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News Now: July 9, 2014

CUNA's Hampel in The Hill: CUs a good option for anyone

Washington
WASHINGTON (7/9/14)--Washington, D.C.-based newspaper The Hill featured an op-ed by Credit Union National Association interim President/CEO Bill Hampel that underscored that credit union membership is right for all Americans. The Hill , with a circulation of more than 24,000, reaches many legislators and other federal policymakers.

Hampel's letter is a response to a June 24 op-ed by the American Bankers Association that attacked plans to create a credit union to serve professional athletes and their families.  

The proposed credit union, sponsored by the ex-spouse and the mother of professional baseball players, would have financial education as its mission and aim to meet the unique needs of professional athletes at all levels.

Hampel went on to say that while superstars with eight-figure contracts receive most of the attention--especially from the bankers--the proposed Players Choice FCU would serve all athletes.

"Our understanding is that the new credit union referred to by the leader of the trade group for big banks would provide financial management resources to athletes and their families, and serve a number of organizations focused primarily on professional and amateur sports," Hampel wrote. "Their membership would include associations and businesses, and would serve both active and retired athletes.

"Most pro athletes are not millionaires. Also on the list are minor league baseball, basketball and soccer players, many of whom have quite low incomes. A much greater portion of these lower-income athletes are likely to avail themselves of a credit union than would the high-paid superstars, most of whom are probably served by private bankers," Hampel wrote.

"A credit union makes sense for everyone, offering a place for the members to pool their resources and save for their futures and help their colleagues meet their own financial challenges in the meantime."

Hampel's op-ed comes a week after National Credit Union Administration board member Michael Fryzel weighed in on the same topic in The Hill , saying credit unions are part of a financial system that offers a wide variety of services to meet the needs of consumers of all types ( News Now July 3).

CUNA's Hampel also refuted the ABA's claim that that professional athletes don't deserve membership to a credit union specific to their needs in a June 29 editorial by Wayne Green in the Tulsa (Okla.) World .

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NCUA will post recorded Listening Sessions to website

Washington
WASHINGTON (7/9/14)--The National Credit Union Administration will begin posting audios of its June 26, July 10 and July 17 Listening Sessions within the next few weeks.  Although the forums are open to any topic, the NCUA's risk-based capital proposal dominated the discussion at the June gathering in Los Angeles and promises to do so at the final two sessions.
 
Originally, the agency had not planned to record the sessions.  However, the NCUA has subsequently said that within a few weeks of each gathering--which is the amount of time the agency expects it will take to transcribe the audios to comply with federal laws on closed captioning for the hearing impaired--the recordings will be posted to the NCUA website.
 
This week's session in Chicago will be attended by NCUA Chair Debbie Matz, as well as board members Rick Metsger and Michael Fryzel. The sessions are scheduled to run from 1 to 4 p.m. (CT) Thursday. Watch News Now for coverage.

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Rep. McHenry requests explanation on RBC proposal

Washington
WASHINGTON (7/9/14)--Rep. Patrick McHenry (R-N.C.), chair of the House Financial Services subcommittee on oversight and investigations, has asked National Credit Union Administration Chair Debbie Matz for several clarifications to the agency's risk-based capital (RBC) proposal.

The letter requests that the NCUA submit answers to a series of questions to the subcommittee no later than 5 p.m. July 18.

The NCUA's proposal would require credit unions to hold capital at 8% of risk-based assets in order to be considered adequately capitalized and 10.5% to be considered well-capitalized. This is in addition to the 6% and 7% leverage ratio requirements to be adequately and well-capitalized. The NCUA would also reserve the right to require credit unions on a case-by-case basis to hold additional capital.

"It is my understanding that this rule would institute far-reaching changes in the Prompt Corrective Action regime, including replacing the agency's current risk-based net worth requirements with new requirements for federally insured credit unions with over $50 million in assets," McHenry's letter reads.

"Given the breadth and scope of the changes the proposed rule would make, the implementation stage will be critical. As a matter of fairness and transparency, the public deserves the opportunity to understand the logic behind this proposal."

McHenry requested that the NCUA provide the subcommittee with the following information:
  • Any cost-benefit analyses performed by the NCUA or that otherwise form part of the administrative record in this matter;

  • The metrics used to determine what asset classifications required revisions;

  • A justification for the revised weighing associated with each individual asset class; and

  • An explanation of the extent to which NCUA examiners would be empowered to assess and make capital recommendations to credit unions that might deviate from the new RBC standards.

CFPB clarifies mortgage rule for surviving family members

Washington
WASHINGTON (7/9/14)--A clarification has been issued to mortgage lending rules that states when a borrower dies, the name of the borrower's heir generally may be added to the mortgage without triggering the Consumer Financial Protection Bureau's ability-to-repay rule. The clarification, issued by the CFPB, is meant to help surviving family members who acquire title to a property to take over their loved one's mortgage.

"Losing a loved one should not mean also losing your home. Today's interpretive rule makes it clear that when family members inherit property, they can take over the mortgage without jumping through unnecessary hoops," said CFPB Director Richard Cordray. "This gives heirs an opportunity to work with the lender to pay off the loan or seek a loan modification."

If a property is legally transferred from family members to their heirs with an outstanding loan still on the property, there can be consequences if the heir cannot add their name to the mortgage. For example, a creditor can deny a loan modification on the grounds that the heir is not officially named on the mortgage.

Since an heir has already acquired the title to the home, the new rule allows the heir's name to be added to the title without triggering the ability-to-repay requirements. The ability-to-repay rule requires lenders make a reasonable, good-faith determination that prospective borrowers have the ability to repay their loans.

In addition, the rule does not require the creditor to determine the heir's ability to repay the mortgage before formally recognizing the heir as the borrower. As the named borrower, the heir may more easily be able to obtain account information, pay off the loan, or seek a loan modification.

The rule can also apply to other family-related transfers, including transfers to living trusts, transfers during life from parents to children and transfers resulting from divorce or legal separation.

Cordray also issued a memo Tuesday clarifying that the CFPB, to the extent permitted by federal law, "recognizes all lawful marriages valid at the time of the marriage in the jurisdiction where the marriage was celebrated."

This rule means any terms used in laws, regulations and policies administered by the CFPB related to family and marital status shall now include lawful same-sex marriages and lawfully married same-sex spouses. This includes the Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Truth in Lending Act and Real Estate Settlement Procedures Act.

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121 Financial emphasizes CU safety, soundness to WJXT-TV

CU System
JACKSONVILLE, Fla. (7/9/14)--The regular "4 Your Money" features by 121 Financial CU on Jacksonville's WJXT-TV typically offer consumer education, but during the July 5 segment, the $449 million-asset credit union took the opportunity to dispel misconceptions brought about by a national news article on credit union lending practices.
 
Rebecca Hulett, senior vice president/chief financial officer, 121 Financial CU, Jacksonville, Fla., explains credit unions' safety and soundness to WJXT-TV host Marques White in a "4 Your Money" segment. ( WJXT-TV Photo)
The piece led off with a reference to a June 6 article in The Wall Street Journal about credit unions' interest-rate risk and if they were as safe as banks ( News Now June 9).
 
The tone quickly changed to a positive one as Rebecca Hulett, 121 Financial CU senior vice president/chief financial officer, explained more about credit unions.
 
The article was "a little bit shaded toward the worrisome side," Hulett noted, adding, "In reality, credit unions have never taken these substantial risks that happened before the bubble burst in 2008, which is why credit unions survived so well throughout the financial crisis."
 
Hulett said that credit unions are easing lending standards slightly, but she credits that to a swing back from the "bit too far" conservative standards created by the financial crisis.
 
She also affirmed the insured status of credit unions--$250,000 per account by the National Credit Union Share Insurance Fund, the same as banks under the Federal Deposit Insurance Corp.
 
Hulett took the opportunity to share the services that credit unions provide, how consumers can learn about the right credit union for them to join and the not-for-profit cooperative structure.
 
"Credit unions are member-owned, so if you hold an account at a credit union, you own the credit union and have a right to vote for the board of directors," Hulett said.

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Bay Area CUs prepared for housing market challenges

CU System
SAN JOSE, Calif. (7/9/14)--In the always-volatile California real-estate market, Bay Area credit unions may soon face more mortgage challenges.
 
The "b-word," as in bubble, has surfaced in several recent articles focusing on the local housing market, Dan Hapner, director of mortgage sales for $1 billion-asset Meriwest CU, San Jose, told National Mortgage News (July 7), as starter homes prices have increased to as high as $800,000.
 
Once those prices reach $1 million, most, even buyers with incomes of $250,000, will be priced out of the market, Hapner said.
 
To minimize risk, on any loan above 75% loan-to-value or $1 million, Meriwest CU requires two appraisals, according to Hapner. And the loans the credit union does make are to well-qualified borrowers, he added.
 
The median purchase price for a mortgage made by Meriwest CU in April was $808,000, and the average is above $1 million, National Mortgage News reported.
 
Considering those numbers, most of the mortgages Meriwest CU books are jumbos, which the secondary market has minimal interest in. Investors are looking for six to 12 months in payment history. That means the credit union is placing most of its mortgages in portfolio at the current time, with hopes that the secondary market will open up in the future.
 
Part of the reason for the Bay Area market explosion is foreign investment in real estate, particularly from China, said Dwight Johnston, chief economist for the California and Nevada Credit Union Leagues.
 
But Johnston did offer some good news when comparing the current housing market with the market that led to the crash of 2008: The previous crisis was caused by bad mortgages, which are not driving the current market increase.
 
Steve Donahue, vice president of mortgage origination for $1.8 million-asset Technology CU, also based in San Jose, went a step further. He said talk of a housing bubble was unfounded.
 
Donahue said the Silicon Valley housing market is hot because numerous tech companies are moving to the area, creating a demand for expensive housing. With that kind of money coming in, a drop-off is unlikely, he told National Mortgage News .
 
Vince Salinas, vice president of home loans for $4.1 billion-asset Patelco CU, Pleasanton, said that it was unlikely there enough volume in the local housing market to create a bubble. High prices do not equate to a bubble, he told National Mortgage News .

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CDFI requests comment on new reporting form

Washington
WASHINGTON (7/9/14)--The U.S Department of the Treasury's Community Development Financial Institutions (CDFI) Fund seeks comment on a new reporting form designed to reduce the burden on CDFIs during the recertification process.

The CDFI Annual Certification and Data Collection Report Form would replace the extensive process currently conducted every three years with a shorter annual report. 

CDFIs traditionally serve economically distressed target markets and provide a range of financial products, such as mortgage financing for low-income and first-time homebuyers and not-for-profit developers; flexible underwriting and risk capital for needed community facilities; and technical assistance, commercial loans and investments to small start-up or expanding businesses in low-income areas. Credit unions represented 177 out of the 811 CDFIs active at the end of 2013, according to a CDFI Fund annual report released last week.

The new reporting form will collect annual financial and impact data from all CDFIs, regardless of whether they have received monetary awards in their last fiscal year. This information will be used to provide the CDFI Fund and the community development finance industry with more insight into the state and accomplishments of CDFIs. 

According to the CDFI Fund, comments are specifically invited on:
  • Whether the collection of information is consistent with the stated background and proposed use necessary for proper performance of the CDFI Fund;

  • The accuracy of the CDFI Fund's estimate of the burden of the collection of information;

  • Ways to enhance the quality, utility and clarity of collected information;

  • Ways to minimize the collection burden, including through the use of technology; and

  • Estimates of operational or maintenance costs to provide information.
Comments are due on Sept. 9 and should be directed to Brette Fishman, Management Analyst at the Community Development Financial Institutions Fund, U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, D.C. 20020; by e-mail to annualreport@cdfi.treas.gov ; or by fax to 202-508-0083.

Use the resource link below for more information.

College an investment worth saving for, GCUA survey finds

CU System
DULUTH, Ga. (7/9/14)--In a recent survey by Georgia Credit Union Affiliates (GCUA), more than 71% of respondents said saving for a college degree is worth the financial investment, with 60% answering that saving for college in general was important to them.

The Mid-Year 2014 Consumer Survey also found that only about 20% of people believe students loans are a good way to pay for a college education, a result that could be driven by ever-escalating costs to attend college.

A recent evaluation of college pricing, reported by GCUA, found that as prices rise for education, so does student debt.

But considering the long-term benefits of receiving a college degree--Americans with a four-year degree make an average of 98% more than those without, according to the Economic Policy Institute in Washington--people still find it imperative to save.

"With tuition costs on the rise, it is important for consumers to begin planning their financing as soon as possible," said Laura Sterling, vice president, Georgia's Own CU, Atlanta, with $1.9 billion in assets. "Even if you have been proactively saving for college, it does not guarantee you won't need financial assistance, and student loans are a great help."

GCUA offers several college savings-related tips, including starting to save as soon as possible, seeking assistance from a financial adviser and researching different ways to save for college.

Sterling, meanwhile, suggests the types of questions those considering taking out a student loan should ask themselves before they sign on the dotted line.

"How much can you afford? Is the school worth the cost of education? How long will it take to pay back the loan?" Sterling said. "What kind of income will you make after you graduate, and what is the job market like in that field?"

Sterling also notes that federal student loans funded by the government can carry less risk and that they're often less expensive than other types of financing options.

"If you need assistance paying for college, it is generally a good rule of thumb to consider federal loans first," Sterling said.

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Ind. joins prize-linked savings movement

CU System
INDIANAPOLIS (7/9/14)--Indiana recently joined the growing list of states in which credit unions have the authority to offer prize-linked savings (PLS) accounts when Gov. Mike Pence formally signed into law HB 1235.
 
Click to view larger image From left: John McKenzie, Indiana Credit Union League (ICUL) president; Carrie Summers, ICUL director of advocacy; State Rep. Gail Riecken (D-Evansville); Connie Gustafson, Indiana Department of Financial Institutions general counsel; Indiana Gov. Mike Pence; Chris Beaumont, ICUL vice president of governmental affairs; Kristi Lowell, vice president of brand strategy and development, FORUM CU, Fishers, Ind.; Doug True, FORUM president/CEO and ICUL vice chair; State Rep. Woody Burton (R-Whiteland); and State Rep. Eric Koch (R-Bedford) (Indiana Credit Union League photo)
Nationally, credit unions have led the development of PLS programs by creating savings accounts and other financial literacy tools that reward members who save money by offering chances to win prizes. The programs have been developed as a way to help encourage people to save money and develop good spending and debt management habits.
 
In Indiana, legislative changes were required to ensure that PLS programs would be in compliance with state gaming laws. Previously, PLS programs had to be offered with a "no purchase necessary," sweepstakes-type approach. This meant that members had to be offered a chance to win prizes, even if they did not make deposits or otherwise participate in the programs.
 
In late 2013, State Rep. Gail Riecken (D-Evansville) approached the Indiana Credit Union League about helping her to draft legislation that would authorize credit unions to offer PLS programs without a sweepstakes approach. The legislation also was designed to clarify that credit unions' PLS programs would not fall under Indiana's gambling, lottery, promotions or charity gaming laws.
 
The league worked with Rep. Riecken to draft legislation that would create PLS programs that would be consistent with already-existing PLS programs in other states and those currently being offered by Indiana credit unions as sweepstakes. Although the bill did temporarily get caught up in some minor controversy related to other charity gaming legislation, HB 1235 received wide support from legislators as it moved through the process in the spring session and passed in its final form the day before session ended.
 
Other states that have passed PLS legislation include Connecticut, Maryland, Nebraska, North Carolina, Washington, Maine and Rhode Island. New York has passed a bill that is currently awaiting the signature of Gov. Andrew Cuomo.

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