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Inside Washington (11/20/2007)

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* WASHINGTON (11/21/07)--The Federal Deposit Insurance Corp. Monday updated the Regional Economic Conditions (RECON) database for the second quarter. RECON provides information to help financial institutions analyze risk … * WASHINGTON (11/21/07)--On Nov. 28, the Federal Deposit Insurance Corp. (FDIC) is scheduled to release its Quarterly Banking Profile for the third quarter. FDIC officials will provide a public briefing after its release. The report, which is usually published about 50 days after the end of each quarter, provides a comprehensive summary of financial results for all FDIC-insured financial institutions …. * WASHINGTON (11/21/07)--The Federal Reserve Board announced a new resource, Federal Reserve Consumer Help, which consolidates and streamlines the Federal Reserve’s consumer complaint and inquiry program. The Federal Reserve Consumer Help is available through a new toll-free number, 888-851-1920, from 8 a.m. to 6 p.m. CT, or through the Consumer Help website … * WASHINGTON (11/21/07)--Freddie Mac Tuesday posted a $2 billion loss for the third quarter and reported that its shares dropped 25%. Revenues were posted at a negative $678 million. The loss is the biggest in Freddie Mac’s history (Associated Press Nov. 20). Freddie said it would consider cutting its dividend in half during the fourth quarter, and stated that it has hired Lehman Brothers Holdings Inc. and Goldman Sachs Group Inc. to devise ways to raise capital. If cutting the dividend doesn’t work, Freddie officials said it could issue new stock, reduce the amount it invests in mortgages or limit growth …

Five noted for service to Native communities

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ALEXANDRIA, Va. (11/21/07)--National Credit Union Administration Chairman JoAnn Johnson noted five credit unions as examples of the positive impact the financial services cooperatives are having on American Indian and Native Alaskan communities. In a release that acknowledged President George W. Bush’s designation of November as National American Indian Heritage Month, the NCUA said its Community Development Revolving Loan Fund (CDRLF) program, along with the Treasury Department’s Community Development Financial Institution Fund (CDFI), have been important sources of assistance to low-income credit unions, including those serving Native communities. The credit unions cited by the NCUA were:
* Lac Courte Oreilles FCU, Hayward, Wis., which received CDRLF assistance to help members with basic financial services, home ownership, and credit building. The credit union also has been proactive with financial literacy initiatives by offering classes covering budgeting; working with checking and savings accounts; understanding credit; and other issues facing their local economy; * Bear Paw CU, Havre, Mont., which used its CDRLF assistance for software upgrades, staff training, and financial education for its members, which includes residents of the Fort Belknap Indian Reservation; * CR Community First FCU, Eagle Butte, S. D., chartered by the NCUA earlier this year to serve 12,000 residents of the Cheyenne River Indian Reservation in Dewey and Ziebach Counties. The credit union organizers worked with the Cheyenne River Sioux Tribal Council, the Cheyenne River Housing Authority, and NCUA staff to obtain the charter, and the credit union has received a low-income designation; * Wolf Point FCU, Wolf Point, Mont., in partnership with the CDFI fund, provides important financial services to Native Americans in the Wolf Point community’ and * Tongass FCU, Metlakatla, Ak., has initiated financial education and savings programs to schools in the communities it serves, helping to promote the importance of savings at an early age.
“The President's proclamation of November 2007 National American Indian Heritage Month presents an opportunity to underscore the way credit unions are fostering financial stability for American Indian and Alaskan Native communities,” said Johnson. “I am particularly pleased with the central role that financial literacy programs are playing in American Indian and Native-focused credit unions as they help members move along a path of financial health and well-being,” she added.

Ed Dept. alleges 34 million in state misuse of funds

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WASHINGTON (11/21/07)—An inspector general’s report from the Department of Education (DOE) alleged that the student loan corporation in Pennsylvania improperly used a subsidy program to collect millions from the federal government, but the chief executive of the state agency rebuffed the charge. According to an article in the Nov. 20 issue of The New York Times, the IG of the Department of Education called on that agency to collect $34 million from the Pennsylvania Higher Education Assistance Agency (PHEAA), a state-owned company that makes and guarantees student loans, which it claims exploited the subsidy. However, PHEAA Chief Executive James Preston issued a statement saying that the report made a jumble of a “present-day interpretation of past department regulations.” He added that it ignored 10 years of his agency’s compliance with regulations. The article noted that a DOE spokesperson has said the report is under review. The subsidy program, started in the high-interest-rate environment of the 1980s and which guaranteed lenders a 9.5% rate of return, has seen a number of failed attempts by Congress to rein it in. The PHEAA is the state agency that warded off a $1 billion hostile takeover attempt by Sallie Mae in 2005.

NCUA says CUs have continued loan and share growth

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ALEXANDRIA, Va. (11/21/07)—The nation’s 8,163 federally insured credit unions continue to “diligently fulfill their mission” of being a major lending source for their members, according to third-quarter 2007 Call Report data just released by the National Credit Union Administration (NCUA). The NCUA noted that the loan-to-share ratio increased and is now at 82.66%. NCUA Chairman JoAnn Johnson said in a release, “A significant portion of loan growth can be attributed to real estate lending during the first nine months of 2007. “Looking at annualized figures, first mortgage real estate loans increased 12.49% and other types of real estate loans increased 8%. NCUA continues to stress the importance that credit unions offer their members safe, stable mortgage lending products.” Loan delinquencies also crept up a bit during the reporting period. The NCUA reported that credit union first mortgage fixed, hybrid, and balloon delinquency hit 0.44%, up from 0.28%, and first mortgage adjustable rate loan delinquency increased to 0.46% from 0.33%. Net charge-offs for first mortgage real estate remained constant from 2006 at 0.02%. Credit Union National Association Chief Economist Bill Hampel said Tuesday that CUNA’s monthly estimates of credit union data tracks very closely to the final NCUA numbers just released. “Our sample showed loans increasing by 5.4% in the first three quarters of 2007 compared to NCUA's 5.2%. Our savings estimate at 4.0% was just below the final 4.4% figure from NCUA,” Hampel said and noted: “Going forward, with a slowing economy we expect savings growth to accelerate and loan growth to slow.” CUNA has also noted an increase in delinquency recently. “According to our sample, the overall delinquency rate from 0.69% to 0.77% over the quarter. NCUA's final report shows the increase was a bit greater, to 0.82%,” Hampel said. Despite the rising delinquency, net charge-offs were virtually unchanged at 0.46% of loans outstanding during the quarter, according the CUNA, “We expect delinquency to rise to 1% or slightly more and charge-offs to 0.65% next year as the economy weakens and credit unions in some parts of the country experience collateral damage from the weak housing market. Although high by recent standards, these levels of delinquency and charge-offs are similar to those of the late 1990's,” Hampel added. The NCUA released the following details of annualized, major balance sheet categories and membership growth for the period spanning Dec. 31, 2006, to Sept. 30, 2007:
* Assets increased 6.5% to $744.4 billion from $709.9 billion; * Loans increased 6.7% to $519.2 billion from $494.4 billion; * Investments increased 5.5% to $186.7 billion from $179.5 billion; * Shares increased 6.0* to $628.1 billion from $601.2 billion; * Net worth increased 6.1% to $85.6 billion from $81.9 billion; and * Membership increased 1.9% to 86.97 million members.
Also, a shift in the share structure continued through the third quarter. Share certificates grew an annualized 14.4% to $209.3 billion, while money market shares grew 10.5% to $108.4 billion, and IRA/KEOGH accounts grew 10.3% to $56.0 billion. Regular shares declined an annualized 3.1% to $176.9 billion and share drafts declined 2.5% to $69.0 billion, which, the NCUA said, may indicate members are transferring funds, taking advantage of the often higher rates offered in money market accounts or share certificates. In addition to growth in mortgage lending, unsecured credit card loans expanded an annualized 7.21% to $28 billion and other types of unsecured loans increased 6.54% to $23.7 billion in the first nine months of the year. Loans for used automobiles grew 2.8% to $89.4 billion, and new automobile loan volume decreased a slight 0.47% to $88.2 billion. While gross income increased, the cost of funds and net operating expenses also increased. As a result, the return-on-average-assets remained at the 0.75% level reported at mid-year 2007. Use the resource link below to access CUNA’s Economic and Credit Union Forecast and to read third quarter 2007 data details in a consolidated balance sheet and a September 2007 NCUA Facts/Summary.