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Matz to AACUL NCUA to help CUs manage higher risk

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WASHINGTON (11/16/09)--Speaking before the American Association of Credit Union Leagues (AACUL) annual meeting in Naples, Fla., National Credit Union Administration (NCUA) Chairman Debbie Matz said that agency is "strengthening supervision to help credit unions manage areas of heightened risk." One way this is being accomplished, Matz said, is increased reviews of call reports. Examiners are reviewing these reports for potential red flags, including concentrations of fixed-rate mortgages, and increased delinquencies in indirect lending portfolios, member business lending and loan participations, according to an NCUA release. Examiners will also focus on fixed-rate mortgages, indirect lending, loan participations, and member business lending, Matz added. NCUA examiners will be taking public administrative actions to ensure compliance, and examiners may follow up with public letters of understanding and agreement or cease and desist orders if a credit union has not followed NCUA recommendations, Matz said. These administrative actions are not meant to discourage lending, Matz said, but are meant to "ensure that credit unions lend in a prudent, safe and sound manner." Matz also previewed the corporate credit union proposal during the meeting. According to Matz, the new corporate rule will prevent the over-concentration of assets in any one type of investment, will modify capital standards to make them more consistent with Basel 1, and will establish new limits on cash flow mismatches to ensure that any asset/liability gap does not pose an excessive risk. The corporate rule, which will also prohibit so-called "golden parachutes" for high-ranking executives and recommend that corporate credit unions provide annual disclosures of the total compensation packages of all senior staff members, will be released for a 90-day comment period. The NCUA has planned a pair of town hall meetings and an online webinar to solicit feedback on the proposal. (See related stories: CUNA's Hampel: Economic freefall has ended, 'REAL Solutions' program getting results, with state league help, League leaders give political pointers at AACUL meeting. And in CU System: Wisconsin league president elected AACUL chairman.)

CUNAs Hampel Economic freefall has ended

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WASHINGTON (11/16/09)--The economic “freefall” has ended, and the economy should likely grow at a rate of 2% during the upcoming year, Credit Union National Association chief economist Bill Hampel told attendees of the American Association of Credit Union Leagues (AACUL) annual meeting in Naples, Fl. While these are relatively positive developments, Hampel said that it will be “a long and slow recovery because the household sector’s balance sheet is still in lousy shape.” Unemployment will likely get close to 11% in the first half of 2010 before backing down, Hampel predicted. “It’s a lagging indicator; people won’t accept that the recession is over until they see lower unemployment, which means credit union members will act like they are in a recession till then,” he added. The bottom line, Hampel said, is to expect a “fragile, low-growth economy,” with the possibility of a fall back into recession not out of the question if there is another economic shock. As a result, credit unions should expect to experience faster savings growth and weaker loan growth. However, Hampel sees lending opportunities for credit unions, as most of them currently “have a fairly low share of their members’ loan business.” “The competition—other lenders—are hurting more than we are. There are opportunities for CUs to pick up share.” Hampel forecasted a 7% credit union loan growth next year and a delinquency rate of 1.5%. He also expects an inflation rate of 1.5% to 2% in the year ahead and no appreciable increase in short-term interest rates until after the unemployment rate begins to fall in the second half of 2010. In other sessions:
* Dave Adams, president of the Michigan league, discussed how consolidation and collaboration of best practices on the business side can further strengthen leagues. He suggested a model that would bring businesses together, share stock ownership, and allow any participating states to operate the businesses under a common brand. The result, he said, would be less fragmentation and greater perceived value from leagues’ member credit unions; * Political consultant Michael Hook and pollster Keith Frederick said the 2010 political environment bodes well for credit unions. Hook underscored credit unions' locally based "boots on the ground" grassroots strength as particularly resonant in an election year. Frederick noted polls showing people angry over feeling "gamed" by Wall Street. "Credit unions have the opportunity to say ‘we are an institution of the people, we didn’t cause the problem, when credit gets tight, we’re there for you.’ It is a great educational opportunity"; * Holly Herman, president of CU Retire Execs, outlined CURE’s free, confidential advising service that taps the expertise of retired CU executives for the benefit of the CU system. She asked leagues to help spread the word about the program; * Successful fundraising strategies for Children’s Miracle Network’s Credit Unions for Kids program were shared by the CEOs of the California/Nevada leagues, the Maryland/DC leagues, the Arizona league and the Nebraska league; * Three leagues—Georgia, Missouri and Iowa--shared successful models they have used for how they handle compliance services; and * Mike Beall, president of the Maryland/DC Credit Union Association, gave leagues an advance on the potential for leagues and CUs to participate in "Bank On (City Name)," a series of coming partnerships spearheaded by the National League of Cities with financial institutions to help unbanked consumers.
(See related stories: Matz to AACUL: NCUA to help CUs manage higher risk,'REAL Solutions' program getting results, with state league help, League leaders give political pointers at AACUL meeting. And in CU System: Wisconsin league president elected AACUL chairman.)

REAL Solutions program getting results with state league help

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WASHINGTON (11/16/09)--Lois Kitsch of the National Credit Union Foundation (NCUF) during the American Association of Credit Union Leagues (AACUL) annual meeting offered an update on the “REAL Solutions” program and detailed league involvement in the program, saying that “really good work is being done by leagues in their states.” Among the work highlighted by Kitsch is the positive growth of the program, which has surpassed its three-year goals, with now 35 states having signed Real Solutions agreements, surpassing the original goal of 33 states. The program has also added 820 participating Real Solutions credit unions and 1.53 million new members. Kitsch also pointed to a number of programs in specific states as examples of league effectiveness in growing Real Solutions, including:
* Iowa, and its offering of services to families with disabilities – which Kitsch called an emerging market that needs access to financial services; * Connecticut, which invited 400 students to the state capitol to engage in a financial literacy program; * Pennsylvania, which has grown its involvement in the program faster than any other state; * The Ohio-founded “Stretch Pay” payday loan alternative, which has now expanded into eight states and has saved credit union members more than $6.5 million; * Michigan’s “Save to Win” program, which convinces consumers to save – a high percentage of which, Kitsch said, had never had savings before;
Kitsch said that the Real Solutions program will continue to promote league participation in 2010. (See related stories: Matz to AACUL: NCUA to help CUs manage higher risk, CUNA's Hampel: Economic freefall has ended, League leaders give political pointers at AACUL meeting. And in CU System: Wisconsin league president elected AACUL chairman.)

League leaders give political pointers at AACUL meeting

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WASHINGTON (11/16/09)--Political fundraising was another topic of discussion at the American Association of Credit Union Leagues (AACUL) annual meeting in Naples, Fl., and the Minnesota Credit Union Network’s Mark Cummins, the Texas Credit Union League’s Dick Ensweiler, and Troy Stang of the Credit Union Association of Oregon each offered their own unique insights into how they have built success for giving to their political action programs in their states. Mark Cummins pinpointed payroll deduction as a key tool in moving strategically from “event-oriented” programs for encouraging contributions to “sustainable” programs. Cummins noted that events, such as raffles and receptions, resulted in a “shallow” reach into credit unions. But payroll deduction, as a “sustainable program,” he said, allowed the the Network to reach more deeply into credit union staff and volunteers. Dick Ensweiler said his organization uses all types of programs to develop greater giving by credit unions – including both events and payroll deduction (which has tripled in receipts over the last three years to nearly $90,000). The keys to success, the Texas CU leader said, is to “make it easy – and ask, ask, ask” for contributions. Troy Stang said his organization has stressed to credit unions in his state the need of giving and encouraged competition among peers in giving. A key element: the annual “CULAC month,” held in July. Dress-down days, bake sales, raffles and other events and rewards are offered to encourage participation. In fact, Stang said, CULAC month has been so successful (raising $60,000 this year) that CUAO has been slow in adopting payroll deduction out of an interest in maintaining momentum in events such as CULAC month. (See related stories: Matz to AACUL: NCUA to help CUs manage higher risk, CUNA's Hampel: Economic freefall has ended, 'REAL Solutions' program getting results, with state league help. And in CU System: Wisconsin league president elected AACUL chairman.)

Dodd reg reform markup to inch forward this week

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WASHINGTON (11/16/09)—Only opening statements will be allowed on Thursday when the Senate Banking Committee is expected to start its mark up of financial regulatory reform legislation. According to CongressDaily Friday, that opening salvo will be followed by a Dec. 2 session during which amendments may be formally offered. As reported last week in News Now, on Tuesday Dodd introduced a draft bill that would, among other things, establish a consumer financial protection agency (CFPA) similar to that proposed by both the Obama administration and members of the House of Representatives. The consumer protection duties of the National Credit Union Administration (NCUA) would be folded into this agency under Dodd's bill. However, Dodd's bill would preserve the NCUA as an independent safety and soundness regulator for credit unions. While credit unions "have long advocated strong consumer protection," the additional regulatory burden imposed by Dodd's legislation would only take away from their ability to provide "continued and effective service" to their members, Credit Union National Association (CUNA) President/CEO Dan Mica said at the bill’s unveiling.

Inside Washington (11/13/2009)

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* WASHINGTON (11/16/09)--Housing and Urban Development (HUD) Secretary Shaun Donovan said he is looking to increase government mortgage insurance program premiums and downpayment requirements to boost the Federal Housing Administration’s (FHA) reserves. The FHA’s reserves have fallen to 0.53%, according to an audit released Wednesday. Donovan said he is seeking to balance boosting the reserves and supporting the housing market. Rodney Anderson, executive director and managing partner of Rodney Anderson Lending Services, said raising premiums would be better than increasing downpayments (American Banker Nov. 13). FHA borrowers currently pay an up-front 1.75% of their mortgage amount and 1.5% of the mortgage to refinance. They also pay monthly premiums of 0.5% to 0.55% each year ... * WASHINGTON (11/16/09)--The Federal Deposit Insurance Corp. (FDIC) said Thursday that it would retain a policy through April that would prevent the agency from laying claim to securitized assets at failed banks (American Banker Nov. 13). However, the agency warned that it could impose other conditions on securitizers that seek exemption. The agency said it would propose a policy next month that would eliminate a blanket exemption for securitizers. Credit card issuers and other industry representatives have watched closely the securitizations decision. Since 2000, the FDIC has kept securitized assets off of balance sheets, but in June, the Financial Accounting Standards Board began requiring securitizations be placed back on banks’ balance sheets ... * WASHINGTON (11/16/09)--Regulatory agencies Friday issued a final rule providing that mortgage loans modified under the Department of the Treasury’s Home Affordable Mortgage Program (HAMP) will retain the risk weight appropriate to the mortgage loan prior to the modification. The final rule clarifies that mortgage loans whose HAMP modifications are in the trial period, and not yet permanent, qualify for the risk-based capital treatment contained in the rule. Agencies issuing the rule included the Office of the Comptroller of the Currency, Federal Reserve Board of Governors, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision ...