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Inside Washington (01/29/2010)

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* WASHINGTON (2/1/10)--Senators told American Banker (Jan. 29) that they are split on whether President Barack Obama’s State of the Union speech helped or harmed regulatory reform efforts. Obama commended the House for passing a reform bill last year but said bank lobbyists are working to squelch it. “We cannot let them win this fight,” Obama said. He noted that he would veto any final bill that does not equal “real reform.” During his speech, he also spoke about his proposal to tax big banks and limit their growth. Sen. Mike Crapo (R-Idaho) said Obama’s proposal makes reform more difficult because increasing taxes was not part of reform. Sen. Richard Shelby (R-Ala.), who said he does not support taxing big banks because many have repaid their bailout money. He added that lawmakers are working in good faith on reform, though nothing has developed yet. Obama did not touch on other topics of interest to the financial industry such as preventing foreclosures and the proposed Consumer Financial Protection Agency ... * WASHINGTON (2/1/10)--Sen. Richard Shelby (R-Ala.) said he would like to see Fannie Mae and Freddie Mac become privatized (American Banker Jan. 29). But, doing so would “take a lot of money,” he said. The Obama administration is expected to release a proposal for the enterprises in its 2011 budget. The budget is scheduled to be released today. Fannie Mae and Freddie Mac were taken into conservatorship in 2008 and lawmakers have speculated about their futures for some time ...

UDAP rule withdrawn with a twist

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ALEXANDRIA, Va. (2/1/10)—As expected, the National Credit Union Administration (NCUA) at its Friday open board meeting voted to withdraw its rule on Unfair or Deceptive Acts and Practices (UDAP). The agency announced last week that it would consider withdrawing its UDAP rule. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit Card Act) essentially codified that rule and would supersede regulations to the extent there are differences among the provisions. The final UDAP rule was adopted jointly in December 2008 by the NCUA, the Federal Reserve Board, and the Office of Thrift Supervision and provisions were set to take effect July 1, 2010. The Fed has also voted to withdraw the rule. For administrative reasons the withdrawal is effective July 1. The NCUA board made it clear that federal credit union examiners will not be checking for compliance preparations with the UDAP rule, but instead will be instructed to consider a credit union’s compliance with the CARD Act provisions. Some provisions took effect Aug. 20, 2009, while most of the provisions take effect in a few weeks on Feb. 22. The only other item on the NCUA meeting agenda was the regular monthly report on the National Credit Union Share Insurance Fund. (See related story: Problem CUs continue to be an NCUA focus)

Whitehead named NCUA Region V director

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ALEXANDRIA, Va. (2/1/10)— Elizabeth Whitehead has been named as National Credit Union Administration Region V Director, with supervisory oversight of 480 federal credit unions with $57.6 billion in combined assets. Whitehead is currently NCUA Associate Regional Director, Programs, in Region I. She joined NCUA as a district examiner in 1988, and also has served as a senior supervision analyst and principal examiner. Prior to federal service, Whitehead was CEO of Hurlbut Employees FCU in South Lee, Mass. Region V covers Alaska, Arizona, Colorado, Hawaii, Idaho, Montana, New Mexico, Oregon, Utah, Washington, and Wyoming and Guam. Whitehead replaces Jane Walters, who has served as acting regional director since March 2009 and now returns to her position as Region II Director. NCUA Chairman Debbie Matz said in a release, "I am extremely pleased that the NCUA board selected Liz Whitehead as Region V director. Her varied and substantive body of regulatory experience, common-sense approach to problem solving, and demonstrated ability to assemble and direct talent makes her an ideal candidate for this position."

Problem CUs continue to be an NCUA focus

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ALEXANDRIA, Va. (2/1/10)—National Credit Union Administration (NCUA) Chairman Debbie Matz Friday expressed concern at the agency’s open board meeting about the high number of CAMEL 3, 4, and 5 credit unions and the percentage of insured shares which they represent. Matz said, as she has before, that the NCUA is being proactive with respect to looking for “red flags” that indicate a credit union is experiencing problems which could lead to a CAMEL downgrade if not corrected. She added that credit unions with these red flags may be subject to unplanned examinations in order to help address their problems before a CAMEL downgrade is required. Areas of concerns mentioned by Matz included increased loan delinquencies, especially increased problems with indirect lending, loan participations, or other areas in which credit unions may not have undertaken sufficient due diligence regarding their business partners. Another warning sign Matz mentioned was credit union exposure to interest rate risk by making large numbers of fixed-rate mortgages and holding them in portfolio. Matz said that the agency is encouraging examiners to adopt a cooperative attitude and not be “bullying.” However, she warned that examiners will issue letters of resolution to credit unions unresponsive to examiners’ concerns. She added that the agency will also consider issuing letters of understanding and agreement, and possibly making those public, in those situations as well as taking other actions as needed to protect the National Credit Union Share Insurance Fund (NCUSIF). According to agency figures, there are currently 351 lowest-ranked CAMEL 4 and 5 credit unions, 80 more than at year-end 2008. They represent 5.82% of insured shares, up from 2.7% in 2008. Staff indicated that, in the aggregate, CAMEL 4 and 5 credit unions hold approximately $41.2 billion of insured shares. NCUA staff also noted that there are currently 1,688 CAMEL 3 credit unions, which represent 13.67% of insured shares. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent approximately 19.5% of insured shares. Also reported, the NCUSIF’s equity ratio is projected to be 1.24% as of the end of December 2009, down from 1.27% at the end of November 2009 and 1.30% at the end of September. The NCUA indicated that the decrease in the equity ratio was the result of an estimated 9.5% increase in member shares and deposits , higher than they expected and loss expenses. Insured shares is the denominator in determining the ratio, and therefore the higher denominator drives down the ratio. Another factor in the decrease, according to NCUA staff, was the agency’s decision in 2009 to expense an additional $270 million to the NCUSIF’s reserves beyond what had been budgeted. The NCUSIF’s reserves, which are not included in the insurance fund’s equity ratio, now stand at $758.7 million. A closed meeting of the board--during which the NCUA was scheduled to discuss supervisory activities and personnel matters—followed the open session. The board also voted to withdraw its 2008 Unfair or Deceptive Acts or Practices rule because it was made redundant by a 2009 law. (See related story: UDAP rule withdrawn, with a twist)

Compliance Reg Z guidance for CUs with card rate floors

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WASHINGTON (1/29/10)—As reported earlier (News Now Jan. 20), the Federal Reserve Board surprised everyone when it included in the official staff commentary accompanying its final Regulation Z rules a new prohibition that will not allow a credit union to offer a variable rate card account with a floor that prevents the rate from decreasing consistent with reductions in the independent index. The Credit Union National Association (CUNA) has discussed this issue with Fed staff, specifically the implementation issues, the requirements to send change-in-terms notices, and how they can comply with a 45-day notice requirement when the Feb. 22 effective date is just weeks away. In a memo to credit unions, CUNA discusses two options that credit unions have to consider. The first option is when the credit union decides to convert its current variable rate to a fixed rate, which will apply to existing balances, and to establish a new variable rate, with a higher margin but without a floor, for new purchases. The memo explains when a change-in-terms notice is necessary and when a required notice needs to be sent. The second option is when the credit union decides to keep its current variable rate card but to eliminate the existing floor. The memo describes the Regulation Z requirement and notes why this approach may be of interest to some credit unions. This issue will be discussed on CUNA’s audio-conference scheduled for next Tuesday, Feb. 2 at 1:00 p.m. CT on the new Credit CARD Act regulation. See the resource links for more information and registration.

Treasury HUD update guidance for mortgage mod program

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WASHINGTON (1/29/10)—An official from the U.S. Department of Housing and Urban Development (HUD) said in a release Thursday that while the administration is meeting goals with its Home Affordable Modification Program (HAMP), new guidance should enable servicers to” transition borrowers more quickly and easily from trial to permanent modification." According to administration numbers, more than 850,000 homeowners have been helped under HAMP with trial and permanent modifications to their troubled mortgages. However, William Apgar, HUD’s senior advisor for housing finance, said, "While we continue to meet our goals to provide immediate assistance, the updates announced today should enable servicers to transition borrowers more quickly and easily from trial to permanent modification." The new guidance from the agencies with HAMP oversight addresses two major issues regarding converting a HAMP trial modification to a permanent one:
* New Requirements that Documentation be Provided Before Trial Modification Begins: A simple, standard package of documents will be required prior to the servicer's evaluation of the borrower for a trial modification. This process will be required for all new HAMP modifications that became effective after June 1, although mortgage servicers may implement it sooner; and * Converting Borrowers in the Temporary Review Period to Permanent Modifications: Describes the proper procedures for conversion of those borrowers who are current on their monthly payments to permanent modifications.
Use the resource link below for more HAMP information.

UDAP NCUSIF report stand alone on NCUA agenda

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ALEXANDRIA, Va. (1/29/10)—Today’s National Credit Union Administration (NCUA) open board meeting, the first of the new year, is expected to be relatively short and sweet with just a UDAP action and insurance fund report on the agenda. The agency announced last week that it will consider withdrawing a final rule that addresses Part 706 of its Unfair and Deceptive Practices rules. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit Card Act) essentially codified the final rule and would supersede the rule to the extent there were differences among the provisions, a point made by the Credit Union National Association in a comment letter to the agency. The board will also be updated on the status of the National Credit Union Share Insurance Fund during the meeting. A closed meeting of the board--during which the NCUA will discuss supervisory activities and personnel matters--will follow the open session. It is unusual for an open board meeting to be scheduled for any day other than the third Thursday of the month; however, the agency had an off-site senior staff planning session that presented a scheduling conflict. All other 2010 board meetings are currently scheduled for Thursdays.

Inside Washington (01/28/2010)

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* WASHINGTON (1/29/10)--The Senate voted Thursday to confirm Ben Bernanke as Federal Reserve Board chairman for another four years. The vote on the final confirmation was 70-30. The final vote followed a cloture vote to avoid filibuster threats (MarketWatch Jan. 28) ... * WASHINGTON (1/29/10)--Treasury Secretary Timothy Geithner said Wednesday during a hearing on the bailout of American International Group (AIG) that he supports President Barack Obama’s plan to tax big banks and limit their growth. If Obama’s plan is adopted, taxpayers will not have to pay for industry bailouts, Geithner said. He also addressed questions about whether Obama’s plan would roll back Depression-era Glass-Steagall legislation, saying that the proposed Volcker rule--which would ban proprietary trading--is not the same as Glass-Steagall. Under Volcker, banks could still underwrite securities, Geithner said. During the hearing, he was questioned on his involvement with AIG’s bailout and the limits on some disclosures. Geithner said he was not involved with the decision to limit disclosures on the payments because he had recused himself after being nominated for a Treasury job (American Banker Jan. 28) ... * WASHINGTON (1/29/10)--The Federal Reserve’s policymaking committee said it will hold a final cash auction March 8 for $25 billion. A Feb. 8 auction also will be held for $50 billion (American Banker and News Now Jan. 28). The auctions, launched in December 2007, are a way for banks to borrow money from the central bank. The Fed auctioned off as much as $150 billion at the height of the financial crisis ...

New rule for GSEs reporting fraud

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WASHINGTON (1/29/10)—Starting Feb. 26, Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs) will be operating under a new fraud-reporting rule. The Federal Housing Finance Agency published a final rule this week that puts into effect requirements of the 2008 Housing and Economic Recovery Act, the statute that transferred oversight power of the government-sponsored entities (GSEs) to the FHFA. The final rules requires Fannie, Freddie and the FHLBs to report all fraud or suspected fraud in all their mortgage programs. The GSEs must do so “upon discovery that it has purchased or sold a fraudulent loan or financial instrument, or suspects a possible fraud relating to the purchase or sale of any loan or financial instrument.” The final regulation also requires the regulated entities to establish and maintain internal controls, policies, procedures, and operational training programs to ensure that any fraudulent loan or financial instrument or possible fraudulent loan or financial instrument is discovered and reported. The rule states clearly that the GSEs and affiliated entities are protected from liability “in making a report or requiring another to make a report if it acts in good faith.”

Move Your Money drumbeat continues

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WASHINGTON (1/29/10)—Arianna Huffington, founder of the news website and aggregator of blogs The Huffington Post, appeared on the Larry King Live show late Wednesday and repeated her call to consumers to move their money away from big banks and into smaller institutions, like credit unions. Appearing as part of King’s State of the Union wrap up—just hours after President Obama presented the first such address of his presidency—Huffington brought the conversation around to the topic of banks that have been TARP bailout recipients. “We've been advocating that for a long while, asking people to move (their money from) their banks too big to fail and putting it into community banks and credit unions that have a much better chance of actually lending to small businesses that create jobs,” Huffington said, in part. The Huffington Post launched a "Move Your Money" campaign last December. It urged readers to move their money from the big banks. The site then carried included an article by Credit Union National Association President/CEO Dan Mica and also a link to CUNA's credit union locator at creditunion.coop. The campaign also inspiredthe nost recent YouTube video posted by Credit Union National Association (CUNA) President/CEO Dan Mica to further spread the good word about credit union membership. (News Now1/27) Mica has said of his latest video, "Consumers deserve to know that credit unions are just as important a place for them to turn to for doing their financial business. We hope this YouTube posting will help point the way for them." Use the resource link to view the Mica video.

CUNA keeps up drive CUs can help countrys credit job woes

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WASHINGTON (1/29/10)—The Obama administration should not overlook credit unions as part of the solution to the country’s credit and job woes, Credit Union National Association President/CEO Dan Mica reiterated after the president’s State of the Union Address Wednesday night. CUNA had called on President Barack Obama to endorse credit union member business lending (MBL) as part of the solution to the small business credit crunch in his State of the Union address. Legislation that would lift the MBL cap is pending in both the House and the Senate, and CUNA estimates lifting the cap could result in as much as $10 billion in new capital for small businesses and the creation of over 108,000 new jobs within one year. After hearing Obama’s remarks, which did not include credit unions, Mica said, “We are disappointed that the administration is going to give banks $30 billion in taxpayer money in the hope that they do the right thing and lend it to small businesses, while keeping the credit union no-cost-to-the-taxpayers solution on hold.” The $30 billion is a reference to Obama’s proposal to channel that amount in TARP funds to community banks to encourage them to lend. “Remember, banks are the ones who are telling Congress -- as recently as two weeks ago -- that demand for small business loans is down. Credit unions know there is demand for small business loans and they are ready to lend,” Mica said. “Mr. President,credit unions are willing and able. Tell Congress to lift that cap and let credit unions help small businesses." CUNA will continue to press the MBL issue with key U.S. Treasury Department officials and in the U.S. Congress.

Inside Washington (01/27/2010)

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* WASHINGTON (1/28/10)--Senate Majority Leader Harry Reid (D-Nev.) has called a cloture vote for today for the re-appointment of Federal Reserve Board Chairman Ben Bernanke to a second term. The cloture vote is used to overcome filibuster threats. After the cloture passes, a simply majority is needed to confirm Bernanke (American Banker Jan. 27). On Friday, Sens. Russ Feingold (D-Wis.) and Barbara Boxer (D-Calif.) said they would not support the re-nomination ... * WASHINGTON (1/28/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is considering whether to continue negotiating with Republicans on regulatory reform or pursue a partisan approach. Dodd plans to meet with Democratic members of his committee this week. Last week, Sen. Mitch McConnell (R-Ky.) told Republicans on the banking panel not to support a bill unless they were certain it would be “a good deal” (American Banker Jan. 27). Sen. Richard Shelby (R-Ala.) is working with Dodd on regulatory reform and hopes for a bipartisan agreement, a Shelby aide told American Banker ... * WASHINGTON (1/28/10)--The Federal Reserve Board is weighing a new benchmark interest rate with interest paid on extra fund reserves. Deposits held with the Fed above required amounts totaled $1 trillion in the two weeks ended Jan. 13, compared with $2.2 billion in January 2007 (American Banker Jan. 27). The reserves were created by the Fed with emergency loans and purchases of $1.7 trillion in mortgage-backed securities. If the deposit rate of 0.25% were raised, banks would keep their money with the Fed and refrain from lending too much until the economy turns around ... * WASHINGTON (1/28/10)--President Barack Obama’s proposal to limit growth at big banks by banning proprietary trading and curb risk-taking echoes some core components of the Glass-Steagall Act, a Depression-era bill that banned proprietary trading. Glass-Steagall became largely ineffective in 1999 when the Gramm-Leach-Bliley Act was implemented (American Banker Jan. 27). After Gramm-Leach-Bliley, big banks earned large profits because the act allowed them to buy and sell stocks within their own accounts. However, Obama’s proposal would not fully reinstate Glass-Steagall because banks would still be allowed to underwrite securities. Paul Volcker, former Fed chairman who championed Obama’s proposal to ban proprietary trading, will provide more details on the proposal Feb. 2 at a Senate Banking Committee hearing ... * WASHINGTON (1/28/10)--A panel created by the Federal Deposit Insurance Corp. (FDIC) to tackle issues affecting community banks will meet Thursday to discuss the financial sector’s attempts to increase lending. Other issues to be discussed include interest rate risk, failed-bank resolution processes, and examinations. The meeting will begin at 8:30 a.m. ET at the FDIC’s headquarters in Washington, D.C. ...

GAO wants improvements in flood insurance programs

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WASHINGTON (1/28/10)--The Government Accountability Office (GAO) has called for improvements to the National Flood Insurance Program. The GAO “reviewed and analyzed Federal Emergency Management Administration (FEMA) / National Flood Insurance Program (NFIP) guidance, data, and financial reports,” as well as prior audit reports, and also interviewed “FEMA officials and contractors.” Citing its recently completed study of the effectiveness of “controls in place during the 2005 to 2007 time frame,” the GAO said that “three key structures” that are used by FEMA to oversee the NFIP and related “financial activity” could be improved. Specifically, FEMA’s reviews of “the results of state insurance department audits related to flood insurance activity,” its “triennial operational reviews” of Write Your Own (WYO) insurance companies, and its claims reinspection program sampling procedures still need improvement. The GAO previously identified all three areas as needing improvement. The GAO suggested that FEMA streamline some of its own procedures and bring in outside independent sources to improve some of its auditing processes. The Credit Union National Association has repeatedly said that adequate funding for the NFIP is important to ensure that people living in flood plains are able to secure protection, obtain mandatory coverage, for their homes and mortgages. Flood insurance is often required by law in certain areas and thus becomes a necessary purchase by prospective homeowners before credit unions can offer mortgages and other related products to homebuyers in flood prone areas. For the full GAO release, use the resource link.

Compliance Good faith estimate round up

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WASHINGTON (1/28/10)--In examples drawn from this month's Compliance Challenge, the Credit Union National Association (CUNA) addresses issues surrounding Good Faith Estimates (GFEs). In one example, a member who received a mortgage loan GFE from a credit union notices that the address of the property to be purchased is missing from the GFE. Would adding the missing address constitute the type of “changed circumstances” that would require the credit union to issue a revised GFE? According to the Real Estate Settlement Procedures Act (RESPA) FAQs, the later identification of a missing property address would not be considered a “changed circumstance” to justify the need to issue a revised GFE. However, an incorrect address on the GFE, and the subsequent correction, would be considered a “changed circumstance” that would require issuance of a revised GFE. Another Compliance Challenge question asks if a mortgage representative should provide a member with a written list of providers if the credit union does not allow its members to shop for settlement services. According to the RESPA FAQs, the mortgage rep is not required to provide a written list of providers to the member, as the member is not permitted to shop for settlement services providers under the terms of the mortgage contract. The credit union would complete item #3 on page 2 of the GFE with all third party settlement services, other than title services, that the credit union requires and select the provider of those services, which can include appraisal services, credit reports, tax services, flood certifications and up-front mortgage insurance premiums. In another example, a mortgage representative from a separate FCU is unsure whether or not items that are to be paid outside of closing in relation to a member’s loan should be documented on the GFE. According to CUNA, RESPA does not provide a place to document paid outside of closing (POC) items. However, POC items that are paid by the borrower, seller, loan originator, real estate agent, or any other person must be included on the HUD-1, and appropriately marked POC. These items must also be excluded from the computing totals, and whether the buyer or seller paid these charges should also be marked on the settlement statement. For more of the compliance challenge, use the resource link.

NCUA underscores CUs offer better rates

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ALEXANDRIA, Va. (1/28/10)-- The National Credit Union Administration (NCUA) yesterday posted a press release highlighting the latest results from DATATRAC, Inc., which showed credit unions posted more favorable rates for consumers than banks in 21 of 23 loan and savings categories. DATATRAC, Inc., whose information is featured daily on the Credit Union National Association website, is a company that tracks rates charged and paid by credit unions, banks, and credit unions that converted to or merged with banks. DATATRAC revealed that at year-end 2009, credit unions on average provided significantly lower rates on all consumer loan types and provided higher yields on all savings products. Credit unions also posted lower average adjustable rate mortgage rates. In the two fixed-rate mortgage product categories (15- and 30-year loans), bank averages were minimally lower by two to three basis points. The NCUA also pointed out that credit unions also posted better results in 22 of 23 categories than the 28 banks that converted from credit unions, merged with credit unions, or merged with former credit unions. Average rates at these converted institutions generally fell between credit union averages and the other bank averages. The converted institution rates on fixed rate mortgages, however, were higher than both credit union and all-bank averages. Use the link below to see more DATATRAC, Inc. results.

Inside Washington (01/26/2010)

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* WASHINGTON (1/27/10)--President Barack Obama will deliver the State of the Union address tonight, and his speech is expected to be of significant interest to the banking industry, according to financial observers. Obama may use his speech to garner support for his proposed tax on big banks, said Brian Gardner, KBW Inc. analyst. In addition to the tax, Obama last week proposed to ban proprietary trading and curb growth of large financial institutions. Obama also could use his speech to convince the Senate to reappoint Ben Bernanke as Federal Reserve Board chairman, said Chris Whalen, managing director at Lord, Whalen LLC. Bernanke’s nomination is expected to generate one of the closest votes in history for the re-election of a Fed chairman. Camden Fine, president/CEO of the Independent Community Bankers of America, told American Banker (Jan. 26) that he hopes Obama will announce programs to help financial institutions provide credit to small businesses ... * WASHINGTON (1/27/10)--The Treasury Department will spend the next couple weeks drafting legislation that will be shared with lawmakers working on financial reform, according to Neal Wolin, department deputy secretary. The legislation aims to control companies’ growth by restricting financial firms from owning hedge funds and participating in proprietary trading (American Banker Jan. 26). It will attempt to constrain growth by acquisition as opposed to organic growth, Wolin said. Commercial banks that do not accept consumer deposits and are not insured by the Federal Deposit Insurance Corp. are not subject to restrictions, but they will be subject to more aggressive supervision, he added ... * WASHINGTON (1/27/10)--Treasury Secretary Timothy Geithner is scheduled to testify today before a House committee on oversight and government reform as part of an investigation regarding allegations that American International Group (AIG) improperly limited disclosures while it was being bailed out by the government (MarketWatch Jan. 26). Geithner was president of the New York Fed when the bailout took place. The bank has said Geithner was not involved with AIG’s discussions regarding the disclosures. Thomas Baxter, the New York Fed’s general counsel, is also slated to testify ...

Average 30-year mortgage rate drops in Dec. FHFA reports

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WASHINGTON (1/27/10)--The Federal Housing Finance Agency (FHFA) on Tuesday reported that the average 30-year conventional mortgage rate for December was 5.05%, slightly down from the mortgage rate reported in the previous month. The rate for conventional fifteen year fixed mortgages averaged 4.54% during December, a .09% decrease from the rate reported in November. These average rates are based on mortgages which closed during the last week of December, and reflect the mortgage conditions present during the last week of November, when the loans were started. The average loan amount increased by $6,600 from the number reported during the previous month, for a total average of $217,800 in December. The FHFA reported a decrease in the contract rate on fixed- and adjustable-rate mortgage loans, which dropped to 4.92% in December, .08% less than the rate reported in November. The FHFA report does not contain any information on adjustable-rate mortgages “due to insufficient sample size.”

Sen. Udall Help Main St. lift MBL cap

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WASHINGTON (1/27/10)--Sen. Mark Udall (Colo.) last week reiterated his support for “unleashing the power of loans to small businesses” by raising the cap on member business lending (MBL) for credit unions. Speaking at a small salon in Thornton, Colo., Udall said that his S. 2919, which would increase the current MBL cap from 12.25% of total assets to 25% of total assets and increase the de minimis amount of a credit union business loan to $250,000, was “all about helping Main Street, not Wall Street.” Congress has “loaned a lot of money to Wall Street and to the big banks,” and Udall said that it is “now time to loan money in every way possible to small businesspeople and families and those who really put it to use.”
Click to view larger image From left: John Burke, president, Westminster FCU, Sen. Mark Udall (D-Colo.), Stacy Hamon, owner, 1st Street Salon, and John Dill, president/CEO, Credit Union Associations of Colorado and Wyoming. (Credit Union Associations of Colorado and Wyoming Photo)
Stacy Harmon, the salon owner whose salon business has grown exponentially since she secured a credit union loan, John Burke, President of Westminster FCU, and Credit Union Associations of Colorado & Wyoming President/CEO John Dill also attended the press conference. Udall cited Credit Union National Association (CUNA) predictions that lifting the MBL cap would result in $10 billion in new loans to small businesses and create as many as 108,000 new jobs, and estimated that raising the cap would allow Colorado-based credit unions to provide $200 million in loans to small businesses in Colorado, creating around 2,000 new jobs. The MBL cap lift would provide this funding at no cost to taxpayers, according to CUNA. Udall will be one of many high profile speakers at CUNA’s Governmental Affairs Conference (GAC) which will take place in Washington, D.C. from Feb. 21-25. For more on the GAC, use the resource link.

NCUA orders bar ten from financial institution work

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ALEXANDRIA, Va. (1/27/10)--The National Credit Union Administration issued orders prohibiting the following individuals from participating in the affairs of any federally insured financial institution.
*Brenda Alexander, a former employee of the merged TRICARE FCU, Newark, N.J., without admitting or denying fault, consented to an order of prohibition to avoid the time and cost of administrative litigation; *Becky Joyce Hughes, a former employee of Wiregrass FCU, Dothan, Ala., was convicted of misapplication of credit union funds and sentenced to 15 months in prison, 5 years supervised probation and ordered to pay $138,318 in restitution; *Charice Kaahanui, a former employee of Leahi FCU, Honolulu, Hawaii, was convicted of bank fraud and sentenced to 14 months in prison, 5 years supervised release, and ordered to pay $26,980 in restitution; *Steven Long, a former employee of Citizens FCU, Midland, Texas, was convicted of theft and ordered to pay $3,200 in restitution; *Steven Pennington, a former manager of the merged First Future CU, San Diego, Calif., without admitting or denying fault, consented to an order of prohibition to avoid the time and cost of administrative litigation; *Ana Santana, a former employee of the merged TRICARE FCU, Newark, N.J., without admitting or denying fault, consented to an order of prohibition to avoid the time and cost of administrative litigation; *Henry L. Slootmaker, a former employee of Peoples First Choice FCU, Glen Rock, N.J., without admitting or denying fault, consented to an order of prohibition to avoid the time and cost of administrative litigation; *Crystal L. Smith, a former employee of Bluegrass Community FCU, Ashland, Ky., was convicted of unauthorized use of an access device with intent to defraud. Smith was sentenced to 57 months imprisonment; 5 years supervised probation and ordered to pay $178,709 in restitution; *Emily Vanterpool-Charles, a former employee of St. Thomas FCU, St. Thomas, U.S. Virgin Islands, was convicted of embezzlement and ordered to serve 2 years in prison, with all but 6 months suspended, and placed on supervised probation for 2 years; and *Betty Lee Wing, former vice chairman of New England Lee FCU, Boston, Mass., was convicted of larceny and filing false reports in relation to employment at the Massachusetts Department of Public Safety, and is therefore prohibited from being affiliated with or participating in the affairs of any federally insured depository institution.
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 view NCUA enforcement orders online.

Mica YouTube video urges move money to a CU

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WASHINGTON (1/27/10)—The Credit Union National Association (CUNA) is making good use of YouTube again on behalf of credit unions. “Move your money to a credit union” is the title of the latest video posted there by CUNA President/ CEO Dan Mica.

The video plays off of and highlights a recent “Move Your Money” campaign prompted by editors of “The Huffington Post,” a quasi-blog/news website. It urged readers Dec. 29 to move their money from the big banks to community banks. The original “Move Your Money” posting on the website has led to more than 5,000 comments by readers of Huffington Post – most of them supportive and many of them also urging other readers to move their money to credit unions. In fact, CUNA’s Dan Mica posted a response on the blog, urging readers to consider credit unions – and that posting garnered more than 240 responses, most of them supportive of Mica’s message and credit unions. All that action spawned the idea for Mica’s “Move Your Money to a CU!” on YouTube as a way of further spreading the word. “There’s no doubt that what the Huffington Post started has really caught the fascination of many – some even calling it a ‘clarion call,’” said Mica. “Consumers deserve to know that credit unions are just as important a place for them to turn to for doing their financial business. We hope this YouTube posting will help point the way for them.”

Inside Washington (01/25/2010)

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* WASHINGTON (1/26/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz plans to continue discussion of credit union issues at a Town Hall meeting Feb. 4 in Lake Buena Vista, Fla. On Thursday, Matz held a similar meeting in Dallas, with more than 200 attendees participating. The session touched on NCUA’s plans to revamp the corporate credit union system, including concerns about legacy assets. The Feb. 4 meeting’s agenda includes more discussion about NCUA’s proposed changes to the corporates and changes to streamline field of membership applications. To register, use the link. Pictured are NCUA Board Member Michael Fryzel and Matz at the Dallas meeting. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (1/26/10)--The Securities and Exchange Commission (SEC) said it plans to more closely scrutinize this year’s proxy statements to see how companies’ board directors and senior executives are paid and how performance targets are used (American Banker Jan. 25). Shelley Parratt, deputy director of SEC’s division of corporate finance, said at a Northwestern University law conference Friday that companies should disclose their performance targets for board directors, even if the benchmarks are met or ignored by compensation committees ... * WASHINGTON (1/26/10)--Under the Federal Housing Administration (FHA)-Hamp Making Home Affordable program, mortgage servicers will have a little more breathing room to assist struggling borrowers with financial hardships, but who have not yet missed a payment. Under a new policy, servicers can reduce payments or offer borrowers forbearance. Previously, borrowers could not access these options until they missed several monthly payments. The options will help borrowers from becoming delinquent and thus enable them retain their homes, said FHA Commissioner David Stevens (American Banker Jan. 25) ... * WASHINGTON (1/26/10)--The Federal Deposit Insurance Corp. (FDIC) and the Bank of England are improving cooperation for cleanups of international banks. The two announced a memorandum of understanding (MOU) Friday signaling their commitment. They will share information and consult with each other regarding the resolution of bank failures in the U.S. and United Kingdom. “The recent financial crisis demonstrates that greater international coordination among resolution authorities as well as resolution processes capable of resolving the largest, most complex financial institutions are necessary to protect the public,” said FDIC Chairman Sheila Bair. “This MOU is an invaluable step forward toward implementing the recommendations of the Basel Committee’s Cross Border Resolution Group, which the FDIC co-chaired. It is also a further step in support of the continuing work of the Financial Stability Board’s Crisis Management Working Group, chaired by Paul Tucker of the Bank of England” ...

FOM mergers focus of CUNA working groups

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WASHINGTON (1/26/10)--The Credit Union National Association (CUNA) has formed a pair of working groups to examine the National Credit Union Administration’s (NCUA) merger practices and recent proposals to alter charter application and field of membership expansion rules for community federal credit unions. The two working groups are still in the process of being assembled and will be comprised of members of existing CUNA committees or subcommittees. The NCUA’s field of membership proposal, which was released at the Dec. board meeting and is out for comment until March 1, would set objective and quantifiable criteria to determine the existence of a well-defined local community (WDLC) for areas that encompass multiple group areas. A new, objective definition for rural districts has also been proposed. The field of membership working group will examine proposed changes to how the NCUA defines the term community for multiple jurisdictional criteria and will also scrutinize the NCUA’s proposed redefinition of what constitutes a so-called “rural area.” The task force, composed of members of CUNA's Community Credit Union Committee and Federal Credit Union Subcommittee, will also review NCUA’s criteria for determining underserved areas. A number of credit unions have raised concerns about the regulatory process for voluntary and involuntary mergers, and the CUNA merger working group will examine those concerns and develop recommendations for improvements to those processes. The working group is drawn from CUNA's Examination and Supervision Subcommittee.The field of membership group will hold conference calls both later this month and in Feb. CUNA will accept credit union comment on the NCUA’s field of membership proposal until Feb. 10.

Info on variable rate rules coming Fed tells CUNA

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WASHINGTON (1/26/10)--A Federal Reserve representative recently informed the Credit Union National Association (CUNA) that the Fed is formulating its thoughts on recently introduced variable rate credit restrictions, and expects to provide CUNA with further guidance by the end of this week. Under provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), which will be effective as of Feb. 22, card issuers will only be able to raise their credit card rates under specific circumstances. One of these is when there is a variable rate and the increase is based on a change in a publicly-available index that is not under the card issuer's control. However, the Fed indicated that the ability to raise rates under these circumstances will not apply if the issuer imposes a floor that will not permit the rate to decrease at all times in a manner consistent with reductions in the index. Credit unions that use floors for their variable rate cards have expressed significant concerns as to impact of these new provisions and that the public did not have an opportunity to comment on this new restriction during the rulemaking process. CUNA and representatives from leagues and credit unions discussed this issue in a conference call with Fed officials held last week. Fed staff and CUNA will also address this issue and other provisions of the final rule, via an audio conference call on Feb. 2nd at 2 pm ET.

Congress this week Focus on Fed chair nomination

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WASHINGTON (1/26/10)--The legislative front will remain quiet for credit unions this week, but committee action will again take place on the Hill, and the confirmation hearing for current Federal Reserve Chairman Ben Bernanke will also take center stage. The House Financial Services Committee will be busy on Wednesday, with its Subcommittee on International Monetary Policy and Trade holding a hearing entitled "The State of Global Microfinance: How Public and Private Funds Can Effectively Promote Financial Inclusion for All." President Barack Obama will also deliver his State of the Union address before a joint session of Congress on Wednesday, and the House will not be in business on Thursday or Friday due to the Republican Issues Conference. While the House Rules Committee had planned to discuss Rep. John Tierney’s (D-Mass.) H.R. 4300, the Restoring America's Commitment to Consumers Act of 2009, on Wednesday, that hearing has been postponed indefinitely. The bill, which would cap credit card interest rates at 16%, has also been referred to the House Financial Services Committee., and has 70 mostly democratic co-sponsors. The bill is opposed by the Credit Union National Association.

BSA advisory group soliciting nominees

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VIENNA, Va. (1/26/10)—The Bank Secrecy Act Advisory Group (BSAAG), which ultimately makes BSA policy recommendations to the U.S. Treasury Secretary, is seeking nominations for new members. The advisory panel operates under the auspices of Treasury’s Financial Crimes Enforcement Network (FinCEN) and is chaired by the FinCEN director. It was created by the 1992 Annunzio-Wylie Anti-Money Laundering Act. FinCEN is inviting the public to nominate financial institutions and trade groups for membership by Feb. 24. New members will be selected for three-year membership terms. The Credit Union National Association is a current member whose term continues to Feb. 28, 2012. Nominations may be mailed Regulatory Policy and Programs Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183 or e-mailed to:BSAAG@fincen.gov. Use the resource link below for more information.

NCUA session features frank talk on corporate plan

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WASHINGTON (1/25/10)—At its first town-hall style meeting of the new year, the National Credit Union Administration (NCUA) shared some frank thoughts about its plans to revamp the corporate credit union system. Hosting what it called “an overflow crowd” of 200 participants at its meeting in Dallas, Texas on Friday, NCUA representatives, for instance, indicated some possible good news to the credit union crowd. The NCUA now estimates that ultimate losses for the NCUA's Corporate Stabilization Fund will be between $4 billion and $6 billion, notably on the low end of an initially reported range of $1 billion to $11 billion, and also representing potentially significant savings from the $6 billion currently earmarked. Agency representatives also acknowledged the prominence that the “legacy asset” issue plays in going forward with corporate restructuring. There are two issues of concern regarding legacy assets. First is the question: Can former capital holders, whose capital has been depleted, have their capital restored in the future if ultimate losses on the legacy assets turn out to be much less than expected. The second issue is whether, going forward, new capital depositors will be at risk if further losses occur on the legacy assets, that is, if losses turn out to be worse than expected. It is upon this second issue that the NCUA focused its attention during the meeting. NCUA staff said they continue to realize the urgency of dealing with the issue in going forward on a corporate plan. They said before a new rule is in place, the agency must find a way to wall off new capital from further losses if natural-person credit unions are to continue to capitalize the system—and that such credit union participation is crucial to an ongoing system. The NCUA noted it is “working around the clock” and with the U.S. Treasury Department on this issue. Also of particular note, the agency announced it is hiring a third-party consulting firm to study the agency’s modeled projections about the impact of its proposed corporate plan on credit unions and the credit union system. There is growing disagreement between the federal regulator and corporate credit unions about the impact the proposed corporate restructuring would have overall. The NCUA models indicate a viable system, but the corporates say the strictures are too binding to allow operational success. NCUA Chairman Debbie Matz continued to assure stakeholders that the current NCUA proposal is not “set in stone” and the agency remains keenly interested in comments. She urged the crowd to include constructive alternatives within your comments rather than just stating something will not work. After attending the meeting, Bill Hampel, CUNA chief economist, said, “There was a great deal of open and frank discussion back and forth between agency and credit unions reps. The credit union folks were very willing and forceful with their remarks and the agency made it clear that it continues to listen.” The deadline for comments submitted directly to NCUA is March 9. CUNA will accept comment from credit unions until Feb. 10, and its Corporate Credit Union Task Force met for three days last week for comprehensive discussion about issues to be addressed. The next NCUA Town Hall meeting will be held Thursday, Feb. 4 in Lake Buena Vista, Fla. Use the resource links below for more information on the NCUA corporate credit union restructuring plan.

Inside Washington (01/22/2010)

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* WASHINGTON (1/25/10)--Missouri Credit Union Association’s (MCUA) President/CEO Rosie Holub and Kevin Brueseke, MCUA chief financial officer and chief operating officer, met with National Credit Union Administration (NCUA) Chairman Debbie Matz and Senior Policy Adviser Sarah Vega in Washington, D.C. on Thursday (The Missouri difference Jan. 22). Scott Hunt, director of NCUA’s Office of Corporate Credit Unions; Mike McKenna, NCUA deputy general counsel; John McKechnie, director of public and congressional affairs; and Steve Bosack, Matz’s chief of staff, also attended. They discussed member business lending, risk-based capital, and two proposed rules regarding the corporate credit unions and the federal charter field of membership. MCUA also met with Reps. Todd Akin (R-2); Roy Blunt (R-7); William “Lacy” Clay (D-1); Jo Ann Emerson (R-8); Blaine Luetkemeyer (R-9) and Ike Skelton (D-4) ... * WASHINGTON (1/25/10)--The results of Ben Bernanke’s confirmation vote for a second term as Federal Reserve Board chairman might be even closer than expected, according to The Wall Street Journal (Jan. 21). Bernanke’s term expires at the end of the month. His confirmation vote will take place next week at the earliest. Sens. Byron Dorgan (D-N.D.) and Jeff Merkley (D-Ore.) said they will vote against Bernanke. Sen. Bernie Sanders (I-Vt.) also said he plans to vote against him. Senate Majority Leader Harry Reid (D-Nev.) said he was readying to file cloture--which requires 60 senators to limit debate on the nomination. A vote would come two days after the cloture is filed. A final vote--which could follow up to 30 hours of debate--requires a simple majority. If the full Senate votes the way the Senate Banking Committee did, 16-7, Bernanke would receive 69 votes--fewer than Paul Volcker, who received 84-16 when he was confirmed for a second term as chairman in 1983 ... * WASHINGTON (1/25/10)--A proposal by President Barack Obama Thursday to limit the size and scope of large financial institutions could be difficult to implement, according to some industry observers. Obama proposed limits on big banks and their ability to take on risk, and said he is ready to fight any opposition to the plan (The New York Times Jan. 22). The president also said the banking industry’s “irresponsibility” contributed to the financial crisis. Sen. Richard Shelby (R-Ala.), ranking member of the Senate Banking Committee, appeared to agree with some of Obama’s positions. He told American Banker (Jan. 22) that some banks put themselves at risk--and banks that focused solely on banking were in “a lot less trouble.” However, Robert Albertson, chief strategist at Sandler O’Neill and Partners LP, said that the problem isn’t banks--it’s that credit is dead. Jamie Cox, managing partner with Harris Financial Group, said it would be difficult to limit banks’ portion of the nondeposit liability market because the problem affects banks globally ... * WASHINGTON (1/25/10)--The Obama administration is expected to revamp its Making Home Affordable program to help homeowners avoid foreclosure and streamline the documents borrowers must submit to lower payments. The changes are expected to prompt mortgage companies to move faster in lowering borrowers’ payments. The changes also could help alleviate the paperwork mortgage companies must process to qualify borrowers for lower payments (The New York Times Jan. 22). However, requiring fewer documents could mean companies will lend to people who can’t afford their homes, and thus cause more delinquencies. Edward Pinto, mortgage industry consultant and former chief credit officer for Fannie Mae, said the program may change from one that tries to legitimately prevent foreclosures into one that simply postpones them. The $75 billion Making Home Affordable program has been slated as a “disappointment” by the industry ... * WASHINGTON (1/25/10)--The Department of Housing and Urban Development (HUD) is cleaning up its Federal Housing Administration (FHA) lending program by eliminating underperforming lenders (American Banker Jan. 22). Every three months, FHA will review all loans that were originated within the last two years. Lenders whose default and claim rates were more than triple than that of its region and higher than the national rate will be terminated. The first review will cover loans made through Dec. 31, 2009. HUD also will consider account changes in a lender’s circumstances, loan volumes and whether a lender operates in an underserved area. A terminated lender can be re-instated after six months but must undergo an analysis to figure out the cause of its high default rates ...

Mica seeks Obamas support for MBL cap lift

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WASHINGTON (1/25/10)--The Credit Union National Association (CUNA) has called on President Barack Obama to endorse credit union member business lending (MBL) “as part of the solution to the small business credit crunch” in his upcoming State of the Union address. Legislation that would lift the MBL cap is pending in both the House and the Senate, and CUNA has estimated that lifting the MBL cap could result in as much as $10 billion in new capital for small businesses and the creation of over 108,000 new jobs within one year. In a letter sent to Obama late last week, CUNA President/CEO Dan Mica asked him to “not let this money go unused and these jobs go uncreated” and urged Obama to “call on Congress to pass legislation to permit credit unions to lend more to their business-owning members.” Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.), as well as Sen. Mark Udall (D-Colo.) have respectively introduced legislation that would increase the current MBL cap from 12.25% of total assets to 25% of total assets, and increase the de minimis amount of a credit union business loan to $250,000. “This does not represent a complete solution to the problems we face, but this lending could be done safely and soundly without costing the taxpayers a dime and without increasing the size of government,” Mica added.

Rep. Cantor joins full CUNA GAC lineup

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WASHINGTON (1/25/10)--Rep. Eric Cantor (R-Va.) will join a number of his congressional colleagues, including Reps. Dave Camp (R-Mich.), Spencer Bachus (R-Ala.), Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.), and Ed Perlmutter (D-Colo.), as well as House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Chris Dodd (D-Conn.), at the Credit Union National Association's Governmental Affairs Conference (GAC). Cantor took part in the 2009 edition of the GAC, publicly opposing mortgage cramdown efforts and telling the assembled crowd that cramdown would make it “more difficult” for credit unions to provide their members with credit. The GAC takes place Feb. 21-25 in Washington, D.C., and will feature a plethora of political and economic heavyweights, with Financial Accounting Standards Board Chairman Robert Herz, former Federal Reserve Chairman Alan Greenspan, and economist and host of CNBC's The Kudlow Report Larry Kudlow also scheduled to appear. For more information on the GAC, use the resource link.

NCUA releases schedule for first 2010 board meeting

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ALEXANDRIA, Va. (1/25/10)--The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. ET Friday, will consider withdrawing a final rule that addresses Part 706 of its Unfair and Deceptive Practices rules. The UDAP rule withdrawal is a technical action, as the UDAP rule codifies many of the same provisions as the rules that were recently enacted by the Credit Card Accountability, Responsibility and Disclosure (CARD) Act and issued in the Fed's final Truth in Lending Regulation Z rules. The board will also be updated on the status of the National Credit Union Share Insurance Fund during the meeting. A closed meeting of the board--during which the NCUA will discuss supervisory activities and personnel matters--will follow the open session.

Check fraud is 2009 big-growth area for SARs

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VIENNA, Va. (1/25/10)—Mid-year numbers for 2009 indicate a shifting focus of suspicious activity reports (SARs) with a 19% increase in check-fraud reports and a 36% jump in counterfeit check SARs filed by credit unions and other depository institutions. Those figures, provided by the Financial Crimes Enforcement Network’s (FinCEN’s) most recent “SAR Activity Review-By the Numbers” report released Friday, also revealed the following: SARs filed by money services businesses showed a 76% increase in suspected fraud involving Traveler's Checks; SARs filed by casinos indicated an 18% rise in suspicious activity involving checks; and, there was a 19% spike in SARs by the securities and futures industries involving check fraud. The figures result from a comparison to activity for the corresponding time periods from the previous year. A much smaller increase—just one percent—was noted for SARs filings indicating suspected mortgage loan fraud. However, FinCEN underscored that sustpected mortgage fraud reports remain at a historically high level. Prior to the current report, mortgage-fraud SARs witnessed six straight years of double-digit growth. "FinCEN remains focused on its proactive efforts to assist state, local and federal investigators in efforts to use SARs to crack down on mortgage fraud and foreclosure rescue scams, and to identify other emerging trends and patterns," said FinCEN Director James H. Freis, Jr. in a release accompanying the report. "Fraudulent and criminal activity is seldom static and predictable, each financial industry sector has an important role to play in identifying these activities."

Inside Washington (01/21/2010)

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* WASHINGTON (1/22/10)--President Barack Obama Thursday proposed a plan that would limit the size and scope of financial institutions (The New York Times Jan. 22). The changes would prevent bank holding companies from owning, investing, or sponsoring hedge fund or private equity funds and from participating in proprietary trading--which Obama called the Volcker rule, after former Federal Reserve Chairman Paul Volcker. The former chairman champions the restriction, the newspaper said. Obama also seeks to limit consolidation in the financial industry by curbing the growth of the market share of liabilities at the nation’s biggest firms. The banking industry and Republicans said they oppose the proposed changes. Rep. Spencer Bachus (R-Ala.) said the Republicans already proposed a plan last July to end the bailouts and restore market discipline. Obama said he expected opposition, and noted, “If these folks want a fight, it’s a fight I’m ready to have” ... * WASHINGTON (1/22/10)--The Federal Deposit Insurance Corp. (FDIC) announced that it plans to open a temporary satellite office in Chicago to manage receiverships and liquidate assets from failed financial institutions primarily located in Midwestern states. The office will provide facilities for up to 500 non-permanent staff and contractors. FDIC uses temporary satellite offices to keep temporary asset resolution staff closer to the concentration of failed bank assets they oversee. As work diminishes, the offices close. Similar offices operate in Irvine, Calif., and Jacksonville, Fla. ... * WASHINGTON (1/22/10)--The Federal Deposit Insurance Corp. (FDIC) may decide not to use ratings agencies when it sets insurance premiums for large banks, FDIC Chairman Sheila Bair said at a conference Wednesday (American Banker Jan. 21). The FDIC has used debt ratings and other risk factors to calculate premiums, but scrutiny over the performance of private ratings agencies has surfaced recently, causing the agency to re-think its process. The FDIC may do its own analysis, Bair added ...

CARD Act compliance is CUNA audio conference topic

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WASHINGTON (1/22/09)—The Credit Union National Association (CUNA) on Feb. 2 will hold an audio conference call on the recent final rule that implements the provisions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that will become effective on Feb. 22, 2010. Topics covered during the audio conference call will include portions of these rules that require new minimum payment warnings on credit card statements, prevent card issuers from increasing interest rates during the first year an account is open, restrict how a card issuer may increase the annual percentage rate of a credit account, require a consumer to opt-in before over-the-limit fees may be charged, impose requirements on how payments are to be applied to different balances, and require co-signers for consumers under 21 years of age. This will also include discussion of the recent provisions that will prohibit creditors from raising their variable rates based on changes to the underlying index if there is a floor on these rates. Additional requirements of these CARD Act rules will also be discussed during the call, which will be led by CUNA Senior Assistant General Counsel Jeff Bloch and CUNA assistant general counsel and senior compliance counsel Michael McLain. The speakers on this call will also include Federal Reserve Board attorneys Benjamin Olson and Amy Henderson and credit union compliance expert Mary-Lou Heighes. To register for the 90-minute, 2:00 p.m. (ET) audio conference, use the resource link.

House subcommittee looks at bank failures

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WASHINGTON (1/22/10)—A House Financial Services subcommittee Thursday took a look at the condition of financial institutions through a case study of a recent bank failure. The House subcommittee on financial institutions and consumer credit, which is chaired by Rep. Luis Gutierrez (D-Ill.), heard from representatives of the banking industry and the U.S. Treasury Department, as well as federal bank regulators. In written testimony, Director Mitchell Glassman of the Federal Deposit Insurance Corp’s (FDIC’s) division of resolutions and receiverships reiterated the agency’s 2009 bank-failure experience. Glassman noted that the FDIC resolved 140 insured institutions with over $171 billion in total assets. He added, “While the economy is showing signs of improvement, recovery in the banking industry tends to lag behind other sectors. We expect to see the level of failures continue to be high during 2010.” Glassman testified that the FDIC is prepared and ready to handle the situation. Due to staffing enhancements that began several years ago and other changes, such as last year’s expansion of the agency’s Receivership Assistance Contractors and geographic expansion through temporary satellite offices on both the west and east coasts, Glassman said the FDIC stands ready to manage bank closing and receivership activities throughout the country. Other witnesses included representatives of: Bethel New Life Inc., a faith-based community group with a focus on Chicago’s West Side; FBOP Corporation; U.S. Bank; Austin Bank; Treasury, and the Office of the Comptroller of the Currency. Today, the parent Financial Services Committee intends to take a look at compensation in the financial industry. Three scheduled witnesses are: Lucian Bebchuk, from Harvard Law School; Nell Minow, editor and founder of The Corporate Library, and Joseph Stiglitz, from the Columbia Business School.

Rep. Camp of Ways and Means joins GAC lineup

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WASHINGTON (1/22/10)--Rep. Dave Camp (R-Mich.), the top Republican on the powerful House Ways & Means Committee, is the latest guest to sign on to speak at the Credit Union National Association’s (CUNA) upcoming Governmental Affairs Conference (GAC). The GAC takes place between Feb. 21 and 25 in Washington, D.C. Camp, who also appeared at last year’s GAC, was one of many co-sponsors of the Credit Union Regulatory Improvements Act, and, more recently, has served as the ranking GOP member of the House Ways and Means Committee. Other key GAC speakers from Capitol Hill include Senate Banking Committee Chairman Chris Dodd (D-Conn.), House Financial Services Commmittee Chairman Barney Frank (D-Mass.) and from that same committee Ranking Minority Member Spencer Bachus (R-Ala), Paul Kanjorski (D-Penn.), Ed Royce (R-Calif.) and Ed Perlmutter (D-Colo). The GAC will also feature further information and entertainment, including an opening day concert, select speakers, and a point-counterpoint debate between MSNBC pundit Joe Scarborough and former Democratic National Committee Chairman Howard Dean. Use the resource links below for more information.

CUNA Little impact seen from high court expenditure ruling

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WASHINGTON (1/22/10)--Thursday’s Supreme Court ruling which lifted restrictions on corporate political spending on communications will likely have little or no impact on the Credit Union National Association’s (CUNA) most effective political action tools, including partisan communications and independent expenditures. The Supreme Court in a 5 to 4 ruling found that existing limits on the campaign spending of corporate interests were not consistent with the political speech protections set forth in the First Amendment. Conservative members of the court supported the ruling, while the four dissenting members included Justices John Paul Stevens, Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor. CUNA Senior Vice President of Political Affairs Richard Gose said the Supreme Court decision “has everything to do with communications by corporations, but little or nothing to do with contributions made to political action committees such as the Credit Union Legislative Action Council (CULAC), CUNA’s political action committee (PAC),” and these types of contributions are expected to continue through the upcoming election cycle. Businesses and labor unions were previously required to use PACs to publicly attack or support a given candidate, and there was a limit on those funds. However, with the Supreme Court ruling, these entities will now be able to support or oppose a given candidate in public advertising campaigns, with no need for a separate PAC. However, they will still be required to disclose their involvement in any campaign-related ads. Direct corporate contributions to candidates will still be prohibited under Federal law. Responding to the ruling, President Barack Obama in a release said his Administration would “get to work immediately” and “talk with bipartisan Congressional leaders to develop a forceful response to this decision.” Sen. Russ Feingold (D-Wis.), who, along with Sen. John McCain (R-Ariz.), authored legislation that reformed some campaign finance laws, has also promised to work to restore “as many of the critical restraints on corporate control of our elections as possible."

CUNA denounces banker opposition to MBL increase

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WASHINGTON (1/21/10)--Credit Union National Association (CUNA) President/CEO Dan Mica contacted Senate leaders Wednesday and denounced bankers' efforts to dissuade lawmakers from supporting a bill that would create more than 100,000 jobs by removing the credit union member business lending (MBL) cap. In a letter to Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.), Mica said he was “disappointed to see” a recent letter from the American Bankers Association which sought to discourage Senate support for including S. 2919, the Small Business Lending Enhancement Act, in jobs creation legislation that is expected to be considered in the near future. “The bankers’ once again oppose efforts aimed at providing small businesses with capital, and offer no alternative to address the current problems facing small businesses – problems that they have helped create and appear to be doing little to help alleviate,” Mica said. Encouraging both Reid and McConnell to support S. 2919 as it makes its way through the Senate, Mica said that “credit unions remain willing to lend to their small business-owning members,” and “allowing credit unions to extend loans to these credit starved businesses will add fuel to a self-sustaining economic expansion.” S. 2919, which was introduced by Sen. Mark Udall (D-Colo.) late last month, would increase credit union MBL authority to 25% of assets and raise the "de minimis" threshold for a loan to be considered a member business loan to $250,000. The legislation also has the support of Sens. Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillibrand (D-N.Y.), and similar legislation is awaiting action in the House. CUNA has estimated that lifting the MBL cap would free credit unions to loan as much as $10 billion to small businesses in the first year of enactment, a move that would create over 108,000 new jobs. CUNA has noted that while this will not solve the entire credit problem facing small businesses, it will provide meaningful assistance at no cost to taxpayers and without increasing the size of government. For the full CUNA letter, use the resource link.

NCUA seeks dismissal of Corp. Central CU suit

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WASHINGTON (1/21/10)--The National Credit Union Administration (NCUA) has filed a motion to dismiss Corporate Central CU's lawsuit seeking a refund of $6 million in capital shares from U.S. Central FCU. The NCUA motion, which was filed in federal court last week, states that Corporate Central lacks the authority to bring a suit against U.S. Central and the NCUA because the Agency assumed the powers of both its management and its members when it took over U.S. Central in early 2009. The NCUA motion also seeks to dismiss Corporate Central's claim that NCUA's actions as conservator violated the equal protection clause of the U.S. Constitution. The case, which is currently in the United States District Court for the Eastern District of Wisconsin, was previously stayed by the NCUA in November of 2009, soon after Corporate Central filed its complaint in October of that year. According to the NCUA’s filings, its authority as conservator of U.S. Central "includes Plaintiff's right as a member of U.S. Central to sue the NCUA as conservator of U.S. Central or U.S. Central for damages arising from Plaintiff's investment in U.S. Central.” "The NCUA's filing to dismiss the Corporate Central lawsuit is similar to its motion to intervene as a substitute plaintiff in the litigation against former and current directors and officers of WesCorp, which it filed in Los Angeles Superior Court last month," said Credit Union National Association Counsel for Special Projects Michael Edwards. "In both cases, the NCUA has asserted that the Federal Credit Union Act gives the agency the rights and privileges of a conserved credit union’s members, including the right to sue the conserved credit union, or its management, under most circumstances." The Corporate Central suit claims that U.S. Central owes corporate credit unions up to $100 million in Membership Capital Shares (MCS) that had usually been returned to members when a member's investments in and loans from U.S. Central decreased. U.S. Central owes over $6 million to Corporate Central itself, according to the complaint, and Corporate Central alleges that U.S. Central improperly changed its bylaws in late 2008 to retain these funds as a reaction to its deteriorating financial condition. U.S. Central’s bylaw change centered on policies that governed the recalculation of required MCS balances. This recalculation created an "adjustment refusal policy" that would prohibit MCS refunds to U.S. Central members, even in the event that a member would have been entitled to a MCS refund under the previous policy based on the member corporate's investment and loan levels. U.S. Central's previous policy required member credit unions to maintain MCS and other capital equal to at least 5% of their total investments in U.S. Central and associated loans from U.S. Central. This percentage was recalculated every six months, and members could reportedly receive refunds of excess MCS if their total investments and loans with U.S. Central had decreased. Corporate credit unions, including Corporate Central, were notified of the policy change shortly before U.S. Central announced substantial losses for the 2008 fiscal year. Corporate Central, which held over $1.3 billion in direct and indirect investments in U.S. Central as of Dec. 31, 2008, has alleged that the bylaw change was invalid based on the theory that some U.S. Central board members should have recused themselves from voting on the bylaw change.

Fed to study check electronic payment methods

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WASHINGTON (1/21/10)--The Federal Reserve (Fed) on Wednesday announced that it will undertake further study of “the current volume and composition of check and electronic payments in the United States.” The Fed study, which will collect information on the “annual number, dollar value and composition of retail noncash payments in the United States,” is similar to studies completed by the Fed in 2001, 2004 and 2007. “The Credit Union National Association’s Payments Subcommittee plans to follow the development of these studies closely, interact with those undertaking the work, and provide information to the Fed as it pursues these studies,” CUNA Deputy Counsel Mary Dunn said. The 2010 study, when combined with the results of these earlier studies, “will provide aggregate estimates and current trends in the use of noncash payment instruments by U.S. consumers and businesses,” the Fed said. “Previous studies have revealed significant changes in the U.S. payments system over time, including a continuing decline in the use of checks and growing use of electronic payments, such as automated clearinghouse, electronic banking transactions, credit cards, debit cards and stored value cards,” the release added. Early results of the studies should be released later this year.

Inside Washington (01/20/2010)

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* WASHINGTON (1/21/10)—The Federal Housing Administration was expected to release tighter standards yesterday for loans to qualify for its guarantee. (The New York Times Jan. 19). Included in the changes will be: a higher initial insurance premium, 2.25%, up from 1.75%; sellers will be banned from offering as much assistance to help buyers cover closing costs; and the ceiling for assistance will drop to 3% of a property’s value, down from 6%, among other things. The new standards are intended to bolster the FHA’s financial position, as well as to screen out unprepared borrowers. As of the end of 2009, the FHA was insuring more than a half million seriously delinquent loans, out of a reported total of 5.8 million single-family residences with a total loan balance of $750 billion... * WASHINGTON (1/21/10)—The Federal Deposit Insurance Corp. (FDIC) is seeking comment on ways its risk-based deposit insurance assessment system could be tweaked to reflect risks that might be posed by certain employee compensation programs. In a Jan. 19 Federal Register document, the FDIC indicated it does not seek “to limit the amount which employees are compensated, but rather is concerned with adjusting risk-based deposit insurance assessment rates to adequately compensate the (Deposit Insurance Fund) DIF for the risks inherent in the design of certain compensation programs.” By doing so, the FDIC intends to provide “incentives for institutions to adopt compensation programs that align employees' interests with the long-term interests of the firm and its stakeholders, including the FDIC.”... * WASHINGTON (1/21/10)) — In a recent speech in New York, a top Federal Reserve official kept up the drumbeat of Fed support for preserving, and even expanding, the central bank’s role in overseeing the country’s financial system. New York Fed President William Dudley, in remarks to the Partnership for New York City, said the Fed system has the experience and expertise needed to continuously monitor three areas that need it: large systemically important financial institutions, payments and settlements systems, and the capital markets. On Capitol Hill, the House has approved a bill that retains the Fed's supervision powers and gives it broad authority to rein in systemic risk. However, the Senate has yet to act on a bill and in that chamber there is bipartisan support to strip down the Fed’s role to setting monetary policy. (American Banker Jan. 20)…

Dodd added to vibrant GAC lineup

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WASHINGTON (1/21/10)—Senate Banking Committee Chairman Christopher Dodd (D-Conn.), whose panel is currently involved in negotiations to hammer out a financial services regulatory reform bill in that chamber, will address the 2010 CUNA Governmental Affairs Conference (GAC) in Washington, D.C. Dodd will address the GAC on Wednesday, Feb. 24. In addition to serving as the head of the Senate Banking Committee, Dodd serves on athe Committee on Health, Education, Labor, and Pensions. Dodd joins other starpower already announced for the upcoming GAC, with Reps. Barney Frank (D-Mass.) Paul Kanjorski (D-Penn.), Spencer Bachus (R-Ala.), Ed Royce (R-Calif.), and Ed Perlmutter among those signed on as speakers for the event. Kanjorski and Royce are longstanding friends of the credit union movement. They recently collaborated to introduce H.R. 3380, a bill that would lift the credit union member business lending cap. Bachus has also backed credit unions by working to maintain credit union independence in this year's ongoing regulatory reform process. All three are senior members of the House Financial Services Committee; Bachus is the panel's ranking Republican and Kanjorski is the number-two Democrat behind Chairman Frank. Perlmutter, also a House Financial Services Committee member, late last year offered an amendment to the committee print of the Financial Stability Improvement Act (H.R. 3996), a bill that would give the systemic risk council the authority to take corrective action regarding accounting matters. The amendment would bolster government oversight of the Financial Accounting Standards Board (FASB) and CUNA maintains it would improve the accounting board's policy-making process and help minimize arbitrary rulemaking. FASB Chairman Robert Herz is also highlighted on the GAC program. The GAC, which will take place between Feb. 21 and 25 in Washington, D.C., will give credit union leaders the opportunity to learn the latest, first hand, from influential policymakers, as well as a platform to advocate for credit union issues. Other featured speakers include: Larry Kudlow, economist and host of CNBC's The Kudlow Report, former Federal Reserve Chairman Alan Greenspan, and Richard Phillips, Captain of the Maersk Alabama, which was hijacked by Somali pirates earlier this year, are also scheduled to speak at the event. A political point-counterpoint discussion between Joe Scarborough, former Congressman and current host of MSNBC's Morning Joe, and Presidential candidate and former Democratic National Committee Chairman Howard Dean, will also liven up the GAC. The festivities will begin with a CUNA Council-sponsored concert by the World Classic Rockers, featuring member of Santana, Journey, Boston, Steppenwolf, Toto and Lynyrd Skynyrd. Use the resource link below for more information.

CUNA Home Act notice regs should apply to mortgages only

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WASHINGTON (1/20/10)--The Credit Union National Association (CUNA) in a Tuesday letter commented on portions of Federal Reserve Board rules which implement the Helping Families Save Their Homes Act that require financial institutions to notify consumers if their mortgages have been sold or transferred to another party. In the letter, CUNA did not object to the 30-day notice requirements for mortgage loans but did not support these requirements for loan participations. “ Participation transactions are complicated” and borrowers may be confused “when they receive a notice that details the various parties who have purchased portions of these loans ,” CUNA senior assistant regulatory counsel Jeff Bloch wrote. According to CUNA, “the confusion for borrowers outweighs the benefits this information provides.” CUNA also urged the Fed to "review the applicability of this rule with regard to participation loans" and to “expand the exception to participation loans in which legal title transfers for some portion, but not for the entire loan, especially when the servicer does not change.” Under the Act, purchasers and assignees that acquire a mortgage loan must provide the notice within 30 days after the loan is acquired, which provides information about the transfer. The notice required under the Act would be provided by the purchaser or assignee of the loan, and while credit unions typically do not purchase loans, the rule would apply to credit unions that purchase loans via participation agreements or merge with other credit unions, CUNA said. According to CUNA, the rule would also apply to credit union service organizations (CUSOs) that purchase mortgage loans from credit unions. Consumers will also "have little interest” in these notifications if the mortgage servicer does not change, as the mortgage servicer collects the mortgage payments “and serves as the main contact for the borrower.” CUNA's letter was developed with CUNA's consumer protection subcommittee, chaired by Idaho CU League President Alan Cameron. For the full comment letter, use the resource link.

Inside Washington (01/19/2010)

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*WASHINGTON (1/20/10)-- While Congress was in recess last week, U.S. Senate Minority Whip Jon Kyl, of Arizona, met with seven credit union leaders from his state and spent more than 45 minutes discussing the Senate version of a member business lending (MBL) bill, The Small Business Lending Enhancement Act (S. 2919.) That bill proposes to increase the MBL cap to 25% of a credit union’s assets. The credit union representatives stressed to Kyl and his staff that the current cap represents an unnecessary restriction on lending and is forcing credit unions to turn down small businesses seeking credit. They explained that even credit unions that aren’t hitting the cap feel pushed to "cherry-pick" loans because the cap doesn't allow them to diversify their portfolios to meet the needs of their membership as a whole. Austin De Bey, of the Arizona Credit Union League, reported from the meeting, “One credit union held that they aren't near the cap yet, but the request for loans has increased so much because banks are referring them to credit unions, that they would reach the cap very soon if the rate of new loan request continued”... * WASHINGTON (1/20/10)—On Jan. 29, at the Federal Deposit Insurance Corp.’s conference on interest rate risk, Federal Reserve Board Vice Chairman Donald Kohn will be a featured speaker. The symposium is being conducted to address topics associated with banks' potential exposure to an expected rise in short-term interest rates this year. (American Banker Jan. 19) Specific topics are to include interest-rate risk management strategies at banks of all asset sizes, how extending maturities on liabilities might mitigate risk, and also the FDIC’s supervisory view on banks' management of interest rate risk...

Feds new variable rate credit restrictions cause issues for CUs

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WASHINGTON (1/20/10)--In the final rule issued last week that implements provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), the Federal Reserve Board (Fed) indicated that credit unions that have a floor on their variable rate credit cards may not take advantage of the variable rate exception when increasing the annual percentage rates (APR) of those cards. Under these provisions, effective February 22, 2010, credit unions will only be able to raise their credit card rates under specific circumstances. One of these is when there is a variable rate and the increase is based on a change in an index that is not under the card issuer's control. However, under the rule issued last week, the Fed has indicated that the ability to raise rates under these circumstances will not apply if the issuer imposes a floor that will not permit the rate to decrease at all times in a manner consistent with reductions in the index. According to Credit Union National Association senior assistant general counsel Jeffrey Bloch, "many credit unions that impose variable rates use a floor to ensure that the APR is sufficient to compensate for the risks of their credit card programs and that these floors have also been necessary due to the very low levels of the underlying indexes that have existed in recent years." Bloch said that "CUNA has already been in contact with the Fed about this issue and the Fed has indicated its willingness to continue discussions with CUNA on the impact of these provisions on credit unions. Credit unions are not only concerned with this change, but are also concerned with the very short period of time they will have to make the necessary adjustments.” Bloch also notes that this change was first implemented in the final rule and that credit unions and others did not have an opportunity to comment on this restriction during the rulemaking process. The CARD Act rules issued last week also outline numerous other credit card industry reforms, including rules that prevent lenders from raising rates on existing balances, require issuers to consider a consumer's ability to make payments, and prevent over-the-limit fees, among other things. CUNA will hold an audio conference call on the new Regulation Z CARD Act rule on Feb. 2nd at 2 pm ET. More information on this call will be announced soon.

Congress Hearings dominate the week for CUs

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WASHINGTON (1/20/10)--The full Congress returns to work this week for the first time in 2010, and while credit union concerns will not be addressed in legislation this week, there will be a busy schedule, with plenty of hearings on the docket. On Wednesday, the House Financial Services Committee Subcommittee on Housing and Community Opportunity will hold a hearing on H.R. 476, the Housing Fairness Act. The Senate Banking Committee on Wednesday will hold confirmation hearings for Department of Commerce, Department of Housing and Urban Development, Government National Mortgage Association, and Securities Investor Protection Corporation nominees. The Finance industry will also be a focus of this weeks hearings, with the House Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit holding a Thursday hearing on the condition of financial institutions and the full House Financial Services Committee discussing finance industry compensation on Friday. The House Financial Services Committee Subcommittee on Housing and Community Opportunity will also hold a field hearing in Minneapolis, Minn., entitled "The Impact of the Foreclosure Crisis on Public and Affordable Housing in the Twin Cities." The hearing will take place on Saturday.

Inside Washington (01/18/2010)

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* WASHINGTON (1/19/10)--The Federal Reserve should keep interest rates at “near zero” for the next couple months, said New York Federal Reserve Bank President William Dudley (Dow Jones Jan. 15). Dudley spoke with PBS in an interview Wednesday. The target rate likely will stay at exceptionally low levels for six months, he said. Dudley also suggested the Fed stop its planned purchase of $1.25 trillion in mortgage-backed securities by March because the economy is starting to improve ... * WASHINGTON (1/19/10)--In a report to Senate Banking Committee members, the Federal Reserve Board argued that it should keep its supervisory powers for several reasons (American Banker Jan. 15). The Fed said it is knowledgeable about monetary policy and consolidated supervision. Its current supervisory role also benefits central bank functions, the Fed added. The Fed submitted the report as senators consider Committee Chairman Christopher Dodd’s (D-Conn.) regulatory reform bill, which would strip the Fed of its powers and give them to another agency ... * WASHINGTON (1/19/10)--Treasury Secretary Timothy Geithner will testify Jan. 27 before a panel in the House that is investigating why the Federal Reserve Bank of New York told American International Group (AIG) not to disclose the government’s bailout to investors. Lawmakers are expected to ask Geithner about e-mails written in 2008 between the New York Fed and AIG (American Banker Jan. 15). Geithner headed the New York Fed during that time. Thomas Baxter, general counsel for the New York Fed, also is slated to testify. Baxter said in a statement Jan. 8 that Geithner was not involved in the issue ... * WASHINGTON (1/19/10)--Financial Crisis Inquiry Commission members Thursday questioned Securities and Exchange Commission (SEC) Chairman Mary Schapiro about SEC’s failure to take care of problems at the institutions it regulated. At the meeting, Schapiro said her agency is not flawed and that other agencies don’t have to ask lawmakers when they need funding (American Banker Jan. 15). She cited the Federal Deposit Insurance Corp. (FDIC), which can raise money from deposit insurance premiums. FDIC Chairman Sheila Bair also was questioned during the hearing. Brooksley Born, former chair of the Commodity Futures Trading Commission, asked Bair if the market still poses a systemic risk and whether regulatory reform is needed. Bair said both should “be a high priority for Congress,” and that regulators can only do so much until legislation is enacted. Also, Attorney General Eric Holder updated commission members on mortgage fraud. The Federal Bureau of Investigation is currently analyzing 2,800 cases, a 400% increase over the past five years ...

CUs equal 20 of CDFIs says federation

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WASHINGTON (1/19/10)--The U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund last week certified five credit unions and one credit union service organization (CUSO) as CDFIs. The certified organizations are Atlanta, Ga.’s B.O.N.D. Community Development FCU, Cleveland, Tenn.’s Bradley Initiative CU, El Paso, Texas’s El Paso Credit Union Affordable Housing, LLC, Clarksdale, Miss.’s Friendship Community FCU, Monroe, Ala.’s Monroe Education Employees FCU, and Jackson, Miss.’s Valued Members CU. Community Development Credit Unions (CDCUs) now account for 165, or 20%, of CDFI-certified financial institutions, the National Federation of Community Development Credit Unions (NFCDCU) reported. In comments accompanying the announcement, NFCDCU President/CEO Cliff Rosenthal said that that his group has “been focusing” on getting more CDCUs certified under the CDFI, as “nearly all” of their member CDCUs “qualify for the designation.” The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit, and credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding that will help maintain their credit union's presence in the community. The Treasury is making a total of $113 million in funding available through the CDFI Fund during 2010.

HUD Over 100k loan mods completed as of Dec.

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WASHINGTON (1/19/10)--The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) have noted a “significant acceleration in the rate at which borrowers are being approved for permanent modifications” under the Obama Administration’s Home Affordable Modification Program (HAMP), with over 100,000 mortgage modifications being converted under HAMP as of Dec. 2009. A number of credit unions participate in HAMP, which aims to help struggling homeowners by modifying their mortgages. The program is attempting to lower the mortgage payments of up to 4 million homeowners through mortgage modifications by 2012. HAMP modifications have resulted in savings of $1.5 billion in funds for homeowners thus far. Over 850,000 homeowners “have had a median payment reduction exceeding $500,” according to the release.

House committee sets hearings on fin. inst. health housing

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WASHINGTON (1/19/10)--The House Financial Services Committee will return to work with a busy week of hearings, beginning with a Jan. 20 hearing on H.R. 476, the Housing Fairness Act of 2009. A hearing on the health of U.S. financial institutions will follow on Thursday, Jan. 21, and Chairman Rep. Barney Frank (D-Mass.) announced a hearing on executive compensation, set for Friday, Jan. 22, earlier this week. Witness lists and prepared testimony had not been posted at press time.

Senate may remove CFPA from its reg reform bill

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WASHINGTON (1/19/10)--As the Senate begins its portion of the regulatory reform debate, Senate Banking Committee leaders Sen. Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.) are reportedly considering removing the proposed Consumer Financial Protection Agency in favor of increasing the consumer protection powers of existing regulatory agencies. Both Dodd and Shelby recently stated that they have made "meaningful progress" in negotiating the structure of the Senate version of a financial regulatory reform bill. The proposed Consumer Financial Protection Agency, which was passed by the House, alongside a series of comprehensive financial regulatory reform measures, just before the recently completed winter break, would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools. However, there were a number of changes made to the agency before it passed the house, including language which exempted all credit unions with under $10 billion in assets from the authority of the agency. Legislators are reportedly considering a wide range of alternatives to the CFPA, including a council of regulators that would collaborate to create and enforce consumer protection measures, and creating a consumer protection division at the Department of Treasury. Ryan Donovan, CUNA vice president of legislative affairs, said that details of the various proposals have not been made available and no decision on how to proceed in the Senate has likely been made. "We will evaluate any new consumer agency proposal as we have the CFPA and other proposals: what is the likely affect of the proposal on credit unions' ability to serve their members, and how can we eliminate or minimize any adverse impact on credit unions and their members?" Donovan said. Dodd, who will retire after his replacement is elected this Nov., introduced his own regulatory reform proposal late last year. However, after that proposal failed to gain support in the Senate from Republicans and some Democrats, Dodd announced the creation of bi-partisan pairs of Senators to work on the major components of regulatory restructuring legislation. The Senate Banking Committee could begin to mark-up regulatory restructuring legislation as early as February, Donovan said.

New NCUA examiner guidance Look beyond fin. ratios

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ALEXANDRIA, Va. (1/19/10)—Guidance to federal examiners to “look beyond financial ratios” to determine a credit union’s financial condition—and particularly when examining a low-income (LICU) or community development credit union (CDCU)—was issued late Friday by the National Credit Union Administration (NCUA). In a Letter to Credit Unions (10-CU-1), NCUA Chairman Debbie Matz noted that the contents of the guidance apply to all federal credit unions but the primary focus is “to discuss the characteristics, benefits, and unique challenges of low-income credit unions and community development credit unions.” “One of the primary reasons for the creation of credit unions is to make credit available to people of modest means for productive purposes.” Matz wrote adding, “This guidance was developed based on discussions with dedicated low-income credit union management.” The agency has been working on the guidance for some time, and has been in communication with the National Federation of Community Credit Unions as the guidance developed. The agency released the letter shortly after meeting Friday with Credit Union National Association’s (CUNA’s) Small Credit Union Committee. The chairman of that CUNA committee, CEO Frank Michael, of Allied CU, Stockton Calif., said after that meeting that the NCUA has a clear view of the existing divide between encouraging messages sent by the agency board to low-income and community development credit unions, and the sometimes discordant, harsh treatment they experience from examiners. The NCUA letter offers 11 pages of guidance to examiners. It clearly defines some operational differences allowed LICUs, which could also apply to many CDCUs, including additional sources of funding and resources from both the NCUA and outside parties. The guidance, in part, tells examiners to consider how these different types of available funding could affect balance sheets. For instance, the letter said:
*Funding sources such as nonmember deposits, secondary capital, and loans from the Community Development Revolving Loan Fund will affect the financial ratios of these usually small credit unions; * In addition to the effects of the additional funding, examiners must also consider the unique characteristics of members in LICUs and CDCUs; * Moreover, examiners should recognize that LICUs and CDCUs systematically show higher operating costs than other credit unions because of the nature of the field of membership they serve. * Similarly, delinquency rates at LICUs and CDCUs, while often higher than other credit unions, do not automatically translate proportionally into charge-offs.
Use the resource link below to acce4ss the NCUA letter.

New NCUA examiner guidance Look beyond fin. ratios(1)

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ALEXANDRIA, Va. (1/19/10)—Guidance to federal examiners to “look beyond financial ratios” to determine a credit union’s financial condition—and particularly when examining a low-income (LICU) or community development credit union (CDCU)—was issued late Friday by the National Credit Union Administration (NCUA). In a Letter to Credit Unions (10-CU-1), NCUA Chairman Debbie Matz noted that the contents of the guidance apply to all federal credit unions but the primary focus is “to discuss the characteristics, benefits, and unique challenges of low-income credit unions and community development credit unions.” “One of the primary reasons for the creation of credit unions is to make credit available to people of modest means for productive purposes.” Matz wrote adding, “This guidance was developed based on discussions with dedicated low-income credit union management.” The agency has been working on the guidance for some time, and has been in communication with the National Federation of Community Credit Unions as the guidance developed. The agency released the letter shortly after meeting Friday with Credit Union National Association’s (CUNA’s) Small Credit Union Committee. The chairman of that CUNA committee, CEO Frank Michael, of Allied CU, Stockton Calif., said after that meeting that the NCUA has a clear view of the existing divide between encouraging messages sent by the agency board to low-income and community development credit unions, and the sometimes discordant, harsh treatment they experience from examiners. The NCUA letter offers 11 pages of guidance to examiners. It clearly defines some operational differences allowed LICUs, which could also apply to many CDCUs, including additional sources of funding and resources from both the NCUA and outside parties. The guidance, in part, tells examiners to consider how these different types of available funding could affect balance sheets. For instance, the letter said:
*Funding sources such as nonmember deposits, secondary capital, and loans from the Community Development Revolving Loan Fund will affect the financial ratios of these usually small credit unions; * In addition to the effects of the additional funding, examiners must also consider the unique characteristics of members in LICUs and CDCUs; * Moreover, examiners should recognize that LICUs and CDCUs systematically show higher operating costs than other credit unions because of the nature of the field of membership they serve. * Similarly, delinquency rates at LICUs and CDCUs, while often higher than other credit unions, do not automatically translate proportionally into charge-offs.
Use the resource link below to acce4ss the NCUA letter.

Inside Washington (01/14/2010)

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* WASHINGTON (1/15/10)--A lot of uncertainty exists surrounding the Troubled Asset Relief Program (TARP)--specifically, when it will wind down and how much it will cost taxpayers, according to TARP’s congressional oversight panel. The report comes after President Barack Obama Thursday unveiled a plan to tax large banks to recoup TARP losses--which could reap an estimated $116 billion, according to the Treasury (Dow Jones Jan. 14). Elizabeth Warren, the congressional panel’s chair, said TARP likely will remain in place after its Oct. 3 expiration date because Treasury can continue to disburse funds after that date. TARP will “live on for years,” Warren said. However, Treasury needs to share with the public more details on why it provided “substantial assistance” to GMAC while appearing to have treated GMAC differently from other stress-tested institutions, the report said. It also questioned how Treasury would handle conflicts of interest while winding down TARP. The panel suggested Treasury hold TARP assets in a trust separate from the government and political pressure ... * WASHINGTON (1/15/10)--As published in the Federal Register Wednesday, the Federal Deposit Insurance Corp.’s Advisory Committee on Community Banking is scheduled to meet Jan. 28 to discuss policy issues that impact small community banks. On the agenda: the impact of the current economic environment on community banks’ ability to raise capital and increase lending, current examination issues, regulatory reform and other legislative proposals. The meeting is open to the public ...

Compliance When negative balance fees may be charged

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WASHINGTON (1/15/10)--Changes to many financial institution business practices, including overdraft fees, have been all the rage in Congress lately, and this month’s Credit Union National Association (CUNA) Compliance Challenge addresses overdraft fees, asking if the newly proposed Regulation E overdraft rule allows credit unions to charge a negative balance fee when the member’s ATM/debit card overdraft leads to a negative balance for a long period of time. The Federal Reserve Board recently changed Reg E to require institutions to inform and to acquire the consent of account holders before they can charge overdraft fees for ATM and one-time debit card transactions. Consumers may revoke this consent at any time, and financial institutions must provide the same types of accounts to all members or customers, whether they choose to opt in or not. According to CUNA, the new Reg E rule does not change, whether you call the fee an “overdraft fee” or a “negative balance fee.” Any fee that results from an ATM/one-time debit card overdraft is covered by the regulation. Thus, credit unions will only be allowed to charge these types of fees for ATM and one-time debit card overdrafts, beginning on July 1st (or on August 15th for existing members) if the credit union member has been notified in writing of the overdraft service and fully opts-in to the service. The notification must disclose all overdraft fees, including per item fees, daily overdraft fees, and sustained overdraft fees, CUNA added. For the full Compliance Challenge, use the resource link.

Obama bank fee would not affect CUs

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WASHINGTON (1/15/10)--President Barack Obama on Thursday announced a new Financial Crisis Responsibility Fee that, according to the U.S. Treasury, “would require the largest and most highly levered Wall Street firms to pay back taxpayers” for the assistance provided to them through the government's Troubled Asset Relief Program (TARP). “Over sixty percent of revenues will most likely be paid by the 10 largest financial institutions,” the Treasury predicted. There is no indication that the fee will affect credit unions. The fee will seek to recoup up to $117 billion in funds, and the Treasury has projected that the fee will bring in $90 billion in funds over a 10-year period. However, if the full $117 billion in funds have not been fully paid back within 10 years, the fee would remain in place until the full amount has been replenished. “It is our responsibility to ensure that the taxpayer dollars that supported these actions are reimbursed by the financial sector so that the deficit is not increased,” the Treasury said in a release announcing the fee. The fee, which covers “firms that were insured depository institutions, bank holding companies, thrift holding companies, insurance or other companies that owned insured depository institutions, or securities broker-dealers,” would “only be applied to firms with more than $50 billion in consolidated assets,” and small and community banks would not be subject to the fee. Domestic firms as well as U.S.-based subsidiaries of foreign firms will be subject to the fee. “The Administration will also work through the G-20 and the Financial Stability Board to encourage other major financial centers to adopt comparable approaches,” the release added. The fee will be assessed at a rate of 15 basis points, or 0.15%, of covered liabilities per year, and Federal Deposit Insurance Corporation-assessed deposits and insurance policy reserves will be exempted, “as appropriate,” from the fee, the Treasury added. The fee will be collected through the Internal Revenue Service, and the Obama Administration plans to “work with Congress and regulatory agencies in order to design protections against avoidance by covered firms.” Additional details on the fee will be released with President Obama’s upcoming budget.

Schumer underscores support for MBL cap increase

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WASHINGTON (1/15/10)--Sen. Charles Schumer (D-N.Y.) this week reiterated his support for increasing the member business lending cap for credit unions, telling a group at Cortland, N.Y.’s CFCU Community Credit Union that in 2010 he must “focus” on increasing lending to the small businesses that “are the lifeblood” of the American economy. Credit unions are well-positioned to help small businesses in central N.Y., adding that the MBL bill will provide “a major boost” for credit unions. Schumer late last year joined Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillibrand (D-N.Y.) in sponsoring Sen. Mark Udall’s (D-Colo.) S. 2919, which would increase the credit union MBL cap to 25% of assets raise the "de minimis" threshold for a loan to be considered a member business loan to $250,000. Schumer, like fellow Senator Hagan, cited Credit Union National Association (CUNA) statistics which estimated that lifting the MBL cap would allow credit unions nationwide to lend up to $10 billion in funds to small businesses in the first year that the cap has been lifted. CUNA has also stated that the MBL reforms would create over 100,000 new jobs. A mere 10 of Central N.Y.’s credit unions currently lend to small businesses, and Schumer said that lifting the cap would encourage credit unions that are not currently lending to small businesses to begin doing so.

Frank announces House hearing on compensation

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WASHINGTON (1/14/10)—House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) on Wednesday announced that the Committee will “discuss the issue of compensation practices for both financial and non-financial firms” at a Jan. 22 hearing. During the hearing, Frank said that “the question of compensation for people in the financial industry is a legitimate cause of concern in the country as a whole,” and he plans to look at the issue of compensation “in the broadest context.” Among the issues cited by Frank are the potential broadening of say on pay rules. Frank also said that he intends to explore the claims of many financial firms that they would lose key employees or simply move overseas if the tougher standards contained in recently passed legislation are imposed. The House passed a number of financial regulatory reforms before leaving for the recently completed winter recess, and the Senate plans to take up financial reforms after it returns to Washington early next week.

Mica encourages strengthening not abandoning CU charter

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WASHINGTON (1/14/10)--In a recently published letter to the editor of American Banker, Credit Union National Association President/CEO Dan Mica encouraged legislators to support “measures that would further strengthen” the credit union charter, “including alternative capital sources.” Responding to a recent Alan Theriault editorial which recommended “rules that more aggressively promote the conversion of credit unions to banks,” Mica said that “in this environment, credit unions are looking to enhance their charter, not run from it.” Theriault’s suggestion that credit unions abandon their charter “flies in the face of today's economic realities and public sentiment,” Mica added. Additionally, Mica said that current National Credit Union Administration rules permit credit unions to convert to different charters, including those of mutual savings banks, “provided clear and adequate disclosures are made to the credit unions' members.” However, “relatively few of the nation's 8,000 credit unions have opted to convert their charter” in “recent years.” Credit unions are thriving under their charter, in spite of the ongoing economic difficulties, and while Theriault in his editorial indicated that credit union capital is "decimated," Mica noted that the average capital-to-asset ratio for credit unions remains at 10%, “a number many banks would envy.” “Mr. Theriault's advocacy of a bank charter in these times amounts to swimming against the tide,” Mica said, citing public disgust with the behavior of many larger banks and a recently completed CUNA consumer survey which found that the majority of consumers identify credit unions as being more "financially safe and sound" than banks.

N.C.s Hagan pledges support for lifting MBL cap

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WASHINGTON (1/14/10)--Praising credit unions for their “critical role” in getting credit flowing, Sen. Kay Hagan (D-N.C.) announced her support for legislation that would increase the member business lending cap for credit unions. S. 2919, which would increase the credit union MBL cap to 25% of assets, was recently introduced by Sens. Mark Udall (D-Colo.), Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillebrand (D-N.Y.). Gillibrand earlier this week also spoke in support of including S. 2919 as part of pending job-creation legislation that will soon come up in Congress. In her remarks, Hagan cited CUNA information that estimates that granting credit unions the higher business lending authority could provide $10 billion in new small business loans and at least 108,000 new jobs. “As we move forward this year with plans to create jobs in our country, we’ve got to ensure that we are doing all we can to support small businesses,” Hagan added.

CUNA monitors Obama bank-fee plan

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WASHINGTON (1/14/10)--The Obama administration today will likely present a plan that would replenish the funds spent to prop up failing banks by introducing a fee to be levied on large financial institutions. The exact amount set to be recouped is widely reported to be more than $120 billion over a 10-year period. While the Credit Union National Association has not seen the proposal, it is monitoring for any related developments. The proposal will reportedly only affect around 20 of the largest banks that accepted funds from the government’s Troubled Asset Relief Program (TARP). CUNA vice president of legislative affairs Ryan Donovan said that the proposal will likely mean little to credit unions. “ We're still waiting to see the details of the proposal, but based on what we have learned so far, if you accepted TARP money and you are a big bank, you might be subject to fees. If you do not and are not, then you likely will not,” he added. As reported by Reuters, a number of potential structures for the fee are being discussed, and the fee may be incorporated into the Obama administration’s fiscal 2011 budget proposal, which will be presented to Congress next month.

Task force meets to hammer out CUNA corp CU remarks

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WASHINGTON (1/14/10)--The Credit Union National Association’s (CUNA) corporate credit union task force has been reviewing the National Credit Union Administration’s (NCUA) comprehensive proposal in detail and discussing the corporate credit union system during a three day meeting in Washington. The task force, led by VyStar CU President/CEO Terry West, analyzed the NCUA’s recently proposed rules for corporate credit unions which would adjust the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio for adequately capitalized corporate credit unions. Corporate credit unions would be required to demonstrate capital ratios of 5%, 6% and 10%, respectively, to be considered well capitalized. The task force is comprised of federal credit unions, state credit unions, and state credit union leagues. The proposal would also prevent corporate credit unions from investing in collateralized debt obligations and net interest margin securities, and would limit so-called "golden parachutes" for troubled corporates and require corporate credit unions to disclose their executive compensation packages. The proposed rules also add new net economic value tests, impose new investment concentration limits and weighted average life constraints, and prohibit corporates from redeeming member certificates at a premium. The NCUA rules would also seek to ensure that corporate boards are mainly comprised of natural person credit union employees, and would require any of these board members to hold the position of CEO, CFO, or COO at their member entity. The CUNA task force met with a range of experts and stakeholders, including Community America Credit Union CEO Dennis Pierce, Association of Corporate Credit Unions executive director Brad Miller, SW Corporate CEO John Cassidy, First Corp CEO Pete Pritts, and Callahan and Associates CEO Chip Filson. NCUA General Counsel Bob Fenner, Office of Corporate Credit Unions Director Scott Hunt, and other senior NCUA staff also met with the group, and the NCUA will be holding conference calls and other meetings in the coming weeks. The NCUA is continuing to reach out to individual credit unions to discuss their corporate proposal, and the corporate proposal will be a topic of discussion at an upcoming NCUA town hall meeting to be held in Dallas, Texas. The NCUA has given a deadline of March 9, 2010 for all comments on its proposed changes to corporate credit union rules to be submitted. CUNA plans to develop a draft comment letter by mid-February, and will also address the NCUA proposal and key issues regarding corporate credit unions at a breakout session of the Governmental Affairs Conference on Feb. 23 at 2 p.m. For the NCUA proposal, CUNA's summary, and a chart comparing the proposal with the current rule, use the resource link.

Inside Washington (01/13/2010)

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* WASHINGTON (1/14/10)--The heads of four large Wall Street banks testified Wednesday before the Financial Crisis Inquiry Commission. The commission’s role is to find the cause of the economic crisis. Lloyd Blankfein of Goldman Sachs said there were three factors to blame for the crisis: 10 low, long-term interest rates; federal policies to promote homeownership; and huge growth in foreign capital (American Banker Jan. 14). John J. Mack of Morgan Stanley said proprietary trading should be scaled back, and noted he supported creating a systemic risk regulator and a federally regulated clearinghouse for derivatives. Jamie Dimon of JPMorgan Chase said lawmakers should re-examine regulators’ roles in the system. No institution should be too big to fail, he added. During his opening remarks, commission Chair Phil Angelides said that consumers are angry because Wall Street is earning record profits after receiving a government bailout while families are struggling. More than two million families have lost their homes and more than 16% of the work force are underemployed or unemployed ... * WASHINGTON (1/14/10)--The Federal Reserve Board does not want to be forced into revealing the names of financial firms that might have failed had the government not stepped in with bailout money, and the agency is asking a U.S. appeals court to overturn a federal judge’s order that the Fed do so. The case revolves around a formal information request made by Bloomberg LP, parent company of Bloomberg News. The Fed argues against making the information public, saying that action could cause a run on those lenders or prompt a sell-off by investors. Bloomberg, on the other hand, has argued that the public has the right to know. Whatever the outcome at the appeals court level—and a ruling is not anticipated there for months--it is unlikely that will be the end of the argument. The losing party may then seek a rehearing or appeal to the full appeals court, and could eventually even petition the U.S. Supreme Court (American Banker Jan. 13) … * WASHINGTON (1/14/10)--The Federal Deposit Insurance Corp. (FDIC) introduced its plan to link bank compensation practices to premium assessments, but Comptroller of the Currency John Dugan and Office of Thrift Supervision Director John Bowman opposed the move (American Banker Jan. 13). The plan conflicts with other pending policies to restrict compensation, Dugan and Bowman said. FDIC’s proposed model would not set specific limits on compensation. Rather, institutions would be discouraged from giving too much compensation up-front to lenders and employees in risky jobs. Employee pay plans also would have to be approved by a separate subcommittee. FDIC officials said “loose” pay practices have led to bank failures. Bowman, however, said most bank executives are not overpaid ... * WASHINGTON (1/14/10)--A review of 15 lenders by the Department of Housing and Urban Development (HUD) was not an investigation and the companies can continue writing Federal Housing Administration (FHA) loans, the department said Tuesday (American Banker Jan. 13). HUD picked 15 lenders for the review based on high default rates. The review aimed to determine why the companies had high rates and whether there was wrongdoing. Several lenders told American Banker they were surprised about the review. Bernie Cason, president of Mac-Clair Mortgage Corp., said he was blown away when he received a subpoena. Richard Reese, president of Dell Franklin Financial LLC, also said he was very surprised. Phillip Schulman, partner at K&L Gates LLP, said that HUD should not have released the names of the lenders under review because it looks as though the companies did not originate the loans in compliance with FHA standards ... * WASHINGTON (1/14/10)--Proposals that would open central bank policymaking to more scrutiny could lead to the politicization of the central bank, which puts the U.S. on a path to “economic ruin,” Richard Fisher, president of the Federal Reserve Bank of Dallas, warned Congress Tuesday. Fisher’s comments in a speech were aimed at a proposal by Rep. Ron Paul (R-Texas) that would subject the Federal Reserve to audits. The House approved Paul’s measure last month. The Senate version has 31 co-sponsors. Fisher also said Fed bank presidents shouldn’t be subject to Senate confirmation ...

Inside Washington (01/12/2010)

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* WASHINGTON (1/13/10)--President Barack Obama said he plans to garner up to $120 billion through a fee on financial institutions that would earn back some of the money lost in the Troubled Asset Relief Program and help reduce the nation’s deficit (Bloomberg News Jan. 12). The administration hasn’t said how it would assess the fee, but details will be released in the fiscal 2011 budget, which Obama will give to Congress next month. The government’s $700 billion financial rescue plan last year contributed to a record $1.4 trillion national deficit ... * WASHINGTON (1/13/10)--Sen. Bob Corker (R-Tenn.) has asked the Obama administration to justify why the cap on Fannie Mae and Freddie Mac’s government financing should be removed (American Banker Jan. 12). He sent a letter to Treasury Secretary Timothy Geithner Monday asking whether the government effectively nationalized the enterprises and how the government will keep shareholders and debt holders from unfairly benefiting from the cap’s removal. Under a Dec. 24 deal, Treasury removed the $200 billion cap on the enterprises’ borrowings. They were placed into conservatorship in September 2008 ... * WASHINGTON (1/13/10)--Testifying this week before the Financial Crisis Inquiry Commission will be: Eric Holder, attorney general; Sheila Bair, Federal Deposit Insurance Corp. chairman; Mary Schapiro, Securities and Exchange Commission chairman, Lisa Madigan, Illinois attorney general; and John Suthers, Colorado attorney general. The commission will hold two days of hearings. Bank executives from Goldman Sachs, JP Morgan Chase, Bank of America and Morgan Stanley, were slated to testify today. The commission aims to find what caused the financial crisis ...

FinCEN provides flexibility on CIP issues

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WASHINGTON (1/13/10)--The Financial Crimes Enforcement Network (FinCEN) in a recent letter advised a financial institution whose customers cannot meet existing customer identification (CIP) requirements due to their participation in state-run address confidentiality programs (ACP). In the letter, FinCEN has determined that that customers who participate in a state-run ACPs “shall be treated as not having a residential or business street address and a secretary of state, or other state entity serving as a designated agent of the customer consistent with the terms of the ACP, will act as another contact individual for the purpose of complying with FinCEN’s rules. Therefore, the financial institution will collect the street address of the ACP sponsoring agency for purposes of meeting its CIP address requirements.” FinCEN addresses a situation in which a customer of a financial institution is “having difficulty establishing accounts or changing their address to the post office box that has been assigned to them” by state authorities. Many of these individuals taking part in these ACPs are victims of crimes and are seeking state protection. Under the Bank Secrecy Act, financial institutions must “implement a CIP that includes, at a minimum, risk-based policies and procedures that enable the [financial institution] to form a reasonable belief that it knows the true identity of its customers.” This relationship is usually established through the filing of a residential or business street address. In the event that there is not a valid business or street address to file, the BSA allows customers to provide the residential or business street address of a close relative of other personal contact. For the full FinCEN letter, use the resource link.

Fed issues final CARD Act rules

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WASHINGTON (1/13/10)--The Federal Reserve Board on Tuesday approved amendments to Regulation Z, Truth in Lending, which implement provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The rules go into effect Feb. 22. The CARD Act legislated sweeping credit card industry reforms aimed at protecting consumers. Known by the partial acronym the "Credit CARD Act," the new law is intended to prevent lenders from such things as making arbitrary changes to the interest rates and terms associated with a card that holds an existing balance. Specifically, the new law and implementing regs prohibit rate increases in the first year that a credit card account is active, require cosignors for credit card accounts taken out by an individual under 21 years of age, require that creditors obtain the consent of the cardholder before charging over the limit fees, and limit many of the fees associated with so-called “subprime” credit cards. In a release, Fed Governor Elizabeth Duke said that the rule, which “bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts,” marks “an important milestone in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly.” Other portions of the CARD Act will be implemented by the Fed in the near future and will become effective on Aug. 22. Additionally, the rule incorporates the Regulation Z open-end final rules that were issued in Jan. 2009. These rules also finalize the interim final rules that were issued in July and that were effective this past Aug. 20. The Fed has also withdrawn its unfair and deceptive acts and practices rule. While the National Credit Union Administration, which was party to those rules, has not yet publicly withdrawn them, the Credit Union National Association (CUNA) anticipates that the NCUA will withdraw them soon. CUNA will be reviewing this rule closely to also determine the extent that they may impact 2009’s open-end Reg Z rules, including the upcoming July 1 compliance date for those rules. CUNA will also hold an audio call on the new rules in the coming weeks.

Cyber attack training exercise offered to financial institutions

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WASHINGTON (1/13/10)--The Financial Services Information Sharing and Analysis Center (FS-ISAC) has announced that on Feb. 9-11 it will hold a simulated nationwide cyber attack as part of a training program. The FS-ISAC has invited financial institutions, card processors, retail outlets, third party service providers, corporate treasurers, and government entities to take part in the test. The testing exercise will take place over a three day period, and is free of charge. During the simulated attack, participants will be asked to detail how they would respond to a series of attack scenarios. These responses will then be assessed, and suggestions for improvement, along with information on best security and response practices, will be made. According to the FS-ISAC, participants in the exercise will later be able to “evaluate” their “current risk mitigation procedures related to cyber attacks and identify potential critical gaps in planning,” will “engage in a live test” of their “ability to respond to major cyber attack incidents,” and will “raise awareness” of the procedures needed to respond to “cyber threats.” The testing exercise is supported by the BITS Financial Services Roundtable, of which the Credit Union National Association (CUNA) is a member. The U.S. Chamber of Commerce, the Federal Reserve Retail Payments Office, and other assorted groups are also supporting the testing. CUNA is the only credit union trade group represented in BITS, and has extensive information on BITS on its regulatory homepage. For more information on BITS, use the resource link.

Informational sessions offered on CDFI certification

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WASHINGTON (1/13/10)--The U.S. Treasury Department’s community Development Financial Institutions (CDFI) Fund announced an its 2010 series of conference calls regarding CDFI certification. The calls are intended to serves as a forum for credit unions and other potential certification applicants to ask questions of CDFI Fund staff about becoming a certified CDFI. Credit unions and other organizations may be CDFI certified to provide financing and related services to communities and populations that lack access to credit, capital and financial services. To become certified, an organization must: be a legal entity, have an eligible primary mission, be a financing entity, serve an eligible target market, be accountable to the target market, provide corresponding development services, and not be controlled by a government entity. Among other benefits, CDFI certification allows applicants to apply for financial assistance through the CDFI Program. The schedule of conference calls is outlined below:
* Jan. 21, 3-4 p.m. (ET); * Feb. 18, 3-4 p.m. (ET); * March 18, 3-4 p.m. (ET); * April 15, 3-4 p.m. (ET); * May 20, 3-4 p.m. (ET); and * June 17, 3-4 p.m. (ET).
No prior registration is necessary to participate. The same call-in and PIN numbers apply to each of the conference calls: Participants need to call (202) 927-2255 and enter the PIN 864232. For more information about CDFI certification eligibility and the application process, use the resource link below.

CDFI Fund pledges high bar for 2010 success

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WASHINGTON (1/13/10)—The U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund said it is setting a high bar for success in FY 2010 in its efforts to increase its effectiveness in providing economic development opportunities in the nation’s most underserved communities. “We are aiming to meet and exceed the accomplishments of last year with greater internal operating efficiencies and by expanding our assistance to underserved communities with new initiatives,” the CDFI Fund Director Donna Gambrell noted in a release. She said first-quarter 2010 initiatives include a first round of the Capital Magnet Fund, and awards under a new Financial Education and Counseling (FEC) Pilot Program. The Capital Magnet Fund is a competitive grant program for CDFIs and other nonprofits to attract private capital for development, preservation, rehabilitation, and purchase of affordable housing for low-income families, as well as economic development activities or community service, which in conjunction with affordable housing activities will implement a concerted strategy to stabilize or revitalize a low-income area or underserved rural area. Through the FEC Pilot Program, the CDFI Fund will provide grants to enable eligible organizations to provide a range of financial education and counseling services to prospective homebuyers. The CDFI Fund, also for the first time, is co-sponsoring the National Interagency Community Reinvestment Conference on March 14-18 in New Orleans, La. Gambrell noted, “This is the first time a non-regulatory agency is officially co-sponsoring the conference and a fantastic tribute in our 15th anniversary year to how far the CDFI Fund has come since its inception. We will continue to build partnerships in FY 2010 with other government and non-governmental organizations interested in improving conditions in low-income communities." The CDFI Fund will receive nearly $247 million in resources in 2010 under its largest-ever appropriations–approximately a 130% increase over the $107 million in regular appropriations received in 2009.

Inside Washington (01/11/2010)

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* WASHINGTON (1/12/10)--Treasury Secretary Timothy Geithner could testify next week in Congress about the Federal Reserve Bank of New York’s effort to limit American International Group Inc.’s disclosures during its bailout. Congress obtained e-mails sent from the New York Fed when Geithner was president of the bank, about withholding the documents. The hearing will put pressure on Geithner to explain his handling of the company’s bailout, observers said (Bloomberg News Jan. 11). Rep. Darrell Issa (R-Calif.) has called the bailout a backdoor deal. President Barack Obama, who expressed confidence in Geithner, said Geithner was not involved in any of the e-mails in question ... * WASHINGTON (1/12/10)--President Obama is considering a fee on financial institutions to offset the federal deficit, according to administration officials. The fee would generate back some of the money that taxpayers paid to bail out the financial system in 2008. Politico reported Monday that the administration was deliberating a fee (The New York Times Jan. 11). The Obama administration has been pressured to tax institutions and their executive compensation. Anger has prevailed as big banks are generating profits and paying big bonuses despite rising unemployment, the Times said. Treasury Secretary Timothy Geithner has argued that a transactions tax would be passed onto consumers and that institutions would work to avoid a bonus tax. The Federal Deposit Insurance Corp. also is considering charging riskier banks higher premiums ...

Congress this week Slow before Senate return

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WASHINGTON (1/12/10)--While the House of Representatives will return for the second session of the 111th Congress on Tuesday, there is little in the way of official business scheduled, and many of the House members will depart Washington on Thursday to attend the Democratic Issues Conference. A number of bank executives later this week will testify before Congressional members in the first of many hearings held by the Financial Crisis Inquiry Commission, a body that was formed to determine the causes of the nation's financial crisis. Additional hearings are planned throughout the year. The Senate will not return to session until Tuesday, Jan. 19.

Jobs effort bankers neglect could help boost MBLs

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WASHINGTON (1/12/10)--Sen. Kristin Gillibrand (D-N.Y.) is pushing to include member business lending (MBL) legislation as part of pending job-creation legislation that will soon come up in Congress. Gillibrande said the MBL legislation “would free up lending at not-for-profit credit unions in every corner of America to small businesses” and is necessary “if we’re going to create new jobs and rebuild our economy for the long term.” House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) in an interview with The Boston Herald, also discussed the small business lending issue, threatening to “give credit unions more power” if banks neglect to improve their current lending practices. State legislators have also come out in support of lifting the MBL cap, with Michigan State Sen. Randy Richardville (R) asking Rep. John Dingell (D-Mich.) to support MBL legislation in a recent letter. Commenting on these reports, Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill said that CUNA is “delighted that the legislators are giving serious attention to this very important lending tool for credit unions.” Speaking at Long Island, N.Y.-based Bethpage FCU, Gillibrand called S. 2919, the Small Business Lending Enhancement Act of 2009, “common-sense legislation” that would “give small businesses more of the capital they need to get off the ground, grow and get thousands of Americans back to work.” Similar to H.R. 3380, the Promoting Lending to America's Small Businesses Act, which was recently introduced by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.), S. 2919 would increase the cap on credit union member business lending to 25% of a credit union's total assets and raise the de minimis loan threshold from $50,000 to $250,000. CUNA has estimated that expanding the capacity of credit unions to make business loans could result in $10 billion in new business loans through credit unions and at least 108,000 new jobs in the first year after enactment, with no additional costs to taxpayers. Expressing frustration with the current “intolerable” lending situation, Frank said that he would consider increasing credit union lending authority if conventional or community banks do not step up to support small businesses. In his interview, Frank said that while the economic recovery is “under way,” it is “not expanding enough.” Frank has also promised to organize a hearing on loan practices in the coming weeks.

Reg alert on CTR exemptions

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ALEXANDRIA, Va. (1/12/10)—The National Credit Union Administration (NCUA) has issued a regulatory alert to red-flag recent guidance by the Financial Crimes Enforcement Network (FinCEN) on determining a accountholders’ eligibility for an exemption from Currency Transaction Report (CTR) requirements. The NCUA issued the alert last month reminding credit unions that under the Bank Secrecy Act (BSA) financial institutions must file a CTR on any transaction in currency of more than $10,000. BSA rules do allow exemptions for certain members, or customers, and FinCEN issued the following guidance late last year on a rule that was actually effective Jan. 5, 2009. In that rule, the NCUA alert noted, FinCEN made the following changes to the previous CTR exemption system:
* Eliminated the designation and annual review requirement for most credit unions; * Decreased the definition of “frequent reportable transactions” from eight to five transactions; * Decreased the waiting time for CTR exemption eligibility from twelve months to two months; and * Eliminated the CTR exemption biennial renewal requirement.
The FinCEN guidance (FIN-2009-G003) also addresses the most frequently asked questions regarding the CTR exemption. Use the resource link below to access the NCUA regulatory alert on the CTR rules.

CUNA analyzes Fed check-processing consolidation

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WASHINGTON (1/11/10)--The Credit Union National Association (CUNA) has analyzed the Federal Reserve’s consolidation of its check processing operations in a Jan. 6 Final Rule Analysis. The Federal Reserve Board late last year approved amendments to Appendix A of Regulation CC regarding check processing operations, and under those amendments, the Federal Reserve Bank of Atlanta on Feb. 27 will transfer its check-processing operation to the Federal Reserve Bank of Cleveland. The Fed has been restructuring its check processing operations for the past several years, transferring operations from Reserve Banks in the various regions across the country to the Cleveland Reserve Bank, and this latest change will create a single check-processing region for Regulation CC. All checks will be considered local once this change is made. However, credit unions that are located in Alaska and Hawaii will be granted an extended hold period of one day for checks drawn on or payable at out-of-state financial institutions under the amended rule. CUNA has contacted the Fed regarding the consolidation of check-processing operations, and has suggested that the Fed take further action to address Regulation CC “to clarify several issues of concern.” For the full final rule analysis, use the resource link.

Inside Washington (01/08/2010)

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* WASHINGTON (1/11/10)--Advice the government gave to American International Group (AIG) regarding its bailout is being scrutinized by lawyers and policymakers (The New York Times Jan. 8). They question whether the information needed to be disclosed under federal law. Joel Seligman, Securities and Exchange Commission historian, said companies are supposed to disclose all information, but the term is not clearly defined. But, when an organization is troubled, disclosures are more important, observers said. However, others say regulators keep their discussions with struggling institutions private to prevent bank runs. The latest concerns arose after Rep. Darrel Issa (R-Calif.) obtained e-mails from AIG and Timothy Geithner when he was with the Federal Reserve Bank of New York. Geithner is now Treasury secretary ... * WASHINGTON (1/11/10)--The Federal Housing Finance Agency (FHFA) has issued a notice in the Federal Register of proposed rulemaking on Minority and Women Inclusion that implements Section 1116 of the Housing and Economic Recovery Act of 2008. The rule requires Fannie Mae, Freddie Mac, Federal Home Loan Banks and the Federal Home Loan Bank System’s Office of Finance to maintain a diversity program. The rule also would require each entity to report demographic data on diversity in employment and contracting ...

NCUA announces agenda for Dallas town hall meet

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ALEXANDRIA, Va. (1/11/10)--The National Credit Union Administration (NCUA) has announced the agenda for the first of its planned 2010 town hall meetings. The meeting, which will take place in Dallas, Texas on Jan. 22, will include a lengthy question and answer session with NCUA representatives. The meeting will also feature opening and closing remarks from NCUA Chairman Deborah Matz. Background information on the corporate credit union situation and the recently proposed corporate and field of membership rules will also be discussed at the meeting. NCUA staff, including Deputy Executive Director Larry Fazio and NCUA General Counsel Bob Fenner, will also speak during the meeting. NCUA board member Michael Fryzel will also be in attendance. The NCUA will hold a second town hall meeting on Thursday, Feb. 4, in Orlando, Fla. To register for the NCUA town hall meetings, use the resource link.

Fannie Freddie made 405K HAMP mods through Nov.

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WASHINGTON (1/11/10)--The Federal Housing Finance Agency (FHFA) on Friday reported that Fannie Mae and Freddie Mac refinanced four million loans and performed more than 405,000 trial and permanent loan modifications under the administration’s Home Affordable Modification Program (HAMP) as of November. The FHFA’s Foreclosure Prevention & Refinance Report also reported a 15% drop in foreclosure starts on enterprise loans, with a 14% increase in loan modifications related to enterprise loans, excluding HAMP trial loan modifications. Fannie and Freddie “completed 105,500 foreclosure prevention workouts” during the third quarter of 2009, a 22% increase over the amount completed during the previous quarter, and entered into 278,100 trial modifications under HAMP, a 320% increase over the total recorded during the second quarter of 2009. HAMP trial modifications, which “have become the primary modification type” used by Fannie and Freddie, “provide immediate payment relief to borrowers,” the release said. Additionally, “nearly half of loan modifications completed in the third quarter, excluding HAMP trial modifications, resulted in borrowers’ payments decreasing by over 20%,” according to the report. The FHFA reported a 39% increase in short sales and deeds in lieu during the recently completed quarter, with loans that were more than 60 days behind in their payments also increasing by nearly 20%. For the full FHFA report, use the resource link.

Kern Central is 2010s first failed CU

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ALEXANDRIA, Va. (1/11/10)--Kern Central CU of Bakersfield, Calif., became the first failed credit union of the new decade after the National Credit Union Administration (NCUA) on Friday announced that Durham, N.C.-based Self-Help FCU would assume Kern Central’s assets and liabilities. Kern Central’s 8,400 members, who had a total of $34.9 million in assets in the credit union, will “experience no interruption of credit union service” as their memberships are transferred to Self Help. Self Help currently holds $75.2 million in assets from 15,000 members and will operate Kern Central’s three branch locations. Self Help currently has six branch offices in California and also serves members through 5,500 shared branching sites throughout the country. The NCUA liquidated a total of 15 credit unions during 2009.

FFIEC releases interest rate risk advisory

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WASHINGTON (1/8/10)--The Federal Financial Institutions Examination Council (FFIEC) in an interest rate risk (IRR) advisory released on Thursday reiterated “the importance of effective corporate governance, policies and procedures, risk measuring and monitoring systems, stress testing, and internal controls related to the IRR exposures of depository institutions.” The FFIEC is comprised of the National Credit Union Administration and the federal bank and thrift regulators. The advisory “also clarifies elements of existing guidance and describes some IRR management techniques used by effective risk managers,” the FFIEC said. While the FFIEC recognizes that financial institutions will always encounter some risk, the group said that “institutions are expected to have sound risk-management practices to measure, monitor, and control IRR exposures,” adding that financial institutions are expected to manage their exposure to risk “using processes and systems commensurate with its complexity, business model, risk profile, and scope of operations.” “Effective” risk management systems do not involve “only the identification and measurement” of risk, but the “appropriate actions to control this risk,” The FFIEC added. “If an institution determines that its core earnings and capital are insufficient to support its level of IRR, it should take steps to mitigate its exposure, increase its capital, or both,” the release said. The FFIEC release was not unexpected. As Mike Schenk, senior economist at the Credit Union National Association pointed out Thursday after the agency released the guidance, financial institutions have exposures to interest rate risk and interest rates will surely move higher in the future. “FFIEC is making it clear that this will cause rate risk exposure to be a point of emphasis in the exam process,” Schenk said, and added, “Low home prices, low mortgage interest rates, and government purchase incentives have translated into a fairly high volume of originations of fixed-rate, long-term mortgages at the nation's financial institutions - all equal more interest rate risk.” At credit unions, fixed-rate mortgages with terms greater than 15 years increased from 29% of total first mortgages outstanding to 37% of total first mortgages outstanding in the past three years. “However,” Schenk said, “it is important to remember that these 15-plus year fixed-rate mortgages represent just 9% of credit union total assets: While interest rate risk exposure has increased, it is limited when balance sheets are viewed broadly. In addition, credit unions have a long track record that makes it clear that they are very good at measuring, monitoring and controlling this risk.” For the full FFIEC advisory, use the resource link.

Next financial lit commission meeting set for Jan. 20

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WASHINGTON (1/8/10)--The U.S. Treasury Department announced on Thursday that the next open meeting of its Financial Literacy and Education Commission (FLEC) will be held on Jan. 20. FLEC is a 20-agency commission lead by the U.S. Treasury Secretary. It was created by Congress in 2003 to create a national strategy for financial education and the National Credit Union Administration (NCUA) is one of the many federal agencies that take part. An agenda for the meeting, which will be held in the Treasury Building, has not yet been made public. While there will be public seating at the meeting, only commission members, special guests, and commission staff members will be allowed to address the floor.

Regulators MBL view NCUA webinar now archived

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ALEXANDRIA, Va. (1/8/10)—Credit unions and others interested in the regulators perspective on member business lending (MBL) can now access an archived version of the National Credit Union Administration’s (NCUA’s) webinar on the subject. Available online through the agency website, the archive includes the actual webinar, the webinar PowerPoint presentation, and a webinar transcript, as well as and frequently answered questions (FAQs). The detailed slides, transcript, and FAQs provide guidance, best practices and insight into examination of member business lending. "This webinar offers credit unions insights into federal and state regulators’ perspectives on member business lending," noted NCUA board member Gigi Hyland in announcing the online availability. She added, “I hope credit unions will avail themselves of the information and resources in order to facilitate their conversations with examiners on this topic.” The Credit Union National Association (CUNA) supports proposed legislation to increase the statutory MBL cap to 25% of assets, up from the current 12.25%. CUNA continues to advocate such a change to key Obama administration officials and on Capitol Hill. Use the recess link to access the NCUA webinar.

Inside Washington (01/07/2010)

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* WASHINGTON (1/8/10)--The Federal Deposit Insurance Corp. (FDIC) could vote Tuesday on a proposal that would base the premium fees lenders pay the FDIC for deposit insurance on the risk profile of executives’ pay packages (The Wall Street Journal Jan. 7). If the plan is adopted, banks with pay structures perceived as less risky could be given a break on fees. However, firms with riskier structures could pay more. The proposal is the latest effort by government to curb executive pay structures ... * WASHINGTON (1/8/10)--With Senate Banking Committee Chair Christopher Dodd’s (D-Conn.) announcement that he will not run again for his seat on the committee, financial observers expect that his likely successor, Sen. Tim Johnson (D-S.D.) will tackle regulatory reform--including that of Fannie Mae and Freddie Mac. If government-sponsored enterprise reform is going to happen--it will happen next year, according to Jaret Seiberg, analyst at Concept Capital (American Banker Jan. 7). He said the Senate Banking Committee will be “in the middle of the debate.” Consumers groups are concerned that Johnson may not be as committed as Dodd was to making sure the underserved can access private-sector products and services. However, Johnson’s appointment could benefit community banks. He has pushed for deposit insurance limit increases and stopped Wal-Mart from buying an industrial loan company in Utah. He also is likely to ensure that the deposit insurance cap remains at $250,000. The cap is due to expire in 2014, returning to $100,000. Credit union accountholders insured by the National Credit Union Share Insurance Fund also are covered on each account up to $250,000 ... * WASHINGTON (1/8/10)--Regulatory reform may be more likely, but it also may be more moderate, financial observers said. Senate Banking Committee Chair Christopher Dodd (D-Conn.) will not seek re-election for his seat, giving him more time to focus on reform. Dodd was criticized in 2008 for running for president while the financial crisis was at its peak. The senator introduced a tough reform bill in November, but backed away from it after committee members urged him to take a more bipartisan approach. Dodd has grouped together committee members to try and reach a consensus. However, as a result, the bill may be scaled back. The shift gives more leverage to Sen. Richard Shelby (R-Ala.), committee ranking member, said Mark Calabria, former Shelby aide. While some observers expect lawmakers to compromise on consumer protection, Amos Hochstein, former Dodd adviser, told American Banker (Jan. 6) that Dodd will likely stay true to his values. He has strong views on consumer issues, and he has not pursued them for political motivation, Hochstein said ... * WASHINGTON (1/8/10)--Federal Reserve Board officials are split on how to move forward with mortgage-backed securities, minutes from a December meeting indicate (The Wall Street Journal Jan. 7). The Fed is expected to purchase $1.25 trillion of securities by March. The purchases keep mortgage interest rates down, which boost the housing and financial markets. But when the Fed quits buying, rates could go up. Officials say the Fed should expand its program beyond the first quarter to keep the recovery’s momentum going. However, at least one Fed official said the program should be scaled down because the economy is improving ...

SBA Administrator Mills joins GAC lineup

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WASHINGTON (1/08/10)—U.S Small Business Administrator Karen Mills has agreed to address the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference (GAC) during the Tues Feb. 23 general session. Mills, who became the head of the Small Business Administration (SBA) in April last year, has during her tenure voiced an eagerness to increase her agency’s cooperation with credit unions and small banks as a means of increasing small business activity. CUNA has a longstanding effort to address with the SBA issues of complex applications and high fees that can act as a roadblock to credit union participation to 7 (a) and 504 guaranteed loan programs. Mills joins a growing roster of heavy-hitter speakers signed onto address CUNA’s GAC. Other speakers include: House Majority Whip Rep. James Clyburn (D-S.C.), House Financial Services Committee Chairman Barney Frank (D-Mass.), that committee's ranking Republican member Rep. Spencer Bachus (R-Ala.), senior members of the committee, Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.), and National Credit Union Administration Chairman Debbie Matz, among many others. As noted in News Now’s Jan. 7 edition, there has been a deadline extension to Jan. 27 for reserving hotel accommodations through CUNA's Housing Bureau. Credit union representatives still needing to reserve accommodation for the GAC should contact the CUNA Housing Bureau website using the resource link below, or call 1-800-974-3084 Monday-Friday from 9 a.m. to 5 p.m. (ET). Use resource links below for more GAC information.

Inside Washington (01/06/2010)

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* WASHINGTON (1/7/10)--Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Tuesday that the Fed needs to consider how to break up banks considered to be “too big to fail” so they don’t pose a systemic risk to the economy (American Banker Jan. 6). One way to define such institutions is to take firms with more than $50 billion in assets or $100 billion or more of assets under management. He spoke at an American Economics Association panel ... * WASHINGTON (1/7/10)--A Federal Housing Finance Agency rule may mean more members for the Federal Home Loan Banks, but is not expected to boost the agency’s bottom line. The rule will allow community development financial institutions (CDFI) to join the banks. The expansion comes after the banks posted a $165 million loss during the third quarter (American Banker Jan. 6). Most CDFIs have an average size of $21 million, so it’s unlikely they will be big borrowers. In 2008, Congress mandated that CDFIs are allowed to access the banks as a part of the Housing and Economic Recovery Act ... * WASHINGTON (1/7/10)--Regulators and industry representatives fear that a spike in interest rates could pare down institutions’ abilities to weather a boomerang effect on funding costs (American Banker Jan. 6). Rates have remained low so banks can build their balance sheets, but representatives expect the rates to increase. The Federal Deposit Insurance Corp. (FDIC) is scheduling a conference on the matter Jan. 29. John Douglas, former FDIC counsel, said there is a legitimate concern about how rising interest rates could affect some banks’ balances sheets. He pointed to the crisis of the early 1980s, which “decimated” the thrift industry. Donald Musso, president/CEO of FinPro Inc., a consulting firm, said while there may be exceptions, the industry is in a much better position to deal with changing rates than in the 1980s ...

Compliance All CUs must report NSF fees monthly

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WASHINGTON (1/7/10)--Credit unions have inquired whether a new Truth in Savings (TIS) disclosure requirement for overdraft services applies to institutions that do not offer overdraft protection services to their members but do charge returned-item (NSF) fees. “The answer to that question is, yes: credit unions that charge returned item/NSF fees must disclose these fees,” according to Valerie Moss, CUNA’s director of compliance information. She said they must use the tabular format found in Appendix B-12 of the National Credit Union Administration’s (NCUA’S) TIS regulation to do so. The credit unions’ questions revolve around the NCUA’s revision last year to its TIS rules. Those changes require all credit unions that provide periodic statements to disclose the periodic and aggregate year-to-date overdraft fees and returned item fees on member statements, regardless of whether they advertise or promote the use of overdraft services. The regulation aligned NCUA’s TIS regulation with the Federal Reserve Board’s Regulation DD, as required under the Truth in Savings Act. The mandatory compliance date was Jan. 1. The regulatory revisions expanded the applicability of the aggregate fee disclosure to all financial institutions, except for institutions that don’t charge any fees. So, Moss points out, credit unions are not required to disclose that "$0" has been charged for the statement period or year-to-date. However, the credit union may provide the disclosure if it so chooses. If a fee is waived in a later periodic statement period, the credit union may--but is not required to--show that adjustment in the year-to-date total on that later statement. And, if the fee is assessed and waived during the same statement period, the credit union may, at its option, show the adjustment in both the year-to-date total and the total for that statement period.

GAC housing sign-up deadline is extended

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WASHINGTON (1/7/10)—There has been a deadline extension to Jan. 27 for reserving hotel accommodations to attend the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference (GAC) Feb. 21-25 in Washington, D.C. Those attending the GAC can enjoy special conference lodging rates by signing up through CUNA’s Housing Bureau through the extended deadline. Reservations, changes and cancellations can be handled through the CUNA housing bureau, with one exception. The Grand Hyatt Hotel will accept no changes through CUNA housing bureau beyond Jan. 13. After that date changes will have to be executed directly through that hotel. Credit union representatives still needing to reserve accommodation for the GAC should contact the CUNA Housing Bureau website using the resource link below, or call 1-800-974-3084 Monday-Friday from 9 a.m. to 5 p.m. (ET). At this year’s GAC, credit union attendees will hear from such high-ranked federal lawmakers as House Majority Whip Rep. James Clyburn (D-S.C.), House Financial Services Committee Chairman Barney Frank (D-Mass.), that committee’s ranking Republican member Rep. Spencer Bachus (R-Ala.), and senior members of the committee, Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.). Also among featured speakers: National Credit Union Administration Chairman Debbie Matz, Financial Accounting Standards Board Chairman Robert Herz, Larry Kudlow, economist and host of CNBC's The Kudlow Report, former Federal Reserve Chairman Alan Greenspan, and Richard Phillips, Captain of the Maersk Alabama, which was hijacked by Somali pirates in 2009.

Dodd gave CUs fair consideration Mica

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WASHINGTON (1/7/10)--Thanking his constituents for giving him the “opportunity” to serve, Sen. Chris Dodd (D-Conn.) on Wednesday announced that he would not run for re-election to his current Senate seat this November. Commenting on the retirement, Credit Union National Association President/CEO Dan Mica said that Dodd “has always given credit unions fair consideration” during his time as Chair of the Senate Banking Committee, adding that CUNA looks forward to working with Dodd “as he completes his term.” Dodd, who served the citizens of Connecticut in Congress for 35 years, expressed his “deepest gratitude to the people of Connecticut for the remarkable privilege of being elected eight times over the past four decades to our national assembly.” Dodd has been busy over the past year, serving as Senate Banking Chair and as acting Chair of the Senate Health Committee, and managing “four major pieces of legislation through Congress.” Current Connecticut Attorney General Richard Blumenthal, a Democrat, is widely expected to announce that he will run for Dodd's vacant Senate seat. Sen. Tim Johnson (D-S.D.) is expected to take up Dodd's Senate Banking chairmanship. Rep. Barney Frank (D-Mass.), who currently chairs the House Financial Services Committee, said he would miss the “leadership” provided by Dodd, who worked to provide “skillful, creative, and forceful leadership on some of the most important problems facing our country and the world.” Frank added that he is looking forward to “working closely” with Dodd as the Senate finishes “the job of significant financial regulatory reform.” Dodd and ranking Committee member Richard Shelby (R-Ala.) in a recent statement said that "meaningful progress" has been made in the area of financial regulatory reform, with accord being reached on some aspects of enhanced consumer protections and preventing government bailouts of financial firms, modernizing the country's financial regulatory structure and the current oversight of the derivatives market.

Fed FTC issue final piece of the FACTA puzzle

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WASHINGTON (1/6/10)--The Federal Reserve Board and the Federal Trade Commission announced final rules in late December that represent the final piece of the Fair and Accurate Credit Transactions Act (FACTA) implementation puzzle. The new rules implement Section 311 of FACTA. FACTA, in turn, amended the Fair Credit Reporting Act (FCRA) in 2003. Credit unions must comply with the new requirements by Jan. 1, 2011. This newest FACTA final rule generally requires a creditor to provide a consumer with a notice when that consumer is receiving credit on less favorable terms than the lender’s other borrowers with better borrowing histories. The risk-based pricing notice requirements apply only to credit that is primarily for personal, household, or family purposes, but not in connection with business credit. The final rules provide creditors with several methods for determining which consumers must receive risk-based pricing notices. Also, as an alternative to providing risk-based pricing notices, the final rules permit creditors to provide consumers who apply for credit with a free credit score and information about their score. The agencies have provided model forms for each of the risk-based pricing notices and alternative credit score disclosures. There is also an exception to the rule for a creditor that provides the consumer with an FCRA adverse action notice in connection with the transaction. The FCRA statute originally called for a Dec. 1, 2004 effective date for the “risk-based pricing” plan, but it has proven to be one of the most controversial rules issued under the Act. For one thing, it was a challenge to try to develop a consensus on terms used in the rule. Also, as expressed by the Credit Union National Association during the proposal process, there were concerns about how to decide who gets the required notices and also how members or customers might react to the notices.

IRS plans new rules for tax return preparers

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WASHINGTON (1/6/10)--The Internal Revenue Service (IRS) this week announced that it will soon propose tightening its regulation of paid tax return preparers by requiring them to register with the service and to complete competency exams. The new rules, once proposed, would apply to paid tax preparers other than attorneys, certified public accountants, and enrolled agents, a list which would include credit unions that offer tax preparation services to their members for a fee, or related credit union service organizations. The proposal will not apply to the current tax filing season, which ends on April 15. The Credit Union National Association (CUNA) is watching this closely for its possible impact on tax return assistance provided by credit unions to their members for a fee. According to the IRS, paid tax return preparers would be required to “register with the IRS and obtain a preparer tax identification number.” “These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid,” the IRS added. Competency tests and ongoing professional education would also be required for these tax return preparers, and the ethical rules found in Treasury Department Circular 230 would also be extended to these preparers. “This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct,” the IRS said. In a release, the IRS said that the “higher standards for the tax preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term.”

Analysis of HMDA asset-size exemption threshold offered by CUNA

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WASHINGTON (1/6/10)--The Credit Union National Association (CUNA) has analyzed the Federal Reserve Board’s determination that financial institutions with assets of $39 million or less as of December 31, 2009 will be exempt from the data collection requirements set forth by the Home Mortgage Disclosure Act for the current calendar year. The asset-size exemption for depository institutions was also $39 million during 2009. The threshold is based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the twelve-month period that ended in November 2009. The HMDA, which helps determine whether financial institutions are serving the housing needs of their communities and assisting in fair lending enforcement, requires many depository institutions and certain for-profit, nondepository institutions to collect, report and disclose data about applications for, and originations and purchases of, home mortgage loans, home improvement loans and refinancings. Data reported include the type, purpose, and amount of the loan; the race, ethnicity, sex and income of the loan applicant; and the location of the property. For the full analysis, use the resource link.

CUNA seeks comment on federal guidance on reverse mortgages

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WASHINGTON (1/6/10)—The Credit Union National Association (CUNA) has issued a regulatory comment call on the Federal Financial Institutions Examination Council’s (FFIEC) proposed guidance for reverse mortgages. The guidance will seek to help financial institutions ensure that their risk management and consumer protection practices adequately address the compliance and reputational risk associated with reverse mortgages. A reverse mortgage is a loan against a residence to provide cash to assist with living expenses, typically in the form of a lump sum or fixed monthly disbursement to the borrower. The National Credit Union Administration is one of several financial institution regulators that comprise the FFIEC, and the agency will be applying the guidance to federally insured credit unions. Specifically, the guidance recommends that credit unions and other financial institutions "provide adequate information" and "qualified independent counseling" for consumers that opt to take part in reverse mortgage products. Financial institutions should also "inform borrowers about reverse mortgage alternatives that they already offer," according to the guidance. The guidance also addresses related policies, procedures, and internal controls and third party risk management, and the FFIEC will issue both supervisory guidance to financial institutions and sample disclosures once the guidance is finalized. CUNA has suggested that those who do submit comments provide input on tailoring the FFIEC guidance to credit unions. More generally, CUNA has also asked for suggested additions or deletions to the guidance. Comments are due to CUNA by Feb. 9. Comments solicited to the FFIEC should be submitted by Feb. 16. To view the CUNA comment call, use the link.

Inside Washington (01/05/2010)

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* WASHINGTON (1/6/10)--Richard Blumenthal, Connecticut attorney general, is urging the Federal Reserve Board to mandate that credit card interest rates and fees return to last year’s levels after banks raised them because the Credit Card Accountability, Responsibility and Disclosures (CARD) Act was signed into law. He wrote a letter to Fed Chairman Ben Bernanke Monday (Dow Jones Jan. 5). Blumenthal cited an American Bankers Association letter that said big banks are charging “enormous” fee increases on low-risk consumers to recoup losses. The CARD Act was passed in May and goes into effect Feb. 22. Until then, interest rate increases apply to future purchase and current balances. After Feb. 22, companies can raise rates on future purchases but not on current balances unless a cardholder is 60 days past due on payments ... * WASHINGTON (1/6/10)--The Small Business Administration (SBA) has again extended its Community Express Pilot Program through Dec. 31, 2010. Credit unions are eligible for the program. The extension will help the SBA evaluate the changes it made to the program in 2008. Under those changes, SBA opened eligibility to any small business whose office was located in a HUBZone or Community Reinvestment Act designated area. It also restricted lenders to charge at maximum the standard 7(a) loan rates--2.25% over prime for maturities under seven years and 2.75% for maturities of seven years or longer; one additional percentage point for loans between $25,000 and $50,000; and two additional percentage points for loans under $25,000 ...

Fed weighs in When do loan mods equal adverse actions

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WASHINGTON (1/5/10)—Prompted by questions from consumer compliance examiners, the Federal Reserve last month issued a letter addressing whether adverse action notices under Equal Credit Opportunity rules are required for mortgage loan modification declinations, including those made under to the U.S. Department of Treasury's Making Home Affordable Modification Program (HAMP). Although credit unions have steadily been working with members on loan modifications—in fact, at a much accelerated rate compared to banks—few lenders are yet involved with the administration’s HAMP program. However, if the administration—through Freddie Mac and Fannie Mae—decides to move forward with ideas to tweak the program through such things as assistance with principal reductions, credit union use of the HAMP program may increase, as might that of other lenders. The December letter, signed by the Fed’s Sandra Braunstein, director of the division of consumer and community affairs, states that the “equal credit” rule (Regulation B) “makes clear that such notice requirements are inapplicable to borrowers in default (Reg. B, § 202.(c)(2)(ii)).” However, the letter also notes “a major caveat in that regard.” The letter outlines four questions to be answered to determine whether declining a HAMP or other loan modification constitutes a disclosure-triggering adverse action:
* First, is there an extension of credit? * Second, is there an application? * Third, was the application for extension of credit declined? * Fourth, was the borrower currently delinquent or in default?
The letter concludes: “Even if an adverse action notice is not required under Regulation B, borrowers may find it helpful to receive from institutions information regarding why their mortgage loan modification request was declined. "For example, we understand that Treasury has directed HAMP servicers to provide written notice to a borrower that has been evaluated for HAMP but is not offered a trial period plan or modification, or is at risk of losing eligibility for HAMP because the borrower has failed to provide the required financial documentation.” Use the resource link to access the Fed letter.

High-ranked reps Matz added to GAC lineup

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WASHINGTON (1/5/10)--The Credit Union National Association (CUNA) continues to build the lineup for its upcoming Governmental Affairs Conference (GAC), adding House Financial Services Committee Chairman
Rep. Barney Frank (D-Mass.), House Majority Whip Rep. James Clyburn (D-S.C.), and National Credit Union Administration (NCUA) Chairman Debbie Matz to a substantial list of speakers. Matz will be the first of the three additions to speak, taking the stage on the morning of Feb. 22. Clyburn will speak the following day, with Frank scheduled to appear early on Feb. 24. Reps. Paul Kanjorski (D-Penn.), Spencer Bachus (R-Ala.), and Ed Royce (R-Calif.) also recently agreed to speak at the event, which will also feature Financial Accounting Standards Board Chairman Robert Herz, Larry Kudlow, economist and host of CNBC's The Kudlow Report, former Federal Reserve Chairman Alan Greenspan, and Richard Phillips, Captain of the Maersk Alabama, which was hijacked by Somali pirates in 2009. Former Congressman and current host of MSNBC's Morning Joe, Joe Scarborough, will debate politics and the economy with Presidential candidate and former Democratic National Committee Chairman Howard Dean. The GAC, which begins on Feb. 21, will start with a CUNA Council-sponsored concert by the World Classic Rockers, featuring member of Santana, Journey, Boston, Steppenwolf, Toto and Lynyrd Skynyrd. Use the resource link below for more 2010 GAC information.

Financial regs jobs bill on early 2010 legislative agenda

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WASHINGTON (1/5/10)--While the House and Senate are not expected to return to Washington for another two weeks, one item of business that is high on the Senate’s list is financial regulatory restructuring debate, which was completed by the House just prior to the ongoing holiday break. The break ends for the House on Jan. 11 and the Senate on Jan. 19. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) in a recent statement said that "meaningful progress" has been made in the area of financial regulatory reform, with accord being reached on some aspects of enhanced consumer protections and preventing government bailouts of financial firms, modernizing the country's financial regulatory structure and the current oversight of the derivatives market. The legislators also will attempt to end the issue of "Too-Big-to-Fail" financial institutions and will look to focus the Federal Reserve more fully on monetary policy. The legislators are “committed to working together," and are hopeful that the remaining issues that do exist can be resolved before the Senate reconvenes on Jan. 19. The House passed a number of significant financial regulatory reforms late last month. The Senate is also expected to discuss pending jobs legislation this month, and Sen. Mark Udall’s (D-Colo.) S. 2919, the Small Business Lending Enhancement Act, could be considered as part of that job creation legislation. The legislation, which was co-signed by Sens. Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillebrand (D-N.Y.), would increase credit union member business lending (MBL) to 25% of assets and raise the "de minimis" threshold for a loan to be considered a member business loan to $250,000.

Rep. Sherman urges colleagues Put MBLs in jobs bill

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WASHINGTON (1/5/10)--Rep. Brad Sherman (D-Calif.) in a letter to House Education & Labor Committee Chairman Rep. George Miller (D-Calif.) said that Rep. Paul Kanjorski’s H.R. 3380, the Promoting Lending to America's Small Businesses Act of 2009, should be included as part of any future “jobs bill” that the Congress could bring to the House floor. The Credit Union National Association (CUNA) has advocated for litfing the member business lending cap through frequent communication with legislators as well as its recently completed national hike the hill, and CUNA has estimated that expanding the capacity of credit unions to make business loans could result in $10 billion in new business loans through credit unions and at least 108,000 new jobs in the first year after enactment, with no additional costs to taxpayers. “While business lending by credit unions represents merely a fraction of that by banks and other financial institutions,” Sherman said that “credit unions are ready to expand their business lending” and “are eager to put their capital to work to help sustain the recovery.” In the letter, which was also sent to Kanjorski and Reps. Nancy Pelosi (D-Calif.) and Barney Frank (D-Mass.), Sherman added that the current de minimis threshold for MBLs, which stands at $50,000, is “prohibitively small to allow credit unions to effectively serve the borrowing needs of their business members in today’s economy.” Kanjorski’s bill, which was introduced in the fall of 2009, would increase the MBL cap to 25% of a credit union's total assets, would raise the de minimis threshold for a loan to be considered a "member business loan" to $250,000, and would exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap.

Chartway action ends 2009 liquidations

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ALEXANDRIA, Va. (1/5/10)--Chartway FCU ended 2009 by assuming the assets, loans and shares of Toole, Utah-based HeritageWest FCU after the National Credit Union Administration (NCUA) approved the liquidation of HeritageWest on Dec. 31. HeritageWest was the 15th federally insured credit union to be liquidated in 2009. The NCUA also approved 15 credit union liquidations during 2008, and NCUA Director of Public and Congressional Affairs John McKechnie said that the NCUA would not predict how the number of liquidations or mergers would play out during the coming year. The National Credit Union Share Insurance Fund lost $116.5 million due to liquidations and assisted mergers as of Nov. 30, 2009, McKechnie said. A total of 140 banks closed during 2009. The 40,000 members of HeritageWest, which held $311 million in assets before its closure, will now be served by Chartway, which holds $1.2 billion in assets from 154,000 members located nationwide. Chartway serves its members through 4,000 shared service locations and an additional 52 branch locations in Arkansas, Florida, Georgia, New Jersey, North Carolina, Ohio, Rhode Island, Texas, and Virginia. McKechnie told News Now that the “two boards made the decision in the best interest of their respective memberships.” During the recent NCUA board meeting, which was held on Dec. 17, Chief Financial Officer Mary Ann Woodson reported that a total of 328 credit unions, holding nearly $41 billion of insured shares, were rated at CAMEL 4 and 5 status. This information, which reflected the status of these credit unions as of November 2009, represented a 27% increase over the amount of CAMEL 4 and 5 credit unions reported as of November 2008. CAMEL 4 and 5 credit unions are often in danger of failing or being liquidated.

Inside Washington (01/04/2010)

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* WASHINGTON (1/5/10)--National Credit Union Administration (NCUA) Supervisory Examiner Hal Krause has left NCUA after 27 years of service (Daily Exchange 1/5/10). Krause began his NCUA career as an examiner out of Philadelphia in 1983. He stayed in that position for 9 years, moved on to become a problem case officer for a few years, and assumed the Supervisory Examiner position for Region II in 1993. He said his proudest moments were helping credit unions succeed. NCUA will focus on transitioning to a 12-month cycle in 2010 from a risk-based exam cycle. Compliance issues like the Bank Secrecy Act are still in focus and credit unions heavy in real estate will see increased scrutiny, he said ... * WASHINGTON (1/5/10)--The Treasury Department is delaying a report on regulatory capital requirements for banks and other financial holding companies. The report, which was supposed to be released at year-end, is still in progress. The report was announced as part of the Obama administration’s plan to revamp financial markets (American Banker Jan. 4) ... * WASHINGTON (1/5/10)--A financial regulatory reform bill will have a tough battle through the Senate, financial observers said. One issue in the bill is a proposed consumer financial protection agency. Sen. Jack Reed (D-R.I.) said that there are several issues with the proposed agency, including enforcement of the agency’s rules and whether rulemaking will be unique to the agency or a shared responsibility (American Banker Jan. 4). The bill, by Senate Banking Committee Chair Christopher Dodd (D-Conn.) also may be very different than what Dodd initially released, said Mark Calabria, former aide to Committee Ranking Member Sen. Richard Shelby (R-Ala.). On Dec. 24, Dodd and Shelby said they were “on track” to make a deal in January. However, Dodd said negotiations can be tricky, and anything could happen in five minutes to change things. A new draft of the bill is expected to be dropped after the Senate comes back from recess Jan. 19. Dodd initially intended to make a deal on the legislation with Shelby last summer ...

Inside Washington (01/03/2010)

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* WASHINGTON (1/4/10)---A new mortgage disclosure rule that went into effect Friday may have some unintended consequences for borrowers and lenders, analysts said (American Banker Dec. 31). The rule requires lenders to give loan applicants good-faith estimates of the closing costs. Lenders also cannot increase some charges during closing, and are limited to a 10% increase on other fees. If the costs of other services--including credit reports and title insurance--are more than estimated, the lender will have to make up the difference. Borrowers are expected to save about $700 from the change in rules, according to the Department of Housing and Urban Development. But some experts said lenders may have to raise their fees to cover the added risk and overestimate third-party expenses in the good-faith estimates. Fred Gooch, vice president of compliance at DocuTech Corp., said one way lenders can control costs is by negotiating contracts with third-party vendors who would be liable for charges that exceed estimates. Also, some lenders who try to avoid being bound by good faith may deny more credit applications to avoid making an estimate, said Melissa Richards, attorney at Buchalter Nemer LLP. However, a lender also could overestimate charges in the good faith estimate, so the costs appear lower at closing, added Richard Andreano, partner at Patton Boggs LLP ... * WASHINGTON (1/4/10)--The Federal Reserve Board has approved amendments to Appendix A of Regulation CC regarding check processing operations. On Feb. 27, The Federal Reserve Bank of Atlanta will transfer its check-processing operation to the Federal Reserve Bank of Cleveland. As of that date, there will be one check-processing region for Regulation CC. Regulation CC establishes the maximum period a depositary institution may wait between receiving a deposit and making the deposited funds available for withdrawal ...