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Inside Washington (12/30/2008)

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* WASHINGTON (12/31/08)--The Federal Register Tuesday published the National Credit Union Administration’s final rule amending credit union service organization (CUSO) regulation. The rule was adopted Dec. 18. The amendment, effective Jan. 28, adds two new categories to permissible CUSO activities: credit card loan origination and payroll processing services. 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 members; and referral and processing of loan applications for members turned down by the credit union ...

Judge delays trial start in Colorado UBIT case

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WASHINGTON (12/31/08)--A federal judge has delayed the trial date of a Colorado credit union’s lawsuit against the Internal Revenue Service over the tax agency’s application of “unrelated business income tax” (UBIT). The change in the trial date, according to Credit Union National Association (CUNA) General Counsel Eric Richard, likely is not indicative of the judge’s attitude toward the case. “We have no reason to believe that the judge's action says anything about how this case is likely to turn out. Courts often reschedule trials just to manage their overall workload. "We anticipate the credit union party to the case will seek a prompt trial date at the appropriate time," Richard said. The trial date for the case, Bellco CU of Greenwood Village, Colo. vs. the United States (IRS), had originally been set for Aug. 31, 2009. On Dec. 22, however, U.S. District Court Judge Christine M. Arguello ordered that the date was “vacated.” She did not set a new trial date. According to CUNA’s Richard, the judge made the ruling without a request from either the credit union or government sides in the case. In the order, Arguello did not give reasons for her action, although she did indicate she would set a new date sometime after a status conference between the two sides in the action set for June 19. The credit union filed the lawsuit in May the tax agency’s UBIT policies toward credit unions. The complaint seeks a refund of $199,000, based on UBIT taxes paid for 2000, 2001 and 2003. For more information about UBIT, use the resource links below.

Banker survey shows similar compliance worries

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WASHINGTON (12/31/08)—Credit unions may be interested in a recent American Banker survey of compliance burden, said Credit Union National Association (CUNA) Senior Vice President of Compliance Kathy Thompson Tuesday, because the headaches related will sound so familiar. The Dec. 30 article, “In Compliance, More Turn to Specialists,” reports that bankers across the United States say compliance is getting tougher as regulatory burden increases and examiners’ scrutiny intensifies. President/CEO Tom Welch of $76 million-asset Pioneer Federal S&L in Dillon, Mont. kicked off the article saying he was told recently that seven examiners soon would be paying a visit over a four-week period. His last review, he said, involved four examiners and lasted closer to two weeks. The article is based on a survey American Banker conducted in October with Greenwich Associate LLC of Stamford, Conn. Polled were 308 bankers from institutions of all sizes. Of the respondents, 85% said they have a chief compliance officer or an equivalent position, up from 70% last year. Of interest, for 2008 all the banks in the survey with greater than $10 billion in assets said they have a chief compliance officer, compared with 84% of smaller banks—quite an increase from last year’s figures that reported 89% of the large banks and 70% of the small banks had one. The bankers also reported stunning jumps in compliance spending with 92% of the respondents saying it had increased in the past three to five years, and 64% of them called the increase significant. Survey respondents spend on average 6% of their annual revenue on compliance, but smaller banks spend a higher percentage than larger ones do, some reporting a number as high as 10%. One banker, Charlie Cross, president/CEO of $125 million-asset Cornerstone Bank of Eureka Springs, Ark., guessed that these higher compliance costs are a major factor when some small community banks decide to sell themselves. Thompson noted that credit unions and community bankers share a lot of similar concerns about compliance burden. "I was particularly taken with the observation of some of the community bankers interviewed who feel that in recent examinations they have been more scrutinized than their larger competitors because examiners feel less intimidated in trying to evaluate their operations and compliance efforts." Bankers said they expect the compliance burden to get even heavier in 2009 as the federal government, and in some cases state agencies, ratchet up regulatory requirements, particularly involving mortgage lending. As one banker stated, he hopes "common sense" will prevail. CUNA's Examination and Supervision Subcommittee is completing a survey of credit unions on their recent examination experiences and concerns about compliance burden. The results are expected to be released in early 2009.

Appraisal agreement an improvement says CUNA

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WASHINGTON (12/31/08)--The Credit Union National Association (CUNA) said Tuesday that a new agreement reached by the country’s two largest mortgage finance companies and the New York Attorney General on independent home appraisals promises to be much less burdensome to lenders. Fannie Mae and Freddie Mac reached an agreement last week with Andrew Cuomo intended to ensure the independence of home appraisals. CUNA had urged revisions to an earlier agreement arguing that there could have been significant burdens on credit unions and other small lenders associated with parts of the new Home Valuation Code of Conduct. One of the significant provisions of the original agreement would have required lenders to maintain a telephone and email hotline to address consumers’ appraisal complaints. This, CUNA warned, would have imposed significant new burdens on credit unions, the cost of which would have to be borne by credit union members. CUNA noted that consequence was particularly unfortunate in the current credit climate of higher costs for mortgage credit. Also, the original version would have required those involved in the appraisal process to be completely independent from the loan production staff, a provision with which CUNA also took issue. The new agreement will allow lenders to implement safeguards if it cannot guarantee this independence. The new agreement also dropped a requirement that would have prohibited the use of "in house" appraisals or appraisals prepared by affiliates, which was another improvement sought by CUNA. CUNA Senior Assistant General Counsel Jeffrey Bloch said CUNA’s analysis shows a much-improved agreement that better balances the need for appraisal independence with fewer burdens on credit unions and other lending institutions. He noted that the effective date for the final agreement has been moved back to May 1, instead of Jan. 1 as indicated in the original agreement.

New post-merger net worth definition effective today

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WASHINGTON (12/31/08)—Today is the day that the National Credit Union Administration’s (NCUA’s) new post-merger net worth definition goes into effect, changing the definition of a natural person credit union's net worth to include as capital the retained earnings of a credit union that is merging into it. The rule applies to credit union mergers taking place after today and the change is consistent for corporate credit unions. The new definition, in effect, implements a statutory correction that was carried in The Financial Services Relief Act of 2006, which addressed accounting anomalies that have arisen since PCA requirements were first instituted. At the time PCA requirements were mandated in 1998 by the Credit Union Membership Access Act, the "pooling method" was used for the financial reporting of a credit union merger. This allowed the acquiring credit union to combine its own retained earnings with that of the merged credit union for determining the post-merger net worth ratio for purposes of complying with PCA requirements. In 2001, Financial Accounting Statement (FAS) No. 141 replaced the "pooling method" with the "purchase method" for business combinations, with the effect that an acquirer's net worth would not increase as a result of the merger. This potentially reduces the post-merger net worth. The Financial Services Relief Act of 2006 essentially reversed that policy by expanding the PCA definition of "net worth" to incorporate the retained earnings of the merged credit union. This would also apply to other combinations, such as purchase and assumption transactions. At the time the change was proposed in July, NCUA staff members noted that the new regime for net worth calculation in mergers would not reinstate the "pooling method," but would have a similar practical effect. Use the resource links below to read the NCUA rule and the Credit Union National Association’s final rule analysis.

NCUA unveils loan participation guidance

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WASHINGTON (12/30/08)—The National Credit Union Administration (NCUA) has released the guidance and questionnaire the agency’s field staff uses to assist in evaluation of loan participation programs. The overall theme of the agency's release is that credit unions must apply the same principles to loan participations that they apply to evaluating, selecting and monitoring third-party relationships. The NCUA has previously expressed concern regarding loan participation arrangements and it has been expected that the federal regulator would issue more direction to help credit unions avoid pitfalls. The agency reported that outstanding loan participations more than doubled between 2003 and 2008, increasing 262% in that period compared to a 149% increase in total loans. What’s more, the NCUA said annualized total dollars of loan participations charged off in 2008 were twice 2006 levels, resulting in the charge-off ratio increasing from 0.41% in 2006 to 0.64% in 2008. The charge-off ratio for total loans increased from 0.46% in 2006 to 0.75% in 2008. Loan participation delinquency was 1.10% in 2006 and 2.27% in 2008. Total loan delinquency was 0.68% in 2006 and 1.13% in 2008. The NCUA maintains that loan participation programs have their place. In his Letter to Federal Credit Unions, with guidance attached, NCUA Chairman Michael Fryzel said that properly managed loan participation programs can be beneficial to both selling and buying credit unions. A credit union selling loan participations may gain a mechanism to manage interest rate, liquidity, and credit risks as well as an enhanced ability to serve members. The purchasing credit unions may benefit from balance sheet diversification and increased revenue. However, the chairman reminded that there are potential risks and advised that a credit union should perform a comprehensive risk assessment before beginning loan participation activities. Due diligence, he said, is a key factor in assuring risks are identified and mitigated. The attached guidance and questionnaire regarding evaluating loan participation programs sets our 11 pages of direction and resources to assist credit unions in setting up successful programs. It describes practices examiners will find in a well-run loan participation program involving any type of loans, including automobiles, residential mortgages, and member business loans. The NCUA, for instance, recommends that a credit union deciding to engage in or develop a loan participation program start out small, gain experience, and build from that foundation. “A loan participation is a third-party relationship between a seller and a buyer, and as with any third-party relationship, the benefits of loan participations are accompanied by a variety of potential risks. Management should complete a risk assessment and perform due diligence prior to entering the third-party arrangement,” the guidance said. This guidance describes practices examiners will find in a well-run loan participation program involving any type of loans, including automobiles, residential mortgages, and member business loans.

Inside Washington (12/29/2008)

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* WASHINGTON (12/30/08)--Rep. Barney Frank (D-Mass.), House Financial Services Committee chair, is working to get the last half of the $700 billion rescue package released before President-elect Barack Obama takes office. Frank said he hopes the $350 billion will stimulate the economy. He also is working on legislation that would require the funds to be spent on stopping foreclosures. Frank’s bill would limit executive compensation and require banks to report on their lending each quarter (The Associated Press Dec. 23).

Annual report BSA reporting over 18 million

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WASHINGTON (12/30/08)—The 2008 annual report of the Financial Crimes Enforcement Network (FinCEN) shows Bank Secrecy Act (BSA) reporting through October was up from the previous year with slightly more than 18 million reports filed. That is up from 17.9 million in FY 2007. The number of Suspicious Activity Reports, Reports of Foreign Bank and Financial Accounts, Registrations of Money Services Business, and Reports of Cash Payments Over $10,000 Received in a Trade or Business all rose from the numbers filed during the previous fiscal year, according to FinCEN. The number of Currency Transaction Reports and Designations of Exempt Persons filed declined slightly. The reports are filed by a range of financial industry sectors, including credit unions and other depository institutions, securities broker-dealers, mutual funds, futures commission merchants, money services businesses and more. The FinCEN report also highlights its accomplishments in areas such as simplifying CTR exemption requirements, gathering feedback from affected sectors on the impact of hew and revised regulations, among other initiatives. The annual report also reiterates the value of BSA reporting to the country’s law enforcement goals. To read more, use the resource link below to access the report.

TARP FHA focus of early House hearings

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WASHINGTON (12/30/08)—The House Financial Services Committee has scheduled a Jan. 7 hearing to review the U.S. Treasury Department’s use thus far of the $700 billion in Troubled Asset Relief Program funds. Frank has been highly critical of the way the Treasury has handled the Capital Purchase Program, a part of TARP. In December, he called a TARP hearing just on the heels of a Government Accountability Office report on Treasury's implementation of TARP. Referring to the GAO report, Frank said at the time, "The American people received two kinds of news about the TARP program – bad and worse news." He said the report confirms that Treasury has no way to measure whether taxpayer funds invested in banks are being used in accordance with the purpose of the law. He added, "The much worse news is Treasury's response that it does not even have the intention of doing so." Also in January, the committee has also announced a hearing on the ninth on the Federal Housing Administration’s oversight of home mortgage loan originators. Witnesses have not been announced for either hearing. The Congress reconvenes Jan. 6. President-elect Barack Obama will be sworn into office Jan. 20.

IRS consolidates resources for Form 990

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WASHINGTON (12/30/08)—The Internal Revenue Service (IRS) has put together several resources on the changes to Form 990 and instructions for 2009, including frequently asked questions (FAQs). This summer, the IRS released revised instructions that will be needed by tax-exempt organizations to fill out the tax agency's redesigned Form 990. The new IRS form, Return of Organization Exempt from Income Tax, is effective for the 2008 tax year, for returns filed in 2009. State-chartered credit unions are required to file Form 990 with the IRS annually, although a few states still permit group 990 filings. Federal credit unions are not required to file, since they are not subject to unrelated business income taxes. Among the online informational resources are a page with seven categories of FAQs just for exempt organizations and a “Tax-Exempt Organizations Tax Kit.” The Credit Union National Association in November added an archived version of its "New 990 Reporting Rules" webinar to its website. It is available through May 11. The webinar, among other topics, shared preparation tips, such as the fact that there will be transition relief available for smaller organizations using a phase-in requirement for filing the new form over a three year period. To access the help-tips straight from the IRS, as well as the CUNA webinar, use the resource link below.

Inside Washington (12/26/2008)

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* WASHINGTON (12/29/08)--The Treasury Department announced last week that it had closed $2.8 billion with 49 banks Dec. 19 and $1.9 billion with 43 banks Wednesday through its Capital Purchase Program. The program is a part of the Troubled Asset Relief Program (TARP), which was created to strengthen the financial system. The department allocated $250 billion under TARP’s Capital Purchase Program to invest in financial institutions. The department has made $162 billion in investments so far ... * WASHINGTON (12/29/08)—Dr. Jill Biden, wife of Vice President-elect Joe Biden, visited her credit union, New Castle (Pa.) County School Employees FCU, two weeks ago, said the Delaware Credit Union League in its newsletter (Together Dec. 19). The credit union told the league that Dr. Biden was accompanied by the Secret Service. Pictured from left are: Dot Kenney, Shannan McMann, Alex Johnson, Lori Mays, Terri Keene, Dr. Biden, Jean Moore, Stephanie Mitchell, Sandra Toppin and Colin MacArthur. (Photo provided by the Delaware Credit Union League) ... * WASHINGTON (12/29/08)--Senior management staff of the Illinois Credit Union League (ICUL) met Dec. 19 with Sarah Vega, chief of staff and senior advisor in the office of National Credit Union Administration Chairman Michael Fryzel. The group used the meeting to discuss operational, regulatory and compliance issues critical to Illinois credit unions in light of the current economic conditions. ICUL staff also provided Vega with a league update on its key programs and initiatives, including the status of its 2008 state legislative agenda. From left are Keith Sias, ICUL director of state legislative affairs; Vega; Patrick Smith, ICUL director of strategic services; and Steve Olson, ICUL executive vice president, general counsel, and chief operating officer. (Photo provided by the Illinois Credit Union League) ...

Parity urged for noninterest transaction accounts

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WASHINGTON (12/29/08)--The Credit Union National Association (CUNA) last week again urged the National Credit Union Administration (NCUA) Board approve full deposit insurance coverage for noninterest bearing transaction accounts--as the Federal Deposit Insurance Corp. (FDIC) has provided for the banks it insures. CUNA’s request was included in comments on an agency interim final rule that will provide options for displaying the official share insurance sign to reflect the increase in the maximum share insurance amount from $100,000 to $250,000. CUNA in its letter noted that the NCUA Board has ample legal authority to increase the coverage for such accounts. “Some credit unions feel they have been disadvantaged by the lack of full insurance for these accounts because they have either lost out on accounts they might otherwise have had or members have taken deposits to competing institutions,” wrote CUNA. In regard to the share insurance sign, CUNA said it supports the increase in the share insurance limit to $250,000 and the flexibility that the rule provides in “displaying the official sign to reflect these new levels, which includes using current signs, new signs, or modifying the current signs.” CUNA also said supports the “expansion of share insurance coverage that will now insure the principal and interest portion of a borrower’s payment separately from the borrower’s individual accounts, which will be consistent with the deposit insurance rules, as administered by the FDIC.” Use the resource link below to read CUNA’s complete letter.

Fed raises HMDA reporting threshold

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WASHINGTON (12/29/08)--The Federal Reserve Board has adjusted its Home Mortgage Disclosure Act (HMDA) asset size data collection requirement threshold for 2009 from $37 million to $39 million. The Fed's annual adjustment of the asset size of financial institutions required to comply with HMDA data collection requirements is based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers. Financial institutions with assets of $39 million or less as of December 31, 2008, will be exempt from the data collection requirements in 2009, but reporting requirements for data collected in 2008 are not affected. The adjustment will be effective Jan. 1, 2009. HMDA requires most financial institutions to collect and report data on home mortgage loans, home improvement loans, and refinancings. The data reported include the type, purpose, and amount of the loan; the race, national origin, sex and income of the borrower; and the location of the property. The purpose of HMDA is to help the Fed and other government agencies determine whether financial institutions are serving the housing needs of their communities and assisting in fair lending enforcement. Use the link below to access CUNA's Final Rule Analysis, which provides additional information.

NCUA SBA clarify MBL programs in audio event

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WASHINGTON (12/26/08)--Credit unions on Monday tuned into a joint audio conference on the topic of member business loans and the Small Business Administration (SBA). The event featured representatives of the National Credit Union Administration (NCUA) and SBA. The call focused on several SBA programs designed to facilitate greater small business lending, which has recently slowed in light of the current overall economy. Grady Hedgespeth, SBA's director of financial assistance, detailed an interim final rule adopted by the SBA which “uses an alternative base rate for determining the interest applied to certain SBA loans.” This interim rule has resulted in more favorable terms for lenders and is aimed at increasing lending, according to Hedgespeth. He also discussed another recently adopted rule related to weighted average coupons for formulation of pools. This rule allows the aggregation of multiple coupon rates. Frank Kressman, NCUA staff attorney in the Office of General Counsel, discussed NCUA's Member Business Lending (MBL) rule and its relation to SBA lending. The agency’s MBL rule contains collateral and security requirements, as detailed in Parts 723.3 and 723.7, which contains required loan to value (LTV) ratios per safety and soundness concerns. A few years ago, NCUA amended the MBL rule for SBA lending in order to allow CUs to more fully participate in the program, explained Kressman. Specifically, the change removed the language which previously stated that the collateral and security requirements of the MBL rules do not apply to MBLs as part of the SBA program. Kressman reiterated that the SBA 7(a) program was included. NCUA recently released an Advance Notice of Proposed Rulemaking (ANPR) to review its entire MBL rule. One of the issues includes the LTV rules for construction and development loans and whether they are appropriate or should be adjusted. To access the entire audio conference, use the resource link below.

Inside Washington (12/25/2008)

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* WASHINGTON (12/26/08)--The Office of the Comptroller of the Currency and the Office of Thrift Supervision Monday released a second report on mortgage performance. According to the report, newly initiated foreclosures dropped 2.6% from the second to third quarter, new loan modifications increased 16% to 133,000, and the number of loans modified in the first quarter that were 30 or more days delinquent was 37% after three months and 55% after six months. Banks and thrifts continue to work with borrowers to mitigate losses and keep them in their homes. Newly initiated home retention actions increased 13% from the second quarter to the third quarter, the report said ... * WASHINGTON (12/26/08)--The Hope Now alliance released a statement Monday indicating that it expects to double loan modifications in 2009. Hope Now’s 11-month data also projected that this year, there were 2.2 million foreclosure preventions, 950,000 mortgage modifications, more than 20,000 homeowners helped at 29 workshops, more than one million calls from homeowners to the Hope hotline, and an 18% response rate to 2.9 million letters sent by Hope Now to at-risk homeowners. Hope Now is an alliance of mortgage market participants, mortgage servicers and counselors that aims to help homeowners ... * WASHINGTON (12/26/08)--The Bush administration is planning to stop the Federal Housing Administration’s (FHA) refinancing program, FHASecure, at the end of the year, industry observers said (American Banker Dec. 23). The program was slated to expire at the end of 2008 after helping 460,000 subprime borrowers refinance, but some consumer groups have encouraged the Department of Housing and Urban Development and the White House to keep it through next year. FHASecure allowed borrowers to refinance into fixed-rate mortgages and was expected to help homeowners who were behind on payments, but it refinanced only 4,000 delinquent borrowers ...

GAC performer earns presidential honor

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WASHINGTON (12/26/08)--An upcoming presenter of the 2009 CUNA Governmental Affairs Conference was awarded the Presidential Citizens Medal--one of the highest honors a U.S. president can confer upon a civilian, second only to the Presidential Medal of Freedom.
President George W. Bush (right) with Gary Sinise after presenting him with the 2008 Presidential Citizens Medal Wednesday, Dec. 10 in the Oval Office of the White House. (Photo provided by White House/Chris Greenberg
Actor and musician Gary Sinise was among 23 people awarded the medal, established in 1969 to recognize U.S. citizens who have “performed exemplary deeds of service for the nation.” Sinise, star of the hit CBS TV show "CSI New York," will perform during the GAC on Feb. 22 with his Lt. Dan Band, formed with Chicago composer Kimo Williams. "Lieutenant Dan" is the character Sinise portrayed in the 1994 blockbuster film, "Forrest Gump," a role that won him an Oscar nomination. The band has completed six tours for the USO and performs regularly for troops around the world. Separately, Sinise is actively involved in a program that provides school supplies to Iraqi children. “The United States honors Gary Sinise for his efforts to improve the human condition and his strong commitment to the selfless men and women who devote their lives to military service,” said the White House in a statement. For more information on the CUNA GAC, use the link below.

Inside Washington (12/22/2008)

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* WASHINGTON (12/23/08)--The National Association of Mortgage Brokers said Friday that it plans to sue the Department of Housing and Urban Development (HUD) to block the Real Estate Settlement Practices Act (RESPA). The group said it will ask for an injunction (American Banker Dec. 22). RESPA would make lenders liable for penalties charged for late payments on property taxes or insurance premiums paid from a mortgage escrow account, prevent lenders from increasing prices on settlement services from third parties, and allow borrowers to sue lenders for violations of the law ... * WASHINGTON (12/23/08)--Financial services industry observers don’t anticipate that the Bush administration will ask for the remaining $350 billion earmarked for the Troubled Asset Relief Program (TARP) in the $700 billion rescue plan. On Friday, Treasury Secretary Henry Paulson and the Bush administration said it would use $13.4 billion now and another $4 billion in February from TARP to bail out the auto industry (American Banker Dec. 22). Sen. John Sununu (R-N.H.), who was appointed to oversee TARP, said the matter will be left for President-elect Barack Obama. If Paulson asks Congress for the funds, the approval likely would be tied to conditions. House Speaker Nancy Pelosi (D-Calif.) has said the Treasury will not receive more money from Congress until it agrees to a loan modification plan ...

Baltimore newspaper explores CU MBL cap

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BALTIMORE (12/23/08)--A Baltimore newspaper yesterday focused on credit unions’ effort to lift the statutory cap on member business loans (MBLs). The story features Credit Union National Association Legislative Affairs Vice President Ryan Donovan and Maryland and D.C. Credit Union League President/CEO Mike Beall explaining why Congress should lift the decade-old MBL cap. CUNA’s Donovan “estimates a first-year, $10 billion credit infusion from cap removal,” and that “the fastest-growing loans for credit unions are business loans." The Maryland league’s Beall said lifting the cap would help his state’s small businesses. Use the resource link to access the complete story.

Dodd Kanjorski Waters to address GAC

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WASHINGTON (12/23/08)--Senate Banking Committee Chairman Chris Dodd (D-Conn.) and two senior members of the House Financial Services Committee--Reps. Paul Kanjorski (D-Pa.) and Maxine Waters (D-Calif.)--will address attendees at the Credit union National Association's upcoming Governmental Affairs Conference, which runs Feb. 22-26.
* Kanjorski will speak Tuesday morning, Feb. 24; * Waters will speak Wednesday morning, Feb. 25; and * Dodd will speak Wednesday morning, Feb. 25.
Rep. Kanjorski is the second-ranking Democrat on the House Financial Services Committee--behind Chairman Barney Frank, who is also speaker at this year's GAC--and chief sponsor of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). He also chairs the House subcommittee on capital markets, insurance and government-sponsored enterprises. Rep. Waters chairs the Financial Services Subcommittee on Housing and Community Opportunity. She also serves on the Subcommittee on Financial Institutions and Consumer Credit, the Subcommittee on Oversight and Investigations, and the Subcommittee on Domestic and International Monetary Policy, Trade, Technology. In addition to serving as Senate Banking Committee chairman, Sen. Dodd serves on the Commission on Security and Cooperation in Europe; Joint Committee on the Library; Committee on Foreign Relations; Committee on Health, Education, Labor, and Pensions; and Committee on Rules and Administration. He spent almost a decade fighting to enact the Family and Medical Leave Act. The three lawmakers join House Financial Services Committee Chairman Barney Frank (D-Mass.) and Rep. Carolyn Maloney (D-N.Y.), who heads the panel's subcommittee on financial institutions and consumer credit. They will speak on Feb. 25. CUNA's 2009 Governmental Affairs Conference is Feb. 22-26 at the Washington Convention Center. Use the resource link to register or learn more.

Feds update ID Theft brochure

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WASHINGTON (12/23/08)--The National Credit Union Administration (NCUA), along with the federal bank and thrift regulatory agencies, Monday announced publication of a revised identity theft brochure to assist consumers in preventing and resolving identity theft. The updated brochure, “You Have the Power to Stop Identity Theft,” focuses primarily on Internet “phishing” by describing how phishing works, offering ways to protect against identity theft, and detailing steps to follow for victims of identity theft. The brochure includes contact information for three major credit bureaus, where to report suspicious e-mails, and where to access additional information. The brochure is available to download from the websites of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, NCUA, and Office of Thrift Supervision. Use the resource link below to access the new brochure or other ID theft resources for credit unions.

New SBA leader named

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WASHINGTON (12/22/08)—President-elect Barack Obama is expected to name Karen Gordon Mills as the new chief of the U.S. Small Business Administration (SBA). SBA Acting Administrator Sandy Baruah said in a release that Mills is “ideally suited to lead the agency.” “Mills’ background is a combination of management, venture capital, and public policy, three elements key to leading the agency successfully. In addition, Mills has a record of bi-partisanship which is important to SBA and the small business community the agency serves,” Baruah said. Even before Obama announced the nomination officially, Sen. Olympia Snowe of Maine, the top Republican on the Senate's Small Business and Entrepreneurship Committee, released a statement congratulating Mills. (washingtonpost.com, Dec. 19) That report noted Mills is president of MMP Group, a private equity investor and adviser based in Brunswick, Maine, and has been part of the Obama SBA transition team . From 1999 to 2007 she was founding partner and managing director of Solera Capital, a New York-based venture capital firm. She is lead director of Scotts Miracle-Gro.

Inside Washington (12/19/2008)

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* WASHINGTON (12/22/08)--President-elect Barack Obama’s pick of Daniel Tarullo--a Georgetown University Law School professor and Clinton administration veteran--to the Federal Reserve Board could help the central bank learn more about the financial services industry’s challenges, observers say (American Banker Dec. 19). The Senate has yet to confirm Tarullo’s position. Tarullo’s academic and policy work on financial regulation has generated ideas to helping solve the financial crisis, Obama said. One of Tarullo’s priorities is Basel II, which began implementation this year. Prior to working as a Georgetown professor, Tarullo served as assistant secretary of state for economic and business fairs, assistant to the president for international economic policy and deputy assistant to the president for economic policy during the Clinton years ... * WASHINGTON (12/22/08)--Maxxam Inc., a Texas conglomerate, has settled with the Federal Deposit Insurance Corp. (FDIC). The FDIC has paid Maxxam $10 mllion over a dispute involving a failed thrift and redwood trees (American Banker Dec. 19). The FDIC argued that Maxxam’s CEO, Charles Hurwitz, was at fault for the collapse of United Savings Association of Texas in 1989. Hurwitz was a partial owner of the thrift ... * ALEXANDRIA, Va. (12/22/08)-- National Credit Union Administration (NCUA) Chairman Michael E. Fryzel met with Pennsylvania Credit Union Association (PCUA) President/CEO Jim McCormack before the December NCUA board meeting Thursday, said the PCUA. From left are Fryzel, McCormack and PCUA General Counsel Rick Wargo. (Photo provided by the Pennsylvania Credit Union Association) ... * WASHINGTON (12/22/08)--The Federal Reserve Board Thursday published its annual notice of the asset-size exemption threshold for depository institutions under Regulation C, which implements the Home Mortgage Disclosure Act. The asset-size exemption for depository institutions will increase from $37 million to $39 million based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the twelve-month period ending November 2008. Depository institutions with assets of $39 million or less as of Dec. 31 are exempt from collecting data. The adjustment is effective Jan. 1 ... * WASHINGTON (12/22/08)--The Federal Deposit Insurance Corp. released its third quarter state banking profiles. The profiles detail economic conditions for each state, including employment growth rates, banking trends, loan concentrations and other data ...

CUNA Compliance What is e-Verify

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WASHINGTON (12/22/08)--Anyone who frequents the human resource or employment law blogs can tell you that a major topic of discussion these days is the federal government's E-Verify system. So, what exactly is E-Verify? The E-Verify program is operated by the Department of Homeland Security (DHS) in partnership with the Social Security Administration (SSA). It enables employers to verify the employment eligibility of new hires online by comparing information from an employee's I-9 form against SSA and DHS databases. The program is free and, according to DHS, “the best means available for determining employment eligibility of new hires and the validity of their Social Security numbers.” Participation in E-verify is voluntary for most employers. But that is not the case with certain federal contractors and subcontractors, who will be required to begin using the E-Verify mid-January. How can you tell if a federal contract requires compliance with E-Verify? Credit Union National Association Director of Compliance Information Valerie Moss notes that federal procurement contracts that are awarded after Jan. 15 will include a clause committing government contractors to use E-Verify. So, she says, the answer to this question lies in the body of the federal contract. A credit union might wonder, Moss said, whether those that sell or redeem U.S. Savings Bonds are federal contractors. They are federal contractors for purposes of affirmative action (equal employment opportunity) but, Moss notes, that fact alone doesn’t make a credit union a federal contractor for purposes of complying with E-Verify. In fact, she says, according to the supplemental information to the E-Verify regulations, “agreements or activities performed by financial institutions that are not subject to the Federal Acquisition Regulations (FAR) are not required to comply with the E-Verify provisions and clauses of the FAR.” Moss says further, “contracts for purchase of goods by companies from the federal government are not subject to the FAR and therefore are not required to comply with the E-Verify provisions and clauses in the FAR.” The Department of Defense, General Service Administration, and the National Aeronautics and Space Administration jointly issue the FAR for use by executive agencies in acquiring goods and services. These regulations do not apply to financial institutions’ agreements with the Treasury Department for the sale or redemption of U.S. Savings Bonds. Moss notes that her comments on this issue in no way constitute legal advice. “Credit unions should always consult the appropriate human resource professional regarding the application of any federal or state employment law to their credit unions’ operations,” Moss advises. Use the resource link below to visit the DHS e-Verify Web page.

Fed action continues CU multi-featured open-end lending

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WASHINGTON (12/22/08)—Changes adopted last week by the Federal Reserve Board to its Regulation Z will permit credit unions to continue offering multi-featured open-end lending, such as under LoanLiner. Credit union members have used multi-featured open-end lending for the last 25 years as a convenient and efficient means of accessing credit from their credit union. The Fed plan as proposed may have put that authority in jeopardy and the Credit Union National Association (CUNA) and CUNA Mutual Group launched a substantial effort to inform the Fed of the possible problems credit unions might face under the Reg Z plan as proposed. The proposal would have required "closed-end" disclosures for certain types of loans provided under these types of programs, instead of the "open-end" disclosures that are currently used. The goal of CUNA and CUNA Mutual was to preserve the ability to use the current disclosures. The groups told reminded the Fed that have been no problems or concerns raised by credit union members that have used these programs. “Working with CUNA Mutual, we met several times with the Fed to ensure that this approach would essentially be preserved in these much-anticipated rules, and we appreciate the Fed’s consideration of our views,” said CUNA President/CEO Dan Mica after the Fed action. “However,” he added, “some changes may be necessary by credit unions to fully comply with the new regulation. We will be carefully reviewing the details and providing guidance to leagues and credit unions regarding these changes, including verifying creditworthiness and other issues.” The final rule approved by the Fed last Thursday made fairly comprehensive changes to the format, timing, and content requirement for the five main types of open-end credit disclosures that are required under its Regulation Z. The types of disclosures covered include credit card application and solicitation disclosures, account-opening disclosures, periodic statements, change-in-term notices, and advertising provisions. It is unclear the extent to which disclosures provided with open-ended lending under LoanLiner may need to be revised. As mentioned, the rule did not change timing requirements for making advances under an open-end lending plan. The Fed won’t require that each subaccount under a plan have a self-replenishing credit limit. Also, credit unions are permitted to verify continuing creditworthiness, but may not conduct additional underwriting. Credit unions and other lenders must comply with the new rules by July 1, 2010. Until then, current lending processes and disclosures may be used. CUNA's Regulatory Advocacy will be providing analysis of the final rule and its implications for LoanLiner and other issues on its website.

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.

Inside Washington (12/17/2008)

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* WASHINGTON (12/18/08)—Credit unions can still register for a a Dec. 22 Credit Union National Association audio call titled "SBA Lending For Credit Unions: Opportunities and Challenges in the Current Economic Environment." Among the speakers participating in the call will be Frank Kressman, staff attorney with the National Credit Union Administration (NCUA), Grady Hedgespeth, SBA's Director of Financial Assistance, and Nicholas Owens, National Ombudsman and Assistant Administrator for Regulatory Enforcement Fairness at the SBA, who will moderate the program. The agency experts will also discuss NCUA's member business lending requirements and how they impact SBA lending… * ALEXANDRIA, Va. (12/18/08)—The National Credit Union Administration (NCUA) has made an archived version of its Dec. 16 audio call on CU HARP and CU SIP available online. The call-in session, co-hosted by the NCUA, Credit Union National Association and National Association of Federal Credit Unions, reiterated the details of the two programs—one to help troubled borrowers keep their homes, the other to shore up the liquidity of the corporate credit unions. It also underscored some important upcoming deadlines for credit unions interested in participating. CU HARP stands for the Credit Union Homeowners Affordability Relief Program. CU SIP stands for the Credit Union System Investment Program… * WASHINGTON (12/18/08)--The Federal Reserve Board announced Tuesday restructuring changes of check processing operations in the Sixth and Eighth Districts. As of Feb. 21, 2009, the head office of the Federal Reserve Bank of St. Louis no longer will process commercial checks, and banks currently served by that office will be reassigned to the head office of the Federal Reserve Bank of Atlanta. As a result of these changes, some checks deposited in the affected regions that currently are non local checks will become local checks that are subject to shorter permissible hold periods ... * WASHINGTON (12/18/08)--The Federal Deposit Insurance Corp. (FDIC) began prepping Tuesday for more bank failures by increasing its 2009 budget 84% to $2.24 billion. During the third quarter, the Deposit Insurance Fund decreased by 23.5% to $34.6 billion due to bank failures. The FDIC also approved a staffing level for 2009 of 6,269--an increase of 1,459 from the beginning of this year. The agency also issued two final rules: one that would permit a banking organization to reduce the amount of goodwill it must deduct from tier 1 capital by any associated deferred tax liability, and another to require troubled insured depository institutions to provide details to the FDIC regarding adequate position level documentation of the counterparty relationships of the failed institutions ... * WASHINGTON (12/18/08)--Rep. Maxine Waters (D-Calif.), chair of the House Financial Services subcommittee, is calling servicers to help her constituents avoid foreclosure (American Banker Dec. 17). Waters and her staff have helped seven borrowers so far, and are working on 30 more cases. Their constituents must sign a waiver to allow her office to deal with servicers. She has designated one full-time staff member to help constituents get loan modifications and gets involved personally when the foreclosure date is near. Waters supports Federal Deposit Insurance Corp. Chairman Sheila Bair’s loan modification plan, and has criticized the Treasury Department for failing to adopt it ... * WASHINGTON (12/18/08)-The Center for Responsible Lending, in a report published Tuesday, urged regulators and the Federal Reserve to do more to help protect consumers against abusive credit card practices. The center’s research indicated that only 3% of Americans understand the difference between teaser rates and rates on purchases and cash advances; one out of every 10 credit card balances carry a penalty interest rate the cardholder doesn’t understand; and penalty pricing and payment allocation hike interest rates, making borrowing most costly for consumers ...

Compliance Take a CTR quiz

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WASHINGTON (12/118/08)—The Bank Secrecy Act, also known as BSA or the bane of compliance officers’ existence, lays out pretty precise rules about when a credit union may designate a Phase II exemption for a member business account. The Credit Union National Association’s December Compliance Challenge features a number of BSA-related questions that reflect the changes brought about by the new currency transaction report (CTR) exemption rules issued by the Financial Crimes Enforcement Network (FinCEN) this month. For instance, what can you do if your federal credit union has a business account that engages in a number of frequent transactions throughout the year that trigger currency transaction report (CTR) filings and your member service representative would like to know if the business account would qualify for a Phase II exemption for non-listed businesses? Let’s say the business account generates a number of currency transaction report (CTR) filings and your member service representative would like to know if the business account would qualify for a Phase II exemption for non-listed businesses. Take this multiple choice quiz: According to the BSA (31 CFR 103.22), in order to qualify for a Phase II exemption from CTR filing, a business would must maintain its account with the credit union for a minimum number of months and have engaged in a minimum number of transactions per year. Which one of the following is correct?
* A. A business would have to maintain its account for at least 12 months and have at least 8 transactions per year to qualify. * B. A business would have to maintain its account for at least 6 months and have at least 20 transactions per year to qualify. * C. A business would have to maintain its account for at least 2 months and have at least 5 transactions per year to qualify. Or, * D. A business would have to maintain its account for at least 8 months and have at least 8 transactions per year to qualify.
Did you know the correct answer is “C”—or did you just guess right? Use the resource link below to find out why “C" is correct and to read more compliance jewels.

NCUA to vote today on unfair practices CUSO activities

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WASHINGTON (12/18/08)—At its open board meeting today, the National Credit Union Administration (NCUA) is scheduled to take up final rules on unfair and deceptive practices and credit union service organization (CUSO) activities, as well as receive a share insurance fund report. The NCUA is expected to mirror an expected Federal Reserve Board action approving stricter rules to ban unfair and deceptive credit card practices. The NCUA must act if the Fed rules are to apply to federal credit unions. Regarding CUSO activities, the NCUA in April proposed changes to its rules that would expand and clarify permissible CUSO activities. The proposed rule would also give NCUA access to the books and records of CUSOs that are owned by federally-insured, state-chartered credit unions (FISCUs); require FISCUs to maintain a separate corporate identity from their CUSOs; and would limit the ability of undercapitalized federal credit unions to recapitalize a CUSO. The Credit Union National Association said in a comment letter that the NCUA is moving in the right direction with its proposal, but could go further to enhance CUSO's abilities to meet credit unions' needs. CUNA urged the NCUA to broaden CUSO authority by allowing them to choose from the range of activities permissible for federal credit unions. In particular, CUSOs should be able to engage in indirect automobile lending services and to sell loan participation interest in a credit card portfolio to credit unions, CUNA said. The NCUA posted a revised meeting agenda to its website Wednesday that added a closed meeting to its schedule. Considerations for that closed sessions are “supervisory activities” and a personnel matter.

CU comments wanted on Fed disclosure plan

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WASHINGTON (12/18/08)—To implement mortgage disclosure rules brought about by this year’s Mortgage Disclosure Improvement Act (MDIA), the Federal Reserve Board has proposed changes to its Regulation Z and the Credit Union National Association (CUNA) seeks credit union comment on the plan. In its comment call, CUNA reminds credit unions this is just the beginning of changes to come. The Fed is in the process of reviewing Reg Z in its entirety and will issue more changes to the mortgage disclosure provisions sometime next year. For now, theThe MDIA requires creditors to mail or deliver good faith estimates of mortgage loan costs within three business days after receiving a loan application and before any fees are collected, other than a reasonable fee for obtaining a credit report. The term “business day” is defined as any day in which the lender’s office is open for business. CUNA notes these early disclosure provisions are consistent with the Fed’s recent final rule that amends the Home Ownership Equity Protection Act (HOEPA), which imposes this requirement for the consumer’s primary home. The MDIA now broadens this requirement to include all dwellings, such as second homes. These requirements will apply to refinancings and home equity loans, but they will not apply to home equity lines of credit (HELOC), which are considered “open-end” loans and not subject to these provisions of TILA and Regulation Z. Use the resource link below to read more about the Fed proposal and to access CUNA’s comment call. CUNA requests comment by Jan. 15. The Fed Wednesday extended its comment period to Feb. 9 from Jan. 23.

Mica explains CU difference on CNBC-TV

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WASHINGTON (12/18/08)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday took an opportunity on national television to spell out the credit union difference, note how credit unions are still lending to consumers in today's economy, discuss a federal backup plan for corporate credit unions, and explain why credit unions need their own federal regulator. In a comprehensive live interview on CNBC “Squawk on the Streets,” Mica first responded to a question from host Erin Burnett about how credit unions differ from banks. The CUNA leader said, “In clear, quick terms, a credit union is a not-for-profit financial institution. Banks are for-profit. There's the bank, the shareholder and you. They try to make money to get to it the shareholders. The credit unions, there's you and the credit union. Any money left over goes to you.” Mica also noted that credit unions have equal federal insurance through the National Credit Union Share Insurance Fund as banks and thrifts have through the Federal Deposit Insurance Corp. All federally insured accounts currently are covered to $250,000, he said. Mica also spoke about the strength and soundness of credit unions, noting that they "have 11% capital nationwide--the rest of the financial services industry would love to say that." And because of their strong capital position and their avoidance of the problem types of subprime loans that have unsettled the housing and mortgage markets, Mica emphasized, credit unions are still making loans.
Click for member-only video CUNA President/CEO Dan Mica on CNBC Wednesday. Click for member-only video. (Photo provided by CUNA)
"They've made very conservative loans, based on relationships," said the head of CUNA. However, Mica also explained that credit unions are “getting some collateral damage” because everything around credit unions is starting to collapse. For that reason, Mica said, the corporate credit unions that support credit union liquidity need to have the same kind of federal backups available to banks. When asked if a single financial regulator would be a good idea for credit unions, Mica said that the unique nature of credit unions makes such a plan a bad one. He also doubted the success of an idea that would lump credit unions with the same commercial bank leaders who have said they want to put credit unions out of business.

Inside Washington (12/16/2008)

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* WASHINGTON (12/17/08)--Sen. Christopher Dodd (D-Conn.) applauded a recent move by Fannie Mae to help tenants stay in their foreclosed homes if the tenants can pay the rent (American Banker Dec. 16). The policy will go into effect before a moratorium on evictions and foreclosures expires Jan. 9. The decision will bring relief to renters in the “wrong place at the wrong time,” Dodd said ... * WASHINGTON (12/17/08)--House Speaker Nancy Pelosi (D-Calif.) is pushing the Bush administration to help homeowners by not releasing more money to the Treasury Department’s bailout effort (The Washington Post Dec. 16). The administration has ignored the bailout’s intent to stop foreclosures, Pelosi said. She also has asked Rep. Barney Frank (D-Mass.), House Financial Services Committee chairman, to work on legislation that requires the provisions of the law to be followed before more funds are released. Frank also supports using the bailout money to help homeowners. So far, the Treasury has spent $335 billion of the $700 billion program.... * WASHINGTON (12/17/08)--Mark-to-market accounting rules’ application could be refined after Securities and Exchange Commission Chairman Christopher Cox rejected a reversal of the rules (American Banker Dec. 16). Changes for the application include: allowing greater flexibility in valuing assets without buyers, slow the impact of fair-value accounting on regulatory capital and smaller write downs on assets that are distressed. Some bankers want the rules scrapped because they believe the rules have caused some institutions to fail. In a speech last week, Cox signaled that the agency would retain mark-to-market accounting, but said the application needs to be clearer. Industry representatives hope there will be changes to make the standard more flexible when accountants write assets down to fair value ...

Bank failures spur FDIC premium increase

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WASHINGTON (12/17/08)—A higher level of bank failures have increased the Federal Deposit Insurance Corp.’s (FDIC’s) resolution costs significantly and spurred the agency to increase risk-based assessment rates for its insured banks by seven basis points on an annual basis. The FDIC voted Tuesday for the higher fee, which is set for the first quarter of 2009. Currently, banks pay between 5 and 43 basis points of their domestic deposits for FDIC insurance. Under the final rule, risk-based rates would range between 12 and 50 basis points on an annualized basis. The FDIC said most institutions would be charged between 12 and 14 basis points. “This assessment increase creates a path for the fund to return to its statutorily mandated level," said FDIC Chairman Sheila Bair. Calling the banking system “the bedrock of our economy,” Bair said deposit insurance has plays a vital role in providing stability to the system. “Maintaining a strong fund positions the FDIC well to handle future challenges," she added. When the FDIC announced its “restoration plan” last October, National Credit Union Administration (NCUA) Chairman Michael Fryzel said his agency did not have similar intentions to raise fees for share insurance. As of today,” he said Oct. 7, “everything looks fine in terms of the share insurance fund.” At the agency’s November open board meeting, staff reported that the National Credit Union Share Insurance Fund’s equity level is now at 1.27% and is expected to be at that level at the end of this year--precluding the possibility of an NCUSIF dividend to federally insured credit unions. Agency staff noted that its 1.27% estimate for yearend is .01% below October's projection. There are currently 246 CAMEL 4 and 5 credit unions, up from 211 at the end of last year. The total insurance loss expense for 2008 is estimated to be approximately $176.5 million.

New SBA rule could help CU participation says CUNA

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WASHINGTON (12/16/08)—A proposed rule change by the U.S. Small Business Administration (SBA) would help establish rates that would make increased credit union participation in SBA loans possible, according to the Credit Union National Association (CUNA). Credit unions will be able to get important information on this and other SBA topics by participating in a Dec. 22 CUNA audio call. Regarding the proposed rule change, CUNA said in a Dec. 15 comment letter to the agency that the SBA interim final rule to adjust loan pricing would help offset current economic conditions that have limited the availability of business loans. Specifically, the rule would allow loans to be priced based on the 30-day London Interbank Offered Rate (LIBOR) plus 300 basis points. The plan would also permit secondary market loan pools to be priced based on the weighted average coupon rate for SBA loans under Section 7(a). CUNA said the option to better price loans would help alleviate the problems caused by the narrowing of the spread between LIBOR and the prime rate. “Our only concern with this proposal would be that small businesses may not be comfortable with having loans that are based on the LIBOR as they may not be familiar with LIBOR and may be concerned that these rates will fluctuate more than the prime rate,” the CUNA comment letter said. “However,” it added, “we believe these concerns will be alleviated to some extent both because using the LIBOR will now be an option in addition to using the prime rate and the use of the prime rate should become more prevalent as the spread widens between the LIBOR and the prime rate.” Regarding the change to the pricing of secondary market loan pools, CUNA noted that now the interest rate on a loan pool is the lowest net rate of all the loans in the pool. The interim final rule, CUNA Wrote, would be successful in its intent to improve liquidity in the secondary market. CUNA also reiterated its support of another government effort to improve liquidity in the secondary market, such as the Term Asset-Backed Securities Loan Facility (TALF) that was recently established by the Federal Reserve Board and the U.S. Department of the Treasury. Under the TALF, loans will be made to investors who purchase asset-backed securities, and this will include small business loans guaranteed by the SBA. Use the resource links below to access the complete CUNA comment letter letter and to register for the CUNA audio call.

NCUA answers CU HARPSIP questions

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WASHINGTON (12/17/08)—The National Credit Union Administration (NCUA) said 1,396 individuals tuned in to a Tuesday audio conference detailing its two new initiatives: CU HARP and CU SIP. The call-in session reiterated the details of the two programs—one to help troubled borrowers keep their homes, the other to shore up the liquidity of the corporate credit unions. It also underscored some important upcoming deadlines for credit unions interested in participating. The audio conference was hosted jointly by the NCUA, the Credit Union National Association and the National Association of Federal Credit Unions. J. Owen Cole, Jr, of the NCUA’s Central Liquidity Facility (CLF), reminded that CU HARP is a one-time, two-year, $2 billion program intended to assist homeowners who are facing delinquency, default, or foreclosure of their mortgages. The CLF will make CU HARP advances for a maximum term of one year, renewable for one year. Initial requests for CU HARP advances must be submitted on Dec. 19. Approved advances will be funded on Jan. 2, 2009 and mature on Dec. 31, 2009. Rollover CU HARP advances will be made on Dec. 31, 2009 and will mature on Dec. 31, 2010. Privately insured credit unions may be eligible for the program. However, as of September only about 600 credit unions have $1 million in first mortgages in default, which is one of the criteria for CU HARP eligibility. CU HARP stands for the Credit Union Homeowners Affordability Relief Program. CU SIP stands for the Credit Union System Investment Program. Under CU SIP, participating creditworthy credit unions would borrow from the CLF and invest the proceeds in participating corporate credit unions. Cole said that in order to enable the CLF to offer a program to make an advance for purposes other than liquidity needs, the NCUA under Section 725.23 of its Rules and Regulations had to determine that such a program under the CLF was in the “national economic interest.” The initial monthly funding amount for the CU SIP is $500 million, but that may be increased at the discretion of the CLF is the offering is oversubscribed, according to NCUA documents. Corporate credit unions interested in participating in the first monthly funding must provide notice to U.S. Central at or before 2 p.m. Dec. 19. CU SIP is designed to complement CU HARP by enabling the CLF to lend to credit unions to invest in NCUSIF guaranteed notes, the proceeds of which will be used to retire external system debt, the NCUA explained in its initial release. It added that the program will free collateral pledged by corporate credit unions and thereby provide increased contingent borrowing capacity. CU SIP will be funded on a monthly basis from January through June of 2009. The NCUSIF guarantee is provided under the Temporary Corporate Credit Union Liquidity Guarantee Program announced in October. The program guarantees senior corporate credit union debt for a 75 basis point fee. The NCUA noted it will archive the CU HARP-CU SIP audio conference and it will be accessible through the agency website soon.

Progress reported on FannieFreddie loan workouts

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WASHINGTON (12/17/08)—The Federal Housing Finance Agency (FHFA), regulator of Fannie Mae and Freddie Mac, reported progress is being made on mortgage workout and loss mitigation efforts have improved since the end of 2007. The FHFA Tuesday released its monthly Foreclosure Prevention Report September. The numbers show that while the number of loans 60-days or more delinquent have increased, loans for which foreclosure was initiated has decreased. According to the agency, loss mitigation actions have increased for all workout types and short sale and deed-in-lieu volumes increased significantly in September 2008. Compared to 2007, the government-sponsored enterprises’ loss mitigation performance ratio showed considerable sustained improvement with the year-to-date ratio at 54.6% versus 43.5% for 2007. The FHFA also noted that as of Sept. 30 of the GSE’s 30.7 million residential mortgages:
* Loans 60 or more days delinquent (including those in bankruptcy and foreclosure) as a percent of all loans increased from 1.46% as of March 31 to 1.73% as of June 30 to 2.21% percent as of Sept. 30; * Loans for which foreclosure was started as a percent of loans 60 or more days delinquent declined from 8.29% for the first quarter and 7.81 % for the second quarter to 7.12% for the third quarter; * Loans for which foreclosure was completed as a percent of loans 60 ore more days delinquent increased from 2.41% for the first quarter to 2.55 % for the second quarter and stabilized at 2.55% for the third quarter; and * Modifications completed declined from 15,636 for the first quarter to 15,372 for the second quarter to 13,450 for the third quarter. However, loans reinstated through Fannie Mae’s HomeSaver Advance (HSA) Program increased from 1,244 in the first quarter to 16,658 in the second quarter and 27,277 in the third quarter.

CU info on SBA loans CUNA audio call

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WASHINGTON (12/16/08)—Credit unions will be able to get important information on U.S. Small Business Administration (SBA) by participating in a Dec. 22 Credit Union National Association (CUNA) audio call. The audio call is titled “SBA Lending For Credit Unions: Opportunities and Challenges in the Current Economic Environment.” It will explore the challenges the current economic environment is posed for credit unions and other who participate in SBA lending, as well provide information on how credit unions can participate in SBA programs. Among the speakers participating in the call will be Frank Kressman, staff attorney with the National Credit Union Administration (NCUA), Grady Hedgespeth, SBA's Director of Financial Assistance, and Nicholas Owens, National Ombudsman and Assistant Administrator for Regulatory Enforcement Fairness at the SBA, who will moderate the program. The agency experts will also discuss NCUA's member business lending requirements and how they impact SBA lending. Use the resource link below to register for next Monday’s audio call.

Register now for todays CU HARP CU SIP webcast

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ALEXANDRIA, Va. (12/16/08)--Credit unions now can register for a no-charge audio webcast focusing on details of the two newly announced National Credit Union Administration (NCUA) programs to assist credit union mortgage holders and corporate credit unions. It happens today at noon ET. The audio webcast will offer credit unions information about how they can participate in the "Credit Union Homeowners Affordability Relief Program (CU HARP)" and the "Credit Union System Investment Program (CU SIP)." The NCUA, Credit Union National Association (CUNA), state leagues and the National Association of Federal Credit Unions are hosting the event. The new time is a change from last week's CUNA announcement. It is in response to high demand for the one-hour event. The NCUA programs are designed, respectively, to lower monthly mortgage payments for struggling low- and moderate-income credit union members, and to free up collateral pledged by corporate credit unions and thereby provide increased contingent borrowing capacity. Both programs rely on the NCUA-administered Central Liquidity Facility (CLF) to provide funding. The CUNA program will feature two NCUA officials:
* CLF President Owen Cole, and * CLF Vice President Steve Sherrod.
The two federal officials will present details of the two programs and answer questions from conference participants. Use the resource link below to register.

CUNA urges quick signing of pension bill

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WASHINGTON (12/16/08)—The Credit Union National Association (CUNA) urged President George W. Bush to sign a bill that would give organizations some flexibility in shoring up pension plans hurt by the current economic upheaval. H.R. 7327, the Worker, Retiree, and Employer Recovery Act was approved last week by the U.S. Congress to amend the Pension Protection Act of 2006. One of the changes would allow organizations with defined benefit pension plans to phase in funding targets over three years. CUNA President/CEO Dan Mica wrote in his letter to the President: “The decline in the market value of equity assets held in defined benefit plans has caused plans that were once fully funded to fall below the capitalization levels required under the Pension Protection Act of 2006. “As a result, many organizations face the prospect of being required to shift operating capital into their defined benefit pension accounts.” The broader three-year timeframe is critical to viability of existing plans during the country’s current difficult economic times, said Mica, and he urged Bush to sign the act into law.

Hyland to CU volunteers Your job is critical

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WASHINGTON (12/16/08)—National Credit Union Administration (NCUA) board member Gigi Hyland told an audience of credit union volunteers recently that while their “jobs” are tougher than ever, they are also more critical to the success of the credit union system. “As volunteers, you are charged with assuring that the spirit of ‘people helping people’ continues,” Hyland said at last week’s Credit Union Executive Society’s Directors Conference in Palm Desert, Calif. Hyland said the role of volunteer requires an individual to “be active, informed, knowledgeable, visionary, and constantly challenge and question management’s assumptions.” “You are your institution’s first line of defense in risk management. These turbulent economic times require the utmost vigilance on the part of the regulator and the regulated. These times also require innovation,” she said. Regarding innovation, Hyland urged volunteers to look at:
* The larger credit union system to seek ways to cooperate and leverage resources, and utilizing capital wisely to weather the current turbulent economic climate; * Understanding your current field of membership, its diversity and making sure that your board and staff look like your membership and are responding to what your members’ need; and * Recognizing that now is not the time to cut back on marketing or member services.
“As I stated earlier, despite the challenges, this is a time of tremendous opportunity for credit unions – a time to continue to do what you do best – serve your members and meet their needs in a manner that is safe and sound,” Hyland said.

Treasury cuts bank taxes yet pushes UBIT says CUNA

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WASHINGTON (12/16/08)—In its attempts to address the national crisis in the financial markets, the U.S. Treasury Department is creating a “disturbing disparity” in the tax treatment of different kinds of depository institutions and is favoring banks, according to the Credit Union National Association (CUNA). CUNA has requested a meeting with Treasury Secretary Henry Paulson and Internal Revenue Service Commissioner Douglas Schulman to discuss recent actions that CUNA said have showered banks with tax relief to help them survive the current financial crisis, while credit unions needs have not been addressed. To make matters worse, CUNA said in its letter to the Treasury and IRS, state-chartered credit unions continue to have unrelated business income tax (UBIT) claims piled on them. The IRS’s aggressive re-interpretation of law to increase the tax liabilities of state-chartered credit unions under UBIT leaves “less funds for them to lend,” CUNA President/CEO Dan Mica pointed out in the letter. “This harsh position has imposed substantial burdens on credit unions, diverting funds which might better be used to provide loans to consumers for homes, cars and education,” Mica wrote. Noting the “urgent circumstances,” Mica requested that the IRS be directed to halt its efforts against credit unions, and a meeting be scheduled to “discuss this significant issue.”

Inside Washington (12/15/2008)

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* WASHINGTON (12/16/08)--Though lawmakers are pushing the Treasury Department to track how banks are using Troubled Asset Relief Program (TARP) funds, doing so may be difficult, industry representatives say. Bankers can’t identify exactly where the money is spent because it’s applied to their balance sheets, said William Longbrake, Federal Home Loan Bank of Seattle director (American Banker Dec. 15). Last week, the House approved an amendment to an auto bailout bill that would require banking companies to report changes in lending. The bill has since died in Congress, but some representatives say lawmakers will continue to push bankers to detail their TARP funds use next year ... * WASHINGTON (12/16/08)--Bankers in the Federal Deposit Insurance Corp. (FDIC) debt guarantee program will be allowed to change their applications after roughly 500 institutions say they signed up for the program’s advanced version under the impression that its benefits were free (American Banker Dec. 15). In addition to the 500 thrifts, holding companies and banks, the agency is contacting 300 others to let them know they can participate in the standard program without extra charges. The guarantee program was launched in October to help credit markets. It charges 50 to 100 basis points for coverage of senior unsecured debt. The advanced program covers newly issued debt up to three years ... * WASHINGTON (12/16/08)--The Small Business Administration (SBA) has awarded four small business development centers in Idaho, Nebraska, Nevada and New York Small Business Sustainability Initiative Grants totaling $500,000 to fund projects offering energy efficiency assistance to small businesses. The centers include: The New York Small Business Development Center at the Research Foundation of the State University of New York, Albany; The Nevada Small Business Development Center at the University of Nevada, Reno; The Nebraska Small Business Development Center at the University of Nebraska, Omaha; and The Idaho Small Business Development Center at Boise State University, Boise. The grant winners proposed programs that provide education, training, energy efficiency audits, information about adoption of energy efficiency and energy conservation practices, and help with purchasing and installing energy efficient building fixtures and equipment, the SBA said ...

NEW Register now for CU HARP CU SIP live event

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ALEXANDRIA, Va. (12/15/08, UPDATED 1:30 p.m. ET)--Credit unions now can register for a no-charge audio webcast focusing on details of the two newly announced National Credit Union Administration (NCUA) programs to assist credit union mortgage holders and corporate credit unions. It happens Tuesday at noon ET. The audio webcast will offer credit unions information about how they can participate in the "Credit Union Homeowners Affordability Relief Program (CU HARP)" and the "Credit Union System Investment Program (CU SIP)." The NCUA, Credit Union National Association (CUNA), state leagues and the National Association of Federal Credit Unions are hosting the event. The new time is a change from last week's CUNA announcement. It is in response to high demand for the one-hour event. The NCUA programs are designed, respectively, to lower monthly mortgage payments for struggling low- and moderate-income credit union members, and to free up collateral pledged by corporate credit unions and thereby provide increased contingent borrowing capacity. Both programs rely on the NCUA-administered Central Liquidity Facility (CLF) to provide funding. The program will feature two NCUA officials:
* CLF President Owen Cole, and * CLF Vice President Steve Sherrod.
The two federal officials will present details of the two programs and answer questions from conference participants. Use the resource link below to register.

Inside Washington (12/12/2008)

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* WASHINGTON (12/15/08)--The U.S. Small Business Administration (SBA) Friday issued an interim final rule for new lender oversight regulations in its guaranteed loan program. Effective Jan. 12, the rule is intended to give the SBA greater enforcement authority and increase transparency on how risk is evaluated. It codifies in SBA regulations SBA's process of risk-based oversight including: accounting and reporting requirements; off-site reviews/monitoring; on-site reviews and examinations; and capital adequacy requirements. It also codifies SBA Supervised Lender regulation and updates SBA's business loan program regulations to specify program standards. Finally, the rule lists the types of, grounds for, and procedures governing SBA enforcement actions against 7(a) Lenders, Certified Development Companies, Microloan Intermediaries, and Non-Lending Technical Assistance Providers within consolidated enforcement regulations … * WASHINGTON (12/15/08)--Though the Federal Housing Finance Agency (FHFA) is expected to unveil a plan that would allow Fannie Mae and Freddie Mac to purchase mortgage-backed securities in an effort to lower rates, mortgage rates may drop to 4.5% on their own, FHFA Director James Lockhart said Thursday (American Banker Dec. 12). Fannie last week issued debt for five-year maturities at 2.8%--a positive sign, he said. Lockhart also noted that a recently announced Federal Reserve Board plan to buy Fannie and Freddie’s debt eliminates the need for the government to back the enterprises. Fannie and Freddie also will be required beginning Monday to support modifications from servicers that lower borrowers’ debt ratio to 38%. Lockhart said he is aware of the problems the Home Loan banks are facing, but said he is not looking to make accounting changes. The Chicago, Atlanta and Seattle banks reported “other-than-temporary” impairments regarding writedowns of private securities in the third quarter … * WASHINGTON (12/15/08)—A provision in a Department of Housing and Urban Development mortgage fee and disclosure rule--the Real Estate Settlement Procedures Act (RESPA)--could end partnerships that some lenders have with builders, according to industry observers. Under the provision, builders would be prohibited from giving homebuyers discounts if they use an affiliated mortgage or settlement company--such as Bank of America, Wells Fargo or JPMorgan Chase and Co. The provision is effective Jan. 16. Also on that day, lenders will be granted permission to charge borrowers average fees for settlement services, instead of the actual fees the lender paid the service provider. However, the rule does not allow average charges for fees based on loan amounts, such as daily interest, reserves, escrow, insurance or transfer taxes … * WASHINGTON (12/15/08)—More than 3,100 banks—mostly community banks--are not planning to participate in the Federal Deposit Insurance Corp.’s (FDIC) program to back debt. About 863 institutions also are not using the program’s coverage of checking deposits that bear no interest (American Banker Dec. 12). Some institutions said they chose not to participate in the program because the backing cost was high and they did not issue senior unsecured debt. The FDIC’s plan was released in October. It was designed to back debt for three years and back checking deposits with 0% interest through the end of 2009. Guarantees were offered free until Dec. 5, and banks could opt out before paying any fees. Banks who keep the coverage will pay to insure new senior unsecured debt—costing about 50 to 100 basis points …

CUNA GOP assignments bright for CUs

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WASHINGTON (12/15/08)—Recent U.S. House committee seat assignments carry some good news for credit unions, John Magill noted last week. Magill is the senior vice president of legislative affairs for the Credit Union National Association (CUNA). The House GOP selected their ranking committee members and among them Rep. Dave Camp (R-Mich.) displaced Rep. Jim McCrery (R-La.) as ranking Republican on the important tax-policy committee, Ways and Means. “Jim McCrery was not an advocate for credit unions,” Magill said, adding that his replacement, Camp, is a co-sponsor of credit union legislation. In fact, Magill pointed out that the number two Republican member of Ways and Means, his old boss Rep. Wally Herger (R-Calif.), is also a co-sponsor of the Credit Union Regulatory Improvements Act (CURIA). “Credit unions can expect a friendly one-two punch on Ways and Means with Dave as ranking member and Wally as number two,” Magill predicted. Also on the House Republican front, Rep. Spencer Bachus of Alabama was elected to remain the ranking member of his party on the House Financial Services Committee. Committee assignments will be finalized when the new Congress convenes in January.

Compliance How long is too long for holidays

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WASHINGTON (12/15/08)—Around the winter holidays each year, one of the most frequently asked questions of the Credit Union National Association’s compliance folks: Is there any federal regulation limiting the number of consecutive days a federal credit union can remain closed? There is no federal law or regulation that limits a federal credit union’s closing, but some states may limit state-chartered institutions from closing for more than three consecutive days. CUNA advises state-chartereds to check with their league’s compliance staff regarding state statutes that could affect their hours of operation. As for federal credit unions, CUNA says even they have several things to keep in mind if planning a longer than usual holiday closing. When closed for a national holiday, the entire credit union staff can be off. However, when closed on a day that isn’t a national holiday, the following must be considered:
* At least some employees in back office departments should be working to clear checks before the midnight deadline, deal with wire transfers, release funds availability holds on deposits and perform other required functions; and * Credit unions should stay open for business long enough to provide sufficient service to members, and to remain competitive with other financial institutions in the same area.
For this and other great compliance advice from CUNA, use the resource link below to visit the December CUNA Compliance Challenge.

US Central capital change approved

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WASHINGTON (12/15/08)—The Credit Union National Association (CUNA) Friday commended the National Credit Union Administration (NCUA) on the action it took the action stabilizes U.S. Central FCU’s AA+ senior unsecured debt rating among the various rating agencies. CUNA said the agency’s action ultimately should assure lenders and lead to U.S. Central being able to borrow at favorable rates. U.S. Central FCU was given the go ahead by NCUA to convert membership capital accounts (MCA), a portion of existing capital, to a new paid-in-capital instrument (PIC2). The NCUA in a Friday morning announcement stated that the PIC2 is considered Tier 1 capital by debt ratings agencies. The agency took the action—voting by notation—to help U.S. Central “maintain robust debt ratings.” NCUA Chairman Michael Fryzel said that converting callable MCA funds to Tier 1 capital is an important facet of the NCUA’s broader efforts. The agency provided the following specifics about the elements of the conversion to PIC2:
* Total subscription is $450 million; * The allocation is proportionate to shares on deposit with U.S. Central; however, there is a cap of 15% for any one corporate; * Perpetual in nature; * Dividends are paid at the discretion of U.S. Central’s board, and may be only paid from current net income (after expenses are recorded and dividends are paid) if U.S. Central would remain adequately capitalized; and * PIC2 subscriptions do not require additional funding by member corporates, unless current MCA falls short of required PIC2.
The NCUA said of its action on behalf of U.S. Central— the nation's only wholesale corporate credit union--that increasing the amount of Tier 1 capital will enhance US Central’s AA+ debt rating and generally requires no additional funding by members. Additionally, U.S. Central members will receive more favorable returns on U.S. Central investments due to U.S. Central’s high credit quality and lower debt costs. In a statement, CUNA said it looks forward to working with the agency and corporate credit unions in serving the nation’s credit unions.

Treasury recognition for direct deposit promo efforts

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WASHINGTON (12/12/08)—Credit unions and other financial institutions can gain official recognition for efforts to promote direct deposit among senior citizens, veterans, people with disabilities and other who receive federal benefits. The U.S. Treasury Department’s Go Direct campaign will launch a six-month program, called the Community Ambassadors, in January. It will be aimed at small- and medium-sized financial institutions. Institutions that fulfill the Community Ambassador requirements for active participation during the January 2009 to June 2009 period will receive a letter of recognition and certificate from the Treasury’s Go Direct campaign. Requirements include such actions as coaching tellers to tell members about the benefits of direct deposit of government checks, circulating statement messages, and displaying Web banners. The Go Direct campaign reminds that among the benefits to members:
* Direct deposit is safer and easier than paper checks – in fact, when there is a problem with a Social Security payment, nine times out of 10 it is with a paper check, not a direct deposit payment; * Direct deposit also provides “green” benefits by reducing the paper and energy required to distribute checks; and * Direct deposit saves taxpayers money. Since it was launched in 2005, the Go Direct campaign has generated more than two million enrollments in direct deposit representing significant savings to taxpayers in printing, mailing and other costs.
Go Direct also administers a "Go Direct Champions" program to recognize all participant financial institutions that exceed the national average, in their size category, for signing up federal benefits recipients for direct deposit. The Credit Union National Association is a Go Direct national partner.

NCUA advises CUs on foreclosed assets

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WASHINGTON (12/12/08)--The current financial market is forcing credit unions to consider the effects of carrying foreclosed and repossessed assets (FRA) on their statements of financial condition and their federal regulator has issued guidance on the issue. The National Credit Union Administration (NCUA) posted to its website a letter from the chairman (08-CU-06) titled “Working with Residential Mortgage Borrowers,” which instructs credit unions on some of the issues they face when holding FRA. First and foremost, the NCUA letter urges credit unions to work with borrowers when possible because prudent workout arrangements can be in the long-term best interest of both the credit union and the member. “However, when foreclosures are unavoidable, you must consider all risks associated with holding FRA,” writes NCUA Chairman Michael Fryzel. The letter states FRA should only be held temporarily and not permanently as an income-producing asset. The assets should be actively marketed for sale “as evidenced by the fact the credit union has committed to a plan of sale, is seeking a buyer, and expects to collect on the sale within 12 months.” A letter footnote reminds that Federal Credit Union Act authorizes a federal credit union to hold and dispose of real property only necessary or incidental to its operations and that most state regulators have similar requirements. The NCUA advises that a credit union managing FRA should establish policies and procedures that establish an acceptable and manageable level of risk to protect the safety and soundness of the credit union. The guidance states that policies and procedures should consider and address the following applicable risks:
* Liquidity--to determine the level of FRA the credit union can hold and manage before negative implications place undue stress on its liquidity position; * Transaction--to ensure the FRA is appropriately reported on the statement of financial condition; * Compliance--considering all applicable consumer regulations and state laws; * Strategic--understanding implications a chosen strategy places on a credit union’s current and future earnings; and * Reputation--a credit union should determine which properties will be sold immediately and which will be held for a short period of time.
“Examiners will evaluate these policies and procedures as needed to ensure the credit union can safely manage all implications associated with FRA on the statement of financial condition,” Fryzel writes. Use the resource link below to read the complete NCUA guidance letter on FRAs.

Fed to vote open-end disclosures

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WASHINGTON (12/12/08)—The Federal Reserve Board is expected to vote on a plan next week that would make comprehensive changes to the format, timing, and content requirement for the five main types of open-end credit disclosures that are required under its Regulation Z. The types of disclosures covered include credit card application and solicitation disclosures, account-opening disclosures, periodic statements, change-in-term notices, and advertising provisions. For the most part the Credit Union National Association (CUNA) has supported the Fed's efforts to simplify the Regulation Z, but did not support the plan as written because it could unintentionally cut into products favored by credit unions and their members, such as the LoanLiner program offered by CUNA Mutual Group. CUNA and CUNA Mutual have been working closely on this issue and have met with the Fed to seek modifications to its plan. The Fed also has scheduled a vote on its unfair or deceptive practices rule, which is intended to prohibit a number of credit card practices as unfair or deceptive, and which it issued jointly with the National Credit Union Administration (NCUA) and Office of Thrift Supervision. CUNA said in a comment letter that credit unions are strong proponents of fair lending practices and proper consumer disclosures. CUNA said the regulators’ plan is appropriate because some in the marketplace have been subjecting consumers to abusive practices. However, CUNA warned of concerns with a number of operational and practical matters, and reiterated its primary concern about an ever-increasing regulatory burden on credit unions. “While credit unions do not engage in certain practices, they will still need to make disclosure changes and other revisions to meet all the requirements of the proposal,” CUNA wrote. CUNA also urged modifications in a proposed opt-out program for overdraft protection plans and case-by-case accommodations for member overdrafts. According to the Dec. 10 American Banker, the Fed is likely to back away from that proposal—at least for now. The NCUA announced Thursday that it will take a final vote on the rule at its open board meeting next Thursday. Also on the NCUA open board meeting agenda: a final rule on credit union service organizations, and a share insurance fund report.

Inside Washington (12/11/2008)

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* WASHINGTON (12/12/08)--Congress plans to reject requests to use remaining Troubled Asset Relief Program (TARP) funds if the Treasury doesn’t put some of the money toward a foreclosure prevention program, Rep. Barney Frank (D-Mass.) warned at a Wednesday hearing on TARP implementation (American Banker Dec. 11). Frank and other lawmakers argued that the Treasury has used $335 billion without significant results and criticized the agency for not tracking how banks use the money. Rep. Maxine Waters (D-Calif.) told Treasury Assistant Secretary Neel Kashkari not to ask Congress for money until it adopts Federal Deposit Insurance Corp. Chairman Sheila Bair’s plan for loan modifications. Kashkari defended the Treasury, saying its investments in banks prevented economic collapse, and noted that Fannie Mae and Freddie Mac recently announced a voluntary loan modification plan that could help roughly every loan. He also said the Treasury failed to support Bair’s plan because it would actually cause more foreclosures. Democrats at the hearing disagreed. Waters also introduced legislation Wednesday that would require the Treasury to back servicers who modify loans … * WASHINGTON (12/12/08)--Small Business Administration (SBA) lenders are counting on President-elect Barack Obama to win back many other small banks that have ceased SBA lending (American Banker Dec. 11). Some congressional members also are pushing to move the SBA into the Cabinet. Obama has not provided many details on his plans for the SBA, but lenders say they hope his administration will be more open to ideas for improvement. Industry representatives and lenders say that the SBA has not been treated as a priority by the Bush administration--as evidenced by a smaller budget, higher fees charged to lenders and restrictions on some loan programs. In October, the agency changed the requirements of the Community Express program and limited the loans lenders could grant per month under it. The program’s dollar volume dropped 76% in October and November, compared with last year … * WASHINGTON (12/12/08)--The Office of Thrift Supervision (OTS) is seeking nominations for members of a Mutual Savings Association Advisory Committee. The committee will study the needs of mutuals, assess the challenges they face and advise the OTS director on how to support mutual institutions. Nominations are due Jan. 8 …

CUNA audio conference will address CU HARP CU SIP

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WASHINGTON (12/12/08)--A no-charge audio conference focusing on details of the two newly announced federal programs to assist credit union mortgage holders and corporate credit unions will be held by the Credit Union National Association (CUNA), in conjunction with the National Credit Union Administration (NCUA) and state leagues, Tuesday, Dec. 16, from 11 a.m. to noon ET. In particular, the event--open to any CUNA-affiliated credit union--will offer credit unions information about how they can participate in the “Credit Union Homeowners Affordability Relief Program (CU HARP)” and the “Credit Union System Investment Program (CU SIP).” The programs are designed, respectively, to lower monthly mortgage payments for struggling low- and moderate-income credit union members, and to free up collateral pledged by corporate credit unions and thereby provide increased contingent borrowing capacity. Both programs rely on the NCUA-administered Central Liquidity Facility (CLF) to provide funding. The CUNA program will feature two NCUA officials:
* CLF President Owen Cole, and * CLF Vice President Steve Sherrod.
The two federal officials will present details of the two programs and answer questions from conference participants. The audio conference is expected to last about one hour. While there is no charge for participants, it is limited to the first 1,000 who register. To register, CUNA-affiliated credit unions should send an e-mail to:
* CUNARegulatoryAdvocacy@cuna.com.
Please, one phone line per registered credit union only to make room for as many as possible. For those unable to listen in on Dec. 16 at beginning at 11 a.m., the call will be recorded and the recording posted to CUNA’s website for review at a later date by affiliated credit unions.

CUNA reminds Congress CUs are lending

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WASHINGTON (12/11/08)—In a follow up to an oversight hearing on the U.S. Treasury Department’s implementation of the Troubled Asset Recovery Program (TARP) Wednesday, the Credit Union National Association (CUNA) reminded federal lawmakers that the country’s credit unions continue to lend despite the country’s credit crunch. In a letter, CUNA noted that during the House Financial Services Committee hearing on TARP, several committee members remarked repeatedly that small business owners, homebuyers and other consumers were having difficulty in securing credit because banks, including several recipients of TARP funds, were not making loans. “I want to assure you that credit unions continue to lend, even in these difficult times. Total lending by credit unions continued to rise through October, the latest date on which we have available data,” wrote CUNA President/CEO Dan Mica. He noted that credit union loans outstanding increased 0.5% from September 2008 to October 2008, and 6.6% over the first 10 months of 2008, compared to increases of 0.7% and 5.6% during the same periods last year. “Moreover, through September, the fastest growing type of credit union lending was business lending,” he added. Mica told the lawmakers that the current statutory limit on credit union member business lending, essentially 12.25% of total assets, is far beneath the level of business lending that a healthy credit union could extend in a safe and sound manner. “We encourage Congress to remove the statutory cap on credit union business lending as a mechanism to ensure that your small business owning constituents can continue to access the credit that they need to operate their businesses,” Mica said.

Bob and Lee Woodruff Al Roker at CUNAs 2009 GAC

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WASHINGTON (12/11/08)--Bob Woodruff of ABC News and his wife, Lee, will provide a poignant start to CUNA's 2009 Governmental Affairs Conference as they recall the shattering moment when Woodruff was seriously injured by a roadside bomb when assigned to report U.S. and Iraqi security forces near Taji. The Woodruffs will highlight the GAC's opening general session on Monday, Feb. 23. The GAC is Feb. 22-26 at the Washington Convention Center in Washington, D.C. Woodruff will share his memories of the moment when he believed his life was over, and his subsequent stages of recovery. He and his wife will recount stories from his moving and inspirational best-selling memoir, "In an Instant." The Woodruffs' presentation provides a new understanding of the precious nature of life, the strength of family, and how to survive and overcome even the most difficult of circumstances. As the closing GAC speaker on Thursday, Feb. 26, NBC’s Roker, beloved weatherman and host of its Today Show, will bring his charisma and sense of humor to the podium during a talk entitled, "Let a Smile Be Your Umbrella." A 10-time Emmy Award winner, for NBC Roker conducts celebrity interviews, technology updates, and the "Today's Dad" continuing segment, featuring parenting tips for fathers. He also hosts the Macy's Thanksgiving Day Parade, The Rose Bowl Parade, and the Christmas Tree Lighting at Rockefeller Center. Additional highlights of the 2009 GAC include:
* A kickoff concert featuring the Lt. Dan Band, formed by Chicago composer Kimo Williams and actor/musician Gary Sinise, star of the hit CBS TV show "CSI New York." Lieutenant Dan" is the character Sinise portrayed in the 1994 blockbuster film, "Forrest Gump," a role that won him an Oscar nomination: * Steve Forbes, editor-in-chief of Forbes magazine, will offer economic outlook and commentary; * Pundits Tucker Carlson and Paul Begala will face off over current economic developments in national news, politics, and world issues; * Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee; and * Rep. Carolyn Maloney (D-N.Y.), chairman of the House Financial Services subcommittee on financial institutions and consumer credit.
Additional speakers will be announced in coming weeks. CUNA's Governmental Affairs Conference is the credit union movement's premier national conference on Washington issues. For more information on the GAC or to register, use the resource link below.

Mica clarifies corporate CUs position

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WASHINGTON (12/11/08)—Credit Union National Association (CUNA) President/CEO Dan Mica appeared on Fox Business News Wednesday to help clear up any confusion associated with a federal regulators’ initiative to add liquidity to the corporate credit union system. On Tuesday, National Credit Union Administration (NCUA) Chairman Michael Fryzel unveiled his proposal to create the Credit Union System Investment Program (CU SIP) to strengthen corporate credit union liquidity. CUNA’s Mica made it clear that the NCUA plan is not a credit union bailout, but rather a “credit union back-up.” The need for such a back-up was, Mica said, in part created by the "unintended consequences" of other recent government action that backed other types of corporate entities that operate in the open securities markets, but not the corporate credit unions. Mica explained to his national television audience that corporate credit unions operationally must be involved in the securities markets, and some of that finance involved mortgage-backed securities. The CUNA leader made it clear that the portfolios of the corporate credit unions are strong, but he added, they, like everyone else, are being hit by declining values. Mica also emphasized that the 8,000 natural person credit unions that serve 90 million consumers have "insured deposit, strong capital, are making loans and are doing very well." The NCUA also on Tuesday performed a national unveiling of its Credit Union Homeowner Affordability Relief Program (CU HARP). Under CU HARP, credit unions could work with their members to temporarily lower monthly mortgage payments.

Inside Washington (12/10/2008)

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* WASHINGTON (12/11/08)--A report released Tuesday by a consumer group and former Department of Housing and Urban Development (HUD) secretaries Jack F. Kemp Jr. and Henry G. Cisneros, recommended the creation of an independent housing agency to prevent housing discrimination and predatory lending (The Washington Post Dec. 9). The report said housing remains segregated and that President-elect Barack Obama should create an Office of Fair Housing to monitor abuse. The office should be created at HUD, an agency that Kemp and Cisneros said does not adequately enforce fair housing rules. For every individual who files a complaint, 150 do not--so although HUD processed 2,500 cases, there are likely four million, the report estimated. Predatory lending also increased because of lacking governmental oversight, it added … * WASHINGTON (12/11/08)—Revamping Fannie Mae and Freddie Mac could be more challenging than lawmakers thought, if a Tuesday House Oversight Committee hearing is indicative of the enterprises’ future. Lawmakers disagreed on the primary cause of the housing problem (American Banker Dec. 10). Rep. Darrell Issa (R-Calif.) said Fannie and Freddie are at the crux of the problem, while Rep. Henry Waxman, House Oversight Committee chairman, said the crisis is larger than the enterprises. Fannie and Freddie’s former chief executives, present at the hearing, also were asked how the enterprises should be revamped. Daniel Mudd, former Fannie CEO, said the enterprise’s mortgage portfolio side may be better regulated by the government, while the guarantee fee side could be handled privately. Lawmakers also expressed their frustration at the executives’ failure to the take responsibility for the enterprises’ downfalls. Rep. Dennis Kucinich (D-Ohio) pressed Mudd on risk management. Rep. Lynn Westmoreland (R-Ga.), likened the executives’ jobs at Fannie and Freddie as “rearranging the chairs on the deck of the Titanic” without knowing that the ship was sinking …

Mica assesses NCUA rescue plans

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WASHINGTON (12/10/08)—The Credit Union National Association (CUNA) greeted the televised announcement of the National Credit Union Administration’s (NCUA’s) relief plans as a positive step, but added there are many underlying issues with the agency’s latest effort. CUNA President/CEO Dan Mica Tuesday applauded NCUA Chairman Michael Fryzel’s steps to address challenges presented to corporate credit unions as the result of a frozen mortgage securities market. Earlier in the day, Fryzel outlined his proposed initiatives--the Credit Union Homeowner Affordability Relief Program (CU HARP) and Credit Union System Investment Program (CU SIP)—before national television audiences (see related story, “NCUA Chairman pushes for CU initiatives”). CU HARP is intended to provide relief to credit union members by members to temporarily lowering monthly mortgage payments. CU SIP would bolster corporate credit unions using billions of dollars in new borrowings from the U.S. Treasury Department. Although welcoming the NCUA’s announcement, Mica noted, “However there are many issues underlying this latest effort by the agency, including whether natural person credit unions will participate in a significant way.” The CUNA leader added, “We think it also vital that the agency brings equal inventiveness and flexibility to the burdens weighing on some natural person credit unions, especially in those parts of the country where the mortgage and credit crises have inflicted extensive collateral damage. “CUNA has been urging NCUA to take such action for a number of weeks.” Mica added that CUNA is just now learning of the details of the CU SIP program: “We will be evaluating its usefulness and reporting to our members on our resulting analysis.”

TARP oversight witness list released

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WASHINGTON (12/10/08)—The House Financial Services Committee Tuesday announced the names of the four witnesses slated to testify today as the panel continues its study of how the U.S. Treasury Department has conducted its Troubled Assets Relief Program (TARP) program to date. Rep. Barney Frank (D-Mass.), who heads the committee, has criticized the Treasury for what he termed its “blatant refusal to enforce any lending obligations on individual institutions.” He has said the department’s “continued policy of ignoring the clear intent” of the of the Emergency Economic Stabilization Act (EESA), which authorized the creation of TARP, to “aid in the reduction of foreclosures” puts the Treasury “perilously close to a breach faith with those who responded to the Bush Administration's request to establish the program.” Scheduled to testify:
* Acting Comptroller General of the United States Gene Dodaro, U.S. Government Accountability Office; * Interim Assistant Secretary for Financial Stability and Assistant Secretary for International Affairs Neel Kashkari, Treasury; * Rep. Jeb Hensarling (R-Tex.), Congressional Oversight Panel under the EESA; and * Prof. Elizabeth Warren, Leo Gottlieb Professor of Law, Harvard University, and chair of the Congressional Oversight Panel.

Fannie gives more servicer flexibility

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WASHINGTON (12/10/08)—Credit Union National Association Senior Assistant General Counsel Jeffrey Bloch said Tuesday credit unions should be aware of new Fannie Mae servicer flexibility to help borrowers avoid foreclosure. Fannie Mae said in its announcement this week that it will allow servicers more flexibility and will provide additional loss mitigation options to address potential delinquencies earlier and to help avoid foreclosure for borrowers with loans in mortgage-backed securities (MBS) pools or in the Fannie portfolio. Fannie introduced a new 2009 Single-Family Master Trust Agreement, an amended and restated 2007 Single-Family Master Trust Agreement, a new base Single-Family MBS Prospectus, and issued certain servicing clarifications and changes. The government-sponsored housing enterprise said in its release that significant changes affecting all MBS pools include:
* Authorization for servicers to begin loss mitigation with a borrower facing imminent default—a default that is reasonably foreseeable but has not yet occurred; * Fannie Mae’s new Early Workout program allowing servicers, in one step, to pre-negotiate a loan modification that becomes effective and permanent only after an initial trial period: * Clarification that a loan can stay in a Trust even if it is 24 months past due, as measured by the last paid installment, if repayment arrangements, foreclosure, or certain other actions are proceeding; and * Elimination of the requirement to refer a loan to foreclosure after a specified number of consecutive days in delinquency status.
Use the resource link below for more information.

NCUA chairman pushes for CU initiatives

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WASHINGTON (12/10/08)—National Credit Union Administration (NCUA) Chairman Michael Fryzel made the rounds on television news shows Tuesday to talk up his proposed initiatives; the Credit Union Homeowner Affordability Relief Program (CU HARP) and Credit Union System Investment Program (CU SIP). Fryzel, addressing national audiences on CNBC and then on Fox Business Network, said that while credit unions generally did not participate in the kinds of activities that spurred the housing and mortgage crisis, some are facing liquidity problems due to the current economic turmoil. He outlined two programs he has recently proposed to help troubled homeowners and to add liquidity to the system. Under the former, CU HARP, the NCUA, through its Central Liquidity Facility (CLF), would work with credit unions and their members to temporarily lower monthly mortgage payments. The program would need NCUA Board approval, as well as an okay by the U.S Treasury Department and the Federal Reserve Board. According to an NCUA announcement last month, the CLF would provide credit unions with funds, borrowed from the Treasury, at lower rates than otherwise available through private sources. In turn, credit unions are expected to pass the entire rate reduction to struggling low- and moderate- income borrowers. The credit union, in exchange for the reduced likelihood of borrower default on the mortgage, would also match the rate break, doubling the benefit to struggling homeowners, Fryzel said of the plan. The agency said CU HARP would be administered at no cost to taxpayers: CLF loans are made to credit unions on a fully secured basis, and all advances received by the CLF will be repaid to the Treasury's Federal Financing Bank, with interest. The program will receive initial funding of $2 billion. The second program, NCUA’s CU SIP, is designed to complement CU HARP by enabling the CLF to lend to credit unions to invest in NCUSIF guaranteed notes, the proceeds of which will be used to retire external system debt, said the NCUA in a release. It added that the program will free collateral pledged by corporate credit unions and thereby provide increased contingent borrowing capacity. CU SIP will be funded on a monthly basis from January through June of 2009. The NCUSIF guarantee is provided under the Temporary Corporate Credit Union Liquidity Guarantee Program announced in October. The program guarantees senior corporate credit union debt for a 75 basis point fee. In the release Fryzel said, “As I have stated previously, I want to use all tools at my disposal to address the difficulties that the larger market problems are presenting for the credit union industry. These new initiatives represent an important avenue for credit unions: both CU HARP and CU SIP employ the existing CLF channel and direct liquidity where credit unions and their members need it most. I encourage credit unions to use these programs constructively as they work through these difficult times.” Use the resource link below to access the CU HARP and CU SIP term sheets.

CUNA unveils comprehensive due diligence guide

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WASHINGTON (12/10/08)—The Credit Union National Association (CUNA) Tuesday unveiled its comprehensive guide to help credit unions successfully negotiate the important and difficult territory of third-party vendor relationships. About nine months in the making, the guide has three core functions: Risk Assessment and planning; a focus on due diligence and contract formation; and risk management monitoring and control. The guide is the product of CUNA’s Due Diligence Task Force, formed by CUNA Chairman Tom Dorety and the CUNA Board of Directors in response to regulatory concern over how to best meet credit unions’ due diligence responsibilities involving third-party vendors without unnecessary duplication of effort. Third-party vendor relationships and strategic planning were identified in January by the NCUA as a key credit union examination issue for 2008. Task Force Chairman Henry Wirz, who is president/CEO of SAFE CU in Sacramento, Calif., identified the following as the top two elements of the extensive due diligence guide:
* First, credit unions must look at their strategic plans and sure whatever service they wish to offer through a third-party relationship is consistent with that plan. “Sometimes a credit union should just say no,” Wirz said: and * Second, once a credit union has determined a new service is consistent with its plan, it must establish a process to manage that service just as it would monitor and evaluate any employee.
The group vice chairman, Bill Raker, noted that the new guide can be considered a template and a set of best practices that will establish consistency in vendor relationships. Raker, president/CEO of US FCU in Burnsville, Minn., added the guide will enable credit unions to proceed with vendor relationships without having to look at each situation in a vacuum. However, Raker also stressed that the guide is not a “formula for making decisions.” “Credit unions must still make their own calls on whether to proceed with a relationship,” he said. The guide was developed by the task force and CUNA staff in consultation with federal and state regulators, credit unions and state leagues. The practices of other federal depository institution regulators were studied to provide a “360-degree view” of due diligence best practices, according to CUNA staff. Mary Ann Clancy, senior vice president and general counsel of the Massachusetts CU League and a Due Diligence Task Force member, noted that the 360-degree review aspect of the guidance is particularly important. “The Guide is applicable to all kinds of credit unions, not just federal charters,” she noted. The guide also includes appendices on SAS No. 70 audits and vendor management software prepared for CUNA by the accounting firm BDO Seidman LLP. Titled simply “Third Party Vendor Management Guide,” the 94-page resource is available online through the CUNA website. Use the resource link below.

Inside Washington (12/09/2008)

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* WASHINGTON (12/10/08)—Comptroller of the Currency John Dugan said this week that data from banks show that more than half of the borrowers who got loan modifications in the first three months of the year were again delinquent by 30 days just six months after their terms were changed. (The New York Times Dec. 9) Dugan said one had to be careful about drawing conclusions from the data and added it was not clear why the re-default rates were so high. He suggested that perhaps some loans are so poorly underwritten that no modification is sufficient to help the borrowers forestay foreclosure…

Inside Washington (12/08/2008)

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* WASHINGTON (12/9/08)—The Federal Deposit Insurance Corp.’s (FDIC’s) decision that funds stored on reloadable cards are deposits and therefore are covered by FDIC insurance raises questions such as whether the cards are accounts that require banks to comply with certain rules and regulations. (American Banker Dec. 9) Those rules would include those of the Bank Secrecy Act, the, the USA Patriot Act's know-your-customer requirements, and Regulation E of the Electronic Funds Transfer Act, according to John L. Douglas, a partner in the Atlanta law firm Paul, Hastings, Janofsky & Walker LLP. Thew FDIC opinion was written by its general counsel and published last month in the Fedearl Register… * WASHINGTON (12/9/08)—House Financial Services Committee Chairman last week chided Bush administration officials about refusing to approve a foreclosure mitigation initiative proposed by Federal Deposit Insurance Copr. Chairman Sheila Bair. (American Banker Dec. 8) Speaking at the Consumer Federation of America conference here, Frank said Bair seems to have annoyed “the old boys’ club” and now several bank regulators are “up in the tree house with a 'No girls allowed' sign." He said, according to the paper’s “Washington People” section, that U.S. Treasury Secretary Henry Paulson’s explanation of being between administrations is no excuse…

Key financial services lawmakers at 2009 GAC

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WASHINGTON (12//9/08)—The chairman and a key Democratic member of the House Financial Services Committee have joined the growing list of speakers for the Credit Union National Association's (CUNA) 2009 Governmental Affairs Conference (GAC). The CUNA 2009 GAC will be held Feb. 22–26 at the Washington Convention Center in Washington, D.C.
Chairman Barney Frank (D-Mass.) and Rep. Carolyn Maloney (D-N.Y.), who heads the panel’s subcommittee on financial institutions and consumer credit, have accepted CUNA’s invitation to speak on Feb. 25. Other highlights already slated for the program include:
* Economic commentary from Steve Forbes, editor-in-chief of Forbes magazine, and * A political face-off between pundits Paul Begala and Tucker Carlson.
Forbes will offer economic outlook and commentary at a time when the nation continues to struggle through one of the worst financial crises in its history. He attained national visibility in the political arena both 1996 and 2000 when he campaigned for the Republican nomination for President. Carlson and Begala will face off over current developments in national news, politics, and world issues. Carlson is a senior correspondent for MSNBC, and Begala is a CNN political analyst and former top aide to President Bill Clinton. The 2009 GAC will again feature a special kickoff concert on Sunday evening, Feb. 22, presented by the CUNA Councils. Performing will be the Lt. Dan Band, formed by Chicago composer Kimo Williams and actor/musician Gary Sinise, star of the hit CBS TV show "CSI New York." "Lieutenant Dan" is the character Sinise portrayed in the 1994 blockbuster film, "Forrest Gump," a role that won him an Oscar nomination. The band has completed six tours for the USO and performs regularly for troops around the world. CUNA's GAC is the credit union movement's premier national conference on Washington issues. The GAC brings together top policy makers from Congress, the Administration, the federal regulatory agencies and the Washington political establishment to provide the latest information on legislation and regulation that affects credit unions and their ability to serve their members. The GAC also devotes an afternoon to Capitol Hill visits, when attendees meet with their members of Congress and staff to discuss the movement's legislative agenda. With a new Congress and Administration fresh in office, a top priority of the 2009 GAC will be to ensure policy makers understand the credit union difference. "In the aftermath of the housing and credit crises that has gripped our nation, we know policy makers will be giving close scrutiny to the regulatory scheme and structure that governs the financial sector," explained CUNA President/CEO Dan Mica. "At such a critically important juncture, it is essential that we make our voices heard. The GAC--where we bring together thousands of credit union representatives--presents a unique opportunity to have a powerful and lasting impact." GAC housing registration is open. Use the resource link below to access more information and the complete schedule.

Hyland wants accelerated supplemental capital push

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ALEXANDRIA, Va. (12/9/08)—National Credit Union Administration (NCUA) board member Gigi Hyland announced Monday she wants to accelerate consideration of supplemental capital approaches to helping credit unions through a tough economy. She said in her role as NCUA liaison to the National Association of State Credit Union Supervisors (NASCUS), she has heard state regulators' compelling arguments “that it is time to seriously consider whether credit unions must be given access to some form of supplemental sources of capital to continue providing members the services they need.” “The economy is taking its toll on every facet of the financial services industry, including credit unions,” Hyland stated in a release. Unlike other financial institutions, credit union access to capital is limited to reserves and retained earnings from net income. Permitting credit unions to accept supplemental capital would require action by the U.S. Congress. “(S)o the sooner we get started on this effort, the better,” Hyland said, and added, “I am committed to working with the state supervisors to expeditiously resolve if and how supplemental capital can be correctly structured and serve as an appropriate safety and soundness tool for the NCUA and state supervisory authorities in regulating U.S. credit unions.” In November NASCUS sent a letter to federal lawmakers, which emphasized that while credit unions remain safe and sound in this troubled and volatile market, supplemental capital will enhance their ability to react to market conditions, grow into the future and serve their members in times of economic trouble. The Credit Union National Association (CUNA) supports a system giving credit unions access to supplemental capital. In fact it was among the credit union topics CUNA President/CEO Dan Mica discussed last week during a meeting with President-elect Barack Obama's Transition Team.

Whats on for Congress second lame duck

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WASHINGTON (12/9/08)—The U.S. Congress returned to Washington Monday to begin a second lame duck session, with focus primarily on consideration of legislation to bailout automobile manufacturers. CUNA Vice President for Legislative Affairs Ryan Donovan said that the association will be monitoring the development of this legislation closely. "Everyone's expectation is that the bailout bill will be carefully negotiated between Congress and the Bush administration, and very limited in scope," Donovan said. And in fact, The New York Times and other media outlets reported late in the day that an agreement between the White House and Congressional Democrats moved forward. The tentative plan would call for a taxpayer-financed rescue with an administration-appointed overseer with expertise in areas such as economic stabilization, financial aid to commerce and industry, financial restructuring, energy efficiency and environmental protection. It is expected that when Congress adjourns this week—most likely with an automaker package hammered out--it will remain out of session until Jan. 6 when congressmen and senators will be sworn into office for the 111th Congress. The federal lawmakers may be quite busy even before the Jan. 20 swearing in of Barack Obama as the 44th President. The House calendar currently features at least 10 days slated for votes. A January calendar has not yet been released by Senate leadership. As reported earlier, there is a House Financial Services Committee hearing scheduled this Wednesday on oversight concerns regarding the U.S. Treasury Department's implementation of the Troubled Asset.

Hood at YES Summit Need young leaders

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WASHINGTON (12/8/08)—At a national conference on strategies to promote credit union membership among the country’s 18-to-30 year-old age group, or “Gen Y,” National Credit Union Administration (NCUA) Vice Chairman Rodney Hood reiterated the details of his own Blueprint 2020 program. Hood was addressing the Credit Union National Association’s (CUNA’s) YES Summit in Tampa, Fla. YES stands for Your Essential Strategies. Hood reminded that his Blueprint 2020 initiative, first announced in June 2007, is meant to encourage strategic partnerships between credit unions and universities and trade schools to provide internship opportunities for young adults. Ultimately the plan is to recruit new leaders to the credit union movement. Students would receive income, academic credit, and the opportunity for permanent employment. In the process, the interns will help sponsoring credit unions attract not only the next generation of members but also the next generation of leaders, Hood told the group. “We have strong credit union leaders and wonderful boards,” said Hood, but added that unless credit unions recruit young leaders, the movement could become stagnant and miss “essential new ideas.” Hood reminded his credit union audience that NCUA makes it possible for low-income credit unions to participate in the enterprise by providing grants of up to $3,000 for paid internships. For full comments and more about the YES Summit, use the resource link below.

NCUA reviews Huron failure causes

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ALEXANDRIA, Va. (12/8/08)—In a study to determine reasons behind the 2007 failure of Huron River Area CU of Ann Arbor, Mich., the National Credit Union Administration’s (NCUA’s) Office of Inspector General (OIG) found blame could be laid at the feet of credit union management, as well as state and federal regulators. In November 2007, the NCUA announced liquidation of Huron River CU saying the action was being taken to protect member assets while addressing operational issues within Huron River. A lawsuit had been filed earlier against the $362 million-asset credit union and a homebuilder, First Home Builder, alleging fraud in the way their home construction loans were set up. The NCUA subsequently tasked its OIG with reviewing Huron to determine causes of the failure, the resultant loss to the National CU Share Insurance Fund, and to assess the NCUA’s and Michigan State Supervisory Authority’s supervision of the credit union. In the report made public last month, the OIG found that on the part of regulators, action could have been more direct and more timely. NCUA Director of Public and Congressional Affairs John McKechnie said Friday that since that time, "The unprecedented volatility and rapid deteriorations in balance sheets experienced by some credit unions during this economic downturn has necessitated changes to NCUA's examination processes.” He added, “Recent steps, such as the 12-month examination program and the increases in the exam staff reflect our recognition of the need to adapt practices in accordance with the times. NCUA is committed to taking every appropriate action to maintain the highest standards in safe and sound regulation of credit unions." Regarding credit union management, the review found that credit risk and strategic risk were major factors in Huron’s failure and that Huron management did not adequately manage and monitor the credit risk within its loan program. In addition, the OIG reported that Huron management made strategic decisions that put Huron’s continued financial viability at significant risk. State and federal examiners found, and OIG concurred, that the credit union’s management:
* Did not exercise due diligence by evaluating the third party relationship held with its lender, the Construction Loan Company (CLC); * Allowed CLC to concentrate a majority of the credit union’s loan portfolio in a speculative Florida real estate construction project; * Allowed CLC to make construction loans to applicants outside the credit union’s approved field of membership; * Misclassified construction loans and violated NCUA’s Member Business Loan (MBL) limits; * Did not have adequate liquidity controls in its ALM Policy; and *Failed to develop or follow adequate plans to guide the direction of the credit union and the Florida construction loan program.
The OIG also said it found that Huron management was “not forthcoming with the Michigan SSA and NCUA examiners about the Florida construction loan program” and may have ignored warnings regarding the “expected decline of housing values, in particular those in the Florida real estate market." As mentioned, the OIG also found that the NCUA and Michigan SSA examiners “may not have adequately monitored or reacted prudently or timely to trends indicating the safe and sound operation of Huron may have been in jeopardy." “Consequently,” the OIG report surmised, “NCUA did not adequately and timely address the credit and strategic risks Huron management caused by entering Huron into an inherently risky and uncontrolled.” The report noted the NCUA recently “reinforced the need for aggressive investigation and protection against perceived risks” in Letter to Credit Unions No.: 08-CU-20 Evaluating Current Risks to Credit Unions. It noted the letter included supervisory guidance given to NCUA examiners “about diligent examination and supervision when potential risk to a credit union is identified.”

Inside Washington (12/05/2008)

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* WASHINGTON (12/8/08)—The Bush administration is taking a new look at helping homeowners, after having poured huge amounts of money into financial institutions, reported the Dec. 5 issues of The New York Times. Ben Bernanke, chairman of the Federal Reserve, warned last week that the soaring number of foreclosures was threatening the U.S. economy. He proposed that the government could begin to engineer loan modifications, and suggested more taxpayer money could be used to help people refinance and keep their homes. And the U.S. Treasury is considering a plan to underwrite tens of billions of dollars worth of 30-year, fixed-rate mortgages at very low rates. However, the article noted that the new focus on helping individuals could create rift of bitter feelings between those who want to buy homes and those who already own them…

2.9 million West Hartford CU is liquidated

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ALEXANDRIA, Va. (12/8/08)—The National Credit Union Administration (NCUA) announced Friday it accepted appointment as receiver/liquidator of $2.9 million-in-assets West Hartford CU, Inc., following the decision of the State of Connecticut Department of Banking to close the credit union. State Banking Commissioner Howard Pitkin declared that the financial condition of the Farmington, Conn. credit union was unsafe and unsound. He petitioned the Superior Court for the Judicial District of Hartford County to name the NCUA as receiver after determining the credit union had inadequate capital and was experiencing significant loan losses. The state regulator attributed the credit union’s elevated risk to poor credit administration practices and recordkeeping. “We are saddened by this development related to the West Hartford Credit Union,” Pitkin commented in a release. “But my primary responsibility is the protection of Connecticut consumers. Therefore, we were forced to close the doors of this institution.” James Heckman, legislative director for the Connecticut regulator, told News Now Friday that the credit union had been having difficulties for some time and current economic conditions “added to the level of financial burden to the organization.” At the time of liquidation, the credit union—chartered in 1959 and serving Litchfield, Hartford, Middlesex, and New Haven counties--served 1,206 members. The NCUA Asset Management and Assistance Center will issue checks to members holding verified share accounts in the credit union within one week. The NCUA National Credit Union Share Insurance Fund insures credit union member deposits to at least $250,000 on regular accounts and $250,000 on certain retirement accounts.

NCUA continues focus on share insurance outreach

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ALEXANDRIA, Va. (12/5/08)--The National Credit Union Administration (NCUA) continues its efforts to promote awareness of the safety of federally insured credit union deposits through a nationwide advertising campaign. Over the last two months, the agency has taken a number of steps to provide the public with necessary information regarding share insurance. The NCUA has:
* Provided nearly 9,000 radio stations across America with 90-second and 30-second public service announcements regarding National CU Share Insurance Fund insurance; * Supplied each federally insured credit union with an “Uncle Sam” federal insurance poster. The poster, intended for display in credit union lobbies, informs members of the recent temporary change in coverage to $250,000 and emphasizes the safety of insured funds: * Run a newspaper ad featuring the same “Uncle Sam” motif in 23 major newspapers nationwide between Oct. 1 and Nov. 17; * Aired 10-second radio ads in six major-market radio stations throughout the month of November describing the changes and share insurance coverage and the security of member funds in a federally insured credit union; and * Continued to update its Share Insurance Toolkit available through the NCUA’s website.
Also board member Gigi Hyland hosted “Share Insurance 101,” an interactive webinar describing share insurance and its changes. NCUA Chairman Michael Fryzel noted of his agency’s efforts, “At times of economic difficulty and uncertainty surrounding the financial services system, it is more important than ever for the NCUA and other federal agencies to step forward and remind consumers of the strength and safety of federal deposit insurance. “While the crisis that intensified during the summer has been unsettling, it has also served as an opportunity for NCUA to increase our educational efforts. I am gratified that, based on feedback from credit union members and leaders, the advertising campaign has succeeded in enhancing public awareness.”

Financial Services Committee to study GAO TARP report

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WASHINGTON (12/5/08)--House Financial Services Committee Chairman Barney Frank (D-Mass.) Thursday announced that the committee will hold a hearing to examine oversight concerns regarding the U.S. Treasury Department’s conduct of the Troubled Asset Relief Program (TARP). This hearing announcement follows the unveiling of a report by the Government Accountability Office (GAO) on the Treasury’s implementation of TARP. In announcing the hearing, Frank noted he has been highly critical of the way the Treasury has handled the Capital Purchase Program, a part of TARP. And, referring to the GAO report, Frank said in a Dec. 3 release, "The American people received two kinds of news about the TARP program – bad and worse news.” He said the report confirms that Treasury has no way to measure whether taxpayer funds invested in banks are being used in accordance with the purpose of the law. He added, “The much worse news is Treasury's response that it does not even have the intention of doing so.” Witnesses have not yet been announced for the Dec. 10 hearing.

Inside Washington (12/04/2008)

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* WASHINGTON (12/5/08)—Consumer protection by bank regulators is not an oxymoron, said Federal Deposit Insurance Corp. Chairman Sheila Bair in a speech Thursday, but those regulators need to change how they approach the role. Addressing the Consumer Federation of America’s Financial Services Conference here, Bair noted that the subprime “debacle” has shaken confidence in the bank regulators ability to protect consumers. “No doubt, when the next Congress convenes and looks at regulatory restructuring, there will be a robust debate on whether the federal banking agencies should maintain responsibility for consumer protection,” Bair said. She said that while “the bulk” of lending abuses were outside the banking sector, some banks were involved. Therefore, she added, if the federal banking agencies hope to keep their consumer protection jurisdiction, they need to demonstrate both to federal lawmakers and the public that they can be more proactive and effective in moving against harmful practices… * WASHINGTON (12/5/08)—Some Republican lawmakers may come back to Congress in January poised and ready to push their case that the Community Reinvestment Act (CRA) caused banks to make poor loans that lend to delinquencies and foreclosures and ultimately caused the subprime crisis. They will use that argument to try to springboard efforts to change CRA. (American Banker Dec. 4) However, at the same time, Bush administration officials have spoken out against criticism of CRA saying data does not support the idea that bankers made poor loans as a result of the requirements. Among those expressing strong support for CRA are Federal Reserve Board Governor Randall Kroszner, Comptroller of the Currency John Dugan and, most recently Federal Deposit Insurance Corp. Chairman Sheila Bair… * WASHINGTON (12/5/08)—House Minority Leader John Boehner and 11 other senior Republican members of the House sent a letter to U.S. Treasury Secretary Henry Paulson criticizing his failure to set clear goals and produce accountability for funds spent to date under the Trouble Asset Relief Program (TARP). The lawmakers signaled that they may launch an effort to clock release of the remaining $350 billion of funds (American Banker Dec. 4)… * WASHINGTON (12/5/08)—The Securities and Exchange Commission this week changed its rule for rating firms in an attempt to curb conflicts of interest and promote competition. Rating firms are now prohibited from rating a security if the firm or its affiliate helped structure it. Employees who work on ratings are barred from participating in fee arrangement. Also, the new rules ban them from accepting gifts worth more than $25 from security issuers, underwriters, or sponsors. (American Banker Dec. 4)…

FinCEN broadens CTR exemptions

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WASHINGTON (12/5/08)— The Financial Crimes Enforcement Network (FinCEN) has simplified its rules for depository institutions to exempt eligible members or customers from currency transaction reporting as required under the Bank Secrecy Act (BSA). “These regulatory changes will make it easier for financial institutions to take better advantage of exemptions from CTR filing requirements for certain classes of customers, while continuing to report valuable information to law enforcement," said FinCEN Director James Freis in a release. "FinCEN also made improvements to our proposed rule based on valuable industry feedback received during the comment period," Freis added. FinCEN’s plan to simplify the regulatory exemption requirements is primarily based on recommendations from a Governmental Accountability Office (GAO) study on the current CTR exemption regime. The Credit Union National Association backed FinCEN’s improvements and called them “a good first step for a more efficient and effective reporting structure under BSA.” The final rule makes the following changes to the current CTR exemption system:
* Depository institutions will no longer be required to review annually or make a designation of exempt person (DOEP) filing for depositors who are other depository institutions, U.S. or state governments, or entities acting with governmental authority; * Depository institutions will be able to designate an otherwise eligible non-listed company or a payroll customer after either two months time, down from the previous one-year requirement, or after conducting a risk-based analysis of the legitimacy of the member’s or customer's transactions; * FinCEN's guidance on the definition of "frequent" transactions will be changed to five transactions per year instead of the current eight transactions per year; * Depository institutions will no longer be required to biennially renew a designation of exempt person filing for otherwise eligible Phase II customers, but an annual review of these customers must still be conducted: and * Depository institutions will no longer be required to record and report a change of control in a designated non-listed or payroll member or customer.
The new rules take effect 30 days after publication in the Federal Register. Use the resource link below to access the final rule.

New RegFlex plan a good one says CUNA

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WASHINGTON (12/4/08)—The Credit Union National Association (CUNA) endorsed a plan under the Regulatory Flexibility Program (RegFlex) that would allow well-run credit unions additional time to occupy properties bought in an unimproved state. Currently, when a federal credit union acquires unimproved land for future expansion and does not fully occupy the completed premises within one year, it must partially occupy the property within three years or obtain a waiver. The National Credit Union Administration (NCUA) proposed a plan in September that would allow the highly ranked Reg-Flex federal credit unions to have up to six years without seeking a waiver. “We believe this change is reasonable and will assist well-run credit unions in managing their fixed-asset portfolios,” said in a Dec. 1 CUNA comment letter. “We also agree that federal credit unions should retain their ability to request a waiver of the partial occupancy requirement under the fixed assets rule,” CUNA added. Use the resource link below to access the CUNA letter.

FHFA Foreclosure mitigation has room for improvement

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WASHINGTON (12/4/08)—The Federal Housing Finance Agency (FHFA) has submitted its first mandated report to the U.S. Congress detailing actions the agency is taking to prevent unnecessary mortgage foreclosures. The 2008 Emergency Economic Stabilization Act (EESA) directed the FHFA, as a federal property manager, to develop and implement ways to maximize assistance to homeowners and to encourage servicers of underlying mortgages to take advantage of programs to minimize foreclosures. The FHFA is a designated FPM because in September it became conservator for Fannie Mae and Freddie Mac. The first report to Congress covers the 60 days since enactment of EESA, but subsequent reports will be submitted on a monthly basis. In a letter to Congress, FHFA Director James Lockhart detailed the streamlined loan modification program (SMP) announced last month. Also submitted for review were FHFA’s monthly Foreclosure Prevention Report, quarterly Mortgage Metrics Report, and the Agency’s Plan to Maximize Assistance for Homeowners and Minimize Foreclosures. Lockhart wrote, “The streamlined modification program is meant to reach as many seriously delinquent borrowers as possible to give them a chance to save their homes and begin restoring their credit.” The FHFA further described the letter to federal lawmakers as describing the the unified effort of Fannie Mae, Freddie Mac, private lenders and servicers, FHFA, the U.S. Treasury Department and Federal Housing Administration (FHA). However, Lockhart noted that the August Foreclosure Prevention Report indicated a need for the government-sponsored housing enterprises to adopt more aggressive loan modification and foreclosure prevention activities. The FHFA noted that the number of foreclosures completed in August 2008 was 15,528, which is above 2008 YTD monthly average. The number of loan modification was 4,402, which was below the 2008 YTD monthly average of 4,959. Use the resource link below to access the agency report.

Inside Washington (12/03/2008)

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* WASHINGTON (12/4/08)--A notice of prohibition from the National Credit Union Administration contained erroneous information, according to David Wright, manager of WIT FCU, Rochester, N.Y. An article about the notice published Nov. 13 said that Josette L. Williamson was convicted of petit larceny in connection with the failure of the credit union. However, the credit union did not fail, said Wright. "We're alive and kicking," he told News Now. Williamson repaid the money to the credit union and was ordered to perform 120 hours of community service … * ALEXANDRIA, Va. (12/4/08)—The National Credit Union Administration (NCUA) touted board member Gigi Hyland’s recent participation on Home & Family Finance Radio, a weekly radio show offering
NCUA board member Gigi Hyland told consumer listeners about share insurance's benefits on a recent Home & Family Finance Radio Show. (Photo provided by CUNA)
helpful information and consumer finance advice, which is sponsored by the Credit Union National Association (CUNA). In a recent release, the NCUA noted that in the Nov. 12 interview Hyland focused on recent changes to federal share insurance coverage and how the economy is affecting credit unions. For instance, the NCUA board member advised that consumers should review their accounts and work with their institutions to ensure they obtain the maximum amount of insurance coverage permitted. She also promoted awareness that accounts at federally insured credit unions have insurance coverage of $250,000 through Dec. 31, 2009. Hyland also urged consumers to visit the NCUA Share Insurance Tool Kit located on the NCUA website… * WASHINGTON (12/4/08)—The U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund released a report on New Market Tax Credit (NMTC) program projects funded through 2007. In its announcement of its fifth round of NMTC recipients, the CDFI said that through the FY 2007 reporting period Community Development Entities (CDEs) had disbursed almost $9 billion in Qualified Equity Investments (QEIs). The proceeds went to 1,981 different Qualified Active Low-Income Community Businesses (QALICBs) and were used to finance both real estate developments and operating businesses in low-income communities. The NMTC program was created by the Community Renewal Tax Relief Act of 2000 to promote economic development in low-income communities. The CDEs pass the tax credit on to investors. As not-for-profit entities, credit unions must have a plan for creating a for-profit subsidiary and to transfer the allocations to those subsidiaries in order to be eligible to apply for an NMTC allocation…

CUNAs Mica meets with Obama transition team

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WASHINGTON (12/4/08)--U.S. President-elect Barack Obama’s Transition Team turned its attention to credit unions Wednesday when transition representatives met with Credit Union National Association (CUNA) President/CEO Dan Mica and senior staff in Washington. Obama’s Transition Team is reviewing all federal agencies, including the National Credit Union Administration (NCUA). The team's members include former NCUA Board Member Debbie Matz; Scott Wallsten, economics professor at Stanford University; and Gregory Rosston, who is the team leader and deputy director of economic policy research also at Stanford. Among the credit union topics discussed during Wednesday’s meeting, according to Mica:
* The distinct characteristics of credit unions and the overall solid condition of the credit union system; * The need for a strong, independent NCUA Board; * How supplemental capital authority could benefit the credit union system; * How lifting the member business loan (MBL) statutory cap would further the new president's goals to increase the number of jobs created within the small business community; * The need for Treasury to be unbiased about credit unions; and * Why credit unions that need it should have access to assistance either through NCUA or Treasury.
The group also discussed the condition of corporate credit unions, fair value accounting, and examination issues. Mica said Obama’s Transition representatives appeared to have a good understanding of credit unions and NCUA. “They raised a number of questions to which we responded,” said Mica. “We also provided several background materials on facts about the credit union system and issues we are facing.” Mica said CUNA will follow up with the Obama Transition Team during the next few weeks. Afterward, the Transition Team will provide to the Obama Administration a confidential report reflecting views from CUNA and others, he added.

GAO TARP needs additional checks. balances

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WASHINGTON (12/3/08)—The Government Accountability Office (GAO) has issued a study on the U.S. Treasury Department’s Troubled Asset Relief Program and has found Treasury has yet to address a number of critical issues. The GAO acknowledged that TARP, created under the Emergency Economic Stabilization Act, had existed less than 90 days at the time of the study. It further noted a new program of such magnitude”faces many challenges, especially in this current uncertain economic climate.” However, Treasury has yet to address a number of critical issues, including determining how it will ensure that TARP’s capital purchase program ( CPP ) is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments. The CPP is a preferred stock and warrant purchase program, through which Treasury has provided more than $150 billion in capital to 52 institutions as of Nov. 25. To help ensure the program’s “integrity, accountability, and transparency,” GAO recommends that Treasury take the following steps:
* Work with the bank regulators to establish a systematic means of determining and reporting in a timely manner whether financial institutions’ activities are generally consistent with the purposes of CPP and help ensure an appropriate level of accountability and transparency; * Develop a means to ensure that institutions participating in CPP comply with key program requirements (e.g., executive compensation, dividend payments, and the repurchase of stock); * Formalize the existing communication strategy to ensure that external stakeholders, including Congress, are informed about the program’s current strategy and activities and understand the rationale for changes in this strategy to avoid information gaps and surprises; * Facilitate a smooth transition to the new administration by building on and formalizing ongoing activities, including ensuring that key Office of Financial Stability (OFS) leadership positions are filled during and after the transition; * Expedite OFS’s hiring efforts to ensure that Treasury has the personnel needed to carry out and oversee TARP; * Ensure that sufficient personnel are assigned and properly trained to oversee the performance of all contractors, especially for Contracts priced on a time and materials basis, and move toward fixed-price arrangements whenever possible; * Continue to develop a comprehensive system of internal control over TARP, including policies, procedures, and guidance that are robust enough to protect taxpayers interests and ensure that the program objectives are being met; * Issue final regulations on conflicts of interest quickly and review and renegotiate mitigation plans to enhance specificity and compliance; and * Institute a system to effectively manage and monitor the mitigation of conflicts of interest.
Every 60 days, the U.S. Comptroller General is required to report on a variety of areas associated with oversight of TARP. Use the resource link below to access the complete GAO report.

NCUAs Skiles to retire Marquis to succeed

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ALEXANDRIA, Va. (12/3/08)—National Credit Union Administration (NCUA) Executive Director Len Skiles is retiring as of year-end and will be succeeded in that position by David Marquis, who is currently the director of the agency’s Office of Examination and Insurance. The NCUA announcement followed, by a day, an unscheduled closed meeting Monday. While that meeting addressed a personnel matter, it was not specified that the meeting was held to discuss the executive director position. Credit Union National Association President/CEO Dan Mica said of the transition: “For nearly 40 years, Len Skiles provided dedicated service to NCUA with an eye toward maintaining the strength and independence of the agency. “We may have stood on different sides of issues at times, but he always respected our right and obligation to express our views with him in pursuit of credit unions’ best interests. “We wish him only the best in future endeavors.” Mica added CUNA’s congratulations to Marquis, and said CUNA looks forward to working with the new executive director after the first of the year. Skiles has been with the NCUA for 38 years, beginning his career there in 1973 as a staff attorney in the office of general counsel. Marquis began his NCUA career as an examiner in Baltimore in 1978. During his time with the agency, Marquis has served as a supervisory examiner, associate regional director, and regional director as well as deputy director of the Office of Examination and Insurance. NCUA Chairman Michael Fryzel called Skiles “an integral part of NCUA for most of its history” and added that “he will leave behind a legacy of excellence.” Part of that legacy has been an abundance of exceptionally talented staff, Fryzel said. "That," he added, "is one of the reasons why NCUA will continue to perform at a high-level with Dave Marquis at the ED helm.” “The turbulent financial times call for a steady, seamless transition, and Dave Marquis’ direct oversight of NCUA’s supervision programs, combined with his close work with the outgoing ED, make him the ideal replacement,“ Fryzel said.

Feds to extend student loan purchases

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WASHINGTON (12/3/08)—The government has announced that it will purchase additional loans under the authority granted under the Ensuring Continued Access to Student Loans Act of 2008. Under that authority the Department of Education may purchase, or enter into forward commitments to purchase, certain Federal Family Education Loan Program (``FFELP'') loans, such as subsidized and unsubsidized Stafford loans and PLUS loans. Those loans may be purchased on terms determined by Secretary of Education, the Secretary of the Treasury, and the Director of the Office of Management and Budget to be “in the best interest of the United States'' and that ``shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).'' According to a recent Federal Register document, the Education Secretary initially exercised the purchase authority in this summer. The notice announcing the plan to purchase additional loans does the following:
* Establishes the terms and conditions that will govern certain additional loan purchases made under the amended Higher Education Act; * Outlines the methodology and factors that have been considered in evaluating the price at which the Education Department will purchase these additional FFELP loans, and * Describes how the use of those factors and methodology will ensure that the additional loan purchases do not result in any net cost to the federal government.
Use the resource link below to read the Federal Register announcement.

Inside Washington (12/02/2008)

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* WASHINGTON (12/3//08)—The Federal Deposit Insurance Corp. (FDIC) announced Tuesday that it has published a study on the types, characteristics, and use of overdraft programs operated by FDIC-supervised banks. The study shows rapid growth of overdraft programs in the last several years. Some of the study’s findings: Most banks (69.4%) initiated their automated overdraft programs after 2001; Large banks were more likely (55.4%) to have had an automated overdraft program in place in 2001; and most banks (75.1%) automatically enrolled customers in automated overdraft programs, although customers were usually permitted to affirmatively opt out of the program. Survey comments indicated that in some cases, customers were not given the choice to opt in or out of the automated program. By contrast, the study notes, almost all banks (94.7%) treated linked-account programs as opt-in programs, requiring that customers affirmatively request to have accounts linked. In addition, customers have to apply and qualify for an overdraft LOC program, so these programs typically operate on an opt-in basis… * WASHINGTON (12/3/08)—The Federal Reserve Board announced Tuesday that it would extend three liquidity facilities through April 30, 2009. They are: the Primary Dealer Credit Facility (PDCF), the Asset-Backed Commercial Paper Money Market Fund Liquidity Facility (AMLF), and the Term Securities Lending Facility (TSLF). These facilities had previously been authorized through January 30, 2009. The PDCF provides discount window loans to primary dealers. The AMLF provides loans to depository institutions to purchase asset-backed commercial paper from money market mutual funds. Under the TSLF, the Federal Reserve Bank of New York auctions term loans of U.S. Treasury securities to primary dealers… * WASHINGTON (12/3/08)—A search committee has been formed by the board of directors of the Federal Reserve Bank of New York to find a new president to success Timothy Geithner, who President-elect Barack Obama has said he will nominate to become U.S. Treasury Secretary. The New York Fed said in a release that its committee will complete its work as “promptly as it prudently can.” American Banker (Dec. 2) said Geithner will remain at the New York Fed "or the next several weeks but will not work with the central bank's policy-making committee…

New appraisal evaluation guidelines open for comment

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WASHINGTON (12/2/08)--The National Credit Union Administration (NCUA), along with federal bank and thrift regulators, proposed interagency appraisal and evaluation guidelines that outline supervisory expectations for sound real estate practices. The Credit Union National Association (CUNA) is asking credit unions to comment on the guidelines by Jan. 12. Comments are due to the agencies by Jan. 20. The guidelines are intended to clarify appropriate risk-management principles and internal controls for ensuring that real estate appraisals and other evaluations are reliable and support a real estate transaction. The proposed guidance would replace the 1994 Interagency Appraisal and Evaluation Guidelines and incorporate recent regulatory actions into the rules. The NCUA was not a party to the 1994 Guidelines. The new, more-detailed guidance would also reflect other changes in industry practices, uniform appraisal standards, and available technologies. It includes three appendices:
* One provides further clarification on real estate transactions that are exempt from the agencies’ appraisal regulations; * Another addresses acceptable evaluation alternatives, including the use of automated valuation models (AVMs); * The third appendix provides a glossary of terms.
Use the resource link below to read more about the joint-agency proposal and to read CUNA’s complete comment call.

Senate hearing signals bankruptcy interest

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WASHINGTON (12/2/08)—The Senate Judiciary Committee has scheduled a field hearing Thursday on “Credit Cards and Bankruptcy: Opportunities for Reform.” The hearing will be conducted at Rhode Island College in Providence and will feature a panel of the following four witnesses:
* John Rao, an attorney with the National Consumer Law Center; * U.S. Bankruptcy Court Judge Thomas Small, from the eastern district of North Carolina; * Robert Lawless, a professor of law from the University of Illinois; and * Associate Professor of Law John Chung, from Roger Williams University.
Ryan Donovan, vice president of legislative affairs for the Credit Union National Association, said the hearing can be viewed as a harbinger of things to come in the 111th U.S. Congress. “We fully anticipate Congress will take a very close look at the bankruptcy code. While the focus of the bankruptcy discussion in Congress most recently has revolved around mortgage cramdown proposals, this hearing and others indicate there may be an appetite to go further in the new Congress,” Donovan said. In October the Judiciary panel conducted a two-part field hearing titled “Keeping Families in Their Home: How to Prevent Foreclosures” in Pennsylvania. Part I was held in Pittsburgh, Part II in Philadelphia.

CUNA CUs raised record 4 million for CULAC

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WASHINGTON (12/2/08)—Credit union political fundraising hit a significant milestone in the 2007-2008 election cycle, raising a record $4 million through the Credit Union National Association’s (CUNA’s) Credit Union Legislative Action Council (CULAC). CUNA President/CEO Dan Mica said the achievement places credit unions in the “upper-tier, elite echelon of political action across the nation.” He said the milestone should make credit unions “proud and confident for their future.” Mica noted that CULAC is among about 4,000 political action campaigns (PACs) nationally, and most of those target a small number of key congressional election races. “But, because of the hard work and generosity of credit unions and the leagues, we have the capability to be involved in nearly all races, and still put to use important, proven tools such as independent expenditures (IE),” Mica said of CULAC’s far-reaching effort. He added that less than one percent of all PACs nationwide that have the ability to support a candidate with an IE. “We are fortunate to be one of them,” Mica said. Federal regulations dictate that IEs must be made independently, with no coordination between the contributor and a candidates' campaign camp. The money is used for such things as independent advertising and mailings in support of a candidate. Mica identified the following key points as among those that led to the success of the last election cycle:
*Fundraising continues to be driven by growth in payroll deduction, a program in place only since 2005. As of Oct. 31, more than 2,800 employees at 113 credit unions, 22 state leagues, and CUNA were contributing to CULAC; *CULAC distributed more than $2.9 million in contributions this cycle to federal candidates and committees, and participated in 8% of the 470 U.S. House and Senate races on the November ballot; *CULAC spent a record $528,000 in IEs in three races, one of which resulted in the defeat of an anti-credit union incumbent by credit union friend and Kansas State Treasurer Lynn Jenkins; *More than 92% of CULAC-supported House and Senate candidates won election in the November elections; *CULAC ranked 14th among all federal PACs in direct candidate contributions, and 6th among trade association PACs. The partisan breakdown (52% to Democrats and 48% to Republicans) was tied with only one other organization as the most bipartisan among the nation’s 20 largest PACs, based on figures provided by the Center for Responsive Politics).
Mica also noted that CULAC has always relied on grassroots, with an average contribution of just about $26.

inside Washington (12/01/2008)

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* WASHINGTON (12/2/08)—Credit Union National Association (CUNA)
CUNA President/CEO Dan Mica appeared live Monday on FOX Business TV. (Photo provided by CUNA)
President/CEO Dan Mica was among those that Fox Business Network tapped yesterday for reaction to Fed Chairman Ben Bernanke's comments on the economy. In a live interview Monday with Fox Business News right after Bernanke concluded his remarks and Q&A session, Mica said the Fed chairman's comments reinforced what the country already knows--that the economy is troubled. “I represent Main Street and you didn’t have to wait until today for an official declaration of a recession. People out there have known for months…that we were having severe problems. People also know that it is going to be very tough next year. There isn’t a small business on Main Street looking forward to the next year with any joy or glee.” Mica also predicted a busy 2009 in the U.S. Congress as federal lawmakers parse the government’s actions in response to the financial meltdown. “There will be hearings, there will be regulations, and there will be blame,” the CUNA leader said... * WASHINGTON (12/2/08)—The Federal Deposit Insurance Corp. said last week it would begin to speed up the eligibility process to bid on assets of failed banks by using a less exhaustive review process. It may also start issuing conditional approval for deposit insurance so more interested parties can become eligible to offer bids for failing institutions .(American Banker Dec. 1)... * WASHINGTON (12/2/08)—The Federal Deposit Insurance Corp. (FDIC) has started to force some banks to adopt its systemic loan modification program to the dismay of some bankers and relief of some consumer advocates. The FDIC stipulated recently that plans of Citigroup Inc. and U.S. Bancorp to buy assets of two failed California thrifts would get the government’s backstop only if they agreed to adopt the FDIC’s plan. (American Banker Dec. 1)…