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CU HARP application period extended to Dec. 29

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ALEXANDRIA, Va. (12/19/08)--The National Credit Union Administration (NCUA) has extended the application period for credit union participation in the Credit Union Homeowners Affordability Relief Program (CU HARP) by ten days. Credit unions now have until Dec. 29 to submit an initial request to participate in the CU HARP program. CU HARP is designed to help credit unions modify mortgage terms to assist delinquent borrowers or borrowers facing undue hardships. The NCUA estimates CU HARP will provide interest rate relief to 10,000 households. It also estimates that about 600 credit unions are eligible for the program. The NCUA this week hosted an audio conference jointly with the Credit Union National Association and the National Association of Federal Credit Unions to address credit union questions about CU HARP and its companion initiative, the Credit Union System Investment Program (CU SIP). Under CU SIP, participating creditworthy credit unions would borrow from the NCUA's Central Liquidity Facility and invest the proceeds in participating corporate credit unions. Use the resource links below to access the NCUA's archived audio conference and program details for CU HARP and CU SIP.

CUNA Obama urged to back removing biz loan cap

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WASHINGTON (12/19/08)--President-elect Barack Obama has been asked by the Credit Union National Association (CUNA) to encourage the U.S. Congress to eliminate the cap on member business lending (MBL) by credit unions. In a letter to the incoming President, CUNA President/CEO Dan Mica noted that during a Thursday press conference Obama remarked that problems in the U.S. economy will continue “if small and large businesses cannot get access to enough credit.” Mica wrote that if the cap on MBLs on credit unions were lifted, credit unions could lend up to an additional $10 billion to the nation’s businesses in the first 12 months of being granted the authority. “This is an economic stimulus measure that does not cost the taxpayers a dime, and does not increase the size of government,” Mica wrote. The Dec. 18 letter follows a similar one sent by CUNA to members of the House Financial Services Committee. CUNA noted that credit unions are continuing to lend, even in these difficult economic and financial times, helping consumers and the economy. The letter asked lawmakers to allow credit unions to do even more by removing the MBL cap through economic stimulus legislation. Use the resource link below to see the complete texts of the CUNA letters.

Inside Washington (12/18/2008)

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* WASHINGTON (12/19/08)--Department of Housing and Urban Development (HUD) Secretary Steve Preston said he blames Congress for the federal government’s failure to help homeowners nearing foreclosure (The Washington Post Dec. 17). The three-year program created to help homeowners has only garnered 312 applications since launching in October because it’s too expensive for borrowers and lenders, Preston told the newspaper. Congress “dotted the i’s and crossed the t’s for us” but made the program hard to use, he said. Rep. Barney Frank (D-Mass.) helped push the HUD program through Congress and recognized that it has some problems, which he blamed partly on the Bush administration. The program is intended to help borrowers who owe more on their homes than the homes’ value refinance ... * WASHINGTON (12/19/08)--Federal Deposit Insurance Corp. (FDIC) Sheila Bair said data released by other regulators doesn’t accurately reflect the agency’s loan modifications successes (American Banker Dec. 18). Last week, Comptroller of the Currency John Dugan previewed modification data and noted that half of borrowers with loan modifications were late on their payments six months later. The data Dugan saw defined modifications broadly and didn’t include loans refinanced by Fannie Mae and Freddie Mac last month, Bair said. She also noted that the report defines a borrower who misses one payment as delinquent--when the common standard is 60 days after the due date ... * WASHINGTON (12/19/08)--Sen. John Sununu (R-N.H.) will replace Sen. Judd Gregg (R-N.H.) on a panel to oversee the Troubled Assets Relief Program (TARP). Sununu was appointed by Senate Minority Leader Mitch McConnell (American Banker Dec. 18). Sununu formerly served on the Senate Banking Committee and the Finance and Joint Economic Committees. The panel Sununu will serve on also will recommend regulatory reform on financial services to Congress ...

NCUSIF Yearend equity projection at 1.27

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WASHINGTON (12/19/08)—The National Credit Union Share Insurance Fund
Click to view larger image During Thursday's monthly meeting, the NCUA Board hears about the NCUSIF from agency Office of Capital Markets and Planning Director Owen Cole, Chief Financial Officer Mary Ann Woodson, and Office of Examination and Insurance Director Dave Marquis. CLICK TO ENLARGE. (Photo provided by CUNA)
(NCUSIF) is currently at 1.27% and is expected to be at that level at the end of the year, according to a monthly National Credit Union Administration (NCUA)status report. The equity level projected by NCUA Chief Financial Officer Mary Ann Woodson would preclude the possibility of an NCUSIF dividend to federally insured credit unions. Woodson also reported that there are now 257 CAMEL 4 and 5 rated credit unions, which is up from 211 at the end of last year. She indicated that 92% of these CAMEL 4 and 5 organizations have asset sizes of under $100 million. Other items of interest: The total insurance loss expense for 2008
Click to view larger image NCUSIF Insurance Loss Expense and Changes to Reserves, 1995-2008. CLICK TO ENLARGE.
is expected to be around $177 million, and actual net income for 2008 will likely be lower than the current $23 million projection. Woodson indicated that, while unlikely in her opinion, it is not impossible that the NCUSIF would end the year with a slightly negative net income. She added that checking back as far as 1971, it would be the first time the fund closed its year in that position.

NCUA bans five unfair card practices

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WASHINGTON (12/19/08)—The National Credit Union Administration (NCUA) Thursday approved a final rule that would ban some of the worst unfair and deceptive credit card practices and said its rule is substantively identical to that adopted by federal bank and thrift regulators. Effective July 1, 2010, the rule prohibits the following five practices:
* Providing insufficient time for consumers to make payments; * Failing to provide reasonable allocation of payments among balances with different interest rates; * Applying increased in annual percentage rates to pre-existing balances; * Calculating finance charges using double-cycle billing, which computes finance charges using the average daily balance from the last two billing cycles rather than only the most recent billing cycle; and * Requiring excessive security deposits and account-opening fees for the issuance or availability of credit.
The final rule does not include provisions that were in the proposal issued in April 2008 that addressed holds placed on available credit. The NCUA rule applies to federally chartered credit unions, but not to state-chartereds, which fall under Federal Trade Commission (FTC) regulation. The NCUA staff noted that the FTC has no intention to adopt a similar rule but has indicated it will go after unfair or deceptive practices on a case-by-case basis. The NCUA had also proposed, in conjunction with the Federal Reserve Board and Office of Thrift Supervision, a couple of revisions affecting overdraft protections, which would have addressed such things as members’ opt-out rights, disclosures and overdrafts due to debit holds. The Fed on Thursday adopted the credit card rule but issued a revised overdraft proposal for public comment. The NCUA said it will take no further action on the overdraft proposal because, if adopted, the Fed plan would cover the activities of federal credit unions. Use the resource link below to access the NCUA fair practices rule.

CUSO powers expanded by NCUA

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WASHINGTON (12/19/08)—Credit Union Service Organizations (CUSOs)
Click to view larger image Before the start of yesterday's monthly NCUA Board meeting, Executive Director Len Skiles talks with CUNA Deputy General Counsel Mary Dunn. It was Skiles' last board meeting before he retires at the end of 2008, after a 36-year career with the agency. CLICK TO ENLARGE. (Photo provided by CUNA)
will now have authority under a new rule to offer two new categories of activities to credit unions: credit card loan origination and payroll processing services. The rule, adopted Thursday by the National Credit Union Administration (NCUA), also adds new permissible activities within existing categories and expands the scope of certain services to include persons eligible for credit union membership. New permissible activities under the board’s action are related to the routine daily operations of credit unions and include:
* Real estate settlement services; * Employee leasing and support; * Purchase of non-performing loans; * Business counseling and related services for credit union business member; and * Referral and processing of loan applications for members turned down by the credit union.
The changes will go into affect 30 days after the regulation is published in the Federal Register, and publication is likely to occur within the next week or so. Regarding the expansion of certain services to individuals within a field of membership who are not members of the credit union, the NCUA said allowing this authority for CUSOs reflects provisions in the Financial Services Regulatory Relief Act of 2006, which granted similar authority to credit unions. The NCUA modified a provision in its original proposal that would have given the agency access to the books and records of CUSOs that are owned by federally insured, state-chartered credit unions (FISCUs). The final rule adopts a procedure whereby a state credit union regulator can request an exemption for FISCUs in that state under certain conditions. An exemption may be granted if the state regulator has full rights of access to relevant books and records of the CUSO under state law and is willing and able to provide NCUA with equal access, and access must be available to the NCUA on its own timetable. For more information on the NCUA’s new CUSO rule, use the resource link below.

Hampel addresses card issues on Bloomberg TV

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WASHINGTON (12/19/08)--As federal financial regulators were voting
Click for member-only video CUNA Economist Bill Hampel on Bloomberg TV Thursday. Click for member-only video. (Photo provided by CUNA)
to ban certain unfair and deceptive credit card practices, Bloomberg TV interviewed Credit Union National Association (CUNA) Chief Economist about what it all means for the industry and consumers. Noting that the regulators’ new rules--beginning July 1, 2010—would ban such practices as double-cycle billing and universal default, thereby reducing revenue for some card issuers, Hampel said they may have to return to making money from credit cards “the old fashioned way,” by charging annuals fees and regular interest rates. However, he added, it might not be such a bad thing for consumers if everyone pays a little more for credit card services , rather than profitability being sustained by very high rates and fees paid by just a few card holders. When asked how the new rules might affect credit unions, Hampel said there will be very little effect because credit unions mostly don't engage in the practices that the new rules will prohibit because of a fundamental difference between credit unions and other types of financial institutions. Explained Hampel with a grin, “At credit unions, our members are our owners, so we kinda like to be nice to them.” For more information on new credit cards rule, see “NCUA bans 5 unfair card practices” in today’s edition of News Now.