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NCUA issues red flags exam guidance

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ALEXANDRIA, Va. (11/3/08)—The National Credit Union Administration (NCUA) said Friday that for credit unions not in compliance as of Nov. 1 with the identity theft “red flags” rule, examiners will consider the credit union’s progress and compliance efforts to date when developing appropriate plans for corrective action. In an official letter, the NCUA communicated to credit unions the “red flags” examination procedures adopted earlier this month by the Federal Financial Institutions Examination Council (FFIEC), comprised of the NCUA and the federal bank and thrift regulators. The NCUA also reaffirmed that the effective date for federal credit union compliance with the “red flags” rule remained Nov. 1. Earlier this month—and just about a week after the FFIEC approved the examination procedures to determine compliance--the Federal Trade Commission (FTC) said it would suspend compliance enforcement of the rule for six months until May 1, 2009. The FTC action covered state-chartered credit unions, along with a broad array of other entities. At that time, the FTC stated that its delay did not affect other federal agencies' enforcement of the original Nov. 1 deadline. The agency explained that it moved back its compliance timetable to give creditors and financial institutions "additional time in which to develop and implement written identity theft prevention programs." The agency said that during its outreach effort, it found some industries and entities under the FTC's jurisdiction were uncertain about their coverage under the rule. After the FTC action, however, federal credit unions questioned whether the NCUA might act to put federal and state credit unions on the same compliance schedule and the Credit Union National Association pursued clarification. In fact, CUNA President/CEO Dan Mica sent a letter to the NCUA Thursday asking for clarification regarding FTC’s decision to delay the enforcement date. The letter was a follow up of CUNA’s earlier discussions with NCUA staff. CUNA received a response that clarified that examiners will be flexible. The identity theft “red flags” rule, along with a companion rule governing how to handle address discrepancies on consumer reports, was issued under the Fair and Accurate Transactions Act of 2003 (FACT Act) and became effective Jan. 1 this year. The "red flags" rule requires an institution to develop and implement a written identity theft prevention program designed to detect, prevent, and mitigate identity theft in connection with any new or existing "covered account." A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft. The address discrepancy rule, in part, requires a user of consumer reports to develop reasonable policies and procedures to confirm that the report relates to the consumer whose report was requested when there is an address discrepancy. To assist credit unions in compliance, the NCUA announced it will issue an examiner checklist to review for compliance during exams which will be sent via express to all credit unions early next week.

CUNA seeks comment on share insurance signage plan

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WASHINGTON (11/3/08)—Does a recent interim final rule issued by the National Credit Union Administration (NCUA) minimize burdens associated with incorporating temporary new share insurance limits into official signage? The Credit Union National Association (CUNA) is asking credit unions to comment by Dec. 11. The rule amends the NCUA’s share insurance regulation to make it consistent with recent actions by the U.S. Congress that temporarily increases the maximum share insurance amount to $250,000, up from $100,000. The temporary authority also increases the coverage for custodial loan accounts, also known as mortgage servicing accounts. The increase in the share insurance amount will be in effect until Dec. 31, 2009, unless it is extended or made permanent, and the interim final rule went into effect Oct. 22. That rule describes necessary changes to make the official insurance sign reflect the higher ceiling. Credit unions may:
* Continue to display the current sign, and there will be no penalty for credit unions that choose this option; * Display a sign that the NCUA will distribute and post on its website that reflects the temporary increase; or * Alter the current sign to reflect the temporary increase, by hand or otherwise, as long as the altered sign is legible. This could be done by placing a sticker that reads “$250,000” over the portion of the current sign that reads “$100,000.”
Credit unions that do not alter the current signs may post additional signs in their lobbies or place a notice on their websites. For mortgage servicing accounts, share insurance coverage will be expanded by insuring the principal and interest portion of a borrower’s payment separately from the borrower’s individual accounts, making coverage more consistent with that provided by the Federal Deposit Insurance Corp. The NCUA has said it believes its interim final rule will provide the greatest flexibility possible with regard to displaying the official sign that incorporates the new insurance limits, while also providing members with the necessary information. In its Comment Call, CUNA asks credit unions to comment. Comments are due to the agency by Dec. 22.

Webinar from CUNA offers latest share insurance info

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WASHINGTON (11/3/08)—The Credit Union National Association is offering a Nov. 4 webinar to update credit unions on the latest information regarding share insurance rules. Tomorrow’s session is intended to help credit unions:
* Gain a full understanding of how credit union accounts are now insured by the National Credit Union Share Insurance Fund (NCUSIF) up to at least $250,000; * Hear about insurance coverage for share accounts, share draft accounts, trusts accounts, and IRAsand others; * Get a good understanding of NCUA’s recent changes in the beneficiary rules and how beneficiaries can increase the amount of insurance on an account; and * Learn how to determine how much of your members account balances are insured.
The webinar is 2-3:30 p.m. EST. Use the resource link below for registration.

Inside Washington (10/31/2008)

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* WASHINGTON (11/3/08)--House Financial Service Committee Chairman Barney Frank (D-Mass.) last week criticized any financial institution that is “distorting the legislation that Congress passed at the president’s request to respond to the credit crisis.” He said the intent of Congress in authorizing the U.S. Treasury Department’s Troubled Asset Relief Program (TARP) was to make funds available for increased lending. Any use of the these funds for any purpose other than lending--bonuses, severance pay, dividends, acquisitions of other institutions and more--is a violation of the terms of the act, the chairman said in a release. He said his committee will conduct oversight hearings Nov. 12 and 18 ... * WASHINGTON (11/3/08)--The Securities and Exchange Commission (SEC) last week hosted a roundtable discussion on mark-to-market (MTM) accounting, giving proponents and detractors of the accounting method a forum to discuss their differences. Certain assets, some of which are held by credit unions, are required to be measured using the MTM accounting technique. This essentially requires these assets to be valued at the price they could be sold for today on the open market. The recently enacted Emergency Economic Stabilization Act requires the SEC to conduct a study on MTM accounting and report its findings to Congress by Jan. 2. The study is to include the effects of MTM accounting on a financial institution’s balance sheet. The act also authorizes the SEC to suspend application of MTM. Those opposed to the use of MTM argue that a financial institution’s intention to hold assets for the long term should be a factor in valuing them. Those in favor of the accounting technique argue that allowing a bank’s management to value assets will only lower investor confidence. The debate will continue at the SEC’s next roundtable on Nov. 21 ... * WASHINGTON (11/3/08)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) sent a letter to President Bush urging him to move forward with foreclosure prevention efforts, saying that media reports have exaggerated the administration’s progress (American Banker Oct. 31). The administration needs to use loan guarantees and credit enhancements for systematic loan modifications with the Federal Deposit Insurance Corp., he said ... * WASHINGTON (11/3/08)--The National Credit Union Administration (NCUA) was presented with the Combined Federal Campaign (CFC) President’s Award. The award, the highest CFC award given to an agency, is granted when an agency has at least 75% employee participation in the CFC or a $275 per capita gift. During 2008, NCUA’s Central and Region II office staffs gave an average CFC gift of $506, with a participation rate of 72.4%. “Credit unions succeed because volunteers give their time and effort,” said NCUA Chairman Michael Fryzel. “For the past 75 years, federal credit unions have been instrumental in helping people achieve their financial goals. Volunteer donations go a very long way in improving the lives of others, especially in these difficult financial times.” ... * WASHINGTON (11/3/08)--National Association of State Credit Union Supervisors (NASCUS) President/CEO Mary Martha Fortney encouraged the National Credit Union Administration to continue working with regulators as the economic crisis affects the examination and supervision of state-chartered, federally insured credit unions. She also addressed the importance of future regulatory enhancements including access to supplemental capital, prompt corrective action changes and increased member business lending capabilities. She explained that NASCUS and state regulators are committed to working with NCUA to ensure credit unions have the resources to remain safe and sound ...

Inside Washington (10/30/2008)

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* WASHINGTON (10/31/08)--The Federal Deposit Insurance Corp. Chairman Sheila Bair said Wednesday the agency had worked out a standardized loan modification program--one step closer to implementing a plan that would guarantee up to three million at-risk mortgages for lenders if they agree to modify loans (American Banker Oct. 30). The plan could cost the government up to $50 billion, and the money would be taken out of the $700 billion Congress gave the Treasury Department for the rescue plan. Last week, Bair said that 400,000 IndyMac borrowers are eligible for modifications. Policymakers need to use temporary measures deployed during the credit crisis and tighten lending rules. Until foreclosures are stemmed, the housing crisis will continue, she added ... * WASHINGTON (10/31/08)--The Financial Crimes Enforcement Network (FinCEN) withdrew its proposed anti-money laundering (AML) program rules for unregistered investment companies, commodity trading advisers and investment advisers in an effort to increase its efficiency and effectiveness in administering the Bank Secrecy Act (BSA). FinCEN will not proceed with BSA requirements for those entities without publishing new proposals and allowing for industry comments. It will consider whether it should impose requirements under the BSA on those entities. FinCEN also announced a new section of its website called “Pending Rules” ...

SBA loan guarantees drop in 2008

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WASHINGTON (10/31/08)—The volume of loan guarantees issued by the U.S. Small Business Administration (SBA) has been pummeled from three directions causing a nearly 30% drop in 2008. The SBA said it was caught in a “perfect storm” of tightened credit by commercial lenders, declining creditworthiness, and reduced demand for loans from small business borrowers uncertain about the future. SBA Acting Administrator Sandy K. Baruah said in a release Thursday that in addition to loan volume dropping almost by a third since 2007’s record year with nearly 100,000 loans approved, the dollar value has also declined. 2008 witnessed a 13% drop to $17.96 billion from $20.6 billion in 2007. The program declines began not long after the fiscal year started in October 2007, and accelerated throughout the fiscal year, the SBA reported. They represent loans made under SBA’s two primary loan programs, the 7(a) guaranteed loan program and the Certified Development Company, or 504, loan program. Baruah said he “feels strongly” that the steps taken by the Bush administration and U.S. Congress will have a positive effect on the credit situation and the economy. The SBA is conducting meetings across the country to study how better to understand how the agency can work with both lenders and small businesses during “these difficult economic times.” For more information on how SBA loans, use the resource link below.

Exam chartering initiative unveiled by NCUA

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ALEXANDRIA, Va. (10/31/08)—Two regulatory initiatives were unveiled Thursday by the National Credit Union Administration (NCUA): one intended to beef up risk-based exams and the other to centralize the process for chartering new financial cooperatives. NCUA Chairman Michael Fryzel used the occasion of his agency’s eighth annual public budget review to announce the changes.
Click to view larger imageDuring yesterday's Eighth Annual NCUA Budget Briefing, CUNA represenative Tom Gaines presents to the NCUA Board. From left: NCUA Board Vice Chairman Rodney Hood, NCUA Chairman Michael Fryzel and NCUA Board Member Gigi Hyland. (Photo provided by CUNA)
The increased frequency of exams, Fryzel said, is in response to the “complexities and volatility of the financial marketplace.” The NCUA’s chartering function would be consolidated from its regional offices and centralized at its headquarters in Alexandria, Va. as of Jan. 1, 2009, under the chairman’s proposal. “It is anticipated that the centralized evaluation will be more streamlined, and will also enable the Regions to devote additional time and resources to the examination process. The proposal will be placed on the agenda for board consideration at its November meeting,” Fryzel said. He added, “I will continue to review every facet of the agency in order to make us more efficient and effective in fulfilling our public policy function.”

Coastal gets adverse bankruptcy decision

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WASHINGTON (10/31/08)—A U.S. District Court has upheld a bankruptcy court's adverse decision against Coastal FCU in a North Carolina bankruptcy case that involves reaffirmation agreements. The case, brought by Coastal, in Raleigh, involves a member’s automobile loan made in February 2005. The borrowers subsequently filed a Chapter 7 bankruptcy and signed a reaffirmation agreement with the credit union in order to retain the automobile. The borrowers were not represented by an attorney; therefore the bankruptcy court was required to hold a hearing to determine if the agreement imposed an undue hardship on the debtors. The court declined to approve the reaffirmation agreement and stated that the debtors could retain the automobile as long as the loan was not delinquent and they continued making payments. On Oct. 28, the U.S. District Court for the Eastern District of North Carolina Western Division upheld the bankruptcy court decision that declined to approve the reaffirmation agreement and permitted the debtors a "ride-through." Coastal FCU, backed by the Credit Union National Association (CUNA) and the North Carolina CU League, argued that through the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), the U.S. Congress intended to eliminate the ‘ride-through' option. The term refers to an interpretation of former bankruptcy laws that permits a debtor to keep the loan collateral, such as an automobile, without either reaffirming the debt or redeeming the loan as long as timely payments continue. According to Mike McLain, CUNA Assistant General Counsel and Senior Compliance Counsel, "Some areas of the BAPCPA are poorly drafted and a literal application of the bankruptcy law can result in a decision that is clearly at odds with Congressional intent. That is what has happened in this case." U.S. District Court Judge James C. Dever III ruled that Coastal failed to show that an “intent exception” applies to this case that would permit the court to consider Congress' intent rather than the plain language of relevant sections of the Bankruptcy Code. McLain said, "We are obviously disappointed by the district court decision. We had hoped that the court would have recognized and upheld the changes made by the 2005 bankruptcy revisions.” Coastal will now consider whether to appeal the district court ruling to the U.S. Fourth Circuit of Appeals, McLain stated.

NCUA Board holds unscheduled closed meeting today

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ALEXANDRIA, Va. (10/31/08)--The National Credit Union Administration (NCUA) Board will convene at 8 a.m. ET this morning for a closed board meeting to consider “supervisory activities.” The agency announced the meeting in a press statement yesterday. No other information was available. CUNA News Now will provide any available details. Follow News Now LiveWire for instantaneous alerts to your desktop or mobile device.

CUNA pushes for CU asset relief plan

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WASHINGTON (10/31/08)—Although the need may be modest, credit unions should have their own credit union-funded troubled-asset relief program through their federal regulator, the Credit Union National Association (CUNA) proposed Thursday. Testifying at the National Credit Union Administration’s (NCUA’s) eighth annual public budget briefing, CUNA reported that credit unions, despite the current economic upheavals, are generally in good shape with overall net worth around 10.5% of assets.
Click to view larger imageTom Gaines, chairman of the CUNA Examination and Supervision Subcommittee, and president/CEO of the Tennessee Credit Union League, tells the three-member NCUA Board that CUNA believes any potential capital deficiency among credit unions due to the financial meltdown is likely modest--given that overall credit union net worth is about 10.5%. (Photo provided by CUNA)
Still, a small number of credit unions have become “collateral damage to the collapse of housing prices in some markets.” Those cooperatives should be able to seek assistance either through the U.S. Treasury Department’s Troubled Asset Relief Program (TARP) or a similar plan administered by the NCUA just for credit unions. Those cooperatives are able to seek assistance through the U.S. Treasury Department's Troubled Asset Relief Program (TARP); however CUNA supports the development of a similar plan, administered by the NCUA, just for credit unions. Tom Gaines, chairman of the CUNA Examination and Supervision Subcommittee, testified on CUNA’s behalf. Gaines is president/CEO of the Tennessee CU League. Gaines also made the following points at the briefing:
* CUNA continues to support full insurance coverage for noninterest bearing transaction accounts; * Credit unions are concerned about an insurance premium. The NCUA board should closely monitor this issue and provide credit unions as much advance notice as possible if a premium assessment is likely; * The NCUA may need additional staff to handle problems. CUNA does not oppose additional staffing, but requests the agency make no unnecessary additions; and * The NCUA has improved its handling of the overhead transfer rate issue, but CUNA maintains it is still unclear how insurance-related costs are distinguished from supervisory ones.
Click to view larger imageTom Gaines (left), chairman of the CUNA Examination and Supervision Subcommittee, and president/CEO of the Tennessee Credit Union League, chats with NCUA Board Member Gigi Hyland during a break in yesterday's NCUA Budget Briefing. (Photo provided by CUNA)
Gaines also noted that CUNA is currently completing a survey on regulatory examinations and share the results with the NCUA and the National Association of State CU Supervisors. “We already know that credit unions are raising concerns about examiner pressure regarding return on assets (ROAs),” Gaines said Thursday. “NCUA should continue to provide training to examiners on communications and ensure board members’ views are reflected in examiner actions.” He added that credit unions continue to seek more regulatory guidance on Bank Secrecy Act issues. In concluding, Gaines acknowledged that the country’s economic woes will make the coming year will difficult for credit unions and he said CUNA appreciates the regulators’ efforts to “contain cost and reduce regulatory burden.”

Revised 2009 meeting schedule for NCUA

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ALEXANDRIA, Va. (10/31/08)—The National Credit Union Administration (NCUA) Thursday announced changes to the 2009 board meeting schedule it had posted to its website last month. The NCUA board is scheduled to convene each month on a Thursday at 10 a.m. on the following dates:
* January 22 * February 26 * March 19 * April 16 * May 21 * June 18 * July 16 * September 24 * October 22 * November 19 * December 17
The NCUA board historically does not meet in open session in August. Further revisioins to the schedule are possible.

NCUA plans increases to 2009 budget staffing

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Click to view larger image During Thursday's Eight Annual Budget Briefing, NCUA Executive Director Len Skiles presents highlights from the agency's proposed 2009 budget. (Photo provided by CUNA)
ALEXANDRIA, Va. (10/31/08)--The National Credit Union Administration’s (NCUA) 2009 budget is expected to increase 15% to $182.9 million and add 85 additional staffers to accommodate program modifications “necessary to address the current turbulent economic environment,” said NCUA Executive Director Len Skiles yesterday. During 2009, the overhead transfer rate is projected to be 55% and the operating fee is expected to increase 10% to oblige increased expenditures, according to Skiles. He spoke during the NCUA’s Eighth Annual Budget Briefing and Public Forum held Thursday in Alexandria, Va. The most significant NCUA program changes under consideration would add additional staff, implement a 12-month examination cycle, develop a national examiner team to conduct high-risk exams, and centralize credit union chartering in 2009.
Click to view larger image Click for larger view
NCUA said it believes it is “imperative to expand its examiner staff and develop a cadre of well-trained experts as credit unions are faced with unprecedented liquidity pressures, increased interest rate risk, due diligence efforts, concentration risk, and additional governmental requirements.” NCUA’s proposed budget includes $12.8 million to hire and train:
* 100 additional examiners; * Five problem case officers; * Five risk management officers; and * Additional support staff.
Click to view larger image Click for larger view
Pay and benefits for the entire staff are projected to increase $14.5 million or 12.3%. Travel expense is expected to increase $6.9 million or 44.7% to accommodate a 12-month examination cycle and expected inflation pressures, said Skiles. The NCUA Board is scheduled to consider the budget at its Nov. 20 meeting. Use the resource link below to access the NCUA budget briefing PowerPoint presentation.

Treasury TARP must include CUs says CUNA

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WASHINGTON (10/30/08)—Although presently it appears unlikely that the credit union system will have a widespread need for capital as proposed by the U.S. Treasury Department’s Troubled Asset Relief Program (TARP), the Credit Union National Association (CUNA) continues to seek access to the program for credit unions. In an Oct. 28 comment letter on the TARP plan, CUNA noted that credit unions generally sought to avoid the kinds of subprime mortgage lending that helped inflame the current economic meltdown. However, the letter added that the Treasury is aware that credit unions do not operate in a vacuum and therefore “will likely not totally escape problems in the broader financial markets.” CUNA also noted its plans to work with the National Credit Union Administration (NCUA) to determine if the federal credit union regulator can develop TARP-like programs that would allow any federally insured credit union that needs to sell troubled assets, apply for additional capital, or obtain asset guarantees will first be able to find a credit union-funded solution before having to call upon taxpayer dollars for help. “Working through NCUA in this manner would also free up Treasury TARP funds for other institutions,” the CUNA letter noted. The TARP program was authorized under the Emergency Economic Stability Act of 2008 (EESA). The troubled assets eligible for the guarantee must have been originated or issued prior to March 14, 2008. The department’s request for comments sought guidance on how the insurance or guarantee program should be established. To read CUNA’s full comments, use the resource link below.

GAO report shows some economies with Check 21

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WASHINGTON (10/29/08)—The Government Accountability Office reports that while the Federal Reserve Board has been able to save on transportation and labor costs under The Check Clearing for the 21st Century Act of 2003 (Check 21) , check truncation has not yet resulted in overall gains in economic efficiency for the Fed or for banks. Check 21 was enacted to make check collection more efficient and less costly by facilitating wider use of electronic check processing. It authorized a new legal instrument—the substitute check—a paper copy of an image of the front and back of the original check. The GAO report, required by the Check 21 law, found that although check volume has declined, checks still represent a significant volume of payments that need to be processed, cleared, and settled. However, a survey of 108 banking customers found that most seem to have accepted changes to their checking accounts from check truncation. That, the GAO surmises, may result in future economies. The GAO said the interviews with bank consumers showed the majority accepted the lack of canceled checks and also accepted being able to access information about their checking account activity online. Several of those surveyed said they considered electronic image and online reviewing to be more secure than receiving canceled checks. Eleven percent of those consumers surveyed did express a preference for receiving canceled checks. Also, the GAO found that the federal banking regulators reported few consumer complaints relating to Check 21. While the GAO report was based on data collection instruments and interviews from the 10 largest banks by deposit size as of March 2008 and a group of smaller banks, which included credit unions, check truncation is not new to credit unions. For instance, even in 2002—just before Check 21 became law—CUNA figures found that 64% of credit unions offered share draft accounts and 91% of those credit unions utilized truncation. Approximately 7.1% of credit unions offering share draft accounts offered images of all checks with their statements. As of 2007, the most recent data available, CUNA figures showed 72% of credit unions offer share draft accounts. Their use of check truncation remains above 90%.

CUNA seeks comment on shared insurance signage

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WASHINGTON (10/30/08)—The Credit Union National Association (CUNA) is asking credit unions to comment on proposed simplifications to the a National Credit Union Administration (NCUA) rule on share insurance signs for shared branching. Under current rules, a shared branch must list the names of all credit unions served and whether each one is federally insured. The proposal would replace that cumbersome list with a general statement that not all of the credit unions served by a shared teller are federally insured and that members should contact their credit union for further information. CUNA notes that the proposal recognizes the burden of the current requirements for those shared branch networks that are national in scope, which may serve thousands of individual credit unions. That situation often results in lengthy signs that need to be updated frequently. The proposal also:
* Requires that the second sign must be similar to the current official NCUA sign in terms of design, color, and font. The NCUA will produce signs that meet these new requirements and will make them available at a reasonable cost. * Clarifies that tellers in nonfederally insured credit union branches may accept deposits for federally insured credit unions as part of a shared branching network. However, these credit union branches may not display the official NCUA sign and there would, therefore, be no need to display the second sign.
Comments are due to the agency by Nov. 21, and CUNA seeks comments by Nov. 17. CUNA specifically asks credit unions to address the NCUA request for comment to help the agency understand the inner workings of shared branching. Use the resource link below to read the complete request for comment.

House panel announces TARP oversight session

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WASHINGTON (10/30/08)—House Financial Services Committee Chairman Barney Frank (D-Mass.) announced his panel will conduct a Nov. 18 oversight hearing on the U.S. Treasury Department’s new Troubled Asset Relief Program (TARP). The panel will also look at initiatives taken by the Federal Reserve Bank and the Federal Deposit Insurance Corp. related to the turmoil in domestic and global financial markets Frank’s announcement said the committee expected testimony from senior administration officials, institutions using or affected by the initiatives, and academic and other experts. “While much of our attention is, appropriately, focused on the $700 billion TARP program recently passed by Congress; it is clear that Treasury has been working closely with both the Federal Reserve and the FDIC on broader coordinated initiatives. “ The committee is interested in exploring the rationale for the specific steps already taken and to better understand how the Treasury Department, Federal Reserve and the FDIC expect their actions to work and how, and over what time frame, they expect to be able to measure results,” Frank said. He identified three primary areas of interest: The effort to recapitalize financial institutions; the effort to reduce volatility and restore liquidity to financial markets and; the effort to reduce foreclosures and mitigate the erosion of housing values.

Inside Washington (10/29/2008)

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* WASHINGTON (10/30/08)—The Credit Union National Association is advising credit unions that the Federal Emergency Management Agency (FEMA) has issued the Compendium of Flood Map Changes, which provides a listing of changes made to the National Flood Insurance Program maps effective Jan. 1 to June 30, 2008. Future notices of map changes will be issued approximately every six months... * WASHINGTON (10/30/08)--Financial services companies slated “too large to fail” may face political backlash next year, according to observers (American Banker Oct. 29). The issue is likely to surface when regulators revamp the financial system. Manuel Johnson, former Federal Reserve Board vice chairman, said he could envision politicians arguing to break up large institutions or tax them to redistribute profits. The “too big to fail” debate has waged for years, and on Oct. 14, the government came close to deciding which institutions were too large to fail when it provided $125 billion to nine institutions. Bank of America, Citigroup, JP Morgan Chase and Co., and Wells Fargo received $25 billion each. The Treasury has hesitated to provide guidelines on how much of their capital infusions banks would be required to use for new lending, but observers expect that the situation will likely change after next week’s presidential elections ... * WASHINGTON (10/30/08)--Steve Cross was named deputy director this week of the Federal Housing Finance Agency, where he will reside over the 12 Federal Home Loan Banks (FHLBs). Cross authored a failed proposal two years ago that would require FHLBs to keep more of their earnings. The proposal triggered tension between him and some individuals in the FHLB system (American Banker Oct. 30). James Lockhart, Finance Agency director, said Cross was hired because he had done a good job running the Federal Housing Finance Board’s supervision department--a position Cross held for six years. Geoff Bacino, director at the Finance Board, who advocated tabling Cross’ original proposal, said Cross would not “disrupt” the banks in his new job ... * WASHINGTON (10/30/08)--The Small Business Administration made changes to the Military Reservist Economic Injury Disaster Loan program, effective Tuesday. The changes will make the program more accessible to small businesses facing financial loss when the owner or an essential employee is called to active military duty. A small business can apply for a loan on the date the employee receives notice of duty. SBA extended the period for one year after the employee is discharged from duty. Also, the small business is no longer required to pledge collateral to secure a loan of $50,000 or less ...

Inside Washington (10/28/2008)

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* WASHINGTON (10/29/08)--The International Association of Deposit Insurers says it hopes a three-day meeting hosted by the Federal Deposit Insurance Corp. will help finalize guidelines to help countries establish standardized deposit insurance systems (American Banker Oct. 28). The meeting starts Wednesday. About 90 government representatives will attend and will focus on finalizing proposed guidelines that were issued in February. Raising or waiving limits on insurance coverage, expanding coverage to credit derivatives and expanding coverage to keep consumers from escaping to money market funds also could be discussed ... * WASHINGTON (10/29/08)--The Federal Housing Finance Agency (FHFA) became official Monday. The agency integrates the Federal Home Loan Banks, the Office of Federal Housing Enterprise Oversight, the Federal Housing Finance Board, and the Department of Housing and Urban Development’s government-sponsored enterprise mission team. The FHFA oversees Fannie Mae and Freddie Mac. The agency also announced the appointments of Edward DeMarco, senior deputy director, chief operating officer and deputy director for Housing Mission and Goals; Stephen Cross, deputy director of the Division of Federal Home Loan Bank Regulation; Chris Dickerson, deputy director of the Division of Enterprise Regulation; and David Lee, the Federal Housing Finance Board’s director of the office of management, as the FHFA’s chief administrative officer ... * WASHINGTON (10/29/08)--Observers speculate that the Treasury may need more than $700 billion for its rescue package. The department already has earmarked $250 billion for banks and the remaining $450 billion to purchase troubled assets (American Banker Oct. 28). David Nason, assistant treasury secretary for financial institutions, said Monday in an interview with CNBC that the department may have to take equity stakes in insurance companies or automakers. The original intent of the Treasury’s plan was to purchase troubled assets. The $700 billion may go mostly into capital, and it’s unknown how active the asset program would be, according to Bert Ely, an independent analyst based in Alexandria, Va. The Treasury remains committed to the asset program, Nason said Monday, but it has not yet released complete details on it ... * WASHINGTON (10/29/08)--According to New York Gov. David Paterson, congressional leaders should include state officials on the two panels overseeing the Treasury Department’s $700 billion financial rescue program. The representatives could provide valuable input, he said in a letter to Senate and House leaders (American Banker Oct. 28). One panel has yet to be formed, while the other will be chaired by Federal Reserve Board Chairman Ben Bernanke. Paterson plans to call for state participation at a Wednesday House hearing ...

CUNA supports Treasury Fin. Lit. Honor Roll

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WASHINGTON (10/29/08)—Efforts to improve Americans financial literacy are always relevant, and their importance just increases during troubled economic times such as the country currently faces, wrote the Credit Union National Association (CUNA) in a letter to the U.S. Treasury Dept. CUNA comments focused on a proposed Treasury program to establish what it has labeled it Workplace Financial Honor Roll, intended to encourage employers to implement efforts that will enhance employee financial knowledge, CUNA told the Treasury that it supports such a program as a means to reach an important goal of expanding current financial education efforts to reach more Americans. CUNA wrote, “We believe that targeting those at the workplace can be an important means to reach a sector of the public that may otherwise be inaccessible. “ However, CUNA expressed concern regarding the financial and resource requirements the program is likely to place on participating organizations. “Having several concerns about the feasibility of implementing such programs, we ask that the Office of Financial Education offer guidance on establishing and maintaining such programs with minimal costs to the organization,” the CUNA letter said. Additionally, CUNA sought suggestions on how and organization could effectively reach employees, as well as encourage participation in the program. Use the resource link below to read CUNA’s complete comment.

HUD revises FHA-lender bankruptcy advice

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WASHINGTON (10/29/08)—The U.S. Department of Housing and Urban Development (HUD) has changed its rules to allow Federal Housing Administration (FHA) loss mitigation while a borrower is in bankruptcy. In an Oct. 17 letter to all FHA-approved lenders, HUD’s Brian Montgomery, assistant secretary for housing-federal housing commissioner, wrote that effective immediately mortgagees must:
* Upon receipt of notice of a bankruptcy filing, send information to debtor’s counsel indicating that loss mitigation may be available making sure to copy the bankruptcy trustee on all such communications; and * Provide instruction sufficient to facilitate workout discussions including documentation requirements, timeframes and servicer contact information.
Providing such information to debtor's counsel concerning loss mitigation options can be accomplished without requiring relief from the automatic stay and in the case of a Chapter 7 bankruptcy, without requiring reaffirmation of the debt. The advisory negates earlier Mortgagee Letter 2000-05, which generally prohibited mortgagees from offering loss mitigation to a borrower in bankruptcy. That guidance. Montgomery wrote, was based on HUD’s desire not to influence mortgagees to take any action that would be considered by the Bankruptcy Court as a violation of the automatic stay. However, the HUD letter said that its recent discussion with mortgage industry and bankruptcy experts shows that contact with debtor’s counsel or a bankruptcy trustee does not constitute a violation of the automatic stay. Further, waiting until a bankruptcy is discharged or dismissed before offering loss mitigation may be injurious to the interests of the borrower, the mortgagee and the FHA insurance funds. The new advisory should provide some help to those facing foreclosure because of the mortgage market meltdown. Many mortgage lenders, using information required to file a bankruptcy petition, have been able to complete a loss mitigation evaluation before the bankruptcy plan is confirmed and have offered a pre-approved loan modification agreement, according to HUD. “For those mortgagors that sought bankruptcy protection solely to avoid foreclosure of their homes, this solution allowed the mortgagor to have the bankruptcy dismissed and begin fresh with a mortgage obligation that is both current and with payments that the mortgagor can afford. “For those mortgagors with other financial problems, the resolution of the mortgage problem will put them in a better position to resolve the remaining financial issues,” the Montgomery letter pointed out. The lender should communicate through a borrower’s bankruptcy counsel. However, the letter noted that in cases where a borrower has filed for bankruptcy without an attorney, the lender may provide mitigation information directly to the borrower, with a copy to the bankruptcy trustee. The communication to the borrower must not infer that it is in any way an attempt to collect a debt. Mortgagees must consult their legal counsel for appropriate language, HUD advised.

Inside Washington (10/27/2008)

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* WASHINGTON (10/28/08)--Fifteen financial institutions have signed up for a cash injection offer from the federal government to bolster the ailing banking sector (The New York Times and American Banker Oct. 27). The Treasury Department plans to fund up to 22 lenders in the $250 billion recapitalization program. JP Morgan Chase and Citigroup were among nine institutions to receive $125 billion of capital infusions two weeks ago. Other institutions that will use the government funds include: BB&T Corp., Capital One Financial Corp., PNC Financial Services Group, SunTrust Banks, Regions Financial Corp., KeyCorp, Comerica, Fifth Third Bancorp, State Street Corp., Northern Trust Corp., First Horizon National Corp., Huntington Bancshares, Washington Federal, City National Corp., Valley National Bancorp and First Niagara Financial Group ...

Reserve GAC hotel rooms beginning Nov. 6

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WASHINGTON (10/28/08)--Beginning Nov. 6 at 2 p.m. ET, those planning to attend the Credit Union National Association's (CUNA) 2009 Governmental Affairs Conference can reserve hotel rooms. Attendees can register online or by phone for the Feb. 22-26 event in Washington, D.C. The GAC offers 13 hotels near the convention center and shuttle service is provided Sunday through Thursday. Three options exist for reserving lodging through the housing bureau:
* Visit gac.cuna.org, and click on "Housing" for easy step instructions for making reservations; * Call 800-974-3084 Monday through Friday from 9 a.m.- 5 p.m. ET. * Beginning Friday, Nov. 7, reservations can be faxed to 800-521-6017 or 847-940-2386. Fax reservations are not accepted on opening day.
A $250 per room deposit, payable by major credit card, is required for all reservations at the time of booking. For complete instructions and a list of hotels, use the resource links for more information.

MBLs important to recovery CUNA tells lawmakers

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WASHINGTON (10/28/08)—If no longer restricted by a statutory business lending cap, credit unions likely could provide $10 billion of new credit to small businesses within the first 12 months of receiving new authority, according to the Credit Union National Association (CUNA). That would be in addition to the approximately $30 billion already in outstanding business loans provided by credit unions, CUNA noted. In letters being sent today to leaders of the House Committee on Small Business Committee, CUNA notes the infusion of funds by credit unions into small businesses would “provide much needed economic stimulus without costing the taxpayers a dime.” CUNA’s letter is being sent to Chairwoman Nydia Velazquez (D-N.Y.) and ranking minority member, Rep. Steve Chabot (R-Ohio) as the small business panel conducts a hearing today on “ Creating Opportunities for Small Business in Economic Recovery.” Over the almost 100 years of credit union history in this country, member business lending was unrestricted until the 1998 Credit Union Member Access Act (CUMAA, H.R. 1151). “Credit unions with business lending experience are in a position to assist small business owners. As a part of a comprehensive approach to make credit more available to small business owners, we encourage Congress to enact legislation eliminating the decade-old cap on credit union member business lending,” the CUNA letter says. “As the economy recovers from this crisis, credit unions will continue to be there for their members. “We know credit unions cannot be the entire solution to the problems we face, but credit unions stand ready, willing and able to assist in the recovery,” the CUNA letter says.

Treasury urged to back parity for non-interest accounts

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WASHINGTON (10/28/08)—The U.S. Treasury Department was urged by the Credit Union National Association (CUNA) to support full share insurance coverage of non-interest bearing transaction accounts. CUNA President/CEO Dan Mica sought Treasury Secretary Henry Paulson’s support to provide the same insurance coverage for credit unions’ non-interest accounts as has been provided by the Federal Deposit Insurance Corp. for insured banks and thrifts. Mica said it is CUNA’s view that the National Credit Union Administration (NCUA) has sufficient legal authority to establish a similar program for any federally insured credit union through the National Credit Union Share Insurance Fund. He added that CUNA "appreciates the fact that NCUA Chairman (Michael) Fryzel has communicated with you about this." Mica said CUNA is "concerned that there may be disadvantages for credit unions should the additional coverage not be provided." Previously, Mica had warned that failure to address this issue for credit unions could undermine “credit unions' hard-won success in serving small businesses and others in their communities."

NCUA attorney-client rule needs more clarity CUNA

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WASHINGTON (10/28/08)—A recent explanation by the National Credit Union Administration (NCUA) of its opinion on attorney-client privilege needs additional clarification, according to the Credit Union National Association CUNA), which requested the recently issued explanation. The agency acknowledged that it previously permitted credit unions to withhold from federal examiners records covered by attorney-client privilege because of an assertion that producing them could be read by the courts as having waived the privilege. However, the NCUA wrote in its Oct. 21 letter to CUNA, it will no longer permit credit unions to withhold privileged documents because of that assertion. The possibility of a court using the release of a privileged document to claim a credit union waived its attorney-client privilege was eliminated by the addition of Section 205(j) to the FCUA, the agency claimed. “This does not mean that it is no longer possible for a credit union to assert the attorney-client privilege against NCUA,” wrote Robert Fenner, NCUA General Counsel, in the agency letter. “However,” he added, “our experience has been that the waiver of privilege as to a third party was almost always the reason for asserting the privilege in the past.” CUNA Deputy General Counsel Mary Dunn said of the NCUA letter, “While CUNA appreciates NCUA’s efforts to clarify its information on this topic, we believe unanswered questions remain about the application of the NCUA opinion.” Dunn said CUNA will follow up with the NCUA.

CUNA will pursue lawyers account coverage issue

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WASHINGTON (10/28/08)—The Credit Union National Association (CUNA) said Monday it will follow up with the National Credit Union Administration (NCUA) on its recent opinion letter on insurance coverage on Interest on Lawyers' Trust Accounts (IOLTA). The accounts in question are those set up by lawyers at a credit union or bank to hold funds for their clients. Often, the interest accrued is paid to the state or the state bar association to fund legal services for those who cannot afford them. In response to an inquiry by the Wisconsin Office of Lawyer Regulation, the NCUA stated its opinion that all clients who have funds represented in an IOLTA must be members of the credit union holding the account. The exception to this, according to the agency, would be accounts deposited in a low-income credit union, which can accept nonmember funds. Those accounts would provide share insurance coverage for all the clients. CUNA Deputy General Counsel Mary Dunn said Monday that this situation puts credit unions at a disadvantage to attract this type of account if all the clients must be members, rather than just the attorney establishing the account. Dunn said that CUNA has discussed this issue with the agency and will continue to pursue further discussions. Use the resource link below to read the NCUA letter.

Inside Washington (10/24/2008)

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* WASHINGTON (10/27/08)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel visited Acceso FCU in Washington, D.C., Wednesday in conjunction with Hispanic Heritage Month. Acceso FCU is a joint project among IDB-IIC FCU, District Government Employees FCU, and OAS Staff FCU designed to improve access to credit union services in a primarily Hispanic part of Washington, D.C. “Acceso is a working example of how credit unions can and do make a difference in their communities,” Fryzel said. “The branch has not only effectively targeted the needs of its Hispanic membership through bilingual outreach and wire transfer services tailored to that community, but it is also an important physical presence in an area badly in need of traditional financial service providers.” From left are: Fryzel, Acceso CEO Carla Decker, and Branch Manager Ana Maria Roig. (Photo provided by the National Credit Union Administration) ...

CUNA details Hope for Homeowners program

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WASHINGTON (10/27/08)—The Credit Union National Association (CUNA) has issued a final rule analysis on the Federal Housing Administration’s (FHA’s) Hope for Homeowners (H4H) Program to refinance up to $300 billion in troubled, subprime mortgages into fixed-rate, FHA-backed loans. The H4H program is voluntary and all lienholders must agree to participate, including any subordinated lienholders who may hold home equity or other similar type loans. The program also allows the subordinated lienholders to share in any future appreciation of the property as a means to encourage them to participate in the program. Under this program, effective for loans originated on or before Jan. 1, 2008, eligible homeowners will be able to refinance their subprime, primary residence home loans. To qualify, the lender or mortgage investor must reduce the loan principal and would receive a guarantee for no more than 90% of the home's current appraised value. In addition, the lender would have to pay a 3% FHA loan origination fee. In exchange for an FHA guarantee on the mortgage, borrowers must share with the FHA the newly created equity and any future appreciation from the resale of the refinanced home. The program became effective as of Oct. 1. For more details, use the resource link below to read CUNA’s complete rule analysis.

Compliance Can CUs give Hope 4 Homeowners loans

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WASHINGTON (10/27/08)--The Federal Housing Administration’s (FHA’s) new Hope for Homeowners (H4H) Program lets lenders refinance certain delinquent mortgages to help borrowers hang onto their homes. But what lenders are eligible to participate? Are credit unions among them? In its October Compliance Challenge, the Credit Union National Association (CUNA) advises credit unions regarding who is an eligible lender, as well as who is an eligible borrower. All FHA-approved lenders are allowed to originate mortgages under the temporary H4H program--so credit unions that offer FHA loans are qualified. All lender participation is voluntary. The program was created by the Housing and Economic Recovery Act of 2008, signed into law in July. The H4H website lists 78 lenders that have been cleared to participate in the program. It has also been reported that the FHA is fielding roughly 1,000 calls a day from interested borrowers. Under the program, certain borrowers facing difficulty in paying their mortgages will be eligible to refinance into a 30-year fixed rate FHA-insured mortgage. The H4H Program is effective for endorsements on or after Oct. 1, 2008 through Sept. 30, 2011. CUNA notes that borrowers may be eligible if, among other factors:
* The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes; * Their existing mortgage was originated on or before January 1, 2008, and they have made at least six payments; * They are not able to pay their existing mortgage without help; * As of March 2008, their total monthly mortgage payments due were more than 31% of their gross monthly income; and * They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s); * The loan amount may not exceed a maximum of $550,440; * The holders of existing mortgage liens must waive all prepayment penalties and late payment fees; * The existing first mortgage lender must accept the proceeds of the H4H loan as full settlement of all outstanding indebtedness; * Existing subordinate lenders must release their outstanding mortgage liens; * The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home; and *The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.
Use the resource links below for more detailed information on the new program.

CUNA league pull out stops for CU champion

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Click to view larger image CUNA Senior Vice President of Political Affairs Richard Gose (right) discusses with Rep. Paul Kanjorski (D-Pa.) the elections during Gose's visit to Kanjorski's campaign in his district in Pennsylvania this week. Gose spoke to credit unions about Kanjorski, a long-time credit union champion. This was the third trip CUNA staff have made to the district during the campaign. (Photo provided by Penn. Credit Union Association)
WASHINGTON (10/27/08)--The Credit Union National Association (CUNA), Pennsylvania Credit Union Association (PCUA) and credit unions from around the country continue efforts to boost credit union champion Paul Kanjorski’s (D-Pa.) reelection bid. The 12-term congressman is in an extremely tight race against challenger Lou Barletta, the mayor of Hazleton, Pa. Kanjorski is a staunch supporter of credit union legislative initiatives in Washington. He was the original sponsor of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537), the Credit Union Membership Access Act (H.R. 1151) and the Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA, H.R. 5519). Kanjorski also chairs the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. In addition to ongoing fundraising activities, the credit union groups have boots on the ground in Kanjorski’s district. Their goal is to educate and mobilize the most likely pro-Kanjorski voters among the approximately 117,000 credit union members who reside there, according to the PCUA. Among the tactics employed by credit unions in support of Kanjorksi: Face-to-face constituent meetings and open houses with Kanjorski, voter canvassing, and direct mail. All of these activities were directed at credit union members. PCUA also hosted an Oct. 20 "thank you" party for credit union members who so far assisted with this campaign.

FBI posts photos of threat letter to financials

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WASHINGTON (10/24/08)--The Federal Bureau of Investigation (FBI), yesterday posted online photographs of one of more than 50 threatening letters mailed to financial institutions in 11 states. In addition to a threatening message, most of the letters also contain a powder substance, according to a statement from the FBI. Field and laboratory tests on the powder so far have been negative, said the agency. Financial institutions in New York, New Jersey, Washington, District of Columbia, Ohio, Illinois, Colorado, Oklahoma, Georgia, California and Texas have reported receiving the letters. The Federal Deposit Insurance Corp. and the Office of Thrift Supervision also received letters, according to the FBI. The U.S. Postal Inspection Service is offering a reward of up to $100,000 for information leading to the arrest and conviction of the person(s) who prepared and mailed the letters, which were mailed from Texas and postmarked at Amarillo. "Should your any part of your institution--corporate offices, branches--receive one of theses letters, please contact your local FBI office and ask for the WMD Coordinator," said the FBI. Use the resource link for more information.

Inside Washington (10/23/2008)

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* WASHINGTON (10/24/08)—Alan Greenspan, who headed the Federal Reserve Board for more than 18 years, acknowledged under questioning at a House Oversight Committee hearing Thursday that he had made a “mistake” in his belief that banks operating in their self-interest would be enough to protect their shareholders and the equity in their institutions (The New York Times Oct. 23). Greenspan said he and others who believed that lending institutions would do a good job of protecting their shareholders are in a “state of shocked disbelief.” Current problems were caused by a heavy demand for securities backed by subprime mortgages from investors who were unconcerned that a boom in home prices could crash to a halt, Greenspan testified. The House panel sought to discover if failed regulatory approaches contributed to the current national crisis. Also testifying were former Treasury Secretary John Snow and Securities and Exchange Commission Chairman, Christopher Cox … * WASHINGTON (10/24/08)-- The Treasury should use its authority granted under the recently enacted rescue bill to encourage lenders and servicers to participate in the Hope for Homeowners program offered through the Federal Housing Administration, according to Richard Neiman, the superintendent of the New York State Banking Department (American Banker Oct. 23). The ratio of delinquent borrowers without a modification plan increased to eight out of 10 by May, according to a regulatory report Neiman cited. He also encouraged the Treasury to offer credit enhancements and loan guarantees to lenders who participate in loan modification programs. Hope for Homeowners, effective Oct. 1, helps borrowers whose homes are worth less than their mortgages ... * WASHINGTON (10/24/08)--Observers say that the Treasury Department’s changing goals are undermining the agency’s efforts to restore confidence in the financial markets (American Banker Oct. 23). The Treasury’s capital injection plan originally aimed to encourage lending and the extra money should be used by banks to offer more credit, Treasury Secretary Henry Paulson said Oct. 14. The next day, Comptroller of the Currency John Dugan said the capital could be used to prevent banks’ losses. A few days later, Paulson said the money could allow stronger institutions to acquire weaker ones. The shifts in the plan’s purposes are creating confusion and undermining its mission, according to Don Mullineaux, University of Kentucky banking professor. However, one observer, Laurence Platt, K&L Gates LLP partner, said the Treasury has to change its focus because new problems are surfacing ... * WASHINGTON (10/24/08)--Federal Insurance Deposit Corp. (FDIC) Chairman Sheila Bair said her agency and the Treasury are proposing to encourage servicers to modify loans nearing foreclosure. If the loans meet established modification standards, the government could guarantee them so that they are sustainable, she added (The New York Times Oct. 24) ...

NCUA seeks non-interest account coverage for CUs

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ALEXANDRIA, Va. (10/24/08)—The National Credit Union Administration (NCUA) is actively seeking parity for credit unions by requesting credit union inclusion in U.S. Treasury Department’s recently expanded deposit insurance coverage of non-interest bearing deposit accounts. ‘Based on the belief that the policies of the National Credit Union Share Insurance Fund (NCUSIF) should be generally consistent with those of the (Federal Deposit Insurance Corp.) FDIC, I believe that there should be full share insurance coverage for non-interest-bearing transaction accounts temporarily through 2009,” said Fryzel in an announcement Thursday. He added that he has sent a letter to Treasury Secretary Henry Paulson requesting Treasury to establish a parallel guarantee for credit unions” in order to avoid any unintended impact on the credit union system.” The FDIC program for insured banks and thrifts included the FDIC guarantee for all funds in such a non-interest bearing deposit accounts. Under the program, for the first thirty days all insured banks and thrifts would be covered. After that time, the accounts at institutions that do not opt out and thus agree to a 10-basis point insurance assessment will be covered. NCUA’s Fryzel noted the importance for consumers in “the federal government creating a uniform regime regarding insured deposits.” “Given the uncertainty and turmoil in the markets, it is critical that consumers have confidence in the guarantee that stands behind funds in these non-interest bearing transaction accounts, regardless of what type of insured institution is providing the service,” he added. Last week, Dan Mica, president/CEO of the Credit Union National Association (CUNA) Wednesday, wrote to each member of the NCUA board to warn that federally insured credit unions will be competitively disadvantaged unless federal regulators move quickly to provide full share insurance coverage for non-interest bearing transaction accounts. “Failure by NCUA to address this issue for credit unions could undermine credit unions' hard-won success in serving small businesses and others in their communities,” the CUNA letter said.

NCUA confirms Nov. 1 enforcement of Red Flags rule

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WASHINGTON (10/24/08)—The Credit Union National Association (CUNA) confirmed with the National Credit Union Administration (NCUA) Thursday that it has no plan to delay the effective date for enforcement of the Identity Theft Red Flags rule for federal credit unions. The Federal Trade Commission announced Wednesday (see News Now, Oct. 23) that it is postponing for six months enforcement of the red flag rules for entities under its jurisdiction, which includes state chartered credit unions. CUNA said it recognized the FTC's action was primarily directed at non-financial institution creditors--such as automobile dealers and utility companies--which were unaware of these rules until recently. However, CUNA sought clarity from the NCUA, through a series of discussions, regarding the extent to which that agency might apply this suspension to federal credit unions. The NCUA and the federal banking agencies still expect federal credit unions and banks to be in compliance as scheduled, and have emphasized earlier that an institution's current policies and procedures on information security and fraud prevention can form the foundation of the required identity theft program, which should help to minimize compliance burdens. The FTC’s suspension of its enforcement of the red flag rules does not apply to the new Fair and Accurate Credit Transaction Act (FACTA) requirements that credit unions have procedures in place to handle discrepancies in the addresses on credit reports and credit applications, a rule the FTC issued at the same time as the red flags rule.

FHA chief says RESPA changes coming in two weeks

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WASHINGTON (10/24/08)—Changes to the Real Estate Settlement Practices Act, known as RESPA, will be out within the next two weeks, according to Federal Housing Administration (FHA) Commissioner Brian Montgomery. The FHA, an arm of the U.S. Department of Housing and Urban Development, has been working to revise rules for the 1974 RESPA since the late 1990s. The current proposal supplants one issued in 2002, scrapped by HUD after the Credit Union National Association (CUNA) and others noted that some of the proposed changes could be confusing to consumers and could have the opposite effect of an intended simplification. The current plan, as proposed, would:
* Make significant changes to the Good Faith Estimate (GFE) form, resulting in a new format for the GFE. That change is intended to ensure that the estimates are more accurate and to facilitate consumer comparisons between lenders. These changes will also facilitate comparisons between the GFE and the HUD-1 or HUD-1A settlement statement; * Ensure that borrowers are aware of the final loan terms and costs at settlement by requiring lenders read to each borrower a copy of a "closing script" containing the information; and * Clarify when it is appropriate to provide borrowers with discounts and average price costing of settlement services.
Montgomery made his timing announcement during Thursday’s Senate Banking Committee hearing on “Turmoil in the U.S. Credit Markets: Examining Recent Regulatory Responses.” Even this latest HUD RESPA plan has its share of critics. This summer 240 members of the U.S. House of Representatives signed a letter to HUD Secretary Steven Preston urging him to withdraw his agency's RESPA plan. The lawmakers petitioned Preston to "immediately commence" joint rulemaking with the Federal Reserve Board to produce "more simplified" mortgage and real estate settlement cost disclosure forms. The lawmakers said they are "profoundly concerned" that HUD plan—which involves hundreds of pages of rulemaking-- will "hinder rather than help the recovery of the housing market." The Credit Union National Association (CUNA) strongly supports the concept of amending the RESPA rules in order to simplify and streamline the home purchase and settlement process. CUNA believes that such changes would reduce out-of-pocket costs to consumers and increase quality of services. However, CUNA also has a significant number of concerns with the HUD proposal and has questioned whether the HUD plan makes the disclosure process more confusing for consumers, rather then less so. Use the resource link below to read more CUNA comments on RESPA changes.

NCUSIF sign rule offers flexibility

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WASHINGTON (10/24/08)—What may credit unions do with their standard official share insurance signs that boldly display the temporarily outdated $100,000 insurance maximum? The National Credit Union Administration (NCUA) recently ruled that they can leave them alone, replace them with newer signs available through the agency, or even place a new $250,000 ceiling sticker on the existing sign. In an Oct. 15 Federal Register document, the NCUA noted that this new interim final rule recognizes that requiring credit unions to replace the current sign with a revised sign would be an expensive and burdensome process—particularly in light of the fact that the revision is temporary—effective from Oct. 3, 2008 to Dec. 31, 2009. To balance the burden with the need and desire to inform members that they have increased share insurance protection, the NCUA said it designed its rule to provide insured credit unions with maximum flexibility. The rule became effective Oct. 22. For credit unions choosing not to change or alter the official sign, the NCUA said they would not face a penalty and can inform members about the temporary increase in account insurance through additional signage. For example, the NCUA noted the credit union could post a lobby sign or a notice on its Web sites for the period of the increase. The NCUA seeks comment on the interim rule for 60 days.

New Fed rate on excess reserve balances

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WASHINGTON (10/24/08)—Effective yesterday, the Federal Reserve Board adopted a revised formula to determine the interest rate it will pay on credit unions' and other depository institutions' excess reserve balances. The Fed determined that a narrower spread between the target funds rate and the rate on excess balances would help encourage trading in the funds market at rates closer to the target rate. Therefore, the Fed issued a new formula that sets the rate on excess balances equal to the lowest Federal Open Market Committee (FOMC) target rate in effect during the reserve maintenance period less 35 basis points. Prior to the change, the rate had been set as the lowest federal funds rate target established by the FOMC in effect during the reserve maintenance period minus 75 basis points. The Fed announced just two weeks ago that it would begin to pay interest on depository institutions' required and excess reserve balances effective Oct. 9. The Financial Services Regulatory Relief Act of 2006 gave the Fed authority starting in 2011 to lower reserves to zero and/or to pay interest--not to exceed other short-term rates--on the reserve balances actually maintained. The new Emergency Economic Stabilization Act gave the Fed that authority starting now. The authority is being implemented through changes to the Fed's Regulation D. Reserve balances are balances held to satisfy depository institutions' reserve requirements and excess balances are those held in excess of required reserving balances and clearing balances.

Authorities investigate threats mailed to financials

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WASHINGTON (10/23/08)--The Federal Bureau of Investigation (FBI), the U.S. Postal Inspection Service and state and local authorities are investigating more than 30 threatening letters received at financial institutions in ten states and the District of Columbia. In addition to a threatening message, most of the letters also contain a powder substance, according to a statement from the FBI. Field and laboratory tests on the powder so far have been negative, said the agency. Financial institutions in New York, New Jersey, Washington, District of Columbia, Ohio, Illinois, Colorado, Oklahoma, Georgia, California and Texas have reported receiving the letters. “Should your any part of your institution--corporate offices, branches--receive one of theses letters, please contact your local FBI office and ask for the WMD Coordinator,” said the FBI. Use the resource link for more information.

FinCen continues effort for BSA clarity

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WASHINGTON (10/23/08)—As part of the Financial Crimes Enforcement Network’s (FinCEN’s) ongoing effort to provide feedback on Bank Secrecy Act (BSA) enforcement to those the agency regulates, Director James Freis recently offered what he termed “explicit clarity on the purpose and conduct of FinCEN’s enforcement program.” Freis said that misperceptions about enforcement matters will “erode the trust and confidence in our financial system that the BSA seeks to protect.” He reiterated that it is FinCEN’s general policy to reserve civil money penalties for the “most significant and systemic violations of the BSA.” In fact, he added, over the past two years FinCEN has assessed only eight civil money penalties and just three of them have been against banks. “To put these figures into context, there are tens-of-thousands of financial institutions subject to the BSA, including over 17,000 depository institutions,” he said. “While lesser BSA infractions should not be ignored, FinCEN has other vehicles to address these deficiencies outside of the context of enforcement,” Freis said. He made his remarks at a money laundering enforcement conference here, sponsored by the American Bankers Association. The FinCEN director said that his agency’s efforts to make its processes more transparent are intended to help depository institutions allocate resources in a manner commensurate with their actual money laundering and terrorist financing risks. He said FinCEN fully recognizes that even a “reasonably designed” compliance program will occasionally suffer from minor and isolated compliance deficiencies. “Good faith efforts to establish, implement, and maintain a sound BSA compliance program and to prevent money laundering and terrorist financing, will not result in the assessment of penalties. However, he added, if a financial institution fails to establish and maintain a reasonably designed anti-money laundering program to ensure compliance with the BSA, or deprives law enforcement of valuable information by failing to report currency and suspicious transactions in accordance with the law or regulation; FinCEN may assess penalties under the provisions of the BSA. Freis said his agency will continue to work toward improved BSA compliance on a national basis and noted an upcoming Chapter X initiative to provide a simplified, centralized and industry-specific codification of the BSA for different segments of the financial services industries. The Credit Union National Assocation expects a Notice of Proposed Rulemaking on Chapter X to be issued in the next few days with an extended comment period.

Frank open to fair-value accounting rule changes

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WASHINGTON (10/23/08)--Changes to fair-value accounting rules could be on the House Financial Services Committee’s agenda next year, Chairman Barney Frank (D-Mass.) said Tuesday at a hearing on financial regulatory restructuring. Several financial services companies have complained that the rules have prevented them from establishing market prices (American Banker Oct. 22). Some changes to the rules would not require legislation, Frank added. Rather, the regulators could be urged to be more flexible with the rules, he said. Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said of the chairman’s comments, “This is extremely encouraging news and we would welcome a decision by the chairman and others to bring their thoughtful consideration to this problem. We hope he will look into this sooner rather than later.” CUNA said earlier this month that a Financial Accounting Standards Board’s (FASB) proposed accounting guidance does not go far enough to address key issues used to determine fair value for certain assets where there is an ability and intent to hold until recovery or maturity. CUNA has written a comment letter to FASB on the matter. To read the letter, use the link.

Red Flags delay for state-chartered CUs

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WASHINGTON (10/23/08)--Just about a week after federal credit union, bank and thrift regulators approved the examination procedures required to determine a financial institution's compliance with rules regarding identity theft "red flags" (12 CFR 222.90), the Federal Trade Commission (FTC) said it will suspend enforcement of the rule for six months until May 1, 2009. State-chartered credit unions fall under the FTC’s rules. The FTC said that its announcement and the release of an Enforcement Policy Statement do not affect other federal agencies’ enforcement of the original Nov. 1 deadline for institutions subject to their oversight. The National Credit Union Administration’s rule applies to federal credit unions. The FTC explained that it moved back its compliance timetable to give creditors and financial institutions “additional time in which to develop and implement written identity theft prevention programs.” The agency said that during its outreach effort, it found some industries and entities under the FTC’s jurisdiction were uncertain about their coverage under the rule. “Many entities also noted that, because they generally are not required to comply with FTC rules in other contexts, they had not followed or even been aware of the rulemaking, and therefore learned of the Rule’s requirements too late to be able to come into compliance by Nov. 1, 2008. "The Commission’s delay of enforcement will enable these entities sufficient time to establish and implement appropriate identity theft prevention programs, in compliance with the rule,” the FTC said in a release. Although the Credit Union National Association (CUNA) recognizes that the FTC's action is primarily directed at non-financial institution creditors not aware of these rules until recently, CUNA has contacted the NCUA to seek clarification regarding the extent to which that agency might apply this suspension to federal credit unions. The FTC’s delay does not apply to address discrepancy rules that were issued at the same time as the Red Flags rules. The Red Flags Rule was developed to implement parts of the Fair and Accurate Credit Transactions (FACT) Act of 2003. Under the rule, financial institutions and creditors with covered accounts must have identity theft prevention programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft. Earlier this month, the federal credit union, bank and thrift regulators approved the examination procedures required to determine a financial institution's compliance with identity theft "red flags" rules (12 CFR 222.90) and other regulations under the Fair Credit Reporting Act (FCRA). Use the resource link below to interagency exam procedures.

Inside Washington (10/22/2008)

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* WASHINGTON (10/23/08)--The Federal Deposit Insurance Corp. (FDIC) and Washington Mutual are disagreeing over $4.4 billion that WaMu deposited into two subsidiaries Sept. 25 before they failed. The thrifts were then sold to JPMorgan Chase and Co. (American Banker Oct. 22). WaMu is seeking approval from a judge to transfer funds transfer from JPMorgan Chase to the bankruptcy estate, which would compensate WaMu’s creditors. However, the FDIC filed a motion Monday to stay the transfer because the agency said the funds should be used to compensate the subsidiaries’ debtholders ... * WASHINGTON (10/23/08)--The Securities and Exchange Commission (SEC) will take a closer look at disclosures and financial statements regarding executive compensation, John W. White, Division of Corporate Finance director at the SEC, said in a speech Tuesday. White also noted that the Troubled Asset Relief Program (TARP) will bring up some new compensation disclosure challenges. “This is certainly something that companies should, and no doubt are, beginning to gear up for,” he added. Nine of the nation’s largest financial institutions already have agreed to participate in TARP and sell $125 billion of their senior preferred stock to the U.S. Treasury. The SEC is required to look at public companies’ annual reports once every three years (American Banker Oct. 22) ... * WASHINGTON (10/23/08)--The National Association of State Credit Union Supervisors (NASCUS) urged the House Financial Services Committee to consider credit union capital improvements in its deliberation of regulatory reform proposals. The committee held a hearing Oct. 21 to address reform for financial markets. NASCUS wrote the committee, saying that credit unions need comprehensive reform, including access to supplemental capital. Access to capital would allow credit unions to accumulate net worth beyond retained earnings, protect their liquidity, and plan and respond proactively in the financial environment, NASCUS said ... * WASHINGTON (10/23/08)--President Bush invited 20 world leaders to Washington, D.C., Nov. 15 for an international summit meeting on the economy. The meeting will take place two weeks after the presidential elections, have a broad agenda, and allow leaders to agree on reform of the institutional and regulatory regimes in the world’s financial sectors, Bush press secretary Dana Perino said (The New York Times Oct. 22) ... * WASHINGTON (10/23/08)--Last month, 13 credit union representatives from Oregon met with National Credit Union Administration Chairman Michael Fryzel and board member Gigi Hyland during a Hike the Hill event (Oregon Outlook Oct. 6). The group also met with Oregon Reps. David Wu (D), Greg Walden (R), Earl Blumenauer (D), Peter DeFazio (D) and Darlene Hooley (D). It also met with staff for Sens. Ron Wyden (D) and Gordon Smith (R), and Small Business Administrator Sandy Baruah. From left are: Chuck Garner, Oregonians FCU; Troy Stang, president/CEO, Credit Union Association of Oregon (CUAO); Tim and Linda Wheeler, Oregon First Community CU; Mark Turnham, NW Priority CU; Carlyn Roy, OSU FCU; Brooke Van Vleet, First Tech CU; Mike Clack and Dave Loprinzi, NW Priority CU; Matt Purvis, Northwest Community CU; Dann Penn, MaPS CU; Char Shinn, Northwest Resource FCU, and Pam Leavitt, CUAO senior vice president of governmental affairs. (Photo provided by the Credit Union Association of Oregon) ...

CUNA offers Pressing Compliance Issues audio conference

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WASHINGTON (10/23/08)—Pressing credit union compliance issues are the subject of an Oct. 30 Credit Union National Association (CUNA) audio conference. Participants will receive an overview of recent compliance developments that will affect credit union operations and insights into why federal regulators are pursuing certain proposals. The 90-minute audio conference, scheduled to begin 2 p.m. ET, will be broken into two parts. Part I will cover the following areas:
* Conducting due diligence reviews of third party relationships; * Increase in share insurance coverage from $100,000 to $250,000; * The Housing and Economic Recovery Act amendments to the Servicemembers Civil Relief Act; * The Federal Housing Administration’s new Hope for Homeowners Program; * The Federal Reserve Board's payment of interest on depository institutions' required and excess reserve balances; * Compliance tips when considering adjustments in home equity lines of credit; AND * Reporting bankruptcies on credit reports.
Part II will provide a quick update on developing compliance issues, such as:
* The Housing and Economic Recovery Act's mortgage licensing and registration provisions; * Truth in Lending – The Federal Reserve Board’s expected final action on open-end changes to Reg Z; * FACT Act – an anticipated final action on accuracy and risk-based pricing regulations; as well as * Other legislative and regulatory developments.
CUNA compliance experts will answer questions at the conclusion of each part of the program on those or any other subjects. For more information or to register for the audio conference, use the resource link below.

Hyland CUs strong but not immune to economic ripples

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ALEXANDRIA, Va. (10/23/08)—Gigi Hyland, a member of the National Credit Union Administration (NCUA) board, noted in a recent speech that credit unions must remain vigilant in their asset-liability management and liquidity management planning to weather the current economic crisis. Hyland said the financial condition of credit unions remains sound and cited as evidence their continued high net worth levels. However, she added, credit unions are not immune from the ripple effects of the country’s credit freeze and subprime mortgage crisis. “The nation’s economy and, specifically, the financial services industry finds itself in a dynamic and fluid situation,” Hyland said. She was addressing the AICPA National Conference on Credit Unions this week in San Francisco, Calif. Hyland also addressed key examination issues for this year. She outlined the NCUA guidance on credit unions due diligence and noted, "Credit unions need to partner with vendors to effectively serve members. However, credit unions must take the time to understand what they are buying from a vendor, to implement programs slowly and to monitor and manage the risks associated with the implementation of new products and services." See the resource link below for more on the NCUA due diligence guidance. Also, the Credit Union National Association is offering an Oct. 30 audio conference entitled “Pressing CU Compliance Issues,” which will include information on conducting due diligence reviews of third-party relationships (See related story this issue).

Inside Washington (10/21/2008)

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* WASHINGTON (10/22/08)--Reps.. Barney Frank (D-Mass.) and Maxine Waters (D-Calif.) have sent a letter to President Bush urging him to put Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair in charge of a government initiative for mitigation of foreclosures (American Banker Oct. 21). The federal lawmakers said Bair's work at the FDIC to reduce the number of mortgages that meet with foreclouser shows that she has the experience needed to lead a governmentwide effort. Also, placing one official--Bair--in charge of the initiative will improve the effectiveness of the federal government’s efforts, Frank and Waters wrote ... * WASHINGTON (10/22/08)--Brian Montgomery, Federal Housing Administration (FHA) commissioner, acknowledged some shortcomings with the FHA’s Hope for Homeowners program during a speech Monday (American Banker Oct. 21). He encouraged lenders to take part in the program, but noted that some homeowners would face a reduction in equity when the market turns around. Lenders in the audience also told Montgomery that they were having trouble qualifying borrowers for the program because their FICO scores were under 580. FHA plans to raise its minimum net worth requirements for FHA-Approved lenders to $1 million from $250,000 and to $75,500 for brokers from $63,000 by Jan. 20, Montgomery said. Hope for Homeowners was created in July and helps delinquent borrowers refinance ... * WASHINGTON (10/22/08)--Federal Reserve Board Chairman Ben Bernanke voiced support for another economic stimulus package Monday and said lawmakers should consider more steps to improve credit markets--such as guaranteeing loans or directly lending to borrowers. Bernanke said a second stimulus should be temporary and the government could consider paying the guarantee fees at Fannie Mae and Freddie Mac. He didn’t offer any specifics, but said easing credit access would promote economic growth and create jobs (American Banker Oct. 21) ...

Frank backs CUs in hearing statement

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WASHINGTON (10/22/08)—As he opened yesterday’s hearing on financial regulatory oversight in light of the country’s economic upheaval, House Financial Services Committee Chairman Barney Frank (D-Mass.) noted that credit unions “have absolutely no responsibility” for creating the current economic crisis. He said they deserve to be recognized for it. From there, the hearing went on for five hours to take a broad look at regulatory issues that broached the span of topics from the creation of the mortgage and housing crisis, the proper regulatory structure for the country’s financial institutions, the mortgage securitization process, and much, much more. The hearing was a continuation of an investigation begun by the committee in July, when the panel conducted two hearings focused on regulatory restructuring and systemic risk, during which the committee heard from regulators.

CUNA urges CU reg changes to help economy

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WASHINGTON (10/22/08)—As the U.S. Congress begins consideration of economic recovery legislation, Credit Union National Association (CUNA) President/CEO Dan Mica this week wrote to remind federal lawmakers they should increase credit unions’ ability to be part of the solution for problems faced by consumers and small businesses. In letters to the leaders of the Senate Banking Committee and the House Financial Services Committee, Mica highlighted several regulatory changes that he said should be considered as part of an economic recovery plan. The Oct. 15 letter said the recommendations “focus on maintaining credit unions’ strong capital levels by implementing robust regulatory tools and restoring credit unions’ ability to fully meet the needs of their small business members during and after the credit crunch.” The letter urged changes that would:
* Allow the National Credit Union Administration to implement a risk-based capital system for credit unions—similar to that of banks-- to help credit unions to better manage unexpected circumstances; * Eliminate the 12.25 % of assets credit union business lending cap as a means to provide much needed credit to America’s small businesses without costing taxpayers a dime; and * Permit all credit unions to accept secondary capital.
Mica wrote: “As the economy recovers from this crisis, credit unions will continue to be there for our members. We know credit unions cannot be the entire solution to the problems our economy faces, but we remain an important resource to credit union members; and data suggests that the existence of a strong credit union movement benefits all consumers.” CUNA sent the letter to the chairman of the Senate Banking Committee, Sen. Christopher Dodd (D-Conn.), and the committee’s ranking member, Sen. Richard Shelby (R-Ala.), as well as House Financial Services Committee Chairman Barney Frank (D-Mass.) and Rep. Spencer Bachus (R-Ala.), who is that panel’s ranking member.

CULAC sets record collections

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WASHINGTON (10/22/08)—With almost two-and-a-half months still to go in the current two-year federal election cycle, the Credit Union National Association (CUNA) reports that it has broken the 2005-2006 political fundraising record with $3.77 million raised to date. For the full two-year cycle ending Dec. 31, 2006, that figure was $3.75 million—itself a record at the time. CUNA also reports that it has contributed $2.4 million directly to candidates thus far in the 2007-2008 federal election period. That makes CUNA’s Credit Union Legislative Action Council (CULAC) the 13th largest political action committee (PAC) in terms of direct contributions to candidates and committees, based on the ranking done by the Center for Responsive Politics. CUNA ranks fifth largest among trade associations PACs. “Open-seat races are where CUNA and credit unions can really make a difference,” Trey Hawkins, CUNA political director, said Tuesday. He said that is where CUNA has concentrated its efforts. Hawkins explained that incumbents making a bid for re-election rarely are defeated. Therefore, the best opportunities for credit union support to have an impact are in races in which both candidates are making a new bid for the position. “We always urge credit unions to be active in their support of credit union-friendly candidates,” Hawkins noted, adding, “That message is certainly as important as ever during this time of financial and economic upheaval—when credit unions really need lawmakers who understand us as member-owned financial cooperatives.”

Fed approves new Reg C threshold

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WASHINGTON (10/21/08)—The Federal Reserved Board announced Monday it has approved amendments to its Regulation C, the Home Mortgage Disclosure Act (HMDA) rules, by revising the threshold for reporting price information on higher-priced loans. The Credit Union National Association (CUNA) supports the Fed’s changes, in part, because they help bring that regulation in line with recent Regulation Z mortgage lending final rules. Regulation C required lenders to report to regulators annually the spread between the annual percentage rate (APR) on a loan and the yield on comparable Treasury securities if the spread was at least three percentage points for first-lien loans or five percentage points for subordinate-lien loans. Under the new rule, a lender would report the spread if the loan APR exceeds an average of comparable prime mortgage rates by at least 1.5 percentage points for first-lien loans or 3.5 percentage points for subordinate lien loans. By making the threshold identical in both regulations, it will help ease the compliance burden of credit unions and other lenders that must follow the regulations, according to CUNA. However, CUNA was concerned with a proposed Jan. 1, 2009 implementation date and argued in a comment letter to the Fed that date would not provide sufficient time for lenders to make necessary programming changes. The Fed revised its effective date in the final rule to October 1, 2009.

NCUA Insurance Estimator now reflects higher coverage

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ALEXANDRIA, Va., (10/21/08)—The National Credit Union Administration (NCUA) has updated the share insurance estimator and placed it on its website to provide members of insured credit unions an opportunity to estimate the amount of coverage the National Credit Union Share Insurance Fund now provides. The estimator, developed by the Federal Deposit Insurance Corp. and adapted for credit union members by the NCUA, now bases computations on the new insurance rules in effect as of Oct. 3, 2008, reflecting the temporary higher $250,000 coverage. E-SIC reflects both the NCUA Board’s recent simplification of the rules for revocable trusts and the passage of the “Emergency Economic Stabilization Act.” If subsequent statutory or regulatory changes should occur, NCUA said it will update the E-SIC as quickly as possible. For the E-SIC and other online share insurance resources, use the resource links below.

Inside Washington (10/20/2008)

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* WASHINGTON (10/21/08)--The Treasury announced a third program last week that would provide direct assistance to systemically significant failing institutions. The terms would be negotiated on a case-by-case basis, the agency said in a release regarding executive compensation standards. “In situations where the Treasury provides assistance under the systemically significant failing institutions programs, golden parachutes will be defined more strictly to prohibit any payments to departing senior executives.” The Treasury also announced Monday new details regarding the capital purchase program ... * WASHINGTON (10/21/08)--Accounting and securities regulators are ready to clarify that banks participating in the recapitalization plan can record their efforts as equity. A letter sent to David Nason, Treasury assistant secretary for financial institutions, top officials from the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) said they would not object if the warrants were classified as permanent equity (American Banker Oct. 19). The letter was signed by Russell Golden, FASB technical director, and James Kroecker, SEC deputy chief accountant. Technical problems arose Friday when bank executives realized warrants could be treated as liabilities, which could have hurt capital levels ...

SBA encourages loan deferment relief

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WASHINGTON (10/21/08)—The U.S. Small Business Administration Monday announced it is strongly encouraging its participating 7(a) lenders and Certified Development companies to work with business borrowers to provide needed flexibility to “keep businesses running during these difficult economic times.” “As access to credit and capital has tightened, many businesses face increased challenges in meeting their financial obligations. This is especially true of small businesses hit hard by the recent economic slowdown that are now unable to make payroll, or purchase essential inventory,” the SBA noted in a release. In April of this year, there were 386 credit unions that participate in SBA's 7a program. Credit unions and other 7(a) lenders were reminded they have authority, on a case-by- case basis, to extend temporary payment relief for qualifying borrowers with 7 (a) and 504 guaranteed loans who are struggling to make their payments. The SBA encouraged its lending partners to extend three-month payment deferments on their SBA guaranteed loans to qualified borrowers who need relief. If a deferment longer than three consecutive monthly payments is needed for a loan, the SBA said, borrowers can work directly with their lenders who, in turn, will work closely with the SBA to “identify the best solution.” The agency also asked its lenders not to broadly call borrower loans due to changing financial variables, such as fluctuations in personal credit scores, declining collateral values, and reduced home equity, which are currently affected by the disruption in the financial markets. The SBA has issued a notice that will be distributed widely to its lenders and 120 field offices encouraging them to look at these cases individually and to work with individual borrowers in order to facilitate the longer term success of these small businesses. The Credit Union National Association (CUNA) supports the kind of flexibility SBA has reminded lenders they have, but will work to ensure that SBA has coordinated with the National Credit Union Administration on the use of such latitude by CUs. Use the resource link below for more on SBA’s programs.

JEC to look at faltering economic growth

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WASHINGTON (10/21/08)—Sen. Charles Schumer (D-N.Y.), chairman, and Rep. Carolyn Maloney (D-N.Y.), vice chairman, announced that their Joint Economic Committee (JEC) will conduct a hearing next week on “faltering economic growth and the need for economic stimulus.” On Oct. 30, the committee will examine the Bureau of Economic Analysis’ release of the Gross Domestic Product (GDP) numbers for the third quarter. According to a JEC release, preliminary data show that export growth has stalled while real consumer spending declined in July, and did not grow in August, and retail sales have fallen sharply over the past few months. These data indicate that the third quarter GDP will likely will show faltering overall economic performance. The committee investigation is intended to determine whether the new government data points to a need for more economic stimulus and what that stimulus should entail. Scheduled witnesses are: Nouriel Roubini, professor, Economics and International Business, New York University, and Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship, MIT. Additional witnesses may be added. The Credit Union National Association will be following hearing developments closely.

Reg restructuring is House panel focus today

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WASHINGTON (10/21/08)--The House Financial Services Committee opens part three of its series of hearings on financial regulatory oversight today. The hearing intends to address the need for "broad regulatory restructuring and reform for the financial markets, including financial institution oversight and regulation, systemic risk, and housing finance," according to a committee release. Specifically the hearing will examine:
* The current state of the financial regulatory system, both in the United States and abroad, and ways to measure and limit risk without stifling innovations while improving market liquidity and breadth; * Implications of current governmental lending and support facilities for the regulatory structure; * Proposals to improve the regulatory structure to restore confidence in financial markets and institutions through a stronger system of regulation and oversight; * The need for enhanced capital and reserve requirements for financial firms; and * Adequacy of current powers and coverage of the existing regulatory structure.
The hearing is a continuation of two hearings held by the committee in July focused on regulatory restructuring and systemic risk, during which the committee heard from regulators. For today’s hearing, there are a total of eight witnesses scheduled to appear on two panels. They include: Alice Rivlin, economic studies director at the Brookings Institution, Joseph Stiglitz, professor, Columbia University, Joel Seligman, president, University of Rochester, Manuel Johnson, chief executive of the financial market advisory firm JohnsonSmick International. Also: Steve Bartlett, president/CEO, The Financial Services Roundtable; Edward Yingling, president/CEO, American Bankers Association, T.Timothy Ryan, Jr., president/CEO, Securities Industry and Financial Markets Association, and Mike Washburn, president/CEO, Red Mountain Bank on behalf of the Independent Community Bankers of America. The Credit Union National Association will be following the hearing developments closely.

CLF is liquidity resource NCUA reminds

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ALEXANDRIA, Va. (10/21/08)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel issued a Letter to Credit Unions on Friday to remind credit unions that the Central Liquidity Facility (CLF) is an available resource for contingent liquidity during the current market turbulence. “The CLF has a total of approximately $41.5 billion available to meet back-up liquidity demands, appropriated by Congress and administered by NCUA. Credit unions should carefully monitor liquidity and if necessary, utilize the CLF on an as-needed basis,” Fryzel stated in the letter, which is also posted on the NCUA website. The CLF lends to credit unions that are creditworthy and demonstrate liquidity needs. A credit union generally is deemed creditworthy if it is a viable operation. Three forms of loans available through the CLF are:
* Short-term adjustment credits; * Seasonal credits; and *Protracted adjustment credits.
Credit unions can apply for a CLF loan either through a corporate credit union or as a regular member, the NCUA said in a release. Use the resource links below to access the NCUA website and to obtain details on the CLF loan process.

NCUA Calculation of new revocable trust insurance coverage

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WASHINGTON (10/20/08)—Although the National Credit Union Administration (NCUA) still has to make technical corrections to its interim regulation on how to calculate share insurance coverage on revocable trust accounts, credit unions can find examples of how the new beneficiary rules work on the agency's website, advised the Credit Union National Association (CUNA). The NCUA rule parallels Federal Deposit Insurance Corp. coverage and was effective Oct. 3. According to Kathy Thompson, CUNA’s senior vice president for regulatory compliance, for a living trust account with up to five beneficiaries, the account will be insured up to $250,000 per each beneficiary (up to $1.25 million) – the agency won’t look at each beneficiary’s proportional interest in the account to calculate the insurance coverage. For instance, if there are three beneficiaries of a living trust account with a balance of $800,000, the account will be insured for $750,000 – regardless of how the trust document itself calls for dividing the $800,000 among the three beneficiaries. For a living trust account with more than 5 beneficiaries, the account will be insured for the greater of $1.25 million or the aggregate of all beneficiaries' proportional interests in the trust, limited to $250,000 per beneficiary. An example provided in the NCUA's share insurance training Power Point presentation helps to clarify how to calculate coverage, she said. In an example provided:
* Adam has a living trust account with a balance of $1,500,000. Under the terms of the trust, upon Adam’s death, Adam’s three children are each entitled to $125,000, Adam’s friend is entitled to $12,500, a designated charity is entitled to $175,000, with the remainder of the trust assets going to Adam’s wife. Since there are 6 beneficiaries, the insurance coverage on Adam’s account would be the greater of $1,250,000 or the aggregate of each different beneficiary’s interest to a limit of $250,000 per beneficiary. * Although the spouse’s interest in the account upon Adam’s death would be $937,500, the rule limits the coverage calculation to $250,000, so the aggregate of the beneficiaries’ interests is $812,500. But the insurance coverage would be $1,250,000 (the greater of $1,250,000 or $812,500).
Thompson added an example to show how insurance coverage can exceed $1.25 million – so credit unions shouldn’t mistakenly think the $1.25 million figure is a cap. Assume, she says, that Adam has $1,500,000 in his living trust account at the credit union and has six beneficiaries. He plans to leave $250,000 to each of his three children, $100,000 to his friend, $300,000 to charity and the remainder ($350,000) to his wife. The share insurance coverage on this account would be $1.35 million (5 beneficiaries times the $250,000 limit + $100,000 to the friend). However, Thompson also clarified that credit unions won't know the details of the living trust agreement. They aren't required to have the names of the beneficiaries in their records, let alone know the proportional interest of each beneficiary, said Thompson.Therefore, a credit union isn't in a position to exactly calculate the insurance coverage if asked by the member who owns the living trust account. But the member should be able to determine the member’s insurance coverage by applying these rules to his or her plan of distributing the money in the account upon death.

Inside Washington (10/17/2008)

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* WASHINGTON (10/20/08)--The Treasury may have wide powers to stabilize the market, according to observers. A provision in the $700 billion rescue bill gives the Treasury the ability to invest in banks directly, but the provision also provides for other options--such as rewriting mortgages, helping the auto industry and securing credit-default swaps (American Banker Oct. 17). The provision is “extraordinarily broad,” said Michael Barr, law professor at the University of Michigan and former Treasury official. Unlike other provisions in the bailout bill, which specify how the Treasury can purchase whole loans, securities or assets, there are no specifics on broad equity investments. The Treasury also could purchase student, auto, commercial construction and credit card loans as well ... * WASHINGTON (10/20/08)--Critics at a Senate Banking Committee hearing criticized the Federal Reserve Board, saying that it did not act quickly enough to stop abusive mortgage lending (American Banker Oct. 17). The crisis was preventable four or five years ago, said Senate Banking Committee Chairman Christopher Dodd (D-Conn.). New mortgage rules were finalized by the Fed earlier this year ...

November IRS webcast on Form 990 changes

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WASHINGTON (10/20/08)--The Internal Revenue Service (IRS) said it’s next “Tax Talk Today” Webcast, on Nov. 4, will focus on issues involved in preparing for the new Form 990. The IRS redesigned Form 990--Return of Organization Exempt from Income Tax--to reflect changes that have taken place in the tax law and the tax-exempt sector. The form is filed annually by state-chartered credit unions. Federal credit unions are not required to file, since they are not subject to unrelated business income taxes. The new Form 990 will be filed in 2009, for the 2008 tax year. Revised instructions, unveiled in August by the IRS, include changes in content and format. They provide additional examples to explain the instructions. The IRS encouraged “organizations and their (tax) preparers” to tune into the free Webinar to gain a full understanding of how the form changes will affect the filing process. Panelists scheduled to participate in the November session include Eve Rose Borenstein, exempt organizations tax attorney, Borenstein and McVeigh Law Offices; Stephen Clarke, IRS tax law specialist, Rulings and Agreements, Exempt Organizations; Julie Floch, CPA, Eisner Director of Not-For-Profit Services; and Ronald Schultz, senior technical advisor to the IRS Commissioner, Tax Exempt and Government Entities Division. The IRS also has a Web page on the Form 990 redesign and background documents. Use the resource links below to register and to access more information.

High Desert FCU taken over by NCUA

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ALEXANDRIA, Va. (10/20/08)—High Desert FCU, a $149 million-asset, Apple Valley, Calif. credit union, has been taken over by the National Credit Union Administration (NCUA), a step intended to conserve assets and protect members’ interests. The action also is used at times to protect the National Credit Union Share Insurance Fund (NCUSIF) from losses. Service to High Desert’s more than 13,000 continues under the NCUA’s management. Members may make deposits, access funds, make loan payments and use share drafts. An NCUA announcement said, “While the credit union was placed into conservatorship because of a declining financial condition, the decision to conserve a credit union enables the institution to continue normal operations with expert management in place.” It reiterated that member accounts are insured to at least $250,000 while IRA and KEOGH retirement accounts are separately insured up to $250,000 under coverage provided by the NCUSIF. High Desert was chartered in 1951 and serves those who live, work, or worship in San Bernardino County.

Corporate CUs get loan guarantee program

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ALEXANDRIA, Va. (10/17/08)--The National Credit Union Administration (NCUA) Thursday announced a corporate credit union liquidity guarantee program that will operate from Oct. 16, 2008, through June 30, 2009. The program is similar to the “Temporary Liquidity Guarantee Program” announced by the Federal Deposit Insurance Corporation Oct. 14, 2008, and is intended to provide corporate credit unions with competitive standing in the debt market. The National Credit Union Share Insurance Fund (NCUSIF) is providing federally insured corporate credit unions with a 100% guarantee on new unsecured debt obligations. The guarantee is subject to terms detailed in the program. To qualify, new unsecured debt obligations must be issued by eligible corporate credit unions on or before June 30, 2009, and mature on or before June 30, 2012. Included promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt, the agency announcement said. The NCUA provided the following details: The amount of debt obligations covered by the guarantee per eligible corporate credit union may not exceed the greater of:
* 100% of the eligible corporate credit union’s maximum unsecured debt obligations outstanding during the period Sept. 30, 2007 through Sept. 30, 2008; * An amount determined by written approval of the agency’s director of the Office of Corporate Credit Unions, with the prior concurrence of its director of the Office of Examination and Insurance, not to exceed $100 million; or * An amount determined by the NCUA Board.
All corporate credit unions are automatically covered for debt obligations issued through Nov. 17, 2008. Corporate credit unions may elect to opt out of the program by providing notice to the NCUA Office of Corporate Credit Unions. The NCUSIF will charge participating corporate credit unions a fee of 75 basis points per year on the outstanding balance of guaranteed debt obligations. "While this new Board action is directed at addressing corporate liquidity issues, I think it is important that natural person credit unions be fully aware of all of their options in this very tight and difficult liquidity situation, including the Central Liquidity Facility (CLF),” said NCUA Chairman Michael Fryzel when announcing the guaranty program. “The standards for CLF borrowing are stringent, and our evaluation of requests will be thorough, but credit unions should know that their short-term liquidity needs can be addressed through CLF borrowings. I encourage all appropriate use of the CLF as another means to maintain liquidity and confidence in the credit union system during these uncertain times." Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said both CUNA and the Association of Corporate Credit Unions had urged agency action. “We commend them for taking this step,” she said.

Inside Washington (10/16/2008)

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* WASHINGTON (10/17/08)--Federal Reserve Board Chairman Ben Bernanke said in a speech before the Economic Club of New York Wednesday that the Federal Reserve Board believes that the difficulties experienced by firms in financial distress should be addressed through private sector arrangements. “Government assistance should be provided with the greatest reluctance and only when the stability of the financial system, and thus the health of the broader economy, is at risk.” Bernanke also mentioned the Troubled Asset Relief Program (TARP), which was announced earlier this week. “We look to strong institutions to participate in this capital program,” he said ... * WASHINGTON (10/17/08)--Sen. Charles Schumer (D-N.Y.), Joint Economic chairman, said Treasury Department officials appear receptive to some guidelines he wants placed on banks regarding how they are using funds provided by the government to free up credit (CongressDaily Oct. 15). Schumer is concerned the money will not make its way to “Main Street,” and thus encouraged the Treasury to adopt four guidelines. The guidelines would urge banks to use the money to aid small business, refinance mortgages, limit executive compensation and prevent the use of “exotic financial instruments” ...

Incidental powers okd shared insurance sign unveiled

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WASHINGTON (10/17/08)—The National Credit Union Administration (NCUA) Thursday approved an updated list of pre-approved incidental powers for credit unions and asked for comments on a plan to amend share insurance sign requirements for federally insured credit unions participating in shared branding networks. The NCUA changed its incidental powers rule (Part 721) by adding
Click to view larger image Before the official board meeting, the NCUA hosted a brief reception in honor of International Credit Union Day. From left, NCUA Associate General Counsel John Ianno; Dave Marquis, director of NCUA's Office of Examination and Insurance; and Kathy Thompson, CUNA senior vice president and associate general counsel for regulatory compliance and legislative law. (Photo provided by CUNA)
illustrations of permissible activities under the categories of correspondent services, operational programs, and finder activities. The new final rule, unchanged since it was proposed, is intended to consolidate published legal opinion letters issued since 2001. Examples of newly included incidental powers for federal credit unions include: providing correspondent services to foreign as well as federal or state-chartered credit unions; finder activities to introduce members to an outside vendor; and payroll services. In addition to the illustrations contained in the regulation, NCUA staff clarified that, upon request, credit unions may seek a determination by NCUA whether a certain activity qualifies as an incidental power. The NCUA board also approved a thirty-day comment period for a proposed rule to amend the share insurance sign requirements for federally insured credit unions participating in shared branding networks. The NCUA staff explained that a comment period was being issued, rather than an interim final rule, to allow for comments that may educate staff on some inner workings of shared branching with which they may be unfamiliar. The proposal is intended to simplify the NCUA’s existing rules governing a required second sign that must be adjacent to the official NCUA insurance sign in shared-branching situations. For instance, currently the second sign must list each federally insured credit union served by a teller, along with a statement naming those credit unions that are federally insured. The proposed rule would replace the required list of credit unions with a general statement that not all of the credit unions served by the teller are federally insured and members should contact their credit union for further information. (See related story: NCUSIF report delivered; “underserved” plan held over) Use the resource link below for more information on the incidental powers rules and the insurance sign proposal.

NCUSIF report delivered underserved plan held over

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WASHINGTON (10/17/08)—The two biggest news items to come out of the
Click to view larger image NCUA Board Chairman Michael Fryzel discusses the National Credit Union Share Insurance Fund with NCUA Chief Financial Officer Mary Ann Woodson (not shown). (Photo provided by CUNA)
National Credit Union Administration (NCUA) open meeting Thursday were the presentation to the board of the third quarter share insurance fund report and the board’s removal of its “underserved areas” proposal from the agenda. At the Thursday meeting, NCUA Chief Financial Officer May Ann Woodson reported that the National Credit Union Share Insurance Fund’s (NCUSIF’s) third-quarter equity ratio is 1.28%. She projected the ratio to remain at that level each of the remaining three months of the year. If accurate, that would preclude a possibility of an NCUSIF dividend to federally insured credit unions, but would also mean that no premium would be required. Woodson also reiterated for the agency that the recent, temporary statutory increase in share insurance coverage to $250,000 will not affect any decision as to whether a premium will be required. The insurance report noted that while the increase in the number of
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credit unions earning the riskier CAMEL 4 and 5 ratings was not dramatic for 2008, the level of total shares represented by those credit unions jumped sharply. As of Sept. 30, the NCUA reported 246 CAMEL Code 4/5 credit unions, compared to 211 for 2007. However, the percentage of shares to total insured shares in these lower-ranked credit unions jump to 2.08%--doubling the 1.04% year-end 2007 figure. THE NCUSIF report also noted that the total insurance loss expense for 2008 is projected to be approximately $152 million, with the agency expecting an additional $13.5 million in losses between September and year end. The NCUA CFO traditionally makes a public accounting of NCUSIF before the NCUA board on a quarterly basis. Chairman Michael Fryzel asked Woodson to prepare to report monthly until the end of the year. Additionally, the chairman asked his CFO to prepare an additional slide to her presentation, one which would provide clearer information regarding insurance loss expense. Currently, the NCUSIF report described losses as zero for years when there were losses, but those losses simply brought down the reserve balance since the fund was over reserved for those years. For accurate comparison, Fryzel asked for historical NCUSIF realized loss amounts, in addition to loss expense. Regarding the proposal intended to clarify “underserved areas,” an NCUA spokesman said the proposal was removed from the agenda because it is still under consideration; it has not yet been rescheduled for action. Fryzel said at the beginning of the meeting that the agency was continuing its work on the plan to determine if there are ways to “make it better for credit unions.” The proposal was issued for comment last summer by the NCUA. It is intended to clarify the procedure for establishing that an "undeserved area" qualifies as a local community; address the application of economic distress criteria; and clarify requirements for showing an area has "significant unmet needs," including the use of data from NCUA and other agencies to analyze whether an area is "undeserved by other depository institutions." The Credit Union National Association (CUNA) has strongly opposed the agency's proposed action, finding the plan inconsistent with the Federal Credit Union Act and, overall, very poor public policy that would limit, rather than enhance, service to underserved areas. (See related story: Incidental powers ok’d, shared insurance sign unveiled.) Use the resource link below to access the NCUA’s NCUSIF Power Point presentation.

Inside Washington (10/15/2008)

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* WASHINGTON (10/16/08)--Sen. Christopher Dodd (D-Conn.) announced that he intends to incorporate homeownership preservation, anti-predatory lending practices, credit card and bankruptcy reform into a legislative package to help the economy. In a statement on his website, Dodd said he supports the Bush Administration’s plan to use the authority granted by the Emergency Economic Stabilization Act passed last month by Congress. The legislation expands the options federal agencies can use to intervene in the economy, including injecting liquidity into the nation’s banks. Dodd also met with Treasury Secretary Henry Paulson to discuss the plan’s details ... * WASHINGTON (10/16/08)--The version of Basel II capital rules finalized this year may prevent competitive inequities that could hurt domestic banks, according to a Government Accountability Office report (American Banker Oct. 15). The report also said regulators have not yet addressed “areas of uncertainty” that could lead to competitive implications. Though the rule allows core banks to apply for exemptions, the criteria for the exemptions is not defined. Regulators need to present more details about what they will look at in a Basel II study of effects, the report added ....

Annual NCUA budget briefing Oct. 30

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ALEXANDRIA, Va. (10/16/08)—Credit unions and the general public are invited by the National Credit Union Administration (NCUA) on Oct. 30 to offer oral or written statements on the agency’s proposed 2009 budget. The NCUA will hold its eighth annual Budget Briefing and Public Forum on that date. The forum provides the opportunity for credit unions to engage with NCUA staff in the formulation of the agency's budget. NCUA Chairman Michael Fryzel, announcing the forum date, encouraged credit unions to take the opportunity of the public session to collaborate with NCUA staff in finalizing the 2009 operating budget. The Credit Union National Association (CUNA) plans to present its views. The 2009 budget is likely to be unveiled by the agency next month. At last year’s briefing, the NCUA proposed a $156.5 million 2008 operating budget, which was 2.97% greater than 2007 spending. Participants who wish to present oral statements at the 10 a.m. open briefing should contact the secretary of the NCUA Board to register. Each registered participant will be allotted 10 minutes to present their statement. Requests to participate must be received by October 23. Due to time restraints, NCUA reserves the right to select witnesses; however, the agency said it will make every effort to accommodate all requests and ensure a broad range of views. Participants submitting written comments must file a “Budget Briefing and Public Forum – Comment” by November 7 to be considered. Mail comments and participation requests to Mary Rupp, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314, fax 703-518-6319, or email regcomments@ncua.gov.

CUNA urges CU parity on non-interest accounts

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WASHINGTON (10/16/08)--Federally insured credit unions will be competitively disadvantaged unless federal regulators move quickly to provide full share insurance coverage for non-interest bearing transaction accounts, wrote Dan Mica, president/CEO of the Credit Union National Association (CUNA) Wednesday. In letters to each member of the National Credit Union Administration (NCUA) board, Mica recalled the administration’s action Tuesday announcing a program for insured banks and thrifts that includes the Federal Deposit Insurance Corporation’s guarantee for all funds in such an account. Under the program, for the first thirty days all insured banks and thrifts would be covered. After that time, the accounts at institutions that do not opt out and thus agree to a 10-basis point insurance assessment will be covered. Mica noted the agency staff’s own informal estimates that a number of credit unions across the country may offer such accounts. “In our view, NCUA has sufficient legal authority to establish a similar program to permit any federally insured credit union to participate,” the CUNA leader wrote. Mica added, “Failure by NCUA to address this issue for credit unions could undermine credit unions’ hard-won success in serving small businesses and others in their communities.”

Underserved rule off todays NCUA agenda

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WASHINGTON (10/15/08)--The National Credit Union Administration (NCUA) Board has removed from today's open Board meeting agenda proposed clarifications to its "underserved areas" rule. The NCUA last summer proposed to clarify the procedure for establishing that an "undeserved area" qualifies as a local community; address the application of economic distress criteria; and clarify requirements for showing an area has "significant unmet needs," including the use of data from NCUA and other agencies to analyze whether an area is "undeserved by other depository institutions." The Credit Union National Association (CUNA) strongly opposes the agency's proposed action, finding the plan inconsistent with the Federal Credit Union Act and, overall, very poor public policy that would limit, rather than enhance, service to underserved areas. An NCUA spokesman said the proposal was taken off today's agenda because it is still under consideration; it has not yet been rescheduled for action. Today's agenda will include:
* A quarterly report on the National Credit Union Share Insurance Fund; * A proposal that would set requirements for the use of the official insurance sign; and * A plan that would affect three categories of incidental powers: correspondent services; operational programs; and finder activities. The NCUA will decide whether to approve additional illustrations of permissible activities within each of these categories.

CUNA informs CUs on Treasury actions

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WASHINGTON (10/15/08)—Amid fast-breaking developments in the government’s evolving actions to address concerns with the functioning of the country’s credit markets, the Credit Union National Association (CUNA) continues to press for clarifications regarding how each of the administration’s steps affects credit unions. The U.S. Treasury Department has indicated it will be providing more details of the Troubled Asset Relief Program (TARP) soon, and CUNA will be analyzing that information for credit unions. Meanwhile, CUNA has drawn up the following summary of recent actions. On the Federal Deposit Insurance Corp.’s (FDIC’s) decision to provide full deposit insurance coverage for non-interest bearing transaction accounts until December 31, 2009:
* These are accounts that, for example, businesses use to fund their payroll payments. Participating institutions will be assessed a 10-basis point insurance surcharge. * The initial announcement from the administration indicated only that non-interest bearing transaction accounts insured by the FDIC would be eligible for this coverage. * CUNA was in immediate contact with the National Credit Union Administration and the Treasury to clarify whether such accounts at credit unions will have the same coverage under the National Credit Union Share Insurance Fund (NCUSIF). CUNA will continue to press for clarification, which in CUNA’s view should be that such credit union accounts have the same full insurance converge through the NCUSIF
Regarding a new capital infusion program for certain banks, bank holding companies, savings and loans and thrift holding companies that agree to participate by November 14, 2008 and whose primary regulator confirms their eligibility:
* Under this program, the Treasury will make available up to $250 billion of the $700 billion authorized under the Emergency Economic Stabilization Act of 2008 to purchase preferred stock in these institutions. * The minimum subscription amount would be 1% of an institution's risk-weighted assets up to the lesser of $25 billion or 3% of risk-weighted assets. * The shares will qualified as Tier 1 Capital and will pay 5% for each of the first five years and then increase to 9% each year. The shares would generally be non-voting and any institution that sells shares to the Treasury, under this program, will have to agree to the executive compensation limitations similar to those under the Troubled Asset Relief Program. *Under the program, Treasury will receive warrants to purchase shares of common stock of the institutions valued at 15% of the amount of the preferred stock.
On a conference call today with senior Treasury officials in which CUNA was a participant, it was clarified that the administration is seeking ways institutions such as S Corporation banks and mutual thrifts could participate. While credit unions are not included in the definition of institutions that may be eligible, CUNA is discussing the ramifications of this program with NCUA and other policymakers. Under another initiative, the FDIC will provide debt guarantee for certain newly issued unsecured senior debt of all FDIC insured banks and thrifts, as well as such debt of their holding companies. This will include promissory notes, commercial paper, inter-bank funding, and the unsecured portion of secured debt, and:
* Coverage is limited to June 30, 2012, and banks will be charged a 75-basis point fee to protect debt issues; and * There will be enhanced supervision of institutions that accept the guarantee, which will expire on June 30, 2009.
On the conference call, Treasury officials indicated they are considering whether community banks that do not have senior debt could be able to receive guarantees for some of their debts. CUNA is also discussing the ramifications of this program with policymakers. Finally, regarding the Federal Reserve Board's purchase of commercial paper, beginning October 27:
* The Federal Reserve's Commercial Paper Funding Facility will be able to purchase commercial paper of 3-month maturity from "high-quality" issuers. * The Facility is designed to support the commercial paper market as needed and will provide funding for eligible entities that use commercial paper to help finance their operations.

Treasury seeks comment on troubled-asset program

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WASHINGTON (10/15/08)—The U.S. Treasury Department Tuesday released a request for public comment on its insurance program for troubled assets, known as TARP. The program is required by the Emergency Economic Stabilization Act of 2008 (EESA), and its purpose is to restore liquidity and stability to the financial system, while minimizing any potential long term negative impact on taxpayers. A Treasury release noted that under the EESA, the Treasury secretary is charged with establishing a program to guarantee principal of, and interest on, troubled assets originated or issued prior to March 14, 2008. The program may take any form and may vary by asset class, but it must be voluntary and self-funding. The Secretary has the authority to set premiums to reflect the credit risk characteristics of the insured assets so as to ensure that taxpayers are fully protected. Treasury invited comment on how the program should be structured to minimize adverse selection, including how premiums should be calculated, what events should trigger insurance payout, what form that payout should take, and which institutions and assets should be eligible. The department also asked for public comment on technical considerations, including what legal, accounting, or regulatory issues would arise and what administrative challenges the program will create. Comments are due by Oct. 28. Use the resource links below to read the Treasury’s request for comment or to submit a comment.

Fryzel to national TV audience CUs safe secure

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ALEXANDRIA, Va. (10/15/08)—National Credit Union Administration (NCUA) Chairman Michael Fryzel assured a national television audience Tuesday that credit unions are a safe, secure source for loans and savings. Appearing on Fox Business Network’s “Money for Breakfast” with Alexis Glick, Fryzel reminded that credit unions are member-owned cooperatives and, as such, do not pay dividends to share holders. The cooperative structure, he said, often enables credit unions to pay higher yields and charge lower rates on loans. Fryzel also underscored the message that while credit unions are either federally chartered or state chartered, nearly all are federally insured up to $250,000 per account, according to the NCUA. “By and large credit unions loans and investments have not been affected by the economic turmoil,” Chairman Fryzel noted. “NCUA was encouraged to see credit unions included in recent legislative changes that will ensure access to liquidity and asset programs if need arises.” Fryzel also commented on the newly announced Troubled Asset Relief Program (TARP) Capital Purchase Program, a voluntary program announced Tuesday by the U.S. Treasury Department. The program is intended to encourage the country’s financial institutions to build capital to increase the flow of financing to both businesses and consumers and to bolster the economy. A key provision of the progam is that financial institutions must decide by Nov. 14 to participate or not. "I have had contact at the highest level of the Treasury Department, and am in the process of assessing the Program’s applicability to credit unions. I have also directed staff to determine how prevalent non-interest bearing accounts are within the credit union industry, and how credit unions offering these types of accounts could be affected by participation in the Capital Purchase Program,” Fryzel said. He also directed viewers to the agency website to locate a credit union or learn more about credit union insurance protection.

ICU Day reception to showcase CU good news

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WASHINGTON (10/14/08)—As part of a day-long celebration of International Credit Union Day (ICU Day) this Thursday, the Credit Union National Association (CUNA) will join with the World Council of Credit Unions (WOCCU) to sponsor a special late-afternoon reception at the Cannon House Office Building on Capitol Hill. At the reception, credit union contributions will be honored before invited guests who will include Capitol Hill staffers, National Credit Union Administration board members, representatives from the credit union trade press, and credit union representatives. “Elsewhere throughout the world, credit unions and their trade associations will celebrate with parades, picnics and special events to celebrate the role that not-for-profit member-owned financial cooperatives play in improving the lives and financial wellbeing of their members,” WOCCU announced in a recent release. This year's ICU Day theme is “My Credit Union: It Belongs to Me.” The theme is designed to recognize the important role that member-ownership plays in defining credit union value to members. The role takes on even more significance given current global financial challenges, according to WOCCU Chairman Melvin Edwards. WOCCU represents credit unions and their associations on a global scale CUNA President/CEO Dan Mica noted, “In a movement that is marked by cooperation rather than competition, ICU Day is the perfect time for credit union groups to demonstrate their spirit of unity and service to members. “At credit unions, which are not-for-profit financial cooperatives, every customer is both a member and an owner,“ Mica said. “This year's theme celebrates the economic democracy and equal ownership rights of each credit union member, regardless of how much money a member has on deposit. Our unique structure and the philosophy it engenders are at the root of the extraordinary affinity that members have for their credit unions.”

CU savings flow a mixed bag says CUNA

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WASHINGTON (10/15/08)—Credit Union National Association (CUNA) Chief Economist Bill Hampel predicted Tuesday that credit unions, overall, will start seeing a marked influx of share deposits by next year. To date, he said, CUNA economists have not seen a “huge flight” of savings to credit unions as a result of the country’s economic turmoil. “As many credit unions have said that they have experienced greater than normal savings growth in the last six weeks as have said they have had weaker savings growth,” Hampel reported. He said the same can be said of credit union experience on the lending side of the business. However, the CUNA economist added that he predicts that over the next year, credit unions overall will see a substantial deposit increase because consumers won’t be spending as much and will be trying to build up their savings.

Inside Washington (10/14/2008)

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* WASHINGTON (10/15/08)--The U.S. Treasury Department announced Tuesday that it has hired Bank of New York Mellon to serve as custodian for the implementation of the Troubled Asset Relief Program (TARP) authorized under the Emergency Economic Stabilization Act. A Treasury release said the New York City-based firm began work immediately to help the department with custodial, accounting, auction management and other infrastructure services needed to administer the “complex portfolio of troubled assets the Department will purchase.” Treasury said it hired the Bank of New York Mellon to provide the accounting of record for the portfolio, hold all cash and assets in the portfolio, provide for pricing and asset valuation services and assist with other related services… * WASHINGTON (10/15/08)--The Treasury Department's Go Direct campaign to boost direct deposits of federal benefits checks is accepting registrations through October for its "Go Direct Champions” recognition program. Credit unions and other depository institutions can register for the program designed to recognize the success of participants in increasing the use of direct deposit among members or customers receiving Social Security or Supplemental Security Income. Top performers over the October 2008 through May 2009 program period will receive an award and official recognition from the Treasury. Interested parties can register at www.GoDirect.org. The Credit Union National Association is a Go Direct national partner… * WASHINGTON (10/15/08)--The Senate Banking Committee and the House Financial Services Committee have scheduled hearings to focus on the current financial crisis and regulation. On Thursday, the Senate Banking Committee is slated to meet. Witnesses include Arthur Levitt, senior advisor, The Carlyle Group; Eugene Ludwig, CEO, Promontory Financial Group; Jim Rokakis, treasurer, Cuyahoga County, Ohio; Marc H. Morial, president/CEO, National Urban League; and Eric Stein, senior vice president, Center for Responsible Lending. The House Financial Services Committee has scheduled a hearing Oct. 21 to address the need for regulatory restructuring and reform for the financial markets. Witnesses have yet to be announced ... * WASHINGTON (10/15/08)--The Federal Deposit Insurance Corp. (FDIC) adopted an interim final rule to simplify deposit insurance rules for accounts held at FDIC-insured institutions by mortgage servicers. Coverage will be provided to lenders and investors as a collective group, based on the cumulative amount of borrowers’ payments of principal and interest. This will enable the FDIC to make deposit insurance determinations on accounts more quickly. Under current rules, accounts maintained by a mortgage servicer comprised of principal and interest payments are insured based on the ownership interest of each lender or investor. “This simplification of coverage rules for accounts will help prevent losses to otherwise insured depositors and prevent withdrawals of deposits for principal and interest payments from depository institutions,” said FDIC Chairman Sheila Bair ... * WASHINGTON (10/15/08)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel (left) recently met with Housing and Finance Board member Geoff Bacino at the NCUA headquarters. “I welcome former NCUA board member Geoff Bacino to NCUA as a fellow regulator responsible for oversight of the nation’s Federal Home Loan Banks. Bacino and I share not only an Illinois background but also a regulators perspective, given his former and my current service on the NCUA Board,” Fryzel said. (Photo provided by the National Credit Union Administration) ...

Final FASB guidance not far enough says CUNA

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WASHINGTON (10/14/08)—The Financial Accounting Standards Board’s (FASB) released final guidance on using FASB Statement No. 157, Fair Value Measurements, in a market that is not active. According to the Credit Union National Association (CUNA), the guidance does not go far enough in addressing key issues used to determine the fair value for certain assets where there is an ability and intent to hold until recovery or maturity. However, the credit union trade association generally supports two points of additional guidance, said CUNA Deputy General Counsel Mary Dunn, who, under the auspices of CUNA’s Accounting Task Force, authored CUNA’s letter to FASB last week. In its final guidance, FASB provides that in determining fair value of the mortgage-backed security, information about the performance of the underlying mortgage loans--such as delinquency and foreclosure rates, loss experience, and prepayment rates--may be appropriate. Also, FASB added a change to the summary of the key existing principles of Statement 157 to help clarify that not all asset sales in a troubled market are forced liquidations or fire sales. Likewise, it is not appropriate to simply accept any transaction price as reflecting the fair value of an asset, according to FASB. The recently-enacted Emergency Economic Stabilization Act, among other things, authorizes the Securities and Exchange Commission (SEC) to suspend the mark-to-market standards and to evaluate that application. CUNA has urged the SEC to proceed with its evaluation of the fair value standards under the new Emergency Economic Stabilization Act “as expeditiously as possible.” Use the link below to access the complete final FASB Staff Position.

Inside Washington (10/13/2008)

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* WASHINGTON (10/14/08)--The U.S. Treasury Department announced Monday that EnnisKnupp and Associates will serve as its investment adviser for the implementation of the Troubled Asset Relief Program (TARP) authorized under the Emergency Economic Stabilization Act. Treasury said it hired the Chicago-based firm Saturday and the firm began work immediately to help administer the “complex portfolio of troubled assets” the Treasury will purchase under the program ... * WASHINGTON (10/14/08)--The Bush administration will work to help banks access capital, the president announced Monday after a meeting with Silvio Berlusconi, Italian premier. He also said the U.S. would work with other countries to solve the global financial crisis. Bush called the Monday meeting with executives from financial firms to firm up details of the Treasury’s $700 billion bailout plan (The New York Times Oct. 13). The financial crisis has shaken Europe, but European markets opened in a strong position Monday after coordinated U.S. and European efforts to beef up the banking system ... * WASHINGTON (10/14/08)--The Bank of England (BoE), the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank (SNB) are jointly announcing further measures to improve liquidity in short-term U.S. dollar fund. The BoE, ECB, and SNB will conduct tenders of U.S. dollar funding at 7-day, 28-day, and 84-day maturities at fixed interest rates for full allotment. Funds will be provided at a fixed interest rate, set in advance of each operation. Swap lines between the Federal Reserve and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded. The Bank of Japan will be considering the introduction of similar measures ...

ID theft help from NFCC CUNA others

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WASHINGTON (10/14/08)—Next week has been named Protect Your Identity Week by the National Foundation for Credit Counseling (NFCC), which will launch a nationwide grassroots consumer outreach at that time. The effort is supported by organizations such as the Credit Union National Association, the Jump$tart Coalition, and others who have become NFCC coalition members. NFCC credit counseling member agencies in more than 100 locations across the country will offer free programs for the public, such as ID theft workshops, credit report reviews, and shredding events, as well as a variety of other protection-oriented education events. Identity theft touched the lives of more than eight million consumers last year, with thefts totaling close to $50 billion, the NFCC noted in an announcement of its effort. It noted that the Federal Trade Commission has named ID theft as the top consumer complaint for the past five years in a row. “We need to fight back, and the way to do that is to arm consumers with concrete steps they can implement into their daily lives,” said Gail Cunningham, spokesperson for the NFCC. To back its community events, the NFCC created a consumer website created to highlight the events and provide valuable identity theft awareness and prevention education. The site features a map of National Protect Your Identity Week events, the “Identity Theft Risk Check,” an interactive quiz to help consumers assess their risk of identity theft; a video of an ID theft victim; steps to take if one becomes a victim of identity theft; and identity theft protection tips and resources.

Comment Fed interest payments OFAC enforcements

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WASHINGTON (10/14/08)—The Credit Union National Association (CUNA) is seeking comment on two recent, unrelated proposals: the Federal Reserve Board’s plan to pay interest on depository institutions’ required and excess reserve balances; and proposed guidelines from the Office of Foreign Assets Control (OFAC) for enforcement of its economic sanctions. Although it was the Financial Services Regulatory Relief Act of 2006 that originally authorized the Fed to begin paying interest on balances held by or on behalf of depository institutions, the 2008 Emergency Economic Stabilization Act moved the effective date up three years from Oct. 1, 2011. The Fed will pay interest on average balances maintained over the reserve maintenance periods as of Oct. 9 this year. In its Comment Call, CUNA noted such details as:
* The initial rate of interest for required reserve balances will be the average targeted federal funds rate over the reserve maintenance period less 10 basis points; * The interest rate for excess balances will be the lowest targeted federal funds rate during the reserve maintenance period less 75 basis points; and * Interest will be paid on correspondent balances, which does not have to be passed back to the respondent.
CUNA requests that comments be sent by Nov. 1; they are due to the Fed Nov. 21. Regarding the OFAC proposal, the guidelines reflect factors that will be considered in determining the appropriate enforcement response to any apparent violation of an OFAC sanctions program. The guidelines identify enforcement actions that OFAC may take and list “general factors” that will be considered in determining both enforcement action and penalty amount. The interim final rule supersedes all previous guidance issued by OFAC, and applies to all persons and entities subject to any of the sanctions programs administered by OFAC. For more on each regulatory plan, and to read CUNA’s complete Comment Calls, use the resource links below.

Exam procedures approved for red flags and more

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WASHINGTON (10/14/08)—Federal credit union, bank and thrift regulators have approved the examination procedures required to determine a financial institution’s compliance with rules regarding identity theft “red flags” (12 CFR 222.90) and other regulations under the Fair Credit Reporting Act (FCRA). The other FCRA regulations addressed by the Federal Financial Institutions Examination Council’s (FFIEC) Task Force on Consumer Compliance address the following areas:
* Duties of users regarding address discrepancies (12 CFR 222.82); and * Duties of card issuers regarding changes of address (12 CFR 222.91).
The FFIEC is comprised of representatives of the National Credit Union Administration, the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposits Insurance Corp., and Office of Thrift Supervision. The FFIEC release announcing examination procedures also reviewed the requirements of the attendant regulations”
* The “red flags” rule requires an institution must to develop and implement a written identity theft prevention program designed to detect, prevent, and mitigate identity theft in connection with any new or existing “covered account.” A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft. * The address discrepancy rule, in part, requires a user of consumer reports to develop reasonable policies and procedures to confirm that the report relates to the consumer whose report was requested when there is an address discrepancy. * The card issuer rule requires credit and debit card issuers to develop reasonable policies and procedures to assess the validity of a change of address that is followed closely by a request for an additional or replacement card. In such situations, the card issuer must not issue an additional or replacement card until it assesses the validity of the change of address in accordance with its policies and procedures.
Examiners are asked to include an evaluation of a financial institution’s compliance with these provisions during the next regularly scheduled examination or supervisory cycle after the mandatory compliance date of November 1, 2008. Use the resource links below to access information about exam procedures and CUNA resources on the red flags rule.

CU CEO Mica talk up CUs on FOX Business TV

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WASHINGTON (10/14/08)--An Illinois credit union CEO and Credit Union National Association (CUNA) President/CEO Dan Mica during a nationally broadcast television interview discussed credit unions’ financial strength and organizational structure. The seven-minute segment aired live last week on FOX Business TV. In the segment’s first half, Robert M. Palumbo, president/CEO of the $268 million-asset Dupage CU in Naperville, Ill., explained credit unions’ unique structure bolsters their financial strength and better returns for members. Palumbo said credit unions can offer lower rates on loans and higher rates on savings because “we are not-for-profit financial cooperatives--any profit goes back to the member” in the form of rates, service or fee structure.
Click to watch FOX Business TV video segment.
“Our whole culture is to serve members,” he said. Palumbo noted Dupage CU continues to lend money. “In fact, September was one of our best months for mortgage lending,” he said. The reporter at the credit union pitched the segment from Naperville back to Washington, where CUNA’s Mica reiterated Palumbo’s points. He said credit unions are part of the solution to the current economic upheaval, and paraphrased House Financial Services Committee Chairman Barney Frank (D-Mass.) that “if everyone acted like credit unions, we wouldn’t have this crisis.” Mica pointed out that credit unions continue to make home loans and provide capital to small businesses. To help more small businesses, the CUNA leader said the trade association wants Congress to raise statutory limits on credit union member business loans from 12.5% of assets to 25%. Credit union mortgage and member business loans combined have very low default rates, Mica told the television audience. Watch the video online on CUNA News Now.

Inside Washington (10/10/2008)

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* ALEXANDRIA, Va. (10/13/08)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel is scheduled to appear Tuesday on the Fox Business Network’s “Money for Breakfast” program. The agency said Fryzel will discuss the recently-passed Emergency Economic Stabilization Act, which includes the increase in National Credit Union Share Insurance Fund (NCUSIF) coverage, as well as the current state of the economy and its relation to credit unions. The segment will air between 8-9 a.m. ET... * WASHINGTON (10/13/08)--The Treasury Department has received several proposals for its $700 billion rescue program from several large banks (American Banker Oct. 10). Bids for the program were due Wednesday evening, and the Treasury plans to make selections this week. Bank of New York Mellon Corp. and State Street Corp. bid on custody services and record-keeping, and BlackRock Inc. and Pacific Investment Management Co. bid on troubled mortgage-backed securities. The securities comprise the larges portion of the bailout. UBS AG analysts predict that the Treasury will begin purchasing mortgage assets within six to eight weeks ...

House panel slates hearing on regulatory oversight

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WASHINGTON (10/13/08)--The House Financial Services Committee said it will hold a hearing to address the need for “broad regulatory restructuring and reform for the financial markets, including financial institution oversight and regulation, systemic risk, and housing finance.” The hearing is scheduled for Oct. 21. No witnesses were announced. The hearing is a continuation of two hearings held by the committee in July focused on regulatory restructuring and systemic risk, which the committee heard from regulators, according to a statement from the panel. The Oct. 21 hearing will “focus on the extent to which an outdated and weak regulatory system contributed to the current market turmoil and whether adoption of a stronger and more robust financial regulatory system could contribute to a more rapid recovery in the financial markets and the economy.” Specifically, the hearings will examine:
* Current state of the financial regulatory system, both in the United States and abroad, and ways to measure and limit risk without stifling innovations while improving market liquidity and breadth; * The implications of current governmental lending and support facilities for the regulatory structure; * Proposals to improve the regulatory structure to restore confidence in financial markets and institutions through a stronger system of regulation and oversight; * The need for enhanced capital and reserve requirements for financial firms; and * The adequacy of current powers and coverage of the existing regulatory structure.
The Credit Union National Association will be following the hearings closely.

Share Insurance 101 PowerPoint available

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ALEXANDRIA, Va. (10/13/08)--The National Credit Union Administration (NCUA) has posted its expanded Share Insurance 101 Webinar PowerPoint presentation on its website in several locations. The complete archived presentation will be available later, said the agency. NCUA described the presentation as “essential information providing the fundamentals of share insurance that credit unions and members will find beneficial.” It was hosted by board member Gigi Hyland and attracted more than 3,000 participants. The webinar provided a basic review of federal share insurance regulations and operational considerations, as well as the NCUA's available resources on share insurance. Frank Kressman, of the NCUA’s office of general counsel, did a walk through of the share insurance rules in which he provided a description of the coverage available for various types of accounts, as well as suggestions on how credit unions could structure accounts to provide maximum insurance coverage to their members. Robert Leonard, of the agency’s office of examination and insurance, discussed the health and stability of the National Credit Union Share Insurance Fund (NCUSIF), as well as the reputation and compliance risk associated with it. Hyland told participants that the NCUA wants credit unions to update their share insurance signs to reflect the higher coverage level “as soon as possible.” Under the recently passed economic rescue package, the $100,000 insurance limit on share and deposit accounts was raised for one year to $250,000. She encouraged credit unions to utilize downloadable signs available on the NCUA's website, which have been updated to reflect the increased coverage. Leonard added that the NCUA would like for the upcoming December 5300 Call Reports to reflect both the $100,000 coverage amount, as well as the $250,000 coverage currently in place. Use the resource links below to access the PowerPoint.

Bush again highlights CU share insurance in speech

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WASHINGTON (10/13/08)--For the fourth time in two weeks, President George W. Bush included federal credit union share insurance in public remarks. In a speech broadcast from the Rose Garden Friday, Bush spoke to shore up consumer confidence in the ailing economy. He addressed federal deposit and share insurance directly. “Some Americans are concerned about whether their money is safe. So the Federal Deposit Insurance Corporation and the National Credit Union Administration have significantly expanded the amount of money insured in savings accounts, and checking accounts, and certificates of deposit,” said Bush. “That means that if you have up to $250,000 in one of these insured accounts, every penny of that money is safe,” he added. The Credit Union National Association (CUNA) has urged the White House at the highest levels to mention credit union share insurance in all statements about financial institution safety and soundness. Access the complete White House transcript using the link below.

Corporate CUs urge amended fair market definition

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WASHINGTON (10/10/08)—Corporate credit unions, some of which hold large portfolios of agency and non-agency residential mortgage-backed securities, yesterday urged the Federal Accounting Standards Board (FASB) to amend the definition of fair value for held-to-maturity (HTM) and available-for-sale (AFS) securities to the net realizable value of these securities. The Association of Corporate Credit Unions (ACCU) advocated the position in a comment letter filed yesterday. ACCU said the amended definition “is necessary in order to place investors in debt securities on equal footing with entities that hold loan portfolios for investment.” “We believe that securitized loans should not be treated differently than unsecuritized loans when the intent and ability to hold the investments is present in both cases,” said ACCU. “At a minimum, FASB should allow the current severe liquidity risk premiums to be adjusted in the determination of fair value to levels observed during periods of normal market activity.” ACCU maintained that financial instruments classified as trading securities should continue to be carried at liquidation--or exit--prices. “Using net realizable value provides a better definition of fair value and a more meaningful measurement of the true economic condition of an entity with regards to its HTM and AFS securities,” said ACCU.

Fair value accounting guidance not enough says CUNA

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WASHINGTON (10/10/08)—The Credit Union National Association (CUNA) yesterday said proposed accounting guidance does not go far enough in addressing key issues used to determine the fair value for certain assets where there is an ability and intent to hold until recovery or maturity. CUNA voiced its concern via comment letter on the Financial Accounting Standards Board's (FASB) Proposed Staff Position FAS 157-d, which offers guidance on using FASB Statement No. 157, Fair Value Measurements, in a market that is not active. The letter was developed under the auspices of CUNA’s Accounting Task Force, led by Scott Waite, senior vice president and chief financial officer at Patelco CU in San Francisco. CUNA, in its letter authored by CUNA Deputy General Counsel Mary Dunn, said FASB’s proposed guidance “raises questions regarding how it should be applied, and we are not certain how useful it will be. We also believe that more direction should be provided for the use of risk-adjusted premiums and discounts.” CUNA pointed out that parts of the proposed guidance does not go far enough to “address the concern that many have raised that an asset that can be held to maturity should not be marked to current market prices.” CUNA also urged a one-week extension to the comment period, which FASB held open for four days--from Oct. 6-9. The Emergency Economic Stabilization Act enacted last week, among other things, authorizes the Securities and Exchange Commission to suspend the mark-to-market standards and to evaluate that application. CUNA said it believed FASB’s guidance appeared to be an effort on the part of FASB to “provide an alternative to the suspension of the FASB Statement 157.” “While we think that appropriate comprehensive guidance can be useful and may be the answer, we also believe that the SEC should still proceed with its evaluation of the fair value standards under the new Emergency Economic Stabilization Act as expeditiously as possible,” wrote CUNA. Use the resource link below to access CUNA’s complete letter.

Hood CUs are healthy can help

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ALEXANDRIA, Va. 10/10/08)—Credit unions can move forward with “confidence in the financial health, transparency, and integrity of the credit union system” to be part of the solution to the unprecedented challenges in today’s financial marketplace, said National Credit Union Administration (NCUA) Vice Chairman Rodney Hood recently. “I am calling on credit unions to be a part of the solution. Being part of the solution requires confidence from your member owners, your management teams, and from your boards,” Hood said during remarks to the CU Credit Association of New York’s annual meeting in Niagara Falls. Hood noted strategic steps NCUA is taking to preserve confidence in the nation’s credit union system. They include:
* An NCUA advertising campaign assuring credit union members that their shares are federally insured. The NCUA also has established a call center devoted to fielding questions about share insurance; * Working for credit union inclusion in the recently enacted Emergency Economic Stabilization Act; and * Attention to proactive risk management through a new risk-focused examination.
Regarding examinations, Hood said the NCUA has eliminated the camel matrix and has developed a new exam which focuses on seven areas of risk; credit, interest rate, liquidity, strategic, transaction, compliance, and reputation. “The overall goal of the Risk Focused Exam is not to play ‘gotcha’, but rather, it is designed to be a collaborative and consultative process,” said Hood.

NCUA to vote on underserved powers and more

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ALEXANDRIA, Va. (10/10/08)—There are four items on the Oct. 16 National Credit Union Administration (NCUA) open board meeting agenda, including a quarterly report on the National Credit Union Share Insurance Fund. The three-member board is also scheduled to vote on a proposed rule that would set requirements for the use of the official insurance sign. Also on the table, a final rule that would affect three categories of incidental powers: correspondent services; operational programs; and finder activities. The NCUA will decide whether to approve additional illustrations of permissible activities within each of these categories. The board is also slated to consider a plan intended to clarify the procedure for establishing that an "undeserved area" qualifies as a local community, address the application of economic distress criteria; and clarify requirements for showing an area has "significant unmet needs," including the use of data from NCUA and other agencies to analyze whether an area is "undeserved by other depository institutions." In a recent comment letter, the Credit Union National Association (CUNA) urged the NCUA not to proceed with its underserved proposal, which CUNA said would establish a much more cumbersome procedure to approve underserved areas. CUNA maintained that the underlying rationale for the proposal is flawed and argued that the rule is not in need of “updating.” If adopted, the proposal would result in fewer and smaller underserved areas being approved, CUNA warned. CUNA urged the NCUA to retain the current process for approving underserved areas.

Inside Washington (10/09/2008)

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* WASHINGTON (10/10/09)—Rep. Barney Frank (D-Mass.), who heads the House Financial Services Committee, sent a letter to some of the nation’s largest mortgage lenders and servicers urging them to work to avoid initiating foreclosure proceedings by helping troubled borrowers to restructure their loans. He said a recent plan announced by Bank of America Corp. should serve as a model for the kind of action other lenders should take. This week, Bank of America Corp. announced intentions for “mass modifications” of troubled mortgages from lending giant Countrywide Financial Corp., which it took over earlier this year. (American Banker Oct. 9)… * WASHINGTON (10/10/08)--The Treasury Department may take ownership in many U.S. banks to restore faith in the nation’s financial system (The New York Times Oct. 8). The $700 billion bailout bill, passed last week by the House and the Senate, affords the Treasury the authority to put liquidity into banks at institutions’ request. Doing so could strengthen banks’ balance sheets and encourage them to lend, officials said ... * WASHINGTON (10/10/08)--Deposits at banks and thrifts were at $7 trillion, according to summary of deposits data released by the Federal Deposit Insurance Corp. Wednesday. The summary listed the deposits for the period ending June 30. Commercial bank deposits were at $5.9 trillion. Savings institutions deposits were listed at $1.13 trillion ... * WASHINGTON (10/10/08)--Firms are signing up: Vanguard Group Inc., T. Rowe Price Group and Fidelity Investments said they plan to sign up for the Treasury Department’s program to guarantee money market funds (American Banker Oct. 9). The temporary program was set up by the Treasury Department to restore faith in money market funds. The program will insure money market holdings below $1 ...

CUNA warns of burdens of home valuation code

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WASHINGTON (10/9/08)—There could be significant burdens on credit unions and other small lenders associated with parts of a new Home Valuation Code of Conduct (Code) and the Federal Housing Finance Agency should consider making revisions, according to the Credit Union National Association (CUNA). The Code is a result of an agreement earlier this year between the New York Attorney General, the Office of Federal Housing Enterprise Oversight—the precursor agency to the FHFA, Freddie Mac and Fannie Mae. Under the agreement, Freddie Mac and Fannie Mae may purchase loans only from financial institutions that meet new standards designed to ensure independent and reliable appraisals. One of the significant provisions of the Code requires lenders to maintain a telephone and email hotline to address appraisal complaints. This, CUNA warns, will impose significant new burdens on credit unions, the cost of which would have to be borne by credit union members—most unfortunately in the current credit climate as higher costs for mortgage credit. The increased burdens include a need to develop new disclosures and new procedures, and the incumbent need for additional staff training to both implement the new system and to investigate any complaints received. “As not-for-profit financial institutions, credit unions will have no choice but to pass these significant, additional costs on to their members, which will further increase the cost of mortgage credit. This will be especially unfortunate during the current mortgage crisis in which both the cost and availability of mortgage loans have been adversely impacted,” CUNA wrote in an Oct. 8 letter to FHFA Director James Lockhart. CUNA also noted, “The agreement allows Freddie Mac and Fannie Mae to provide exceptions for lenders with assets of $250 million or less, and we request that this be specifically included in the Code.” Earlier CUNA comment letters have requested clarification of the provisions in the Code in which the lender’s loan staff, or others who are connected with the loan staff or compensated based on the successful completion of the loan, will not be permitted to be involved in the selection of the appraiser or communicate with the appraiser. CUNA has also requested clarification of the provisions in the Code that prohibit lenders from using “in-house” appraisals or using an appraiser who is affiliated with the lender or with an entity owned by or which owns the lender. Use the resource link below to read the CUNA letter.

Comment wanted on FHLB director rule

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WASHINGTON (10/9/08)—The Credit Union National Association (CUNA) is seeking credit union comment by Nov. 11 on a new rule that outlines the process for nominating and conducting the election of independent directors for the Federal Home Loan Banks (FHLBs). The new Federal Housing Finance Agency (FHFA) interim final rule was effective Sept. 26, but that agency has asked for comment on specific areas of the plan. Under the Housing and Economic Recovery Act, signed into law in July, certain changes were made to the process for the election of the directors of Home Loan Banks. Until then, the board of directors of each FHLB was comprised of elected directors and those that were appointed by the board and were known as independent directors. The 2008 law now gives the members of the FHLBs the right to elect these independent directors, and the interim final rule outlines the process for nominating and conducting the election of these independent directors. As before, an independent director may not be an officer, director, or employee of any financial institution that is a member of the FHLB. CUNA seeks comment on the interim final rule in such areas as:
* Should the boards of directors of the FHLBs or should the FHFB establish the number of public interest directorships? *Do you have any comments on the requirement that directors may only serve three consecutive full terms, especially in situations in which a director does not serve a full term? * Should an FHLB board of directors be permitted to nominate more candidates for independent directors than there are positions to be filled? Also, independent directors must receive at least twenty percent of the eligible votes. Should this be a requirement? Would a different threshold be more appropriate? Should the threshold be based on the number of votes or the number of eligible votes? * Should the revised experience requirements for “public interest” directors be applied to existing directors?
The Housing and Economic Recovery Act was also responsible for creating the FHFB by combining the responsibilities formerly divided between the now-gone Federal Housing Finance Board and the Office of Federal Housing Enterprise Oversight. Use the resource link below to see the full list of questions for comment.

Inside Washington (10/08/2008)

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WASHINGTON (10/9/08)--On Tuesday, a delegation of staff members from the Credit Union National Association (CUNA) visited the Federal Reserve in Washington, D.C. to meet with Federal Reserve Board Gov. Elizabeth Duke. Duke was recently sworn in as the Federal Reserve Board's newest governor. From left are: CUNA General Counsel Eric Richard, Duke, CUNA President/CEO Dan Mica and CUNA Deputy General Counsel Mary Dunn.(Photo provided by CUNA) ... * WASHINGTON (10/9/08)--The Treasury Department yesterday announced a technical correction that would permit additional money market funds to participate in Treasury's Temporary Money Market Fund Guarantee Program. Funds that have a policy of maintaining a stable net asset value or share price that is greater than $1.00 and had such policy on Sept. 19, 2008 are eligible to participate, provided the fund meets all of the other original requirements. The enrollment deadline for these funds that are now eligible as a result of this technical correction is 11:59 p.m. ET on Oct. 10, 2008. This technical correction does not extend the original deadline for funds that maintain a stable share price of $1.00 and that qualified under the program originally announced on Sept. 29, 2008... * WASHINGTON (10/9/08)--Public comment is being sought by federal bank and thrift regulatory agencies on a joint notice of proposed rulemaking to assign a 10% risk weight to claims on or guaranteed by Fannie Mae and Freddie Mac. Claims include all credit exposures but do not include preferred or common stock. The Federal Reserve Board, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision, issued the rulemaking. The current risk level is 20% ...

NCUA updates graphics for 250K insurance

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ALEXANDRIA, VA. (10/9/08)--The National Credit Union Administration (NCUA) said yesterday it has updated its collection of printed and online materials that communicate increased federal share insurance to consumers. The changes were made after President George W. Bush signed into law the “Emergency Economic Stabilization Act of 2008” on Oct. 3, which temporarily increases federal deposit insurance coverage. The new law will remain in place through Dec. 31, 2009. It provides for an increase in the minimum National Credit Union Share Insurance Fund (NCUSIF) coverage from $100,000 to $250,000 on member share accounts.
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NCUA said it has updated the “Your Insured Funds” and “How Your Accounts Are Federally Insured” brochures to reflect the increased NCUSIF coverage. Updated versions of the brochures, NCUA insurance signs and labels, FAQs, print ads, and other insurance-related information are available on NCUA’s website in the Share Insurance Tool Kit. Use the resource link below to access. The agency said it is printing updated brochures and revised NCUA insurance signs and decals, and during the next few weeks will “mail a modest number of these items free of charge to all federally insured credit unions.” The Share Insurance Calculator is in the process of being updated, as a joint project with FDIC. NCUA said will notify credit unions when complete. Meanwhile, a freshly-shipped batch of the new posters featuring Uncle Sam, emphasizing that member deposits are backed by the full faith and credit of the U.S. Government already are outdated. “Because the posters were shipped just days before the passage of the Emergency Economic Stabilization Act, they do not reflect the increase in coverage,” said NCUA. Credit union managers have two options to bring the posters up-to-date:
* Strike through the $100,000 on the poster and write in $250,000 in a visually noticeable way; * A downloadable file of the updated poster, with the new $250,000 limit printed, is available on NCUA’s website.
NCUA said it will issue a “Letter to Credit Unions” with similar information. “Should you have questions, please contact your district examiner, regional office, or state supervisory authority,” said the agency. Use the link below to access the NCUA materials.

Mica talks CU strength safety in radio blitz

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WASHINGTON (10/8/08)—Credit Union National Association (CUNA) President/CEO Dan Mica hit the airwaves Tuesday in a radio tour where he emphasized credit union soundness and strength amid today’s credit crisis and reminded listeners that virtually all credit unions have federal deposit insurance. Mica conducted interviews with more than a dozen radio stations in major markets around the country, including CBS Chicago, one of the biggest financial news shows in the country, and Marketwatch radio, which airs nationally. Other cities covered include New York, Boston, Kansas City and Pittsburgh.
Click to view larger image During a radio interview via telephone with Chicago's WBBM AM 780, CUNA President/CEO Dan Mica in his Washington, D.C., office touts credit union safety, soundness, and federal insurance. (Photo provided by CUNA)
A key point Mica stressed is that credit unions have been part of the solution for borrowers in today’s economy, making loans responsibly. He noted that lending has soared at credit unions since the beginning of the year. Mica also pointed out that the new financial rescue bill signed into law last week raises the level of federal deposit insurance at credit unions as well as banks from $100,000 to $250,000. “Consumers must understand that there are no significant differences in the level of federal deposit insurance coverage at a credit union or a bank,” he explained. The radio blitz is part of a concerted effort by CUNA and state credit union leagues to educate consumer about credit union strength and safety. Last week CUNA distributed a pre-recorded radio news release featuring Mica’s comments on that subject that so far has aired on nearly 200 stations.
Audio file: click to hear CUNA's Dan Mica explain credit union safety, soundess, vitality during economic downturn on Chicago's WBBM radio.

Bush again highlights CU share insurance

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WASHINGTON (10/8/08)—For the third time in a week, President George W. Bush included federal credit union share insurance in public remarks.
Click to hear President Bush talk about federal insurance for your savings at credit unions
The Credit Union National Association (CUNA) urged the President Sept. 24 to instruct those within his administration to include federal credit union share insurance in messages meant to reassure Americans about the safety of their federally insured deposits. At a small business in Chantilly, Va., Bush spoke in support of the recently enacted Emergency Economic Stabilization Act of 2008. In his remarks, Bush said of the measure: “It temporarily expands federal insurance; bank and credit union deposits of up to $250,000. That's important. In essence, it's a safeguard for a lot of small businesses and a lot of families.” John Magill, CUNA senior vice president of legislative affairs, said, "In addition to our letter to the President, we also talked to the White House at the highest levels and they agreed that credit union share insurance should be mentioned in future remarks. They are making good on that now."

Ad series helps display CU soundness insurance

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WASHINGTON (10/8/08)--The Credit Union National Association (CUNA) has developed and released to credit unions and state leagues a series of print ads for credit unions to use – in a variety of ways--to explain to the public and their members that they have federal insurance, now to at least $250,000. The three ads--released for use by credit unions and leagues at no charge as a member service--focus on safety and soundness of credit unions, as well as their federally insured status.
Click for full details on downloading these ads.
The ads are designed to help credit unions answer questions from credit union members and the public in their communities, particularly in the wake of the enactment last week of the “Emergency Economic Stabilization Act”--which raised federal share insurance coverage to $250,000. Each ad targets credit union members as a primary audience and opinion leaders as a secondary audience. According to CUNA President/CEO Dan Mica, the creative objectives of the ads are to reassure members and the public that their money is safe in a credit union and to remind all of credit unions’ financial mission and track record. “The single most important message in all three,” Mica said, “is: ‘You should feel secure that your money is safe in a not-for-profit credit union; virtually all are also federally insured.’ We hope that credit unions find this message to be useful and easy to incorporate into their own communication plans.” According to Mica, credit unions are already using the ads for a variety of purposes: As print ads in local publications, but also as website art, teller display signs and as posters in lobbies and windows. Use the link below to download or preview any or all of the ads.

Inside Washington (10/07/2008)

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* WASHINGTON (10/8/08)--On Monday, the Treasury Department placed Neel Kashkari, formerly the assistant secretary for international development, in charge of its new $700 billion program to move problem assets off the books of financial institutions. Meanwhile, an unnamed bank was reportedly drawing up its application to be the first to sell its assets under the program signed into law last week. The department must make public the name of the bank within two days of its purchase or sale. Also on Monday, Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said in a speech to the National Association of Business Economists that the FDIC will not balk at using the "systemic risk exception" to resolve failing banks. The exception sets aside a requirement that the FDIC always take the lowest-cost approach to any failing bank…

FDIC premiums up NCUSIFs steady for now

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WASHINGTON (10/8/08)—The Federal Deposit Insurance Corp. (FDIC) announced a “restoration plan” Tuesday, accompanied by a proposal to increase rates banks pay for deposit insurance by seven basis points. At this time, the National Credit Union Administration (NCUA) has no similar intention. Under the FDIC plan, on average banks would pay roughly 13.5 basis points in premiums by the second quarter of next year. They currently pay 6.5 basis points. Credit unions are not facing a similar increase in share insurance premiums—at this time, according to National Credit Union Administration (NCUA) Chairman Michael Fryzel Tuesday. “As of today, everything looks fine in terms of the share insurance fund,” Fryzel said
Click to view larger image NCUA Board Chairman Michael Fryzel during an interview Tuesday. (Photo provided by CUNA)
as part of remarks during a wide-ranging interview. “And as of today I cannot tell you that there will be an increase in the premiums” federally insured credit unions pay for coverage by the National Credit Union Share Insurance Fund (NCUSIF), he added. However, he noted that based on the changes in the financial markets and other factors “everything comes into play and we will be looking at everything we need to do to make sure the fund remains strong, vibrant” and has “sufficient dollars in it to cover anything we need to.” In July, the NCUA Board reported that the NCUSIF's equity level was at 1.24%. Historically, the NCUSIF equity level fluctuates somewhat during the course of a year. Under the Federal Credit Union Act, the Board has authority to charge an insurance premium to federally insured credit unions if the Fund's equity ratio is less than 1.3%, but is not required to. If the equity ratio is below 1.2%, the Board must assess a premium to restore the ratio to 1.2%. “CUs have never cost the taxpayer a penny. We want to make sure that continues and we will do whatever we need to do to make sure the Fund remains strong and that credit unions are able to operate with that strong fund in place,” he said. When asked the earliest the issue of a premium could be raised, the chairman said: “I hope to know something by the end of this year. That is contingent upon my staff putting together all the information I have requested and everything we are working on in regards to what we need to do in the next few months to make sure everything stays—pretty good.” Meanwhile at the FDIC, that agency said its proposed changes to the assessment system include assessing higher rates to institutions with a significant reliance on secured liabilities, which generally raises the FDIC's loss in the event of failure without providing additional assessment revenue. The proposal also would assess higher rates for institutions with a significant reliance on brokered deposits but, for well-managed and well-capitalized institutions, only when accompanied by rapid asset growth. Brokered deposits combined with rapid asset growth have played a role in a number of costly failures, including some recent ones. The proposal also would provide incentives in the form of a reduction in assessment rates for institutions to hold long-term unsecured debt and, for smaller institutions, high levels of Tier 1 capital. "Like any insurance company, we've identified activities that have increased or reduced the cost of insurance, and as a result, want to factor them into our determination of assessment rates," Bair said. The FDIC Board of Directors also voted to maintain the Designated Reserve Ratio at 1.25 percent as a signal of its long term target for the fund. Comments on the proposal are due no later than 30 days after publication in the Federal Register, which is expected soon. The complete interview with NCUA Chairman Fryzel will appear in the next edition of Credit Union Magazine.

FHA foreclosure relief open for business

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WASHINGTON (10/8/08)—The Federal Housing Authority (FHA) has unveiled rules for its statutorily mandated temporary foreclosure relief program—HOPE for Homeowners, effective Oct. 1 to Sept. 30. The program, referred to as H4H on the FHA website, was created this summer when Congress passed the Housing and Economic Recovery Act. It is intended to help borrowers who are at risk of default and foreclosure to refinance into more affordable, sustainable loans. Credit unions, banks and thrifts are eligible to participate in the program, but must be FHA lenders to do so. However, to date, few credit unions FHA-approved lenders. A list of participating lenders is not available yet, but has been promised “in the coming days” by the FHA. According to FHA, there are four ways that a distressed homeowner could pursue participation in the HOPE for Homeowners program:
* Homeowners may contact their existing lender and/or a new lender to discuss how to qualify and their eligibility for this program. *Servicers working with troubled homeowners may determine that the best solution for avoiding foreclosure is to refinance the homeowner into a HOPE for Homeowners loan. * Originating lenders who are looking for ways to refinance potential customers out from under their high-cost loans and/or who are willing to work with servicers to assist distressed homeowners. * Counselors who are working with troubled homeowners and their lenders to reach a mutually agreeable solution for avoiding foreclosure.
It has been estimated that as many as 400,000 homeowners over three years could avoid foreclosure through this program by refinancing loans into new 30-year fixed rate loans with lower payments. The FHA information provides the requirements lenders must meet to make these types of loans, including additional consumer disclosures and certifications to the FHA that there has been proper underwriting. It is expected that the program will be tweaked as any need of modifications becomes apparent. The Credit Union National Association (CUNA) has been contacted by the FHA and will work with the FHA to provide more information to credit unions on the H4H program in the coming weeks. The FHA is part of the Department of Housing and Urban Development. Use the resource link below to read more program details.

Inside Washington (10/06/2008)

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* WASHINGTON (10/7/08)--On Tuesday, the Federal Deposit Insurance Corp. (FDIC) is expected to raise premium rates for 2009 and propose changes to its risk-based pricing system (American Banker Oct. 6). The FDIC did not release information on the new rates, but observers expect that the two-basis-point range would double and some healthy banks could pay up to 15 cents per $100. Healthy banks currently pay five to seven cents per $100. The agency must raise premium rates to replenish its reserves after several big bank failures. It has five years to raise its ratio of reserves to 1.15%--up from the current 1.01% ... * WASHINGTON (10/7/08)--Now that the $700 billion bailout bill has passed, the Treasury Department can begin purchasing $250 billion of illiquid assets immediately from banks through a no-bid process, or through an auction program (American Banker Oct. 6). Treasury Secretary Henry Paulson said the department would likely buy simpler securities first and that the Treasury can handle about $50 billion of purchases per month. Observers also expect the department to hold its first auction within one month and hire five to 10 asset managers. About two dozen lawyers, bankers and accountants could also be hired by the department, although a payscale has not yet been determined. In addition to purchasing assets, the Treasury must create an insurance program to guarantee mortgage-backed securities that are uninsured. The department also must encourage mortgage servicers to use a refinancing program that went into effect Oct. 1. Both Paulson and President Bush said that more details would come to light this week ... * WASHINGTON (10/7/08)--The Small Business Administration (SBA) reported that its loan volume dropped 13% to $18 billion, and that the number of loans decreased 29% to 78,317. The number of loans in August and September plummeted more than 50%compared with last year, according to Eric Zarnikow, SBA administrator for the office of capital access (American Banker Oct. 6). Applications are down at SBA’s lending partners, and applicants are not as creditworthy as they have been in the past, added Zarnikow. The economy, high energy and commodity prices, and tighter lending standards are also to blame for the loan drop. A Federal Reserve Board survey in July indicated that 70% of senior loan officers said their commercial and industrial credit standards had tightened ...

Fed pay on reserves starts Oct. 9

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WASHINGTON (10/7/08)—The Federal Reserve Board has announced that effective Oct. 9 it will begin to pay interest on credit unions’ and other depository institutions' required and excess reserve balances. The Financial Services Regulatory Relief Act of 2006 gave the Fed authority starting in 2011 to lower reserves to zero and/or to pay interest--not to exceed other short-term rates--on the reserve balances actually maintained. The new Emergency Economic Stabilization Act gives the Fed that authority starting now. The authority is being implemented through changes to the Fed’s Regulation D. While the action is effective immediately, the Fed will accept public comments until Nov. 21 and the proposal will soon be published in the Federal Register. The Fed said it will adjust the rule as appropriate in light of comments. Reserve balances are balances held to satisfy depository institutions’ reserve requirements and excess balances are those held in excess of required reserving balances and clearing balances. The Fed announcement said the interest rate paid on required reserve balances will be the average targeted federal funds rate established by the Federal Open Market Committee over each reserve maintenance period less 10 basis points. Paying interest on required reserve balances should essentially eliminate the opportunity cost of holding required reserves, promoting efficiency in the banking sector,” according to the Fed. The rate paid on excess balances will be set initially as the lowest targeted federal funds rate for each reserve maintenance period less 75 basis points. The formula for the interest rate on excess balances may be adjusted subsequently in light of experience and evolving market conditions. “Paying interest on excess balances should help to establish a lower bound on the federal funds rate…The payment of interest on excess reserves will permit the Federal Reserve to expand its balance sheet as necessary to provide the liquidity necessary to support financial stability while implementing the monetary policy that is appropriate in light of the System’s macroeconomic objectives of maximum employment and price stability,” the Fed notice claimed. The Fed has also made several other amendments to Reg D, including the treatment of balances maintained by pass-through correspondents and eliminating transitional adjustments for reserve requirements in the event of a merger or consolidation. The Board also published the annual adjustments for reserve requirements and reporting requirements for depository institutions. For 2009, the first $10.3 million in net transaction accounts will be exempt from the reserve requirements. This figure is the reservable liabilities exemption adjustment. Transaction account amounts over $10.3 million up to and including $44.4 million will have a three percent reserve requirement. Transaction account amounts over $44.4 million will have a 10 percent reserve requirement. This figure, $44.4 million, is known as the low reserve tranche. The Credit Union National Association (CUNA) has worked hard to achieve changes in reserve requirements. Our preference is for Reg D reserve requirements to be completely eliminated, but paying interest on reserves certainly is an improvement over holding what is referred to as ‘sterile reserve,’” said CUNA Senior Vice President of Compliance Kathy Thompson Monday.

Two CUs closed total now 13

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ALEXANDRIA, Va. (10/7/08)—The National Credit Union Administration (NCUA) has liquidated a $6 million-asset credit union in West Virginia and a $1.8 million-asset credit union in Texas, bringing the total number of federally insurance credit unions to be closed this year to 13. In Wichita Falls, Tex., Postal Family CU has purchased the assets and assumed member shares of the recently liquidated TEXDOT-WF CU, according to an NCUA announcement. The Texas CU Department made a decision to liquidate TEXDOT-WF as of Sept. 30, and discontinued its independent operation after determining the credit union was insolvent and has no prospects for restoring viable operations. At the time of liquidation, the credit union served 530 members within various select employee groups. Postal Family CU is a state-chartered, federally insured institution, chartered in 1936 to serve U.S. Postal Service employees. It is a full service, $50 million-asset credit union with more than 6,100 members located throughout the country. In Bluefield, W.V., N&W Poca Division FCU went into liquidation Oct. 3. The NCUA Asset Management and Assistance Center will issue checks to individuals once it has verified balances in share accounts.The credit union served 1,194 members before the NCUA determined it was insolvent and had no prospects of restoring viable operations. The NCUA reminded that through the National Credit Union Share Insurance Fund, credit union members’ deposits are insured to at least $250,000 on regular accounts and $250,000 on certain retirement accounts. Last week’s passage of the Emergency Economic Stabilization Act of 2008 increased share insurance protection for regulator accounts to $250,000, up from $100,000, until Dec. 31, 2009.

Inside Washington (10/03/2008)

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* WASHINGTON (10/6/08)--The New Markets Tax Credit Program has been extended through 2009 as part of the Emergency Economic Stabilization Act, signed into law Friday. The package authorized $3.5 billion in new tax credit allocation authority to encourage further investment of new private sector capital into distressed communities. Credit unions and other non-profits may apply for the credit, but must be certified first as a Community Development Entity (CDE)… * WASHINGTON (10/6/08)--C-SPAN Television cameras videotaped Friday morning's installment of the 2008 presidential election "Power Breakfasts," organized by National Journal. The Credit Union National Association (CUNA) co-sponsors the series.
Click to view larger image Click for larger view
More than 150 congressional staffers attended Friday's event, which focused on the previous night's vice presidential debate between Democratic vice presidential candidate Sen. Joe Biden (D-Del.) and Republican vice presidential candidate Gov. Sarah Palin of Alaska. Ronald Brownstein, political director for the Atlantic Media Co., moderated the panel. The event happened at Union Station in Washington, D.C., and featured: Michael Feldman, former senior adviser to Vice President Al Gore; Stan Greenberg, Greenberg Quinlan Rosner; Neil Newhouse, Public Opinion Strategies; and Sara Taylor, former White House political adviser to President George W. Bush. (Photo provided by CUNA) ... * WASHINGTON (10/6/08)--The federal government could receive more “bang for its buck” through a provision in the bailout plan that would allow the Treasury to give enhancements and credit guarantees on loans, according to Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair. The provision would allow the government to stabilize home prices and increase the number of loan modifications at a lesser cost, she added. Bair supports the $700 billion plan, which was approved by the House and signed into law by President Bush Friday, but said the provision could be used as a less expensive alternative (American Banker Oct. 3). The plan raises deposit insurance to $250,000 per depositor at each institution. Coverage is in effect through Dec. 31, 2009 ... * WASHINGTON (10/6/08)--Rep. Jason Altmire (D-Pa.) commended credit unions for helping average working Pennsylvanians on Pittsburgh’s business talk radio show, WMNY 1360 AM Thursday (Life is a Highway Oct. 3). Altmire called into the show to praise credit unions. Also on the show were Jim McCormack, Pennsylvania Credit Union Association president/CEO, and Ralph Canterbury Jr., vice president of technology, Clearview FCU, Moon Township ...

250K NCUSIF coverage effective immediately

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WASHINGTON (10/6/08)--Friday's passage of the Emergency Economic Stabilization Act of 2008 will require the National Credit Union Administration (NCUA) to immediately increase share insurance protection to $250,000 on all types of accounts until Dec. 31, 2009. President George W. Bush signed the economic rescue package just hours after it was passed by the House 263-171. The Senate approved the bill on Wednesday. The NCUA said it is reviewing all share insurance coverage materials included on the Internet Share Insurance Tool Kit, such as the "Your Insured Funds" brochure and print advertisement, to make needed revisions. Revised documents reflecting $250,000 coverage will be posted to the NCUA website as soon as possible, according to the agency. The overall rescue bill—intended to shore up the nation's economy in light of such factors as the current mortgage crisis and wildly fluctuating activity on Wall Street—would allocate up to $700 billion to the U.S. Treasury Department to buy up mortgage-backed securities whose values have dropped or become hard to sell. The package gives the government an ownership share in the companies that participate in the program, an element that was missing from earlier rescue drafts. This provision makes it so taxpayers could benefit from any increased value in the securities created by the government's support. After the bill became law, CUNA President/CEO Dan Mica said, "Credit unions had no hand in creating the root cause of the problem this bill aims to fix. Without question, however, they and their members like so many others are collateral damage of the economic hardship that has resulted. "In that sense, Congress had to act to avert any additional damage to the nation's economy and inject confidence in our financial system. Along those lines, credit unions appreciate the fact that the bill reflects our priority of raising the level of federal deposit insurance at credit unions (through National Credit Union Share Insurance (NCUSIF) coverage) to $250,000, giving credit unions parity with the same increase for banks and the FDIC. "This action sends a vital message to credit union members and consumers that their federally-insured deposits in credit unions remain safe."

NCUA changes revocable trust coverage

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ALEXANDRIA, Va. (10/6/08)--The National Credit Union Administration (NCUA) Friday announced changes to simplify its rule determining the coverage available on revocable trust accounts--commonly called payable-on-death accounts or living trust accounts. Applying to existing and future revocable trust accounts at all federally insured credit unions, the rule change eliminates the concept of qualifying beneficiaries, so coverage is based on the naming of virtually any beneficiary. The interim final rule is effective immediately and is substantially similar to one adopted recently by the Federal Deposit Insurance Corp. The NCUA is seeking comments for a 60-day period, to begin when the rule is published in the Federal Register. In light of the new $250,000 insurance coverage that went into effect on Friday, the agency will have to re-issue the interim rule, noted Kathy Thompon, CUNA senior vice president/associate general counsel for regulatory compliance and legislative analysis. It is not clear how NCUA will adjust the new $500,000 rule, she added. Use the resource link below to read the new regulation.

Fryzel Rescue package CLF cap good tools for NCUA

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ALEXANDRIA, Va. (10/6/08)—The passage of the Emergency Economic Stabilization Act last week in combination with recent enactment of a higher borrowing ceiling for the Central Liquidity Facility (CLF) will help the National Credit Union Administration (NCUA) mitigate some current and potential difficulties facing the credit union industry, said the agency’s chairman, Michael Fryzel, Friday. “In addition to the highly publicized increase in share insurance coverage, I am particularly pleased that Congress included important last-minute changes recommended by NCUA. “The final version of the Act incorporates language that allows (the National Credit Union Share Insurance) insurance level to be increased while recognizing the unique elements of the fund that make it different from the (Federal Deposit Insurance Corp.FDIC, and it also provides for NCUA to act in a consultative role with other regulators in determining how the Troubled Asset Repurchasing Program (TARP) will work,” Fryzel said in a statement. His remarks were issued just after the House voted 263-171 to pass the emergency stabilization act. The bill was approved Wednesday by the Senate and awaits the signature of President George W. Bush. “Viewed in their totality, I firmly believe that these actions will add important dimensions of financial and regulatory assistance to NCUA, credit unions and the entire financial services industry. I will move forward expeditiously and with a sense of purpose as we employ the new tools at our disposal,” Fryzel said.

Better debt management terms sought for borrowers

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WASHINGTON (10/6/08)—The National Foundation of Credit Counselors (NFCC) has launched a call to action for the development of affordable debt management plans (DMPs) asking 10 major card issuers to join the effort. The highly regarded NFCC is the nation's oldest association of credit counseling agencies, and the Credit Union National Association (CUNA) is a member of its Advisory Council. The NFCC is asking all card issuers to act by March 31 to use a universal, two-tiered DMP, which would offer either a maximum monthly fixed payment of 2% or a hardship payment of 1.75% of a balance. The development could be important for credit unions and their members, according to Mike McLain, CUNA's assistant general counsel, senior compliance counsel, and NFCC representative. “As a general rule, credit unions will experience higher losses if their members file bankruptcy rather than complete an acceptable debt payment plan. The NFCC is proposing somewhat more reasonable limits for debt payment plans that should enable more CU members—and borrowers in general--to repay their debts through debt payment plans rather than resorting to bankruptcy,” McLain explained. According to NFCC, about 25% of the clients its 108 credit counseling agencies see would benefit from a DMP. However, without modification to DMP terms, the option will be unaffordable by at least a third of those.

NCUA letter CU performance is what counts

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ALEXANDRIA, Va. (10/6/08)—Any credit union involved in advertising that could imply that other financial institutions are not safe for consumers’ deposits should discontinue their activity, said National Credit Union Administration (NCUA) Chairman Michael Fryzel in a new letter to credit unions. The chairman noted that such ad campaigns are “uncharacteristic of credit unions” and he admonished any involved to refrain from such remarks. “In these turbulent times, consumers need to have faith and confidence in the financial system. At NCUA, we have been working with Congress to make certain that I, as the federal insurer, and you, as the financial service provider, have the tools we need to keep credit unions strong and vibrant, and member funds safe and secure,” the chairman wrote in an Oct. 2 letter. “Credit unions do not need to criticize another financial institution regardless of its charter. Your performance is all that matters,” Fryzel said.

CDFI information call for CUs tomorrow

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WASHINGTON (10/6/08)—Credit unions interested in applying in 2009 for grants from the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Program can tune in tomorrow for an hour-long teleconference for more information. The CDFI Fund is hosting four, one-hour question-and-answer sessions this week and the 2 p.m. Tuesday session is geared toward frequently asked questions pertaining to credit union involvement in the program In August, the CDFI Fund released its notice of funds available for FY 2009 and noted that the program annually provides up to $54 million, subject to final appropriations, in the form of awards to the community-based organizations known as CDFIs. The CDFIs provide affordable financing and related services to low-income communities and populations that lack access to credit, capital and financial services. The CDFI Program application deadline is 12 a.m. EDT on Oct. 29. An applicant not currently certified as a CDFI must first submit a CDFI certification application by 12 a.m. EDT on Oct. 1.

Fast-paced action rules in intense atmosphere

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Click to view larger image Before a well-attended House press conference on Capitol Hill yesterday, CUNA Communications Vice President Pat Keefe reminds reporters that credit unions will also benefit from the financial rescue legislation's provisions raising credit union federal share insurance coverage to $250,000. (Photo provided by CUNA
WASHINGTON (10/3/08)--The atmosphere remained intense in Washington--and the action fast-paced--as the Credit Union National Association (CUNA) worked Thursday to ensure credit unions were well-represented in the financial rescue legislation, and the words and actions being used to describe the bill, given its impact on the economy and overall public confidence. Among the developments and actions:
*Following encouragement through repeated contacts by CUNA with the Treasury and the White House, President George W. Bush specifically mentioned credit unions being included in deposit insurance coverage in the bill passed by the Senate, and under consideration today by the House. “This was huge in terms of raising the visibility of the parity issue,” said CUNA President/CEO Dan Mica. CUNA urged House leadership to do the same in their public remarks about the bill. *CUNA continued to reach out to national press with phone calls and email contacts reminding them of the increased coverage leverage for credit unions as they prepare cover the House vote. CUNA communications staff also visited Capitol Hill press galleries handing out press releases reminding them to include "credit unions" in their reporting on the financial rescue legislation's provisions on expansion of federal deposit insurance coverage. *Nearly 200 radio stations so far have aired a radio news release CUNA released Wednesday--featuring comments by CEO Mica--about credit union federal deposit insurance coverage. Markets where the segment aired included Los Angeles, New York, Chicago, Philadelphia and Minneapolis. *Ahead of the House vote today, CUNA blast-distributed a second press release to more than 500 news organizations and news outlets across the nation, pointing out that the Senate-passed legislation now before the House will increase federal insurance at credit unions, as it will at banks. A version was shared with league communicators so they can issue similar reminders to their state and local media. *CUNA is coordinating with NCUA on efforts to support language that would preclude adjustment of the 1% NCUSIF deposit and/or the assessment of a premium to pay for the additional insurance coverage levels in order to minimize the cost to credit unions of any additional insurance coverage. *Letters were sent by CUNA to each House member urging support of the financial rescue bill. Many leagues and individual credit unions are doing the same. CUNA lobbyists continue to note that credit unions did not cause the problems we face but they and their members are certainly being affected by current economic conditions, and so the cost of inaction may well outweigh the cost of action. *With the Senate vote on the financial rescue bill completed, CEO Mica contacted Senate Banking Committee Chairman Chris Dodd (D-Conn.) to press for final passage of the Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA) prior to Senate’s adjournment. CUBTRRA--which grants credit unions new authorities to serve lower-income individuals--has already passed the House with the support of banks and credit unions and is considered noncontroversial.

Inside Washington (10/02/2008)

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* WASHINGTON (10/3/08)--A refinancing program launched by the Department of Housing and Urban Development (HUD) Wednesday has triggered analysts’ concerns because the program requires that borrowers with payment and debt-to-income ratios over a certain amount complete a three-month trial before the loan is insured by the Federal Housing Administration (FHA). The rule requires the FHA lender and servicer to “work hand in glove,” said Rod Dubitsky, Credit Suisse Group head of asset-backed securities research (American Banker Oct. 2). Borrowers must also provide new lenders with two years’ worth of tax returns from the Internal Revenue Service, and they cannot participate if the mortgage is on a second home. They also are required to have made at least six payments. The plan is open to improvements, said HUD Secretary Steve Preston ... * WASHINGTON (10/3/08)--As of Thursday, the House had not yet passed the bailout bill. The Senate passed the bill Wednesday after adding tax breaks (American Banker Oct. 2). The bill is “take it or leave it on our side,” said Rep. Michele Bachmann (R-Minn.). Bachmann opposes the bill and said the Senate took a high-stakes risk by passing it. Others may switch their vote, including Rep. Patrick Tiberi (R-Ohio) who opposed the legislation Monday but is now reconsidering. Rep. Melissa Bean (D-Ill.) said it is up to the Republicans to change their minds on the bill. Speaker of the House Nancy Pelosi doesn’t need Republican votes, and that she can “deliver those votes” without the Republicans, Bachmann added ...

NCUA charters new Texas CU

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ALEXANDRIA, Va. (10/3/08)—There is a new federal credit union in Dallas, Tex., according to an announcement by the National Credit Union Administration (NCUA) Thursday. Oak Cliff Christian FCU has a field of membership with 8,500 potential members. The NCUA said the credit union will serve members and employees of the Oak Cliff Bible Fellowship Church and its subsidiaries, as well as students of the fellowship Christian Academy--all based in Dallas. The credit union office will be located on the campus of the Oak Cliff Bible Fellowship Church. The credit union’s founders decided to charter the credit union to “offer the field of membership a place to confidently deposit their savings and investments with security for the future,” and to provide a safe, sound democratic alternative to traditional financial institutions, according to the NCUA.

CUNA Lame duck could be good for CUBTRRA

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WASHINGTON (10/3/08)—Senate Majority Leader Harry Reid (D-Nev.) has declared that the Senate will return for a lame duck session in November, which would give credit unions one more shot at regulatory improvements in 2008. Reid has said the Senate will return for several days during the week of Nov. 17. John Magill, senior vice president of legislative affairs for the Credit Union National Association (CUNA), said that development is good for credit unions. “The Senate is where CUBTRRA now sits,” Magill said, referring to the Credit Union, Bank and Thrift Regulatory Relief Act (H.R. 6312), approved by voice vote in the House on June 24. “A so-called lame duck session in the Senate, after the federal elections, will give us another opportunity—another shot at getting the regulatory improvements through the Senate this year.” For all financial institutions, CUBTRRA would provide exceptions to annual privacy notice requirements under the Gramm-Leach-Bliley Act for institutions that don’t share information with affiliates or that have not changed their privacy policies. For credit unions, the bill:
* Permits federally chartered credit unions (FCUs) to have up to 10% of aggregate assets in investment-grade securities; * Raises to 3% from 1% of assets the limit on an FCU’s total investment in or loans to a credit union service organization (CUSO); * Excludes member business loans (MBLs) to non-profit religious groups from the credit union MBL cap; * Permits the National Credit Union Administration (NCUA) to set longer maturities for certain FCU loans; * Allows the NCUA greater flexibility in adjusting the FCU usury ceiling; * Permits the NCUA to set rules for continued service to previous groups by credit unions converting voluntarily to a community charter; * Permits the NCUA to allow FCUs of any charter type to serve underserved areas, while modifying the definition of an underserved area; * Codifies FCUs’ ability to provide short-term loans as an alternative to payday loans to anyone within their fields of membership; * Revises credit union governance provisions; and * Excludes MBLs provided in underserved areas from the MBL cap.
"Clearly there is precious little legislative time left on the 2008 clock. However, CUNA continues to work in Congress at every opportunity to advance legislation to provide regulatory relief for credit unions,” Magill said.

NEW 250K NCUSIF coverage now effective

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WASHINGTON (10/3/08, UPDATE 3:30 p.m. ET)--Today’s passage of the Emergency Economic Stabilization Act of 2008 will require the National Credit Union Administration (NCUA) to immediately increase share insurance protection to $250,000 on all types of accounts until Dec. 31, 2009. President George W. Bush this afternoon signed the economic rescue package passed by the House today. NCUA said it is reviewing all share insurance coverage materials included on the Internet Share Insurance Tool Kit, such as the “Your Insured Funds” brochure and print advertisement, to make needed revisions. Revised documents reflecting $250,000 coverage will be posted to the NCUA website as soon as possible, according to the agency.

Bush highlights CU share insurance

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WASHINGTON (10/3/08)—Correcting earlier omissions that the White House categorized as “oversights,” President George W. Bush Thursday clearly and unequivocally included credit unions in his remarks following a meeting with business leaders about the pending economic rescue package. The Credit Union National Association (CUNA) urged the President last week to instruct those within his administration to include federal credit union share insurance in messages meant to reassure Americans about the safety of their federally insured deposits. In a message apparently intended to spur support in the House for the Senate-approved $700 billion rescue plan, Bush said: “A lot of people are watching the House of Representatives now to determine whether or not they will be able to act positively on a bill that has been improved. People say, what do you mean by that? Well, the insurance for the FDIC goes up to $250,000. That's an improvement to the legislation -- not only for banks but for credit unions, as well.” John Magill, CUNA senior vice president of legislative affairs, said, “In addition to our letter to the President, we also talked to the White House at the highest levels and they agreed that credit union share insurance should be mentioned in future remarks. They are making good on that now.” Wednesday night, the Senate voted 74-25 in favor of the multi-billion dollar financial rescue package, which included a temporary increase in federal share and deposit insurance coverage to $250,000 for regular accounts. Retirement accounts continue to be covered up to $250,000 at federally insured depository institutions. The Senate housing rescue includes an amendment barring the NCUA and Federal Deposit Insurance Corp. from factoring the insurance ceiling increase into decisions about assessing a premium. The House is widely expected to vote on the economic rescue plan Friday.

NEW Deposit insurance increase just one step away

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WASHINGTON (10/3/08, Updated 1:30 p.m. ET )—The House passed the Senate-approved economic rescue package 263-171 Friday afternoon and now the legislation, which carries a temporary hike in deposit insurance coverage, just needs the signature of the President to become law. Credit unions have been questioning at what point can they refer to the new $250,000 insurance ceiling as they work to reassure members of the safety of their shares accounts. CUNA’s Ryan Donovan said, “It is possible the President may sign the bill today, but maybe not until tomorrow or Sunday.” Donovan is vice president of legislative affairs. The overall rescue bill—intended to shore up the nation's economy in light of such factors as the current mortgage crisis and wildly fluctuating activity on Wall Street—would allocate up to $700 billion to the U.S. Treasury Department to buy up mortgage-backed securities whose values have dropped or become hard to sell. The package gives the government an ownership share in the companies that participate in the program, an element that was missing from earlier rescue drafts. This provision makes it so taxpayers could benefit from any increased value in the securities created by the government's support. After the House vote, CUNA President/CEO Dan Mica said, "Credit unions had no hand in creating the root cause of the problem this bill aims to fix. Without question, however, they and their members like so many others are collateral damage of the economic hardship that has resulted. "In that sense, Congress had to act to avert any additional damage to the nation’s economy and inject confidence in our financial system. Along those lines, credit unions appreciate the fact that the bill reflects our priority of raising the level of federal deposit insurance at credit unions (through National Credit Union Share Insurance (NCUSIF) coverage) to $250,000, giving credit unions parity with the same increase for banks and the FDIC. "This action sends a vital message to credit union members and consumers that their federally-insured deposits in credit unions remain safe."

Senate passes rescue with deposit insurance boost

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WASHINGTON (10/2/08)—The U.S. Senate voted 74-25 last night to approve a multi-billion dollar financial rescue package that included a temporary increase in federal share and deposit insurance coverage. The $700-billion rescue plan is expected to be taken up by the U.S. House Friday and, if passed, quickly sent to the President’s desk for his signature transforming the bill to public law. Under the deposit insurance provisions, the current $100,000 limit on share and deposit accounts would be raised for one year to $250,000. The Credit Union National Association (CUNA) supported that increase and sent letters to President George W. Bush, Treasury Secretary Henry Paulson and members of Congress Monday urging them to make sure to include credit unions in any plans for increased deposit insurance coverage. CUNA President/CEO Dan Mica said of the Senate’s vote, “It is important to America’s credit unions that they have parity with banks in any increase in federal deposit insurance coverage. We are pleased to see this goal achieved in the Senate’s financial rescue legislation.” Mica added that another CUNA goal has been to ensure credit unions have access, if needed, to the legislation’s relief measures for troubled assets. “By providing this access, the Senate legislation is careful not to place credit unions at a disadvantage. CUNA will continue to press for similar treatment in the House as it resumes its consideration of this legislation,” Mica said. The overall rescue bill—intended to shore up the nation’s economy in light of such factors as the current mortgage crisis and wildly fluctuating activity on Wall Street—would allocate up to $700 billion to the U.S. Treasury Department to buy up mortgage-backed securities whose values have dropped or become hard to sell. The package gives the government an ownership share in the companies that participate in the program, an element that was missing from earlier rescue drafts. This provision makes it so taxpayers could benefit from any increased value in the securities created by the government’s support.

FASB SEC closer to fair value accounting relief

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WASHINGTON (10/2/08)—On day after clarifying its fair value accounting rules for mortgage-backed securities, the Financial Accounting Standards Board (FASB) Wednesday said it may issue additional guidance as early as this week about its mark-to-market standards, while the Senate may give the Securities and Exchange Commission (SEC) additional flexibility in the matter. In a meeting yesterday, FASB officials said the Statement of Financial Accounting Standards (FAS) No. 157, Fair Value Measurements, which establishes a framework for measuring fair value that applies broadly to financial assets and liabilities, needs additional guidance to provide clarity and assist in these unprecedented times. The expected FASB guidance will address, among other things, the relevant input, such as broker quotes or the use of pricing services, to determine fair value in an inactive market. FASB said it seeks to clarify Statement 157 and illustrate examples of how to determine the fair value of a financial asset when the market for that financial asset is not active. "The objective of the guidance is to clarify the framework within which financial statement users, preparers, auditors, and others are to determine the fair value of assets and liabilities when markets are not active,” said FASB. Many in the financial services industry, including the Credit Union National Association (CUNA), have urged additional FASB accounting guidance on fair value accounting standards. Meanwhile, the Economic Stabilization Act of 2008 passed last night by the Senate includes language that would allow the SEC to suspend the mark-to-market requirements for mortgage-backed securities. In certain instances, Generally Accepted Accounting Principles (GAAP) on fair value require assets to be marked to market. While credit unions are not supervised directly by the SEC, they are required to follow GAAP, and the suspension of these standards would impact the financial statements of credit unions with mortgage related instruments, according to CUNA Accounting Task Force Chairman Scott Waite, who also is senior vice president and chief financial officer at Patelco CU in San Francisco. Access more information from FASB using the resource link below.

Inside Washington (10/01/2008)

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* WASHINGTON (10/2/08)--Arty Arteaga, (right) president/CEO of the Defense Credit Union Council, met with National Credit Union Administration (NCUA) Chairman Michael E. Fryzel Tuesday at the NCUA headquarters. “Military credit unions have been one of the traditional cornerstones of the industry, from the earliest days to the present,” Fryzel said. “The dedication to providing the highest-quality financial services to the military community is impressive, and the Defense Council of Credit Unions is an exceptionally important voice in making certain that the defense credit union story is told.” (Photo provided by the National Credit Union Administration) ... * WASHINGTON (10/2/08)--The Department of Housing and Urban Development was scheduled to release details yesterday about its Hope for Homeowners program, which would allow borrowers nearing foreclosure on homes worth less than their mortgages to refinance into loans backed by the Federal Housing Administration (FHA). If the bailout bill is approved, the FHA would pay the new lender up front. The government facility created to purchase the $700 billion of troubled assets under the bailout plan also could buy loans eligible for Hope for Homeowners (American Banker Oct. 1). The bailout plan requires the government to prevent foreclosures and encourage servicers whose loans were purchased by the Treasury Department to use the FHA program ... * WASHINGTON (10/2/08)--The President’s Advisory Council on Financial Literacy will meet Oct. 14 at 2 p.m. in Washington, D.C. The public is invited to submit comments to financialliteracycouncil@do.treas.gov or through mail. The department will post all statements on its website ... * WASHINGTON (10/2/08)--The Consumer Advisory Council will meet Oct. 23 at 9 a.m. Attendees should register no later than Oct. 21 by completing a form ... * WASHINGTON (10/2/08)--Twenty-four Maine Credit Union League representatives and 10 Maine credit unions visited Washington, D.C. Sept. 16-18. They talked with each member of Maine’s congressional delegation, heard a legislative briefing from the Credit Union National Association (CUNA) at Credit Union House, toured the National Credit Union Administration with board member Gigi Hyland, and attended a reception on Capitol Hill with the Maine delegation and staff members. “The visits are an important part of why we are so fortunate to have solid and positive relationships with our entire congressional delegation,” said league President John Murphy. Hyland said the current economic uncertainty and credit market dislocation underscore the need for the Credit Union System to work as a system. Liquidity is tight and corporate credit unions continue to work diligently to access all available liquidity sources, she said. “Maintaining calm and confidence in the credit union is vital to overcome the current challenges,” Hyland added. About 17 Hill hikes took place in September. Thirty-six have taken place year-to-date, with 35 leagues participating, according to CUNA ...

Native American CDFI funding requests accepted.

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WASHINGTON (10/2/08)—The Community Development Financial Institutions (CDFI) Fund is accepting applications for the Fiscal Year 2009 funding round of the Native American CDFI Assistance (NACA) Program. Credit unions and other financial institutions that are certified CDFIs can apply for funding for work in Native American, Alaskan Native and Native Hawaiian communities. New certification applications are due Nov. 3. The Fund expects to award approximately $8 million in appropriated funds for the NACA Program in 2009. Applications for grants and technical assistance are due Dec. 19. Applications must be submitted electronically through Grants.gov. Applications sent by mail, facsimile or other form will generally not be accepted. For more information on the program and application rules, use the resource link below to access the Federal Register.

Comment date set for NCUA Reg Flex plan

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WASHINGTON (10/2/08)-Interested parties have until Dec. 1 to comment on a National Credit Union Administration (NCUA) plan to allow credit unions eligible under the Regulatory Flexibility Program (Reg Flex) additional time to occupy properties bought in an unimproved state. The agency approved its proposal for comment at its Sept. 25 open board meeting and yesterday’s Federal Register announced the comment deadline. Currently, when a federal credit union acquires unimproved land for future expansion and does not fully occupy the completed premises within one year, it must partially occupy the property within three years or obtain a waiver. The NCUA proposal would extend that three-year period to six years. Also at the meeting, the NCUA approved two final regulations:
* One revises the agency's rule governing the requirements for use of the official insurance sign and official advertising statement to give credit unions the flexibility to use the basic form of the official statement, a shortened form, or just the official sign. * The other to streamlines the agency's system for complying with freedom of information and privacy laws.
Both rules are effective Oct. 31, according to the Federal Register.