their input was vital in shaping our response and I urge the NCUA to consider our recommendations carefully," Nussle said.

NCUA budget hearing bill has strong support from CUNA

WASHINGTON (4/20/15)--The National Credit Union Administration Budget Transparency Act (S. 924) would increase transparency and accountability at the agency, thereby strengthening its mission, CUNA believes.
CUNA President/CEO Jim Nussle wrote a letter of support Friday to Sen. Dean Heller (R-Nev.) and Mark Warner (D-Va.), who introduced the bill last week.
The bill would amend the Federal Credit Union Act to require the NCUA to make a copy of its draft operating budget publicly available, and would also require the agency to provide notice of a public hearing, conduct the hearing and allow the public to submit comments on the budget.
"Credit union member resources are used to fund nearly all of NCUA's budget. It is not too much to ask for the members of the NCUA Board to conduct a hearing and listen to stakeholder feedback from those responsible for funding the activities of the agency," Nussle wrote. "We disagree with those who would suggest that a hearing on the agency's budget would result in 'regulatory capture.'"
Nussle added that, as former chair of the House Budget Committee, he is well aware that Congress regularly holds hearings on the federal budget and other activities to solicit stakeholder input, and that "this type of back and forth is an important part of our democratic process."

Other Resources

CUs from all 50 states wanted for Home Depot breach lawsuit

WASHINGTON (4/20/15)--To best ensure monetary recovery from the September 2014 data breach at Home Depot is available to credit unions in all states, plaintiff lawyers are seeking at least one plaintiff from each state to be involved as a named plaintiff in the current class action lawsuit, Susan Parisi, chief counsel of CUNA, has noted. She emphasizes that credit unions still need to make their own decision about whether joining as a named plaintiff is right for them.
CUNA's participation does not mean credit union participation is not needed. Parties to the lawsuit must be identified and evaluated within the next two to three weeks to make the May 15 deadline for inclusion in the class action lawsuit.
There are multiple firms participating as counsel for the class. CUNA is using the firms below and credit unions interested in joining the lawsuit using those firms can contact:
CUNA has agreed to join credit unions and other financial institutions around the country as a plaintiff in a class action lawsuit against Home Depot that seeks recovery and injunctive relief associated with the retail giant's massive 2014 data breach. That breach resulted in credit unions bearing tens of millions of dollars in costs. Home Depot has acknowledged that 56 million credit and debit cards were compromised.
Class counsel is still actively seeking credit union plaintiffs from most states.

CUNA's participation does not mean credit union participation is not needed. Parties to the lawsuit must be identified and evaluated within the next two to three weeks to make the May 15 deadline for inclusion in the class action lawsuit. 

Those credit unions who choose not to participate as named parties can still likely participate as class members. No immediate action is needed by credit unions not wishing to be named parties.

Other Resources

Mortgage loans a 'bit easier' to get, CUNA's Hampel to WaPo

CU System
WASHINGTON (4/20/15)--Financial institutions have stricter standards in underwriting mortgage loans than a decade ago, but mortgages are still attainable for many consumers, CUNA Chief Economist and Chief Policy Officer Bill Hampel told the Washington Post in a recent article.
"People typically underestimate the likelihood of getting a loan," Hampel said. "There's no question that it's harder today to get a loan than it was 12 years ago, but it's a little bit easier than it was three years ago."
One reason for the stricter requirements are the rules set by Fannie Mae and Freddie Mac for the conventional loans they buy and package for the secondary market, Hampel said.
"If a lender plans to sell their loan to Freddie Mac or Fannie Mae, then they have to meet their requirements, which are pretty uniform across all lenders," Hampel told the Washington Post . "If a loan goes bad at some point after it's been sold, then Freddie Mac and Fannie Mae can go back to the original documentation to look for a mistake. If any mistake has been made, the lender can be forced to buy back the loan."
That rule gives lenders reason to be more strict with their underwriting standards, Hampel said.
"The exception is that some lenders hold some or all of their loans in their own portfolio and don't sell them to investors," Hampel said. "In that case, the lenders have greater flexibility in making decisions about a loan approval because they are only answering to themselves."
As an example, Hampel said a loan might be approved for an applicant with a debt-to-income ratio that is a little high, such as 45%, but who has a high credit score and is making a down payment of 20% or 30%.

Matz to Hensarling: NCUA does not participate in Choke Point

ALEXANDRIA, Va. (4/20/15)--The National Credit Union Administration does not, and will not, participate in programs such as U.S. Department of Justice's (DOJ) Operation Choke Point, agency Chair Debbie Matz told a prominent legislator last week.
Matz wrote to Rep. Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, in response his April 8 request about the NCUA's relationship with Operation Choke Point.
Operation Choke Point allows the Financial Fraud Enforcement Task Force to investigate whether financial institutions and payment processing companies are enabling fraudulent activity. Critics say it is being used to separate consumers from access to financial services.
Hensarling wrote to Matz requesting the NCUA to publicly disclaim any NCUA involvement in Operation Choke Point. According to Matz, the NCUA "has not and will not participate in Operation Choke Point or any other similar operation."
She cited DOJ testimony from a July 2014 House Judiciary Committee hearing on Operation Choke Point, in which the DOJ listed the regulators with which it communicated on Operation Choke Point. The NCUA was not listed.
Hensarling's second request was that the agency issue a letter to credit unions and a memo to employees clarifying the NCUA's Operation Choke Point policy. Per Matz's response, the agency issued its most recent anti-money laundering guidance in December 2014, acknowledging that money service businesses (a frequent Operation Choke Point target) provide necessary and valued financial services.
The NCUA also issued a memorandum to all field staff in August 2014 indicating the agency's policy is that a decision to open, close or decline an account or relationship is generally made by the individual credit union without the agency's involvement.
"The decision may be based on the credit union's particular business objectives, its evaluation of the risks associated with offering particular products or services and its capacity and systems to effectively manage those risks," Matz wrote, adding that going forward the NCUA will continue to ensure all materials and guidance clearly outline this policy.

Other Resources

FHFA says g-fees are at appropriate levels, will continue to monitor

WASHINGTON (4/20/15)--Current guarantee fees charges by Fannie Mae and Freddie Mac are appropriate, according to a recently completed review by the Federal Housing Finance Agency (FHFA).

The agency also determines some modest adjustments to upfront guarantee fees are also appropriate.

CUNA was strongly opposed to any raising of the fees, otherwise known as g-fees, citing potential effects on lenders and consumers involved in the mortgage market.

As a result of the review, FHFA is directing Fannie Mae and Freddie Mac to eliminate the adverse market charge put in place in March 2008. That revenue will be replaced by targeted increases in guarantee fees to address various risk-based and access-to-credit considerations.

According to the FHFA, the changes to guarantee fees are roughly revenue neutral for Fannie and Freddie and will result in either little or no change for most borrowers.

The FHFA will continue to monitor guarantee fees closely and make adjustments as necessary. FHFA says g-fees are at appropriate levels, will continue to monitor.

Other Resources

62% of world's adults have access to fin. services: World Bank

CU System
WASHINGTON (4/20/15)--The number of adults with access to financial services rose to 62% from 51% between 2011 and 2014, according to the World Bank's recently released Global Financial Inclusion database.

Financial inclusion is defined as having an account at a formal financial institution or through a mobile money provider. It also has been broadly recognized as critical in reducing poverty and achiev­ing inclusive economic growth, the report noted.

Between 2011 and 2014, 700 million adults became account holders while the number of those without an account--the unbanked--dropped by 20% to 2 billion.

Account penetration, which increased by 13 percentage points, and technology are behind the growth. For instance, in sub-Saharan Africa, almost a third of account holders use financial services through mobile money accounts.

The World Council of Credit Unions and the E-Kenya Savings and Credit Cooperative Society (SACCO) deliver financial services to rural Kenya with mobile technology and the M-Pesa mobile money transfer network ( News Now Jan. 2).

Respondents said poverty (59%) and distance to financial institutions (21%) were among the biggest barriers to becoming banked.

Other findings:
  • Forty-two percent of women are unbanked compared with 35% of men;
  • Half of the unbanked adults--1 billion worldwide--belong to the poorest 40% of households; and
  • South Asia, East Asia and the Pacific are home to about half of the world's 2 billion unbanked adults.

Other Resources

Commissioner notes state CU strength at Calif. league rally

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SACRAMENTO, Calif. (4/20/15)--State-chartered credit unions in California have reported healthy net-worth ratios recently, and the trend has state regulators taking notice.

Click to view larger image Jan Owen, California Department of Business Oversight commissioner, commended credit union leaders for the hard work they have invested in their institutions and members over the past year during the 2015 California Government Relations Rally. (California and Nevada Credit Union Leagues Photo)
Jan Owen, commissioner for the California Department of Business Oversight (DBO), said during her address at the California Credit Union League's 2015 Government Relations Rally last week that the average net-worth ratio at California's state-chartered credit unions was 11.2% in 2014 ( In the News April 14).

She also commended credit union leaders for their hard work.

"In an area of rapid evolution for financial services, the DBO is still focused on safety and soundness, as well as California's credit union strengths," Owen said.

Owen added that credit unions have made a lot of progress in a number of areas over the past four years, including in the state's average net-worth ratio, which climbed to 11.2% from 8.7% in 2010.

The commissioner also talked about interest-rate risk, and DBO's joint examinations with the National Credit Union Administration. Owen said she will meet with NCUA officials next month in an effort to improve communication within those joint exams.

Other Resources


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