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CUNA continues push for alt capital

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WASHINGTON (12/18/09)—Noting that the issue continues to be a priority for many credit unions, the Credit Union National Association (CUNA) pushed its efforts to get the Obama administration on board with the idea of alternative sources of capital for credit unions. In its latest effort to garner support, CUNA reinforced to key contacts within the U.S. Treasury Department the importance of credit union alternative capital authority. “CUNA is acutely aware that some credit unions need to issue supplemental capital products in order to maintain their net worth ratio requirements,” CUNA General Counsel Eric Richard said. “We are reaching out to help the Treasury understand the dilemma some credit unions find themselves in.” "We have long maintained that secondary capital and PCA—-prompt corrective action--reform are required for credit unions for the long term. However, that future is here for some,” Richard noted. CUNA figures show upward of 15% of well-managed, well-capitalized credit unions are now sufficiently close to the PCA net worth cutoffs to be concerned that they could run into PCA issues in the mid- to near-term. CUNA has been aggressively pursuing reforms through meetings with Obama administration officials and federal legislators. CUNA also reached out to the National Association of Federal Credit Unions earlier this year in an effort to work together to obtain alternative capital for credit unions. In a recent development on PCA reform, National Credit Union Administration Chairman Debbie Matz, in a Dec. 7 letter to Rep. Barney Frank (D-Mass.), asked for legislators to address issues with PCA standards by allowing qualified credit unions "to issue alternative forms of capital to supplement their retained earnings." Frank is chairman of the House Financial Services Committee. Matz wrote, in part, that while the intent of PCA is to control potentially "accelerated, unmanageable growth of credit union assets," PCA can at times "discourage manageable asset growth by financially healthy credit unions in times of economic distress." CUNA President/CEO Dan Mica, at that time, commended Matz’s letter saying the agency chairman’s action clearly draws the connection between increased credit union service to the American public and the need for PCA reform and additional sources of capital for credit unions.

FFIEC plans reverse mortgage guidance for CUs banks

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WASHINGTON (12/18/09)--The Federal Financial Institutions Examination Council (FFIEC) in proposed guidance released this week advised credit unions and other financial institutions to “provide adequate information” and “qualified independent counseling” for consumers that opt to take part in reverse mortgage products. Specifically, the FFIEC recommended that “consumers be provided clear and balanced information about the relative benefits and risks of reverse mortgage products” and encouraged financial institutions to “inform borrowers about reverse mortgage alternatives that they already offer.” The counseling provided to consumers should “cover the potential consequences of entering into these transactions, such as the potential effect on eligibility for needs-based public benefits,” the FFIEC added. Credit unions and other financial institutions should also “avoid potential conflicts of interest,” the FFIEC recommended. The guidance also addresses “related policies, procedures, and internal controls and third party risk management.” Comments on the proposed guidance must be received 60 days from publication in the Federal Register. For the full FFIEC guidance, as published in the Federal Register, use the resource link.

Shorter community charter process second mortgage rule voted

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ALEXANDRIA, Va. (12/18/09)--The National Credit Union Administration (NCUA) on Thursday approved a proposed rule that would revise the agency's community chartering policies and more clearly outline the parameters of a community chartered credit union. While federal credit unions that applied for community credit union charters have in the past provided “reams of information – hundreds of pages long – in order to demonstrate evidence of a community,” NCUA Chairman Debbie Matz said that the new NCUA standards will provide credit unions with a defined set of objective and quantifiable criteria to determine the existence of a well-defined local community. Credit unions also will no longer need to provide a narrative statement with their application.
Click to view larger image NCUA Chairman Debbie Matz, center, and the board discuss the community credit union charter changes with NCUA staff. (CUNA Photo)
The redesigned process will also shorten the amount of time needed to approve an application to “a couple of months” in most situations, with the more difficult situations needing slightly more time to be resolved, NCUA staff said. NCUA staff estimated that the previous application process resulted in an ordeal that took as long as 18 months in some cases. Commenting on the improved timeline, Matz said that “this proposed rule would dramatically improve the future process for credit unions to apply for community charters – and improve the standards for NCUA to evaluate them.” Under the proposal, a “community” could be a single political jurisdiction or multiple political jurisdictions within a single Metropolitan Division, as long as the total population does not exceed 2.5 million. To qualify for a new “rural district” standard, the area that a credit union looks to serve must be a contiguous area with over 50% of its population in “rural” census blocks. Additionally, the population of the area in question must not exceed 100,000. These limits, Matz said, “would ensure that a Rural District’s population is fairly small, yet still large enough to support a full-service credit union.” Credit unions must also detail how they will implement their business plan to serve the community in question and the unique needs of the various demographic groups in that community. Credit unions must also provide details on their community outreach and marketing plans, and an NCUA Regional Office will verify that these plans are being followed for the first three years that the new community credit union is in business. The NCUA will also allow credit unions that are insolvent or in danger of insolvency to merge with another credit union if its net worth is declining at a rate that will render it insolvent within 24 months or will reduce its total net worth under 2% within one year. The NCUA will also allow a merger if the credit union’s net worth is “significantly undercapitalized” under Prompt Corrective Act (PCA) requirements and there is no reasonable prospect of the credit union becoming “adequately capitalized” under PCA within the next 36 months. The NCUA will collect public comment on the rule for 60 days. The NCUA during the meeting also made final a rule that creates a limited exception to the 20-year maturity limit on second mortgage loans. Under the final rule, federal credit unions that take part in the U.S. Treasury Department's Making Home Affordable (MHA) Program would be permitted to extend second mortgages beyond 20 years to match the terms of modified first mortgages, which can have up to a 40-year maturity. This rule is unchanged from the interim final rule that the Board issued at its June meeting and was effective as of June 24, 2009. NCUA Chief Financial Officer Mary Ann Woodson also updated the NCUA on the status of its National Credit Union Share Insurance Fund (NCUSIF) and Temporary Corporate Credit Union Stabilization Fund (TCCUSF). According to Woodson, the NCUA has received $1.7 billion of the $2 billion dollars expected from the payment of NCUSIF 1% deposits and premium assessments. Those payments were due to the NCUA from federally insured credit unions this week. The NCUSIF’s equity level was at 1.27% as of November 30, 2009 and is expected to remain at that level through the rest of the year, Woodson said. Woodson also reported 328 CAMEL 4 and 5 credit unions, which hold nearly $41 billion of insured shares, as of November 2009, a 27% increase over the amount of CAMEL 4 and 5 credit unions reported as of November 2008. Woodson also reported that there was little to no change in the TCCUSF’s retained earnings since they were reported at last month’s board meeting.

Inside Washington (12/17/2009)

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* WASHINGTON (12/18/09)--The Senate Banking Committee Thursday approved Federal Reserve Board Chairman Ben Bernanke for a second term by a vote of 16-7. Sen. Richard Shelby (R-Ala.) voted against Bernanke. Shelby said he disapproves of some the Fed’s actions and is not confident in Bernanke’s future plans (The Wall Street Journal Dec. 17). Sen. Kay Bailey Hutchison (R-Texas) said she voted against Bernanke because she feels misled by the Troubled Asset Relief Program. Six of the opponents were Republicans. One Democratic panel member, Sen. Jeff Merkley (D-Ore.) opposed the renomination. Sen. Bob Corker (R-Tenn.) supported Bernanke, but said he has made mistakes, as has every other financial regulator. However, Corker said he couldn’t think of another person who could do a better job. Sen. Jim Bunning (R-Ky.) urged the committee to delay the renomination until the Fed gives more information on last year’s activities ... * WASHINGTON (12/18/09)--Sens. John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) introduced legislation Wednesday that would reverse a provision of the Gramm-Leach-Bliley Act by prohibiting commercial banks from affiliating with investment banks (American Banker Dec. 17). The bill, the Banking Integrity Act of 2009, also would prevent banks from engaging in insurance activity and force them to eliminate any investment or commercial banking operations within one year of enactment. The act would reinstate the Glass-Steagall Act of 1933, which separated commercial banking from securities and insurance industries. McCain said the bill would prevent banks from being bailed out by Americans ... * WASHINGTON (12/18/09)--Policymakers appear to be moving ahead on financial regulatory reform, but some financial observers say the approach misses key issues. For instance, Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair testified at a hearing last week about a Bank of America Corp. deal with Merrill Lynch. The hearing was the fifth the House Oversight and Government Reform Committee had conducted regarding the deal (American Banker Dec. 17). In contrast, the committee has held only one hearing this year on the Troubled Asset Relief Program (TARP). The government contributed $20 billion to the BoA deal, while TARP cost $700 billion. Robert Hockett, professor at Cornell University Law School, said policymakers’ work is misdirected. Congress is spending time on matters that later become “tangential,” he said. Also, lawmakers also are moving ahead with financial reform but haven’t found the cause of the financial crisis. However, some say Congress must act “when the iron is hot” or lawmakers may lose their chance to legislate when the public loses their “appetite for change,” said Brian Gardner, Keefe, Bruyette and Woods Inc. analyst ... * WASHINGTON (12/18/09)--The Federal Reserve Board has named 10 new members to its Consumer Advisory Council for three-year terms, and has designated a new chair and vice chair. Michael D. Calhoun was designated chair. Calhoun is the President of the Center for Responsible Lending in Durham, N.C., a nonprofit research and policy organization focusing on consumer lending issues. Jim Park was designated vice chair. His term on the Council ends in December 2011. Park is CEO of New Vista Asset Management in San Diego, which provides community-focused real-estate owned disposition services and works to turn foreclosures into affordable housing options for minority and low- and moderate-income families. His term on the council ends in December 2010. Other new members include: Joanne Budde, William Dana, Tino Diaz, Kerry Doi, Mike Griffin, Brian Hudson, Dory Rand, Phyllis Salowe-Kaye, Corey Stone and Mark Wiseman ...

FinCEN FY2009 annual report is available

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WASHINGTON (12/18/09)—The Financial Crimes Enforcement Network (FinCEN) has released its annual report for fiscal year 2009--complete with what the agency sees as its accomplishments, as well as its continuing goals. Within its 77 pages, is a subhead reading “BSA Data
Click to view larger image Click for larger view
Security.” This section reiterates the agency’s commitment to safeguarding the data collected under provisions of the Bank Secrecy Act (BSA) and a pledge to continue to review procedures to enhance security. The agency said increased awareness of the value of BSA information to detect financial crimes or oversee BSA compliance has resulted in more requests for access. As the fiscal year closed, the report said, FinCEN had more than 300 memoranda of understanding with external client agencies. In order to safeguard BSA data, FinCEN said it conducts onsite inspections at each agency to assess the proper and efficient use and security of BSA information, legitimate and documented purposes for utilization and re-dissemination, and appropriate retention and destruction procedures. Click below to take a look at the full report.