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Mica takes alternate funding case to NCUA board

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WASHINGTON (2/2/09)—Credit Union National Association (CUNA) President/CEO Dan Mica contacted the three members National Credit Union Administration (NCUA) board Friday to urge them to reconsider the agency’s plan to aide corporate credit unions. In a letter advocating the credit union case directly with NCUA board, Mica urged “in the strongest terms” that they “reconsider the mechanism NCUA has announced for funding the assistance.” Last week when announcing a plan to bolster the liquidity of U.S. Central FCU and other corporate credit union system, the agency said it would declare a premium assessment to restore the National Credit Union Share Insurance Fund (NCUSIF) equity ratio to 1.3%. The premium will be collected later in 2009. CUNA is not challenging the agency's decision to assist the corporates at this time. However, the NCUA's plan to pay for the assistance in a way that would result in 80-90% of credit unions having negative ROAs is not acceptable, Mica wrote. (See related stories: CUNA concerned about costs of NCUA corporate plan, Alternatives to premium assessment urged by CUNA.) CUNA will continue pressing NCUA next week to address a range of alternatives that will minimize the costs imposed on federally insured credit unions. Mica emphasized that this issue is the highest priority for CUNA's members. Mica noted that the NCUA’s plan to pay for the corporate assistance could not have come at a worse time for the credit union system and underscored that it will impact credit unions’ ability to serve their members and their communities.

Inside Washington (01/30/2009)

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* WASHINGTON (2/2/09)—Credit Union National Association (CUNA) analysis of the stimulus package (H.R. 1) passed recently by the House showed it would restore the high-cost area limit on Fannie Mae and Freddie Mac loans to $729,750 for loans made in 2009. The high-cost limit reverted to $625,500 on Jan. 1. The conforming loan limit remains at $417,000. The Senate as of late Friday had not yet scheduled a vote on its stimulus bill. However, President Barack Obama has said he wants final passage by Feb. 23 … * WASHINGTON (2/2/09)--Lawmakers plan to question the Treasury Department on how it is handling the financial crisis, Sen. Christopher Dodd (D-Conn.) said Thursday. Treasury Secretary Timothy Geithner will appear before the Senate Banking Committee, of which Dodd is chairman, to discuss how the Obama administration will use the second half of the $700 billion bailout (American Banker Jan. 30). Geithner is scheduled to meet with the committee Feb. 10. Dodd said he will ask if the Treasury plans to request more money. The administration must demonstrate it knows how to handle the funds it’s been given before asking for more, Dodd said. The senator is planning two meetings next week on regulatory reform and on Troubled Asset Relief Program oversight ... * WASHINGTON (2/2/09)--Three areas of regulation could have prevented the current economic crisis: basic consumer protection rules, supervision of credit rating agencies and regulation of companies slated to be “too big to fail,” according to a report released Thursday by the Congressional Oversight Panel for the Troubled Asset Relief Program. The report examines how deregulation of financial markets over the last 25 years have returned the boom-and-bust cycles that had plagued the U.S. economy until reforms of the Great Depression ushered in a half-century of financial stability. It also addresses eight areas of reform to avoid another financial crisis in the future ... * WASHINGTON (2/2/09)--The Federal Emergency Management Agency, known as FEMA, has issued a revised Standard Flood Hazard Determination Form, which includes a new Office of Management and Budget control number. The form is used for determining whether real property offered as collateral on a loan is located in a special flood hazard area. The form's format and content have not changed. The updated form must be used beginning June 16 …

Alternatives to premium assessment urged by CUNA

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WASHINGTON (2/2/09)—Federal regulators must consider alternatives to their plan to assess a share insurance premium to help fund a stabilization plan for corporate credit unions, the Credit Union National Association (CUNA) urged. CUNA has expressed great concern that the National Credit Union Administration (NCUA) has not adequately explored a complete range of choices available or ways the plan could be less of a cost burden to credit unions already coping with tough economic conditions. (See related story: “CUNA concerned about costs of NCUA corporate plan.”) "We are fully aware of and troubled by the pressures that the agency's decision will have on credit unions,” said CUNA President/CEO Dan Mica. He added, “There is a wide range of alternatives that the agency can and must consider.” Among them, Mica identified:
* Allow credit unions to tap the U.S. Treasury Department’s TARP (Troubled Asset Relief Program), as soon as possible to deal with the corporate credit union liquidity emergency. This may require a statutory change and CUNA will sound out federal lawmakers to assess support: * Use the Central Liquidity Facility (CLF) to provide the funding. CUNA is currently analyzing CLF’s legal obligations and whether there may be opportunities for additional approaches or flexibility; * Permit credit unions to pay the assessment from reserves rather than running it through CUs’ balance sheets; and * Assess the premium in stages, rather than all at once. For example, split the premium into two or more equal parts, and allow credit unions to pay over time. CUNA is currently exploring the accounting and regulatory permissibilities of this approach.
Mica noted that the late 2009 time-frame that the agency has set for assessing a premium gives the NCUA, and credit unions, the opportunity to flesh out and choose among better alternatives.

CDFI notes funds availability

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WASHINGTON (2/1/09)—The U.S. Treasury Department’s Community Development Financial Institutions Fund (CDFI) Friday issued a notice of funds availability (NOFA) for its Bank Enterprise Award (BEA) program. Although eligible applicants must be federally insured banks and thrifts, those awarded BEA funds are encouraged to increase their financial assistance to Community Development Financial Institutions (CDFI), including credit unions. The Treasury noticed, published in the Jan. 30 Federal Register, noted that the NOFA does not obligate the CDFI to make any award or to obligate any available funds. However, the notice also projected that the Fund may award approximately $20 million for FY 2009 BEA Program awards, and reserved the right award in excess of that amount, if funds are available.

CUs eligible for proposed excess balance accounts

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WASHINGTON (2/2/09)—The Federal Reserve Board is proposing to establish limited-purpose “excess balance’ accounts (EBAs) from which eligible institutions, including credit unions, can earn interest. The Fed intends its authorization of EBAs to allow eligible institutions to earn interest on their excess balances at the excess balance rate. Under the proposal, eligible institutions will be able to earn this rate without having to open separate individual accounts at the Federal Reserve Banks by using accounts managed by a correspondent institution, who would manage the account on behalf of the eligible institution. The Fed believes this arrangement allows depository institutions to earn interest on excess reserve balances without disrupting existing correspondent relationships they may have with other institutions. The proposal would amend the Fed’s Regulation D, Reserve Requirements of Depository Institutions. The plan is being proposed to address current market disruptions and the use of EBAs will be reevaluated when normal market conditions are restored. Comments are due by March 2.

CUNA concerned about costs of NCUA corporate plan

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WASHINGTON (2/2/09)--The Credit Union National Association (CUNA) said that is does not welcome federal regulators’ action to support corporate credit union liquidity by extracting a high price from credit unions, but does understand the need for the agency to act. CUNA, in a statement issued today, said the agency must consider other solutions to mitigate the costs on credit unions during these difficult economic times. The NCUA announced Wednesday it would:
* Guarantee uninsured shares at all corporate credit unions through February 2009, and establish a voluntary guarantee program for uninsured shares of all corporate credit unions through Dec. 31, 2010; * Issue a $1 billion capital note to U.S. Central Corporate FCU (U.S. Central); and * Declare a premium assessment to restore the National Credit Union Share Insurance Fund (NCUSIF) equity ratio to 1.30 percent. The premium will be collected in 2009.
CUNA said there is real concern about whether the agency adequately explored the complete range of choices available, and ways the plan could be less of a cost burden on credit unions already coping with tough economic conditions. “We are fully aware of and troubled by the pressures that the agency’s decision will have on credit unions. Our view is that other choices can and must be explored, immediately, to mitigate the impact on credit unions,” said CUNA President/CEO Dan Mica. “Based on what we know from both NCUA and the corporate network, the agency was compelled to act promptly to address growing demands on corporate liquidity and capital.” Mica said. The CUNA Corporate Task Force met all day Thursday and discussed with NCUA, natural person credit union and corporate experts concerns about NCUA’s actions. The group also began the process of identifying alternatives to recommend to NCUA. For the next weeks, CUNA will continue a dialog with the agency and urge it to consider other approaches to this challenge, Mica declared.

NEW CUNA concerned about costs of NCUA corporate plan

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WASHINGTON (1/30/09, UPDATED 10:30 a.m. ET)—The Credit Union National Association (CUNA) said that is does not welcome federal regulators’ action to support corporate credit union liquidity by extracting a high price from credit unions, but does understand the need for the agency to act. CUNA, in a statement issued today, said the agency must consider other solutions to mitigate the costs on credit unions during these difficult economic times. The NCUA announced Wednesday it would:
* Guarantee uninsured shares at all corporate credit unions through February 2009, and establish a voluntary guarantee program for uninsured shares of all corporate credit unions through Dec. 31, 2010; * Issue a $1 billion capital note to U.S. Central Corporate FCU (U.S. Central); and * Declare a premium assessment to restore the National Credit Union Share Insurance Fund (NCUSIF) equity ratio to 1.30 percent. The premium will be collected in 2009.
CUNA said there is real concern about whether the agency adequately explored the complete range of choices available, and ways the plan could be less of a cost burden on credit unions already coping with tough economic conditions. “We are fully aware of and troubled by the pressures that the agency’s decision will have on credit unions. Our view is that other choices can and must be explored, immediately, to mitigate the impact on credit unions,” said CUNA President/CEO Dan Mica. “Based on what we know from both NCUA and the corporate network, the agency was compelled to act promptly to address growing demands on corporate liquidity and capital.” Mica said. The CUNA Corporate Task Force met all day Thursday and discussed with NCUA, natural person credit union and corporate experts concerns about NCUA’s actions. The group also began the process of identifying alternatives to recommend to NCUA. For the next weeks, CUNA will continue a dialog with the agency and urge it to consider other approaches to this challenge, Mica declared.

Compliance The rules on e-statements

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WASHINGTON (1/30/09)—Everyone is looking for cost savings in this tough economy and fictitious ABC CU is no different. An astute staff member suggests: Let’s just expedite our members’ transition from paper statements to electronic ones. It’s an appealing idea, management thinks while picturing the cost savings on paper, mailing costs, even processing expenses. But let’s check what our compliance expert says about this first, some cautious party proposes. Can ABC CU simply convert members still receiving paper statements to e-statements? What if the credit union offers the option to opt-out at any time? Well, it is a good thing the credit union has young Sara on its staff because she has been boning up on compliance issues. She knows: The credit union cannot automatically convert members without first getting their consent (opt-in) to receive e-statements. "Participation in e-commerce must be voluntary under the federal e-signature statute—known as ESIGN,” Sara says. The compliance experts at the Credit Union National Association (CUNA) back her up on this. They note ESIGN requires consumers to express their consent electronically, or confirm their consent electronically, in a manner that reasonably demonstrates that they’ll be able to access information electronically. Also, prior to consenting, consumers must be provided with a disclosure informing them of their rights regarding any electronic transaction, as well as a statement of hardware and software requirements for the access and retention of electronic records. For more on this, and other compliance challenges, use the resource link below.

Internet not a service facility NCUA

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WASHINGTON (1/30/09)—The National Credit Union Administration (NCUA) reiterated its stance that a credit union’s Web site does not qualify as a service facility under the agency’s chartering and field of membership requirements. If formation of a separate credit union is not practical, a multiple common bond credit union may add a new group to its field of membership if it shows the NCUA it is “within reasonable proximity to the location of the group.” The group would have to be within “reasonable proximity” of a service facility of the credit union. A service facility can be a credit union-owned branch, ATM, or mobile branch, among other things. It cannot, said the NCUA, be a Web site. “A credit union’s Internet website lacks a physical presence so cannot meet the statutory requirements to be within reasonable proximity of the groups,” the agency said in a Jan. 12 legal opinion letter. The observation was made by NCUA General Counsel Robert Fenner in response to a letter from Ronald L. Burniske, President/CEO, Chartway FCU, Virginia Beach, Va. Burniske had requested the agency consider modifying NCUA regulations to include internet banking services within the definition of a service facility in this instance.

Inside Washington (01/29/2009)

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* WASHINGTON (1/30/09)--The Treasury Department announced that it will post investment contracts for future completed transactions to its website within five to 10 business days. For contracts already completed, documents will be posted on a rolling basis. Nine contracts completed under the Capital Purchase Program were posted Wednesday. “We are taking a step toward increased transparency by committing to place all of our Troubled Asset Relief Program investment agreements on the Internet so that taxpayers can see how their money is being spent,” said Treasury Secretary Tim Geithner ... * WASHINGTON (1/30/09)--The Board of Governors of the Federal Reserve System swore in Daniel K. Tarullo as a Fed governor Wednesday. Tarullo was nominated to an unexpired term ending Jan. 31, 2022. He previously taught courses in international financial regulation, international law and banking law at Georgetown University Law Center. Before joining Georgetown, Tarullo worked in several senior positions in the Clinton administration ... * WASHINGTON (1/30/09)--House of Representatives Agriculture Committee Chairman Collin Peterson (D-Minn.) proposed a bill Wednesday that would prevent investors from engaging in credit default swap (CDS) trading unless they own the underlying bonds. U.S. trading also would be processed by a clearinghouse (Bloomberg.com Jan. 29). The bill would kill the CDS market, according to Tim Backshall, chief strategist, Credit Derivatives Research LLC. About 80% of the CDS market is traded by investors who don’t own the bonds, said Eric Dinallo, superintendent, New York Department of Insurance. CDSs are based on bonds used to analyze a company’s ability to pay back debt. Buyers are paid in face value for the cash equivalent if a borrower doesn’t adhere to debt agreements. Regulators have stepped up pressure on banks to use clearinghouses for CDSs and improve transparency amid the financial crisis ... * WASHINGTON (1/30/09)--Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) introduced a bill Wednesday that would give the government access to the books of certain financial institutions. Called the Troubled Asset Relief Program (TARP) Enhancement Act, the bill would require any party that receives U.S. Treasury Department TARP funds to give the Government Accountability Office access to its books…

NCUA approves stabilization efforts for corporates

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ALEXANDRIA, Va.(1/29/09)--The National Credit Union Administration (NCUA) Wednesday took steps to “enhance and support” the corporate credit union system. The system, NCUA noted, is facing liquidity and capital strains due to extraordinary market disruptions and the current economic climate. Corporate credit unions provide investment and liquidity services to consumer-owned natural person credit unions. The agency said its three-pronged initiative will provide natural person credit unions important safeguards by drawing upon the strong, aggregate capital already within the credit union system. Under the actions approved at a special closed meeting, the NCUA will:
* Guarantee uninsured shares at all corporate credit unions through February 2009, and establish a voluntary guarantee program for uninsured shares of all corporate credit unions through Dec. 31, 2010; * Issue a $1 billion capital note to U.S. Central Corporate FCU (U.S. Central); * Issue an Advance Notice of Public Rulemaking (ANPR) on restructuring the corporate credit union system; and * Declare a premium assessment to restore the National Credit Union Share Insurance Fund (NCUSIF) equity ratio to 1.30 percent. The premium will be collected in 2009.
The $1 billion injection is intended to provide reserves to offset anticipated realized losses on some mortgage- and asset-based securities held by U.S. Central, known as the “corporates’ corporate." U.S. Central announced it expects to report a net loss of approximately $1.1 billion for the year ended Dec. 31, 2008, when it makes public its financial results during the first week of February. U.S. Central attributed the net loss to charges for other-than-temporary impairments (OTTI) of $1.2 billion. (See related News Now story: "U.S. Central to release '08 financials next week.") Regarding the ANPR, the NCUA set a 60-day comment period, which will begin when the document is published in the Federal Register, likely within the next week or so. The NCUA said it is seeking input on “the entire range of areas” of potential reform and restructuring for the corporate system, and the ANPR specifies the following: The role of corporates in the credit union system, corporate capital, permissible investments, credit risk management, asset liability management, and corporate governance. The NCUA previously approved an action that will, in effect, change the way current outstanding loans from the Central Liquidity Facility (CLF) are booked by corporate credit unions, as well as by U.S. Central. At its monthly board meeting last week, the NCUA Board voted 2 to 1 to delegate to CLF President Owen Cole authority to sign an amendment to the Repayment, Security and Credit Reporting Agreement currently in place between U.S. Central and the CLF. Cole could also amend an Assignment Agreement between U.S. Central and the CLF. The Credit Union National Association (CUNA) recently established a Corporate CU Task Force, which is meeting in Washington, D.C. today. The task force will focus on developing CUNA's response to the ANPR, said CUNA Deputy General Counsel Mary Dunn Wednesday. CUNA's analysis of the ANPR and the NCUA’s other actions regarding corporate credit unions will be available on CUNA's Regulatory Advocacy website soon.

Inside Washington (01/28/2009)

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* WASHINGTON (1/29/09)--Rep. Spencer Bachus (R-Ala.) Tuesday announced that the House Financial Services Committee has selected subcommittee seats and ranking member positions. For a complete list of names, use the link. .. * WASHINGTON (1/29/09)--The Federal Housing Finance Agency has published an interim rule in the Federal Register addressing the critical capital level and four capital classification categories for the Federal Home Loan Banks. Banks will be considered “undercapitalized” if their assets are 3% to 4% of capital, “significantly undercapitalized” if the figure is between 2% and 3%, and “critically undercapitalized” if assets are under 2%. The rule also implements prompt corrective action provisions that the Housing and Economic Recovery Act of 2008 (HERA) applied to the banks. If banks wrote off their portfolios of private mortgage-backed securities, only Des Moines, New York, Dallas and Cincinnati banks would be adequately capitalized, according to Moody’s (American Banker Jan. 28). The FHFA also published a regulation Tuesday that would allow Fannie Mae and Freddie Mac to grow their mortgage assets up to $850 billion by Dec. 31. Starting Dec. 31, 2010, they must hold 10% fewer mortgage assets in their portfolios than at the end of the preceding year until those assets reach $250 billion ... * WASHINGTON (1/29/09)--The U.S. Supreme Court has agreed to hear a case in April involving New York Attorney General Andrew Cuomo, who charges that JPMorgan Chase and Co., Wells Fargo and Citigroup gave white borrowers lower-priced mortgages than they gave to minority borrowers. The case involves a state’s right to request data from banks to ensure compliance with state anti-discrimination laws. Observers question the court’s decision to hear the case because the court ruled in April 2007 that states were not allowed to investigate federal institutions (American Banker Jan. 29). The court may have taken the case to confirm the Office of the Comptroller of the Currency’s preemption powers, observers say. The case also would let Justice Clarence Thomas weigh in on the preemptive powers issue since he has taken himself off of similar cases involving Wachovia, where his son works. Wachovia was recently purchased by Wells Fargo ... * WASHINGTON (1/29/09)--The Federal Deposit Insurance Corp. (FDIC) is proposing a national rate establishing how much banks can pay for brokered deposits. Currently institutions cannot pay more than the rates in their normal market area (American Banker Jan. 28). However, the agency recognized that normal market area is ambiguous because Treasury rates are low. If a national rate is established, the agency would still require that adequately capitalized banks obtain a waiver from the FDIC for new deposits. Uncapitalized banks and thrifts would not be able to accept deposits ... * WASHINGTON (1/29/09)--The Federal Reserve Board is attempting to stem foreclosures by requiring banks to modify select delinquent mortgages. Included in the mortgages are the assets the Fed acquired in the American International Group and Bear Stearns rescues (CNNMoney.com Jan. 28). Democratic lawmakers, including Rep. Barney Frank (Mass.) and Sen. Christopher Dodd (Conn.), supported the move. Under the program, loans must be at least 60 days delinquent, have a debt-to-income ratio less than 38%, a term no longer than 40 years and a fixed interest rate (American Banker Jan. 28) ...

CU board removal authority limited says NCUA

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WASHINGTON (1/29/09)—The National Credit Union Administration (NCUA) reminded federal credit unions (FCU) that a board does not have blanket authority to remove a director. The NCUA legal opinion letter was responding to a query by a credit union board member who was removed when his or her seat was declared vacant by a special meeting of the board of directors. The agency said FCU Bylaws allow a board to declare a seat vacant only if the director fails to attend regular meetings or otherwise fails to perform any of the duties as a director. Even under those circumstances, a special meeting of the members would be needed to remove the director. The inquiring board member said, in declaring the seat vacant, the board relied on alleged infractions, including breach of confidentiality, divisive behavior, and breach of fiduciary duty. The NCUA noted, “Absent an affirmative membership vote at a special meeting, a director cannot be removed from membership on the board of directors.” The NCUA also pointed out that if a board believes a member is acting inappropriately, as did the board of the credit union in this instance, it may bring the issue to its supervisory committee, which can then suspend the director until a special meeting of members is called.

CU rep to head NACHA board

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HERNDON, Va. (1/29/09)—The Electronic Payments Association —NACHA--has elected a credit union representative as the chairperson of it board of directors. Marcie J. Haitema, executive vice president of correspondent services at U.S. Central FCU, in accepting the position said, “I’m honored to serve as chair of an organization that offers such universal value to depository institutions of all types and sizes, from the largest global banks to our community banks and credit unions.” She credited NACHA with working to maintain and improve the safety, soundness and efficiency that the ACH Network provides to its participants. She added that the group will continue to seek opportunities for growth of electronic payments in the global economy. Haitema joined U.S. Central in August 2005, where she oversees the correspondent services division, which includes payment and technology services, member support and related operations. She also serves as the presiding manager of Corporate Network eCom, LLC® (eCom), a credit union service organization (CUSO) and majority-owned subsidiary of U.S. Central responsible for electronic bill presentment and a payment suite of services. Another credit union official among the newly elected NACHA board members is David Willis, vice president, debit card and funds services, Navy FCU, Vienna, Va.

Judge denies stay in Bellco UBIT case

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WASHINGTON (1/29/09)—There was recent good news for Bellco CU in its lawsuit challenging the Internal Revenue Service’s (IRS) application of unrelated business income tax (UBIT). A federal court denied the government’s request to dismiss the case or order a stay of action. Attorneys for the IRS had argued that the case could not be decided until the IRS finished all of its audits of Bellco's tax returns. “It was rightfully a losing argument because the Internal Revenue Code specifically allows taxpayers to bring refund suits after their refund requests have been pending for six months,” noted Eric Richard, general counsel for the Credit Union National Association (CUNA). Bellco, of Greenwood, Colo.. filed its lawsuit last May against the tax agency's UBIT policies toward credit unions. The complaint seeks a refund of $199,000, based on UBIT taxes paid for 2000, 2001 and 2003. Now Bellco must wait for a trial date to be set. The trial date for the case, known as Bellco CU of Greenwood Village, Colo. vs. the United States, had originally been set for Aug. 31. On Dec. 22, 2008, however, U.S. District Court Judge Christine M. Arguello ordered that the date was "vacated." She did not set a new trial date and no reason was given for the delay. Of the latest action in the case, CUNA’s Richard said Bellco has moved one step closer to its goal of compelling the IRS to adopt a more reasonable position on UBIT. He said Bellco has a strong case, “essentially seeking to right a wrong that IRS has committed by forcing cooperatively owned, not-for-profit credit unions to pay tax on some of the financial services they offer.” The credit union’s refund claim is based on income generated primarily through sales of credit life and credit disability insurance over those three tax years. Revenue generated from sales of accidental death and disability insurance, and the credit union's involvement with CFS Member Financial Services, a credit union service organization, were included under the 2003 refund claim. The lawsuit contends that the revenue is substantially or otherwise related to the exempt purposes and functions of the credit union as a tax-exempt, state-chartered credit union. Bellco has asserted that no portion of the taxes paid were legally due. In a related case, a Wisconsin credit union filed a complaint in January 2008 against IRS seeking a refund of $54,000 in taxes paid in UBIT on income from several insurance products. Appleton-based Community First CU also contends that the revenue from sale of the products is "substantially related" to the purposes and functions of the tax-exempt, state chartered credit union. Federal Judge William Griesbach has set May 11 as the trial date for that case.

Altered bankruptcy bill clears House panel

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WASHINGTON (1/28/09)—The House Judiciary Committee late Tuesday approved mortgage bankruptcy reforms but made a few changes as it marked up its bill (H.R. 200). Voting 21-15 along party lines for the Helping Families Save Their Homes in Bankruptcy Act, the committee ended up okaying a bill with notable improvements from the original. The committee approved a manager's amendment offered by the bill's sponsor, Rep. John Conyers (D-Mich.). The original bill would have given bankruptcy judges unfettered authority to change—or “cramdown”-- a borrowers’ mortgage loan terms, a provision strongly opposed by the Credit Union National Association (CUNA) and other financial services groups. In its amended version, the committee-approved measure would:
* Limit the application of the bill to mortgages made prior to the date of enactment; * Require borrowers to contact their lender or servicer at least 15 days prior to petitioning a bankruptcy court; * Allow lenders to share in the appreciation of a home's value with borrowers who discharge mortgage debt in bankruptcy, if the house is sold while the Chapter 13 plan is in effect, which typically is 5 years; and * Prohibit the Act from being construed as modifying any obligation of the Federal Housing Administration, the Veterans Administration, or the Department of Agriculture, under a contract that guarantees or insures the payment of any part of a loan secured by a security interest in a principal residence.
The committee also ringingly endorsed an amendment that would exclude borrowers who misrepresent their financial situation in bankruptcy from being eligible to have their mortgage crammed-down. The vote on this amendment was 21-3. Despite the improvements, Ryan Donovan, CUNA vice president of legislative affairs, said CUNA remains opposed to the bill. He said CUNA understands that a small number of Democratic committee members withheld amendments to the bill and will continue to try to work with the chairman as the bill proceeds to House floor consideration. That, Donovan said, could come as early as next week.

Frank hearing on promoting bank liquidity

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WASHINGTON (1/28/09)--House Financial Services Committee Chairman Barney Frank (D-MASS.) Tuesday announced that the committee has scheduled a hearing on how to enhance bank liquidity and lending. The hearing title is, “Promoting Bank Liquidity and Lending through Deposit Insurance, Hope for Homeowners, and other Enhancements.” It will be held Feb. 3 at 2:00 p.m. (ET) A witness list was not yet available.

NCUA asks Geithner for TARP aid for CUS

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ALEXANDRIA, Va. (1/28/09)—As Timothy Geithner assumed his new job as U.S. Treasury Secretary, he was contacted Tuesday by the federal credit union regulator about asset relief funds for credit unions. In a letter Tuesday, National Credit Union Administration (NCUA) Chairman Michael Fryzel congratulated Geithner on his successful appointment and called upon the Secretary to expand options for credit union participation in the Troubled Assets Relief Program (TARP). “Knowing of your commitment, and that of President Obama, to reforming the Troubled Assets Relief Program, I request that you take a fresh look at two of the issues of the greatest concern to me as the federal regulator with responsibility for the safety and soundness of the credit union system,” wrote Fryzel. Fryzel asked Geithner to reconsider two issues in particular. Fryzel specifically identified past decision by the Treasury Department not to institute an illiquid-asset-purchase feature of TARP. He also noted an absence of guidelines for participation for cooperatives such as credit unions “Although I can understand the initial actions that the Treasury Department has taken to help the large banks, insurance companies, and other major financial institutions that have faltered or failed, I am concerned about the second-place status into which credit unions and other smaller financial institutions have been placed,” noted the NCUA chairman. Fryzel additionally addressed the need for the Treasury to allow the National Credit Union Share Insurance Fund to establish a guarantee for credit union deposits in non-interest bearing transaction accounts, parallel to authority granted to the Federal Deposit Insurance Corp. He also asked the Secretary to “bear in mind the key role played by credit unions and credit union members in our financial system as you reevaluate the Federal response to the ongoing economic crisis.” Use the resource link below to read the complete letter.

Special NCUA closed meeting today

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ALEXANDRIA, Va. (1/28/09)—The National Credit Union Administration (NCUA) has scheduled a special closed meeting for today at 3 p.m. (ET). The single agenda item is “Consideration of supervisory activities.” Use the resource link below for the NCUA website.

MasterCard paper explains importance of interchange

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WASHINGTON (1/28/09)—MasterCard International recently released a paper on interchange fees. It posits that the relatively small fee brings enormous benefits to all electronic payment participants—including both consumers and merchants. The paper, titled “Benefits of Open Payment Systems and the Role of Interchange,” argues that electronic payments have become so ingrained in everyday life that they are often taken for granted or misunderstood. “Perhaps the easiest way to grasp the value of electronic payments is to envision a world without them. Clearly, if electronic payments came to a sudden halt, many facets of commerce – travel, trade and the Internet just to name a few – would face dire consequences,” MasterCard President and CEO Robert W. Selander says in the introduction. The paper goes on to outline the role of interchange, which is the fee paid by merchants for the benefits of card acceptance. The Credit Union National Association (CUNA), with other financial services groups and card issuers, launched a huge opposition campaign last year when federal lawmakers proposed legislation that would allow the government to set interchange fees. CUNA said such an action would adversely affect consumer options, competition and technological innovation. According to CUNA, interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants. Discussions regarding what value should be placed on the use of electronic payments should be within the purview of the industry participants, not government, the group maintains. CUNA expects that interchange bills, similar to those that circulated in 2008, will be re-introduced this year.

Inside Washington (01/27/2009)

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* WASHINGTON (1/28/09)—The Federal Reserve Board yesterday announced the appointment of the chairs and deputy chairs of the twelve Federal Reserve Banks for 2009. Each Reserve Bank has a nine-member board of directors. The Fed announcement noted that the Board of Governors in Washington appoints three of these directors and each year designates one of its appointees as chair and a second as deputy chair… * WASHINGTON (1/28/09)--On his first day as U.S. Treasury Secretary, Timothy Geithner proposed reforms to the Emergency Economic Stabilization Act (EESA), which was enacted last year to bolster a flagging economy. He outlined new rules designed to limit the influence of lobbyists and special interests in the EESA process. The idea, he said, is to ensure that investment decisions are guided by objective assessments in the best interest of the health and stability of the financial system. An agency release said Tuesday’s announcement builds on EESA reforms already outlined by President Barack Obama, including monitoring and tracking lending patterns by financial institutions, limiting executive compensation, and preventing shareholders from being unduly rewarded at taxpayer expense. Credit Union National Association (CUNA) President/CEO Dan Mica, in a recent column in The Hill, backed Obama’s move toward transparency in lobbying efforts calling the change “welcome and overdue.” He said the organizations that face a difficult future are those claiming falsely to represent wide interests, while really representing a narrow few … * WASHINGTON (1/28/09)--The Federal Deposit Insurance Corp. (FDIC) issued a final rule Tuesday requiring insured depository institutions to inform their sweep account customers of the nature of their swept funds and how those funds would be treated if the institution fails. The rule largely codifies the agency’s long-standing policies on bank closings, the FDIC said. The rule is a follow-up to a July 2008 interim rule, which establishes the FDIC’s practices for determining deposit and other account balances at failed banks ... * WASHINGTON (1/28/09)--The Federal Deposit Insurance Corp. (FDIC) plans to tighten and clarify interest-rate restrictions on banks that are less than well-capitalized. The agency is seeking comments on a proposal that would define nationally prevailing deposit rates as a direct calculation of the national averages computed by the FDIC. Reliance on Treasury yields would be discontinued. The regulation also would establish a presumption that locally prevailing deposit rates equal the national rates published by the FDIC and “bring much needed concreteness to the administration of these statutory interest rate restrictions,” said FDIC Chairman Sheila Bair. As of third quarter 2008, about 154 banks reported being less than well-capitalized out of 8,300 banks nationwide ... * WASHINGTON (1/28/09)--The Federal Reserve Bank of New York named William Dudley as president/CEO to succeed Timothy Geithner, who was sworn in as Treasury Secretary Monday. Dudley was executive vice president of the Markets Group at the New York bank and was manager of the System Open Market Account for the Federal Open Market Committee. Prior to joining the bank in January 2007, Dudley was a partner and managing director at Goldman, Sachs and Co. ... * WASHINGTON (1/28/09)--Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee, asked regulators to report on their fraud detection improvement efforts every three months (The New York Times Jan. 27). At a hearing Tuesday, Dodd questioned the Securities and Exchange Commission enforcement director and the interim chief executive of the Financial Industry Regulatory Authority on what happened with the Bernard Madoff pyramid scheme ...

CUNA alert seeks cramdown opposition

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WASHINGTON (1/27/09)—In a continuing effort to keep the spotlight on credit union concerns regarding mortgage bankruptcy legislation, the Credit Union National Association (CUNA) is seeking grassroots action to block current “cramdown” bills. CUNA issued an Action Alert Monday urging state leagues and their member credit unions to contact federal lawmakers to opposed S. 61 and H.R. 200 as currently written. Those bills would allow a bankruptcy court to modify a debtor's mortgage terms-- an action known as a “cramdown.” In its alert, CUNA warns credit unions that the bills do not limit mortgage rewrites to the types predatory loans that fueled the current housing crisis; the provision would apply to all existing mortgages. “In the current crisis, credit unions are already working with members by stretching terms and lowering rates,” CUNA noted in its communication. “Credit unions use strong underwriting standards to make mortgages to their members and should not be swept up with this far-reaching bankruptcy reform proposal. “We need to send the message that significant changes need to be made to this legislation before it is enacted into law, and in the absence of significant change, credit unions must oppose the legislation,” CUNA urged. CUNA also encouraged credit unions to ask House and Senate lawmakers not to include "cramdown" legislation in an upcoming economic stimulus bill. CUNA last week sent letters to Capitol Hill to oppose broad cramdown authority and to suggest a more targeted approach. CUNA’s Action Alert was sent in advance of today’s scheduled House Judiciary Committee hearing on H.R. 200.

Congress Week short agenda long

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WASHINGTON (1/27/09)--WASHINGTON (1/27/09)--This week will be a short one for Congress, but it's packed with credit union interest--including votes on an economic stimulus bill and bankruptcy legislation. The Credit Union National Association (CUNA) will monitor the meetings of the Senate Finance Committee and the Senate Appropriations Committee as they mark up provisions of the Senate version of the American Recovery and Reinvestment Act of 2009—the stimulus package. The House is expected to consider the legislation on Wednesday. CUNA also will monitor the House Judiciary Committee as it marks up H.R. 200, Helping Families Save Their Homes in Bankruptcy Act of 2009. The bill carries a provision that would allow bankruptcy judges to change—or “cramdown”—a borrower’s mortgage terms. “We believe that the significance of the mark-up of the House version of the cramdown legislation on Tuesday is to give House leaders the ability to show that this legislation has received complete committee consideration," said Ryan Donovan, CUNA vice president of legislative affairs. "However, it also gives those concerned about the legislation an opportunity to attempt to improve the bill before it is considered by the full House, either on its own or as a part of a larger bill. We have been working closely with several offices that oppose the bill to identify areas where the legislation needs significant modification," he added. In a letter sent to House Judiciary Committee Chairman John Conyers (D-Mich.) and the panel’s ranking member, Lamar Smith (R-Texas), CUNA said it opposes adding the legislation to a stimulus package. CUNA identified several changes that it wants before the bill proceeds through the legislative process. This week CUNA also will monitor:
* The Senate Banking Committee's hearing on the Madoff Investment Securities case on Tuesday; * The House Financial Services Committee's meeting on Tuesday to meet and approve the committee rules for the 111th Congress, and elect members to subcommittees; *The Senate Budget Committee's Wednesday hearing on the federal response to the housing and financial crisis; and *The Senate Budget Committee's Thursday hearing entitled, "The Global Economy: Outlook, Risks and Policy Implications."
No votes are expected in the House Thursday and Friday due to a Republican conference retreat.

Inside Washington (01/26/2009)

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* WASHINGTON (1/27/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call for an interim final rule for the Hope for Homeowners Program. The rule implements Emergency Economic Stabilization Act (ESSA) provisions. ESSA created the $700 billion Troubled Asset Recovery Program, which allows the Federal Housing Administration to pay an amount up front to the subordinated lienholder at the time the loan is refinanced in lieu of providing a payment when the property is sold. The interim rule implements the ESSA provisions by determining the amount of the up-front payment. The rule was effective Jan. 7. Comments are due by March 9 ... * WASHINGTON (1/27/09)--The Senate has confirmed the Obama administration’s nomination of Shaun Donovan to oversee the Department of Housing and Urban Development, and Mary Schapiro as Securities and Exchange Commission chairman by unanimous consent (American Banker Jan. 26). The Senate Monday night confirmed Timothy Geithner’s nomination as Treasury Department secretary... * WASHINGTON (1/27/09)--Vice President Joe Biden and House Speaker Nancy Pelosi (D-Calif.) agree that more money is needed to stabilize the nation’s banks. Though both said they were open to providing more funds, they emphasized that there must be transparency in how the money is spent (The Washington Post Jan. 26). The Obama administration has proposed an $850 billion economic stimulus package to help recover the economy. House Republican leader John A. Boehner (R-Ohio) said most of his party members oppose the measure. Obama has increased his lobbying for the bill and is expected to meet with Republican caucuses today ...

Royce Camp join GAC lineup

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WASHINGTON (1/27/09)—Two long-time Republican friends of credit unions from Capitol Hill, Reps. Ed Royce and Dave Camp, are scheduled to address the Credit Union National Association's (CUNA) 2009 Governmental Affairs Conference in February. Royce, from California, is well known to credit unions as a primary sponsor to credit union legislation such as the Credit Union Regulatory Improvements Act (CURIA) and other regulatory relief measures. Royce will address the GAC during the morning general session on closing day of the conference Feb. 26. The GAC this year begins on Feb. 22. Camp, from Michigan, has weighed in as a CURIA co-sponsor and was recently selected by the GOP to be ranking member on the important tax-policy committee, Ways and Means. He replaced Rep. Jim McCrery (R-La.), a member not known as a credit union supporter. Camp is also slated for Feb. 26. Royce and Camp are just part of a top of the line list of key speakers, including House Financial Services Committee Chairman Barney Frank (D-Mass.), its ranking member, Rep. Spencer Bachus (R_Ala.), and Rep. Carolyn Maloney (D-N.Y.), formerly head the panel's subcommittee on financial institutions and consumer credit and now chairman of the Joint Economic Committee. Also among those scheduled to speak are House Minority Leader John Boehner (R-Ohio) and Senate Banking Committee Chairman Christopher Dodd (D-Conn.).

WOCCUs Afghanistan work outlined for U.S. Senator

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WASHINGTON (1/27/09)--In a follow-up letter to a U.S. Senator’s recent remarks about the country’s involvement in Afghanistan, President/CEO Pete Crear of the World Council of Credit Unions (WOCCU) said his organization strongly agrees that development assistance is needed there. Crear emphasized WOCCU’s work in Afghanistan and the organization’s willingness to help policymakers in a letter to a Wisconsin senator. The letter, sent Jan. 16 to Sen. Russ Feingold (D-Wis.), responded to a statement Feingold made during Sen. Hillary Clinton’s (D-N.Y.) confirmation hearing for U.S. Secretary of State. Feingold had noted the importance of increased military and development assistance in Afghanistan. WOCCU agrees with Feingold’s position on Afghanistan, Crear said. WOCCU has helped create Afghanistan’s first credit union system, enabling the country’s 14 financial cooperatives to serve 27,000 consumers. The financial cooperatives have $1.1 million in savings, and 1,000 new members join each month, he added. As Secretary of State, Clinton will oversee the U.S. Agency for International Development (USAID), which funds part of WOCCU’s work in Afghanistan. WOCCU hopes that her “past support for microfinance will translate into increased development and microfinance work by USAID in Afghanistan and elsewhere,” Crear said.

Delay likely on mortgage bankruptcy legislation

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WASHINGTON (1/26/09)--The Obama administration and congressional Democrats have agreed not to include controversial mortgage bankruptcy provisions in an economic stimulus bill currently making its way through Congress, according to press reports. Reuters late Friday reported a meeting between President Barack Obama and Democratic leaders during which they agreed to try to pass bankruptcy reforms as part of a major spending bill to be considered early in the year. The Credit Union National Association (CUNA) mid-week had sent a letter to House committee leaders last week opposing inclusion of mortgage bankruptcy provisions in a stimulus bill. (See News Now, Jan. 23, “CUNA opposes current bankruptcy bills.) CUNA also told the leaders of the House Judiciary Committee that unless changes are made to current legislative language to address mortgage bankruptcy, CUNA would actively oppose such legislation. Among its concerns, CUNA opposes unlimited mortgage loan “cramdown” authority for bankruptcy judges. CUNA urges Congress to limit such power specifically to loans determined to be "subprime," with large re-sets of interest rates; loans with negative amortization; or loans that a court reasonably determines were fraudulent or abusive when made with no reasonable underwriting standards and expectation the borrower could actually repay the loan. CUNA has also voiced concern that a lender that made a mortgage loan using good underwriting standards should not bear the risk of a decline in the house's value. CUNA also warned that imprudent legislative action could encourage financially fit borrowers to stop mortgage payments, triggering foreclosure, simply because they no longer want to make large mortgage payments on houses which have dropped notably in value. The letter noted that CUNA has worked for more than a year with Hill staff to design a bankruptcy amendment that would allow courts to amend only certain mortgage loan agreements secured by the debtor's principal residence. CUNA Vice President of Legislative Affairs Ryan Donovan said of the development, “Clearly we still have our work cut out for us. While the bankruptcy provision will not be a part of the stimulus, the supporters of this legislation will try again on future must-pass bills. “But,” he added, “We now have more time to continue to convey our message to Congress that the mortgage bankruptcy bill in its current form would have an adverse impact on credit unions."

FASB rejects fair value disclosure plan

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WASHINGTON (1/26/09)—The Financial Accounting Standards Board (FASB) decided not to finalize a proposed FASB Staff Position (FSP) on FAS No. 107, regarding disclosures for financial instruments. The proposal would have required disclosures based on fair value and on "incurred loss amounts." FASB stated, however, that it will issue a new proposed FSP that would require disclosures of fair value measurements for financial instruments within the scope of FAS 107, Disclosures about Fair Value of Financial Instruments. Additionally, the proposed FSP would reiterate qualitative disclosure requirements in Statement No. 107 and FASB Statement No. 157, Fair Value Measurements, according to the Board. The Board indicated that the new proposed FSP would not require disclosures for “incurred loss” amounts. The proposed FSP is expected to be released sometime this week and will be open for a 30-day comment period. The proposal would apply for interim and annual periods ending after March 15, 2009.

Inside Washington (01/23/2009)

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* WASHINGTON (1/26/09)--The Credit Union Association of New York’s Michael Lanotte, senior vice president and general counsel, and Amy Kramer, vice president of governmental affairs, met five freshman members of New York’s congressional delegation in Washington, D.C. recently. Kramer and Lanotte discussed the credit union difference while meeting with Reps. Chris Lee (R-Buffalo/Rochester); Daniel B. Maffei (D-Central New York); Eric J.J. Massa (D-Finger Lakes/Jamestown); Michael E. McMahon (D-Metropolitan); and Paul D. Tonko (D-Capital/Southern Adirondack). Lanotte and Kramer also advocated for credit union access to Troubled Asset Relief Program funds, lifting the member business lending cap, and modernizing credit union’s capital requirements, and emphasized the importance of maintaining a separate credit union regulator. From left are: Kramer; Maffei; Tom Gannon, Credit Union National Association senior legislative representative; and Lanotte. (Photo provided by the Credit Union Association of New York) ... * WASHINGTON (1/26/09)--The Federal Deposit Insurance Corp. (FDIC) will meet Tuesday to discuss a proposal regarding interest rate restrictions for institutions that are less than well-capitalized. The agency also will discuss a final rule on processing deposit accounts in case of an insured depository institution fails. The meeting will be Webcast via the Internet and made available on-demand after the event ... * WASHINGTON (1/26/09)--The U.S. financial regulatory system is outdated and significant reforms are critically and urgently needed, according to a Government Accountability Office (GAO) report released Thursday. “The current regulatory approach has significant weaknesses that if not addressed will continue to expose the U.S. financial system to serious risks,” said the 99-page report. Determining how to create and implement a regulatory system that reflects new market realities is key to reducing the chance that the U.S. will experience another financial crisis, the GAO said ... * WASHINGTON (1/26/09)--The House Financial Services Committee will meet Tuesday at 10:15 a.m. to appoint majority and minority members to subcomittees, committee Chairman Barney Frank (D-Mass.) announced Friday. The committee also will consider a resolution adopting the rules for the 111th Congress ... * WASHINGTON (1/26/09)--New York Gov. David Paterson announced that Rep. Kristin Gillibrand (D-N.Y.) will succeed Hillary Clinton in the U.S. Senate. The appointment lasts until 2010. Gillibrand is a second-term representative. She has represented New York’s 20th Congressional District. A special election will be held to fill Gillibrand’s vacant seat. The Credit Union Association of New York (CUANY)’s governmental affairs staff participated in a credit card hearing with Gillibrand in 2007 and established a solid relationship with her regarding the credit union difference and issues that concern New York’s credit unions, CUANY said. “On behalf of New York’s credit union community we congratulate Rep. Gillibrand on her appointment,” said CUANY President/CEO William J. Mellin. “We look forward to growing our relationship with her and advancing credit unions’ legislative agenda in the Senate.” ...

Software patch added to 5300 reports

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ALEXANDRIA, Va. (1/26/09)—The National Credit Union Administration posted a notice on its 5300 Call Report webpage stating that a software patch was required to fix an error. “An error was discovered which effects the December 2008, 5300 Call Report Uninsured Shares accounts on page 5. A software patch was created to correct the problem,” the notice says. It goes on to guide installation instructions and patch downloading. Use the resource link below to read more.

CUNA urges new players attention to CUs

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WASHINGTON (1/26/09)— The Credit Union National Association (CUNA) last week urged key lawmakers to remember credit unions when considering the pressing issues confronting the new administration and Congress. After the Presidential inauguration on Jan. 20—and on the cusp of Senate confirmation hearings--CUNA sent letters to the leadership of the Senate Banking Committee and the Senate Finance Committee. Those panels are tasked with considering nominees for positions at the Securities and Exchange Commission, the Federal Reserve Board, and the Council of Economic Advisors, among others. In the letter, CUNA President/CEO Dan Mica wrote that CUNA endorsed the Obama administration’s choices and acknowledged that each face “unprecedented challenges.” “While the U.S. Treasury is the agency charged with implementing the Emergency Economic Stabilization Act (EESA), these nominees will have an important voice in key decisions regarding the use of TARP funds to mitigate the economic crisis,” wrote Mica. Mica reminded lawmakers that while EESA clearly includes credit unions among the institutions that should be eligible for TARP assistance, there has been no serious consideration at Treasury of credit unions’ needs for TARP relief. In general, Mica assured, credit unions are doing well and working hard to make funds for loans available to individuals and member businesses, to the extent statutory limitations permit. However, there are credit unions that have been seriously hurt by the impact of the problems in their markets. In a related story, Rep. Jane Harman (D-Calif.) issued a press release last week that noted she voted against the release of the second $350 billion of the TARP funds. She did so in part, she said, because of the way Treasury has handled the funds so far. “What is clear is that little of the funds went to the small banks and credit unions that actually keep our communities growing,” she said.

Financial Services subcommittee chairs nominated

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WASHINGTON (1/23/08)--House Financial Services Committee Chairman Barney Frank (D-Mass.) Thursday announced the committee's choices for six subcommittee chairs. The recommendations will next be forwarded to the Democratic Caucus for final approval. The Democratic subcommittee assignments can be seen using the link below.

Inside Washington (01/22/2009)

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* WASHINGTON (1/23/09)--The House Wednesday passed legislation that would limit how the Obama administration uses funds from the Troubled Asset Relief Program (TARP). Institutions receiving funds from TARP would be required to report on how the money is used and require that $40 billion to $100 billion be used to stop foreclosures (American Banker Jan. 22). House Financial Services Committee Chairman Barney Frank (D-Mass.) said a Senate vote on the bill is not likely. The Credit Union National Association (CUNA) has sought to include credit unions in TARP. Ryan Donovan, CUNA vice president of legislative affairs, said that while the TARP reform bill ultimately is not expected to go beyond House approval, it is a good development if the House goes on record supporting the credit union amendment (News Now Jan. 22) ... * WASHINGTON (1/23/09)--On Thursday, the Senate Finance Committee approved the nomination of Timothy Geithner for Treasury Secretary with a vote of 18 to 5. Democrats unanimously supported the nomination (MarketWatch Jan. 22). Several Republicans said they could not vote for him due to problems with his personal tax return ...

NCUSIF sign vote pulled

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ALEXANDRIA, Va. (1/23/09)—Honoring President Barack Obama's
Click to view larger image NCUA Board Chairman Michael Fryzel announced he pulled from the agenda a final rule outling requirements for a new official insurance sign. (Photo provided by CUNA)
directive for all federal agencies, the National Credit Union Administration (NCUA) pulled its insurance sign final rule from Thursday’s board meeting agenda. In one of his first actions after being sworn in Tuesday as the country’s 44th President, Obama ordered a halt to implementation of pending regulations promulgated under the Bush administration during its waning days. The NCUA rule pulled from the agenda would provide official options for displaying the share insurance sign to reflect the increase in the maximum share insurance amount from $100,000 to $250,000.

December 08 NCUSIF insurance loss 113.4 million

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ALEXANDRIA, Va. (1/23/09)—The National Credit Union Share Insurance Fund (NCUSIF) projected an insurance loss for December 2008 at $113.4 million, according to its year-end report. At a National Credit Union Administration (NCUA) open board meeting Thursday, staff continued to project a 1.27% equity level for 2008. That figure precludes the possibility of an NCUSIF dividend to federally insured credit unions. The NCUSIF also posted gross income of $129.9 million in December 2008. Of that, $106 million of the gross income was from the NCUSIF’s sale of longer-term U.S. Treasury Department Securities that appreciated in value. Approximately $97 million of the $113.4 million insurance loss .
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expense went to unallocated reserves in order to move the NCUSIF’s insurance loss reserves from the minimum level required to its “midpoint,” according to the NCUA. Other details: NCUSIF reported there are currently 271 low-ranked CAMEL 4 and 5 credit unions, up 28% from 211 at the end of 2007. The total insurance loss expense for 2008 is estimated to be $290.4 million.

CUNA opposes current bankruptcy bills

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WASHINGTON (1/23/09)—The Credit Union National Association (CUNA) informed House lawmakers Thursday that credit unions cannot support changes to the Bankruptcy Code that would give courts unlimited authority to modify any type of loan secured by a debtor’s principal residence. In fact, CUNA stated in a letter to leaders of the House Judiciary Committee, unless changes are made, CUNA would actively oppose such legislation. The letter to the committee chairman, Rep. John Conyers (D-Mich.), and its ranking member, Rep. Lamar Smith (R-Tex.), said that any amendment to the Code must target certain types of loans and be limited in duration. The committee conducted a hearing Thursday on bills currently under its consideration, H.R. 200, the Helping Families Save Their Homes in Bankruptcy Act of 2009, and H.R. 225, the Emergency Homeownership and Equity Protection Act. Those bills do not contain the limitations sought by CUNA on behalf of credit unions. “Therefore,” CUNA President/CEO Dan Mica wrote to the panel leaders, “Credit unions cannot support these bills in their current form, and CUNA opposes any amendment to the bankruptcy law being included in the economic stimulus legislation." Mica urged, “Adequate consideration needs to be given to the unintended consequences of amending the bankruptcy law and to the practical implementation issues associated with any amendment to the code since the bankruptcy law has no implementing regulations to serve as guidance to the courts.” Among its concerns, CUNA said a lender that made a mortgage loan using good underwriting standards should not bear the risk of a decline in the house’s value. CUNA also warned that imprudent legislative action could encourage financially fit borrowers to stop mortgage payments, triggering foreclosure, simply because they no longer want to make large mortgage payments on houses which have dropped notably in value. The letter noted that CUNA has worked for more than a year with Hill staff to design a bankruptcy amendment that would allow courts to amend only certain mortgage loan agreements secured by the debtor’s principal residence. Specifically, the authority would apply to loans determined to be “subprime,” with large re-sets of interest rates; loans with negative amortization; or loans that a court reasonably determines were fraudulent or abusive when made with no reasonable underwriting standards and expectation the borrower could actually repay the loan. For any loan falling within this category, CUNA said in the letter, a bankruptcy court should have the authority to:
* Cancel prepayment penalties; * Lower the interest rate to the current conventional fixed market rate; * Extend the maturity of the loan; and * Adjust the principal balance to no lower than the current market value of the house if, when the house is eventually sold by the debtor, the debtor would not only have to repay the remaining loan balance established by the plan, but also have to turn over to the original first and junior lien holders any net proceeds up to the original mortgage balances, even after discharge, also known as recapture.
Use the resource link below to read CUNA's complete letter.

CLF change to ease corporate balance sheet pressure

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ALEXANDRIA, Va. (1/23/09)—The National Credit Union Administration (NCUA) Thursday approved an action that will have the effect of changing the way current outstanding loans from the Central Liquidity Facility (CLF) are booked by corporate credit unions, as well as by US Central FCU. At its open board meeting, the NCUA Board voted
Click to view larger image NCUA Central Liquidity Facility President Owen Cole explains a proposed change in the way current loans oustanding are booked by corporate credit unions and U.S. Central. Cole made his presentation during yesterday's monthly NCUA Board meeting in Alexandria, Va. (Photo provided by CUNA)
2 to 1 to delegate to CLF President Owen Cole authority to sign an amendment to the Repayment, Security and Credit Reporting Agreement currently in place between US Central and the CLF. Cole could also amend an Assignment Agreement between US Central and CLF. The action was designed to execute a change in the way current loans outstanding from the CLF are booked by corporates and by US Central by allowing both US Central and participating corporates to assign the loans, without recourse, to the CLF. By removing the loans from the books of US Central and participating corporates, the new agreement will alleviate pressure on corporate balance sheets created by holding these assets, according to an NCUA staff document. The new approach, the document noted, will change the way loans are administered in the future as well. “(A)lthough (US Central) will retain its role as master servicer and the relevant corporate will continue to service the loan, loans will be booked exclusively as an asset of the CLF.
Click to view larger image NCUA Board Member Gigi Hyland during Thursday's monthly meeting questions an agency proposal that would change the way current loans outstanding from the Central Liquidity Facility are booked by corporate credit unions. Hyland voted against the proposal, which passed 2-1. (Photo provided by CUNA)
"In connection with this change, the corporate servicing the loan will agree in an ancillary agreement with USC (to which CLF is not a party) to subordinate any claims it may have to collateral also pledged to secure the CLF indebtedness,” the NCUA noted. Board Member Gigi Hyland cast the dissenting vote. She said she was “not convinced” that the CLF should assume the full the risk of default on these loans. Hyland said that the CLF would lose the corporates’ and US Central’s “guarantee” on these loans because they would be transferred without recourse, and she stated that she believes that “a guarantee is important” given the current financial crisis. Hyland also expressed concern that this program would not help natural person credit unions that are experiencing lower capital levels and possible sanctions under PCA because they have expanded their balance sheets by participating in the CU SIP and CU HARP programs.

CUNA suggests changes to appraisal guidance

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WASHINGTON (1/22/09)—Credit unions are prudent real estate lenders and already apply necessary safeguards to ensure the integrity of the appraisal process, said the Credit Union Association (CUNA) commenting on proposed interagency appraisal guidelines. The National Credit Union Administration (NCUA), along with federal bank and thrift regulators, proposed interagency appraisal and evaluation guidelines in December that outline supervisory expectations for sound real estate practices. In its comment letter, CUNA noted that although many credit unions have been affected by the current economic crisis, their long-standing careful lending practices helped them avoid making many of the types of loans that have often been cited as a cause of the crisis. “For this reason, we are confident that credit unions have been and are continuing to take the necessary safeguards to ensure the integrity of the appraisal process and that they are meeting the expectations outlined in the guidelines,” wrote CUNA Senior Assistant General Counsel Jeffrey Bloch in CUNA’s comment letter. However, the CUNA letter noted, credit unions have raised a number of issues with the guidelines. CUNA suggested changes be adopted before the National Credit Union Administration (NCUA) and other federal financial regulators adopt the guidance. For instance, CUNA urged the regulators to consider whether lenders should have more flexibility in determining whether there must be an appraisal or valuation for every loan modification, particularly if an appraisal that is consistent with these Guidelines was obtained for the original loan. CUNA also recommended that final guidelines should clarify to what its definition of “appraisal” refers. It should define the extent to which the definition refers only to full-scale interior inspections and to the extent it could also include exterior-only inspections, commonly referred to as “drive-by” appraisals. Also, CUNA noted, the proposed guidelines indicate that a lending institution should discuss its needs and expectations with an appraiser. "We do not believe this is either practical or realistic and does not reflect current business practices, at least for larger credit unions and other financial institutions,” CUNA wrote. To read more of CUNA’s extensive comment, use the resource link below.

TARP bankruptcy part of busy Hill agenda

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WASHINGTON (1/22/09)--Even with the Martin Luther King, Jr. holiday and the Presidential Inauguration falling on consecutive days, this week is a busy one in both the House and the Senate. The House and the Senate were both in session Tuesday—the day Barack Obama became the 44th U.S. president. The House conducted a pro forma session, while the Senate met briefly to confirm certain nominees to the President's cabinet by unanimous consent. And then, according to Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan, things just get busier. Of most interest to credit unions, the House Thursday night passed H.R. 384, the TARP Reform and Accountability Act. “When the House suspended debate on this legislation last week, four additional amendments were pending, including language that would provide a limited form of alternative capital to help credit unions participate in government assistance programs,” noted Donovan. He said that while the TARP reform bill ultimately is not expected to go beyond House approval, it is a good development if the House goes on record supporting the credit union amendment. Neither the Senate Banking Committee nor the House Financial Services Committee are expected to meet this week, but Donovan noted several hearings that CUNA will closely follow. On Wednesday, the Senate Finance Committee held a confirmation hearing for Timothy Geithner to be Secretary of Treasury. Also, the Senate Homeland Security and Governmental Affairs Committee held a hearing on "Where Were the Watchdogs? The Financial Crisis and the Breakdown of Financial Governance." On Thursday, the House Judiciary Committee has scheduled a hearing on H.R.200, the "Helping Families Save Their Homes in Bankruptcy Act of 2009", and H.R.225, the "Emergency Homeownership and Equity Protection Act." “These bills are mortgage cramdown bills that are similar to the legislation that Sen. Durbin has introduced,” Donovan said. He added, “It is also worth noting that a number of committees on both sides of the Capitol will begin to mark-up the portions of the economic stimulus package that fall within the jurisdiction of the committee.” Also, it is expected that the Senate Finance Committee, House Appropriations Committee, House Ways and Means Committee, House Energy and Commerce Committee and the House Transportation and Infrastructure Committee will conduct committee meetings to consider the stimulus bill this week. The stimulus legislation likely will be on the floors of both Houses during the week of Jan. 26.

Inside Washington (01/21/2009)

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* WASHINGTON (1/22/09)—At a Senate Finance Committee hearing on his nomination for the position of Secretary of the U.S. Treasury Department, Timothy Geitner was grilled by senators of both parties. He was questioned closely about his views of the country’s current financial crisis, as well as about his reported errors in his personal income tax filings (NYTimes.com Jan. 21). Geitner, who is president of the Federal Reserve Bank of New York, told the committee that the Obama administration soon would propose an overhaul of the nation’s financial institutions regulatory system. He said he also to expect plans to change the Treasury’s use of the $700 billion financial bailout program. Geitner also apologized to the panel for his late payment of more than $34,000 in income taxes, something he called “careless” and “avoidable” mistakes, but also “unintentional.” Geitner is expected to be confirmed by the Senate by next week ... * WASHINGTON (1/22/09)--President Barack Obama’s pick for Treasury Secretary, Timothy Geithner, called for reform of the government’s $700 billion rescue plan on Wednesday during his confirmation hearing. Geithner said changes to the Troubled Asset Relief Program (TARP) are needed immediately (The New York Times Jan. 21). The program has given financial institutions “too much upside” and has done little for families and small business owners, he said. The program needs to be restructured so that there is enough credit to help the economy recover, he added. Congress has approved the second half of the TARP program, but the funds have not been deployed ... * WASHINGTON (1/22/09)--Sens. Charles Schumer (D-N.Y.) and Richard Shelby (R-Ala.) announced intentions to introduce legislation Thursday that would enable federal law enforcement to better police and prosecute investor fraud scams on Wall Street. The senators said they would unveil their bill today at a press conference, and predicted that the country’s ongoing financial crisis likely will expose more “bad actors” in the financial services industry. They will discuss the need for stepped-up efforts to bring these white-collar wrongdoers to justice ... * WASHINGTON (1/22/09)--The Treasury Department is asking recipients of the Troubled Asset Relief Program (TARP) fund to provide monthly reports on purchases of asset- and mortgage-backed securities (American Banker Jan. 21). Companies that received the Treasury’s request include: Wells Fargo & Co., JPMorgan Chase & Co., Goldman Sachs Group Inc., PNC Financial Services Group Inc., Morgan Stanley, U.S. Bancorp, SunTrust Banks Inc., Regions Financial Corp., Capital One Financial Corp., Fifth Third Bancorp., BB&T Corp., KeyCorp, Bank of New York Mellon Corp., Comerica Inc., CIT Group Inc., Northern Trust Corp., State Street Corp., and Marshall and Ilsley Corp. The Treasury had been criticized for not requiring institutions to provide information about how they used the TARP funds ...

Inside Washington (01/20/2009)

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* WASHINGTON (1/21/09)--A fraudulent e-mail seeking credit card information that purports to be from the National Credit Union Administration (NCUA) has been in circulation since Friday, Members United Corporate CU said in a statement to its members. The phishers ask e-mail recipients to click on a link to obtain a subscription from the NCUA Express Subscription Service. The recipient is then directed to a clone site that seeks credit card information. The NCUA does not charge for the service and does not solicit information over the Internet, the statement said ... * WASHINGTON (1/21/09)--The Federal Deposit Insurance Corp. (FDIC) is working to restore the Troubled Asset Relief Program (TARP) to its original purpose. The agency could issue a proposal soon that would allow financial institutions to apply for a 10-year debt guarantee if they put up collateral of recent consumer loans (American Banker Jan. 20). Currently financial institutions are guaranteed for three years. Institutions must apply before July and would agree to issue no more than 125% of their outstanding secured debt. Last week, Ben Bernanke, Federal Reserve Board chairman, suggested an aggregated bank could be created to purchase bad assets. Sheila Bair, FDIC chairman, said she supported his idea. Institutions planning to sell assets to the bank would be required to take an equity position, she said. The Treasury originally said TARP would be used to purchase troubled assets and create a market for them, but changed its focus to inject capital into banks ... * WASHINGTON (1/21/09)--The Federal Reserve Board has approved amendments to Appendix A of Regulation CC that reflect the restructuring of the Federal Reserve’s check processing operations in the Fifth and Sixth Districts. As of March 21, the Charlotte branch office of the Federal Reserve Bank of Richmond will no longer process checks. Bankers served by that office will be reassigned to the head office of the Federal Reserve Bank of Atlanta ...

Credit card bills back on Hill agenda

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WASHINGTON (1/21/09)--Sweeping credit card reforms are back in the sights of some federal lawmakers. Sen. Charles Schumer (D-N.Y.) introduced a such a bill last week and Rep. Carolyn Maloney (D-N.Y.) is expected to do so in the House, if she has not already. Last year, lawmakers in both the House and Senate sponsored bills that would have, in part, required credit card companies to give 45-days notice prior to an interest rate change and prohibited card companies from increasing rates on existing balances except under certain circumstances. Since those bills were first introduced, the Federal Reserve Board has imposed stricter rules on credit cards, but similar action by the U.S. Congress would give those prohibitions the weight of law. The Credit Union National Association (CUNA) supports federal lawmakers’ intentions to end discriminatory, predatory, deceptive and abusive lending practices, said Ryan Donovan, the group’s vice president of legislation affairs. However, he emphasized that CUNA continues its work to ensure that unintended consequences do not restrict the range of products and services that credit card issuers currently offer, thereby cutting off credit to some and raising the price of credit for all.

RESPA required use date pushed back

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WASHINGTON (1/21/09)--The U.S. Department of Housing and Urban Development (HUD) has pushed back the effective date of its revised definition of “required use” under the Real Estate Settlement Procedures Act (RESPA). The definition was set to go into effect Jan. 16, but a final rule published last week in the Federal Register changed the date to April 16. RESPA currently allows businesses to make referrals to their affiliates that provide loan services, as long as the consumer is not required to use the service. The final rule on “required use” clarifies that referrals can include incentives, as well as disincentives. However, these provisions are not intended to eliminate the use of legitimate consumer discounts if they are not tied to the use of a specific settlement provider, according to Jeffrey Bloch, senior assistant general counsel of the Credit Union National Association (CUNA). An example of improper use of an incentive, Bloch said, could be a discount to a borrower if an affiliate is used for a certain service if the affiliate charges more than other competitors or if the discount is offset by higher costs elsewhere. However, providing a package of services in which the total price is less than the sum of the prices of the individual services will be permitted, assuming the use of the package is optional and that the lower price is not offset by higher costs elsewhere, Bloch said,

CUNA in IPoliticoI on economic challenges Obama faces

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WASHINGTON (1/21/09)--Credit Union National Association (CUNA) Chief Economist Bill Hampel was quoted in Politico Monday about the economic challenges President Barack Obama will face in his term. Obama has won Senate approval to release the second half of the $700 billion Troubled Assets Relief Program, the article said. “It really doesn’t matter what they spend it on. They just need to spend it so someone gets income,” Hampel told Politico. “It would be nice if they spent it on useful things, but that doesn’t really matter. They just need to start spending money quickly.” Hampel also commented on the market’s turnaround. “The good news is that three years from now, it is almost inconceivable that the economy won’t look a whole lot better than it looks now,” he said. For the full article, use the link.

NCUA charters new CU in New Jersey

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ALEXANDRIA, Va. (1/21/09)--The National Credit Union Administration (NCUA) has approved a charter for 1st Bergen FCU, Hackensack, N.J. It is the first new credit union chartered in 2009. “The credit union will provide a cooperative alternative to low- and moderate-income members,” said NCUA Chairman Michael Fryzel. 1st Bergen was chartered Jan. 14 to serve the 884,000 people who live, work, worship, volunteer, and attend school, businesses and other legal entities in Bergen County. The credit union will open in March. It plans to offer regular shares, holiday and vacation club accounts, share certificates, personal loans, and new- and used-automobile loans. It also will provide check-cashing services, money orders, traveler’s checks and cashier’s checks. By 2012, 1st Bergen FCU plans to offer ATM services, debit and credit cards, wire transfers and small-business loans. The credit union was organized by the Bergen County Community Action Partnership Inc., Bergen County’s anti-poverty agency.

CUNA-D.C. closed for Inauguration Day

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WASHINGTON (1/20/09)—The Credit Union National Association’s (CUNA) Washington, D.C. office is closed today due to Inauguration Day events happening in the nation's capital. CUNA's Washington office address at 601 Pennsylvania Ave. NW places it directly on the inaugural parade route and within an established security zone. The Secret Service has asked downtown Washington employers to limit operations today, so CUNA's office is officially closed.

House Minority Leader joins GAC program

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WASHINGTON (1/20/09)--House Minority Leader John Boehner (R-Ohio) will address participants of the Credit Union National Association's (CUNA) 2009 Governmental Affairs Conference (GAC) on Wednesday, Feb. 25. Also slated for that day is the ranking Republican member of the House Financial Services Committee, Rep. Spencer Bachus of Alabama. Boehner and Bachus join a growing list of key speakers, including House Financial Services Committee Chairman Barney Frank (D-Mass.), Rep. Carolyn Maloney (D-N.Y.), who heads the panel's subcommittee on financial institutions and consumer credit, and Senate Banking Committee Chairman Christopher Dodd (D-Conn.). Watch CUNA’s News Now for upcoming announcements of additional speakers from Capitol Hill. Use the resource link below for more program highlights and registration information.

CUNA launches Corporate CU task force

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WASHINGTON (1/20/09)—A new task force on corporate credit union issues has been established by the Credit Union National Association (CUNA) in recognition of the significance of the corporate network and challenges posed the current economic climate. The Corporate CU Task Force reflects CUNA's ongoing discussion and consideration of corporate credit union issues. The task force’s efforts will supplement CUNA’s review by focusing on specific issues, including capital, function and overall structure of the corporate network. CUNA Chairman Tom Dorety Friday announced Terry West as the chairman of the new group. West is CEO of Vystar CU in Jacksonville, Fla.. Dorety is CEO of Suncoast Schools FCU, Tampa, Fla. The task force will gather in Washington, D.C. in late January to hear from representative stakeholders. Other members of the task force include Dave Rhamy, CEO of Silver State Schools CU, Las Vegas, Nev., Frank Michael, CEO of Allied CU, Stockton, Calif.; Jane Watkins, CEO of Virginia CU, Inc., Richmond; Dale Dalbey, CEO of Mutual Savings CU, Hoover, Ala.; Bob Allen, CEO of Teachers FCU, Farmingville, N.Y.; and Tom Gaines, CEO of the Tennessee Credit Union League, Chattanooga, Tenn. Kris Mecham, chairman of CUNA's Governmental Affairs Committee and CEO of Deseret First FCU, Salt Lake City, Utah, will also be involved as an ex-officio member. The panel is expected to develop its recommendations within the next several weeks.

Inside Washington (01/19/2009)

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* WASHINGTON (1/20/09)--At a confirmation hearing Thursday, nominees for the Federal Reserve Board and Securities and Exchange Commission (SEC) said reform of the financial regulatory system is a top priority (American Banker Jan. 15). Regulation should focus on monitoring the system for risks at any institution--not just ones that access the Fed’s lending facilities--and focus on improving capital cushions, said Daniel Tarullo, Fed governor nominee. Tarullo, a professor at the Georgetown University Law Center, said policymakers need to restructure the system so it can recognize and number potential sources of stress. Mary Schapiro, SEC chairman nominee, said the federal government should oversee insurance companies and regulate systemic risk, and hedge funds should disclose their activities. Sen. Richard Shelby (R-Ala.), expressed concerns that the Fed has not yet created an exit strategy. Tarullo responded that while opinions differ on how the Fed should exit the private sector, the market may determine how it can actually “pull back” ... * WASHINGTON (1/20/09)--Systemic risk will remain, even if policymakers shrink the scope and size of large institutions, former Federal Reserve Board chairman Paul Volcker said at a press conference Thursday (American Banker Jan. 16). The conference released a report on global financial regulation by the Group of 30, in which Volcker is involved. He signaled support for efforts to reduce Citigroup’s scope. Larger institutions “will have to come under closer surveillance than in the past,” Volcker told CNBC Thursday. “We do recommend they should not undertake some of the risker capital market functions they have in the past.” The central bank must play a more formal role in financial stability, he said. The report supported Treasury Secretary Henry Paulson’s suggestion to turn Fannie Mae and Freddie Mac into private companies and criticized fair-value accounting. Accounting principles should be more realistic to deal with distressed markets, the report said ... * WASHINGTON (1/20/09)--President-elect Barack Obama will commit $50 billion to $100 billion of Troubled Asset Relief Program funds to address the foreclosure crisis, according to a letter Lawrence Summers, director-designate of the National Economic Council, sent to Senate Majority Leader Harry Reid (D-Nev.) Thursday. “We will implement smart, aggressive policies to reduce the number of preventable foreclosures by helping to reduce mortgage payments for economically stressed but responsible homeowners, while also reforming our bankruptcy laws and strengthening existing housing initiatives like Hope for Homeowners,” the letter said. Banks receiving support under the Emergency Economic Stabilization Act will have to implement mortgage foreclosure mitigation programs. The council also plans to require the Treasury to provide data on banks that receive investments ...

TARP reform bill takes another step forward

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WASHINGTON (1/16/09)—In an action perhaps meant to be more symbolic than real, the House voted Thursday on amendments to a bill intended to provide the incoming Obama administration greater guidance on the use of the second installment of Troubled Asset Relief Program (TARP) funds. The House voted 273 to 152 in favor of a “manager’s amendment” that could facilitate a vote on Rep. Barney Frank’s bill to modify TARP (H.R. 384). A final vote on the legislation could come as early as next week. The bill, titled the "TARP Reform and Accountability Act," was introduced just last Friday. There is no comparable bill in the Senate and Frank himself has said he does not expect his bill to become law. “The House wants to sent a message to the new administration regarding how they would like to see the next $350 billion spent," Ryan Donovan said. He is vice president for legislative affairs for the Credit Union National Association (CUNA). As reported earlier, the Frank bill includes an amendment that would provide a limited form of alternative capital to help credit unions participate in government assistance programs. "The manager's amendment includes language that would permit credit unions to count TARP assistance as net worth," Donovan said. "Even though this provision is not likely to become law through this legislation, we believe it will strengthen our hand at Treasury," Donovan said. CUNA has been addressing all levels of government, seeking credit union access to government economic relief programs. CUNA has noted that even without expectations of being signed into law, a House vote for the Frank bill would make it clear that it wants credit unions to have access and is willing to change the law if the Treasury Department doesn't facilitate such changes in its TARP plan.

Inside Washington (01/15/2009)

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* WASHINGTON (1/16/09)--A Housing and Economic Recovery Act of 2008 program that will help cities and states purchase foreclosed real estate is moving forward. Consumer advocates have formed a trust company to act as a liaison between lenders and the municipalities who received $4 billion in grants from the government under the program. The company’s first program started in Minneapolis late last year. The city has used $5.6 million to buy 20 foreclosed properties. JPMorgan Chase and Co., Citigroup, Fannie Mae and Wells Fargo are participating. The Minneapolis program is a “success,” Wells Fargo said in a statement. The group is asking Congress for another $5 billion, which would be used to stabilize home prices ... * WASHINGTON (1/16/09)--The Federal Reserve Board needs to create an exit strategy from the various lending programs it is using to cope with the economic crisis, Charles Plosser, president/CEO of the Federal Reserve Bank of Philadelphia, said in a speech Wednesday. The Fed’s lending programs to reduce interest rate spreads and revive credit markets were “created for extraordinary times and involve significant intervention in the credit markets. They are not part of the normal operation of a central bank and should not be expected to continue,” he said. Simply terminating the programs will not work, so the Fed should develop objectives and boundaries for lending that it can use in the future, he suggested. “Clarifying the criteria under which we will intervene in markets or extend credit, including defining what constitutes the ‘unusual and exigent’ circumstances that form the legal basis for the Fed’s nontraditional lending, will be essential if we are to mitigate the moral hazard we have created,” Plosser concluded ...

Official sign main item on NCUA agenda

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ALEXANDRIA, Va. (1/16/09)—The National Credit Union Administration (NCUA) Thursday announced three items for its Jan. 22 open board meeting including a vote to change the share insurance fund sign rules. The official sign rule provides options for displaying the official share insurance sign to reflect the increase in the maximum share insurance amount from $100,000 to $250,000. As proposed, the rule would provide the following options with regard to the extent changes need to be made to the official sign to reflect the temporary increase in the maximum share insurance limit:
* Continue to display the current sign, and there will be no penalty for credit unions that choose this option. Credit unions that do not alter the current signs may post additional signs in their lobbies or place a notice on their websites. * Display the sign that NCUA will distribute and post on its website that reflects the temporary increase. *Alter the current sign to reflect the temporary increase, by hand or otherwise, as long as the altered sign is legible. An example would be placing a sticker that reads “$250,000” over the portion of the current sign that reads “$100,000.”
The other items on the NCUA agenda were labeled simply: Public Notice – Central Liquidity Facility, and Insurance Fund Report. The NCUA recently instituted monthly public reports on the state of its National Share Insurance Fund (NCUSIF). Last month, NCUA Chief Financial Officer Mary Ann Woodson said the fund’s equity level was at 1.27% and was expected to be at that level at the end of the year. Regarding the CLF item, it is expected that staff will discuss a document modification to the repayment security and credit reporting agreement that is used in CLF lending.

House Financial Services Bachus joins GAC lineup

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WASHINGTON (1/16/09)—The ranking Republican member of the House
Rep. Spencer Bachus (R-Ala.), ranking minority member of the House Financial Services Committee, said at the CUNA’s 2008 GAC, ““I respect what credit unions do. There are so many people you serve that would not be served otherwise.” (Photo provided by CUNA)
Financial Services Committee, Rep. Spencer Bachus of Alabama, is now scheduled to address the Credit Union National Association's (CUNA) 2009 Governmental Affairs Conference (GAC) on Wednesday, Feb. 25. He joins a growing list of key speakers, including his panel’s chairman, Rep. Barney Frank (D-Mass.), Rep. Carolyn Maloney (D-N.Y.), who heads the panel's subcommittee on financial institutions and consumer credit, and Senate Banking Committee Chairman Christopher Dodd (D-Conn.). Additional Hill speakers will be announced in coming weeks. More highlights already slated for the program include economic commentary from Steve Forbes, editor-in-chief of Forbes magazine, and a political face-off between pundits Paul Begala and Tucker Carlson. Forbes will offer economic outlook and commentary at a time when the nation continues to struggle through one of the worst financial crises in its history. He attained national visibility in the political arena both 1996 and 2000 when he campaigned for the Republican nomination for President. Carlson and Begala will face off over current developments in national news, politics, and world issues. Carlson is a senior correspondent for MSNBC, and Begala is a CNN political analyst and former top aide to President Bill Clinton. Also, Bob Woodruff of ABC News and his wife, Lee, will provide a poignant start to CUNA's 2009 Governmental Affairs Conference as they recall the shattering moment when Woodruff was seriously injured by a roadside bomb when assigned to report U.S. and Iraqi security forces near Taji. The Woodruffs will highlight the GAC's opening general session on Monday, Feb. 23. And wrapping things up will be Al Roker, NBC’s beloved weatherman and host of its Today Show. Roker will bring his charisma and sense of humor to the podium during a talk entitled, "Let a Smile Be Your Umbrella." Use the resource link below for more program highlight and registration information.

Inside Washington (01/14/2009)

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* WASHINGTON (1/15/09)--If he is confirmed by the Senate, Shaun Donovan, secretary-designate of the Department of Housing and Urban Development (HUD), said he will ensure the agency returns to its role in easing the housing crisis. Donovan made the statement at a confirmation hearing before the Senate Banking Committee (American Banker Jan. 14). He said he supports using Troubled Asset Relief Program money for loan modifications and noted some possible changes for the Federal Housing Administration's Hope for Homeowners (H4H) program, which was implemented in October. Though H4H was slated to help up to 400,000 homeowners, fewer than 500 have applied for the program. Reforming Hope’s fee structure and writing down troubled loans to 96.5% of the current appraised value--compared with 90%--could spark participation, he said ... * WASHINGTON (1/15/09)--The Department of Housing and Urban Development is launching a financial literacy effort over the next six months in six cities to prevent foreclosures. “Keep Your Home. Know Your Loan” will kick off in Chicago, Detroit, Los Angeles, Miami, New York and Phoenix, and target homeowners who are three to six months from defaulting, facing a reset, or experiencing a family crisis. Campaign materials include print, radio, television public service announcements and a toolkit for non-profits to join the effort. The agency is seeking homeowner associations, real estate brokers and other members of the financial services industry to participate ...

CUs should weigh in on Fed overdraft plan says CUNA

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WASHINGTON (1/15/09)—A Federal Reserve Board proposal to amend its Regulation E to afford consumers more protections regarding overdraft fees would apply to all credit unions and the Credit Union National Association (CUNA) is seeking credit union comment on the plan. The Fed proposal would change rules implementing the Electronic Fund Transfer (EFT) Act. The bank regulator scrapped earlier proposals that would have tried to address overdraft fee programs through rules under the Unfair and Deceptive Acts or Practices (UDAP) Act and the Truth in Savings Act. Those rules, if implemented, would not have covered state-chartered credit unions. The Fed’s current proposal outlines two approaches for providing consumers a choice regarding the payment of ATM and one-time debit card overdrafts by their financial institution and seeks comments on which approach should be adopted in the final rule:
* Opt-out: Under this approach, an institution would be prohibited from imposing an overdraft fee unless the consumer is given an initial notice and a reasonable opportunity to opt-out of the institution’s overdraft service, and the consumer does not opt-out; or * Opt-in: This second approach would prohibit an institution from imposing an overdraft fee for paying such overdrafts unless the consumer affirmatively consents to the institution’s overdraft service.
The Fed’s proposal would also prohibit credit unions and other financial institutions from imposing an overdraft fee when an account is overdrawn because of a hold placed on funds in the consumer’s account that exceeds the actual transaction amount. The prohibition would be limited to debit card transactions in which the actual transaction amount can be determined within a short period of time after the transaction is authorized. Examples include transactions at gas stations and restaurants. In a CUNA Comment Call, CUNA asks credit unions to remark on those and other provisions within the Fed plan by Feb. 25. Comments are due to the agency within 60 days after it is published in the Federal Register, which should occur within the next several days. Use the resource link below to read more CUNA analysis of the Fed proposal and to access the extensive lists of questions CUNA seeks to have addressed by credit unions.

Regulators release guidance on remote capture

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WASHINGTON (1/15/09)—The Federal Financial Institutions Examination Council (FFIEC) issued guidance Wednesday for examiners, financial institutions, and technology service providers to identify risks, evaluate controls, and assess risk management practices related to remote deposit capture (RDC) systems. The FFEIC is comprised of the National Credit Union Administration and the federal bank and thrift regulators. Remote capture is a service that lets credit union members or bank and thrift customers to make deposits from their homes or businesses—removing the need for a trip to the financial institution. The service, used mostly by businesses, obviously saves time and travel expenses, but also can accelerate funds availability while reducing processing costs. However, the NCUA and other federal regulators warn that RDC systems introduce an added element of risk to processing deposits. In a recent Letter to CUs on risk management of remote capture, which was accompanied by the FFIEC guidance, the NCUA wrote that this service can add risk in legal, compliance, and operational areas. Performing effective risk management, the letter said, is the key to mitigate and control associated risks. It added that the risk management process should include:
*Risk Assessment: Management should perform a comprehensive risk assessment to identify and assess legal, compliance, and operational risks. * Risk Mitigation and Controls: Management should establish policies addressing risk tolerance levels, internal procedures and risk controls, risk transfer mechanisms, and contracts and agreements. * Risk Measuring and Monitoring: Management should establish operational performance metrics, benchmarks and standards, and develop management reports to support management oversight of RDC operations.
The letter also noted that too ensure sound implementation and ongoing operations, a credit unions’ board of directors should approve and oversee RDC plans and policies, and review performance and risk management reports. The NCUA suggested that questions should be directed to NCUA Regional Office or State Supervisory Authority.

SAR half-year mark at six million

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WASHINGTON (1/15/08)—The Financial Crimes Enforcement Network (FinCEN) Wednesday released its twice-annual data on Suspicious Activity Report (SAR) filings, which showed more than 6 million SARs had been filed in 2008 by June 30. Of that amount, FinCEN said 62%--or 3.7 million—were filed by credit unions and all other depository institutions. The FinCEN report, called “The SAR Activity Review – By the Numbers,” said that the Bank Secrecy Act-structuring-money laundering continued to be the leading characterization of suspicious activity by depository institutions. It noted that the first two quarters of 2008 reiterated a continued upward trend of mortgage loan fraud and identity theft. Mortgage loan fraud SARs, FinCEN reported, increased by approximately 40%, consumer loan fraud filings increased 35%, and wire transfers fraud SARs increased 87% compared to the corresponding six-month reporting period in 2007. The SAR Activity Review By the Numbers is published twice annually covering two filing periods: January 1 to June 30, and July 1 to December 31. It is a companion report to “The SAR Activity Review – Trends, Tips & Issues.” Use the resource link below to read report details.

CUNA CU TARP language sends strong signal

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WASHINGTON (1/15/09)—As House members tussle over the release of the remaining $350 billion in Troubled Asset Relief Program (TARP) funds to the incoming Obama administration, some lawmakers are taking the opportunity to make an important statement about credit unions, noted Ryan Donovan of the Credit Union National Association (CUNA) Wednesday. “For instance, Rep. Joe Baca’s recent question about credit unions’ inability to access TARP funds, and his introduction of an amendment to address the inequality, send important signals to the new administration,” Donovan said. He is CUNA’s vice president of legislative affairs. Donovan was referring to remarks made by Baca, a Democrat from California, during a Tuesday House Financial Services Committee hearing on "Priorities for the Next Administration: Use of TARP Funds under EESA (Emergency Economic Stabilization Act)." The hearing also focused on H.R. 384, a new bill introduced by the committee’s chairman, Rep. Barney Frank (D-Mass.), intended to modify rules governing TARP. Baca offered an amendment that would provide a limited form of alternative capital to help credit unions participate in government assistance programs. Currently, credit unions have been unable to access TARP funding—which has focused on capital injections-- because of statutory prohibitions that generally bar credit unions from obtaining capital from outside sources. Frank included the Baca amendment in his “manager’s amendment,” which will become the base text of the bill when it is considered by the House. The California CU League met with Baca on this and other credit union issues just last week. And CUNA also kept the heat on for credit union inclusion in any new program developed by Treasury under TARP with a letter to key committee members. Frank himself has said he does not expect his TARP modification bill to complete the legislative process and becomes law. (American Banker Jan. 14). While a vote is expected in the House, there is no comparable on the Senate side. “What is important here to credit unions, however, is whether the House passes a TARP bill with language specifically addressing the needs of credit unions—something CUNA has been pushing hard for on all levels of the government,” Donovan said. “Through passage of this bill the House would be making a statement that they want credit unions to have access and they are willing to change the law if the Treasury Department doesn’t facilitate such changes in its TARP plan,” he added.

NCUA offers changes to House TARP bill

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ALEXANDRIA, Va. (1/14/09)—The National Credit Union Administration (NCUA) yesterday urged House Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.) to make changes to the TARP Reform and Accountability Act of 2009 (H.R. 384). In a letter to the lawmakers, NCUA Chairman Michael Fryzel expressed his agency’s support for the measure. However the federal credit union regulator said he “believes it to be extremely important to equip NCUA with the same essential powers and authorities being considered for FDIC in dealing with the varied and complex set of risks confronting financial institutions in this volatile market.” Use the resource link below to access Fryzel’s 11-page letter.

Inside Washington (01/13/2009)

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* WASHINGTON (1/14/09)--A new Federal Emergency Management Agency (FEMA) flood hazard form has a June 16 compliance date. FEMA has replaced Form 81-93, the Standard Flood Hazard Determination Form (SFHDF), which expired Oct. 3, with a new Form 81-93 that expires Dec. 31, 2011. SFHDFs completed June 16 or later must use the new form for compliance purposes. Credit unions must perform a flood hazard determination when they make, increase, extend, or renew a loan secured by a “building”--a home on a permanent foundation or a mobile home--located in a special flood hazard area. The credit union or its service provider must document the flood determination on the SFHDF. The form must be retained, in hard copy or electronically, while the credit union owns the loan ... * WASHINGTON (1/14/09)--President-elect Barack Obama is pushing for the second half of the $700 billion bailout fund to be released (The Associated Press Jan. 13). On Monday, the Bush administration requested the second half of the bailout fund at Obama’s request. At a luncheon Tuesday, Obama asked senators not to stand in the way of the bailout, and said that Troubled Asset Relief Program (TARP) funds are necessary to stimulate the economy. House Financial Services Committee Chairman Barney Frank (D-Mass.) agreed and said the second $350 billion is needed for foreclosure relief. However, some lawmakers are resisting the release of TARP funds. Rep. Spencer Bachus (R-Ala.) questioned if the funds are needed or would be used as a “grab bag” of taxpayer money. Frank is working on legislation to set conditions on the way the second half of the funds will be spent. His bill is slated for release Wednesday ... * WASHINGTON (1/14/09)--The Small Business Administration was ranked No.1 in the highest overall improvement in Talent Management, and Leadership and Knowledge Management, according to the 2008 Federal Human Capital Survey. The agency also had the second largest gain in Job Satisfaction, and the sixth largest gain for establishing a Results-Oriented Performance Culture. The survey measures employees’ perceptions of whether, and to what extent, conditions characterizing successful organizations are present in their agencies ...

Rep. Baca offers plan for CUs under TARP

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WASHINGTON (1/14/09)—Rep. Joe Baca (D-Calif.) offered an amendment to Troubled Asset Relief Program (TARP) legislation that would provide a limited form of alternative capital to help credit unions participate in government assistance programs. Baca offered his amendment Tuesday during a House Financial Services Committee hearing titled, "Priorities for the Next Administration: Use of TARP Funds under EESA (Emergency Economic Stabilization Act).” The hearing also focused on H.R. 384, a newly introduced bill intended to modify rules governing TARP. A member of the financial services committee, Baca questioned the fact that credit unions have not received any of the U.S. Treasury’s TARP funds even though they are included in statutory language as eligible institutions. The California CU League met with Baca on this and other credit union issues just last week. The Credit Union National Association (CUNA) Tuesday also kept the heat on for credit union inclusion in any new program developed by Treasury under TARP. In a letter to the top members of the House Financial Service, CUNA urged that as Congress considers the conditions under which the administration may use a second installment of TARP funds, lawmakers should ensure credit unions are included in any additional programs developed for mutual institutions. CUNA President/CEO Dan Mica noted in the letter that, to date, Treasury has focused its TARP efforts on capital injections. “As a result, credit unions, including corporate credit unions, that may need access to TARP funds are shut out because the Federal Credit Union Act does not generally permit credit unions to obtain capital from outside sources,” wrote Mica. The CUNA leader recommended that Congress consider a statutory change to the definition of net worth to allow credit unions to access TARP funds. The CUNA letter also sought statutory systemic risk authority for the National Credit Union Administration Board (NCUA), on a similar basis to that which the Federal Deposit Insurance Corporation enjoys. “Without a specific systemic risk provision, NCUA has been reluctant to take this action. We believe that given the uncertainty of the economic crisis, parallel authority for NCUA to address systematic risk issues in a timely fashion is reasonable.” Mica wrote. He noted that CUNA recognizes that the challenges that our economy is facing are extraordinary, and that credit unions, as an industry, remain relatively healthy. “While there is rightly a tendency to deal with the largest problems first, the legislative changes described herein would provide avenues to assistance for which Congress intended credit unions to be eligible, and which some credit unions may need in the near future,” Mica urged. The letter was addressed to House Financial Services Committee Chairman Barney Frank (D-Mass.) and the panel’s ranking member, Rep. Spencer Bachus (R-Ala.).

House FS Republicans Slow down on TARP mods

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WASHINGTON (1/14/09)—The ranking Republican members of the House Financial Services Committee urged their chairman to slow his drive for a bill to modify rules governing the U.S. Treasury Depaertment’s Troubled Asset Relief Program (TARP). Frank introduced the TARP Reform and Accountability Act (H.R. 384) last week and the House is expected to vote on it this week, without the normal legislative process of a committee mark up. (See related story "Rep. Baca offers plan for Cus under TARP.") In a letter to Chairman Barney Frank (D-Mass.), the committee Republicans wrote, ““The original TARP was considered and enacted in a panicked rush to judgment. We are again moving far too quickly in considering whether to approve the expenditure of hundreds of billions of taxpayer dollars.” The letter continued: “The hurried nature of this legislation is particularly mystifying when the Senate had indicated that it has no intent of taking up this bill. Accordingly, we respectfully request that you postpone Floor consideration of H.R. 384 and schedule a mark up in the Financial Services Committee.” The letter was signed by ranking member Spencer Bachus (Ala.), and Reps. Randy Neugebauer (Tex.), Judy Biggert (Ill.), Jeb Hensarling (Tex.), Scott Garrett (N.J.), Shelley Moore Capito (W.V.), Gary Miller (Calif.), and Ron Paul (Tex.).

Five cited in NCUA prohibition orders

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ALEXANDRIA, Va. (1/14/09)--The National Credit Union Administration (NCUA) recently cited five individuals in prohibition orders as the result of offenses ranging from “fraudulent misappropriation by a fiduciary” to “bank larceny.” According to NCUA, the following former credit union personnel are now banned from participating in the affairs of any federally insured financial institution:
* Adelle Herron, a former employee of Peoria Hiway CU. Peoria, Ill., who pled guilty to bank fraud and was sentenced to 36 months in prison, five years probation, and ordered to pay $540,627 in restitution; * Lori A. Kloss, a former employee of Niagara Falls Memorial Medical Center FCU, Niagara Falls, N.Y., who was convicted of petit larceny and sentenced to 60 days in jail and three years of probation; * Marcella G. Miller, a former employee of Georgia-Pacific Toledo Employee FCU, Toledo, Ore., who pled guilty to bank larceny and was sentenced to 24 months in prison, 36 months probation and ordered to pay $506,161.86 in restitution; * Judy N. Putman-Speight, who in 2003 was convicted in the Maryland Circuit Court for Montgomery County of “fraudulent misappropriation by a fiduciary.” Putman-Speight was sentenced to 12 months in prison, with all but 15 days suspended, 18 months probation, fined $1,000, and ordered to pay $38,000 in restitution; and * Winston Louis Smith, a former employee of State Employees CU, Jacksonville, Fla., who pled guilty to embezzlement, defrauding a financial institution, and false statements. Smith was sentenced to 18 months in prison, five years probation, and ordered to pay $178,921 in restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link below to see these and other NCUA enforcement orders.

CUNA VP Klavitter exits for CU gig

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WASHINGTON (1/14/09)--News Now editor David Klavitter is leaving the Credit Union National Association (CUNA) after 10 years to rejoin a Dubuque, Iowa-credit union for which he worked earlier in his career. Klavitter will join Dupaco Community CU as senior vice president of marketing and communication, starting Feb. 9. He previously worked on Dupaco's marketing staff from 1996 to 1999 before joining CUNA. "We are excited to welcome him back to our credit union family and onto our senior management team as he is the perfect fit to lead brand Dupaco into the future," Dupaco President/CEO Bob Hoefer said in a release. Klavitter has been vice president of editorial communications in CUNA's Washington office for six years, where his duties have included editing News Now. Before that he held editorial and public relations positions for four years in the CUNA Madison office. Dupaco has $545 million in assets.

FASB adopts impairment plan

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WASHINGTON (1/14/09)—The Financial Accounting Standards Board (FASB) approved changes to its guidance for determining impairment of certain debt securities. Historically, there have been two similar models for determining when a security is other-than-temporarily-impaired (OTTI), but they included some key differences. One of FASB's primary objectives in issuing the amended guidance was to increase consistency between the models, an objective supported by the Credit Union National Association (CUNA). CUNA Regulatory Research Counsel Luke Martone reviewed the changes and noted they shift the determination of impairment from market participants' assessment of cash flows to management's assessment. “That’s a change supported by CUNA and by many in light of the current dislocated market,” Martone said. He added that while the guidance modifies the method for determining when securities are OTTI, a subsequent requirement that such securities are then to be written down to their fair value is unchanged. In its guidance EITF 99-20-1, FASB noted that a determination of OTTI requires analysis and judgment based on all available relevant information. It stated that it is “[i]nappropriate to automatically conclude that a security is not other-than-temporarily-impaired because all of the scheduled payments to date have been received,” nor is it appropriate to “automatically conclude that every decline in fair value represents an other-than-temporary-impairment.” According to Martone, the new guidance was not approved unanimously by FASB. Some dissenting board members maintained that the FASB staff position (FSP) “does not result in sufficient benefits to investors to warrant its issuance.” “While CUNA supported the change, we agree that it does not afford complete relief from the problems related to applying fair value standards to securities that are not intended to be sold,” Marton said. CUNA will continue working to improve the application of fair value standards to credit union assets. “The dissenters’ primary concern is that this FSP will only lessen the already shaky confidence of many investors, and that ‘the majority of investors who responded [to FASB’s proposal] strongly opposed the FSP,’” Martone explained. He said they maintained that FASB’s rules should focus on investors. The FSP is effective for interim and annual reporting periods ending after December 15, 2008, and are to be applied prospectively.

IRS Reporting required minimum distributions

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WASHINGTON (1/13/09)--The Internal Revenue Service (IRS) has released Notice 2009-9 to provide guidance to financial institutions, including credit unions, on reporting required minimum distributions (RMDs) for 2009. The Worker, Retiree, and Employer Recovery Act of 2008 waives RMDs from individual retirement accounts (IRAs) and qualified retirement plans for 2009. Most IRA owners and beneficiaries who would have been required to take an RMD for 2009 are not required to take a distribution, says CUNA Mutual Group. Financial institutions also are required to report RMDs to the IRS and the IRA owner. Notice 2009-9 provides instructions for reporting these on Form 5498 and under the RMD reporting requirements of Notice 2002-27. The guidance indicates financial institutions that issue 2008 Forms 5498, IRA Contribution Information, should not put a check in Box 11. (Box 11 indicates to the taxpayer that an RMD is required in 2009.) If the financial institution issues a 2008 Form 5498 with the box checked, the IRS will not consider the statement incorrect--provided the financial institution notifies the IRA owner by March 31, 2009, that no RMD is required for 2009. In addition, the RMD statement required under Notice 2002-27 need not be sent to IRA owners for 2009, said CUNA Mutual. If an RMD statement is sent, it must reflect that the 2009 RMD is zero. As an alternative, the financial institution may send the IRA owner a statement showing the RMD that would have been required had RMDs for 2009 not been waived, along with an explanation of the waiver for 2009. “The IRS recognized the short amount of time financial institutions have to make programming changes to meet these requirements and issued very flexible guidance,” said Dennis Zuehlke, compliance manager for CUNA Mutual Group. By permitting financial institutions to separately notify their clients of the RMD waiver, in cases where they cannot modify their systems to reflect that RMDs are waived for 2009, financial institutions will not face penalties for noncompliance. Also, they will not incur additional expenses to adapt their data processing systems for this one-time change in the reporting requirements, Zuehlke said. CUNA Mutual serves 80% of credit unions offering IRA programs.

Inside Washington (01/12/2009)

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* WASHINGTON (1/13/09)--In a letter sent to financial institutions Monday, the Federal Deposit Insurance Corp. (FDIC) told state nonmember institutions that they must monitor use of Troubled Asset Relief Program (TARP) funds. “Given that government funds, capital and guarantees are being used to support banking institutions, banks are expected to document how they are continuing to meet the credit needs of creditworthy borrowers, as described in the Interagency Statement on Responsible Lending,” the agency said. Institutions should describe how they used the money and summarize the information in annual reports and financial statements, FDIC added. The Treasury was criticized in a Congressional Oversight Panel report released Friday for not requiring financial institutions to document how TARP funds are being used (News Now Jan. 12) ... * ALEXANDRIA, Va. (1/13/09)--National Credit Union Administration
Click to view larger image Click for larger view
(NCUA) Chairman Michael Fryzel met with members of the California and Nevada Credit Union Leagues at NCUA headquarters last week. “The active involvement of the California and Nevada leagues in the governmental affairs process is impressive,” he said. “It demonstrates their awareness of how important it is to interact, to have dialogue and to work with us at NCUA on critical issues.” From left are: Debbie Kwon-Moore, director of federal governmental affairs at the leagues; Ron McDaniel, CEO, California CU, Glendale, Calif.; Simone Lagomarsino, CEO, Kinecta FCU, Manhattan Beach, Calif.; Larry Sharp, CEO, Arrowhead CU, San Bernardino, Calif.; Fryzel; Mary Cunningham, CEO, USA FCU, San Diego; Dave Rhamy, CEO, Silver State Schools CU, Las Vegas; and Bill Cheney, president, California and Nevada leagues. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (1/13/09)--Randall S. Kroszner Monday announced his resignation from the Board of Governors of the Federal Reserve System, effective Jan. 21. He has been with the board since March 1. Kroszner served as chairman of the Committee on Supervisory and Regulatory Affairs, and the Committee on Consumer and Community Affairs. He is returning to the Booth School of Business at the University of Chicago to assume a chaired professorship ...

67 million members matched via Project Zip Code

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WASHINGTON (1/13/09)--More than 67 million credit union members have been matched with their congressional districts through Project Zip Code--a number that represents nearly 75% of the total 90 million members nationwide. "Being able to cite how many credit union members live in a particular congressional district or state is a very influential tool when credit union representatives want to make their cases to lawmakers," explained Elizabeth Furey, director of grassroots for the Credit Union National Association (CUNA). "The Project Zip Code information can help you get your foot in the door, and backs up your message by defining the number of voters who could be affected by a lawmaker's position on credit union issues," she added. Project Zip Code is one of a number of initiatives offered by CUNA to facilitate political involvement by credit unions. CUNA this week releases Version 9.0 of the software program. The improvements make the software easier to use, according to Furey. “It is important for credit unions to use every tool available to make their political voices heard," she said. As an added benefit, Project Zip Code information can be used by credit unions to help make decisions on where to locate ATMs and branches, noted Furey. Use the resource link below to learn more.

Frank bill would modify TARP rules

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WASHINGTON (1/12/09)—A vocal and consistent critic of the U.S. Treasury Department’s decisions concerning use of it Troubled Asset Relief Program (TARP) funds, Rep. Barney Frank (D-Mass.) Friday introduced a bill to amend statutory language in the bill that authorized the program. Frank said in a release that his TARP Reform and Accountability Act (H.R. 384) is intended to “strengthen accountability, close loopholes, increase transparency, and require Treasury to take significant steps on foreclosure mitigation.” The bill would amend provisions of the Emergency Economic Stabilization Act of 2008 (EESA) that created TARP. One provision important to credit unions and all federally insured depository institutions would make permanent the share and deposit insurance ceiling increase to $250,000, which was established on a temporary basis in EESA. Under some other, general, provisions of the bill, an insured depository institution receiving TARP funds:
* Would be required to report quarterly on the amount of any increased lending (or reduction in decrease of lending) and related activity attributable to the financial assistance; * Or, where that institution cannot categorize the effect of investment, it must report on lending and related activity during the period, with comparable prior period data.
Treasury, in consultation with the bank regulatory agencies, would have to establish standards for the required reporting. In new allocations of TARP funds, Treasury would be required to reach agreement with the institution and its primary federal regulator on how the funds are to be used. The department would have enlist benchmarks that would “advance the purposes of the Act to strengthen the soundness of the financial system and the availability of credit to the economy.” Under the Frank bill, examinations by a recipient institution’s primary federal regulator must specifically examine use of funds and compliance with any program requirements, including executive compensation and any specific agreement terms.

Top Republicans named to House Fin. Serv. subcommittees

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WASHINGTON (1/12/08)—Rep. Jeb Hensarling (R-Tex.) has been named ranking minority member of the House Financial Services subcommittee on financial institutions and consumer credit. Hensarling, now in his fourth term representing Texas’ fifth district, has been a member of the subcommittee and its parent committee. He is also a member of the Congressional Oversight Panel established under the 2008 Emergency Economic Stabilization Act (EESA). The oversight panel is charged with monitoring the expenditures of the U.S. Treasury Department under its Troubled Asset Relief Program (TARP), which was also established by EESA. Also announced by Rep. Spencer Bachus (R-Ala.), the top Republican on House Financial Services, were the following ranking members for the panel’s other subcommittees.
* Rep. Ron Paul (Tex.), Subcommittee on Domestic Monetary Policy and Technology; * Rep. Judy Biggert (Ill.), Subcommittee on Oversight and Investigations; * Rep. Gary Miller (Calif.), Subcommittee on International Monetary Policy and Trade; * Rep. Shelley Moore Capito (W.V.), Subcommittee on Housing and Community Opportunity; and * Rep. Scott Garrett (N.J.), Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.

CUNA priorities 9-plus-1 in 09

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WASHINGTON (1/12/09)—Protecting the federal credit union tax exemption and preserving an independent federal credit union regulator and insurance fund, as well as the dual chartering system, are top among the Credit Union National Association’s (CUNA) action priorities this year. According to CUNA President and CEO Dan Mica, the watchwords for the association and the credit union movement in 2009 will be “agile and nimble.” “In fact, our emphasis on being ‘agile and nimble’ in dealing with the multitude of issues this year is reflected in the priority list itself, as the ‘+1,’” Mica added. “Seen from our vantage point, we believe it is vital for CUNA and credit unions to be ready to pivot readily-- from taking advantage of opportunities, to dealing with challenges, and back again – as occasions arise.” Also on the 2009 CUNA priority list:
* Expand ability of credit unions to provide business loans to members (and position credit unions as ready and willing to help the nation’s economic recovery); * Obtain more flexibility for credit unions in accumulating capital, in support of safety and soundness and continued growth of the movement; * Emphasize credit unions’ role as the solution to the financial crisis (not the source of the problems); * Restore the ability of single common bond credit unions and community chartered credit unions to add underserved areas to their fields of membership (FOM); * Ensure appropriate credit union access to “economic relief” programs; * Ease the regulatory and compliance burdens on credit unions; and * Sustain credit union access to products/services that best serve their members.
Rounding out the priority list in ‘09 is the “+1’: Being nimble and agile in dealing with opportunities and threats as they develop for credit unions.

Mortgage cramdown bills moving in Congress

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WASHINGTON (1/12/09)—In its first week in session, the 111th U.S. Congress saw a flurry of activity on bankruptcy issues, including three mortgage bankruptcy “cramdown” bills, and an early revision to one of those measures. Sen. Richard Durbin (D-Ill.), Rep. John Conyers (D-Mich.) and Rep. Brad Miller (D-N.C.) all introduced bills last week. The bills would, in part, allow judges to modify certain terms in certain mortgages in the bankruptcy proceedings, a practice called a “cramdown.” Ryan Donovan, vice president of legislative affairs for the Credit Union National Association (CUNA), said Friday the association is carefully evaluating the proposed legislation. “CUNA remains concerned about unintended consequences of any legislative proposals that would open the federal bankruptcy code and allow for broad loan term modifications for homes in bankruptcy,” Donovan said. He added, “Giving bankruptcy judges wide latitude to change mortgage interest rates and maturity dates would have an adverse effect on existing loan portfolios held by financial institutions. “In addition, the value and safety of existing mortgage-backed securities would be called into question.” Donovan noted that CUNA worked closely last year for modification in Durbin’s 2008 cramdown bill and appreciated the effort that Durbin and his staff made to address many credit union concerns. ‘We will continue our efforts to ensure those concerns are addressed in this year’s legislation as well,” Donovan said. Changes have already been considered. A day after introducing his bill with provision strongly opposed by the CUNA and others in the financial services industry, Durbin announced he would make certain changes to his bill. Durbin indicated that he would amend his bill to:
* Limit eligibility for bankruptcy modification of mortgages to only existing mortgages (mortgages originated by the date of enactment); * Require homeowners to certify that they attempted to contact their lender regarding loan modification before filing for bankruptcy; and * Provide that only major violations of the Truth in Lending Act (TILA) will invalidate creditor claims in bankruptcy, rather than TILA violations of any size.
Donovan said that as mortgage bankruptcy legislation develops in Congress, it will remain a top priority of CUNA to work to ensure that the bill targets toxic mortgages made by predatory lenders and does not have unintended negative effects on credit unions. CUNA will also work for inclusion of a sunset provision, and a limited scope of what the bankruptcy courts could do to the loans. CUNA also is working to add provisions to the bill that would make it less likely that borrowers able to pay their current mortgages will resort to bankruptcy simply to reduce their loan amounts. “This situation is extremely fluid," said Donovan, "As the legislative process continues to evolve, we will continue to discuss credit union concerns with Sen. Durbin and Congressional leadership."

Inside Washington (01/09/2009)

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* WASHINGTON (1/12/09)--The financial regulatory system appears to be ill-suited to meet the nation’s needs in the 21st century, the Government Accountability Office (GAO) said in a 107-page report released Thursday. The agency recommended that state regulators create a more effective regulatory model. The report was released as state regulators work on recommendations to emphasize the importance of state regulation. The recommendations, which will be released by the Conference of State Bank Supervisors, state that regulation should be based on an institution’s size and consumer protection guidelines should fit state and federal institutions (American Banker Jan. 9). The GAO report also said a revamped regulatory system should include items such as clearly defined regulatory goals, consistent consumer protection and financial oversight, and have minimal taxpayer exposure ... * WASHINGTON (1/12/09)--The Treasury’s oversight of the $700 billion federal bailout--known as the Troubled Asset Relief Program--is faulted, according to a draft report from the Congressional Oversight Panel. The report was expected to be released Friday (The New York Times Jan. 9). In the draft, the panel criticized the Treasury for changing its explanations about the bailout’s purpose and not requiring financial institutions receiving money from the program to account for how the money was used. The Treasury has not yet commented on the panel’s assessment, but has continually told Congress that the rescue plan is working and has reduced foreclosures ... * ALEXANDRIA, Va. (1/12/09)--Consumer bankruptcy filings increased 33% in 2008, the American Bankruptcy Institute (ABI) said last week. Data indicates that consumer filings for 2008 reached 1,064,927, compared with 801,840 filings in 2007. However, data indicates that 84,926 consumer filings in December represented a 15% decrease compared with November. “We expect the upward spike in personal bankruptcies to continue in 2009,” said Samuel J. Gerdano, ABI executive director ... * WASHINGTON (1/12/09)--Michael Fryzel (left), chairman of the National Credit Union Administration (NCUA), visited South Side Community FCU (SSCFCU), Chicago. Fryzel congratulated SSCFCU, a $3.5 million-asset community development credit union, on its work as a start-up credit union, according to the Illinois Credit Union League. Fryzel also said he was impressed with the credit union’s financial education curriculum. “It was quite an honor for our credit union to be recognized by the NCUA chairman,” said Gregg Brown, SSCFCU CEO. (Photo provided by the Illinois Credit Union League) ...

GOP members named to House Financial Services

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WASHINGTON (1/9/08)—The ranking Republican member of the House Financial Services Committee Thursday began announcing new GOP members of that panel—including some credit union friends. Rep. Spencer Bachus announced that freshman Congresswoman Lynn Jenkins of Kansas will join the committee. A former Kansas State Treasurer and a long-time credit union advocate, Jenkins won against Rep. Nancy Boyda (D-Kan.) in the 2008 federal election. The Credit Union National Association (CUNA) and the Kansas CU Association supported Jenkins’ campaign, with the Credit Union Legislative Action Council spending more than $203,000 in campaign contributions and Independent Expenditures on her behalf, according to Trey Hawkins, CUNA Political Director. Also named to the committee was freshman Rep. Erik Paulsen of Minnesota. During his race, the Minnesota CU Network for the first time endorsed a candidate when it backed Paulsen over his strongest opponent. The opponent was a candidate who had considered a plan to remove the credit union tax exemption to fund small business health insurance benefits. CULAC also supported the ultimate victor with $10,000 and the league provided additional support in the form of grassroots volunteers. Also newly named to the financial services panel, according to Bachus, were Rep. Leonard Lance of New Jersey and Rep. Bill Posey of Florida. The other Republican members for the committee during this session of the 111th Congress are: Bachus and Reps. Michael Castle (Del.), Peter King (N.Y.), Ed Royce (Calif.), Frank Lucas (Okla.), Ron Paul (Tex.), Donald Manzullo (Ill.), Walter Jones (N.C.), Judy Biggert (Ill.), Gary Miller (Calif.), Shelley Moore Capito (W.V.), Jeb Hensarling (Tex.), Scott Garrett (N.J.), J. Gresham Barrett (S.C.), Jim Gerlach (Pa.), Randy Neugebauer (Tex.), Tom Price (Ga.), Patrick McHenry (N.C.), John Campbell (Calif.), Adam Putnam (Fla.), Michele Bachmann (Minn.), Kenny Marchant (Tex.), Thaddeus McCotter (Mich.), Kevin McCarthy (Calif.), and Christopher Lee (N.Y.).

NCUA launches enhanced supervisory effort

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ALEXANDRIA, Va. (1/9/09)--The National Credit Union Administration (NCUA) activated its National Examination Team (NET) Thursday, an effort meant to respond to current market difficulties facing credit unions. The NET was announced in October as part of the NCUA's budget process and is in response to difficulties caused by declining home values, high mortgage delinquency rates, high foreclosure rates, high unemployment rates, and concentrations of real estate loans that have affected credit unions to varying degrees. The agency has also indicated it will utilize a 12-month exam schedule for federal credit unions, beginning this year, and encourage state regulators to follow suit. The NET is comprised of a director, five problem case officers and the equivalent of one loss-risk analysis officer. In addition, regional subject matter examiners will be detailed to NET on an as needed basis. The team will supervise assigned credit unions until problems are resolved, either returning the credit union to regional supervision or activating merger, conservatorship or closure, according to the NCUA announcement. Additionally, the agency said, the NET will be responsible for examining and supervising approximately ten credit unions, mainly large and more complex institutions. A side benefit of the program, though not unintended, is that the NET also represents an opportunity to expose NCUA examiners to a broad range of credit unions and varying levels of risk, thereby augmenting the NCUA’s succession planning objectives. NCUA Chairman Michael Fryzel, in launching the new trouble-shooting team, said, “The knowledge, skill, and experience of NET members will enable them to quickly identify complex problems, recommend appropriate corrective actions and thereby improve the overall quality of NCUA supervision during a very volatile period for all financial institutions, including credit unions. The NET is a logical and essential component of our overall NCUA's focus on strong and proactive regulation, and the priority we place on safety and soundness."

Rep. Sherman backs more MBL authority

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WASHINGTON (1/9/09)—In a statement on the House floor this week, a senior member of the House Financial Services Committee backed lifting the credit union member business lending (MBL) cap as foremost among options that could help the economy without costing taxpayers money. Rep. Brad Sherman, a California Democrat, said it was “folly” for the U.S. Congress to “take one of the healthy groups of financial institutions in this country namely, the credit unions, and tell them they can't make the $100,000 loan that is desperately needed by the small businesses in our respective districts.” He made his remarks as he laid out his 2009 legislative agenda for his House colleagues Wednesday. He said, in part, that he looks forward to passing legislation within the jurisdiction of the Financial Services Committee that can help deal with the economic crisis and noted “ a couple of opportunities” for doing so. “First,” he said, “we can increase the amount of business lending that can be made by credit unions. Right now, we limit credit unions severely as to how much business lending they can do.” Congress could, for the duration of the country’s economic crisis, allow credit unions to make more small business loans of $100,000 to $150,000, he suggested. “We need to allow businesses in all of our districts to get that $100,000 loan that they need to expand or even to stay in business.” The Credit Union National Association (CUNA) has asked lawmakers to lift the business lending cap in upcoming economic stimulus legislation. An additional $10 billion in business loans could be made by credit unions in the first twelve months once the cap is lifted, CUNA has told members of the House and Senate, the Bush administration and President-elect Barack Obama’s transition team. Small businesses pay the price of the credit union business lending cap because they have fewer options; and in the credit crunch, some are finding they have no options at all, CUNA has advised.

Inside Washington (01/08/2009)

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* WASHINGTON (1/9/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) could release a bill as early as today that would attach conditions to how the remaining $350 billion of the Troubled Asset Relief Program (TARP) funds would be spent (American Banker Jan. 8). Frank’s legislation would restrict executive compensation, require banks who receive capital from TARP to follow lending requirements, and ensure the Treasury uses the funds for foreclosure prevention. Changes to the Hope for Homeowners program also are expected to be in the bill. Frank said he anticipates a hearing on the legislation next week ... * WASHINGTON (1/9/09)--Comptroller of the Currency John Dugan said he won’t leave until the end of his term in August 2010, though the transitioning Obama administration has asked him to step down, observers said (American Banker Jan. 8). If Dugan is unsuccessful in his bid to stay, his possible successors include Greg Baer, deputy general counsel of regulatory and public policy for Bank of America, and former Treasury assistant secretary for financial institutions under the Clinton administration; and Chuck Muckenfuss, a senior deputy comptroller for policy at the Office of the Comptroller of the Currency from 1978-1981 and partner at Gibson, Dunn and Crutcher ... * WASHINGTON (1/9/09)--The Federal Deposit Insurance Corp. (FDIC) plans to retain a chunk of failed IndyMac’s assets, though the agency has found a buyer for the institution. FDIC will share 80% of the bank’s losses on $13 billion of loans, and will take 80% of a $2 billion construction loan portfolio (American Banker Jan. 8). The agency’s agreement to retain some of the failed bank’s assets indicates that the FDIC is using loss-sharing and participation models to deal with failed institutions. Observers note the FDIC may be using loss-sharing because it has worked in the past, while others say the FDIC may not have many options in resolving failures. The FDIC, in order to get a buyer for IndyMac, had to provide support, said Oliver Ireland, a partner at Morrison & Foerster. Ireland also is a former Federal Reserve Board lawyer ...

Jan. 13 is new TARP hearing date

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WASHINGTON (1/8/09)—The new date for the House Financial Services Committee's postponed hearing on the use of the U.S. Treasury Department’s Troubled Asset Repurchase Program (TAPR) funds is Jan. 13. The hearing is titled “Priorities for the Next Administration: Use of TARP Funds under EESA” and was first scheduled for Jan. 7. EESA refers to the Emergency Economic Stabilization Act approved by Congress last year to help shore up the nation’s economy and which created TARP. A witness list has not yet been made public.

HUD to testify on loan origination oversight

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WASHINGTON (1/8/08)—The House Financial Services Committee Wednesday announced its four witnesses scheduled to testify at Friday’s hearing on oversight of loan originators: two U.S. Housing and Urban Development (HUD) officials, a mortgage broker and a mortgage banker representative. The hearing will take a look at HUD’s Federal Housing Authority (FHA) and the role it plays in overseeing mortgage originators. Scheduled witnesses are:
* Phillip Murray, Deputy Assistant Secretary for Single Family Housing. HUD; * James A. Heist, Assistant Inspector General for Audit, Office of Inspector General, HUD; * George Hanzimanolis, CRMS, Bankers First Mortgage Inc. and past president of the National Association of Mortgage Brokers; and * John A. Courson, recently named president/CEO of the Mortgage Bankers Association.

Mica Obamas K St. change--transparency

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WASHINGTON (1/8/09)--With Congress back in session, Credit Union National Association (CUNA) President/CEO Dan Mica's monthly “K Street Insiders” column resumes in The Hill newspaper. His first topic of the year, fittingly, is “change.” “Since the campaign, we have heard so much about ‘change,’” Mica wrote, referring to the contest leading up to the 2008 federal election, which resulted in the election of Barack Obama as 44th president. What ‘change’ means in practice, Mica wrote, is to be determined. But, he added, his recent meeting representing CUNA before President-elect Obama’s transition team made it apparent that change has already come to lobbying efforts. Obama’s team said it wanted to post to the Internet the documents CUNA and other’s presented to transiton officials so that others can see what was presented. “Some on K Street may bristle at this new emphasis on transparency. I, for one, feel it is welcome and overdue. “It is about time that we have a level playing field, so that consumers and advocacy organizations can truly understand the facts — or, sadly, the distortion of facts — that are being presented to the administration,” Mica wrote. According to Mica, the organizations that face a difficult future are those claiming falsely to represent wide interests, while really representing a narrow few. “These are the same lobbying organizations that use questionable, in fact sketchy, data to make their distorted points. The public will now be able to see how they conduct a campaign of downright misinformation.” Mica assessed. Read more by accessing the resource link below.

Mortgage bankruptcy bills spring early in 09

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WASHINGTON (1/8/09)—Lawmakers in both houses of the U.S. Congress reintroduced legislation this week that would let judges modify mortgage terms in bankruptcy proceedings. After falling short in completing the legislative process in 2008, the bill was reintroduced in the Senate by Sen. Dick Durbin (D-Ill.) and in the House by Rep. Brad Miller (D-N.C.) Tuesday. Ryan Donovan, vice president of legislative affairs for the Credit Union National Association (CUNA), said he believes that the lawmakers will try to get the bill attached to a much-anticipated, second economic stimulus package. Durbin tried a similar strategy at the end of 2008 when he attempted to get mortgage “cramdown” provisions—that would have granted bankruptcy judges the power to rewrite the terms of loans—included in The Foreclosure Prevention Act of 2008.

Inside Washington (01/07/2009)

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* WASHINGTON (1/8/09)—The U.S. Department of Housing and Urban Development (HUD) has posted on its website new guidance on how it will interpret states' compliance with the Secure and Fair Enforcement Mortgage Licensing Act (SAFE Act). States are required to have a system for licensing and registering loan originators if they want to participate in the Nationwide Mortgage Licensing System and Registry. HUD’s review of the model legislation developed by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) determined that it meets the requirements of the SAFE Act. The Credit Union National Association’s (CUNA) compliance team notes that HUD's guidance does not address the registration aspects of the law that affect credit unions. The National Credit Union Administration (NCUA) and the federal banking agencies are currently developing a system for registering credit union and bank employees on the nationwide licensing system and registry. Credit union and bank loan originators will not be required to comply with the state licensing requirements. The NCUA and the banking agencies have until August 2009 to develop their system, and credit unions are not required to do anything until the system is up an running. Additional agency announcements are expected in the next several months… * WASHINGTON (1/8/09)--Lenders seeking licenses to originate Federal Housing Administration-insured mortgages will have to wait while the Department of Housing and Urban Development (HUD) works overtime and on weekends to process the applications (American Banker Jan. 7). Brokers are hurrying to submit their applications so they don’t go out of business, said Scott Dodson, president, Federal Mortgage Licensing Inc. HUD recently cleared a backlog of applications that took five months to process. A typical application can be completed in two months. The slowdown in application processing is partly due to incomplete or poorly completed packages submitted by brokers. There are many ways to erroneously put together an application, and HUD does not have clear guidelines, Dodson said. The agency also is looking at large lenders for loan performance, added Brian Chapelle, former HUD official. HUD usually signs off on 90% of applications. For the year ending Sept. 30, HUD approved 3,297 applications, which is three times the number approved in 2007. About 70% of the applications were submitted by brokers ... * WASHINGTON (1/8/09)--The Federal Reserve Board, Office of Thrift Supervision, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. released interagency questions and answers regarding the Community Reinvestment Act on Tuesday. The revised questions and answers encourage financial institutions to participate in foreclosure prevention programs. They also address activities that a majority-owned financial institution can take with a minority-owned institution or low-income credit union ... * WASHINGTON (1/8/09)--Ronald Rosenfeld, chairman of the Federal Housing Finance Board, has resigned effective Dec. 31. “Under his leadership, the Federal Housing Finance board took steps to strengthen the oversight of the Federal Home Loan Banks and encouraged the banks to adopt policies that are in the best interests of the public,” said Federal Housing Finance Agency (FHFA) Director James Lockhart. The FHFA announced Rosenfeld’s resignation Tuesday. Rosenfeld was appointed Dec. 14, 2004, to position ... * WASHINGTON (1/8/09)--Rep. Barney Frank (D-Mass.) said Tuesday that he has made an agreement “in principle” with President-elect Barack Obama to release the remaining $350 billion of the $700 billion rescue fund if banks agree to restrict executive compensation and help homeowners avoid foreclosure (Bloomberg Jan. 7). Frank and other members of Congress have criticized the Bush administration for not setting conditions on the first half of the bailout package. The Treasury also is working with Obama aides on releasing the remaining funds from the Troubled Asset Relief Program. The department must notify lawmakers before accessing the funds, and lawmakers have about two weeks after being notified to block the money ...

Broad financial issues grab new Congress attention

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WASHINGTON (1/7/09)—Barring something unforeseen, it is all but assured that the early days of the 111th Congress will be dominated by the same issues that seized the country’s attention before the beginning of the new year.
Click to view larger image During swearing-in ceremonies Tuesday for the 111th Congress, CUNA lobbyists greet an old credit union friend: Former U.S. representive and newly sworn-in U.S. Sen. Mark Udall (D-Colo.). Udall was a five-term congressman and co-sponsor of the Credit Union Regulatory Improvements Act (CURIA). From left: CUNA's Michele Johnson, Udall, and CUNA's Phil Drager. (Photo provided by CUNA)
There will be congressional investigations into the U.S. Treasury Department’s use of the $700 billion it was allotted by Congress last year to shore up the economy through such programs as the Troubled Asset Relief Program (TARP). One such session is the recently rescheduled House Financial Services Committee hearing on the use of TARP funds granted under last year’s Emergency Economic Stabilization Act (EESA). More such investigative sessions are likely. Beyond that, lawmakers in both the House and Senate are expected to fire up their efforts to hammer out more economic stabilization measures once President-elect Barack Obama is installed as President on Jan. 20. And, as a result of the economic turmoil launched by the subprime mortgage lending crisis, the Treasury’s plan to restructure the country’s financial services regulatory scheme is likely to get closer scrutiny as Congress parses what went wrong in financial regulations, and when and where. In fact, on Tuesday, the first day back in session, the House Financial Services Committee conducted a full committee hearing entitled, "Assessing the Madoff Ponzi and the Need for Regulatory Reform."
Click to view larger image During swearing-in ceremonies Tuesday for the 111th Congress, CUNA lobbyists Phil Drager (from left) and Michele Johnson greet U.S. Sen. Susan Collins (R-Maine), who was elected to her third Senate term. In the 110th Congress, Collins was a co-sponsor of the Senate version of the Credit Union Regulatory Improvements Act. (Photo provided by CUNA)
The hearing was intended to zero in on the alleged $50 billion investment fraud engineered by Bernard Madoff. However, Rep. Barney Frank (D-Mass.), who heads the panel, said in a release that the hearing will help to guide the work of the Financial Services Committee “in the 111th Congress in undertaking the most substantial rewrite of the laws governing the U.S. financial markets since the Great Depression.” When Treasury Secretary Henry Paulson last April unveiled his 212-page plan to overhaul the nation's financial institution regulatory structure, the Credit Union National Association (CUNA) quickly identified it as perilous to credit unions. Key to CUNA’s concern is that the Treasury plan operates on an assumption that financial institutions can be compared solely on the basis of the services they offer, without regard to structural and cultural differences between different types of institutions. CUNA President/CEO Dan Mica pointed out at the time that the result of that thinking is that Treasury does not acknowledge any unique contribution from credit unions based on their not-for-profit, cooperative structure. CUNA also noted that such an overhaul would require a lengthy timetable; passage of Gramm-Leach-Bliley took about 20 years. Even without the current crisis climate, it is unlikely that it would take as long to enact comprehensive regulatory restructuring if Congress determined it was in the country’s best interest. But under the gray clouds of the current economic environment, it can be expected that, at least in the short term, federal lawmakers will place this issue on their front burners, and it will remain a front-burner issue for CUNA on behalf of credit unions as well.

NCUA reallocates regional supervisory resources

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ALEXANDRIA, Va. (1/7/09)--The National Credit Union Administration (NCUA) has reassigned the supervision and examination of Alaska and Nevada credit unions. Credit unions in Alaska and Nevada are currently assigned to NCUA's Region V, based in Tempe, Arizona. The Region V office now supervises credit unions based in a dozen western states, and some of those areas are experiencing some of the highest foreclosure rates in the country. The NCUA said the reassignment of two of those states to other regional offices allows the agency to reallocate its supervisory resources and adjust for workload imbalances. The change was effective Jan. 1. Under the new supervision scheme, Nevada credit unions are reassigned to the Region I office in Albany, N.Y., and Alaska credit unions are reassigned to the Region II office in Alexandria, Va. The NCUA said affected credit unions have been notified of call report processing and district examiner assignment changes. When asked if credit unions should expect further reassignments this year, an agency spokesman responded, “We will continue to closely monitor supervisory requirements and make decisions on an as-needed-basis. We are not making any projections at this time.”

Inside Washington (01/06/2009)

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* WASHINGTON (1/7/09)--At a hearing Monday, lawmakers debated on whether the Madoff Investment Securities fraud could have been uncovered with more regulation (American Banker Jan. 6). The scheme involves Bernie Madoff, a money manager accused of using a Ponzi scheme to take billions from investors. Rep. Barney Frank (D-Mass.) said the Madoff case indicates that more regulation is needed. He and Rep. Paul Kanjorski (D-Pa.) said Democrats have tried to increase authority at the Securities and Exchange Commission (SEC), but that their efforts have been rejected by Republicans. Rep. Spencer Bachus (R-Ala.) argued that more regulation would not have prevented the fraud. The SEC didn’t use the powers it already has, he said. Rep. Scott Garrett (R-N.J.) agreed. Some Democrats--including Rep. Carolyn Maloney (D-N.Y.) and Rep. David Scott (D-Ga.)--said the Madoff case has caused them to lose confidence in the SEC. The Senate Banking Committee also announced Monday that Sens. Christopher Dodd (D-Conn.), chairman, and Richard Shelby (R-Ala.), ranking member, sent a letter to SEC Chairman Christopher Cox stating that they are reviewing the reported fraud. They also requested documents about the case ... * WASHINGTON (1/7/09)--Rep. Barney Frank (D-Mass.) said he expects that President-elect Barack Obama’s team will seek the remainder of the $700 billion bailout fund (Congressional Quarterly Jan. 6). Frank is drafting a bill on limitations on how the remaining $350 billion will be spent and said he has talked with the Obama transition team about the legislation. Frank said he would release his bill after Obama takes office Jan. 20. The Bush administration also could seek the funds before it leaves office, he said, noting that the money is “Obama’s to spend” ... * WASHINGTON (1/7/09)--Colin McGinnis will serve as acting staff director of the Senate Banking Committee (American Banker Jan. 6). McGinnis, former chief of staff for the late Sen. Paul Wellstone (D-Minn.), will succeed Shawn Maher. Maher left his post to serve in the Obama administration as Senate deputy director of legislative affairs ... * WASHINGTON (1/7/09)--The Treasury announced Monday details of its $15 billion investment in seven banks made through its Capital Purchase Program. The program--a part of the Troubled Asset Relief Program--was created to stabilize and strengthen the financial system. The details indicate that the Treasury’s largest investment was in SunTrust Banks at $1.3 billion. Other banks receiving investments include Fifth Third Bancorp and the PNC Financial Services Group ...

CU exec among new Fed advisory groups members

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WASHINGTON (1/6/09)—Credit union executive Randy Smith was named last week by the Federal Reserve Board to a two-year term on the agency’s Thrift Institutions Advisory Council (TIAC). Smith, who is president/CEO of Randolph-Brookes FCU in Live Oak, Tex., was one of six new members named to the advisory group, comprised of 12 individuals from savings and loan associations, savings banks, and credit unions. Smith is a recent trustee of the Credit Union Legislative Action Counsel, the political action committee of the Credit Union National Association (CUNA). He served on the CUNA Governmental Affairs Committee from 2000 to 2004, and was part of the National Credit Union Roundtable Advisory Council from 2006 to 2007. He was named to the CUNA Mutual Group board of directors last June. Smith will be the second credit union representative on the advisory board, joining former CUNA Board Member Christopher Jillson, whose TIAC term ends Dec. 31, 2009. Jillson is president/CEO of Sandia Laboratory FCU, Albuquerque, N.M. and a former CUNA Federal Credit Union Subcommittee chairman. Harriet May was another credit union representative on the advisory panel until her term expired Dec. 31. May is president/CEO of GECU of El Paso, Tex. and is a CUNA Board member. TIAC was established by the Fed Board in 1980. It meets three times each year with the Board of Governors to discuss developments relating to thrift institutions, the housing industry, mortgage finance, and regulatory issues. In addition to Smith, the new TIAC members, named for two-year terms that began Jan. 1, are:
* Barrie G. Christman, chairman of Principal Bank, Des Moines, Iowa; * Richard G. Harwood, president/CEO, Newport Federal Bank, Newport, Tenn.; * Kay M. Hoveland, president/CEO, Kaiser Federal Bank and K-Fed Bancorp, Covina, Calif.; * Richard J. Green, CEO, Firstrust Bank, Conshohocken, Pa.; and * William R. White, chairman/CEO, Dearborn FSB, Dearborn, Mi.

House TARP hearing postponed

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WASHINGTON (1/6/09)—A Jan. 7 hearing to review the U.S. Treasury Department's to-date use of the $700 billion in Troubled Asset Relief Program funds scheduled by the House Financial Services Committee has been postponed. In a release, Rep. Barney Frank (D-Mass.), chairman of the committee, gave no reason for the delay but did say he would announce a new time and date for the hearing. A witness list had not yet been made public. Frank has been critical of some aspects of the Treasury’s implementation of the TARP program, and even recently questioned specifically the impact on credit unions of that department’s choice not to use TARP funds to purchase troubled assets. (See related story: Frank wants CUs to have relief source.) The committee’s Jan. 9 hearing on the Federal Housing Administration's oversight of home mortgage loan originators remains on the schedule.

Noon today 111th Congress convenes

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WASHINGTON (1/6/09)—Although many federal lawmakers have not been waiting for the formal start of the 111th Congress to get to work on the country's pressing issues, the official beginning of the new session is noon today. According to Ryan Donovan, the Credit Union National Association’s (CUNA) vice president of legislative affairs, the schedule on Capitol Hill looks like this: The House today will hold a Quorum call vote to launch the 111th Congress. Following the Quorum call, the chamber will proceed to the election of the Speaker of the House, swear-in all members of Congress, and adopt a Rules package that will govern the proceedings for the 111th Congress. The Senate will also convene on Tuesday to swear-in new Senators and conduct organizational business. While the Senate has not announced its legislative schedule for the remainder of the week, the House is expected to consider two jobs bills. Also, on Thursday, the House and the Senate will meet in Joint Session to count the electoral ballots for President and Vice President of the United States. The inauguration of Barack Obama as the country’s 44th President is, of course, Jan. 20. "In any other inaugural year, Congress would recess between its opening day and the presidential inauguration," Donovan said. "But, given the condition of the economy, this is no ordinary year. Congress will be in session from now until the Presidents Day district work period." He added, "It promises to be a long legislative year, and once the economic stimulus bill is enacted, Congress will be focused squarely on the financial services sector." The first district work period of the year will be the week of Feb. 16, President’s Day.

NCUA announces another unscheduled closed meeting

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ALEXANDRIA, Va. (1/6/09)--For the third time in four months, the National Credit Union Administration has announced a previously unscheduled closed Board meeting. This one is set for Jan. 8. The agenda carries one item: Consideration of supervisory activities. Closed pursuant to Exemptions (8) and (9). The next regularly scheduled open and closed NCUA board meetings are Jan. 22. Historically, the agency releases an open board meeting agenda one week prior to that session. The Credit Union National Association’s News Nowwill provide live updates via LiveWire, providing instantaneous alerts to your desktop or mobile device.

Inside Washington (01/05/2009)

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* WASHINGTON (1/6/09)--The Treasury Friday released the program description for the Targeted Investment Program as required by the Emergency Economic Stabilization Act. The department has already invested $20 billion in Citigroup under the program (Forbes Jan. 2). The objective of the program is to foster financial market stability. Financial institutions will be considered for participation on a case-by-case basis. There is no deadline for participation ... * WASHINGTON (1/6/09)--On Friday, the Treasury released a report stating that it is exploring the use of the Asset Guarantee Program (AGP) to help Citigroup. The Treasury and Citigroup announced Nov. 23 that the Treasury would assume second-loss position after Citigroup on some mortgage-related assets. Under the AGP, the Treasury would assume a loss position on selected assets. It also would collect a premium. Participants’ eligibility would be determined on a case-by-case basis ...

Frank wants CUs to have relief source

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WASHINGTON (1/6/09)—House Financial Services Committee Chairman Barney Frank (D-Mass.) recently wrote to the head of the Federal Reserve Board to relate his concern that the U.S. Treasury Department’s decision not to use its relief funds to buy troubled assets may particularly hurt credit unions. Frank told Fed Chairman Ben Bernanke that Treasury’s “misguided decision” not to use Troubled Asset Relief Program (TARP) funds to buy underwater assets may cause credit unions to lose a chance “to make progress in diminishing the number of foreclosures.” “Therefore,” Frank said in a Dec. 23 letter, “I was pleased that you supported the National Credit Union Administration’s ability to use the Central Liquidity Facility (CLF) for its new initiatives to provide liquidity into the credit unions system, specifically into the corporate credit unions.” The letter noted CU HARP, designed to assist homeowners who are facing mortgage delinquency, default or foreclosure, and CU SIP, intended to provide additional liquidity to the corporate credit union system. Frank added that he would appreciate the Fed chairman’s continued support for maintaining the removal of a statutory cap on the CLF’s borrowing authority, as well as Bernanke’s “continued flexibility” to respond to similar future proposal “when they serve the national best interest.”

Inside Washington (01/02/2009)

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* WASHINGTON (1/5/09)--In a letter to financial institutions sent Wednesday, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency and the Federal Reserve Board reminded banks to record the amount and number of their non-interest-bearing transaction accounts of more than $250,000. The FDIC offered the extra coverage to banks in October. The temporary increase will expire later this year ... * WASHINGTON (1/5/09)--Regulators are deploying loss sharing to deal with expected bank failures this year and to provide an incentive for healthy institutions to take on the troubled assets of failed institutions (The Wall Street Journal Jan. 2). Loss sharing could be costly to the Federal Deposit Insurance Corp. (FDIC) if the agency bears responsibility for exotic assets normally assumed by the acquiring institution, or if loss-sharing is applied to institutions that have not failed. But loss sharing could also help reduce the losses the government would absorb during a failure, like bad real estate loans. FDIC last year used the loss sharing model to help Citigroup, Wachovia and two failed California institutions. Loss sharing was primarily used during the savings and loan crisis of the 1980s and 1990s ...

Compliance ID theft info for CUs

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WASHINGTON (1/5/09)—The subject of identity theft may have been eclipsed in the news lately by the country’s economic woes, but it remains a huge issue for financial institutions and consumers alike, reminds Valerie Moss, Credit Union National Association (CUNA) director of compliance information. The Federal Trade Commission has estimated that 8.3 million Americans were identity theft victims in 2005, the most recent data available. Moss brings credit unions’ attention to a sometimes-forgotten section of the Fair Credit Reporting Act (FCRA) added in 2003, of which they should be aware. Section 609(e) of FCRA requires a business that has provided credit to an identity thief to make available, upon the request of the victim or law enforcement, a copy of the application and any business transaction records maintained by the business or another person on behalf of the business entity. And a credit union or other business must provide this information free of cost, under the law, Moss says. This is the process that is to be followed, Moss advises: Before providing any information, a credit union must verify a victim’s identity unless it has a “high degree of confidence” already of that individual’s identity. The victim must provide the following as proof at the time of the request:
* A government issued ID; * Identifying information of the same type as was provided to the credit union by the unauthorized person; or * Identifying information that the credit union typically requests from new applicants or for new transactions, including the information described above.
As proof of the claim of ID theft, the credit union can also request a copy of a police report evidencing the victim’s claim; a properly completed copy of the FTC’s standardized affidavit of ID theft; or an affidavit of fact that the credit union considers acceptable for that purpose. The request must be in writing and mailed to an address specified by the credit union. In addition, the credit union may ask the ID theft victim to include relevant information about any transaction alleged to result from ID. This topic was included in compliance tips in CUNA’s December Compliance Challenge. Use the resource links below to read more on this and other compliance topics.

CUNA asks key lawmakers to loosen MBL restrictions

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WASHINGTON (1/5/08)—Just prior to an important Democratic policy meeting in the U.S. House, the Credit Union National Association (CUNA) sent letters to key lawmakers encouraging them to consider elimination of the cap on member business lending (MBL) by credit unions. The letters were sent to Reps. George Miller (D-Calif.) and Rosa DeLauro (D-Conn), who chair the House Democratic Steering and Policy Committee. That panel is scheduled to conduct a hearing on economic stimulus legislation Wednesday. In its letter CUNA noted that removing the 12.25% of assets cap on MBL authority for credit unions could help offset a “troubling trend” of declining commercial credit availability at banks. “Banks are pulling back at a time when the small business owner needs them the most,” wrote CUNA President/CEO Dan Mica, who cited a Federal Reserve System survey that showed 75% of senior loan officers at America’s banks indicated that their institution was making less business credit available. Noting that “The engine of our economy is the American small business owner. “ Mica told the lawmakers that the country’s credit unions continue to lend to their business-owning members, even in these difficult times. “The credit union system remains generally healthy and credit unions are not only willing, but able, to continue lending to their members,” the CUNA leader noted. He added that if the cap on MBLs was lifted, credit unions could lend up to an additional $10 billion to the nation's businesses in the first 12 months of being granted the authority. This is an economic stimulus measure that does not cost the taxpayers a dime, and does not increase the size of government, Mica wrote. CUNA took a similar opportunity to present the credit union system’s case for greater member business lending authority to President-elect Barack Obama last month. On Dec. 18, Obama remarked during a press conference that problems in the U.S. economy will continue "if small and large businesses cannot get access to enough credit." CUNA’s Mica fired off a letter to the incoming President that day explaining how credit unions could help.

CUNA says FASB impairment plan an improvement

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WASHINGTON (1/2/09)—Proposed changes to Financial Accounting Standards Board (FASB) guidance on impairment and interest income measurement generally are an improvement over current rules for recognizing when a security is considered other-than-temporarily-impaired (OTTI), according to a comment letter from the Credit Union National Association (CUNA). Currently, there are two similar models for determining OTTI, but they do include some key differences. One of FASB’s primary objectives in issuing the proposed amendment is to increase consistency between the models, an objective supported by the trade group. The model addressed by this proposal is used to determine OTTI for low credit quality securities; this includes any mortgage-backed securities with such a credit rating. “Overall, we are encouraged by this (FASB staff position) and believe holders of securities covered by EITF 99-20 will benefit from these proposed changes in the current dislocated market, but we believe its long-term effects are less certain,” wrote CUNA Regulatory Research Counsel Luke Martone. The new FASB guidance would shift the determination of impairment from market participants’ assessment of cash flows to management’s assessment, a change backed both CUNA. Once determined as OTTI, however, the security would still be required to be marked down to fair value. Use the resource links below to access the comment letter.

Inside Washington (01/01/2009)

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* WASHINGTON (1/2/09)—The National Association of Mortgage Bankers said it will seek an injunction against the U.S. Department of Housing and Urban Development’s (HUD) new rule on mortgage fees and disclosures. HUD’s rule overhauls how the Real Estate Settlement Procedures Act is enforced and most of its significant changes are scheduled to take effect in 2010. The broker trade group wants the court to overturn the new HUD rule because, the group claims, its provisions may be confusing to borrowers and also would create an uneven playing field for lenders (National Mortgage News via American Banker Dec. 29). Jeffrey Bloch, senior assistant general counsel for the Credit Union National Association said the lawsuit could provide an “interesting wrinkle” to HUD’s final plan. However, Bloch advises credit unions that at this point, the rule will still go into effect as written … * WASHINGTON (1/2/09)--Lawmakers will continue to push for credit card reform in the new year, according to observers (American Banker Dec. 31). The Federal Reserve Board two weeks ago approved new restrictions on card practices effective July 2010. But some say the Fed rules are insufficient. Sen. Carl Levin (D-Mich.) has conducted several hearings on the topic. Rep. Carolyn Maloney (D-N.Y.) said she wants the Fed’s restrictions to be implemented faster. Maloney is working on a bill that would prevent card companies from marketing to minors, let consumers set their own credit limits and reject cards before they are activated. Her bill also would legislate the Fed ban on double-cycle billing and universal default. Sen. Dick Durbin (D-Ill.) and Rep. John Conyers (D-Mich.) also may introduce legislation regarding interchange fees again ... * WASHINGTON (1/2/09)--Observers say the Treasury has allocated more than is available in Troubled Asset Relief Program (TARP) funds after the agency announced Monday that it will support GMAC LLC with $6 billion. A Treasury official said Monday in a conference call that TARP funds are not in debt (American Banker Dec. 31). The Treasury received $350 billion from Congress and has allocated $358.4 billion. Of the $350 billion, $217 billion has been disbursed. Speaker of the House Nancy Pelosi (D-Calif..) and House Financial Services Committee Chair Barney Frank (D-Mass.) have said they will not release TARP’s remaining $350 billion until the Treasury agrees to a foreclosure prevention plan ... * WASHINGTON (1/2/09)--Piggybacks on second mortgages could trip up loan modifications, Federal Reserve Board researchers said (Bloomberg News Dec. 31). Piggyback mortgages are not usually owned by those who hold the main loans on homes, and piggyback owners must provide approval when a first mortgage is modified. For loan transactions where defaults occur, loss mitigation problems could be more difficult, according to Fed economists Robert Avery, Glenn Canner and Kenneth Brevoort ... * WASHINGTON (1/2/09)—The U.S. Treasury Department Wednesday released its responses to questions posed in the Congressional Oversight Panel's first report on implementation of the Emergency Economic Stabilization Act. The Treasury document addressed 10 queries, including: What is Treasury’s strategy and what specific facts changed that led to your change in strategy? Is the strategy working to stabilize markets? What have financial institutions done with the taxpayers’ money received so far? And is the Treasury looking ahead? ...