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Washington Archive

Washington

NCUA Unveils Upcoming CU Exam Changes

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ALEXANDRIA, Va. (10/9/13)--Changes that will streamline credit union examination reports and improve the overall exam process by setting clearer expectations for credit unions and examiners will be introduced on Jan. 1,  the National Credit Union Administration said in a letter to credit unions (13-CU-09) released Tuesday. The Credit Union National Association has long sought the kind of changes provided in this NCUA letter, Deputy General Counsel Mary Dunn noted.

The NCUA noted it considered feedback from credit union industry officials as it developed these changes. The agency also incorporated recommendations from the U.S. Government Accountability Office and the NCUA's own Office of Inspector General.

One specific change outlined by the agency is separating the Document of Resolution (DOR) and Examiner's Findings sections of the examination reports into stand-alone documents.

"Separating the DOR and Examiner's Findings documents--and providing descriptive definitions of each document's purpose--will help credit union officials clearly differentiate between major and minor problems in order to prioritize corrective actions," the agency wrote.

Examiner concerns and documented support for material problems listed in the examinations will be included in the DOR, along with corrective action plans, the agency added. "This will help credit unions and NCUA implement timely problem resolution of the most critical and material concerns" and "enhance consistency in the exam process," the letter said.

These and other changes will better clarify the priority exam action items to be resolved, reduce redundancy, and ensure consistency, the agency wrote.

A new status update template has also been developed as part of the exam document changes. The update will provide details on credit union outstanding administrative actions, including Letters of Understanding and Preliminary Warning Letters, the agency said. The informal discussion document will be eliminated.

Examiners will need to follow up with credit union officials on any outstanding DOR items within 120 days after the timeframe for completion has passed. Credit unions that have received DORs instructing them to cease unsafe or unsound practices will need to notify their respective NCUA Regional Office in writing once they have implemented corrective actions, the letter adds.

Reasonable solutions provided by a given credit union will become the corrective action plan included in the DOR, the NCUA said.

Risk-Based Lending Webinar Scheduled By NCUA For Oct. 22

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ALEXANDRIA, Va. (10/9/13)--An overview of risk-based lending, and details on how that practice has become an important part of consumer lending, will be provided in an Oct. 22 National Credit Union Administration webinar.

The free webinar, entitled "Risk-Based Lending--More than a Loan Pricing Tool," is scheduled to begin at 2 p.m. (ET).

Tom Penna, NCUA Office of Small Credit Union Initiatives Economic Development Specialist, Susan George, CEO of Lake Shore FCU, Angola, N.Y., and Kelly Haaksma, CEO of Greater Chautauqua FCU, Falconer, N.Y., will co-host the webinar.

George and Haaksma will discuss how their credit unions have used risk-based loans to serve their members, increase loan volume, and create new sources of income while mitigating unnecessary risks.

The webinar will also feature useful reporting tools that a board of directors and management can use to get a better understanding of the risks present in a credit union's loan portfolio.

The CUNA Lending Council has noted that risk-based lending helps credit unions reach out to higher-risk borrowers, keeping them from predatory lenders, and allows credit unions offer lower rates to the most creditworthy members, rewarding their excellent credit habits and keeping them from the competition.

However, the Council has advised that risk-based lending can be complex. It is important for credit unions to do their homework before implementing it, the Council wrote. Sound planning, specialized expertise, reliable monitoring and control systems, and proper pricing are key components of any risk-based lending plan, the Council stressed.

Webinar participants may submit questions to the NCUA in advance by sending an e-mail to WebinarQuestions@ncua.gov. The subject line of the e-mail should read, "Risk-Based Lending Webinar."

To register for the NCUA webinars, use the resource link.

Franken: Shutdown Hurts CUs' Ability To Verify Loan Info

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WASHINGTON (10/9/13)--If credit unions want further proof of the impact that Hike the Hill events have on Capitol Hill, they need look no further than a speech by U.S. Sen. Al Franken (D-Minn.) about the impact of the government shutdown on Minnesotans, including small businesses and credit unions. The speech, made on the Senate floor, referred to a meeting he had with a group of Minnesota credit unions.
 
The government shutdown is hurting people in Minnesota and around the country, he said, noting that Minnesota's businesses are feeling the impact. Small businesses there received an average of $1.8 million loans every day under the Small Business Administration's loan guarantee programs in 2012. "With the government shut down, these programs will no longer take applications, and our businesses have had to put their plans on hold," he said.
 
"And it's not just businesses that are facing problems getting access to loans," he added.
 
"Minnesota is home to a lot of great, smaller financial institutions--community banks and credit unions--and I talk with them regularly," Franken said. "Earlier this week, I met with folks from some Minnesota credit unions, and they explained to me that as a result of the shutdown, they are having problems approving mortgages because the Social Security Administration can't verify Social Security numbers. That is not just terrible for those Minnesotans who are trying to buy or sell a home, it's also terrible for our economy."
 
Franken pointed out a number of other areas the shutdown has hit and urged the passage of the Senate passed bill to fund the government.

"We appreciate Sen. Franken speaking up for Minnesotans and their credit unions on this important issue," said Mara Humphrey, Minnesota Credit Union Network vice president--governmental affairs. "We'll also continue to advocate for easing the challenges resulting from the shutdown for those seeking home loans."
 
Credit unions from 10 states hiked Capitol Hill in Washington last week to highlight the value of their corporate income tax exemption and defend their tax status. They also urged passage of a bill to lift credit unions' member business lending cap to open up more business lending opportunities. Credit unions from Illinois, Iowa, Kansas, Maine, Michigan, Minnesota, Missouri, Montana, Nebraska and Ohio participated.

NEW: CUNA, Cosigners: Reducing Mortgage Limits Would Disrupt Housing Recovery

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WASHINGTON (UPDATED: 1:20 P.M. ET, 10/9/13)--Reducing the size of the mortgages that Fannie Mae and Freddie Mac can finance "would have a very disruptive impact on the availability of affordable housing credit," the ongoing housing recovery and the economy as a whole, the Credit Union National Association said in a joint letter sent to Federal Housing Finance Agency Acting Director Ed DeMarco today.

The letter follows the recent FHFA announcement that it is considering reducing Fannie Mae and Freddie Mac loan limits. Any change would be implemented on Jan. 1, 2014.

CUNA cosigned the letter alongside several financial services and housing groups.

"Not only is lowering loan limits bad for housing, we question to what extent FHFA's authority would allow for such a change considering Congressional intent when passing [the Housing and Economic Recovery Act of 2008] was certainly opposed to a reduction," the letter said. HERA clearly indicates that the maximum loan limits for loans taken on by Fannie and Freddie shall not decline below the current limit of $417,000, the letter added.

"Lowering the loan limits further restricts liquidity and makes mortgages more expensive for households nationwide. Without affordable financing, families are unable to purchase or refinance homes, and those who wish to sell find it more difficult, all of which will continue to prolong our housing crisis," the cosigners wrote.

The letter was cosigned by the American Escrow Association, American Financial Services Association, American Land Title Association, Asian Real Estate Association of America, Coalition of US Mortgage Insurers, Community Home Lenders Association, Community Mortgage Lenders of America, Leading Builders of America, Mortgage Bankers Association, National Association of Federal Credit Unions, National Association of Hispanic Real Estate Professionals, National Association of Home Builders, National Association of REALTORS® and The Realty Alliance.

FDIC Objects To BofA Mortgage Settlement

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WASHINGTON (10/9/13)--The Federal Deposit Insurance Corp. this week objected to a $500 million April settlement between Bank of America and several class action plaintiffs.

The objection was filed in California state court.

The suit involves Bank of America subsidiary Countrywide Mortgage's sale of mortgage-backed securities in the days before the financial crisis. A number of pension funds were among those that brought or later joined in the lawsuit against the bank.

According to Bloomberg News, the FDIC said the proposed settlement was not enough. The $500 million total only represents about 0.11% of the face value of the securities it covers, the FDIC said. In similar cases, plaintiffs have received 1.1% of the value of the securities in question, Bloomberg noted. In its objection, the FDIC also said the plaintiffs that accepted the settlement had a conflict of interest: Lawyers and main plaintiffs in the settlement would receive substantially more than other minor plaintiffs in the class action suit.

Bank of America did not comment on the FDIC objection.

A hearing on the settlement has been scheduled for Oct. 28. The settlement could be approved at that time.

CompBlog: CUs Should Plan For Credit Insurance Premium Changes

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WASHINGTON (10/9/13)--Credit unions should begin planning a way to account for credit insurance premiums and debt protection fees that is consistent with pending Consumer Financial Protection Bureau regulatory changes, CUNA Mutual Group Lead Attorney David Tomar wrote in a recent Credit Union National Association CompBlog post.

The CFPB's loan originator compensation rule adopted the Dodd-Frank Act's prohibition on creditors financing credit insurance premiums in connection with certain mortgage transactions. The final rule makes clear that credit insurance premiums are "financed" by a creditor when the creditor allows the consumer to defer payment of the premium past the month in which it is due. The rule explains how it applies to "level" premiums, when the monthly premium is the same each month rather than decreasing along with the loan balance.

Tomar said the rule is effective for loans whose applications are taken on or after Jan. 10, 2014. The scope of the rule still applies only to closed-end loans secured by any dwelling or open-end loans secured by a principal dwelling, he added.

As noted in Tomar's blog post, advocacy by CUNA, credit unions and CUNA Mutual resulted in the CFPB determining that adding a premium to the outstanding loan is not "financing" if the premium is posted and paid in the same monthly period, even if some interest accrues. "That's the most common scenario and a huge relief for credit unions because credit unions do not need to make changes by Jan. 10, 2014," Tomar said.

The bureau may also revisit rules regarding underlying credit insurance or debt cancellation product agreements, and charging interest on credit insurance premiums. Credit unions may need to revise their practices in the near future to comply with CFPB changes to these rules and regulations, Tomar warned.

For the full CompBlog post, use the resource link.