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News Now: November 20, 2014

NCUA to make 2015 budget decisions at today's open meeting

Washington
ALEXANDRIA, Va. (11/20/14)--The National Credit Union Administration's 2015 budget will be the chief topic of discussion at today's board meeting, which will also include an update on the National Credit Union Share Insurance Fund premium range.

The Credit Union National Association has requested the NCUA make every effort to keep the budget from growing, in a letter sent earlier this month. The letter, signed by CUNA President/CEO Jim Nussle, requested the agency "refrain from raising the 2015 budget and to look for additional ways to streamline its operations."

NCUA Chair Debbie Matz responded to Nussle's letter, saying the proposed 2015 budget is "pre-decisional until the board formally acts." She added that once the board votes on the budget, more information will be supplied on the agency's website.

"NCUA's budget formulation process employs zero-based budgeting techniques requiring each NCUA central office director to justify their annual budget requests," Matz wrote. "In addition, we ensure that the total budget aligns with the goals and objectives set forth in the National Credit Union Administration strategic plan, 2014 through 2017."

In addition to the board briefing on the estimated range of premiums for the National Credit Union Share Insurance Fund, there will be a quarterly update on the Corporate Stabilization Fund and the assessment for the Corporate Stabilization Fund.

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Record Buffalo blizzard forces CUs to hunker down

CU System
ALBANY, N.Y. (11/20/14)--The area surrounding Buffalo, N.Y., received more than 60 inches of snow during a 24-hour period Wednesday, shutting down roadways and businesses, with more on the way.
 
"Based on our assessment, everything south of Buffalo, including credit unions, are closed," Ron McLean, Credit Union Association of New York (CUANY) senior vice president, told News Now . "I-90 from Henrietta to the Pennsylvania border is closed.
 
JoAnn Gorman, marketing manager, Western New York FCU, West Seneca, sent this photo taken by President/CEO Marie Betti of the street outside Betti's home. (Western New York FCU Photo)
"Credit unions are directing members to use mobile banking. For those credit unions that have members outside of the affected areas, shared branching has proven to be a valuable resource," he added.
 
Buffalo Community FCU, with $73 million in assets, closed two of its branches and notified members that it would reopen once weather permits. On its website, it also directed members to its Williamsville, N.Y., branch.
 
Social media again played a role in communicating with members. On its Facebook page, Western New York FCU, West Seneca, with $40 million in assets, directed members to use online banking or voice tellers.
 
Late Wednesday afternoon, McLean reported that CUC Mortgage Corp., an affiliate of CUANY with an office in Buffalo, remained open throughout the storm.
 
New York Gov. Andrew Cuomo declared a state of emergency for the 10 counties, including Erie County, most affected by lake-effect snow. The declaration mobilizes more than 1,000 transportation personnel, including 526 snow plows, 74 large loaders and 21 snow blowers. It also sends 150 National Guardsmen into the Buffalo area to assist with recovery efforts ( The Weather Channel Nov. 18).
 
Another lake-effect storm is on its way with the National Weather Service predicting another two feet of snow between 11 p.m. Wednesday and 1 a.m. (ET) Friday.
 
Agility Recovery, a CUNA Strategic Services alliance provider, offers a checklist for winter weather preparedness. Among the tips are having on hand the names and phones numbers of the credit union's heating contractor, plumber, building owner and insurance agent as well as local emergency services.

CU CEO confidence still high, but ticks down 3Q: Catalyst survey

CU System
PLANO, Texas (11/20/14)--Credit union CEO optimism declined slightly after three straight quarters of increasing confidence in the economy, according to results of Catalyst Corporate FCU's third quarter 2014 Credit Union CEO Confidence Survey.
 
Click to view larger image Catalyst Corporate FCU Graphic
The Credit Union CEO Confidence Index now stands at 31.29, down from 32.94 in the second quarter. Even with the step back, the current index is still the highest in seven years, with the exception of last quarter's index. The Present Situation Index declined to 31.57 from 32.76 in the second quarter, while the Expectations Index weakened to 31.15 from 33.03.
 
"Some of the weakening in confidence could be attributed to the uncertainty created by the recent Ebola scare in the U.S.," said Steven Houle, director of Catalyst Strategic Solutions' advisory service. "Other likely factors include continued political tension around the globe, particularly in the Ukraine and Russia, and the economic slowdown in Europe and Asia."
 
CEOs' outlook for the economy decreased regarding both the financial conditions of their credit unions and of their members. Assessment of their institutions' current condition declined slightly to 37.23 from 37.61, while expectations for their institutions' condition over the next six months experienced a greater drop to 42.80 from 45.64 the previous quarter.
 
CEOs' assessment of their members' current financial condition fell to 25.97 from 27.95, while expectations for members' future financial condition dropped more than four points to 29.53 from 33.64--the largest decline in the recent survey.
 
The survey also indicated that CEO expectations for loan demand increased by almost two points over the previous quarter. Expectations for share-deposit growth fell by 2.66 points.
 
David Green, president/CEO of the $630 million-asset Contra Costa FCU in Martinez, Calif., said his sentiments reflect the survey results. He cited a disconnect between Washington economists who only look at the numbers and credit union CEOs who look at their individual members' financial conditions. "A Google employee, for example, with great salary and benefits offsets a long-term unemployed person when only looking at the gross numbers," Green said. "On the other hand, we see members losing their purchasing power every day, because their salaries are not keeping up with higher prices, especially with healthcare and technology products, such as phones and tablets."
 
Catalyst Corporate's quarterly confidence survey was sent to 2,247 credit union CEOs across the nation in October 2014; 233 credit union professionals responded, for a response rate of 10.37%.
 
Using a scale ranging from negative 100 to 100, respondents registered their confidence levels in six key areas to create an overall index, as well as a snapshot of present-day feelings and future expectations. The areas CEOs were asked to evaluate included:
  • Current financial condition of members;
  • Current financial condition of credit union;
  • Anticipated financial condition of members in six months;
  • Anticipated financial condition of credit union in six months;
  • Anticipated loan demand at the credit union in six months; and
  • Anticipated share deposit growth at the credit union in six months.

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McWatters outlines his areas of focus for revised RBC plan

Washington
ALEXANDRIA, Va. (11/20/14)--National Credit Union Administration board member J. Mark McWatters highlighted a list of issues he intends to scrutinize when the agency issues a revised proposed rule on a risk-based capital (RBC) regime for credit unions.

In a column in this month's The NCUA Report , McWatters said review and analysis of the NCUA's RBC proposal was one of his top priorities upon being sworn into his post at the agency this summer.

While the revised proposal is being put together, McWatters said he is continuing to assess:
  • Whether the NCUA has the legal authority to apply a separate RBC regime to well-capitalized credit unions;
  • How to remove interest-rate risk from the individual risk weights;
  • How to simplify the incorporation of concentration risk in the individual risk weights;
  • How to modify the individual risk weights;
  • How to define a "complex" institution;
  • How to make the individual minimum capital requirement operate in a less problematic manner; and
  • Whether certificates of indebtedness can be used as a form of credit union capital.
McWatters cited the more than 2,000 comments the agency received, including those from more than 350 members of the U.S. Congress, as an indicator that the proposal "merits substantial revision." 

The revised RBC plan is not on today's open board meeting agenda, and while there is one more chance for the agency to get the new plan out before the end of the year--at the December meeting--some observers say it won't be a shock if it is not made public until the new year.

In September, the agency changed course and said that the changes to the proposal would be significant enough to reissue the revised version for a public comment period.

"I am pleased the chairman and vice chairman have agreed to a new comment period for a revised risk-based capital rule, as it is important we listen to the needs and perspectives of the credit union community," McWatters wrote.

"Many challenges remain for credit unions and NCUA in working through these issues," he wrote. "As we move forward to meet those challenges, we must do so in a thoughtful manner."

McWatters' concerns are consistent with concerns raised by the Credit Union National Association during the comment period. CUNA Deputy General Counsel Mary Dunn commended McWatters for his willingness to look beyond NCUA staff analysis.

Among issues raised by the CUNA, the state credit union associations and credit unions during the initial comment period that ended in May were:
  • Reducing the RBC requirement for a credit union to be well-capitalized so that it is no higher than the RBC requirement to be adequately capitalized;

  • Retaining  the 1% NCUSIF deposit in the calculation of risk-based capital;

  • Addressing the provision that would authorize NCUA to impose additional minimum capital beyond what the rule requires;

  • Revising key risk-weightings, particularly in the areas of member business loans, mortgages, mortgage servicing and credit union service organization investments;

  • Developing a more complete definition of "complex" credit unions so that fewer credit unions will be covered by the rule; and

  • Providing ample time for credit unions to comply with a risk-based capital final rule.

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CUNA, trades voice concerns over increased FHA fees

Washington
WASHINGTON (11/20/14)--The Credit Union National Association joined nine financial services organizations in a letter to Senate and House leadership expressing concerns with a provision of an appropriations bill that could raise U.S. Department of Housing and Urban Development (HUD) fees for credit unions and other financial institutions. 

Congress is expected to consider several appropriations bill before it adjourns for the year.

The provision in the Transportation, HUD and Related Agencies Appropriations Act for Fiscal Year 2015 (S. 2438) would grant HUD's request to charge lenders an administrative support fee, which would generate approximately $30 million per year to fund an enhanced quality assurance program for single-family loans.

While the groups featured in the letter support the goal of improving Federal Housing Administration (FHA) quality assurance processes, they consider the provision in S. 2438 to be "overly broad, and could negatively impact consumers and lenders alike."

The fee, as proposed, is not to exceed four basis points of the original principal balance of loans originated by the mortgagee that were insured during the previous fiscal year.

A key concern is that the fee will be calculated using the previous year's mortgage originations instead of new originations. The organizations feel that this will raise costs on mortgages that have already been originated and insured, and believe if the provision is included in a final bill, it should be calculated on a prospective basis.

The organizations are also concerned about the overall size of the fee. The Senate Appropriations Committee provided $8 million of the proposed $30 million HUD requested, but the provision in the appropriations bill does not limit HUD to collect only the remaining $22 million.

"The legislation allows FHA to charge as much as 4 basis points on aggregate lender originations, far in excess of what it needs. And because the fee is not limited only to FY2015, HUD would be permitted to levy this charge in future years," the letter reads. "If the final appropriations bill contains language authorizing FHA to impose a fee on lenders to fund a new quality assurance program, we believe it should be limited in size, scope and duration to cover the specific technology improvements needed to implement the program."

The House-passed version of the appropriations bill did not give HUD the authority to charge the administrative support fee. S. 2348 has been approved by the Senate Appropriations Committee but was not considered by the full Senate.

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CUNA Mutual issues risk alert on HELOC wire fraud

CU System
MADISON, Wis. (11/20/14)--CUNA Mutual Group issued an alert this week regarding a wave of fraud that originates from home equity lines of credit (HELOCs) and requests wire transfers be sent to construction company accounts.

Wire transfer fraud involving HELOCs first surfaced in 2006, but this appears to be a new round of attacks that are hitting credit unions nationwide, according to the risk alert.

After mortgages are filed and become public record, cybercriminals scrape data from the public documents to learn where members have HELOC accounts from which they can steal.

Recent frauds have been conducted by requesting wire transfers be sent to accounts in the name of construction companies to make it look like advances for home improvement projects. In certain cases the companies are legitimate, and are used as "money mules."

The fraud incidents featured a number of common traits, including:
  • Fraudsters contacting credit unions directly to change member profile information, including addresses, phone numbers or email accounts;
     
  • Online accounts are taken over entirely, allowing the fraudsters to manipulate members' online banking services. Once this occurs, they can change profile information or transfer funds from the HELOC into a share draft account, reducing the chance that a credit union employee would notice suspicious activity;
     
  • Wire requests received by fax with accurately forged signatures, which they find on the HELOC documents they search out online;
     
  • Member phone numbers are call-forwarded by the criminals, or callbacks by the credit union are forwarded to the criminals; and
     
  • Fraudsters build a profile of member information from what they can gather on a member through online sources, and when a credit union employee asks the criminal to verify certain information, the criminal can give the correct information.

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World Council's new weCU2 digital hub to connect millennials, CUs

CU System
MADISON, Wis. (11/20/14)--As millennials ascend to the top of all consumer spending demographics--by 2017, they are estimated to be the largest--it's becoming more imperative for credit unions to position themselves to best serve these young adults.

To help credit unions ramp up memberships among this younger demographic, the World Council of Credit Unions has developed a new program, called weCU2 , as part of its "Build the Brand" initiative.

The new program serves up digital strategies that will help credit unions become familiar and engage with millennials and, perhaps just as importantly, help millennials learn about credit unions.

These marketing strategies can attract young adults, whose communication methods and disinterest in traditional media have caused difficulties for many credit unions, despite young adults' closely aligned personal values with cooperative principles, World Council said.

"Youth and technology are key elements to growing our industry," said Victor Corro, Worldwide Foundation for Credit Unions vice president. "World Council recently challenged the global community to add 50 million new members by 2020. This initiative not only raises awareness of that challenge, but also provides best practices for membership growth."

weCU2 includes a series of online podcasts with industry expert interviews, videos, product case studies, Twitter chats, SlideShare presentations, an interactive blog and direct millennial feedback from across the globe.

To help illustrate the program, World Council launched the weCU2 program with a video, produced in partnership with Canada-based Vancity CU.



The goals of the program are to familiarize and educate millennials on how their values align with those of credit unions, and to give credit unions a full understanding of a millennial's unique needs and "digital DNA."

Sam Maule, emerging payment systems expert, will lead the program with additional staff from the Worldwide Foundation for Credit Unions.

weCU2 will launch its first podcast next week, featuring industry expert Jake Fuentes, CEO of Level Money. World Council will promote all program activities on its website, YouTube, Twitter and Facebook. Use the hashtag #weCU2 to follow all program activities.

Meanwhile, World Council and the Credit Union National Association will host an in-person weCU2 event next year at the 2015 World Credit Union Conference, which will run in conjunction with the CUNA 2015 America's Credit Union Conference in Denver.

Nev. double-digit loan growth spurred by lower unemployment

CU System
ONTARIO, Calif. (11/20/14)--Nevada's credit unions recorded double-digit increases in business lending, credit cards and used-vehicle loan growth in the third quarter, the California and Nevada Credit Union Leagues reported.

"Nevada's return to normal looks to be spurred by the continued economic recovery, including an unemployment rate that continues to decline; it's now at 7.3%," said Dwight Johnston, chief economist of the California and Nevada Credit Union Leagues (In the News Nov. 18).

According to numbers from the Credit Union National Association, business lending topped the state's loan growth categories at 14.9%, followed by credit cards at 13.3% and used-vehicle loans at 11.9%.

Overall lending has jumped 9.9% in the first three quarters of the year, with first-mortgage loans gaining 9.5%, new autos climbing 6.3% and personal loans increasing by 4.6%.

Nationally, credit unions have experienced a 10.1% increase in overall loan growth year-over-year, according to September's credit union monthly estimates from CUNA, with new-auto loans jumping 19.8% annually and used-auto loans climbing 12.6% annually.

In California, credit unions have seen loan growth climb 10.5% over the first three quarters of 2014.

Auto lending topped all loan categories at California credit unions, with new vehicle loans surging by 29.7% through the first nine months of the year and used autos jumping 13.4%.

Auto loans were followed by first mortgages (9.2%), unsecured personal loans (9.2%) and business loans (7.4%).

The Nevada data comes from a report that aggregated numbers from 33% of all Nevada credit unions, representing more than half of the state's credit union members.

The California information comes from 52% of all of the state's credit unions, representing roughly 94% of all California's credit union members.

Other Resources

CUNA urges CUs to complete new remittance transfer survey

CU System
MADISON, Wis. (11/20/14)--Just over a year after the Consumer Financial Protection Bureau's (CFPB) regulation on international remittance transfers went into effect, the Credit Union National Association is following up with credit unions about how the rule affected their service to members. A previous CUNA survey asked about their expectations of the regulation.
 
CUNA is collecting the information to share with regulators and legislators so they have a better understanding of the operational impact of this regulation and to increase the likelihood that meaningful changes to those regulations are achieved, noted CUNA Deputy General Counsel Mary Dunn in the trade association's request to credit unions.
 
Under the regulation, remittance transfer providers are required to provide prepayment and receipt disclosures to the consumer-sender that include the exchange rate, certain fees and taxes associated with a transfer, and the amount of money that will be received on the other end of the transfer. Remittance transfer providers will also be required to investigate disputes and correct errors.
 
CUNA urged the CFPB to use its exemption authority granted by the Dodd-Frank Act to exempt all credit unions from this regulation because there was no evidence that credit unions engaged in providing remittance services to their members had been subject to complaints. The bureau did exempt credit unions that performed 100 or fewer international wire/ACH remittance transfers in the previous calendar year and in the current calendar year.
 
In August, the CFPB extended an exception that allows credit unions and other depository institutions to estimate certain remittance pricing disclosures when specific pricing information is not available.
 
Prior to last year's implementation, credit unions that responded to CUNA's first survey were concerned they would have to increase service fees, reduce international wire or automated clearinghouse services or even discontinue all types of international remittances.
 
CUNA requests responses by Wednesday, Nov. 26.
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