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NCUA opinion addresses pre-approved CUSO activity

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ALEXANDRIA, Va. (12/13/11)--A federal credit union may invest in a credit union service organization (CUSO) established solely to act as a corporate trustee on deeds of trust for real estate loans made by another CUSO of the credit union.  It also is permissible for a CUSO to form a subsidiary to function as the corporate trustee for its own real estate loans.

So said a Nov. 17 legal opinion letter from National Credit Union Administration (NCUA) Associate General Counsel Hattie Ulan to Samuel T. Wyrick, III., general counsel of Wyrick, Robbins, Yates & Ponton, LLP, of Raleigh, N.C.

The NCUA letter notes that deeds of trust are three-party documents, used in some states instead of mortgages, and which pledge real property to secure a loan: Typically, the borrower-trustor conveys legal title to real property to an impartial trustee to hold for the benefit of the lender-beneficiary in order to secure the loan obligation.

Ulan goes on to point out that the NCUA CUSO rule provides illustrations of permissible CUSO activities (12 C.F.R. §712.5) and trust and trust-related services, such as  acting as trustee, are allowed.

To read the complete opinion, use the resouce link below.

CUNA Exiting CUs should pay stabilization assessments

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WASHINGTON (12/13/11)--The Credit Union National Association (CUNA) is recommending to the National Credit Union Administration (NCUA) that a credit union leaving the system by converting to private insurance or a bank charter should be required to provide its share of future temporary corporate credit union stabilization fund assessments to recognize liabilities incurred as a federally insured credit union.

CUNA's analysis reviewed the issues surrounding how requirements to obtain such assessments would work and determined that the NCUA has the legal authority under the federal credit union act to adopt such requirements.

Some credit unions have raised concerns about the basic issue that remaining credit unions should not be left to cover the assessments that a credit union exiting the system would avoid.

The NCUA is on record as having advised the National Association of State Credit Union Supervisors--NASCUS--and others that a converting credit union cannot be assessed for all future assessments in a single payment prior to conversion, but that issue is different from key ones raised by CUNA and the alternatives CUNA has presented.

CUNA's recommendations would require a credit union leaving the system to set up an escrow account as part of its conversion, one that is comprised of funds representing a general estimate of that credit union's future assessments.

The account would be managed by the NCUA and future payments would be made out of the account as they are assessed on all federally insured credit unions.

CUNA has noted that this structure for future payments is intended to avoid triggering an accounting event that would make all federally insured credit unions recognize all remaining assessments immediately as an expense. CUNA also has identified several other accounting issues associated with the plan and is pursuing those with credit union certified public accountants.

CUNA has initiated early meetings with federal financial regulators on this TCCUSF issue, including NCUA, as well as the Federal Deposit Insurance Corp. (FDIC). The FDIC coordinates with the NCUA regarding a conversion to a federally insured bank or thrift.

CUNA will follow up with the FDIC as discussions with the NCUA proceed. CUNA also is pursuing meetings with other policymakers including the Office of the Comptroller of the Currency.

Spending deal leads as Congress ends 2011 session

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WASHINGTON (12/13/11)--Legislation that would continue to fund the government beyond Dec. 16 will top the agenda as many in the U.S. Congress expect to leave Washington once the first session of the 112th Congress ends later this week.

Continued government funding could take the form of an omnibus appropriations bill, a continuing resolution, or a combination of the two, and any of these options would need House and Senate votes to move forward.

Credit unions will be particularly interested in H.R. 3630, the Middle Class Tax Cut and Job Creation Act, which would extend payroll tax cuts and jobless benefits. Portions of this bill would extend the National Flood Insurance Program (NFIP) until Sept. 2016.

Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said CUNA supports this language, but noted that it may not pass the House or Senate. Separate legislation that would extend the NFIP until May 31 was approved by a voice vote in the Senate last week, and Donovan added the House may consider this legislation at some point this week.

Several hearings will also be held this week. The Senate Banking Committee has scheduled an oversight hearing on the Federal Housing Finance Agency for today, and will also vote on the nominations of Maurice Jones to be deputy secretary and Carol Galante to be an assistant secretary of Housing and Urban Development; and Thomas Hoenig to be a vice chairman and member of the Board of Directors of the Federal Deposit Insurance Corporation. Today will also feature a Senate Banking housing subcommittee hearing on foreclosures and their impact on homeowners.

The Senate Banking subcommittee on securities, insurance, and investment will address investor risks in capital raising on Wednesday. House subcommittees will also be busy on Wednesday, as the House Financial Services capital markets subcommittee marks up a discussion draft of the Private Mortgage Market Investment Act and H.R. 2483, the Whistleblower Improvement Act, and the House Energy communications and technology subcommittee discusses online domain name changes.

The week will end for a trio of House Financial Services subcommittees on Thursday, as the capital markets subcommittee holds a hearing on H.R. 3606, the Reopening American Capital Markets to Emerging Growth Companies Act. The House insurance, housing and community opportunity subcommittee will discuss ways to promote economic independence for homeless children and youth in another Thursday hearing, and the House oversight and investigations subcommittee will also hold a hearing on the collapse of financial firm MF Global on Thursday.

Same-day ACH processing Start as pilot CUNA says

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WASHINGTON (12/12/11)--The Credit Union National Association (CUNA) has encouraged the Electronic Payments Association (NACHA) to conduct a pilot program to study the effects of its proposed network-wide premium same-day automated clearing house (ACH) expedited processing and settlement (EPS) service before taking further action.

CUNA in a comment letter added that credit unions and others should be given the option of opting in to the new EPS service, and said that not all receiving financial institutions should be required to receive and post same-day ACH payments because of significant implementation and risk management concerns, especially for smaller credit unions and other financial institutions.

NACHA has proposed amending its operating rules to enable EPS ACH entries to be processed and settled on the same day they are originated, while preserving existing ACH processing and settlement features for non-EPS entries. Under the proposal, credit unions and all other Receiving Depository Financial Institutions (RDFIs) would be required to both receive and settle EPS transactions.

The proposal sets specific timelines for payment file transmissions and fund availability, and also proposes new per-entry EPS dollar limits of $25,000 or $100,000.

NACHA has said the proposal would aid financial institutions by easing the flow of funds, increasing customer use of direct deposit, reducing counter-party settlement risks on received ACH credits, and mitigating risks.

CUNA in the comment letter said credit unions would incur increased costs, including implementation costs, under the NACHA proposal.

The EPS proposal would provide network-wide expedited settlement for all types of payments that currently use the ACH network, and provide a platform for other applications, such as mobile and person-to-person (P2P) payments. Credit unions and other financial institutions could offer EPS as a premium service to their customers.

If the current proposal is finalized, NACHA should "provide an adequate timeframe for implementation to minimize costs and impact to credit unions and others" that are working to comply with various regulatory changes, CUNA said.

For the full comment letter, use the resource link.

Inside Washington (12/12/2011)

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  • WASHINGTON (12/13/11)--Collecting and using available data to predict the next financial crisis is similar to forecasting the weather, Treasury Secretary Tim Geithner said in describing the challenge facing the Office of Financial Research (OFR), created by the Dodd-Frank Act (American Banker Dec. 12). "Policy makers are always looking for the financial system equivalent of the MRI; over-the-horizon radar, the kind we put on aircraft carriers; or, to borrow [an] analogy, a National Weather Service," Geithner said at a conference hosted by the Financial Stability Oversight Council dedicated to helping to set up the OFR. "That goal will always elude us. But we will keep pursuing it, and we can do a lot better than we have done to date." Regulators face three primary challenges in fulfilling the office's mission: defining systemic risk, assessing risk as the industry evolves and creating a new, flexible risk model …
  • WASHINGTON (12/13/11)--The Internal Revenue Service on Monday issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating vehicle for business, charitable, medical or moving purposes. Beginning Jan. 1, the standard mileage rates for the use of a car, truck or van will be 55.5 cents per mile for business miles driven; 23 cents per mile driven for medical or moving purposes; and 14 cents per mile driven in service of charitable organizations. The rate for business miles driven is unchanged from the rates that became effective July 1. The medical and moving rates have been reduced by 0.5 cents per mile …