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CU MBL provisions urged for stimulus bill

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WASHINGTON (1/25/08)--As the House pared its economic stimulus package to focus on “timely, targeted and temporary” provisions, the Credit Union National Association (CUNA) yesterday continued efforts to include two that would allow credit unions to make more business loans to members in need of affordable capital. On Wednesday, CUNA President/CEO Dan Mica in a letter to House and Senate leaders pointed out the two related provisions together would provide $5.7 billion in economic stimulus at no cost to taxpayers. The provisions would raise credit unions' current member business lending (MBL) ceiling from 12.25% of assets to 20% of assets and increase the minimum threshold for a qualifying member business loan from $50,000 to $100,000. Both provisions are currently part of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537) which so far has amassed 141 cosponsors. According to CUNA Legislative Affairs Vice President Ryan Donovan, thousands of requests for inclusion in the stimulus package flooded Congress this week. So far the House version contains only six provisions--none of which are specific to credit unions. “The leadership remains focused on provisions that are ‘timely, targeted and temporary,’” said Donovan. In its letter, CUNA explained that adding CURIA's MBL provisions to the economic stimulus package "will provide immediate stimulus for a targeted segment of the economy that may need assistance the most, specifically small business owners, at no cost to taxpayers." CUNA estimates these provisions will make about $5.7 billion in new, reasonably priced credit available to borrowers. Such relief would be well-timed, CUNA added, pointing to a Jan. 22 front-page article in the Wall Street Journal about how--in the current credit crunch--banks are making it harder and more expensive for some small businesses to borrow. CUNA's letter was sent to Senate Majority Leader Harry Reid (D-Nev.), Minority Leader Mitch McConnell (R-Ky.), House Speaker Nancy Pelosi (D-Calif.) and Minority Leader John Boehner (R-Ohio). Use the link below to access the complete letter.

Inside Washington (01/24/2008)

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* WASHINGTON (1/25/08)--Mortgage fraud drove a 15% increase in suspicious activity reports (SARs) last year, observers said. The Financial Crimes Enforcement Network (FinCEN) is scheduled to release a report showing that 650,000 reports were filed in 2007, compared with 567,000 in 2006 (American Banker Jan. 24). About 46,700 filings were related to mortgages in the fiscal year ending Sept. 30, according to the Federal Bureau of Investigation. The FBI also estimated that about 15,000 SARs related to mortgage fraud have already been filed this year ... * WASHINGTON (1/25/08)--Comptroller of the Currency John Dugan announced Wednesday he has named agency veteran Tim Long to serve as senior deputy comptroller for Bank Supervision Policy. Jennifer Kelly will succeed Long as senior deputy comptroller for Mid-Size and Community Bank Supervision. Long also will serve as chief national bank examiner and as chairman of the Committee on Bank Supervision. Long succeeds Wayne Rushton, who will retire in April. Long joined the OCC in 1979 ...

Public Service CU chosen to absorb Norlarco

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WASHINGTON (1/25/08)--During yesterday’s closed board meeting, the National Credit Union Administration (NCUA) selected Public Service CU’s bid to purchase the assets and assume the shares of Norlarco CU of Ft. Collins, Colo. Public Service CU (PSCU) of Denver, Colorado, will provide Norlarco members with uninterrupted credit union service following consolidation of the two credit unions, said the agency. Norlarco was placed into conservatorship by Colorado state regulators in May after a number of its construction loans issued in Lee County, Fla., became delinquent. In July, the NCUA took control of the credit union and removed its board of directors. With assets purchased and assumed by PSCU following the liquidation, Norlarco members are guaranteed full member-owner rights at PSCU, said NCUA. PSCU was chartered in 1938, and has $623 million in assets with more than 76,000 members primarily located in the Denver and Colorado Springs areas. Chartered in 1959, Norlarco has assets of more than $290 million, and serves over 42,000 members. NCUA never identified the bidding organizations. However, Ent FCU, a $2.292 billion-asset Colorado Springs-based institution, confirmed it is one of three credit unions interested in purchasing Norlarco. The other was identified by the Nov. 27 issue of The Coloradoan newspaper as Bellco CU, Greenwood Village, Colo.

House Financial Services set 08 priorities

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WASHINGTON (1/25/08)—Chairman Barney Frank (D-Mass.) of the House Financial Services Committee unveiled his panel’s 2008 agenda Thursday, although he warned that the issues noted comprise a partial list. Frank opened his press conference by reiterating his view that the country’s current financial crisis was spurred by irresponsible lending and securitization, but noted that some securitization activities are beneficial to the economy. He added that deregulation will be a subject before his committee this year, but that the current problems in the housing market drive home his position that some regulation is necessary to avoid abuses. He said his committee will look at the history of Suspicious Activity Report filing to study whether the number of filed reports are overwhelming law enforcement officials and hampering law enforcement efforts. The chairman also said that housing issues, such as the lack of subsidized public housing and affordable rental housing, will come before his committee this year. He added that a proposed Housing Trust Fund contained in the House-passed FHA bill is still on his radar. Credit card practices will have the panel’s attention in 2008, Frank said. He did not support setting card rates, but did favor regulating practices such as universal default. Other issues on the front burner include the Community Reinvestment Act (CRA) and Home Mortgage Disclosure Act data that has indicated racial disparities in lending. The topics raised by Frank also included data security, and he said he continues to believe that those who are responsible for the data breach should pay for the costs. John Hildreth, senior legislative representative of the Credit Union National Association, said after the briefing that Frank made it clear that he was addressing only some of the issues that will come before the committee and that there were many others on the horizon.

Federal CU rate set for 18 months

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ALEXANDRIA, Va. (1/25/08)--The National Credit Union Administration (NCUA) voted Thursday to continue the 18% interest rate ceiling for loans and lines of credit advances made by federal credit unions. The ceiling is set for an 18-month period from March 10 through Sept. 10, 2009.
Click for slide show[CLICK TO VIEW SLIDESHOW] On the agency’s interest rate ceiling, NCUA Director of the Office of Capital Markets and Planning J. Owen Cole Jr. (right) recommended the board leave the permissible maximum interest rate for federal credit unions at 18% for the next 18 months. As part the agency’s analysis of the rate, it solicits input from Congress and the U.S. Treasury. “We received no specific feed and view that to mean they’re comfortable with our economic rationale and justification,” he said. (Photo provided by CUNA)
The agency will issue a Letter to Federal Credit Unions to notify those institutions of the rate decision. The current 18% ceiling was due to revert to 15% on March 10 absent NCUA’s action. As required by Congress, the NCUA will review this rule again in 18 months or sooner if economic conditions warrant. Prior to the vote, the board emphasized the benefits of a higher interest rate ceiling to credit union members and their communities. A higher rate can enable credit unions to provide affordable capital through risk-based lending, according to agency staff.

NCUA seeks comment on CU board fiduciary duties

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ALEXANDRIA, Va. (1/25/08)--The National Credit Union Administration (NCUA) is seeking comment as it considers amending its rules to more clearly define a credit union board’s fiduciary duties in the face of major decisions, such as mergers or conversions to mutual thrifts.
Click for slide show[CLICK TO VIEW SLIDESHOW] NCUA Office of General Counsel Staff Attorney Frank Kressman, right, told the three member NCUA board it’s clear that a credit union’s board has a fiduciary duty to members. “What’s not entirely clear is how to measure that duty,” he said. “We don’t have a benchmark.” (Photo provide by CUNA)
At its monthly open board meeting Thursday, the three-member NCUA board agreed to receive comments for 60 days after its advanced noticed of proposed rulemaking (ANPR) is published in the Federal Register, a process which often takes about a week. According to a staff document presented at the meeting, the primary focus of the agency’s possible action is protection of members/ interests in transactions that involve fundamental changes in their ownership or in the structure of their credit union. The ANPR addresses six types of transactions: merger of a federally insured credit union (FICU) into another FICU; merger of such an institution into a privately insured credit union (PICU); conversion of a federally insured state-chartered credit union into a PICU; conversion of a FICU into a mutual savings bank (MSB) merger of a FICU into a financial institution other than a MSB; and conversion of a FICU into a financial institution other than a MSB. The transactions noted above are all legally permissible. However, the NCUA believes its current regulations may not adequately address the issues raised by the various forms of business deals. In its ANPR, the NCUA asks for comment in the following areas:
* Credit union conversion into a financial institution other than an MSB. The agency said it is considering establishing an administrative framework and procedures rather than continue its case-by-case approach, and asks for comment on such things as whether such conversions are beneficial to credit union members; * Issues that affect member interests in restructuring transactions; * Is there a need for a regulation to address the fiduciary obligations a credit union director owes members and/or a need for additional regulatory provisions to guard against insider enrichment; * Communications to members. The NCUA is considering, for instance, a need to specifically state a prohibition against credit union officials stating or implying that the NCUA has endorsed the charter change or accompanying credit union materials; and * Member voting rights, such as the right to request a recount and the use of interim tallies
The Credit Union National Association (CUNA) will be reviewing the ANPR with several of its subcommittees during its Governmental Affairs Conference here in March. Use the resource link below to read the NCUA request for comments.