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CU exec is new Boston Fed advisory council member

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WASHINGTON (1/10/13)--Edward Danek, Jr., president/CEO of Hartford FCU in Connecticut, will join three other credit union representatives on the 12-member Federal Reserve Bank of Boston First District Community Depository Institution Advisory Council (CDIAC) in 2013.

Danek is a first-time member of the CDIAC.

The other three current credit union representatives on the CDIAC are:

  • John Dwyer, Jr., president/CEO of New England FCU, Williston, Vt.;
  • Michael L'Ecuyer, president/CEO of Bellwether Community CU, Manchester, N.H.; and
  • James Blake, president/CEO of HarborOne CU, Brockton, Mass.
There are 12 CDIAC groups nationwide, with each group representing one Federal Reserve district. The district CDIACs are comprised of representatives from commercial banks, thrifts and credit unions with assets of $10 billion or less.

First district CDIAC members are drawn from Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.

The First District CDIAC's next meeting is scheduled for March 11.

The councils provide input to the Fed on the economy, lending conditions and other issues. The Fed selects one member from each of its 12 Fed local advisory councils to serve on the full CDIAC, and the council meets with the Fed in Washington, D.C., twice each year.

Inside Washington

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  • WASHINGTON (1/10/13)--A decision by regulators to provide banks time to comply with restrictions on swaps activities could penalize foreign banks operating in the U.S. (American Banker Jan. 9). Under the Dodd-Frank Act, banks are prohibited from using federal assistance such as federal deposit insurance or access to the discount window to support swaps activities (News Now Jan. 7). The new rules will force some banks to stop or divest their swaps businesses. The Office of the Comptroller of the Currency (OCC) said Jan. 3 banks will be provided more time to comply with restrictions. But foreign bank branches without deposit insurance do not qualify for the extension, and must soon move hedging activities that U.S. banks can maintain
  • WASHINGTON (1/10/13)--JPMorgan Chase CEO Jamie Dimon left the board of the Federal Reserve Bank of New York when his term expired Dec. 31. Lawmakers called for Dimon's resignation following JPMorgan's 2011 multibillion-dollar trading scandal (American Banker Jan. 9). The New York Fed's nominating committee has not recommended a replacement, a spokeswoman for the bank told the Banker. Among the lawmakers who called for Dimon's resignation was Elizabeth Warren (D-Mass.), who successfully ran for the U. S. Senate in 2011. Sen. Bernie Sanders (I-Vt.) introduced legislation that would prohibit bank executives from serving on the boards of regional Fed banks. A Government Accountability Office study cited by Sanders called on the Fed to prevent conflicts of interest on its regional bank boards …

NEW: CFPB QM, ability-to-repay rules are out, CUNA provides summary

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WASHINGTON (1/10/13, UPDATED 5:18 p.m. ET)--It's official. The Consumer Financial Protection Bureau (CFPB) standards to define a "qualified mortgage (QM)" under the agency's "ability to repay" rules are posted to the bureau's website and now may be considered "issued."

As indicated to Credit Union National Association (CUNA) President/CEO Bill Cheney in a Wednesday phone call from CFPB Director Richard Cordray, the CFPB has taken steps to address various CUNA concerns, including legal protection from challenges for noncompliance with qualified mortgage standards.

"We support the agency's steps to minimize disruptions in the availability of mortgage credit for consumers," said CUNA's Cheney Thursday. "CUNA strongly supported a 'safe harbor' approach for  QM loans that would provide the maximum legal protection to credit unions under the 'ability-to-repay rule."

Cheney added that the approach taken by the bureau "should provide legal certainty to lenders such as credit unions."

CUNA has created a summary of the final rules with credit union perspective. (Use the resource link below.)

Congress directed that the ability-to-repay rules include provisions that would help shield lenders whose loans meet QM standards if challenged in court by a borrower alleging the loan is not in compliance. The new CFPB rules take a dual approach to higher-priced loans and lower-priced ones regarding legal protection.

For lower-priced loans, the CFPB rule creates a "safe harbor" status for lenders. These prime loans generally are made to consumers who are considered to be lower risk borrowers.

It is anticipated that most credit union mortgage loans would qualify for the safe harbor status, an outcome that CUNA has aggressively pursued. Consumers may challenge their loan under the new rule if they feel the loan does not meet the definition of a Qualified Mortgage, but the safe harbor is intended to provide lenders with legal protection that QM standards have been met.

For higher-priced loans, sometimes given to consumers with insufficient or weak credit histories, the CFPB rules would allow a "rebuttable presumption" in legal challenges. A borrower seeking to challenge such a loan will have to prove he or she did not have sufficient income to pay the mortgage and other living expenses.

Additionally, within the last hour, the CFPB has also posted final rules to its website for Home Ownership and Equity Protection Act (HOEPA) "high cost" mortgages and mortgage escrows, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. See News Now Friday for more information on these two rules.

Use the resource link to read the CUNA summary of the rule.

New NCUA video series informs consumers on CUs

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ALEXANDRIA, Va. (1/10/13)--In the first of a series of new consumer-focused videos, the National Credit Union Administration (NCUA) seeks to send one message to current and potential credit union members: Your money is safe.

NCUA Chairman Debbie Matz said the new series of NCUA Consumer Protection Report videos is one of many ways the agency is working to "communicate to consumers that their savings are insured up to $250,000--just like at banks."

Future videos will address financial planning, fraud and scam avoidance, and how to resolve consumer complaints at credit unions.

For more on the video, use the resource link.

A closer look: Leagues were busy in statehouses in 2012

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WASHINGTON (1/10/13)--'Gridlock' may have been the descriptor most often applied to legislative action on a federal level in 2012, but on a state level more than 29,000 bills--on issues across the board--were enacted by legislatures, according to the National Conference of State Legislatures. That was out of almost 86,000 bills introduced nationally.

Credit Union National Association's (CUNA) State Government Affairs tracked over 800 bills during the 2012 state legislative session to monitor potential impact on credit unions. This information was used by the state credit union leagues to advocate on behalf of credit unions in statehouses across the nation.

"Everything from state credit union acts to charitable giving to merger rules were in play in different states," noted Richard Dines, CUNA's senior state and league affairs director,  describing state actions. "CUNA and the state leagues advocated for credit-union friendly policy on all fronts."

The leagues were also nimble and persistent in their work to refute state bank associations' 2012 campaigns to challenge the tax treatment of credit unions. These attacks were seen in ad campaigns and other communications to legislators and the public in Illinois, Minnesota, Oregon, South Dakota, and Washington, and more are anticipated in 2013 as federal lawmakers work to revise the country's tax laws.   

Leagues were able to counter these attacks and stop them from gaining traction, and are prepared for more battles in the year ahead. 

Among other state legislative successes:

  • The leagues sought and won updates to their state credit union acts in California, Illinois, Kansas, Wisconsin, Arizona, and Rhode Island;
  • A new California law allows credit unions to provide lifeline services to non-members within a credit union's field of membership, including negotiable checks, money orders, and other similar money transfer instruments;
  • Updates to Illinois law clarified provisions on mergers, board authority, and membership;
  • In Kansas, updated provisions included changes to credit committee appointments, the loan approval process, and suspension of credit union officials and members;
  • Wisconsin law loosened restrictions on the amount of charitable donations that credit unions can make each year;
  • In Arizona, state-chartered credit unions now have parity with federally chartered credit unions with respect to the rules on converting to a savings and loan association; and
  • Legislation passed in Rhode Island gives state-chartered credit unions federal parity in the area of participation loans.
In 2012, states continued to debate legislation to reform their mortgage foreclosure laws, with a couple states passing laws in this area. California enacted new legislation that substantially changed its foreclosure law, but has a limited effect on credit unions since most provisions of the enacted legislation only apply to mortgage servicers that have more than 175 foreclosures per year.  

Illinois passed a fast-track foreclosure law that reduces the foreclosure process from about two years to about six months. 

The Illinois Credit Union League's instrumental efforts to get this bill pass are particularly notable because it may become a nationwide model for addressing the issue of vacant and residential properties in foreclosure.

News Now is featuring an in-depth look at each area of CUNA's 2013 priorities. This article is the third in that series. The first unveiled CUNA's legislative priorities; the second discussed regulatory goals.

NEW: NCUA increases small CU asset threshold to $50 million; Consistent with CUNA recommendation

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ALEXANDRIA, Va. (1/10/13 UPDATED: 10:30 A.M. ET--The National Credit Union Administration (NCUA) today increased the asset-level test that defines a small credit union. The threshold was raised to $50 million as recommended by the Credit Union National Association (CUNA), up from $10 million.

CUNA President/CEO Bill Cheney said, "Raising the threshold for the definition of 'small entity' is a step in the right direction, and we look forward to monitoring the effectiveness of this approach for credit unions."

He added, "In our comments to the agency, we suggested a threshold of $50 million for agency assistance and access – and a higher level for purposes of regulatory relief. We commend the agency for taking the action today, which will benefit many more small credit unions. CUNA continually looks for ways to assist small credit unions and we anticipate working with NCUA as it implements this new threshold."

The NCUA's change will make assistance from the NCUA's Office of Small Credit Union Initiatives (OSCUI) available to more than 4,600 credit unions--an increase of 2,270. The agency made it clear that the OSCUI will make changes to its procedures to handle the increased workload without adding additional staff.

Under the new rule, the NCUA will consider periodic changes to the asset-level test; initially every two years, and eventually every three years.

NCUA Chairman Matz said, "We will not be in a situation again where the definition lags reality."

The regulatory changes will go into effect in 30 days after publication in the Federal Register, which generally occurs within a week or two of an agency's adoption of a new rule.  Credit unions that meet the regulatory definition for "small" have some additional flexibility when it comes to NCUA rules. The current $10 million small credit union asset threshold was set by the agency in 2003.

In CUNA's comment letter CUNA demonstrated that using the "complexity index" as a method for determining small entity thresholds can or will be used in a variety of ways that could, ultimately, lead to negative or unintended results for credit unions. "Those include reductions in credit union flexibility, increases in risk profiles and reductions in member service provision," the letter stated.

The agenda for today's NCUA open board meeting also included:

  • A board briefing on an interagency final rule addressing higher-priced mortgage loans;
  • The agency's 2013 annual performance plan;
  • A final rule to extend credit union low-income designation response time to 90 days, up from 30 days; and
  • Some technical amendments.
For more coverage of these items, see Friday News Now.

FTC report 'incomplete, misleading' on interchange: CUNA

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WASHINGTON (1/10/13)--A recent Federal Trade Commission (FTC) report on the impact of new laws capping interchange fee revenues presents an "incomplete and thus misleading view of the impact on credit unions," Credit Union National Association (CUNA) President/CEO Bill Cheney wrote in a letter to the agency.

The FTC's late 2012 report claimed that credit unions and other small issuers have been unharmed by new interchange laws.

Cheney in the letter sent this week noted that the 11-page FTC report includes only four paragraphs on the impact of debit interchange provisions on small banks and credit unions, and relies on "selective information" from Federal Reserve and Government Accountability Office (GAO) reports to reach its conclusions.

The report also fails to note that the full impact of the interchange cap regulations will not be known for some time. Routing and exclusivity provisions contained in the final interchange rule are also not discussed in the FTC report, Cheney added. CUNA recently made a similar point in an interview with The Washington Post.

The CUNA CEO also pointed out that the GAO report cited in the FTC document found that the average interchange fee received by credit unions and small banks declined by $0.02, or around 5%, after the interchange rule took effect. The GAO report also said that concerns remain about the potential for further interchange fee or fee income declines over the long term, Cheney emphasized.

The impact of an interchange fee cap is "a very important issue for credit unions and their members. Congress intended for credit unions and small banks to be exempt from the impact of the regulation of debit interchange fees, not just from the wording of key provisions of the rule. In order to ensure that outcome, it is imperative that agencies such as the FTC are as accurate as possible in reporting on debit interchange fees," Cheney wrote.

For the full letter to the FTC, and more on the Washington Post interview, use the resource links.

Cordray to Cheney: CFPB rules will include safe harbor for prime loans

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WASHINGTON (1/10/13)--The Consumer Financial Protection Bureau (CFPB) is expected to address the standards to define a "qualified mortgage (QM)" under the agency's "ability to repay" rules. The rules have not yet been released and are anticipated later today.

The Credit Union National Association (CUNA) will post its summary of the final rules with credit union perspective shortly after they are released.

CFPB Director Richard Cordray called CUNA President/CEO Bill Cheney Wednesday to discuss the rules and the changes advocated by CUNA on behalf of credit unions. Based on early information and summaries the agency has released this morning, the agency has taken steps to address various CUNA concerns, including legal protection from challenges for noncompliance with qualified mortgage standards.  

CUNA has been consistently seeking to minimize the impact of these rules on credit unions since they were ordered by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. As recently as Tuesday, CUNA sent another letter to the CFPB director addressing concerns about the mortgage rules and urging that the bureau bring its awareness of the credit union difference into play as it develops all new rules.

Also today, SECU of Maryland President/CEO Rod Staatz will testify on behalf of CUNA and credit unions at a CFPB Jan. 10 mortgage-policy field hearing in Baltimore, Md. He will drive home CUNA's message that the agency must direct its appreciation of the way credit unions operate into meaningful regulatory relief for credit unions so that they can do even more to serve their communities.

News Now will provide details of the new mortgage rules as soon as the rules are released.

Congress directed that the ability to repay rules include provisions that would help shield lenders whose loans meet QM standards if challenged in court by a borrower alleging the loan is not in compliance. CFPB information indicates the rules take differing approaches to higher-priced loans and lower priced ones regarding legal protection.

For lower-priced loans, the CFPB announced it created a "safe harbor" status for lenders. These prime loans generally are made to consumers who are considered to be lower risk borrowers.

It is anticipated that most credit union mortgage loans would qualify for the safe harbor status, an outcome that CUNA has aggressively pursued. Consumers could challenge their loan if they feel it does not meet the definition of a Qualified Mortgage but such a safe harbor is intended to provide lenders with legal protection that QM standards have been met.

For higher-priced loans, sometimes given to consumers with insufficient or weak credit histories, the CFPB indicated that legal challenges would involve a "rebuttable presumption." A borrower seeking to challenge such a loan would have to prove he or she did not have sufficient income to pay the mortgage and other living expenses.

The CFPB's summary also indicates requirements such as the following are included:

  • Before making a loan, a lender must document such things as a borrower's employment status; income and assets; current debt obligations; credit history; monthly payments on the mortgage; monthly payments on any other mortgages on the same property; and monthly payments for mortgage-related obligations;
  • Therefore, lenders would be banned from offering "no-doc" and "low-doc" mortgages--loans that don't ask for documentation of such things as income and assets; and
  • A borrower would need to show sufficient assets or income to pay back the loan and lenders must evaluate this information; and
  • Lenders would be prohibited from basing their evaluation of a consumer's ability to repay on teaser rates.

Matz talks CU issues in LEADERS magazine

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ALEXANDRIA, Va. (1/10/13)--Americans are becoming more aware of how critical credit unions are, and this increased interest "explains why credit unions have added nearly three million members since 2010," National Credit Union Administration (NCUA) Chairman Debbie Matz said in a new LEADERS magazine interview.

"Members know that they can usually get a better deal at a credit union," Matz said. She noted that cooperative, not-for-profit credit unions generally charge lower interest on loans, pay higher dividends on deposits, and are an excellent source for small business loans. "With the average business loan only $220,000, credit unions often make loans that banks turn away. In fact, while other institutions cut back lending during the financial crisis, credit unions gained further recognition as the only insured institutions to increase lending," she added.

LEADERS is a quarterly magazine featuring interviews about the thoughts and visions of leaders in government, business, academia, labor, religion, science and the arts. The state of the credit union movement and the agency's response to the financial crisis are also addressed in the interview.

The NCUA Chairman noted the agency "needed to act decisively to stabilize the credit union system" when the financial crisis hit in 2008. "Approximately 2,200 of the 7,000 credit unions were at risk, so we had to stabilize the system by rigorous supervision, rather than by regulation, which takes time," Matz added.

Credit unions weathered the financial crisis and its aftereffects, and the credit union industry is "exceptionally well-capitalized at over 10%," she noted. "Return on assets is 86 basis points, up from 18 basis points when I became chairman; and loan delinquencies and charge-offs are trending in the right direction--down," she added.

"These metrics indicate that the credit union industry is resilient and in a strong position," Matz said.

For the full LEADERS interview, use the resource link.

NCUA says Telesis could cost NCUSIF $72M

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WASHINGTON (1/10/13)--The mid-2012 liquidation of Telesis Community CU could create an estimated $72 million in National Credit Union Share Insurance Fund (NCUSIF) losses, according to the National Credit Union Administration (NCUA).

The Chatsworth, Calif. credit union had 37,600 members and held $301.3 million in assets, core facilities, and consumer loans when it was liquidated by the NCUA last June. The California Department of Financial Institutions took Telesis into conservatorship in March 2012. The conservatorship resulted from "many problems," including problems tied to a low net worth ratio, negative returns on average assets, high loan delinquencies and charge-offs, high operating expenses, and many foreclosed and repossessed assets, the NCUA said last year. The California economy also affected the credit union.

Premier America CU of Chatsworth, Calif., assumed the assets and members once held by Telesis in a purchase and assumption deal that was completed after the Telesis liquidation.

Since the start of the financial crisis, four times the number of banks than credit unions have failed.