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Inside Washington (11/20/2009)

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* WASHINGTON (11/23/09)--National Credit Union Administration (NCUA) Board Member Gigi Hyland met with the Young Credit Union Professionals (YCUP) during the Credit Union Association of Oregon’s annual convention. She addressed the group of 30 YCUP members in Salem, Ore., speaking about share insurance assessments, proposed regulation and capital structure. She also offered her “top four tidbits” for YCUP members to walk away with: educate your elders, advocate, look at what changes need to be made, and attend Credit Union Development Educator training. From left are NCUA Senior Policy Adviser Gary Kohn; Matt Goodwin; Chad Warneke; Angie Cayot; Rachel Snyder; Hyland; Victoria King; and Sara Bebout. (Photo provided by Oregonians CU) ... * WASHINGTON (11/23/09)--The Treasury Department said it will sell the warrants it received from TCF Financial Corp., CapitalOne, and JP Morgan Chase and Co. in a public auction (American Banker Nov. 20). The department obtained the warrants for the capital infusions it provided the institutions as a part of the Troubled Asset Relief Program. The companies have pushed for the sales to take place publicly. Some firms have negotiated directly with Treasury on the sales. The auction will be structured so investors can submit bids at certain levels above a minimum price to establish the warrants’ market price ... * WASHINGTON (11/23/09)--On Thursday, the House Financial Services Committee approved amendments that would give the government resolution powers for systemic firms, and create a fund to pay for the resolution of those firms. A vote was expected on the measure but Chairman Barney Frank (D-Mass.) said a final roll call vote would be delayed until after Thanksgiving due to a request from the Congressional Black Caucus regarding the economy. Among the amendments the committee approved included an amendment by Rep. Ron Paul (R-Texas), which would allow the Government Accountability Office to audit the Federal Reserve Board. It also would require the Fed to name who received 13(3) help after six months. The committee also approved Frank’s amendment to disclose the borrowers using 13(3) facilities after one year ... * WASHINGTON (11/23/09)--Both Democrats and Republicans on the Senate Banking Committee picked apart Chairman Christopher Dodd’s (D-Conn.) plan for financial reform. On Thursday, several committee members said the legislation was not “well-constructed” and not ready for quick action. Lawmakers indicated they agreed on Dodd’s legislative goals, but didn’t agree with his execution of them. Sen. Michael Bennet (D-Colo.) said Dodd should create a bipartisan bill before moving forward to avoid unintended consequences. Sen. Tim Johnson (D-S.D.) expressed some concerns about consolidating banking supervision into one agency, eliminating national bank preemption and creating a consumer financial protection agency. The bill needs to strengthen regulation where needed but not harm community banks and credit unions, who didn’t cause the financial crisis (American Banker Nov. 20) ...

Corp CU town-hall meetings to continue in Jan. Feb.

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ALEXANDRIA, Va. (11/20/09)—The reform plan for corporate credit union regulation has been unveiled and the National Credit Union Administration (NCUA) intends to continue its town-hall style approach to garnering comment from stakeholders. NCUA documents said that during the 90-day comment period on the proposed rule to adjust the current corporate regulatory scheme there will be two more Town Hall meetings and another webinar on the issues involved. While drafting the plan that was proposed by the agency at last Thursday’s open board meeting, the NCUA hosted a series of Town Hall meetings to elicit comment. The agency received around 500 comments during that period. The proposed rule, which would amend Part 704 of the NCUA's rules, would adjust the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio. Among other things, it also would prevent corporate credit unions from investing in collateralized debt obligations and net interest margin securities, and would make A- the lowest rating at which corporate credit unions with expanded investment authority may purchase nationally recognized statistical rating organization-rated investments. News Now will carry further details on the NCUA’s meetings and webinar as they become available. The proposed rule can be accessed via the resource link below.

Buckham to lead NCUAs consumer protection effort

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ALEXANDRIA, Va. (11/23/09)—The National Credit Union Administration (NCUA) at last week’s board meeting, announced the disbanding of its National Examination Team (NET) and a day later announced that its director will become the leader of the agency’s new Office of Consumer Protection (OCP) when it opens in January. Kent Buckham has been director of the specialized NET unit since November 2008. That unit has been charged with a focus on large, complex credit unions that were encountering market difficulties. The board said it decided to dissolve the examination unit because its centralized nature was a challenge to adequate monitoring of troubled credit unions. In making the personnel announcement, NCUA Chairman Debbie Matz stated that “the Office of Consumer Protection is intended to be a high-visibility office that will be a top priority for 2010 and beyond. Kent is uniquely qualified given his track-record in setting up the very successful National Examination Team, and his outstanding management skills and stature in the agency." The agency’s OCP will handle all consumer matters, as well as adopt field-of-membership and chartering activities. It will be set up into two divisions, one addressing consumer protection and one addressing consumer access.

Fed CARD Act approach needs changes CUNA

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WASHINGTON (11/23/09)—The Credit Union National Association (CUNA) strongly endorsed part of a proposed Federal Reserve Regulation Z (Reg Z) rule that would clearly limit minimum payment warning disclosures to credit cards by recognizing the provision should not apply to other types of credit in which these minimum payment warnings were not intended. However, in a recent comment letter CUNA expressed significant opposition to other portions of the Fed’s plan. With regard to the minimum payment warning provisions, CUNA said the proposal would require creditors to indicate on periodic statement the amount a consumer could save by paying the balance in 36 months, as compared to only making the minimum payments. CUNA opposes this requirement and believes it would not provide meaningful information to a borrower because the factors that comprise this calculation will constantly change. Overall, the Fed proposal would implement provisions of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) that go into effect Feb. 22, 2010. CUNA told the Fed it strongly opposes any agency consideration to set a February 22, 2010 effective date, instead of the current July 1, 2010, for provisions of the Reg Z rules issued earlier this year that are not directly related to these CARD Act rules. “It should be the credit union’s decision as to whether it is feasible or desirable to comply with certain of these Regulation Z provisions prior to July 1, based on its own timetable and resources,” wrote CUNA Senior Assistant General Counsel Jeffrey Bloch. Also, creditors would be required to maintain a toll-free telephone number for consumers seeking to obtain information on credit counseling agencies Creditors would be permitted to use information obtained from the website of the U.S Trustees Office or a relevant bankruptcy administrator. “We believe the preferable approach for both consumers and creditors will be to allow creditors to disclose this website address on the periodic statement, in lieu of the toll-free telephone number,” the CUNA letter recommended. Use the resource link below to read more CUNA comments on the Reg Z plan.

Filene study finds bank fees dwarf those of credit unions

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WASHINGTON (11/23/09)--Bank customers pay substantially more in overdraft fees and other account fees than credit union members, with low-balance bank customers taking the brunt of that burden, a recently released Filene Research Institute study has found. The study, which was authored by University of California, Davis assistant professor of economics Victor Stango and Dartmouth College associate professor of economics Jonathan Zinman, draws information on transaction account fees from the account data of a panel of consumers. While some of the cost differences “can be attributed to behavior,” the study concluded that “much of the difference simply stems from banks’ higher prices.” “The largest driver of the bank/credit union fee difference is the overdraft fee, which on average is roughly one-third lower at credit unions than at banks. Credit unions also charge significantly lower ATM foreign fees,” the study added. Overall, the study found that while credit union members paid $35 in overdraft fees over the course of a year, bank customers on average paid $132 in overdraft fees over the same time period, almost four times the amount paid by credit union members. The report also found that while credit union members pay an annual average of $73 in total transaction fees, including ATM foreign fees, ATM surcharges, and other fees, bank-customer households pay $183 in fees during the same time period. Low-balance accountholders, which the study defines as accounts with a balance under $1,500, paid $165 per year in overdraft fees if they were customers of a bank, whereas low-balance credit union members paid $42 in those same fees. General account fees were also higher for low-balance bank customers, with a reported $218 in fees being paid on a yearly basis. Credit union members paid $80, the study found. Sixty-nine percent of bank customers and 75% of credit union members surveyed fell below the “low-balance” threshold. The majority of accountholders surveyed had an average account balance of $500 or less.

30-year mortgage rate lowest since May Freddie Mac

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WASHINGTON (11/23/09)--Freddie Mac this week reported an average 30-year mortgage rate of 4.83 percent, the lowest mortgage rate of its type reported since the week ended May 21. Thirty-year mortgages averaged 6.04% during the same week of 2008 and 4.91% during through the end of last week. Fifteen year fixed rates, which averaged 4.32% during the week ended Nov. 19, were the lowest since Freddie Mac began tracking its weekly rates in 1991, Freddie Mac Vice President and Chief Economist Frank Nothaft said. “Low fixed rates throughout the third quarter prompted an estimated $1.1 trillion in refinancing activity, saving homeowners about $10 billion in aggregate monthly payments over the first 12 months of their new loan,” Nothaft added. Five-year and one-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.25% and 4.35%, respectively, during the week. Both rates represent slight decreases from the numbers reported during the previous week, and significant decreases from the rates reported during the corresponding period of 2008.

NCUA new CAMEL 3 reports aimed at preventing troubles

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WASHINGTON (11/23/09)--While the National Credit Union Administration has long monitored the status of CAMEL Code 4/5 credit unions, the agency is taking a closer look at CAMEL Code 3 credit unions with the recent addition of a CAMEL Code 3 slide to its monthly report on National Credit Union Share Insurance Fund (NCUSIF) and Temporary Corporate Credit Union Stabilization Fund (TCCUSF) statistics. The CAMEL Code rating system, employed by the NCUA, is meant to gauge the overall financial condition of credit unions. It is thought that the CAMEL Code 3 slide, which was first added during last month’s NCUA board meeting at the behest of Chairman Debbie Matz, could be a response to the record growth of CAMEL Code 4/5 credit unions. Matz told News Now that the “NCUA’s increased supervisory efforts are aimed at mitigating and preventing any further deteriorations in credit union balance sheets.” “The 2010 budget represents an attempt to accomplish this in a variety of ways, such as augmented staff resources, additions to subject matter expertise among NCUA examiners, and a more stringent application of administrative orders,” she added. NCUA Chief Financial Officer Mary Ann Woodson last month reported a total increase of 55 CAMEL Code 4/5 problem credit unions from the amount reported one year ago. At this month’s meeting, which took place November 19 in Alexandria, Va., Woodson reported a total of 1,637 CAMEL Code 3 credit unions, which held a total of $101.6 billion in total assets and $87.7 billion in total shares. According to the NCUA numbers, there were 1,540 CAMEL Code 3 credit unions as of Dec. 31, 2008, with $68 billion in assets and $80.4 billion in shares between them. While the overall numbers for CAMEL Code 3 credit unions have been steady, CAMEL Code 4/5 credit unions tell a different story, with Woodson reporting that the number of troubled credit unions with over $1 billion in assets has doubled to a total of ten as of October 31, 2009. The NCUA reported a total of five CAMEL Code 4/5 credit unions with $7.8 billion in total shares as of Dec. 31, 2008. The amount of CAMEL Code 4/5 credit unions reported has increased by 66 since the end of 2008, with the total assets held in these credit unions more than doubling during that time, for a total of $46.3 billion.

CU 2010 assessment may be 0.15-0.4

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ALEXANDRIA, Va. (11/20/09)—The credit union assessment to fund the National Credit Union Share Insurance Fund (NCUSIF) and the corporate credit union stabilization fund could range from 0.15% and 0.4% of insured shares in 2010, the National Credit Union Administration (NCUA) estimated Thursday. At the agency’s open board meeting, Melinda Love, director of examination and insurance, predicted that NCUSIF losses for the coming year could range from $450 million to $1.68 billion -— a substantially wide range. Those losses, she said, could require a 0.1% to 0.25% premium, and the assessment to fund the NCUA’s Corporate Stabilization Fund could be between 0.05% and 0.15% of insured shares.
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