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CU pro-MBL efforts must continue CUNA

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WASHINGTON (10/28/11)--Support for increasing the credit union member business lending (MBL) cap continues to grow following this month's House Financial Services subcommittee hearing, and the Credit Union National Association (CUNA) continues to call on credit unions to keep up their advocacy efforts as MBL legislation moves forward.

National Credit Union Administration Chairman Debbie Matz and Jeff York, president/CEO of CoastHills FCU, Lompoc, Calif., testifying on CUNA's behalf, gave both a broad and narrow view of the promise that an MBL cap lift holds for small businesses, and the difficulties that credit unions facing the 12.25% of assets MBL cap face, during the Oct. 12 hearing. CUNA also refuted many banker claims that were made during that hearing in a recent letter to Rep. Shelley Moore Capito (R-W.Va.). (See related Oct. 27 story)

CUNA has estimated that lifting the MBL cap would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

H.R. 1418, the Small Business Lending Enhancement Act of 2011, had 101 cosponsors as of late Thursday, with Reps.  Sander Levin (D-Mich.) and Donald Payne (D-N.J.) serving as the most recent supporters. Sen. Mark Udall (D-Colo.) also continues to support his own MBL cap lift legislation, S. 509.

That bill has 20 cosponsors.

The fight to increase these numbers, and move MBL legislation on to President Barack Obama's desk, continues, and these credit union advocacy efforts are aided by CUNA's Grassroots Action Center. Nearly 20,000 separate contacts have been made since late spring, with credit union advocates reaching out to members of the House and Senate, as well as the Obama administration, to seek their support for an MBL cap lift.

MBL advocacy is also being achieved through direct contact with legislators and their staff on Capitol Hill. The majority of this year's Hike the Hills are complete, as the New Jersey Credit Union League and the Credit Union Association of the Dakotas visited this week and the New Hampshire, Massachusetts, and Rhode Island leagues are scheduled to come to D.C. at the beginning of November.

To contact your congressional representatives, use the resource link.

CUNA suggests series of steps to cut regulatory burden

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WASHINGTON (10/28/11)--The Credit Union National Association (CUNA) suggested adopting a temporary moratorium on new regulations as one of many ways the National Credit Union Administration (NCUA) could ease the regulatory burden on credit unions, and is also working on the legislative front to address these same issues.

CUNA in a 14-page letter sent Tuesday to NCUA Chairman Debbie Matz said "there is considerable merit in this idea, especially as there are no new, material systemic problems within the credit union system" and "current safety and soundness concerns within natural person and corporate credit unions seem to be manageable." Any significant threats or technical matters could still be addressed by the agency, CUNA added. CUNA suggested the moratorium could last as long as six months.

When the agency does create new regulations, those regulations should be limited to addressing material safety and soundness problems, and any rules that are developed should apply only to those credit unions that engage in activities that directly cause the problems in question, unless otherwise directed by Congress, CUNA urged.

CUNA also called upon NCUA to solicit input from credit unions and credit union associations on whether a regulation is needed before proceeding with the development of a particular rule, as opposed to issuing a rule and then seeking comments. This is the approach that the Consumer Financial Protection Bureau is using, and it seems to be working well, CUNA noted. The agency should also support any rulemaking with supporting data detailing why the regulatory action is needed, and what the costs and paperwork burden of the regulatory action would ultimately be. While NCUA does include some of this information in proposals and final rules, it does not so consistently, the letter said.

Enforcement actions should also be limited. CUNA advocated, for example, that NCUA examiners make every effort to resolve disagreements with credit union officials before issuing a Document of Resolution (DOR) or Letter of Understanding and Agreement. While a recent NCUA Office of Inspector General Material Loss Review Report found that the agency has not been adequately following through with credit unions on whether DORs were resolved, this report should not be viewed as evidence that the NCUA needs to be more aggressive in issuing its DORs. Rather, CUNA said, credit unions should be permitted to pursue their own solutions, working with their examiner.

Healthy credit unions should also be permitted to manage their own risks by being able to decide for themselves whether they need to make additions to their net worth when it is at 7% or higher. CUNA also supported expanding the Regulatory Flexibility Program.

CUNA commended NCUA Chairman Matz for steps she has initiated recently to address regulatory burdens but urged the agency to consider many more ways to help relieve credit unions.

CUNA's Examination and Supervision Subcommittee, the American Association of Credit Union Leagues Regulatory Advocacy Advisory Committee, credit union officials, state league staff, and other leadership groups, including CUNA council members, worked to develop these recommendations.

CUNA has also addressed the credit union regulatory burden with other regulators as well as legislators on Capitol Hill. The most recent interaction with the legislative branch came Thursday, when CUNA commended Rep. Shelley Moore Capito (R-W. Va.) for holding a House hearing on an Internal Revenue Service (IRS) deposit income reporting requirement. That proposal, which was discussed during a House Financial Services financial institutions subcommittee hearing, would require credit unions and other financial institutions to report on their Form 1042-S interest of $10 or more earned annually on deposit accounts held by nonresident aliens who are residents of any foreign country.

CUNA in a letter to Moore Capito said this rule would "only contribute to the tremendous regulatory burdens credit unions face that make it increasingly harder for them to serve their members" and would also increase compliance costs for credit unions. The costs to financial institutions and consumers will far outweigh any benefit to the IRS, and CUNA added that that agency has not proven that the new regulation is needed.

For more on CUNA's regulatory relief efforts, use the resource links.

NCUA adopts CDRLF changes

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NCUA Board Member Michael Fryzel, left, Chairman Debbie Matz, and Board Member Gigi Hyland listen to a staff presentation on CDRLF changes during Thursday's open board meeting. President Barack Obama last week announced his intention to nominate Carla León-Decker to join the board.  León-Decker, if confirmed, would take the spot of Hyland, whose term officially ended in August. (CUNA Photo)
ALEXANDRIA, Va. (10/28/11)--The process by which the National Credit Union Administration (NCUA) solicits, receives, evaluates, and acts on credit union applications for loans and technical assistance grants from the Community Development Revolving Loan Fund (CDRLF) will be changed under a final rule that was approved by the agency yesterday.

The agency will no longer require community needs plans to be filed with CDRLF applications and will increase the maximum amount of a single loan to more than $300,000 in some circumstances. The NCUA will also offer flexible repayment options for CDRLF loans and may offer lower interest rates in some cases.

The NCUA rule will also change the CDRLF rule's low-income credit union (LICU) designation criteria.

The final rule is similar to a proposed rule that was issued earlier this year. However, a proposed requirement regarding financial projections was not included in the final rule. The Credit Union National Association did not support this financial projection requirement, and encouraged the NCUA to remove the requirement from the final rule in a summer comment letter.

The changes are intended to increase transparency and improve the CDRLF's organization, structure, and ease of use by credit unions. The NCUA in a release said the rule changes "will result in increased loan demand due to reduced burdens on participating credit unions, thereby enhancing the provision of financial services for low-income households."

NCUA staff during the meeting said some forms, including loan applications and Notices of Funding Opportunity, would need to be amended to reflect the changes. These changes would be completed before the rule comes into effect.

The final rule is scheduled to become effective 30 days after it is published in the Federal Register.

During the customary report on the NCUA's financial status, Chief Financial Officer Mary Ann Woodson said the National Credit Union Share Insurance Fund's equity ratio remained at 1.31% in September. The same number was reported last month, and NCUA Chairman Debbie Matz last month requested that her staff provide the board with their "best possible estimate" of the year-end ratio of the NCUSIF at the upcoming November board meeting.

The NCUA CFO reported there are currently 384 CAMEL 4 and 5 credit unions, which represent 3.88% of insured shares, or approximately $30 billion.  Woodson also noted that there are 1,777 CAMEL 3 credit unions, which represent 16.59% of insured shares, or $130 billion. 

Insured shares in CAMEL 3, 4, and 5 credit unions represented around 20% of total insured shares in September, with the number of CAMEL 3 credit unions decreasing slightly and the number of CAMEL 4 and 5 credit unions increasing slightly during that month. A total of $160 billion in shares are held in CAMEL 3, 4 and 5 credit unions.

The NCUSIF held $1 billion in reserves and the Temporary Corporate Credit Union Stabilization Fund recorded $1.97 billion in total earned revenues for the month of September. These revenues were due to the NCUA's recent TCCUSF assessment, Woodson said.

For more on the board meeting, use the resource link.

Inside Washingtonbr

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  • WASHINGTON (10/28/11)--The Credit Union National Association (CUNA) thanked Sen. Dianne Feinstein (D-Calif.) for drawing attention to the important role credit unions play in the lives of their members and the good work they are doing worldwide.  Feinstein submitted a statement into the Congressional Record to recognize International Credit Union Day (News Now Oct. 21), and she noted the 186 million consumers in 97 counties that are served by more than 56,000 credit unions. "These member-owned financial cooperatives provide their members access to affordable financial services. Many credit union members otherwise would not have access to these services because of financial or geographic challenges. Across the globe, credit unions are working every day to fulfill the mission, 'People Helping People,' CUNA noted in its letter of thanks. "We believe that credit unions are the best way for consumers to conduct their financial services, and we look forward to continuing to work with you on initiatives that support that goal."… 
  • WASHINGTON (10/28/11)--The U.S. Treasury Department must develop a clear exit path for community banks still mired in the Troubled Asset Relief Program (TARP), according to according to a government watchdog report due out Thursday. A common misperception is that most of the 707 TARP banks have paid back TARP, when only the largest banks have exited TARP, according to the report from the Special Inspector General for TARP. Smaller and medium-size banks are not exiting TARP with the same speed as the larger banks, with roughly 400 still in TARP. Of these, nearly half are not paying their TARP dividend and in some cases, the banks are operating under an order by their regulator. Compared with larger banks, community banks may face an uphill battle to exit TARP, the report said. Community banks do not have the same access to capital as the larger banks. They are more exposed to distressed commercial real estate-related assets and non-performing loans ...
  • WASHINGTON (10/28/11)--The Federal Housing Finance Agency (FHFA) Thursday released updated projections of the financial performance of Fannie Mae and Freddie Mac, including potential draws under the Senior Preferred Stock Purchase Agreements with the U.S. Department of the Treasury. FHFA first released financial projections in October 2010, and these updated projections show similar results for two out of three scenarios, and a decrease in cumulative Treasury draws in one scenario. Through the FHFA Conservator's Report, FHFA tracks actual performance versus projections on a quarterly basis. Under the three scenarios used in the projections, cumulative Treasury draws (including dividends) at the end of 2014 range from $220 billion to $311 billion. In the initial projections released in October 2010, cumulative Treasury draws (including dividends) at the end of 2013 ranged from $221 billion to $363 billion …
  • WASHINGTON (10/28/11)--New Jersey credit union advocates yesterday joined New Jersey Credit Union League (NJCUL) President/CEO Paul Gentile and Director of Government Affairs Chris Abeel for a day-long series of meetings on Capitol Hill to bring the job creation message to targeted members of New Jersey's Congressional delegation. In the morning the group met with U.S. Sens. Robert Menendez and Frank Lautenberg, both Democrats. In the afternoon, the group met with U.S. Reps. Donald Payne (D) and Bill Pascrell (D). They also met with the legislative counsel to U.S. Rep. Frank LoBiondo (R), who was called away at the last minute for a floor vote, and U.S. Rep Albio Sires' (D) chief of staff. On Wednesday, Payne announced he had signed-on to the House version H.R. 1418 of the Small Business Lending Enhancement Act that would increase the current credit union member business lending cap. Pictured from left: Chris Abeel, NJCUL director of government affairs; Beth Degnan, assistant vice president of external affairs, Affinity FCU, Basking Ridge, N.J.; U.S. Rep. Bill Pascrell (D); Paul Gentile, NJCUL president/CEO; Gary Chizmadia, volunteer, Credit Union of N.J., Ewing, N.J, and Al Feigenbaum, CEO, Advanced Financial FCU, New Providence, N.J. (Photo provided by NJCUL) …

NCUA conserves 1.3M-asset Birmingham Financial FCU

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ALEXANDRIA, Va. (10/27/11)--The National Credit Union Administration (NCUA) today assumed control of the services and operations of Birmingham Financial FCU of Birmingham, Ala.  The agency will continue normal services to Birmingham Financial's 429 members, but in a new location, as it works to resolve issues affecting the institution.

Birmingham Financial is the eleventh federally insured credit union placed into conservatorship during 2011.

Members of the $1.3 million-asset credit union can continue to conduct normal financial transactions, such as making deposit and accessing funds, making loan payments, and using shares. Birmingham Financial FCU is a multiple-bond credit union serving the employees of Birmingham Housing Authority and Birmingham Health Care who work in Birmingham.

Deposits at Birmingham Financial FCU remain federally protected. The NCUA's National Credit Union Share Insurance Fund (NCUSIF) insures individual accounts up to $250,000. The NCUSIF, like the FDIC's Deposit Insurance Fund, has the backing of the full faith and credit of the U.S. government.

Under conservatorship, the credit union moved to a new location and members can access their at America's First FCU, 1200 4th Avenue North, Birmingham. The credit union's new phone number is: (205)731-3527.

The decision to conserve a credit union enables the institution to continue regular operations with expert management in place, correcting previous service and operational weaknesses. Members who have questions about the conservatorship may review the Birmingham Financial FCU Frequently Asked Questions document when it is posted later to the NCUA website at