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Treasury to increase mortgage servicing monitoring

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WASHINGTON (12/1/09)--The U.S. Treasury Department announced on Monday that it will require that mortgage lenders report their plans for increasing the number of successful modifications of troubled home loans and will increase its monitoring of mortgage servicing companies. The Treasury plan would seek to increase the number of troubled mortgages that are converted into new home loans with reduced monthly payments, and would not pay proposed cash incentives to participating mortgage companies until their loan modifications, which are intended to lower costs for homeowners, are made permanent. The Treasury will increase its monitoring of banks and mortgage companies through daily reports on the progress of individual mortgage lenders. Under the plan, the Treasury will also impose monetary penalties and sanctions on lenders and servicers that do not meet their obligations to mortgage holders. The Obama administration has also extended the period for trial modifications that began on or before Sept. 1. The Treasury will also streamline the mortgage modification application and submission process and will provide additional resources for borrowers, including housing counselors, through the makinghomeaffordable.gov web site and an 888 hotline. The Treasury’s foreclosure prevention plan has over 650,000 participants at this time, and the Treasury estimated that 375,000 of these participants will have converted from trial modifications to permanent modifications by the end of 2009. The exact number of permanent modifications will be reported later this month. Phyliss Caldwell, who will lead the conversion efforts as chief of the Treasury’s Homeownership Preservation Office, said that her office must “refocus” its efforts to “ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.”

Inside Washington (11/30/2009)

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* WASHINGTON (12/1/09)--The Federal Reserve Board has revised its policy governing eligibility, qualifications, and rotations for directors of Federal Reserve Banks and their branches. The revisions address situations where affiliations and stockholdings that were previously permissible may become impermissible for Class B and C directors. The revised policy provides that if a Class B or C director is affiliated with a company that becomes a financial affiliation company during his or her term, the director must resign from the impermissible affiliation company or resign from the bank board within 60 days of learning of the prohibited affiliation. The policy also addresses Class C directors’ indirect holdings in financial stock issuers and the eligibility rules that apply to directors of Reserve Bank branches ... * WASHINGTON (12/1/09)--While Federal Reserve Board Chairman Ben Bernanke is expected to be confirmed Thursday by the Senate to continue in his role as head of the central bank, financial observers said Bernanke may face some of the toughest questions of any Fed chairman at a confirmation hearing (American Banker Nov. 30). Bernanke likely will be questioned on the Fed’s bank supervision responsibilities, liquidity programs, and bailouts of firms such as American International Group. Mark Calabria, Cato Institute director of financial regulation studies, said the votes against Bernanke may reach “double digits.” People will be upset about the bailouts, the Bank of America deal with Merrill Lynch, and how the Fed can regulate institutions “at arm’s length,” he said ...

Dates set for corp CU info-gathering sessions

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ALEXANDRIA, Va. (12/1/09)—The dates have been set for a new round of information- gathering sessions on corporate credit unions as the National Credit Union Administration (NCUA) announced Town Hall meetings Jan. 22 in Dallas, Texas and Feb. 4 in Orlando, Fla. The sessions will be similar to those held this fall, and are a part of the agency’s effort to prompt stakeholders to be involved through comment in the corporate credit union rulemaking process, as well as other issues. The meetings are being conducted during the 90-day period provided for public comment on the NCUA’s recently proposed rule to adjust the current corporate regulatory scheme. (Use resource link below for more information.) NCUA Chairman Debbie Matz said of the new session, "The first round of Town Halls provided invaluable insight and dialogue as we formulated the proposed corporate regulation. These next meetings will build on that foundation." She encouraged all interested parties to add their voices to this process." The sessions will begin at 9:00 a.m. and end at noon. A webinar will follow in February. To register, use the resource link.

Reps. Perlmutter Miller featured at CUNA breakfast

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WASHINGTON (12/1/09)--Reps. Ed Perlmutter (D-Colo.) and Brad Miller (D-N.C.) will take to the podium Thursday to discuss financial regulation reform in 2010 at the next National Journal Group policy breakfast, sponsored by the Credit Union National Association (CUNA). Both lawmakers’ names are familiar to credit unions for their recent actions supported by CUNA. Perlmutter last month offered an amendment to the House Financial Services Committee print of the Financial Stability Improvement Act (H.R. 3996), a bill that would give the systemic risk council the authority to take corrective action regarding accounting matters. The amendment would bolster government oversight of the Financial Accounting Standards Board (FASB) and CUNA maintains it would improve the accounting board's policy-making process and help minimize arbitrary rulemaking. In October, Miller, along with Rep. Dennis Moore (D-Kan.), successfully offered an amendment to Consumer Financial Protection Agency (CFPA) legislation. That amendment would limit the proposed CFPA's examination and enforcement authority to credit unions over $1.5 billion in assets and banks with more than $10 billion in assets. For institutions whose assets fall below those thresholds, enforcement authority would stay with their prudential regulator. The Thursday breakfast, moderated by John Maggs, National Journal’s economy and taxes correspondent, will begin at 8 a.m. at The Liaison Capitol Hill. The session will streamed live from Nextgenweb.org. CUNA and the National Journal Group have sponsored breakfast policy and information sessions for the last two years.

Fairfield County Ohio Federal Employees FCU closed

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ALEXANDRIA, Va. (12/1/09)--The National Credit Union Administration (NCUA) Monday announced the liquidation of $1.5 million-asset Fairfield County Ohio Federal Employees FCU of Lancaster, Ohio. This is the 14th federally insured credit union liquidation of 2009. Chartered by the NCUA in 1957 to serve employees of the U.S. government working in Fairfield County, Ohio, the credit union served 747 members at the time of its closing. The NCUA said it liquidated the credit union and discontinued its independent operations after determining it was insolvent and had no prospects for restoring viable operations. The NCUA Asset Management and Assistance Center will issue checks within one week to individuals holding verified share accounts and reminded that member accounts are insured to at least $250,000 by the National Credit Union Share Insurance Fund.

Senate considers Bernankes post before resuming regulatory debate

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WASHINGTON (12/1/09)--Regulatory reforms will take a back seat this week as the Senate Banking Committee on Thursday will hold a confirmation hearing on the nomination of Ben Bernanke to continue as Chairman of the Federal Reserve Board of Governors. Bernanke’s nomination comes at a crucial time for the Fed, as the oversight body is facing potential role changes and power reductions through possible House and Senate regulatory reform legislation. Action on the hill will include discussion of several items under suspension, and the House Financial Services Committee will resume its mark-up of H.R. 3996, the Financial Stability Improvements Act, and H.R. 2609, the Federal Insurance Office Act, on Wednesday. The House Committee will also hold hearings on H.R. 2266, the Reasonable Prudence in Regulation Act, and H.R. 2267, the Internet Gambling Regulation, Consumer Protection and Enforcement Act, on Thursday of this week. The House Financial Services Committee Michigan Credit Union League President/CEO Dave Adams on Monday testified before a House Financial Services Committee Subcommittee on Oversight and Investigation field hearing on improving responsible lending to small businesses. Legislators on the House side are expected to resume regulatory restructuring discussions including H.R. 3126, the Consumer Financial Protection Agency Act, next week. Credit Union National Association Vice President of Legislative Affairs Ryan Donovan said that while it “is not clear” when the Senate Banking Committee will resume its consideration of regulatory restructuring legislation, it may not be before Dec. 14.

New House bill would cap credit card at 16

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WASHINGTON (12/1/09)--Rep. Louise Slaughter (D-N.Y.), with the assistance of Reps. John Tierney (D-MA) and Michael Capuano (D-MA), will soon introduce legislation that would cap yearly credit card interest rates at 16%. Slaughter’s legislation, which has been referred to as the Renewing America’s Commitment to Consumers Act, would, according to a press release, seek to “prevent the kind of dramatic rate hikes consumers - even those with strong credit histories and who have paid their balances on time - have been experiencing.” The bill, as currently written, would also cap contingency fees, including late payment fees, at $15, and would limit membership fees and annual fees, but would allow temporary rate cap increases “in extraordinary circumstances and upon regulatory finding that modification maintains the goal of protecting consumers from exploitive lending practices.” The provisions of the legislation would not “supersede any state law with a lower usury cap,” according to the release. Rep. Tierney also praised the potential legislation, saying that it would fight the “exploitive practices” of some credit card issuers that are “unfairly and arbitrarily” raising interest rates “across more customer accounts than ever before.” Capuano in a statement added that the bill, which “will protect consumers by ensuring access to affordable credit,” could not “come at a more critical time."

Inside Washington (11/29/2009)

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* WASHINGTON (11/30/09)--National Credit Union Administration Board Member Michael Fryzel visited First Trust CU, Valparaiso, Ind., where he met with CEO Ronald Budzinski and Board Chair Arnold Bass, and Indiana Credit Union League President John McKenzie. Fryzel said he was pleased with the efforts First Trust has made to serve its diverse field of membership and reach out to the community with school programs and financial education. Pictured (from left) are Budzinski, Fryzel and Bass. First Trust has $77 million in assets. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (11/30/09)--The banking industry managed to profit and boost capital during the third quarter, but it has backed off from risk and lending to small businesses (American Banker Nov. 25). While Federal Deposit Insurance Corp. Chair Sheila Bair applauded banks for “charging off problem loans and building reserves and capital,” she said banks need to make more loans to their business customers to help economic recovery. The Credit Union National Association has been in contact with representatives from the Senate and House, and key Obama administration officials, urging that credit unions’ member business lending cap be raised. CUNA reasons that credit unions, which are restricted from lending more than 12.25% of their assets, can bridge the gap created by banks pulling back credit from small businesses in the struggling economy ... * WASHINGTON (11/30/09)--The Federal Reserve Board is working on a plan to help banks repay the money they received in the government bailout as a part of the Troubled Asset Relief Program. Nine banks that were part of a stress test the Fed conducted this year have not yet paid back their funds. The Fed has asked the institutions to submit plans for repayment. The banks include GMAC Inc., Wells Fargo, Bank of America and Citigroup (American Banker Nov. 25). In other news, the Fed is working on a strategy to extract the cash it injected into financial markets during the crisis. According to meeting minutes released Tuesday, there are three options: increasing the interest the Fed pays on reserves, reversing repurchasing agreements, and creating separate accounts for banks to hold their reserves. The Fed also has been debating whether it should sell the assets that boosted its balance sheet to $2.2 trillion last week. Selling the assets “would help reinforce the effectiveness of paying interest on excess reserves,” the minutes stated ... * WASHINGTON (11/30/09)--Federal Reserve Board policymakers have become more optimistic about the economic recovery, but they predict that unemployment will remain above 9% next year. Minutes the Fed released last week from a meeting earlier this month indicate that policymakers also are unsure whether the recovery is strong enough to survive without government stimulus measures. The Fed is expected to raise the overnight interest rate--which has remained at zero since last December--and also is expected to end its program to boost mortgage lending by buying $1.25 trillion in securities. The Fed’s minutes hinted at a debate among policymakers on ending the securities program, raising interest rates, and selling securities, but no start dates were noted ...

NCUA supervisory letter provides guidance on CU earnings reviews

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ALEXANDRIA, Va. (11/20/09)--In a National Credit Union Administration (NCUA) supervisory letter published on Wednesday, Office of Examination and Insurance Director Melinda Love said that “examiners must evaluate each credit union’s earnings level relative to net worth needs, financial and operational risk exposures, the current economic climate, and the institution’s strategic plans,” when reviewing the adequacy of credit union earnings. Love in the letter also recommended that NCUA staff “continue to utilize a balanced approach in assessing earnings,” as there is “no simple metric for determining what an individual credit union’s earnings level should be.” A glut of restatements “will make the evaluation and trending of earnings more challenging,” the letter added. The letter also encourages examiners to review prior guidance on earnings adequacy reviews and “stresses the importance of communication with credit union officials and management regarding earnings deficiencies.” Specifically, the letter recommends that examiners consider the adequacy of net worth given the risk profile of the credit union and the quality and sources of the credit unions’ earnings structure. The letter also states that examiners must consider the risk profile, the operational structure, and the strategic plans of the credit union while they complete their earnings review. Examiners should also ensure that credit unions can “realize an adequate level of earnings in a safe and sound manner.” For the full NCUA release, use the resource link.

NCUA CU net worth remains above 10 in 3Q 2009

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ALEXANDRIA, Va. (11/30/09)--In its comprehensive report on third-quarter numbers for credit unions, the National Credit Union Administration (NCUA) disclosed increases in membership and lending from its 2008 levels and reported that the net worth of credit unions remained above 10 percent. First mortgage real estate loans, credit cards, and used auto lending “gained momentum in the third quarter,” the NCUA added. The call report data, which was gathered from all 7,637 federally insured credit unions, also showed a 7.7% increase in assets, an 8.4% increase in shares, a 24.7% increase in investments, and a 1.9% increase in membership, when compared with the numbers reported as of Dec. 31, 2008. However, the NCUA also noted some less fortunate news, reporting a “modest” 0.28% return on average assets and a slight increase in delinquent loans as a percentage of total loans, which were up to 1.68% as of Sept. 30, 2009. Net charge-offs to average loans also increased to 1.17 percent during the quarter, according to the NCUA. Federally insured credit unions increased provisions for loan and lease losses by 30.7% and have set aside a total of over $2 billion to cover losses on real estate loans. This data strengthens “the case for increased regulatory oversight as credit unions deal with adverse economic conditions," NCUA Chairman Debbie Matz said. The environment for financial institutions and consumers is still challenging, and Matz said that “credit unions must consider the unemployment rate, housing market weakness and overall economic volatility as they continue serving member needs.” “Likewise, NCUA is enhancing our supervision, and increasing the number of examiners and frequency of examinations, all of which reflect our strong commitment to assisting credit unions during this difficult time," Matz added. For the full NCUA report, use the resource link.

CUNA issues comment call on Fed gift card rules

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WASHINGTON (11/30/09)—The Credit Union National Association (CUNA) has issued a regulatory comment call on the Federal Reserve Board’s proposed rules that will restrict the fees and expiration dates that apply to gift cards and certificates. The Fed rules will restrict dormancy, inactivity, and service fees on gift cards and will require that cards not expire until at least five years after the date of issuance or five years after the date when funds were last loaded. However, under the rule, dormancy, inactivity, and service fees will be allowed to be assessed on gift cards that have been inactive for at least one year, provided that no more than one such fee is charged per month and the consumer is given clear and conspicuous disclosures about the fees. The proposal generally covers retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and also covers network-branded gift cards that are redeemable at any merchant that accepts the card brand. The proposed rules are issued under Regulation E, the Electronic Fund Transfers Act and implement the gift card provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. Comments are due to CUNA by Dec. 11. Comments are due to the Fed by Dec. 21. To view the CUNA comment call, use the resource link.

Hinojosa withdraws support for House overdraft reform bill

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WASHINGTON (11/30/09)—Rep. Rubén Hinojosa (D-Texas) last week officially withdrew his name as a sponsor of Rep. Carolyn Maloney’s overdraft reform bill, H.R. 3904, "The Overdraft Protection Act of 2009." Maloney’s bill, which was referred to the House Committee on Financial Services in late October, would, according to www.thomas.gov, "amend the Truth in Lending Act to establish fair and transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions." Reps. Barney Frank (D-Mass.), Luis Gutiérrez (D-Ill.), Gary Ackerman (D-N.Y.), Michael Capuano (D-Mass.), Keith Ellison (D-Minn.), Anna Eshoo (D-Calif.), Paul Hodes (D-N.H.), Walter Jones (R-N.C.), Paul Kanjorski (D-Penn.), Daniel Maffei (D-N.Y.), Brad Miller (D-N.C.), Gwen Moore (D-Wisc.), Jackie Speier (D-Calif.), and Maxine Waters (D-Calif.), remain sponsors of the bill. The Federal Reserve Board earlier this month introduced a final rule that would require credit unions and other financial institutions to obtain consent from consumers before they could be charged overdraft fees for ATM and one-time debit transactions. The rule, which will go into effect on July 10, also requires credit unions and other financial institutions to fully disclose the overdraft services, the fees, and the consumer's right to opt-in, and ensures that members or customers that do decide to take part in the overdraft protection service may cancel the service at any time. Credit Union National Association Senior Vice President of Legislative Affairs John Magill said of Hinojosa’s action, “I think the congressman’s decision to withdraw from the bill once the Fed rules were out reflects what CUNA has been saying all along. To the degree that changes need to be made to the consumer protections attached to overdraft plans, let the federal rule makers--those most familiar with the service--make them.” “We do not believe this needs a statutory sledgehammer at this time,” Magill added. National Credit Union Administration Chairman Debbie Matz earlier this month said that she supports overdraft protection plans that are carefully done with minimal impact on members, such as limiting the number of transactions and corresponding fees per day.

Committee to consider financial stability UIGEA

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WASHINGTON (11/30/09)—This week the House Financial Services Committee has a vote on its calendar for H.R. 3996, the Financial Stability Improvement Act, and will conduct hearings on two Internet gambling bills. The vote is scheduled for Wednesday, and the committee intends to vote on H.R. 2609, Federal Insurance Office Act of 2009 as well. Also on Wednesday, the panel has planned a hearing on the FY09 FHA Actuarial Report. H.R. 3996 would create a stabilization resolution fund, located at the Federal Deposit Insurance Corporation, to cover the cost of resolving failing financial companies that are systemically important to the financial system. The National Credit Union Share Insurance Fund (NCUSIF) currently has similar authority with respect to insured credit unions. The Credit Union National Association (CUNA) backed an important amendment to the bill which was offered by Rep. Brad Sherman (D-Calif.) and adopted by the committee. Any institutions with less than $50 billion in assets are exempt from providing initial funding for the new fund, thereby excluding all credit unions from the assessment. On Thursday, the committee is scheduled to conduct a hearing spotlighting Internet gambling. Both H.R. 2266, the Reasonable Prudence in Regulation Act and H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act will be discussed. Both bills were introduced by the committee chairman, Rep. Barney Frank (D-Mass.).The Reasonable Prudence in Regulation Act would push back implementation of the Unlawful Internet Gambling Enforcement Act (UIGEA) by a year. It's currently due to take effect on Dec. 1. CUNA supports this bill. Frank's second bill, the Internet Gambling Regulation Consumer Protection and Enforcement Act, would allow Internet gambling companies to accept bets from persons in the United States if they are licensed by the U.S. Treasury Department and maintain effective protections against underage and compulsive gambling and money laundering and fraud. CUNA hasn't taken a position on this legislation.

UIGEA compliance pushed back to June 1

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WASHINGTON (11/30/09)—Just days before the compliance date rolled around—and months after urgings to delay implementation of the Unlawful Internet Gambling Enforcement Act (UIGEA)—the Federal Reserve and U.S. Department of Treasury announced they were pushing back the law’s Dec. 1 compliance date. The new compliance date is June 1 for the rules requiring credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted Internet gambling transactions, or rely on those procedures established by the payments system. The Federal Register document states that the effective date of the final rule published Nov. 18, 2008 (73 FR 69382) remains Jan. 19, 2009—the new rule just gives more compliance leeway. The Credit Union National Association has backed a delay of the compliance date, as have certain lawmakers. A bi-partisan coalition of 19 lawmakers urged the Fed and Treasury to give financial institutions more time to comply with the complicated law. House Financial Services Committee Chairman Barney Frank (D-Mass.) and 18 other members of that panel sent an Oct. 1 letter to the heads of the U.S. Treasury Department and the Federal Reserve Board, CUNA President/CEO Dan Mica applauded lawmakers’ efforts when in October House Financial Services Committee Chairman Barney Frank (D-Mass.) and 18 other members of that panel sent a letter to the heads of the Treasury Department and the Fed noting that at a time of economic crisis, it is too great a burden on regulators and the financial services industry to move ahead with rules to UIGEA. CUNA opposes the agencies' draft implementation proposal. Also, CUNA testified against the plan at a House Financial Services Committee hearing in April. CUNA witness Harriet May, president/CEO of GECU, El Paso, Texas, reiterated CUNA's concerns that aspects of the proposal would be difficult, if not impossible, to implement. May also said financial institutions could be swamped by the compliance burdens associated with UIGEA. The current plan to implement the complicated law, she said, lacks clarity and sufficient definition of terms. House Financial Services, prior to the regulators’ announced delay, already had scheduled hearing this week on two internet gambling bills. (See related story: Committee to consider financial stability, UIGEA.) Use resource link to read more about the Fed-Treasury action on UIGEA delay.

Matz urges removal of statutory MBL cap

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ALEXANDRIA, Va., (11/25/09)--National Credit Union Administration (NCUA) Chairman Debbie Matz would like to see the statutory cap on credit union member business lending (MBL) increased or eliminated and wrote to the U.S. Treasury Department urging support for measures that would allow NCUA to establish the regulatory parameters. “I believe any lending limitations should be regulatory, not statutory. NCUA is best positioned to set requirements and maintain limits on member business lending, utilizing our direct supervisory knowledge and application of firm safety and soundness standards,” Matz stated in a Nov. 24 letter to Treasury Counselor Gene Sperling. Sperling had requested additional policy suggestions from the NCUA following last week’s Small Business Financing Forum, hosted by Treasury and the Small Business Administration (SBA) and attended by Matz. NCUA supports a proper balance of serving business lending needs with a prudent regulatory framework to protect safety of the institutions and of the National Credit Union Share Insurance Fund. “Historically, credit unions have been successful at making member business loans,” Matz noted. She urged the Department of Treasury and the SBA to support legislative and regulatory enhancements to allow “well-managed credit unions to make more business loans to members who need them.” “This will in turn help achieve your over-arching goals to create jobs and grow the economy,” she added. Credit Union National Association (CUNA) President/CEO Dan Mica said Tuesday that Matz’s strong statement is a significant step and that it will certainly help the overall effort to build support for lifting the statutory MBL cap, a change CUNA has been working for diligently. In testimony last summer, Roger Heacock testified on behalf of the Credit Union National Association (CUNA) that the current number one obstacle to more business lending by credit unions is the restrictive 12.25%-of-assets cap imposed on credit unions just over 10 years ago. The hearing was conducted by the House Small Business Committee. Heacock is president/CEO of Black Hills FCU, Rapid City, S.D., and that credit union was the South Dakota district SBA award-winner for writing more SBA loans in the state than any other financial institution during 2008-2009. The loans totaled just over $1.6 million, and averaged $56,703 per loan. CUNA has repeatedly urged members of Congress to support increased business lending capacity for credit unions by backing HR 3380, the Promoting Lending for America's Small Business Act, which would raise the amount of money a credit union can devote to business lending. CUNA President/CEO Dan Mica said that HR 3380, if passed, "would enable credit unions to continue to provide significant capital to credit union member-owned small businesses – up to $10 billion in the first year--and create as many as 108,000 new jobs." CUNA has sent similar letters to the House, Senate, President Barack Obama, White House Chief of Staff Rahm Emanuel,and other top administration officials.

Inside Washington (11/24/2009)

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* WASHINGTON (11/25/09)--Rep. Ron Paul (R-Texas) has indicated that he will not support legislation to curb systemic risk, even though he proposed an amendment that will be attached to the bill aiming to toughen oversight of the Federal Reserve Board (American Banker Nov. 24). Paul’s amendment, which the House Financial Services Committee approved last week, would subject the Fed to audits from the Government Accountability Office. The Fed opposes the measure because it argues that audits would compromise the independence of monetary policy. But Paul said the amendment does not have anything to do with running monetary policy but rather finding out what the Fed is doing and how it is spending money ... * WASHINGTON (11/25/09)--A report Monday picked out six large and midsize banks that are most likely to expand through failed-bank acquisitions (American Banker Nov. 24). The banks are: BB&T Corp., New Alliance Bancshares Inc., People’s United Financial Inc., New York Community Bancorp, Washington Federal, and U.S. Bancorp. The report was issued by FBR Capital Markets. Analysts said the companies would be attracted to the low costs and high earnings potential of acquiring failed institutions with help from the Federal Deposit Insurance Corp., which has pledged to cover some of the closed institutions’ losses ... * WASHINGTON (11/25/09)--Critics of a plan to handle oversight of systemically significant financial companies said the bill does not address how the Federal Reserve Board and an interagency council would interact. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has proposed giving the oversight to an interagency council, while the Obama administration has proposed giving the power to the Federal Reserve Board. It’s unclear [in the bill] who is going to do what, said William Isaac, former Federal Deposit Insurance Corp. chairman. Isaac also questioned what would happen if the council and the Fed disagreed on an issue. The Fed and the council don’t have “defined responsibilities,” added Gil Schwartz, a former Fed lawyer. Congress should settle on a solution, said Oliver Ireland, also a former Fed lawyer. The combo is “confusing,” and could create friction, he told American Banker (Nov. 24) ...

CUs should assess impact of Fed Reg CC amendments

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ALEXANDRIA, Va. (11/25/09)--The National Credit Union Administration (NCUA) has urged federally insured credit unions to assess the impact that the Federal Reserve’s recent amendment to its Regulation CC could have on “their funds availability policies and schedules.” These credit unions should also notify their members of the changes, if required to do so, the NCUA added. However, the NCUA said that the Fed amendments should not impose an “additional burden” on credit unions. The Fed recently amended its routing number guide to next-day availability and local checks in Regulation CC to reflect recent changes in the Fed's check processing operations, and transferred its check processing operations from the head offices of the Federal Reserve Bank of Dallas and the Los Angeles branch of the Reserve Bank of San Francisco to the Federal Reserve Bank of Cleveland. The Fed has also provided advanced notice that its check-processing infrastructure will be consolidated into a single check-processing region early next year. In a separate regulatory release, The NCUA also addressed recent Fed changes to the minimum level of points and fees that designate when lenders must provide borrowers disclosures required by Section 32 of Regulation Z, Truth in Lending. While “very few” credit unions charge mortgage rates and fees as high as those cited under the Fed changes, and few credit union real estate loans “should require these additional disclosures,” NCUA Chairman Debbie Matz said that some risk-based loans may exceed the Fed’s yearly thresholds. According to the NCUA release, the minimum total fee and point threshold as of Jan. 1, 2010, will decrease from $583 to $579. Under section 32 of Reg Z, lenders would be required to provide borrowers with additional disclosures if the total amount of points and fees exceeds $579 or 8 percent of the loan amount, the NCUA release added. For the full NCUA regulatory alerts, use the resource links.

Mica asks CUs Step it up in Dec. through grassroots action

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WASHINGTON (11/25/09)--Credit Union National Association (CUNA) President/CEO Dan Mica has urged credit unions to “step it up” and get involved in CUNA’s grassroots efforts as the Congress races to complete business for the year. “We need to step forward and let Congress know CUs are indeed the white hats,” Mica says in a video posted on CUNA's web site. “We didn’t start the fire; this crisis, that was created by others—we helped solve it." Mica said that with Congress primed to take hasty action in order to pass legislation before the holidays, and with so many crucial issues for credit unions possibly coming to a vote next month, lawmakers must hear from credit unions before they take any action. Comprehensive regulatory reform legislation is active on both the House and Senate sides of Congress, and legislation addressing overdraft fees and interchange is also in play. CUNA is developing a multi-pronged program for bringing the credit union voice to lawmakers – in Washington, from home to Washington and at home in district and state meetings at lawmakers’ offices, and has recently communicated with lawmakers via grassroots action on the issues of overdraft and interchange fees. While Congress is scheduled to finish its work for the year on Dec. 18, CongressDaily this week said that Senate Democratic leaders have indicated that that chamber could remain in session during the upcoming winter break, if necessary. Credit unions are being asked to coordinate their grassroots advocacy activities in conjunction with the CUNA program through their state leagues. To view the video, use the resource link.

Bank collapses push FDIC fund over 8B into the red

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WASHINGTON (11/25/09)--The net worth of the Federal Deposit Insurance Fund during the third quarter of fiscal 2009 declined to negative $8.2 billion, the Federal Deposit Insurance Company (FDIC) reported on Wednesday. This is the third time since 1992 that the net worth of the fund has fallen below zero, and the loss reflects a contingent loss reserve of $38.9 billion that the FDIC has “set aside to cover estimated losses over the next year,” according to the FDIC. The National Credit Union Administration (NCUA) also reported on the status of its own insurance fund at its recently held November meeting. While the National Credit Union Share Insurance Fund (NCUSIF) remains well capitalized at 1.28% of insured shares with over $8.3 billion in total equity as of Oct. 31, the agency estimated that an NCUSIF assessment in the range of 0.10% and 0.25% of insured shares could be sought in 2010 to replenish projected expenses. Melinda Love, NCUA director of examination and insurance, recently predicted that NCUSIF losses for the coming year could range from $450 million to $1.68 billion. The FDIC also reported that the number of institutions on its "Problem List" rose to 552 as of Sept. 31, the highest level since 575 institutions were reported in late 1993. These problem institutions accounted for a total of $345.9 billion in assets, according to the FDIC. Fifty institutions failed during the most recent quarter, increasing the number of failed institutions reported during 2009 to 95. "For now, the credit adversity we have been observing for some time remains with us, and we expect that it will be at least a couple of more quarters before we see a meaningful improvement in that trend," Chairman Sheila Bair said. "Despite the challenges, depending on the economy, I am optimistic that if we address these problems head-on we will see clear signs of improvement in bank earnings and lending in 2010," she added.

Inside Washington (11/23/2009)

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* WASHINGTON (11/24/09)--The House Financial Services subcommittee on oversight and investigations announced yesterday that it will conduct a field hearing next week on “Improving Responsible Lending to Small Businesses.” The Nov. 30 hearing will be held at Lawrence Technological University, in Southfield, Mich., and the subcommittee will hear from local business leaders, representatives of depository institutions, and government officials on the status of prudent lending to small and mid-sized businesses, while maintaining financial stability… * WASHINGTON (11/24/09)--Federal Reserve Board Chairman Ben Bernanke’s renomination hearing before the Senate Banking Committee will be Dec. 3. Bernanke has been nominated by President Barack Obama to lead the Fed for another four years. The Senate is expected to approve his nomination, but Bernanke likely faces tough questions (American Banker Nov. 23). Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has said he has held “serious differences” with the Fed ... * WASHINGTON (11/24/09)--Financial regulatory reform seems to have backpedaled, according to industry observers. Last week, a House panel vote on legislation that would give the government power over systemically significant institutions was delayed until after Thanksgiving. House Financial Services Committee Chairman Barney Frank (D-Mass.) said the delay--which was caused by a request regarding the economy fromt he Congressional Black Caucus--wouldn’t compromise the package since it wasn’t scheduled to go onto the House floor until December. Also, an amendment that could compromise the Federal Reserve Board’s independence was attached to Frank’s legislation. Frank opposed the amendment, and said he would readdress the issue. In the Senate, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) stepped back from his timetable to pass a reform bill after panel members expressed their concerns about his legislation, saying he should work on a bipartisan approach. Dodd’s bill still needs a lot of work, according to Jaret Seiberg, Washington Research Group analyst. He noted that Dodd may have to negotiate and create a “narrow” reform package (American Banker Nov. 23) ...

Corporate CU guarantee program gets another extension

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ALEXANDRIA, Va. (11/24/09)—The Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) has received another extension from its parent agency, the National Credit Union Administration (NCUA). The agency is pushing the expiration date past the current sunset of Dec. 31, 2011 to let the program run until March 31, 2012. The Dec. 31, 2011 date was itself an extension. The NCUA announced in August that TCCUSGP would not be allowed to expire on the scheduled Sept. 31, 2011 date. The TCCUSGP backs up the National Credit Union Share Insurance Fund's (NCUSIF) coverage of all shares--excluding paid-in-capital and membership capital accounts--at corporate credit unions. More technically, the NCUA's Corporatee Stabilization Fund is obligated for any liability arising from the Temporary Corporate Credit Union Share Guarantee Program ("TCCUSGP") and from the TCCULGP. To the extent that any liability from the TCCUSGP or TCCULGP exceeds funds available from the Stabilization Fund, funds shall be made available from the NCUSIF. Use the resource link below to read the NCUA's Juner Letter to Credit Unions on "Corporate Stabilization Fund Implementation."

Media turn out for CUNA holiday poll

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WASHINGTON (11/24/09)—More than 15 national, international, and local media outlets covered the tenth annual projection of consumers' holiday spending plans produced by a national survey sponsored by the Credit Union National Association (CUNA) and Consumer Federation of America (CFA). CUNA and CFA also used the
Click to view larger image Sabri Benachour of National Public Radio follows up with CUNA's Bill Hampel about the meaning of the results in the CUNA/CFA holiday spending survey. (CUNA Photo)
opportunity to provide consumers with tips to help keep holiday spending debt under control. The event was held Monday at The National Press Club in Washington, D.C. CUNA Chief Economist Bill Hampel discussed the survey, estimating that consumer spending during the upcoming holidays could increase by as much as 3%. Only 8% of consumers surveyed said that they would spend more this year than the previous year, Hampel said. The Wall Street Journal provided quick coverage of the event, reporting that 43% of consumers surveyed would significantly reduce their holiday spending from the previous years budget. To read the Wall Street Journal story, use the resource link. Other television, cable and radio networks, and newspaper groups that attended or covered the press conference included:
Click to view larger image News camera crews prepare their equipment before the holiday spending press conference begins. More than a dozen major news outlets covered the tenth annual release of CUNA-CFA consumer spending predictions. (CUNA Photo)
* CNN * Fox News * WAMU, a D.C.-based affiliate of National Public Radio * CNBC * CBS * The Epoch Times * Japan Broadcasting Corporation * Credit Union Times * ABC Radio News * American Observer * Market News International * AM Media * Business News Americas * Hearst Television * WUSA, a D.C.-based CBS affiliate
CBS Radio also interviewed Hampel later in the day. For more on the CUNA-CFA predictions and to read the groups’ consumer tips to help keep holiday spending debt under control, see related story in today's News Now: CUNA-CFA: Consumer holiday spending to improve from last year.

CUNA-CFA Consumer holiday spending will improve over 2008

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WASHINGTON (11/24/09)--Credit Union National Association (CUNA) Chief Economist Bill Hampel has predicted that consumer spending during the upcoming holidays could increase by as much as 3% compared to 2008’s numbers.
Click to view larger image As Consumer Federation of America Executive Director Steve Brobeck listens, CUNA Chief Economist Bill Hampel explains the results of the CUNA/CFA Holiday Spending Survey. (CUNA Photo)
Speaking during a press conference announcing the tenth yearly holiday spending survey conducted by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA), Hampel said that 43% of consumers surveyed this year said they intend to cut back their holiday spending, compared to 55% last year. “Consumers are telling us they will not cut back as much on spending as last year, but more so than in previous years,” Hampel said, adding that 8% of consumers surveyed “planned to spend more than last year,” the lowest percentage in the ten year history of the survey. The survey, which was conducted between November 6 and 9 and collected comments from 1,000 respondents, indicated that economic concerns are tops for reserved consumers, with widespread fear over unemployment, limited work hours, or current pay affecting their attitude toward spending. While 44% of those surveyed said their economic situation was similar to that of last year, 36% of consumers said their situation was worse, with only 19% of respondents saying that they were better off than they were last year. A mere 24% of those surveyed said they were concerned about meeting monthly credit card payments this year and only 42% said they were concerned about meeting all debt payments this year, and both figures represented a decrease from last years report. While many of those surveyed are still concerned about their financial condition, CFA Executive Director Stephen Brobeck said “it is good news that fewer people are concerned about meeting monthly debt payments this year than last.” CUNA and CFA have also suggested that consumers can keep their individual levels of holiday debt under control by sticking to a predetermined budget for gifts, holiday foods, party clothes, holiday decor and postage. Consumers will also benefit financially from comparison shopping and paying with cash or lower-interest credit union cards. Consumers can also plan for future holidays by shopping post-holiday sales for next years’ gifts and starting a holiday savings account that they will contribute to over the course of the year, or take the novel approach of curbing spending through low- or no-cost ways to celebrate the holidays, Brobeck suggested. Over 15 national and local media outlets covered Monday's release of the consumer holiday spending projections. (See related story in today's News Now: International, national, and local news outlets cover CUNA holiday spending survey.)

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.

GAO report backs opposition to interchange legislation Mica says

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WASHINGTON (11/20/09)--A U.S. Government Accountability Office (GAO) report on the impact of interchange fees, released on Thursday, “further underscores why Congress must protect the interests of consumers and oppose harmful interchange legislation,” Credit Union National Association (CUNA) President/CEO Dan Mica said. The report, entitled “Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges,” found that merchants benefited from “increased sales, faster payments, and lower labor costs” related to card acceptance. “Accepting credit cards also allows merchants to make sales on credit at a generally lower cost than operating their own credit program,” the GAO report added. “Consumers would also benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult. Consumers also might face higher card-use costs if issuers raised other fees or interest rates to compensate,” the GAO report found. The report also “rightly pinpoints the fact that Interchange is a significant source of revenue for smaller issuers such as credit unions,” Mica stated, adding that this revenue “allows credit unions to offer credit card programs to their consumer/members which are competitive with card programs offered by much larger institutions.” “In fact, those credit union programs have proven to be less expensive for our members than those offered by larger issuers,” he said. The GAO report also “recognizes that having small issuers in the market benefits consumers by forcing competition,” Mica said. “Limiting or reducing Interchange would likewise limit competition – and our members would pay the price,” he added. The GAO, which was tasked with the interchange study following the passage of the 2009 Credit Card Accountability, Responsibility, and Disclosure Act, also found that while “some consumers have benefited from competition in the credit card market,” those who do not use credit “may be paying higher prices for goods and services, as merchants pass on their increasing card acceptance costs to all of their customers.” CUNA and credit union leagues have combined forces to advocate against merchant-proposed changes to interchange by distributing over 300,000 postcards to be mailed to the Senate. Credit union leagues have also used CUNA's Hike the Hill program to communicate with Congressional representatives on interchange and other issues central to credit union success.

Comprehensive corporate plan out for 90-day comment period

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ALEXANDRIA, Va. (11/20/09)--The National Credit Union Administration on Thursday approved proposed new rules for corporate credit unions that would amend Part 704 of the NCUA’s rules, adjusting 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. The corporates would need to demonstrate capital ratios of 5%, 6% and 10%, respectively, to be considered well capitalized. The proposed rules, which will be open for public comment for a 90-day period, will also prevent corporate credit unions from investing in collateralized debt obligations and net interest margin securities, and makes A- the lowest rating at which corporate credit unions with expanded investment authority may purchase nationally recognized statistical rating organization-rated investments. Corporates will also be required to keep on hand the funds needed to support its payment system obligations. Any credit union service organizations that the corporate credit union does business with must “primarily serve credit unions” and “restrict its services to those related to the normal course of business of credit unions,” the NCUA said. The NCUA proposal would prohibit troubled corporates from providing so-called “golden parachutes” to executives, and would impose other limits on corporate leadership. Corporate boards must be mainly comprised of natural person credit union employees, and board members would be required to hold the position of CEO, CFO, or COO at their member entity. Executive compensation would also need to be disclosed on a yearly basis under the proposed rules. Credit Union National Association President/CEO Dan Mica has promised that CUNA will “develop a comprehensive view” of the new proposed rules once the 253-page document has been fully reviewed, and noted that “a number of the safety and soundness provisions of the proposed rule on corporate credit unions” were “broadly consistent” with some of the recommendations provided by the CUNA/National Association of Federal Credit Unions joint task force on corporate regulation. Commenting on the new corporate rules, NCUA Chairman Debbie Matz commended the agency’s “unprecedented effort” to incorporate outside input into the rulemaking process. The new rules have the potential to “fundamentally change” the way that credit unions interact with the corporate credit union system, and encouraged both corporate and natural person credit unions to provide extensive comments during the 90-day review period. The NCUA also approved a new National Credit Union Share Insurance Fund premium and 1% deposit, and estimated that credit unions could be assessed between .05% and .15% to maintain the corporate stabilization fund in 2010.

CUs carved out of Stability Fund Act

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WASHINGTON (11/19/09)—In a vote of 52-17, the House Financial Services Committee adopted an amendment to H.R. 3996, the Financial Stability Improvement Act of 2009, which would, in effect, exclude all credit unions from having to contribute to a stabilization resolution fund for systemically risky institutions. H.R. 3996 would create a stabilization resolution fund, located at the Federal Deposit Insurance Corporation (FDIC), to cover the cost of resolving failing financial companies that are systemically important to the financial system. The National Credit Union Share Insurance Fund (NCUSIF) currently has similar authority with respect to insured credit unions. The stability bill was set to direct the FDIC to assess financial companies, including credit unions, with over $10 billion in total assets to provide the initial funding for the new fund, and to replenish the fund in the future. Offered by Rep. Brad Sherman (D-Calif.), the amendment adopted Thursday ups that threshold to $50 billion, effectively exempting all credit unions. Credit Union National Association (CUNA) President/CEO Dan Mica praised the committee vote and said, “Credit unions and CUNA appreciate the House Financial Services Committee taking action to essentially eliminate credit unions from paying into a fund that would finance a ‘systemic risk’ regulatory agency. “In fact, by adopting the amendment that raises the threshold for institutions that must pay into the fund from $10 billion to $50 billion by a vote of 52-17 – a 3-1 margin – lawmakers, in our view, were signaling strongly that credit unions should never have been included under this requirement in the first place. Our sincere thanks to Rep. Brad Sherman for moving this amendment forward.” CUNA earlier this week wrote to House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) and ranking member Rep. Spencer Bachus (R-Ala.), seeking their support for the Sherman amendment. CUNA detailed several reasons that credit unions should be excluded from the legislation, including their member-owned, not-for-profit cooperative business plans. Credit unions "exist to provide financial services to their member-owners" and "by definition face a set of incentives that are very different from those confronting for-profit financial companies," the letter added.

NCUA orders bar six from financial institution work

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ALEXANDRIA, Va. (11/20/09)--The National Credit Union Administration issued orders prohibiting the following individuals from participating in the affairs of any federally insured financial institution.
* Donald Bowers, Jr., the former manager of 1st United Labor FCU, Louisville, Ky., without admitting or denying fault, signed an order of prohibition to avoid the time and cost of administrative litigation; * Jessica Franco, a former loan officer of Navy Army FCU, Corpus Christi, Texas, was convicted of aiding and abetting a false statement on a federal credit union loan or credit application and sentenced to five years probation and ordered to pay a $2,000 fine and a $100 assessment; * Ana Gonzalez, former head teller of Southland FCU, Lufkin, Texas, without admitting or denying fault, signed an order of prohibition to avoid the time and cost of administrative litigation; * Tracey Michelle Reese Hitt, a former employee of Magnolia FCU, Jackson, Miss., without admitting or denying fault, signed an order of prohibition to avoid the time and cost of administrative litigation; * Anthony C. Jones, a former vice president of State Department FCU, Alexandria, Va., was convicted of credit union theft, embezzlement or misapplication of more than $1,000 and sentenced to 21months in prison, three years of supervised probation and ordered to pay $122,067 in restitution; and * Christina Pushnik, a former teller at Stanwood Area FCU, New Stanton, Pa., was convicted of property theft and sentenced to two years supervised probation.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link below to view NCUA enforcement orders online.

Holiday spending survey to be released Monday

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WASHINGTON (11/20/09)—It’s been a decade since the first joint consumer survey on holiday spending was executed by Consumer Federation of America (CFA) and the Credit Union National Association (CUNA), and this year’s outcome promise to be interesting when released Monday. The results of the tenth annual survey, conducted just days ago on Nov. 6-9, provide fresh findings on consumer attitudes towards their personal financial condition and how that may translate into holiday spending plans. After finding a record-high level of concern last year, this year’s survey documents the change in consumers' attitude in spending compared to a year ago, after more than a year of economic recession. As always, the survey asks those who expressed their intent to spend less why they plan to do so. For the first time, the survey asks consumers whether they feel their financial situation has gotten better or worse compared to a year ago. CFA and CUNA representatives will discuss their complete survey findings at a Nov. 23 press conference, including:
* The latest look at consumers’ holiday spending plans; * Consumer concern about credit cards and paying off the full monthly balance; * How the findings compare to consumer attitudes last year; * How consumer attitudes have changed over ten years; and * New tips for managing holiday spending.
CFA Executive Director Stephen Brobeck and CUNA Chief Economist Bill Hampel will meet with the media at 10 a.m. at the National Press Club here.

NCUA discloses 13 2010 budget increase

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ALEXANDRIA, Va. (11/20/09)--The total 2010 budget for the National Credit Union Administration (NCUA) will be $200,923,512, an increase of 13% over the 2009 budget, the board reported during its monthly meeting held Thursday.
Click to view larger image Former NCUA Chairman Michael Fryzel (left) and the agency's current leader, Debbie Matz (right), listen intently to a staff presentation of the 2010 operating budget plan, which represents a 13% jump from the previous year. Matz said her top goal as chairman is for the NCUA to be recognized as a "fair and effective regulator that sets the highest standards for safety and soundness." She added the 2010 budget will help the agency achieve this goal. (CUNA Photo)
NCUA Chairman Debbie Matz said the increased budget is a response to past budget cuts and also reflects the need for more funding due to the current “state of the credit union industry.” Over $14 million of the $23 million funding increase is related to NCUA program changes. Responding to the news of the budget increase, Credit Union National Association President/CEO Dan Mica said that CUNA has “significant concerns about the magnitude” of the increase, adding that those concerns are shared by many credit unions and credit union leagues. Even with steps the NCUA has taken to mitigate the cost impact, the budget actions taken today will add to the cost burden born by credit unions, Mica added. “Going forward, we hope to see more disclosure in the budget process and will seek to work with NCUA to ensure expenses are kept to the minimum necessary without compromising the agency’s mission of safety and soundness,” he said. Matz said that while "the proposed increases in dollars and full time staff are extraordinary," credit unions, regulators, and citizens "are living in extraordinary times." The budget adds a total of 74 new positions to NCUA staff, bringing the total NCUA staff to 1,112.
Click to view larger image Click for larger view
$1.5 million of the budgetary increase will go toward establishing the NCUA’s new Office of Consumer Protection, which will divide a total of thirty positions into two divisions, one addressing consumer protection and one addressing consumer access. While many of the Office of Consumer Protection staffers will be current NCUA employees, the new agency will create seven new positions. According to the NCUA’s board action memorandum on the budget, the Office of Consumer Protection will:
*Provide consumers with educational resources and a forum for dispute resolution; *Consolidate a number of consumer protection functions; *Work with other federal agencies to address consumer protection; *Take on centralized chartering activities; and *Take over the tasks of the NCUA’s ombudsman.
The Office of Consumer Protection will also handle field of membership change processing, a move that could address concerns over consistent handling of FOM requests. The establishment of the Office of Consumer Protection will “elevate the importance of consumer protection in the industry,” board member Gigi Hyland said. The NCUA budget will also create a new Office of Chief Economist, and will dissolve the NCUA’s National Examination Team, which was charged with examining cases that threatened the National Credit Union Share Insurance Fund. The examination team, which was established last year, handled large and complex credit unions that were experiencing financial issues, but the NCUA determined that the centralized oversight of the examination team did not allow for adequate monitoring of troubled credit unions. A further 57 of the new positions will be taken up by regional employees added due to the NCUA’s new Annual Examination Program. The NCUA will realign some of its examiner resources and will also hire 39 examiners, 12 case officers, four lending specialists, and two supervisory examiners to implement increased onsite and offsite monitoring of troubled credit unions. The agency plans to add a further 28 examiners in 2011. The examinations will be integrated into the existing examination schedule, and will not result in new examinations for credit unions. The NCUA also approved a 2010 overhead transfer rate of 57.2%, up from the 53.8% rate approved for 2009, during the meeting. Additionally, the agency voted to decrease the natural person federal credit union operating fee rates by 1.58 percent and increase the asset level dividing points for natural person federal credit union operating fee scale by 8.5%. These operating fees will be collected by the NCUA by April 15, 2010. The board has also shifted supervison of California credit unions to Region II because of the availability of more experienced examiners. It also moved supervision of Alaskan credit unions to Region V. For further quotes from Matz, use the resource link.

Inside Washington (11/19/2009)

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* WASHINGTON (11/20/09)--The House Financial Services Committee approved an amendment Wednesday that would prevent large financial institutions from receiving Federal Home Loan Bank (FHLB) advances and raise large institutions’ funding costs. The amendment was one of several pieces the committee voted on, but financial observers said the FHLB amendment would have the largest impact because it would allow the Federal Deposit Insurance Corp. (FDIC) to impose a 20% haircut on secured creditors when resolving failed systemically important institutions. Lawrence Kaplan, partner at Paul, Hastings, Janofsky and Walker, said the move will ultimately raise credit costs (American Banker Nov. 19). Cutting off advances to some institutions from the FHLBs also may prevent the FHLBs from lending to those institutions, said Alfred DelliBovi, president of the Federal Reserve Bank of New York. Rep. Brad Miller (D-N.C.), one of the amendment’s authors, said he drafted the legislation at the suggestion of the FDIC and proposed it as a way to save taxpayers from bailing out banks ... * WASHINGTON (11/20/09)--Banks need to increase their lending, Treasury Secretary Timothy Geithner said Wednesday during an Obama administration summit on credit flow. Limits on credit availability for small businesses will slow the nation’s economic recovery, he added (American Banker Nov. 19). Geithner said there needs to be more positive figures in banks’ earnings for the economy to recover, but Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said credit losses will continue to affect banks’ earnings ... * WASHINGTON (11/20/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is sparring with members of the Republican Party over legislation that would freeze interest rates until the Credit Card Accountability, Responsibility and Disclosures (CARD) Act takes effect in spring. Dodd asked the Senate to quickly begin considering his bill. Republicans filed an objection to his request, which prevents the bill from coming to a quick vote (American Banker Nov. 19). Dodd’s bill responds to credit card companies that are hiking their rates before the CARD Act goes into effect ... * WASHINGTON (11/20/09)--“Systemic risk” can be broadly defined as unsafe amounts of leverage at a bank, the possible failure of a large financial firm that could adversely impact the financial system, or breaks in regulatory oversight, Federal Reserve Board Chairman Ben Bernanke said in a letter to Sen. Bob Corker (R-Tenn.) Systemic risks threaten the stability of the nation’s financial system as a whole, Bernanke said (American Banker Nov. 19) ...

House starts reg reform discussion

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WASHINGTON (11/19/09)--Regulatory reform discussion continued on Wednesday as the House Financial Services Committee began its markup of H.R. 3996, the Financial Stability Improvement Act of 2009, with opening statements. The legislation would create a stabilization resolution fund, located at the Federal Deposit Insurance Corporation (FDIC), to cover the cost of resolving failing financial companies that are systemically important to the financial system, and would direct the FDIC to fill this fund by assessing fees on financial companies, including credit unions, with over $10 billion in total assets. A to-be-offered amendment from Rep. Brad Sherman (D-Calif.) would increase the $10 billion-asset funding threshold to $75 billion, effectively exempting all credit unions. CUNA has detailed several reasons that credit unions should be excluded from the legislation, including their member-owned, not-for-profit cooperative business plans. NCUA Chairman Debbie Matz has also called for credit unions to be exempted from the terms of this bill. While it is not known how long regulatory debate will continue, Senate Majority Leader Harry Reid (D-Nev.) and House Majority Leader Steny Hoyer (D-Md.) are reportedly aiming to end this year’s congressional action by Dec. 18.

CUNA urges accounting oversight amendments adoption

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WASHINGTON (11/19/09)—An amendment to bolster government oversight of the Financial Accounting Standards Board (FASB)would improve the accounting board’s policy-making process and help minimize arbitrary rulemaking, the Credit Union National Association (CUNA) said in a letter of support Wednesday. Referring to an amendment designed by Rep. Ed Perlmutter (D-Colo.),CUNA told key lawmakers that the amendment would not compromise the independence or integrity of FASB. CUNA added that it would not impinge on FASB’s setting of accounting standards, nor the oversight of these standards by the Securities and Exchange Commission (SEC), except to the extent that these principles pose systemic risk concerns to the financial services sector of the economy. In its letter seeking support for the amendment from House Financial Services Committee Chairman Barney Frank (D-Mass.) and the panel’s ranking member, Rep. Spencer Bachus (R-Ala.), CUNA said “a range of accounting issues continues to undermine financial institutions' operations.” The letter noted specifically the impact on a financial institution's financial statements of having to determine assets are Other Than Temporarily Impaired (OTTI) Assets and the specter of having to apply fair-value accounting principles to loans and the allowance for loan losses account. The Perlmutter amendment would authorize a systemic risk council the authority to take corrective action regarding accounting matters if the SEC failed to do so, CUNA wrote.

Inside Washington (11/18/2009)

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* WASHINGTON (11/19/09)--During a speech Tuesday, Janet Yellen, president of the Federal Reserve Bank of San Francisco, said that the financial crisis shows that a strong relationship needs to exist between bank regulation and monetary policy (American Banker Nov. 18). In the past, the two had been viewed as separate, she added. Her speech comes as the Senate Banking Committee takes up legislation that would remove supervisory powers from the Federal Reserve Board and other banking agencies ... * WASHINGTON (11/19/09)--The Federal Reserve Board announced Tuesday that it has reduced the maximum maturity of primary credit loans at the discount window to 28 days from 90 days, effective Jan. 14. Primary credit loans will remain eligible for renewal upon a borrower’s request. Prior to August 2007, the maximum available term of primary credit was overnight. The Fed later lengthened this to 30 days on Aug. 17, 2007, and to 90 days on March 16, 2008 ... * WASHINGTON (11/19/09)--The House Financial Services Committee continues to debate over how to end government-funded bailouts in regard to legislation that would allow the Federal Reserve Board to take apart systemically risky firms. A vote on the bill is not expected until later in the week, but panel members worked to revise the legislation Tuesday (American Banker Nov. 18). The panel approved several amendments that would boost taxpayer protections by shrinking the scope of resolutions and by limiting the Fed’s power, focusing on resolving insolvent firms whose troubles could destabilize the financial system, and allowing only the Federal Board of Governors to decide which institutions are considered a risk. Committee chair Barney Frank (D-Mass.) said he is working on other amendments, including provisions to create a $200 billion systemic resolution fund and subject the Fed to an audit ... * WASHINGTON (11/19/09)--Many financial institutions are not stopping their participation in the Transaction Account Guarantee (TAG) Program, even though the Federal Deposit Insurance Corp. (FDIC) has tried to wean the industry off of the blanket coverage. The FDIC extended TAG through June 30, and increased its price. FDIC also gave institutions a chance earlier this month to leave the program. About 80% of banks, however--mostly community banks--have opted to stay in the program. Financial observers say larger institutions do not need to participate because of other aid they’ve received, and that for smaller banks, the cost for participation is modest (American Banker Nov. 18) ...

SBAs Mills promises increased cooperation as CUs help small business

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WASHINGTON (11/19/09)--Small Business Administration Administrator Karen Mills promised increased cooperation with credit unions and small banks as a means of increasing small business activity. Mills spoke during a Department of the Treasury Small Business Financing Forum held Wednesday in Washington. Treasury Secretary Timothy Geithner also spoke during the forum, which was attended by over 100 small business owners, government officials, legislators, and others, saying that the U.S. government needs to work to “support those who support small businesses.” Geithner also encouraged Congress to work to “create the conditions” that will allow small financial institutions to “participate” in the “efforts to promote small business lending.” National Credit Union Administration Chairman Debbie Matz was also in attendance, but did not speak at the forum. Also attending: the Credit Union National Association’s Senior Vice President of Legislative Affairs John Magill, who in a submitted question asked if the Obama administration, which has indicated that job creation is a top priority, would support raising or eliminating the credit union member business lending (MBL) cap. CUNA has steadfastly supported MBL legislation which, if passed, would enable credit unions to continue to provide up to $10 billion in funds to credit union member-owned small businesses within one year and would create an estimated 108,000 new jobs. HR 3380, the Promoting Lending for America's Small Business Act, would increase the MBL cap to 25% of a credit union's total assets, would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, and would exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. The legislation, which was introduced by Rep. Paul Kanjorski (D-Penn.), is currently awaiting Congressional action.

Hyland urges slow steady approach for CUs taking on MBL

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ALEXANDRIA, Va. (11/19/09)--While she supports credit union involvement in commercial member business lending (MBL), National Credit Union Administration (NCUA) board member Gigi Hyland has urged credit unions to “go slowly” and do their “homework” to ensure that they have appropriate risk management as they develop their loan portfolios. Panelists during the NCUA’s Wednesday MBL web cast said that the best way to ensure that commercial MBLs are executed safely is by following existing MBL rules. While federally-chartered credit unions are not required to have risk rating systems, they are effective when they are used, NCUA Region IV Problem Case Officer and panelist Linda Vick said. When establishing a risk rating system, credit unions should ensure that their ratings “shape or reflect” the nature of their lending decisions, Vick added, saying that credit unions should not adopt a particular form of risk rating system simply to appease examiners. Addressing examination, NCUA MBL Program Officer Erika Eastep advised credit union officials to consult NCUA opinion letters, AIRES exam questionnaires, appendix 10A of the NCUA’s examiner guide, and section 107A of the Federal Credit Union Act to gain insight on what examiners will look for during their inspections. The panelists also detailed the NCUA’s MBL exam process, which includes discussion of strategic goals and objectives department structure, and credit union policies and procedures. The Credit union’s credit memorandum, which is also reviewed during the examination process, should be a standalone document that details what management was thinking when they decided to execute the loan, the panelists added. In preparation for examinations, credit union officials should review “every single loan” in their portfolio on a regular basis, Eastep added. While commercial member business loans can often be complex, the “key” for credit unions looking to engage in these loans is “due diligence, a strategic planning process, and knowing which loans you can do and how you can do them,” Vick said. The NCUA has not provided an official position on H.R. 3380, the Promoting Lending for America's Small Business Act, would increase the MBL cap to 25% of a credit union's total assets, would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, and would exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. However, Hyland said that the MBL cap is not a statutory issue, and should instead be handled by regulatory action.

Corp CUs budget are NCUA headliners today

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WASHINGTON (11/19/09)--The National Credit Union Administration (NCUA) will unveil its proposed rules on corporate credit unions later today, and while many details of the rules remain unknown, the agency has said that the rules will include new capital standards and will address concentration of risks in mortgage-related securities and other asset-backed securities. The rules are also expected to address executive compensation for corporate credit union leadership. Regardless of the details of the plan, it is expected to generate significant comment from credit union industry insiders. The NCUA's 2010/2011 operating budget will also be discussed during the open portion of the meeting. The agency approved a tentative fiscal 2010 budget of $189.97 million last year. The NCUA earlier this year also approved plans for an office of consumer protection, and while that office has yet to be staffed, many will be watching to see what place, if any, that office takes in the NCUA's budgetary plans. Part of the regulatory revamp debate that is ongoing in Washington surrounds the creation of a proposed Consumer Financial Protection Agency, and the NCUA’s consumer protection duties would be folded into this agency if House and Senate legislation is not amended prior to its potential passage into law. Other items up for discussion during the meeting include:
*The NCUA’s overhead transfer rate and operating fee scale; *The National Credit Union Share Insurance Fund premium and 1% deposit; and *The NCUA’s monthly insurance fund report.
A closed NCUA board meeting will follow the open session.

CUNA Matz seek CU exemption from systemic risk legislation

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WASHINGTON (11/18/09)--The Credit Union National Association (CUNA) has urged lawmakers to support an amendment to H.R. 3996, the Financial Stability Improvement Act of 2009, offered by Rep. Brad Sherman (D-Calif.), which would, in effect,exclude all credit unions from contributing to a stabilization resolution fund for systemically risky institutions. H.R. 3996 would create a stabilization resolution fund, located at the Federal Deposit Insurance Corporation (FDIC), to cover the cost of resolving failing financial companies that are systemically important to the financial system. The National Credit Union Share Insurance Fund (NCUSIF) currently has similar authority with respect to insured credit unions. The stability bill, as currently written, would direct the Federal Deposit Insurance Corporation (FDIC) to assess financial companies, including credit unions, with over $10 billion in total assets to provide the initial funding for the new fund, and to replenish the fund in the future. Sherman’s bill would raise the current $10 billion-asset funding threshold to $75 billion, effectively exempting all credit unions. While the current $10 billion threshold removes all but three credit unions from the effects of the legislation, lifting the asset cap to $75 billion would protect Navy Federal FCU, Pentagon FCU and State Employees CU from the bill. In the letter, which was addressed to House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) and ranking member Rep. Spencer Bachus (R-Ala.), CUNA detailed several reasons that credit unions should be excluded from the legislation, including their member-owned, not-for-profit cooperative business plans. Credit unions “exist to provide financial services to their member-owners” and “by definition face a set of incentives that are very different from those confronting for-profit financial companies,” the letter added. While the Sherman amendment “would not provide for the complete exclusion of credit unions from the scope of this legislation,” it would address “significant credit union concerns,” CUNA added. Separately, National Credit Union Administration Chairman Debbie Matz sent a letter Tuesday to committee Chairman Barney Frank (D-Mass.) that expressed concerns shared by CUNA, saying it was not “equitable to require credit unions to participate in the resolution fund to be managed by FDIC.” While the costs of dealing with large-scale financial firm failures should not be born by the greater taxpaying public, Matz does not believe that credit unions should be included either. Credit unions pose little to no systemic risk to financial markets, as “even the failure of the largest credit union would have no systemic effect outside of the credit union industry,” the NCUA letter said. Matz also questioned the “advisability” of allowing a federal agency outside of the NCUA “to take supervisory action against credit unions.” Matz also thanked Frank for including the NCUA in the planned Financial Services Oversight Council, saying that the NCUA “looks forward to working cooperatively” within the council, which will “provide an excellent forum for interagency discussion and will be an effective mechanism to strengthen safety and soundness regulation.” As reported in The Hill, Rep. Ed Perlmutter (D-Colo.) may soon introduce a separate amendment that would give financial regulators increased authority over the actions of the Financial Accounting Standards Board (FASB), which is currently under the oversight of the Securities and Exchange Commission (SEC). CUNA would support Perlmutter's intent to give greater congressional oversight of accounting standards. Debate on H.R. 3996 is expected to continue this week, and it is not known when the bill could pass out of committee. For the CUNA letter, use the resource link.

Inside Washington (11/17/2009)

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* WASHINGTON (11/18/09)--Angela Sanders has been named staff assistant to National Credit Union Administration (NCUA) Chairman Debbie Matz. Sanders previously served as executive assistant to PNC Bank. She has 20 years of administrative assistant experience in the government public, private and non-profit sector ... * WASHINGTON (11/18/09)--The Federal Reserve Board Monday announced proposed rules that would restrict the fees and expiration dates on gift cards. The rules would protect consumers from unexpected costs and would require that conditions on gift cards be clearly stated. The rules would prohibit inactivity and services fees on gift cards unless there has been at least one year of inactivity, and the consumer is given clear disclosures about the fees. Expiration dates for the cards must be five years after the date of issuance, or five years after the date when the funds were last loaded. The rules generally cover retail gift cards and network-branded gift cards. The rules are issued under Regulation E (Electronic Fund Transfers) to implement the gift card provisions of the Credit Card Accountability, Responsibility and Disclosures Act of 2009 ... * WASHINGTON (11/18/09)--The Federal Reserve Board’s independence will likely be debated under draft legislation introduced by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) last week. Dodd’s proposal aims to improve governance at the banks by requiring chairmen of the 12 regional banks to be nominated by the president and confirmed by the Senate, but industry critics said the requirement could make the financial system increasingly political while slowing financial reform efforts (American Banker Nov. 17). Dodd said he doesn’t like the way presidents are currently selected because it’s “contradictory.” During an interview last week with CNBC, Dodd said he would like the Senate to confirm Fed bank chairmen the way the Fed confirms governors. David Berenbaum, executive vice president of the National Community Reinvestment Coalition, said the public would have more confidence in the central bank if it was clear of conflicts of interest ... * WASHINGTON (11/18/09)--Rep. Scott Garrett (R-N.J.) asked Treasury Secretary Timothy Geithner Monday to clarify which companies would pay into a fund intended to resolve systemically important institutions (American Banker Nov. 17). The House Financial Services Committee is currently considering legislation to require financial companies with $10 billion or more in assets to pay into a fund. Garrett requested an answer from Geithner by the end of the week ... * WASHINGTON (11/18/09)--Federal Reserve Board Chairman Ben Bernanke said he does not support breaking up large financial institutions (American Banker Nov. 17). During a speech in New York, Bernanke dismissed a suggestion by Mervyn King, Bank of England governor, to break up big banks. Simply making banks smaller would not work because banks can be “systemically critical even if they are somewhat smaller” or if they are connected with out banks. There may be situations in which a regulator would force an institution to cut back on commercial banking activities, but it’s difficult to draw a “bright line,” he added ...

Let regulators handle overdraft CUNA to Senators

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WASHINGTON (11/18/09)--Credit Union National Association (CUNA) President/CEO Dan Mica has encouraged members of the Senate Banking Committee to suspend further consideration of S. 1799, the Fairness and Accountability in Receiving Overdraft Coverage Act of 2009 (FAIR Act), saying that he has “grave concerns” regarding the effect that the legislation “would have on credit union members who use and value the overdraft protection services their credit union provides.” The letter, which was submitted as written testimony in advance of Tuesday’s hearing on overdraft fees, added that “the provisions of S. 1799 that would limit the number of overdraft fees that could be charged per month and per year would simply end overdraft programs to the detriment of many consumers who truly value these programs.” The hearing included testimony from the Center for Responsible Lending's Eric Halperin and Pentagon FCU President/CEO Frank Pollack, among others. While CUNA “recognizes concerns exist about how some overdraft protection programs operate,” Mica, noting the recently released Federal Reserve rule that requires credit unions and other financial institutions to obtain consent from consumers before they could be charged overdraft fees for ATM and one-time debit transactions, said that taking a regulatory approach would be the most efficient means of tackling the issue. Though the requirements may present “significant compliance issues for some credit unions,” CUNA said that the Fed rule “significantly improves consumer protections with respect to these programs, by ensuring that consumers are made aware of the existence of these programs and requiring an opt-in in order to use overdraft protection programs with respect to ATM and one-time debit transactions.” Under S. 1799, credit union members would incur more non-sufficient fund fees, pay more merchant return check fees, and have more bad checks reported to consumer reporting agencies. Merchants would also be forced to deal with increased numbers of bounced checks, according to the letter. “Overlapping, duplicative and frequently changing regulatory and statutory mandates” would also have negative effects on credit unions, the letter added. “We hope the Fed action, as well as the fact that Congress is presently considering the creation of a consumer financial protection agency, will give Congress pause in pursuing the various legislative proposals pending before both chambers,” Mica wrote. To see the letter in full, use the resource link.

National Hike the Hill planning underway

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WASHINGTON (11/18/09)—The Credit Union National Association (CUNA) and the state leagues are putting the wheels in motion to bring credit union representatives to Washington in mid-December just before Congress is likely to begin voting on key issues affecting credit unions. “Whether it’s overdraft protection, regulatory reform, systemic risk, or the many, many other issues it is tackling, Congress needs to hear from us: ‘We didn’t start the fire; don’t penalize us for the financial meltdown,’” said CUNA President/CEO Dan Mica. Mica said he has contacted each league and asked them to begin identifying credit union representatives who can come to Washington next month for a “National Hike the Hill.” “In the hectic days that come at the end of a session, Congress often finds itself pressured by time to take action, which could end up affecting us for years to come, ” Mica said. “We think it important that Congress hear from credit unions heard before a number of these issues can come up for vote as Congress rushes to leave town days just before the holidays.” The CUNA leader said more information about the National Hike the Hill would be provided to credit unions in the coming days, primarily through the leagues.

Hyland applying finishing touches to alt cap guidance

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WASHINGTON (11/14/09)—The finishing touches are being applied to National Credit Union Administration board member Gigi Hyland’s white paper on credit union alternative capital and it could be before the agency board by January. Hyland told league presidents at the American Association of Credit Union Leagues Annual Meeting in Naples, Fla. last week that she is just now “putting the finishing touches” on the report that is intended to help guide the NCUA deliberation on secondary capital. “I want to be sure it is as thorough and complete as it can possibly be,” Hyland said. While earlier she had hoped to complete it by December, she said January is now more realistic given her recent focus on the coming corporate credit union proposal, expected to be unveiled by the agency at its meeting this Thursday. Hyland said the white paper will look at alternative capital with credit unions’ cooperative model in mind, balanced with the economy’s impact on the credit unions, their interest in additional capital sources, and consumer protection considerations. “We’ll discuss the fact that statutory changes are needed, and there are other tweaks in PCA (NCUA’s prompt corrective action rules) that would allow NCUA to be responsive in times like this,” she added. Once finalized, the paper, Hyland said, will be sent to the agency’s regional offices for comment and then shared with fellow NCUA board members to see how they want to proceed with it. Still to be determined is whether it will be on the board meeting agenda for action or used internally as a reference. “It’s really up to the NCUA board to figure out” what is done with the white paper,” he said. On member business lending (MBL), Hyland emphasized the need for credit unions to do the necessary due diligence and understand the risk parameters, a need that would become more pronounced if Congress raises the current statutory cap on MBLs. The MBL issue will be the subject of a webinar Hyland is hosting today (see resource link). Examiners will discuss what they are seeing in the field, what is working and what is generating concern, she said. NCUA MBL Webinar Today

Model privacy form unveiled by regulators

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WASHINGTON (11/18/09) -- Eight federal financial regulators, including the National Credit Union Administration (NCUA), released a final model privacy notice form intended to make it easier for consumers to understand how financial institutions collect and share information about consumers. Development of a simpler privacy form was required under 2006 amendment to the Gramm-Leach-Bliley (GLB) Act, signed into law in 2000. Critics argued that the notices required under GLB were legalistic and difficult to understand for ordinary consumers. Credit unions, banks and thrifts are not required to use the new form released Tuesday. However, its use assures "safe harbor" compliance with regulatory disclosure requirements. The rule implementing the new form is effective 30 days after it is published in the Federal Register, which could occur later this week. However, the rule also allows for a transition period until Jan. 12, 2012, for dropping the sample clauses now included in the appendices of the agencies’ privacy rules. According to a joint-agency release, the agencies conducted extensive consumer research and testing to develop the newly released model form. The final model privacy form was developed jointly by the NCUA and the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Trade Commission, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Securities and Exchange Commission. Use the resource link to access the rule.

NCUA moves closer to final SAFE Act rule

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ALEXANDRIA, Va. (11/18/09)— The Federal Deposit Insurance Corp. (FDIC) announced the approval of a draft final rule to implement the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). The National Credit Union Administration (NCUA) and the other federal bank and thrift regulators are still working through some issues and will follow suit at a later date. Under the SAFE Act, employees of financial institutions, or their subsidiaries that act as residential loan originators, are required to register with the Nationwide Mortgage Licensing System and Registry. The FDIC plan states:
* For purposes of the registry, each mortgage originator must obtain a unique identifier, and maintain the registration; * Financial institutions must require employees acting as residential mortgage loan originators to comply with the S.A.F.E. Act’s requirements to register and obtain a unique identifier; * Financial institutions must adopt and follow written policies and procedures designed to assure compliance with these requirements.
In a July comment letter to the NCUA on its proposed S.A.F.E. Act rule, the Credit Union National Association (CUNA) requested that privately insured credit unions have access to the mortgage registry even though they are not covered under the rules. In addition, CUNA suggested changes to the threshold for determining which financial institutions would be covered by the rules and requested that there be an exception for loan modifications.

Inside Washington (11/16/2009)

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* WASHINGTON (11/17/09)--The Federal Deposit Insurance Corp. (FDIC) voted Thursday to require insured financial institutions to prepay about three years’ worth of estimated insurance assessments. The pre-payment will boost the FDIC’s cash position of the Deposit Insurance Fund (DIF) without impacting industry earnings. Payment of the assessment is due Dec. 30. The agency estimates it will collect $45 billion from the pre-payment. The assessment is different from a special assessment, which the FDIC collected on Sept. 30, because it does not affect bank earnings, the agency said in a release ... * WASHINGTON (11/17/09)--National Credit Union Administration (NCUA) Board Member Michael Fryzel met with Central Credit Union of Illinois CEO Joan Jensen in Bellwood, Ill. Fryzel and Jensen discussed corporates, member business loans, alternative capital, credit card issues, real estate trends and activities in Congress regarding regulatory reform and consumer protection. “Regardless of size, credit unions across this country are staying aware of all the important issues that impact their operations and what they can do for their members,” Fryzel said. “I am encouraged by the involvement of these individuals who truly put helping others first.” Central Credit Union of Illinois has $78 million in assets. * WASHINGTON (11/17/09)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said injecting capital into the nation’s banks through the Troubled Asset Relief Program (TARP) was a mistake (American Banker Nov. 16). Bair said she regrets not doing more to stop the move. TARP was originally created to dump toxic loans but was later scrapped for perform capital infusions into the nation’s struggling banks. Bair did not blame Treasury officials for the decision to infuse the capital but said the plan backfired, leading to public outcry. The program has had a “terrible” impact on public attitudes toward the financial system, she said ... * WASHINGTON (11/17/09)--Financial industry representatives are working on a strategy to respond to a regulatory reform bill that the Senate Banking Committee hopes to pass by next month (American Banker Nov. 16). The banking industry has a growing list of complaints about the discussion draft of the legislation, released Nov. 10, but the list is so long, many industry representatives do not know where to start. Larger financial institutions are concerned about the proposed creation of a consumer protection agency, derivatives contracts changes, and the elimination of national bank preemption. Smaller institutions are focused on the consumer agency and proposed consolidation of regulators. Credit Union National Association (CUNA) President/CEO Dan Mica has said that credit unions need a “unique” regulator in all aspects of examination and supervision (News Now Nov. 11) ... * WASHINGTON (11/17/09)--The Federal Deposit Insurance Corp. (FDIC) has softened the wording of the orders the agency sends to stressed financial institutions (American Banker Nov. 16). FDIC has changed cease-and-desist orders to “consent orders” and relaxed some of the wording used in the order’s introduction. Traditional cease-and-desist orders will now be issued to banks that refuse to stipulate and seek administrative hearings. Banks that consent will receive the newer version of the order. No new orders have been made public so far ...

Matz NCUA looking at legal issues of legacy assets

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ALEXANDRIA,Va. (11/17/09)—The topic of corporate credit union capital depletion remains a topic of internal and external discussions at the National Credit Union Administration (NCUA), said the agency chairman Monday. Debbie Matz, who heads the NCUA, issued a statement saying that each day since the NCUA’s Nov. 5 meeting on the issue of capital depletion, the agency leadership and staff has been carefully weighing the issues and considerations raised by stakeholders at that meeting. At that meeting Thursday, Credit Union National Association (CUNA) President/CEO Dan Mica urged the agency to allow a process that would leave the door open to future capital recoveries if the magnitude of losses at the corporate credit unions is not as great as the NCUA has estimated. In a follow-up letter to the NCUA, Mica added, “(T)he central issue is that it is unfair to require credit unions to write down their capital in these corporates on the basis of estimates of their future losses, with absolutely no possibility of future recovery should those estimates turn out to be inaccurate." Matz said in her Monday missive: “Any successful solution will hinge on whether or not current holders of depleted capital accounts can legally retain some form of rights to any future earnings on corporates’ ‘legacy assets.’ At this time, it appears unlikely that earnings or losses from legacy assets can be isolated or set aside in ongoing corporates. Nor can corporates’ depleted capital be frozen in a way that would preserve the integrity of their capital going forward.” “However,” Matz continued, “we are still exploring creative ideas to address legacy assets as well as to allow affected capital holders to benefit if confirmed losses are less than recognized losses. Any such alternative approach must be consistent with all legal and accounting requirements, and uphold the fundamental purpose of capital.” CUNA continues to work on solutions to the problem of capital depletion.

CUNA analyzes revocable trust rule

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WASHINGTON (11/16/09)--The Credit Union National Association (CUNA)has posted analysis of a recent National Credit Union Administration (NCUA) action that finalized a rule eliminating the concept of "qualifying beneficiaries" for share insurance coverage purposes. Informal and formal revocable trust accounts, which are created by credit union members, are covered under the NCUA’s share insurance. These accounts are controlled by the creating member, and transfer any assets in the account to listed beneficiaries in the event that the accountholder dies. The final rule is very similar to an NCUA interim rule issued in October of 2008 which made coverage rules for revocable trust accounts easier to understand and apply. However, the new final rule does reflect a statutory Standard Maximum Share Insurance Amount increase to $250,000 level, the new $1,250,000 benchmark for revocable trust account coverage, and revised examples. The final rule also adopts the calculation created by the interim final rule to determine revocable trust coverage. Under the rule, owners of trust accounts with as many as five beneficiaries are insured up to $250,000 per beneficiary. For owners with over $1,250,000 in a revocable trust, and more than five beneficiaries of that trust, the trust is insured for the greater of $1,250,000 or the aggregate amount of the beneficiaries’ interests, limited to $250,000 per beneficiary. The NCUA final rules will become effective on Nov. 30. For more detailed analysis of the new rules, use the resource link.

FinCEN amends Patriot Act search requirements

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WASHINGTON (11/17/09)--Certain foreign law enforcement authorities beginning in 2010 will be allowed to submit information requests on financial institutions through the 314(a) program after the Financial Crimes Enforcement Network (FinCEN) on Monday released a notice of proposed rulemaking (NPRM). The 314(a) search requirements, which are part of the USA Patriot Act, require financial institutions to comply with law enforcement requests that the institution search its records for "persons of interest." The rule, as proposed, would allow State and local law enforcement to also submit information requests through FinCEN. According to FinCEN, the information requests “would enable these agencies to know whether a financial institution has established an account or conducted a transaction with a person reasonably suspected, based on credible evidence, of engaging in terrorist activity or significant money laundering.” However, FinCEN noted, requesting law enforcement agencies “would have to certify that the matter is significant, and that it has been unable to locate the information sought through traditional methods of investigation and analysis” before they can make use of the 314(a) program. FinCEN will also submit information requests for the Treasury Department, according to the rulemaking notice. FinCEN Director James Freis, Jr. said that the information sharing program “is a proven tool, and these changes will help further protect the integrity of our national financial system." FinCEN is also exploring other avenues to improve the transfer of information among law enforcement, financial industries, and regulators, according to the release. Additionally, FinCEN is looking to amend portions of the Bank Secrecy Act (BSA) that address its administrative ruling system. For the full FinCEN release, as submitted to the Federal Register, use the resource link.

NCUA closes Nev.-based Ensign FCU

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ALEXANDRIA, Va. (9/25/09)--The National Credit Union Administration (NCUA) on Friday closed 7,900-member and $98 million-in-assets Ensign FCU of Henderson, Nevada. According to an NCUA release, Plano, Texas’s EDS CU has purchased and assumed Ensign FCU’s member share accounts, and former Ensign FCU members will “continue to receive uninterrupted credit union service.” EDS CU holds $772 million in assets from 57,000 members in several states nationwide. The NCUA closed Ensign FCU due to its “declining financial condition,” according to the release. Ensign FCU is the 13th federally insured credit union to be closed this year, according to the NCUA. The Federal Deposit Insurance Corporation also reported late last week the closure of Pacific Coast National Bank, which was the 123rd FDIC-insured institution to fail this year.

Congress this week Overdraft returns in Senate maybe in House

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WASHINGTON (11/17/09)--Overdraft legislation will return to the Hill this week, with the Senate Banking Committee holding a Tuesday hearing on overdraft protection programs. The Federal Reserve late last week released an overdraft rule that would require credit unions and other financial institutions to obtain consent from consumers before they could be charged overdraft fees for ATM and one-time debit transactions. CUNA has said that while the Fed rule "may present compliance challenges for certain credit unions," the Fed rule does not present the same challenges or restrictions that are included in either the House or Senate overdraft legislation. Specifically, CUNA has expressed concern over portions of Dodd’s bill which would impose a proportional fee structure on overdraft fees and limit the number of overdraft transactions that a consumer could make to one per month and six per year. The Credit Union National Association (CUNA) will submit a statement for the record, but will not testify at the hearing, which will include testimony from the Center for Responsible Lending’s Eric Halperin and Pentagon FCU President/CEO Frank Pollack, among others. The House Financial Services Committee could also begin overdraft discussion this week, although it is not on the schedule at this time. The House Committee is set to resume its markup of H.R. 2609, the "Federal Insurance Office Act of 2009", H.R.3996, the "Financial Stability Improvement Act of 2009," and H.R.3904, the "Overdraft Protection Act," on Tuesday. The committee is expected to begin the session by considering H.R. 3996, and this weeks’ committee discussion may be limited to the systemic risk bill. Returning to the Senate, the Dodd-led Banking Committee is expected to begin consideration of the "Restoring American Financial Stability Act of 2009," which would provide many comprehensive reforms of the financial regulatory system, on Thursday. However, the Thursday hearing is only expected to include opening statements from Senators, and the real work of modifying the bill may not begin until late November, at the earliest, and may not kick off until the first week of December, according to CUNA’s Vice President of Legislative Affairs Ryan Donovan.

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 ...

Judge rules investment products exempt from UBIT

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DENVER (11/13/09)— Income from investment products, such as stocks, bonds, mutual funds and annuities, made available by a state-chartered credit union to its members is not subject to unrelated business income tax (UBIT), according to a summary judgment ruling by a U.S. District Judge yesterday. The ruling in U.S. District Court for the District of Colorado was issued in the case of Bellco CU Union v. United States. Bellco is based in Greenwood Village, Colo. Judge Christine M. Arguello ruled that investment products made available by Bellco to its members were "substantially related" to Bellco's tax-exempt purposes, and therefore the income from those activities was, under the law, exempt from UBIT. At the same time, Arguello ruled that income from investment products sold to nonmembers was not "substantially related" to Bellco's tax-exempt purposes, and therefore could be subject to tax. Bellco’s investment advisors had some nonmember clients. Arguello deferred to trial, scheduled to begin Dec. 7, the treatment of Bellco's income from credit life and disability insurance and accidental death and dismemberment (AD&D) insurance. The judge found that some of the facts concerning these products remained uncertain and needed to be clarified. Arguello will preside over a trial to determine those facts. The judge also said the trial should address the issue of whether sales of certain insurance products to people who are not members of Bellco, but do belong to other credit unions, should be exempt from UBIT because the products further Bellco's tax-exempt purposes. Bellco brought the lawsuit with the support of the UBIT Steering Committee, which includes the Credit Union National Association (CUNA), CUNA Mutual, the American Association of Credit Union Leagues, and the National Association of State Credit Union Supervisors. CUNA General Counsel Eric Richard said the steering committee is pleased with the ruling on financial services and looks forward to dealing with the remaining issues at trial. “The court made clear that financial products sold to members are fully consistent with the purpose of credit unions and should not be taxable,” Richard said. “Bellco argued, and the court agreed, these financial and insurance products help promote thrift on the part of CU members.” Richard said next month’s trial gives Bellco the opportunity to make its case as to why income derived from credit life and disability insurance, as well as royalties from AD&D, should not be subject to UBIT. Bellco has challenged an IRS assertion that UBIT is due on three of its products, and has asked the court to grant a refund of $199,293 in tax that was paid on income from AD&D insurance, credit life and disability insurance, and financial products and services in 2000, 2001 and 2003, plus statutory interest. Earlier this year, the U.S. District Court for the Eastern District of Wisconsin, following a jury trial, ruled that Community First CU of Appleton, Wis. was exempt from UBIT on income from credit life insurance, credit disability insurance, and GAP coverage, because those products were "substantially related" to the credit union's tax-exempt purposes as a state-chartered credit union.

Corporate CU plan 1 deposit on NCUA meeting docket

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ALEXANDRIA, Va. (11/13/09)--The National Credit Union Administration (NCUA) has confirmed that it will unveil its long-awaited proposed rules on corporate credit unions at its upcoming monthly board meeting, to be held Nov. 19 here. While the exact details of the proposed rules are not yet known, the NCUA has provided some information on what the new guidelines could entail. Specifically, the agency has indicated that new capital standards that call for a 4% leverage ratio, which will include retained earnings and paid-in capital from members, could be part of the plan. The proposal is also expected to address concentrated risks in mortgage-related securities and other asset-backed securities and set general rules on executive compensation for corporate credit union leadership. Another issue of importance on the NCUA docket is the National Credit Union Share Insurance Fund premium and 1% deposit. While there has been some speculation that the 2010 share insurance assessment could fall between 15 and 30 basis points, NCUA board member Gigi Hyland has publicly stated that the NCUA could not predict the amount of the assessment in 2010 due to the unknown nature of future expenses, share growth, investment yields and resolution costs. The NCUA will also consider its monthly insurance fund report at the meeting. The NCUA’s 2010/2011 operating budget, its overhead transfer rate, and its operating fee scale will also be discussed during the open portion of the meeting. The NCUA approved a tentative fiscal 2010 budget of $189.97 million last year. As is routine, a closed session of the NCUA board will follow the early open session.

Regulation is the better overdraft approach CUNA

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WASHINGTON (11/13/09)--The Federal Reserve Board's final rule on overdraft protection plans, which was released on Thursday, “should give Congress pause before it proceeds further with the various legislative proposals that are now pending,” according to Credit Union National Association(CUNA) President/CEO Dan Mica. The Fed rule, specifically, would require credit unions and other financial institutions to obtain consent from consumers before they could be charged overdraft fees for ATM and one-time debit transactions. The rule, which will go into effect on July 10, also requires credit unions and other financial institutions to fully disclose the overdraft services, the fees, and the consumer’s right to opt-in, and ensures that members or customers that do decide to take part in the overdraft protection service may cancel the service at any time. (See related story: Opt-in featured in Fed overdraft rules.) Sen. Christopher Dodd (D-Conn.) and Rep. Carolyn Maloney (D-N.Y.) last month each introduced bills aimed at addressing overdraft fees by prohibiting them unless the member or customer exercises the option to opt-in to the program. Dodd's legislation only requires the opt-in provisions for ATM and debit card transactions, while Maloney's bill would impose opt-in requirements for all transactions. Both pieces of legislation are awaiting committee action on their respective sides of Congress. While the Fed rule “may present compliance challenges for certain credit unions,” Mica said that the rule does not present the same challenges or restrictions that are included in either piece of legislation. Those include restrictions on the amount and frequency of overdraft fees or requirements that force financial institutions to provide same-day notification to consumers when an overdraft is paid or notification if an ATM transaction will result in an overdraft. “CUNA's position has been that a regulatory approach to these issues is far preferable than these legislative initiatives,” Mica said. CUNA is analyzing the rule, and will provide credit unions with a more in-depth explanation of how the rule could impact their business practices as soon as possible.

Inside Washington (11/12/2009)

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* WASHINGTON (11/13/09)--The Federal Deposit Insurance Corp. (FDIC) was expected to provide clarification Thursday on how to treat securitized loans at failed banks (American Banker Nov. 12). The move would significantly impact investors if the FDIC took ownership of the assets. Current policy keeps the assets off a failed bank’s books, but next year, a change in accounting rules could mean the banks may have to place the assets back on the books. As such, investors may rethink their participation in securitizations if the FDIC would later claim them ... * WASHINGTON (11/13/09)--A proposed fund to pay for the resolution of systemically significant institutions is triggering questions from the financial services industry. Senate and House bills would require large institutions to fund an assessment after a systemic collapse, but the House Financial Services Committee is expected to propose a prepaid system that would require institutions to pay before a failure. Rep. Luis Gutierrez (D-Ill.) is expected to release an amendment that would require institutions with more than $10 billion in assets to pay into the fund. House Financial Services Committee Chairman Barney Frank (D-Mass.) said he supports the move (American Banker Nov. 12). The topic of a resolution fund has surfaced as a significant debate topic recently because the Federal Deposit Insurance Corp.’s (FDIC) Deposit Insurance Fund reached a high of $5.28 billion in 2008 but is now insolvent. Some observers said the proposed resolution fund would have to be “huge.” William Isaac, former FDIC chair, called the reserves a “big slush fund” ... * WASHINGTON (11/13/09)--The Federal Housing Administration (FHA) announced that its reserves have fallen to a record low after another drop in home prices (Bloomberg.com Nov. 12). The loan insurance ratio decreased to 0.53% in the year ended in September from 3% in 2008. FHA said it would tweak its risk models in case the fund falls below zero, which would trigger taxpayer aid. Congress requires the FHA is required to maintain a 2% threshold. The FHA, with Fannie Mae and Freddie Mac, accounted for more than 90% of U.S. home loans in the first half of 2009 ...

Opt-in featured in Fed overdraft rules

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WASHINGTON (11/13/09)--The Federal Reserve Board's final rule on overdraft protection plans, which would require the consent of consumers before they could be charged overdraft fees for ATM and one-time debit transactions, was released on Thursday. According to the Fed, the overdraft rule also prohibits credit unions and other financial institutions from “discriminating against consumers who do not opt in” to overdraft plans by requiring them to provide those consumers with identical account terms, conditions, and pricing to those given to customers that have opted in to overdraft plans. The final rules, which are issued under Regulation E, would require credit unions and other financial institutions to fully disclose the details and fee structure of the overdraft service. Financial institutions also may not require that a consumer opt-in to ATM and one-time debit card overdrafts in exchange for having overdrafts paid on checks under the terms of the new rule. Members and customers that have elected to accept the overdraft service will also have the right to cancel that service in the future under the Fed rule. Fed Governor Elizabeth Duke in a release said the Fed rule would “help consumers better understand the terms and conditions of overdraft services” and help them to “avoid fees when these services do not meet their needs." The rule does not cover check transactions, and will apply to all consumers, including existing account holders. The Credit Union National Association had supported an opt-in feature if it was limited to debit and ATM transactions. However, CUNA said it would only back this feature if it was limited to new members, due to the potential operational difficulties of applying such a requirement retroactively to existing member relationships. The rule will come into effect on July 1, 2010. Both the House and Senate have been working to address overdraft fees through separate pieces of legislation. Senate Banking Committee Chair Sen. Chris Dodd (D-Conn.) recently introduced legislation that would force financial institutions to provide customers with the ability to choose whether or not they wish to participate in an overdraft program. Rep. Carolyn Maloney, (D-N.Y.) has also recently offered similar legislation. Commenting on the Fed rule, Dodd said that legislators "need to do far more to protect customers from abusive bank products." While Maloney said that the Fed rule was a "good, solid step forward," she said in a statement that there is still a "need for Congressional action on this issue." Credit Union National Association President/CEO Dan Mica, however, indicated that further legislative action on overdraft fees may not be prudent. (See related coverage: Regulation, not legislation, is right overdraft approach: CUNA.)

Inside Washington (11/11/2009)

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* WASHINGTON (11/12/09)--House Majority Leader Steny Hoyer (D-Md.) announced that the schedule for the House of Representatives has been updated. The House is expected to be in session the week of Nov. 16, the week of Dec. 7, and the week of Dec. 14. It also could be in session on Dec. 21 and Dec. 22 if needed, Hoyer said. The schedule was updated because of action on health insurance reform legislation, which has now moved to the Senate ... * WASHINGTON (11/12/09)--Federal Reserve officials have commented on the idea of creating “living wills” for financial institutions, signaling some support. Fed Gov. Daniel Tarullo, during a speech before an international banking group Tuesday, said a living will has some limitations because it’s difficult to predict which parts of a financial firm will be under the largest amounts of stress during a crisis. A living will also should be used as a supervisory tool, where firms would draw up contingency plans, identify obstacles to an orderly resolution, and produce the information a supervisor would need to ensure a resolution, he said (American Banker Nov. 11). Eric Rosengren, president of the Federal Reserve Bank of Boston, said living wills should account for how regulators will handle a firm when a crisis hits. The wills could serve as a “mechanism to encourage greater synchronization of supervisory policies,” he added. Discussion regarding living wills has surfaced recently among lawmakers because of a bill introduced by Rep. Barney Frank (D-Mass.) that would require companies to submit wind-down plans to the government to guide regulators in taking apart an institution without damaging the financial system (News Now Nov. 10) ... * WASHINGTON (11/12/09)--Financial industry observers are discussing the impact on the financial system of a recent order barring the Federal Home Loan Bank of Seattle from redeeming or repurchasing stock or paying dividends. The Federal Housing Finance Agency (FHFA) considers the bank to be undercapitalized. Richard Riccobono, president of the Seattle bank, said he doesn’t think the decision will impact the rest of the system (American Banker Nov. 11). Alfred DelliBovi, president of the Federal Home Loan Bank of New York, agreed, saying the FHFA’s order is helping the bank return to profitability. However, Brian Harris, Moody’s Investors Service analyst, said the move will cause banks to think about when they could get their stock back. Jim Vogel, head of fixed-income research at First Financial Capital Markets Corp., said the impact will be wide, because member banks will worry that they won’t be able to withdraw their stock ...

2009 common BSA violations highlight at CUNA conference

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WASHINGTON (11/12/09)--During the recent Credit Union National Association/National Association of State Credit Union Supervisors (NASCUS) Bank Secrecy Act (BSA) conference held in San Franciso, the National Credit Union Administration (NCUA) highlighted many of the common compliance violations examiners are finding during BSA examinations. Many of these violations mirror those found in 2008. For instance, the NCUA reported that BSA training among some credit unions was not properly documented, was not comprehensive, and was not done frequently enough. The NCUA also noted that some credit unions may need to increase the frequency which with they review/update their risk assessments, as well as select anti-money laundering systems better suited to address the institution's risks. The NCUA also asked credit unions to increase the frequency and thoroughness of their independent testing. Independent testing should include transactional testing, and credit unions should use the Federal Financial Institutions Examination Council's (FFIEC) BSA/AML manual as a guide for their independent testing, the NCUA added. The NCUA said it continues to see repeated errors, such as incomplete forms and blank narratives on suspicious activity reports, and urged credit unions to utilize the BSA E-filing system. The agency also noted that the FFIEC BSA/AML Examination manual is being revised and that the revised manual should be available sometime in early 2010. The Office of Foreign Assets Control finalized its economic sanctions enforcement guidelines, which were recently published in the Federal Register with an effective date of Nov. 9. The guidelines outline the factors that will be considered in determining the appropriate enforcement response to an apparent violation of an OFAC sanctions program. This final rule supersedes all previous enforcement guidance issued by OFAC, and applies to all persons and entities subject to any of the sanctions programs administered by OFAC. The OFAC is also preparing to change its regulations to mandate electronic filing of blocked and rejected transaction reports.

Matz details exams fine balance responding to congressional concerns

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ALEXANDRIA, Va. (11/12/09)--Responding to a recent letter from Reps. Barney Frank (D-Mass.) and Walter Minnick (D-Idaho) that asked federal regulators to "show some temperance" during their examinations of financial institutions, National Credit Union Administration (NCUA) Chairman Debbie Matz said that the agency is working to balance the lending needs of a weakened economy with the need to ensure the “safety and soundness” of the institutions insured by the NCUA. Specifically, Matz said, the NCUA is drafting a supervisory letter to encourage credit union examiners to “show flexibility” if a credit union that is undergoing a period of financial stress “demonstrates adequate long-range strategic planning that would enable the institution to weather broader economic difficulties.” According to Matz, the NCUA’s view is that it “may be appropriate for a credit union to forego short-term earnings so that a high level of member service can be maintained,” in some circumstances. Matz also detailed some ways that the NCUA is encouraging further leeway for both credit unions and their members through its support of residential real estate mortgage loan modification programs and a recent joint policy statement with the Federal Financial Institutions Examination Council (FFIEC) that spoke in support of prudent commercial real estate loan workouts. The NCUA/FFIEC statement “provides guidance for examiners and financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties,” according to Matz. The NCUA will also provide examiners and constituents with further guidance, information on best practices, and insight into the underwriting and examination of member business lending during a Nov. 18 webcast led by board member Gigi Hyland, the letter added.

NCUA to remain independent under Dodd plan CUNA

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WASHINGTON (11/12/09)--While Sen. Chris Dodd’s recently released financial regulatory overhaul discussion draft would, if approved, bring sweeping changes to the financial services landscape, CUNA commended the Senator for not changing the National Credit Union Administration’s authority as sole safety and soundness regulator for credit unions. Dodd’s bill would consolidate the powers of other Federal regulators, including the Office of the Comptroller of the Currency, the Office of Thrift Savings, the state-based authorities of the Federal Deposit Insurance Corporation, and the state bank and holding company oversight authority of the Federal Reserve, into a single financial institutions regulatory administration. Following the introduction of the bill, John Magill, senior vice president of CUNA's legislative affairs department, commended the senator for recognizing the needs of credit unions and granting the NCUA its continued regulatory independence. “The Dodd bill provides great news for credit unions on this issue because it helps to solidify recent House comments to CUNA which promised the uninterrupted continuation of the NCUA’s role as federal credit union regulator,” Magill added. Dodd’s legislation would also address the systemic risks posed by derivatives and discourage much of the excessive financial firm growth exemplified by so-called “too big to fail” institutions. The bill would also promote the creation of 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. Dodd’s version of the CFPA would be led by a five member board with a single independent director, and would be the sole agency held accountable for consumer protection. The resources of this version of the CFPA would, according to a summary of the legislation, focus on “mortgage bankers, brokers, finance companies” and large financial institutions, and the CFPA would have “broad authority” to “investigate and react to abuses as they develop.” The House version of the CFPA legislation, H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act of 2009, contains similar provisions, and would, as currently written, also be managed by a five-member board. CUNA is working with Rep. Barney Frank (D-Mass.) to modify this bill before it moves on to the full House. While the Senate version of the CFPA would not exempt credit unions from examination and supervision by CFPA, CUNA will be working hard to fix this issue.

CUNA GAC lineup adds FASB Chair Herz

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WASHINGTON (11/10/09)--The Credit Union National Association (CUNA) has added another notable presence to its 2010 Governmental Affairs Conference, with Financial Accounting Standards Board (FASB) Chairman Robert Herz committing to speak at the conference on Thursday, Feb. 25, the final day of the conference. FASB continues to work on potential changes to its fair value accounting standards in the aftermath of the financial crisis, and CUNA representatives last month discussed the range of potential difficulties that credit unions could face if fair value accounting rules are changed during a conference call with FASB Chairman Robert Herz and other senior FASB members. CUNA's 2010 GAC is Feb. 21-25 at the Washington Convention Center in Washington, D.C. Larry Kudlow, economist and host of CNBC's The Kudlow Report, will explain on Monday, Feb. 22 how government, markets and industry can join together to make a true difference, real progress and a lasting recovery. On Tuesday, Feb. 23, long-serving former Federal Reserve Chairman Alan Greenspan will provide analysis of economic trends and offer new insights into the current economic challenges. Joe Scarborough, former Congressman and current host of MSNBC's Morning Joe will spar with Governor, Presidential candidate and former Democratic National Committee Chairman Howard Dean as the two debate politics, economics and the course of the nation on Wednesday, Feb. 24. Richard Phillips, Captain of the Maersk Alabama, which was hijacked by Somali pirates earlier this year, will be the closing speaker as the conference ends on Thursday, Feb. 25. The informational portion of the conference will be finely balanced with entertainment, as the World Classic Rockers, featuring member of Santana, Journey, Boston, Steppenwolf, Toto and Lynyrd Skynyrd, will perform as the conference opens on the night of Sunday, Feb. 21. The concert is sponsored by the CUNA Councils. Registration and housing lines are open. Click the resource link below for more information. Use the resource link below for more 2010 GAC information.

Inside Washington (11/10/2009)

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* WASHINGTON (11/11/09)--Credit conditions are still tight, and about 35% of domestic banks said they had restricted standards for commercial real estate loans (CRE), compared with 45% in July, according to results of the October Senior Loan Officer Opinion Survey on Banking Lending Practices. The Federal Reserve Board released the results Monday. Roughly 25% of banks said they had tightened prime real estate loan standards during the third quarter--slightly higher than July but lower than 75% in July 2008 (MortgageNewsDaily Nov. 10). Loan officers said about 10% of their CRE loans were in foreclosure (American Banker Nov. 10). The loan officer study focused on CREs, commercial and industrial loans, and pending implementation of the Credit Card Accountability, Responsibility and Disclosures Act. It is based on responses from 57 domestic banks and 23 U.S. branches of foreign banks ... * WASHINGTON (11/11/09)--Critics said the Gramm-Leach-Bliley Act, which was enacted in 1999 and allowed banks and other financial services companies to consolidate, fell short in the nation’s financial crisis. The act may not be directly to blame for the financial crisis, but its shortfall paved the way for firms slated “too big to fail” to be too tough for the government to resolve and regulate, observers said (American Banker Nov. 10). Eugene Ludwig, CEO of the Promontory Financial Group, said the act failed to “produce a coherent regulatory mechanism that was up to the new powers it created.” Gramm-Leach-Bliley gave the Federal Reserve Board more power to oversee financial institutions, but some critics question whether the restrictions on the Fed’s power were too strict by allowing holes in the Fed’s “umbrella” to permit risky activity. Ludwig noted that financial holding companies had new powers, but regulators didn’t have an increasing ability to monitor how the companies used the powers--leading to a “recipe for trouble,” he said. Former Sen. Phil Gramm, who helped author Gramm-Leach-Bliley, said he could have done more to prevent the nation’s financial troubles, but shifted some of the blame to former Fed Chairman Alan Greenspan for inflating the housing market. Gramm, who chaired the Senate Banking Committee from 1999 to 2001, also said he is “perplexed” by the idea of giving the Fed the role of systemic risk regulator, because the Fed was given that role under Gramm-Leach-Bliley ...

NCUA Premium assessment bills in the mail next week

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ALEXANDRIA, Va. (11/11/09)--The National Credit Union Administration (NCUA) has confirmed that the bill will be in the mail to credit unions the week of Nov. 16 for the 2009 National Credit Union Share Insurance Fund (NCUSIF) premium assessment of 0.15% of insured shares. The NCUA in September approved the 0.15% of insured shares assessment on federally insured credit unions to help raise the NCUSIF equity to 1.3% of June 30, 2009 shares and repay $310 million in funds the Stabilization Fund has borrowed from the U.S. Treasury. The assessment would also repay all interest accrued by the NCUSIF as of June 30, 2010. Payment of the assessment will be due by mid-December. The assessment will not include extra NCUSIF premiums or an additional special assessment. Although it was anticipated that the NCUA would discuss at its October meeting a more finely honed prediction for next year’s share insurance assessments than the 15-30 basis points currently being circulated, that discussion did not occur. Shortly before that meeting, board member Gigi Hyland foreshadowed the board’s decision by stating publicly that the NCUA could not predict the amount of the assessment in 2010 due to the unknown nature of future expenses, share growth, investment yields and resolution costs. One concern about stating too narrow an estimate is the accounting repercussions such an action could have. The NCUA staff is once again expected to make a presentation before the board at the Nov. 19 open meeting: How this is presented will be of great interest because, some observers note, if the agency were to announce too precise a figure for the future premium assessment, accountants might require credit unions to book the costs this year.

CUs among awardees of 8 million in VITA grants

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WASHINGTON (11/11/09)—At least two credit unions are among the dozens of organizations that were awarded nearly $8 million total in matching grants from the Internal Revenue Service (IRS) to support the tax agency’s Volunteer Income Tax Assistance (VITA) program. Under the VITA Grant Program, the IRS awarded matching grants to 147 organizations that will offer free tax preparation services during the 2010 filing season at locations in all 50 states and the District of Columbia. Among them were State Employees' CU (SECU) of Raleigh, N.C. and El Paso CU, in Texas. SECU received $150,000 and El Paso CU received $90,0000. VITA is an IRS program that helps low- and moderate-income taxpayers complete their annual tax returns at no cost. Credit unions and community organizations receive IRS-provided training in the preparation of basic tax returns and establishment of tax preparation sites. As reported in News Now earlier this year, SECU reported in April that its VITA staff completed more than 25,000 returns, generating more than $33 million in total refunds during this year's tax season. The previous year, SECU said it helped 15,000 qualifying individuals claim more than $8 million in tax credits over a three-month span. The IRS said there was a strong response to the 2010 VITA grant program with 360 organizations submitting applications requesting more than $30 million in matching funds, similar to the prior year. The VITA program has the backing of the National Credit Union Administration, and the agency has encouraged credit unions to participate.

CUs need unique agency in new reform bill CUNA

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WASHINGTON (11/11/09)--Responding to Sen. Christopher Dodd’s (D-Conn.) Tuesday introduction of draft financial legislation that would, among other things, create a single prudential financial regulator, Credit Union National Association (CUNA) President/CEO Dan Mica said that credit unions “need a unique regulator in all aspects of examination and supervision.” The bill would also promote the creation of 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, Mica said. The additional examinations and supervision that credit unions would face from the CFPA “is a significant issue for credit unions and can be a factor in our ultimate disposition toward this legislation,” Mica added. Dodd’s legislation would task a single regulator with the work of several financial regulatory bodies, including the Federal Reserve. Dodd during the Tuesday press conference indicated that legislators would have two to three weeks to review the bill, and that formal markup of the bill could begin in the first week of December. Calling the establishment of a single prudential regulator “critically important,” Dodd said that the legislation’s intent to reallocate all Federal Reserve Board responsibilities outside of determining monetary policy is meant “not to punish the Federal Reserve, but to strengthen and enhance their role.” The bill also creates a systemic resolution fund under the Federal Deposit Insurance Corp (FDIC) that would be used to help unwind troubled financial firms. However, the legislation would strip the FDIC of some of its supervisory activities. Overall, the bill would give some additional oversight responsibilities to the states. While Sen. Richard Shelby (R-Ala.) has not publicly commented, Dodd commented that he has been working with Shelby, adding that he hopes for significant additional input from his fellow senators. The Credit Union National Association is currently analyzing how the bill would affect credit unions.

Inside Washington (11/09/2009)

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* WASHINGTON (11/10/09)--The Federal Housing Administration’s (FHA) move to delay releasing an audit of its capital reserves has prompted fears in the financial services industry that the fund is in the red and that the FHA will increase mortgage insurance premiums to make up the difference. The FHA has nearly depleted its reserves, and financial industry observers expect that the Department of Housing and Urban Development will try to raise more money as soon as it can. FHA lenders currently charge a borrower 165 basis points at closing plus another 50 basis points each month. The points are financed and the borrower cannot recoup the premium (American Banker Nov. 9). FHA hasn’t released information about its reserves, but the industry expects the ratio of cash to mortgages will be lower than 2%. Jim Pair, president of the National Association of Mortgage Brokers, said raising the mortgage premium would hurt the housing market ... * WASHINGTON (11/10/09)--The Federal Home Loan Bank of Seattle is undercapitalized, said the Federal Housing Finance Agency Friday (American Banker Nov. 9). The bank cannot redeem or repurchase stock or pay dividends, the agency said. While the institution has met its minimum capital requirements, the agency maintains that it is undercapitalized because of declines in the value of private-label mortgage-backed securities. Also, the bank is in danger of exhausting its retained earnings if credit losses on the securities in the fourth quarter matched losses in the third quarter. Last week, the bank said it lost $144.3 million in the first nine months of the year--$93.8 million of which was during the third quarter ... * WASHINGTON (11/10/09)--Lawmakers are debating the concept of “living wills” for financial institutions as a way to resolve systemically significant firms. Under a bill that would also create a new regulator for systemic firms, companies would be required to submit wind-down plans to the government to guide regulators so they can take apart an institution without damaging the financial system. The goal is to help the firms and the government prepare for a crisis. Rep. Barney Frank (D-Mass.) is sponsoring the bill. Several observers question if the guide would actually be followed, because the government would not be obligated to use the plan during a resolution. Harvard University Professor Kenneth Rogoff noted that firms would have to change their wills “all the time” (American Banker Nov. 9). He said the exercise wouldn’t be “bad to go through” but another line of defense is needed. Douglas Elliott, Brookings Institution fellow, said the benefits of a “living will” may be small but “still worth it” ...

Matz urges better settlement for CU fraud victims

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ALEXANDRIA, Va. (11/10/09)—National Credit Union Administration (NCUA) Chairman Debbie Matz sent a letter Monday to the Federal Housing Finance Agency encouraging that regulator to get Fannie Mae to offer a more reasonable settlement to credit unions defrauded by CU National Mortgage. Matz noted that approximately two dozen credit union were scammed by CU National to a tune of more than $125 million in potential losses. CU National sold mortgage loans to Fannie Mae but did not remit sale proceeds back to the originating credit unions. The credit unions received monthly principal and interest payments and did not become suspicious of the fraud, according to the NCUA letter. Fannie Mae offered a settlement equal to approximately 15% of potential losses in August and raised that in a second offer to closer to 25%, with a 3% bonus if at least 18 credit unions agreed to the offer. The NCUA said only two have signed on for it. “The outcome seems especially egregious considering Fannie Mae’s status as a government-sponsored enterprise, and doubly so in light of the fact that it is currently in conservatorship and receiving billions of dollars of taxpayer assistance,” wrote Matz to FHFA Acting Director Edward DeMarco. Matz noted that one credit union has filed suit against Fannie Mae and others are considering similar action, but added that the cost of such litigation further jeopardized the financial health of these victim cooperatives. “(T)he financial impact of CU National’s frauds on these member-owned cooperatives is significant. Indeed, for some of the credit unions, their losses will be so great as to force out agency to take drastic action under the prompt corrective action rules,” Matz informed her fellow regulator. She concluded by offering the help of her staff to work with FHFA to bring about “a rapid and cost-effective resolution.”

Fed attorney says rule will reflect 21-day fix

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WASHINGTON (11/10/09)--Even before President Barack Obama signed the CARD Act Technical Corrections Act (H.R. 3606) into law on Friday, staff from the Federal Reserve had confirmed with the Credit Union National Association that Fed staff will include this change in the CARD Act final rule that will be issued by the end of the year, or January at the latest. These rules will address the provisions that were effective as of Aug. 20 and that will be effective as of Feb. 22, 2010. Fed attorney Ben Olson also indicated that the Fed staff has no objection to the correction, telling CUNA Senior Assistant General Counsel Jeff Bloch that the correction "makes a lot of sense." The CARD Act change fixes portions of the act that implied that a 21-day late notice requirement applied to all open-end credit by clearly stating that late-notice provisions apply to credit cards only. CUNA consistently argued that lawmakers had always intended to apply the provision to credit cards only, and worked closely with lawmakers and their staffs to inform them that the CARD Act drafting error prevented credit unions from granting biweekly payment plans or sending consolidated billing statements to their members and would force them to change payment due dates for members that had previously chosen due dates based on their specific financial circumstance. CUNA President/CEO Dan Mica hailed the quick and decisive work by the House, Senate, and President, saying that the to-be-enacted legislation “gives credit unions the opportunity to go back to doing what they do best: Serving their members with affordable and needed financial services.” Use the resource link below for comprehensive compliance information about "un-complying" with the 21-day requirement now that the fix has been enacted.

Fed to transfer Phila check processing to Cleveland branch

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WASHINGTON (11/10/09)--The Federal Reserve late last week announced that on December 12 it will transfer its check processing operations from the head office of the Federal Reserve Bank of Philadelphia to the Federal Reserve Bank of Cleveland. The Fed earlier this year announced that it would transfer the check processing operations of its Dallas branch and its Los Angeles branch of the Reserve Bank of San Francisco to Cleveland, effective November 14. The moves reflect an overall restructuring of the Fed's check processing operations, and are a response to consumers' and businesses' shift from using paper checks toward electronic payments. According to the Fed, all check processing will be handled by the Cleveland office by early next year. For the full Fed release, use the resource link.

Congress this week After brief recess overdraft to take Senate stage

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WASHINGTON (11/10/09)--While the Senate will go into a brief Veterans' Day recess beginning on Tuesday afternoon, the Senate Banking Committee will resume business with a hearing on overdraft protection legislation on Tuesday, Nov. 17. The hearing, which will address S. 1799, The FAIR Overdraft Coverage Act, will feature testimony from Pentagon FCU President/CEO Frank Pollack as well as the Consumer Federation of America's Travis Plunkett and the Center for Responsible Lending's Eric Halperin. The Credit Union National Association will submit a statement for the hearing record, but will not testify at the hearing. S. 1799, which was introduced by Senate Banking Chairman Sen. Chris Dodd (D-Conn.), would limit the fees that financial institutions can charge on overdraft protection services. There will be no action on the House side this week, as the House will be in recess until Nov. 16. However, there was significant news in the House at the end of last week, with the House Financial Services Committee on Friday approving an amendment to H.R. 3996, the Financial Stability Improvement Act of 2009, that would reduce some of the risk monitoring powers of the Federal reserve Board. As reported in American Banker, the committee chairman, Rep. Barney Frank (D-Mass.), on Friday said that while he favors maintaining the Federal Deposit Insurance Corporation’s oversight of state-chartered banks and opposes a single regulator, he would consider moving some of the Federal Reserve Board’s current authority to a new national bank overseer. While legislation offered by Frank would make the Fed responsible for systemic risk regulation while stripping it of some consumer protection powers and merge the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision, a pending proposal from Dodd would move all Federal bank oversight ability to the OCC.

CARD Act 21-day fix homebuyer tax credit are now law

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WASHINGTON (11/10/09)—Starting the weekend off right for credit unions, President Barack Obama on Friday signed the CARD Act Technical Corrections Act (H.R. 3606) into law. He also penned his name to the bill extending the homebuyer tax credit. The new CARD Act law fixes a situation that has been plaguing credit unions since the original Credit Card Accountability, Responsibility and Disclosure (CARD) Act was signed in May. That bill incorrectly implied that a 21-day late notice requirement applied to all open-end credit, and the Credit Union National Association (CUNA) has argued that it had always been lawmakers’ intent to apply the provision only to credit cards. The corrections bill states clearly that the late-notice provision applies only to credit cards. CUNA has worked closely with lawmakers and their staffs warning that the drafting mistake would prevent credit unions from granting biweekly payment plans to their members, from sending members consolidated billing statements, and would force them to change payment due dates for members that had previously chosen due dates based on their specific financial circumstance. The situation was particularly problematic for Home Equity Lines of Credit (HELOC) because the due date of a HELOC is often a contractual term. CUNA President/CEO Dan Mica hailed the quick and decisive work by the House and Senate on the correction bill and the president’s very timely signing of the measure. “By signing the law, the president gives credit unions the opportunity to go back to doing what they do best: Serving their members with affordable and needed financial services. "Credit unions can continue the practices of sending members consolidated billing statements, changing payment due dates for members who had previously chosen a due date based on their specific financial situation, and continuing bi-weekly payment plans--all essential tools consumers use to manage their finances in the ways that best suit their needs," Mica noted. Mica also noted the efforts of “the leagues and the many credit unions” who worked with lawmakers to get the fix into law. “Without their efforts,” Mica said, “credit unions would still be reeling from the unintended consequences of this law.” The President also signed legislation extending the $8,000 first-time homebuyer tax credit that was set to expire at the end of the month. That bill also creates a new $6,500 tax credit for current homeowners who purchase a new home between Dec. 1, 2009 and April 30, 2010. Use the resource link below for comprehensive compliance information about “un-complying” with the 21-day requirement now that the fix has been enacted.

Inside Washington (11/06/2009)

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* WASHINGTON (11/9/09)--Fannie Mae is awaiting approval from the Treasury Department to sell $2.6 billion in unused low-income housing tax credits. The Treasury is deciding whether to allow Goldman Sachs Group to buy the credits. Fannie entered into an agreement Sept. 30 to sell the credits, according to a filing with the Securities and Exchange Commission (Bloomberg News Nov. 6). The Federal Housing Finance Agency, which regulates Fannie, did not object to the sale. Fannie has garnered about $5.2 billion in tax credits for investing in low-income housing ... * WASHINGTON (11/9/09)--Senate Committee Chairman Christopher Dodd (D-Conn.) is expected to release a regulatory reform bill next week. Few committee members know what the bill contains, but there are likely three points of contention, according to financial observers. They include: creating a consumer protection agency, eliminating federal preemption for national banks and thrifts, and taking away the Federal Reserve Board and Federal Deposit Insurance Corp.’s supervisory powers and consolidating them into a single entity (American Banker Nov. 6). Dodd hopes to have the committee debate on the measure before Thanksgiving, but a vote is not likely to take place until December. If a deal with Republican committee members can’t be reached now, Dodd likely will work to win their support before the bill moves to the Senate, observers added ... * WASHINGTON (11/9/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) said he would revise a systemic risk reform bill before it moves to a final vote in two weeks (American Banker Nov. 6). Frank said he plans to reduce the Federal Reserve Board’s power and emergency lending authority, remove a provision that would allow the Fed to override other regulators, and eliminate the Federal Deposit Insurance Corp.’s ability to put a systemic firm into conservatorship. Frank also supports making public a list of systemically significant institutions. The debate over the bill began Thursday. The committee approved an amendment by Rep. Carolyn Maloney (D-N.Y.) to require that an interagency systemic risk council consider a company’s leverage and current regulation before it is slated as “systemic” ... * WASHINGTON (11/9/09)--Fannie Mae reported a $18.9 billion loss for the third quarter, according to a company press release. This compares with a loss of $14.8 billion in the second quarter. Third quarter results were due to $22 billion of credit-related expenses. The results reflect the continued building of combined loss reserves and fair-value losses associated with the increasing number of loans acquired from mortgage-backed securities trusts to pursue loan modifications. The loss resulted in a net worth deficit of $15 billion as of Sept. 30, taking into account unrealized gains on available-for-sale securities during the third quarter. The Federal Housing Finance Agency, Fannie’s regulator, has submitted a request for $15 billion from the Treasury Department by Dec. 31 ...

Mica on iBloombergi CUs can help small biz funding gap

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WASHINGTON (11/9/09)--While credit union funds could not fully make up the difference, credit unions could fill "a small piece" of the business lending gap that has been created by the recent bankruptcy filing of CIT Group, Credit Union National Association President/CEO Dan Mica said in an appearance on Bloomberg TV. And he stressed credit unions could do even more "if we're just given a little leeway by Congress." Supporting HR 3380, the Promoting Lending for America's Small Business Act, which would raise the amount of money a credit union can devote to business lending, is a "crucial issue" for both the U.S. Congress and the country in general, Mica said. He added that the legislation could help inject up to $10 billion in new credit union lending to bolster the struggling economy and create more than 100,000 new jobs. Specifically, the legislation, which is awaiting congressional action, would increase credit unions’ cap for member business lending (MBL) to 25% of a credit union's total assets, up from the current 12.25% limit. It also would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, from $50,000, and exempt from the cap loans made to non-profit religious organizations, as well as those made in qualified underserved areas. The legislation would aid the economy at no cost to taxpayers, Mica emphasized. In fact, he said, increasing the amount credit unions are allowed to lend "would ultimately raise” tax revenue by creating more strong jobs from small businesses and could aid economic recovery "without spending one dime of government money." Credit union business loans can be used for nearly any business purpose as long as the member seeking the loan meets some requirements, Mica said during the 11-minute interview with Pimm Fox, host of Bloomberg's "Taking Stock" program. While commercial lending from banks has decreased 8% over the last year, business lending from credit unions has increased 14%, "and we can go up a lot more" if given the green light from congress, Mica said. Asked who is objecting, Mica said a "certain group" in the banking community regularly opposes non-profit financial services entities, such as credit unions. But, he said, the recent decreases in bank lending in the face of increased credit union lending shows that "their argument is hollow." In a related story, the Washington Post on Friday reported that while large U.S. businesses continue to have some success in obtaining loans, many smaller U.S. firms are still being rejected by banks. One example found a business owner was forced to look beyond U.S. shores, opting for funding from foreign banks when striking out at domestic banks.

NCUA will respond to exam temperance letter

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WASHINGTON (11/9/09)--The National Credit Union Administration (NCUA) will respond with a letter this week to Rep. Barney Frank’s (D-Mass.) request that federal regulators “show some temperance” during their examinations of financial institutions, NCUA Director of Public and Congressional Affairs John McKechnie told News Now. In a letter sent to NCUA Chairman Debbie Matz and the other federal financial regulatory leaders, Frank and co-signer Rep. Walter Minnick (D-Idaho) asked for the regulators to take a temperate approach to examinations so financial institutions “can continue to lend money to help the economy improve.” The legislators criticized seemingly tightening capitalization standards that have forced some financial firms to restrict their lending practices, and noted that CAMEL ratings should give greater weight to an institution’s liquidity and core earnings instead of focusing so closely on asset quality. “While our regulators need to uphold safety and soundness standards in this difficult economy, unnecessarily aggressive decisions made in the field by individual examiners or teams” that require capital in excess of the “official regulatory standard” for being well capitalized “must be avoided” to prevent unnecessary failures. “We are calling upon you to take the long view” and to use “wisdom and experience” to to guide field staff, Frank and Minnick wrote.

NCUA meets to discuss corporate capital issues

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ALEXANDRIA, Va. (11/6/09)—At a National Credit Union Administration (NCUA) meeting Thursday on corporate credit union issues, Credit Union National Association (CUNA) President/CEO Dan Mica urged the agency to allow a process that would leave the door open to future capital recoveries if the magnitude of losses at the corporate credit unions is not as great as the NCUA has estimated. The meeting was called by NCUA Chairman Debbie Matz to conduct a wide-ranging discussion of issues related to the treatment of corporate capital and the upcoming NCUA corporate rulemaking. About 40 representatives of corporate credit unions, natural person credit unions, CUNA and the leagues, and others, attended the meeting. The session facilitated an open and frank discussion of the NCUA's decision to deplete capital in Western Corporate CU and U.S. Central CU and the consequences of that decision, according to CUNA Deputy General Counsel Mary Dunn, who attended the meeting. Also discussed were possible approaches to mitigate the impact of that decision. After the meeting at NCUA headquarters here, Matz said in a statement that the agency will immediately begin analysis of the information gathered, “take a fresh look at the capital depletion issue and its component parts, and make certain that NCUA is proceeding in a way that satisfies all legal, policy and accounting requirements.” She said the corporate review will be completed in a way that will “enable all stakeholders to move forward with full transparency of corporates’ financial statements and full confidence in the stability of the credit union industry.” The NCUA is expected to come out this month with its anticipated draft plan for restructuring corporate credit union regulations. Among those attending the Thursday meeting were California League President Bill Cheney, Utah League President Scott Simpson, CUNA Accounting Task Force Chair Scott Waite, CUNA General Counsel Eric Richard, and Senior Economist Mike Schenk.

Community First UBIT decision backs other exemptions claims

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WASHINGTON (11/6/09)--The decision in the Community First CU v. United States case constitutes “substantial authority” for the position that the products covered in the case are not subject to unrelated business income tax (UBIT) for credit unions that are situated similarly to Community First, law firm Foley & Lardner LLP concluded in a recent memo to credit unions and credit union legal, tax, and accounting advisors. The memo provides general information about the Community First case and tax law, and notes that each individual state-chartered credit union—in consultation with its accountant and other advisors—must determine for itself whether the Community First decision constitutes “substantial authority” sufficient for the credit union to not pay UBIT on sales of credit insurance and GAP products without penalty. A jury on May 14, 2009 found in favor of Community First’s refund claim for a total of $54,604 in UBIT taxes that the credit union paid on sales of credit life insurance, credit disability insurance, and Guaranteed Asset Protection products to its members, plus costs. The Justice Department at that time asked a trial judge to overturn the jury's verdict, and a judge in July upheld the jury verdict in a written opinion. The government did not appeal this decision. The Internal Revenue Service’s UBIT policy addresses income that is deemed to be "substantially unrelated to the purpose of a tax-exempt organization." State-chartered credit unions with more than $1,000 in UBIT must report the tax on an IRS 990-T form. However, federally-chartered credit unions are not subject to UBIT. Foley & Lardner LLP is counsel to the UBIT Steering Committee, which is composed of representatives from the Credit Union National Association (CUNA), CUNA Mutual Group, the American Association of Credit Union Leagues and the National Association of State Credit Union Supervisors. To read the Foley & Lardner LLP memo in full, use the resource link.

Inside Washington (11/05/2009)

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* WASHINGTON (11/6/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) wrote in a letter Tuesday to the Commodity Futures Trading Commission and Securities and Exchange Commission that he would continue to strengthen his bill on derivatives. Frank said he would draft amendments that would address who has the power to decree that a derivative should be cleared and to determine which derivative users can be exempted from clearing requirements (American Banker Nov. 5). Originally, Frank’s bill would have given for-profit clearing platforms the ability to decide what contracts to clear. But observers have said clearinghouses would base their decisions on their own interests ... * WASHINGTON (11/6/09)--Guidelines released Friday by the Federal Deposit Insurance Corp. provided needed clarification for banks on how they should handle troubled credits when modifying commercial real estate (CRE) loans, financial observers said (American Banker Nov. 5). The guidance includes a series of examples of CRE loan workouts. It also aims to cover examiners who would penalize banks for not marking down poor performing loans. Though the guidance will provide clarity for banks, it’s unknown if it will stabilize the housing market, observers said. Richard Spillenkothen, former Federal Reserve Board director, said the guidance is helpful, but it’s also a reiteration that for certain borrowers, restructuring can be helpful for both the borrower and lender. But judging that is “tricky and difficult,” he said. Ron Glancz, partner at Venable LLP, said the guidelines could have a big impact on the CRE market. If examiners apply the guidelines, it could be a great help to banks with large CRE portfolios, he said ...

House clears CARD Act acceleration bill

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WASHINGTON (11/6/09)--The House this week passed H.R. 3639, the "Expedited CARD Reform for Consumers Act of 2009," by a 331 to 92 vote. The legislation would accelerate the effective date of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to Dec. 1 of this year, rather than the Feb. 22, 2010 deadline originally proposed in the bill. The committee also approved an amendment, offered by Rep. Betty Sutton (D-Ohio), that would place a moratorium on raising interest rates between the date of enactment and the original February 22, 2010 deadline. "We are grateful that the House retained language we were able to secure at mark-up to limit the accelerated effective dates to card issuers with more than 2 million credit cards in circulation. However, we are concerned that an amendment placing a moratorium on raising interest rates on credit cards between the date of enactment and February 22, 2010, was adopted. This proposes an unnecessary restriction where credit unions are concerned and we will be raising this issue with the Senate," Credit Union National Association Vice President of Legislative Affairs Ryan Donovan said. The Associated Press on Thursday reported that the legislation’s Senate prospects are “dim,” as many lawmakers are concerned by the negative effects that the bill could have on the industry and credit availability for consumers.

Homebuyers tax credit extension OKd by House

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WASHINGTON (11/6/09)--The House on Thursday passed by a 403-12 vote legislation that would extend access to the $8,000 first-time homebuyer tax credits that were set to expire at the end of the month. The homebuyer tax credit, which also creates a new $6,500 tax credit for current homeowners that purchase a new home between Dec. 1, 2009 and April 30, 2010, was attached to H.R. 3548, the Worker, Homeownership, and Business Assistance Act of 2009. The bill will extend unemployment insurance benefits for a 14-week period. The tax credit will be made available to single homebuyers with up to $125,000 in income and joint income tax filers with up to $225,000 in total income. It will not be available for home purchases totaling more than $800,000. The homebuyer will need to close by 60 days to be eligible for the credit. The bill also extends the tax credit to individuals who are in the market for a new home but have owned their current home for five years or longer. H.R. 3548 passed the Senate on Wednesday by a 98-0 vote. To become law, it must be signed by the president. Elsewhere in the Senate, it is widely reported that Senate Banking Committee Chairman Chris Dodd (D-Conn.) could introduce his own comprehensive regulatory restructuring legislation as a draft bill as early as Monday. The Wall Street Journal on Thursday reported that Dodd's legislation would remove the supervisory authority of the Federal Reserve and Federal Deposit Insurance Corporation and create a new single agency for bank and holding company supervision. The committee has also announced a Nov. 10 hearing, entitled Protecting Consumers from Abusive Overdraft Fees: The Fairness and Accountability in Receiving Overdraft Coverage Act, and Pentagon FCU President/CEO Frank Pollack will be among those testifying. Other witnesses scheduled to testify during the hearing on S. 1799, The FAIR Overdraft Coverage Act, include the Consumer Federation of America's Travis Plunkett and the Center for Responsible Lending's Eric Halperin. The Senate may announce further witnesses at a later date, according to a release. The legislation, introduced by Dodd, would limit the fees that financial institutions can charge on overdraft protection services. Potential changes to overdraft legislation were discussed in a House Financial Services Committee hearing held in late October, and witness President/CEO Rodney Staatz, of SECU of Maryland, speaking on behalf of the Credit Union National Association, advised members of the panel to conduct an "independent, unbiased" survey of consumer opinions on overdraft before they act on any legislation. He also stated that responsible overdraft protection plans are an important service to members, and oversight should remain in the regulatory arena. National Credit Union Administration Chairman Debbie Matz has also recently spoken out on overdraft issues, saying that she supports overdraft protection plans that are carefully done with minimal impact on members.

CUNA urges different treatment of CU capital investments in corporates

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WASHINGTON (11/5/09)--Credit unions should not have been required to write down their capital in U.S. Central CU and Western Corporate CU (Wescorp) based only on estimates of future losses, Credit Union National Association (CUNA) President/CEO Dan Mica emphasized in a letter to National Credit Union Administration (NCUA) Chairman Debbie Matz on the eve of a meeting where this issue will be discussed. “We urge the board to reverse this decision and allow credit unions that had capital investments into these corporates to retain the ability to recover at least some of their capital, in the event the actual losses relating to asset-backed securities are not as large as NCUA has estimated they will be,” Mica wrote. “As we have stated, the central issue is that it is unfair to require credit unions to write down their capital in these corporates on the basis of estimates of their future losses, with absolutely no possibility of future recovery should those estimates turn out to be inaccurate,” Mica noted. The CUNA leader made these points as the NCUA board prepares to hold a meeting today with corporate credit unions on the capital extinguishment issue. CUNA will be among those attending the meeting. Mica told Matz that CUNA disagrees with NCUA’s Letter No. 09-CU-10, which says NCUA corporate rules require the depletion of corporate capital. He also took issue with those at NCUA who have indicated Generally Accepted Accounting Principles dictate depletion of capital in Wescorp and U.S. Central. “We do not agree, and neither do the accounting practitioners and experts we consulted on this matter,” he added. NCUA has several options it can pursue to address the unfair treatment of corporate capital, CUNA said. These could include:
* Refraining from depleting all capital. NCUA has this authority, CUNA contends, and it would mean some capital could be recovered if all of the losses do not materialize; * “Freezing” rather than deplete capital accounts and allow corporates to operate with negative retained earnings under certain conditions; * Precluding the use of new capital to cover legacy losses at corporates; and * Using the Corporate Stabilization Fund to help manage the corporates’ losses as they are realized.
Mica concluded by urging the NCUA following today’s meeting to “expeditiously reconsider and rescind” its decision on capital depletion.

Inside Washington (11/04/2009)

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* WASHINGTON (11/5/09)--The Federal Deposit Insurance Corp. (FDIC) issued a financial institution letter regarding the way FDIC administers its statutory restrictions on the deposit interest rates paid by banks that are less than well-capitalized. A final rule, effective Jan. 1, redefines the national rate as an average of rates paid by all insured depository institutions and branches for which data are available. Once the rule takes effect, an institution that believes it is operating in a high-rate area can use the rates in its market area only if it seeks and receives a determination from the FDIC that it is operating in a high-rate area. The FDIC said it would issue another letter explaining how banks can request such a determination. During the interim period ending Jan. 1, institutions can use national rates and rate caps on the FDIC’s website ... * WASHINGTON (11/5/09)--Debate in the House Financial Services Committee on a bill that would create a systemic risk regulator was expected to begin Wednesday. Several issues regarding the bill need to be addressed, according to financial observers (American Banker Nov. 4). Issues include whether the Federal Reserve Board should have powers over other regulators, how to create a resolution fund to handle systemically important firms, and how high a proposed risk retention requirement for securitizations should be set. The debate will likely be contentious, said Mark Calabria, director of financial regulations studies at the Cato Institute. Rep. Barney Frank (D-Mass.), House committee chairman, said he doesn’t expect a final vote on the bill for at least one week due to amendments. The 379-page bill would designate the Fed as systemic regulator, combine the Office of Thrift Supervision and the Comptroller of the Currency, create a resolution process to help systemic institutions and create an interagency council to help the Fed advise the institutions. The Credit Union National Association sent a letter Tuesday to House Financial Services Committee Chairman Barney Frank (D-Mass.) and ranking member Spencer Bachus (R-Ala.), asking that credit unions not be entangled in the legislation because they do not pose any systemic risk to the financial system ... * WASHINGTON (11/5/09)--If Federal Reserve Board Chairman Ben Bernanke’s plan to stop purchasing mortgage-backed securities (MBS) fails, he will likely face pressures from Congress to extend credit programs for consumers and small business programs, and maintain support for housing, financial observers said (American Banker Nov. 4). If Bernanke is pressured by Congress to carry out these tasks, it would undermine the Fed’s ability to control independent money policy. Bernanke has already been pressured to help car companies and extend more credit to the commercial real estate market. William Poole, former president of the Federal Reserve Bank of St. Louis, said Congress may ask the Fed to invent a new program when a sector has difficulties, The Fed is the biggest purchaser of securities from Fannie Mae and Freddie Mac, and Bernanke hopes to stop purchasing the MBSs by March. The Fed has maintained that the securities have helped to stabilize the housing market ...

CUNA covers Reg Z at CU eBoot camp

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WASHINGTON (11/5/09)--Individuals looking to gain a more thorough understanding of the Federal Reserve Board’s recent amendments to open-end credit rules under Regulation Z can improve their knowledge on the issue through the Credit Union National Association’s (CUNA) Z eBoot Camp eSchool. The comprehensive training program, which begins on Nov. 19, will cover the basics of Regulation Z and provide an in-depth look at how recent changes will affect credit unions. The proposed changes would affect disclosures for credit cards and other credit plans, and are intended to resolve uncertainties and make other technical changes to the rule, although they are not intended to change the level of protection. CUNA’s eSchool will be divided into five separate 90-minute webinars which can be attended for $219 per class. The sessions, which will take place at 3 pm, will begin with a class on Regulation Z consumer lending basics on Nov. 19. CUNA will follow up with classes on Regulation Z mortgage lending basics on Dec. 3 and a class on account opening and credit card disclosures on Dec. 10. Finally, CUNA will cover advertising, change in terms notices, and multi-featured open-end loan programs on Dec. 17 and requirements for periodic statements on Jan. 7. The sessions will also be archived for attendees that cannot view the courses at the scheduled time. To register for the courses, use the resource link.

NCUA kicks off 2009 CDRLF program

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ALEXANDRIA, Va. (11/5/09)--The National Credit Union Administration (NCUA) on Wednesday announced that it has opened the 2009 edition of its Community Development Revolving Loan Fund (CDRLF) program. The CDRLF is administered by the NCUA's Office of Small Credit Union Initiatives and the funds are used for such things as improved financial services for members and stimulating community economic development through financial education programs, free tax preparation and asset-building services, and improved credit union operations. The application period began on Nov. 4 and will end on Dec. 30. Credit unions that will be awarded funds will be notified on March 1. In statements accompanying the release, NCUA Chairman Debbie Matz encouraged “low income-designated federal and state-chartered credit unions that have received NCUA concurrence to apply” for CDRLF funds. “I can’t think of a more opportune time to assist your members and at the same time support your community,” Matz added. Eligible credit unions may apply for as much as $300,000 in funding from the CDRLF, which has $3 million in funds available for credit unions. The House in July approved $1.25 million in CDRLF funding for the 2010 fiscal year as part of the General Government Appropriations Bill. The NCUA in May of this year had requested $1 million in funding for the CDRLF for 2010.

CU-backed candidates win Virginia California contests

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WASHINGTON (11/5/09)--Credit union leagues nationwide took part in Tuesday’s elections, and credit union-backed candidates have gained two prominent positions. New Congressman John Garamendi, who was supported by the California Credit Union League and the Credit Union National Association (CUNA)'s federal political action committee, the Credit Union Legislative Action Council (CULAC), will serve California’s 10th Congressional District, which spans Contra Costa, Solano and Alameda counties in Northern California. Garamendi defeated Republican challenger David Harmer by earning 53% of the total vote. Garamendi, who has also served as lieutenant governor and state insurance commissioner, became the Democratic nominee earlier this year when he won a California special primary. Former representative Ellen Tauscher (D-Calif) vacated the congressional seat to take a position in the State Department. Commenting on the result, CUNA Political Director Trey Hawkins said that Garamendi “has been a strong friend to credit unions on the state level, and we look forward to continuing to work with him in Congress.” The Virginia Credit Union League publicly backed incoming Virginia Governor Bob McDonnell (R), who soundly defeated Democratic challenger Creigh Deeds by 17 points on Tuesday. CULAC and the league earlier this year also supported Judy Chu (D-Calif.), who won a special election for the House seat from the 32nd district.

Inside Washington (11/03/2009)

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* WASHINGTON (11/4/09)--The Community Development Advisory Board of the Community Development Financial Institutions (CDFI) Fund will meet Nov. 16 in Washington, D.C. Fifty seats are available. Members of the public can attend the meeting on a first-come, first-served basis. To attend, individuals must contact the CDFI Fund’s office by Nov. 11. The CDFI issues community development grants to financial institutions, including credit unions, to help the underserved access affordable financial services ... * WASHINGTON (11/4/09)--The Federal Home Loan Banks continue to be hurt by losses, despite changes by the Financial Accounting Standards Board (FASB) in March to stop the fallout of other-than-temporary impairment (OTTI) charges at the banks. During the third quarter, the system’s credit-related charges were $1.042 billion, more than half of the $1.995 billion charges the system has had this year. Last week, the system said it lost $165 million during the quarter. Despite the losses, financial observers said the situation could be worse, as noncredit-related charges were $84 billion during the first nine months of this year. Before the FASB changes, the banks would have had to deduct that amount from their earnings also (American Banker Nov. 3). Some said the models the banks use to determine charges are too conservative and actual losses are lower. There are potential recoveries because the charges may result from front-end accounting losses, said Jim Vogel, head of fixed-income research at First Horizon National Corp. However, Brian Harris, analyst at Moody’s Investors Services, said the losses are real ... * WASHINGTON (11/4/09)--When FBOP Corp.’s nine subsidiaries collapsed last week, the Federal Deposit Insurance Corp. (FDIC) brought back an old method, cross guaranty, to charge two viable banks--Park National, Oak Park, Ill., and Citizens National Bank, Teague, Texas--for the resolution costs incurred by the other institutions (American Banker Nov. 3). The action reduced the cost of the subsidiaries’ failures and may be a move the FDIC will use again to handle insolvencies. Using cross guaranty “could be a wake up call” for some banks, said Kip Weissman, partner at Luse Gorman. Under the law, the FDIC can use its cross guaranty power when it believes the assessment would be the least costly resolution. Usually, the amount of the assessment against viable institutions is equal to what the FDIC would lose in its Deposit Insurance Fund for a failure. Park National and Citizens could not pay the full amount of the resolution costs, so the Office of the Comptroller of the Currency closed them. Neither would have failed without cross guaranty, but observers said the move was justified. Richard Herring, finance professor at Wharton Business School, said the FDIC’s move was “perfectly logical,” because a bank holding company may not deserve “the benefit of a doubt if they’re running some dodgy banks and some better banks” ...

FBI warns consumers of increased phishing scam attempts

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WASHINGTON (11/4/09)--The Federal Bureau of Investigation on Tuesday warned consumers that it has “seen a significant increase in fraud involving the exploitation of valid online banking credentials belonging to small and medium businesses, municipal governments, and school districts” over the recent months. According to the FBI, potential victims of this type of fraud will receive a so-called “spear phishing” e-mail that contains an infected e-mail attachment or a link that sends the e-mail recipient to a website that is infected. Malware which contains a keylogger program is then installed on the victim’s computer once they click on the link or attachment. The keylogger is then used to track account information, and that information is used to steal from the victim via fund transfers or to create additional accounts in the victim’s name. The FBI has found that transferred funds of funds from the created accounts are then diverted into bank accounts of individuals that have been recruited to serve as payment processors through work-at-home advertisements or job search websites. The unwitting individuals then transfer the money that arrives in their accounts to overseas locales through a wire transfer service. The FBI has advised customers that do their banking online to contact their financial institution to ensure that they are employing all the appropriate security and fraud prevention services their institution offers.

FTC to delay red flag rule enforcement until June 1

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WASHINGTON (11/4/09)--The Federal Trade Commission (FTC) on Tuesday announced that it will delay enforcement of its so-called “red flags” rule, which addresses identity theft, until June 1, 2010. Congress requested that the FTC delay enforcement of the rule, which was developed to implement parts of the Fair and Accurate Credit Transactions (FACT) Act of 2003. The FTC action would only apply to state-chartered credit unions. Federal credit unions were required to comply with NCUA's red flag regulations on Nov. 1, 2008. FACTA directed financial regulatory agencies, including the FTC, to promulgate rules requiring those under its supervision that have covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. Consumer accounts or other accounts that financial institutions find to have a risk of identity theft are covered by the rule. The FTC previously delayed the enforcement of the rule until November 1, 2009.

Exclude CUs from systemic risk legislation CUNA says

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WASHINGTON (11/4/09)--In a Tuesday letter to House Financial Services Committee Chairman Barney Frank (D-Mass.) and ranking member Spencer Bachus (R-Ala.), Credit Union National Association (CUNA) President/CEO Dan Mica said that credit unions should not be entangled in the Financial Stability Improvement Act, which is meant to address “too big to fail” institutions and the dangers they impose on the U.S. financial system. Mica encouraged lawmakers to “consider the effect” that the systemic risk legislation, which was taken up for markup on Tuesday, “would have on credit unions, and whether it is good public policy for member-owned financial cooperatives to be asked to cover the losses of large, complex, for-profit financial companies.” The draft bill, according to a House summary, will “create a mechanism for monitoring and reducing the threats that systemically risky firms pose to the financial system, establish a process for winding down large, financially-troubled non-bank financial institutions in a way that protects American taxpayers and minimizes the impact on the financial system,” and “overhaul and update” the current financial regulatory system. Specifically, CUNA objects to portions of the legislation that would require credit unions with over $10 billion in assets to pay fees to the Federal Deposit Insurance Corporation to “insure risky behavior of huge, complex for-profit financial companies,” CUNA Vice President of Legislative Affairs Ryan Donovan said. According to Mica, credit unions should not be addressed by the legislation as they do not pose any systemic risk to the financial system. “In fact,” Mica added, “evidence suggests that the small number of credit unions facing challenges today are victims of the crisis, primarily resulting from the markets in which they operate.” Mica said that credit unions “continue to play a vital role in the financial well-being of their members,” continue to lend responsibly, and are well capitalized. The failure of any single credit union or a group of credit unions would not have a systemic impact on the financial system,” he added. Additionally, any issues within the greater credit union system have been resolved internally through the National Credit Union Share Insurance Fund (NCUSIF), Mica said. For the full CUNA letter, use the resource link.

Mica urges Congress to back MBL cap lift

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WASHINGTON (11/4/09)--The Credit Union National Association (CUNA) in a Tuesday letter urged U.S. House members to support increased business lending capacity for credit unions by backing HR 3380, the Promoting Lending for America’s Small Business Act, which would raise the amount of money a credit union can devote to business lending. In the letter, CUNA President/CEO Dan Mica said that HR 3380, if passed, “would enable credit unions to continue to provide significant capital to credit union member-owned small businesses – up to $10 billion in the first year – and create as many as 108,000 new jobs.” CUNA has sent similar letters to the Senate, President Barack Obama, and other top administration officials. As he advocated lifting the lending cap, Mica emphasized that credit unions are financial institutions that “know their members and know how to lend to their members” and “have demonstrated the ability to provide these loans safely and soundly.” “This is common sense legislation that will provide economic stimulus without increasing the size of government or costing taxpayers a dime,” he added. Mica also cited backing for HR 3380 from a number of small business and public policy groups, including Americans for Tax Reform, the Competitive Enterprise Institute, the National Association of Mortgage Brokers, and the National Small Business Association. HR 3380 would increase the MBL cap to 25% of a credit union's total assets. It also would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, and exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. While HR 3380 continues to await Congressional action, small business lending was addressed by the recently passed HR 3354, the Small Business Financing and Investment Act, which House Speaker Rep. Nancy Pelosi said would “comprehensively reform small business lending programs to spur job creation and meet the needs of American small business.” HR 3354, which passed the House by a vote of 389 to 32 on October 29, would give small banks and credit unions “the confidence to open lending to a wider community of entrepreneurs.” “By offering small businesses the tools and resources to endure our current crisis and thrive in the future, we are laying the foundation for our recovery and placing a down payment on our long-term economic growth," Pelosi added. For the full CUNA letter, use the resource link.

Inside Washington (11/02/2009)

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* WASHINGTON (11/3/09)--Fannie Mae and Freddie Mac will be allowed to back larger loans for another year (American Banker Nov. 2). The House and Senate approved legislation Thursday allowing the government-sponsored enterprises to guarantee loans up to $729,750 through 2010. President Barack Obama is expected to sign the legislation soon. Without the legislation, the enterprises could only guarantee loans up to $625,000, their previous limit, at year-end ... * WASHINGTON (11/3/09)--The Federal Reserve Board said it will not share the results of its latest review on industry compensation practices, citing the confidential nature of supervision (American Banker Nov. 2). The Fed reviewed compensation that targets executives and other employees of 28 large financial institutions. The Fed’s decision not to publicize the review contrasts with its focus on transparency in the financial markets, observers said. Releasing compensation data is different from publicizing which financial institutions have enough capital to weather a financial crisis, said Fed Chairman Ben Bernanke, referring to the stress tests. Gil Schwartz, former Fed lawyer, said the public has a right to know which institution’s compensation practices could affect the economy ...

CUNA 21-day CARD fix compliance issues

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WASHINGTON (11/03/09)-Passage by the House and Senate of the CARD Act Technical Corrections Act is raising some questions by credit unions on what steps to "uncomply" with the former terms of the 21-day mailing provision. President Obama is expected to sign that bill, H.R. 3606, at any time and the Credit Union National Association (CUNA) has urged him to act quickly. As a "technical correction" to the May 2009 law—known now mostly as the Credit CARD Act--to make clear that a 21-day late notice mailing requirement only applies to credit card accounts, "it's like the requirement never existed for the rest of open-end loans," explained Mike McLain, CUNA's Senior Compliance Counsel and Assistant General Counsel. "The Federal Reserve Board doesn't have to amend its interim regulation because there's no longer a statutory basis for the 21-day mailing requirement as it applies to open-end loans other than credit cards." Credit unions, however, spent the summer struggling to comply with the requirement to provide at least 21 days after mailing the periodic statement for any open-end loan before assessing late payments fees or imposing other penalties. Numerous compliance problems were identified affecting consolidated periodic statements, bi-weekly payment plans, existing due dates, and more. "We know that credit unions expended a lot of time and resources to come up with a variety of ways to comply with this burdensome requirement, and now are asking what should they do next," said McLain. Some credit unions simply followed a temporary solution permitted by the Fed in its interim rule to put a special notice on their periodic statements: Your Payment will not be considered as late for any purpose if it is made within 21 days of the date your statement is mailed or delivered, regardless of the due date that is reflected on the statement. "These credit unions can just stop putting this special notice on their periodic statements," McLain said. Other credit unions decided to comply by listing several upcoming due dates on the current periodic statement to make sure that the member had plenty of notice. They also can just discontinue printing outward due dates on their periodic statements, noted McLain. Once it was clear in July that the Fed would not resolve credit unions' problems with the 21-day mailing requirement by a regulatory interpretation, CUNA established as a high legislative priority to amend the CARD Act to resolve this problem. However, since no one could predict in August if and when a technical corrections bill would pass, many credit unions decided to make more comprehensive changes to their open-end lending terms and practices. "Credit unions that took actions such as changing due dates to the end of the month or altering bi-weekly payment plans will have to make their own business decisions on whether they want to revert to what they did prior to August 20," said McLain. "As the Fed made clear this summer, changing a loan's payment due date is not an action that requires compliance with Regulation Z's change-in-terms rules." However, McLain emphasized that there are certain situations where the 21-day notice will continue – beyond of course credit card programs, which are definitely subject to the 21-day notice. "Some credit unions apparently provide a grace period for repayment before charging any finance charge on certain open-end loans they offer. If there is a grace period on any type of open-end loan, the credit union must give the member 21 days to take advantage of the grace period," McLain emphasized. "Congress was unwilling to change this aspect of the 21-day rule." Anytime a lender decides to eliminate a grace period, a change-in-terms notice is required. If the loan is a credit card, the change-in-terms notice must be provided 45 days in advance (a rule that became effective August 20). If the loan is any other type of open-end loan, the change-in-terms notice must be given 15 days in advance – but starting July 1, 2010, all open-end loans will require a 45-day advance notice similar to the new credit card rule. "Credit unions are also asking about potential liability between May 22 – the date the CARD Act became law -- and today if there were any issues about their compliance efforts with the now-repealed 21-day notice requirement," said McLain. "There isn't any potential liability, because the technical correction made clear that the 21-day notice provision in the CARD Act was always intended to only apply to credit card accounts."

NCUA opens registration for MBL webinar

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ALEXANDRIA, Va. (11/3/09)—Registration is now open for the Nov. 18 member business lending webinar announced recently by National Credit Union Administration board member Gigi Hyland. Entitled “Member Business Lending: Regulators’ Perspective,” the webinar is scheduled to begin at 1:00 p.m. (ET) and end at 2:30 p.m. ET. The webinar is free and open to the public. The free webinar will provide guidance, best practices and insight into examination of member business lending, from both federal and state credit union regulators’ perspectives. The webinar is designed to be interactive and Q&A will be an integral part of the presentation. Panelists include:
* Linda Jekel, director of credit unions for the state of Washington, Division of Credit Unions; * Erika Eastep, member business lending program officer, Office of Examination and Insurance, NCUA; and * Linda Vick, former agricultural and commercial lending specialist and current problem case officer, Region IV, NCUA.
Use the resource link to sign up for the online session.

Matz Consumers want overdraft protection

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ALEXANDRIA, Va. (11/03/09)—National Credit Union Administration (NCUA) Chairman Debbie Matz, speaking at a recent league chapter meeting, said she supports overdraft protection plans that are carefully done with minimal impact on members, such as limiting the number of transactions and corresponding fees per day. Having worked at a credit union that offers overdraft protection, she said that she realizes that consumers would not be happy if the service was eliminated. Credit unions can provide a service members want that also is balanced and pro-consumer, she said. Matz made her remarks last week to credit union representatives attending a Suburban/D.C. chapter meeting of the Maryland & D.C. Credit Union Association. The league also reported that Matz acknowledged that the NCUA’s Region II staffing changes have recently been in flux. She attributed this to needs in other regions, and said it is like “robbing Peter to pay Paul” to shift personnel resources. Matz added that the agency plans to bring Jane Walters back as Region 2 director in March 2010. Walters currently is serving as Acting Regional Director, Region V.

Congress this week More overdraft action arguments near

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WASHINGTON (11/3/09)--The House Financial Services Committee heard testimony regarding on overdraft fees late last week, and the Senate Banking Committee may also discuss the issue by the end of the year, according to the Credit Union National Association’s (CUNA) Vice President of Legislative Affairs Ryan Donovan. While the timing of potential legislation addressing overdraft protections is not known, Donovan said that the House leadership generally only brings legislation to the floor if they expect that that bill would pass. House Financial Services Chairman Rep. Barney Frank (D-Mass.) last week indicated that overdraft legislation would not be on the committee's agenda this week. Timing questions also surround the ongoing development of Consumer Financial Protection Agency (CFPA) legislation, and while the House may consider the CFPA legislation during the week of Nov. 16, there is not a definite timetable for the Senate version of the legislation. While the exact schedule is not known at this time, President Barack Obama this week could sign H.R. 3606, the CARD Act Technical Corrections Act. The legislation, which was approved by the House earlier last month, made its way through the Senate late last week. In a letter sent Friday, CUNA President/CEO Dan Mica urged Obama to swiftly sign the bill, which corrects section 601 of the original Credit Card Accountability, Responsibility and Disclosure (CARD) Act and declares that a 21-day late-notice rule would apply not open-end credit in general, but only to credit cards. While there is not a great deal of credit-union specific legislation on the House or Senate floor this week, Senate legislation that would extend unemployment insurance benefits, which includes an amendment that would extend the homebuyers tax credit, was discussed on Monday. The House Financial Services Committee later today will also begin full mark-up sessions of H.R.3817, the "Investor Protection Act of 2009," H.R.2609, the "Federal Insurance Office Act of 2009," and the "Financial Stability Improvement Act of 2009."

NCUA update U.S. Central WesCorp coping with liquidity issues

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ALEXANDRIA, Va. (11/3/09)--In its latest update on the status of the corporates, the National Credit Union Administration (NCUA) reported that “normal operations continue without interruption” at U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp) and both corporate credit unions, with the help of the agency, “have been effective in managing the seasonal liquidity pressures that occur during this time of the year.” Average share balances for the corporates have “remained relatively flat, removing some measure of liquidity pressures,” the NCUA added. The corporates also reported on their Other-Than-Temporary-Impairment (OTTI) charges for the recently-passed third quarter of 2009, with U.S. Central reporting a total of $320 million and WesCorp reporting a total of $356 million. These charges “have fully exhausted Paid-in-Capital (PIC) I and PIC II balances and depleted MCS to $140 million as of September 30, 2009” for U.S. Central and “have fully exhausted all PIC and MCS balances, and created a retained earnings deficit of $4.6 billion as of September 30, 2009” for WesCorp, the NCUA reported. Both U.S. Central and WesCorp have issued medium term notes to fund a total of $8.2 billion in outflows that will occur due to Credit Union System Investment Program (CUSIP) funds that will mature in January, February, and March of next year. CUSIP funds are issued under the Temporary Corporate Credit Union Loan Guarantee Program (TCCULGP). The NCUA in the release also confirmed that it will present its in-development proposed corporate credit union rule at its upcoming board meeting, scheduled for November 19th. “The proposed rule reflects a comprehensive review of the existing corporate regulations,” and “incorporated feedback obtained” from recently held online and live town hall meetings, the NCUA said.

Compliance Questions about the 21-day CARD Fix

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WASHINGTON (11/02/09)-Passage by the House and Senate of the CARD Act Technical Corrections Act is raising some questions by credit unions on what steps to “uncomply” with the former terms of the 21-day mailing provision. President Obama is expected to sign that bill, H.R. 3606, at any time and the Credit Union National Association (CUNA) has urged him to act quickly. As a “technical correction” to the May 2009 law—known now mostly as the Credit CARD Act--to make clear that a 21-day late notice mailing requirement only applies to credit card accounts, “it’s like the requirement never existed for the rest of open-end loans,” explained Mike McLain, CUNA’s Senior Compliance Counsel and Assistant General Counsel. “The Federal Reserve Board doesn’t have to amend its interim regulation because there’s no longer a statutory basis for the 21-day mailing requirement as it applies to open-end loans other than credit cards.” Credit unions, however, spent the summer struggling to comply with the requirement to provide at least 21 days after mailing the periodic statement for any open-end loan before assessing late payments fees or imposing other penalties. Numerous compliance problems were identified affecting consolidated periodic statements, bi-weekly payment plans, existing due dates, and more. “We know that credit unions expended a lot of time and resources to come up with a variety of ways to comply with this burdensome requirement, and now are asking what should they do next,” said McLain. Some credit unions simply followed a temporary solution permitted by the Fed in its interim rule to put a special notice on their periodic statements: Your Payment will not be considered as late for any purpose if it is made within 21 days of the date your statement is mailed or delivered, regardless of the due date that is reflected on the statement. “These credit unions can just stop putting this special notice on their periodic statements,” McLain said. Other credit unions decided to comply by listing several upcoming due dates on the current periodic statement to make sure that the member had plenty of notice. They also can just discontinue printing outward due dates on their periodic statements, noted McLain. Once it was clear in July that the Fed would not resolve credit unions’ problems with the 21-day mailing requirement by a regulatory interpretation, CUNA established as a high legislative priority to amend the CARD Act to resolve this problem. However, since no one could predict in August if and when a technical corrections bill would pass, many credit unions decided to make more comprehensive changes to their open-end lending terms and practices. “Credit unions that took actions such as changing due dates to the end of the month or altering bi-weekly payment plans will have to make their own business decisions on whether they want to revert to what they did prior to August 20,” said McLain. “As the Fed made clear this summer, changing a loan’s payment due date is not an action that requires compliance with Regulation Z’s change-in-terms rules.” However, McLain emphasized that there are certain situations where the 21-day notice will continue – beyond of course credit card programs, which are definitely subject to the 21-day notice. “Some credit unions apparently provide a grace period for repayment before charging any finance charge on certain open-end loans they offer. If there is a grace period on any type of open-end loan, the credit union must give the member 21 days to take advantage of the grace period,” McLain emphasized. “Congress was unwilling to change this aspect of the 21-day rule.” Anytime a lender decides to eliminate a grace period, a change-in-terms notice is required. If the loan is a credit card, the change-in-terms notice must be provided 45 days in advance (a rule that became effective August 20). If the loan is any other type of open-end loan, the change-in-terms notice must be given 15 days in advance – but starting July 1, 2010, all open-end loans will require a 45-day advance notice similar to the new credit card rule. “Credit unions are also asking about potential liability between May 22 – the date the CARD Act became law -- and today if there were any issues about their compliance efforts with the now-repealed 21-day notice requirement,” said McLain. “There isn’t any potential liability, because the technical correction made clear that the 21-day notice provision in the CARD Act was always intended to only apply to credit card accounts.”

Survey consumers CUNA to legislators on overdraft changes

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WASHINGTON (11/02/09)--Speaking before the House Financial Services Committee hearing on overdraft protection plan, Credit Union National Association (CUNA) witness Rodney Staatz advised members of the panel to conduct an "independent, unbiased" survey of consumer opinions on overdraft before they act on any legislation. Staatz is president/CEO of SECU of Linthicum, Md. In fact, Staatz told the panel, consumer protections to overdraft plans, should be addressed through regulation, not legislation. CUNA supports credit unions’ ability to offer overdraft protection plans to members and considers it an important member service that can help with short-term financial issues. Staatz told the assembled committee members that CUNA opposes H.R. 3904, The Overdraft Protection Act of 2009, because it could make it impossible for credit unions to offer the service to members. He warned legislators if credit unions drop the so-called “courtesy pay” programs, it would ultimately harm consumers, in part, by driving them to higher-cost alternatives. Testifying on his own behalf, former National Credit Union Administration Chairman Dennis Dollar concurred that H.R.3904 could eliminate credit unions’ ability to offer overdraft protections altogether. Dollar also indicated that the issue of overdraft fees could best be handled by individual regulators, and should not be treated on a statutory level. While many banks promote overdraft programs and make them mandatory parts of their checking account programs, Staatz said that although his credit union does offer a courtesy pay overdraft program, “SECU does not market Courtesy Pay because we do not want to encourage members to live beyond their means” by viewing it as available funds.