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CUs an alternative to stealth bank fees

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MADISON, Wis. (1/27/12)--Credit unions are among those institutions cited as an attractive alternative to the "stealth bank fees" that banks are starting to charge to recoup lost revenues from regulations and the sluggish economy, said a column Wednesday on MSNBC.

"We've found that credit unions, online banks and local community banks tend to be cheaper than the big banks," Greg Daugherty, executive editor at Consumer Reports told Herb Weisbaum, "The Consumer Man" on MSNBC's "Bottomline."

The article--just one of several appearing the past couple of weeks alerting consumers to expect new fees, more fees, and higher fees during 2012-- noted that banks are charging for: paper statements; higher safe deposit box fees; one-time services such as certified checks, money orders, wire transfers, using a teller, paying by phone, cashing a check from another bank; ATM fees for noncustomers;  and higher penalty fees for overdrafts.

Chase and PNC banks are charging $25 to close accounts in certain situations, and PNC  charges $3 when a customer goes to a teller to transfer funds (The Wall Street Journal Jan. 14).  Many are raising their monthly maintenance fee. In February, TD Ameritrade Holding's TD Bank will charge noncustomers a $5 fee to cash checks at its branches.

Customers at Citizens Bank, a unit of Royal Bank of Scotland Group, already ante up $50 a month if they fall below the minimum balance required on some money-market accounts. Bank of America charges some customers $25 if they fall below the minimum balance on premium-checking accounts.  U.S. Bancorp charges a 99-cent fee to make a mobile deposit.  Those are just the tip of the iceberg.

However, some analysts predict that if the fees don't make sense, consumers will vote with their feet, like they did on Bank Transfer Day. Consumers concerned about higher fees are inundating consumer websites. For example, CreditCardForum's site received 900 questions about fees so far this month--a leap from the 200 questions about bank fees it received last January.

During a conference call to discuss the bank's earnings, Bank of America CEO Brian Moynihan admitted that the $5 monthly debit card fee it proposed in late September was rescinded when customers began fleeing the bank because of the fee. Moynihan said the ensuing public consumer outcry resulted in an "elevated level of account closings" in fourth quarter. He reported a 20% jump in closings during fourth quarter 2011, from account closings in 2010 (ABC News Jan.23).

Meanwhile, consumers are being advised by publications to look at the institution's fee schedule, watch for account-terms changes, try to negotiate with the institution to waive a fee, and if that doesn't work, move the money to a credit union, online bank, or local community bank.

JP Morgan uses NCUA suit vs. WesCorp officials in case

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WICHITA, Kan. (1/27/12)--JP Morgan Chase--one of the Wall Street entities sued by the National Credit Union Administration  (NCUA) for allegedly misrepresenting the risks involved in mortgage-backed securities sold to four corporate credit unions--has filed its response to NCUA's complaint in a federal court.

NCUA filed the suit in U.S. District Court for the District of Kansas, Wichita,  against  JP Morgan Securities LLC; JP Morgan Acceptance Corp. I, American Home Mortgage Assets LLC; IndyMac MBS Inc., and Bond Securitization LLC.

In the suit, NCUA, liquidating agent for four corporates,  alleges the entities misrepresented the risks when they sold MBSs to Western Corporate FCU (WesCorp),  U.S. Central FCU, Members United Corporate FCU and Southwest Corporate FCU, and that those MBSs were instrumental in the failure of four corporates, according to court documents.

In its motion to dismiss the case, filed Wednesday, JP Morgan asserts that NCUA:

  • Was not specific enough in terms of specific loans and certificates purchased to demonstrate that JP Morgan  made material misrepresentations  in selling them.
  • Failed to prove that the investment originators "systematically disregarded" their underwriting guidelines in making the loans. JP Morgan noted that NCUA relied heavily on post-purchase loan performance statistics to argue that point and that most allegations refer to relaxation of underwriting standards, not the abandonment or systemic disregard of the standards in place.
  • Labeled as irrelevant the offering documents that "explicitly disclosed the risks associated with reduced documentation loans."
  • Was wrong in asserting that loan-to-value ratios were held out to investors as reasonable measures to ensure borrowers would pay. JP Morgan said the ratios "might not be a reliable indicator of rates of delinquencies, foreclosures and losses that could occur."
  • Failed to plead a complete abandonment of underwriting related to general loosening of standards.  "The (NCUA)  board has admitted that credit unions should have understood those risks as early as 2005…Thus, although the board now contends that  'public information was not sufficiently material to dissuade a reasonable investor from purchasing the certificates,' it took exactly the opposite position when it sued the WesCorp directors for ignoring the disclosed risks. It is beyond dispute that the credit unions knew or should have known about the risks associated with loans at issue. Additional disclaimers could not have 'significantly altered' the mix of available information. "
JP Morgan also argued that the statute of limitations was past and thus barred NCUA's claims. It noted "sufficient storm warnings to alert a reasonable person to the possibility" of misrepresentations were made by no later than February 2007.  The warnings included "public disclosures of the same general mortgage loan origination allegations upon which the board now relies," warnings from NCUA to credit unions regarding the potential for inflated appraisals and the risks of liberalized underwriting practices, and monthly trustee reports and data that indicated spikes in delinquencies and defaults. 

"That information put the credit unions on inquiry notice by February 2007 (at the latest) of the very facts the board now asserts in its complaint." NCUA's claims "would be time barred because credit unions had actual knowledge of the facts alleged in the complaint before February 2007," JP Morgan said in its motion to dismiss the case.

WesCorp settlement conference set for Feb. 27

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LOS ANGELES (1/27/12)--A settlement conference has been set for Feb. 27 by a federal court overseeing the National Credit Union Administration's (NCUA) $6.8 billion lawsuit against top executives of the now defunct Western Corporate FCU (WesCorp).

The U.S. District Court for the Central District of California, Los Angeles, ordered the parties to appear at 10 a.m. PT on that date.  The session is expected to continue throughout the day, according to the court order setting the conference.

Also, they are to deliver or fax to Magistrate Judge Margaret A. Nagle, on or before Feb. 20, a confidential settlement conference statement  that summarizes the factual background of the case, important legal and factual issues; damages or other relief sought; settlement negotiations; trial plans; and other relevant facts.  Nagle will preside over the settlement negotiations.

NCUA's lawsuit alleges that senior WesCorp executives were negligent in monitoring the investments of the corporate, which was hard hit by losses related to mortgage-backed securities. The suit against former WesCorp officers Robert Siravo, CEO; Thomas Swedberg, head of human resources; Timothy Sidley, chief risk officer; Robert Burrell, chief investment officer; and Todd Lane, chief financial officer, alleges breach of fiduciary duty and fraud related to the investments that resulted in $6.8 billion in investment portfolio losses (News Now Jan. 24).

The executives filed counterclaims and affirmative defenses against NCUA, alleging the agency was aware of WesCorp's investment strategies and approved of and encouraged the strategies.

Local media shine spotlight on CU growth

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MADISON, Wis. (1/27/12)--Local media recently highlighted the growth of credit unions in Pennsylvania and Florida.

Tobyhanna FCU, a $155.8 million asset credit union based in Scranton, Pa., in July moved into its new three-story glass-and-brick headquarters, which has three drive-thru lanes and an ATM and offers financial services that range from business loans to first mortgages (thetimes-tribune.com Jan. 22).

After its humble beginnings situated on the Tobyhanna Army Depot grounds, the credit union merged with a local hospital's credit union and moved to downtown Scranton. Over the years, Tobyhanna added more than 500 select employee groups, ranging from companies with sole proprietors to big manufacturers, the paper said.

The credit union now has four branches--one each in Scranton, Tobyhanna, East Stroudsburg and Wilkes-Barre.

In the past two decades, credit union assets in the state more than tripled to $33.8 billion from $8.9 billion, the Pennsylvania Credit Union Association told the paper.

Another Scranton credit union, the $126.3 million asset Penn East FCU, also has seen large growth. Penn East opened its first office in 1995, after operating for most of 73 years "out of a volunteer's briefcase," the paper said. Aided by a community charter, the credit union added two new branches--one in Scranton and one in Clarks Summit--since 2007.

The $9.2 million asset Scranton Times Downtown FCU also has a community charter to serve residents of downtown Scranton, the paper said. To read, the article, use the link.

Also, three Florida credit unions are experiencing above-average success, according to The North Central Florida Business Report (Jan. 18).

They include:

  • Campus USA CU, a $1.04 billion asset Gainesville-based credit union, with 65,000 members and $844 million in deposits--compared with $841 million for Wells Fargo--the bank with the most deposits in the surrounding county.
  • The $446.2 million asset Florida CU in Gainesville, which garnered twice as many members as usual in the fourth quarter, even though the credit union didn't do any advertising about Bank Transfer Day, Chris Clore, the credit union's vice president of marketing, told the publication. Its assets have risen to $500 million today from $74 million in 1995.
  • SunState FCU in Gainesville has seen it assets increase to $283 million from $70 million in 1992. In that timeframe, SunState's membership has grown to 28,000 from 15,000.

CU offers Mad Money for foster youth

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SAN JOSE, Calif. (1/27/12)--Volunteers from $1 billion asset Meriwest CU, San Jose, Calif., recently used the Credit Union National Association's (CUNA) "Mad City Money" simulation program to teach young adults in the Santa Clara County Social Services Foster Youth program about real-life budgeting and lifestyle management.

Developed by CUNA, "Mad City Money" provides each participant with an occupation, a salary, a family and some debt. Players learn to create and manage a monthly budget.

Just as in life, there are variables in "Mad City." One variable is the vendors, who are encouraged to "up-sell" the students to make them overspend and create difficult budget situations. Students often have to go back to vendors to get refunds and buy some less expensive items.

At other times, unforeseen life events can affect students' budgets: Teeth whitening creates a $200 expense; selling some old compact discs produces a profit of $45.

Students learn how the decisions they make about life and money can have some far reaching consequences.

"It was a special night that created some great memories for our youth and taught them some valuable lessons," said Liza Giron-Espinoza Santa Clara County Social Services Agency foster youth program supervisor. "Not only did I see a team of knowledgeable professionals, but a group of people who really cared."

Greg Meyer, Meriwest CU community relations manager said the students and staff "connected." "We were able to do away with the generational and economic differences between us to focus on the important lesson of the day: Manage your money well and thrive. Manage it poorly and live with the consequences," he added.

VolCorp W.Va. Corporate merger OKd by NCUA

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NASHVILLE, Tenn. and PARKERSBURG, W.Va. (1/27/12)--Volunteer Corporate CU (VolCorp) in Nashville, Tenn., and West Virginia Corporate FCU in Parkersburg, W.Va., announced that the proposed merger of the two corporates received approval Thursday from the National Credit Union Administration (NCUA).

The NCUA board addressed the corporates' merger request Thursday during a closed meeting.

Obtaining NCUA's approval for the merger is one of the requirements that VolCorp and West Virginia Corporate FCU must have before the merger can be completed. The others include approval from the West Virginia Corporate membership--to be decided during a special member meeting on Jan. 30, certification of the West Virginia member vote, and final approval from the Tennessee Department of Financial Institutions.

"The combined entity will be large enough to be very competitive on pricing, yet small enough to provide a high level of service to each of our members," said VolCorp President/CEO Rick Veach.

Charlie Thomas, president/CEO of West Virginia Corporate, said the capital commitments made by West Virginia members to ensure the merger were a definitive testament that credit unions are willing to work together within a cooperative system to further their member-service goals.

The combined corporate will have assets of about $1.4 billion with 335 members.

iU.S. Newsi CUs support community development

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MADISON, Wis. (1/27/12)--A Jan. 26 U.S. News & World Report article praises credit unions for supporting community development.

"In addition to providing excellent customer service, many credit unions give back to their local communities in a variety of creative and generous ways," wrote reporter Tim Chen in the article, headlined "How Credit Unions Support Community Development."

Among the "amazing" ways credit unions support their communities listed by Chen:

  • No-fee checking and savings accounts. While some banks require a minimum balance to avoid fees, many credit unions offer no fee-checking without any requirements, and high-yielding savings accounts.
  • Financial literacy training. Credit unions offer classes, free credit counseling online courses and reading material on personal finance.
  • Microloans for personal businesses. Credit unions make smaller loans to both individuals and businesses that banks won't typically offer.
  • Low annual percentage rate credit cards. "Credit union cards generally have lower [annual percentage rates] and fees, which make them a great resource for people looking to build credit," Chen wrote.
  • Grants and scholarships. Chen cited Alliant CU in Chicago and Freedom First FCU in Salem, Va., as credit unions that give back to their local communities through scholarships and grants.
  • School and university outreach. The article noted that Alternatives FCU in Ithaca, N.Y., runs nine student credit unions in local elementary schools. Generations FCU, San Antonio, offers No Suckers Here, a program that helps students understand basic financial concepts.
To read the article, use the link.

CU System briefs (01/26/2012)

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  • FORT WORTH, Texas (1/27/12)--CUNA Mutual Group employees in the Fort Worth, Texas,
    Click to view larger image Click for larger view
    area partnered with their sales colleagues from around the country to raise donations for a local charity as part of a national team meeting held in Fort Worth. Participants who attended (pictured in the photo) contributed $5,000 plus food donations to Mission Central, a non-profit, emergency assistance center that supports economically disadvantaged families in Hurst, Euless and Bedford, Texas.  Funds were raised through friendly contributions during the three-day event and resulted in a record-setting event donation to Mission Central. (Photo provided by CUNA Mutual Group) …
  • SAN FRANCISCO (1/27/12)--CMG Mortgage Insurance Co. (CMG MI) announced that Pete Pannes has been named senior vice president and general manager. He succeeds G. Michael Edwards, who retired in November, and joins co-senior vice president and general manager Kim Shaul in leading the company. Under the terms of the joint venture agreement between CMG MI's parents, CUNA Mutual Group and PMI Mortgage Insurance Co., the company is always headed by two senior vice presidents and general managers. Shaul oversees marketing, sales, legal and product development. Pannes will supervise insurance operations, including risk management, underwriting, customer service and loss mitigation. Pannes was formerly senior vice president for field sales and national accounts at PMI. Before that, he worked with CMG MI, serving in key positions from 1994 to 2004, including that of senior vice president and general manager between 2002 and 2004 …

OCUF 67 grants in 2011 total 197k

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COLUMBUS, Ohio (1/27/12)--The Ohio Credit Union Foundation (OCUF) awarded 67 grants in 2011, totaling more than $197,000, to assist credit unions, communities and individuals statewide.

The grants were made possible through the generosity of many credit unions, individuals, chapters and business partners, OCUF said.

The grants in 2011 included a grant for more than $97,000 for reality day events, classroom visits and two student-run credit unions that serve more than 6,000 high school students. Also, $35,000 in disaster relief was granted to help credit unions, their members and communities in the U.S. and worldwide in the wake of six catastrophes.

Roughly 43 professional development grants and three memorial scholarships totaling more than $50,000 were granted to strengthen leadership, credit union advocacy and job expertise, said the foundation.

"The need for grants last year was greater than ever," said Becky Hart, OCUF executive director. "The 2011 grant-making budget was nearly depleted by the end of September and the foundation Board of Trustees approved allocating money from its endowment fund to meet the increased demand, allowing OCUF to further help credit unions meet their training, outreach and financial education needs."

Also in 2011, OCUF partnered with the National Credit Union Foundation and Corporate One FCU to create a renewed Community Investment Fund (CIF) option. The CIF gives credit unions a vehicle to support financial education, professional development, community outreach, and disaster relief initiatives. With the Corporate One CIF option, credit unions can choose products such as callable and bullet U.S. government agency securities, and negotiable certificates of deposit, without a capital requirement.

"Corporate One took the initiative to examine the traditional CIF model, with the goal of creating a new option that benefits investors and helps sustain OCUF and the national foundation," Hart said.

Other successes for OCUF in 2011 include the debut of the William A. Herring Society, which raised more than $50,000 for the foundation, and a re-tooled golf outing, which netted more than $20,000.

For 2012, the Ohio Credit Union League Board of Trustees established a $200,000 fundraising goal, and the foundation has $234,000 to grant this calendar year.

Altura CU financial results for 2011 strong

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RIVERSIDE, Calif. (1/27/12)--Altura CU, with $642 million in assets, Riverside, Calif., on Wednesday reported net income of $8.43 million for 2011--a substantial improvement over 2010, when the credit union reported a loss of $5.8 million. 

For the fourth quarter, Altura reported net income of $3.53 million, continuing a trend of improvement, said the credit union.

"Our net income for the most recent quarter marks the third straight period of strong net income," said Mark Hawkins, Altura CU CEO.  "After the economic turmoil of the past few years, 2011 was our best year since 2006. Although we continued to deal with a difficult economy, 2011 was the year in which we finally saw the marketplace begin to firm up.  Unemployment is settling down, and foreclosures and delinquencies have eased substantially."

Altura ended 2011 with a net worth ratio of 7.84%, an improvement of more than 200 basis points over its year-end 2010 net worth ratio of 5.81%. 

It also reported $642.9 million in total assets, compared with total assets of $721.6 million in 2010.

Following multiple branch closures in early 2011, Altura membership grew during the  fourth quarter to 95,990 members.

A subtle improvement in the local economy allowed Altura to reduce its set-asides for loan losses. Altura ended 2010 with $35.6 million in its allowance for loan and lease losses.  For year-end 2011, Altura reduced its allowance balance to $30.8 million.

This trend is consistent with credit unions across the country, according to the Credit Union National Association (CUNA). Credit unions are reporting bottom-line improvements as credit quality has improved, reductions have been realized in loan loss provisions, and operating expenses have been slashed.

"Over the past few years, Altura has had to adapt to a radically different marketplace," said Hawkins.  "And, we had to do so while continuing to focus on the needs of our members.  Thankfully we were able to remain focused on delivering core services to our membership, while examining other areas where we could reduce costs. These decisions were not easy, such as closing branch locations and reducing member convenience. Now, we are seeing the results of those decisions."