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iReutersi names CUs as a financing trend for 2011

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WASHINGTON (12/30/10)—Credit unions were among “financing trends for 2011” noted in a recent Reuters article that told small business owners that credit unions could be among the forces that have a real impact on financing needs in the coming year. “These cooperative financial institutions are among the most active in making smaller loans to entrepreneurs and have only gotten busier in recent years, according to the National Credit Union Administration (NCUA),” the article noted. “(NCUA) figures show credit unions made more than $33 billion worth of business loans in 2009, up from $12 billion in 2004.” Reuters pointed out the lower default rates of credit unions loans, and noted that rates and terms that “are often better than traditional banks,” according to the NCUA and even federal-bank-regulator, the Federal Deposit Insurance Corp. The article informs readers that they have to be a credit union’s member to obtain a loan. The other trends mentioned in the article were microlending, the “slow-money movement,” where investors use patience to get returns from “socially responsible companies,” “bootstrapping,” which is when an entrepreneur taps personal savings, gets vendors to front start-up supplies for delayed payment terms, hits up friends and relatives, or uses one money-making venture to fund another, and, finally, even “crowdfunding,” a term used to describe when a large group of people help fund a project or business by clustering small donations.

Inside Washington (12/29/2010)

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* WASHINGTON (12/30/10)--The Crash Network, a group of under-30 professionals looking for deeper involvement in the credit union industry, is seeking applicants for its 2011 “Crash the GAC.” The “crash” concept is the group’s way of gently nudging its way into mainstream credit union meetings to rub shoulders with system leaders and create networking and educational opportunities. The group is looking for 15 young professionals to take part in the 2011 Credit Union National Association’s (CUNA) Governmental Affairs Conference, Feb. 27-March 3, at the Washington Convention Center, Washington, D.C. Interested candidates, who must work for a league/CUNA-affiliated credit union, can fill out an application at www.CrashtheGAC.com. Applications are due Jan. 14. PSCU Financial Services will be the official Crash the GAC sponsor and cover the cost of crashers’ lodging, meals, and a reception. CUNA’s Center for Professional Development has offered full scholarships for crashers to attend the conference ...

New FCRA risk-based rules kick in on Saturday

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ALEXANDRIA, Va. (12/30/10)—For months, the Credit Union National Association has been advising credit unions that the Fair and Accurate Credit Transactions Act's (FCRA) risk-based pricing regulations, which become effective on Jan. 1, will require credit unions to provide risk-based pricing notices to each consumer in situations where two or more consumers are granted, extended, or otherwise provided credit. The National Credit Union Administration (NCUA) also is reminding credit unions of the rule’s effective date and requirements. In a Regulatory Alert signed by Chairman Debbie Matz, the NCUA noted the following:
* If a credit union offers risk-based pricing loan programs and uses credit scores to determine the annual percentage rate charged to each borrower, it will need to comply with the upcoming changes to risk-based pricing notices. * The new requirements take effect on Jan. 1 as a result of rules issued by the Federal Reserve Board and the Federal Trade Commission. * The two agencies’ rules are substantively identical and can be found at 12.CFR Part 222 and 16.CFR Part 640 and 698, respectively. The rules are meant to complement the existing adverse action notice provisions of the FCRA. * Section 615(h) of the FCRA generally requires a user of consumer reports to provide a risk-based pricing notice to a consumer. The notice is required when a credit union uses a consumer report in connection with an application, extension, or other provision of credit and, based on the consumer report, grants, extends, or provides credit on terms that are materially less favorable than terms the credit union has extended to other consumers. Section 615(h) does not apply to an application primarily for a business purpose. * The rules provide alternative means by which a credit union can determine who should receive a risk-based pricing notice. The rules also include certain exceptions to the general rule, including exceptions for creditors that provide a consumer with a disclosure of the consumer’s credit score.
The NCUA alert noted that the risk-based pricing notice requirement is designed primarily to improve the accuracy of consumer reports by alerting consumers to the existence of negative information on their reports. Consumers will be able to check their reports for accuracy and correct any inaccurate information. The agency enclosed, with the alert, the “Interagency Examination Procedures" examiners will use, and a questionnaire that will help a credit union document its compliance.

CUNA keeps CU hum before administration officials

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WASHINGTON (12/3010)—The Credit Union National Association (CUNA) continued to bring credit union issues before key administration officials this month, making important points during a recent follow-up meeting with the White House National Economic Council (NEC). CUNA President/CEO Bill Cheney met with key NEC staff members to detail a range of significant credit union issues and concerns, including:
* The credit union tax status and its importance to consumers and the economy; * The need for increased member business lending (MBL) authority, a legislative initiative already supported by the Obama administration; * The need for supplemental sources of capital for credit unions, which are currently restricted to retained earnings for to build capital resources; * Credit union concerns regarding the Federal Reserve Board’s proposal to set government pricing on interchange fees; and * The impact on credit unions of the National Credit Union Administration’s budget increases for 2011, and CUNA’s request that the agency follow the administration’s proposed pay freeze for federal workers.
The meeting with NEC staffers was a follow-up to a session earlier this month between Cheney and NEC Director Lawrence Summers, who will turn over the reins of that position at the beginning of the new year. During the meeting, Cheney acknowledged the substantial support that the U.S. Treasury Department has thrown behind legislation to raise the statutory limit on member business lending to 27.5%--up from the current 12.25% limit. However, he urged the administration to be more active in its support of credit union priorities, particularly as proposals to reduce the deficit are considered in the U.S. Congress, and as CUNA continues to pursue MBL statutory improvements and supplemental capital in the new Congress.

TARP deadbeat problem is growing say pubs

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WASHINGTON (12/29/10)—National publications, such a The Washington Post and The Wall Street Journal, in recent days have featured stories on the growing problems the government is facing with so-called “deadbeat” banks failing to make their TARP dividend payments. The number of banks that have missed six or more payments has more than doubled from the previous quarter, up to 19 from seven. That delinquency gives the government the right to monitor the board meetings of those institutions, as well as appoint new board members. The Post, in its Monday issue, reported that the U.S. Treasury Department has dispatched officials to monitor the board meetings of those 19 banks and may take steps to replace some board members in the new year. The Post also reported that the number of “deadbeat” banks--those failing to make at least one dividend payment--rose to 132 last quarter. The laggards are almost solely community lenders, ones that have “collectively received billions of dollars in taxpayer assistance.” In addition to the banks that have not paid dividends, seven other TARP recipients have failed “resulting in the total loss of the government's investment” in those collapsed institutions. The article noted that analysts believe the repayment and profits generated overall will more than offset the financial losses generated by smaller banks. But they added that the issues surrounding community banks indicate that the Treasury lacked proper filters in determining which institutions got access to the financial rescue program.

Inside Washington (12/28/2010)

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* WASHINGTON (12/29/10)--Debit interchange revenue for regulated card issuers will decline by 73%, according to a report issued by Oliver Wyman last week. In the U.S. banking industry, $11.8 billion of the $16.2 billion generated in debit interchange revenue will disappear from the system, according to the report, “The U.S. Debit Market and the Durbin Amendment: Worse Than the Worst Case Scenario.” Based on the proposed draft rules announced by the Federal Reserve on Dec. 16, debit interchange revenue will shrink from an average of 44 cents per transaction to at most 12 cents per transaction as of July 21, 2011. With the new rates set in reference to a subset of all debit card costs, the economics of debit card programs will become significantly unprofitable, said the report. Between 2000 and 2009, debit grew at an average annual rate of 18% and is now the most commonly used non-cash payment method. In 2009, 37.9 billion debit card transactions were performed in the U.S., representing 35% of total non-cash retail payments. Currently, card issuers generate an average of $87 of revenue per active consumer debit card per year, but starting on July 21, for banks with at least $10 billion in assets, this figure will drop to $24 per year. Card issuers with less than $10 billion in assets may also be affected, as there is no provision that requires debit networks to set different interchange rates between large, regulated card issuers and small, exempt card issuers such as credit unions. The Oliver Wyman report agrees with the Credit Union National Association’s analysis that if debit interchange revenue for smaller issuers declines, the result could be severe; not only will these programs become unprofitable, the viability of some community banks and credit unions will be threatened …

Monthly FHFA report shows ARMfixed-rates drop slightly

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WASHINGTON (12/29/10)—When viewed together, the contract rate on fixed- and adjustable-rate mortgages (ARM) went down slightly in November from the previous month—to 4.35% from 4.44%, a decline of nine basis points (bp). The composite effective interest rate, which also reflects the
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amortization of initial fees and charges, was down 11 bp at 4.46% in November. When viewed separately, fixed-rate mortgage loans experienced the bigger decline. For instance, the average interest rate on conventional, 30-year fixed-rate mortgage loans of $417,000 or less decreased 12 bp in November to 4.32%. The average November rate for ARM contracts was 4.42%, down 7 bp from the previous month. The averages are those reported by the Federal Housing Finance Agency’s National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders released Tuesday.

NCUA-safe campaign attracts millions in donated ad space

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ALEXANDRIA, Va. (12/29/10)—The “NCUA-safe” ad campaign featuring personal finance expert Suze Orman touting the virtue of federal credit union insurance has tallied more than $2.6 million in free advertising for the National Credit Union Administration (NCUA). Launched just three months ago, the public-education campaign combines 30- and 60-second
Suze Orman, nationally recognized personal finance expert, is shown here in an NCUA-designed ad that assures the public their funds are safe with federal credit union share insurance. (NCUA Photo)
television and radio ads, as well as outdoor and indoor posters proclaiming the safety of the National Credit Union Share Insurance Fund that guarantees credit union member deposits. NCUA Chairman Debbie Matz announced the campaign will continue throughout 2011. She said the campaigns “impressive results” are particularly gratifying because there is a national scope of the pick-up of the “NCUA-safe” ads. Through Dec. 20, the NCUA announced the following ad-space results:
* National cable networks: 79 airings on CBS, ION and WGN Superstation, for a total of $154,000 in donated airtime; *Local TV: 1,346 airings, worth $388,808; * Radio: 817 airings, worth $963,018; and * Out-of-home (bus shelters, mall posters and Times Square (N.Y.) message board); worth $1,108,000.
“I look forward to continuing the success of our efforts to elevate the financial public’s understanding of the value of federally insurance,” Matz said. The NCUA revealed the precise dollar-value amount of $2,613,826 for the PSAs.

Inside Washington (12/23/2010)

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* WASHINGTON (12/28/10)--Citing the cost to taxpayers of taking over Fannie Mae and Freddie Mac and structural weaknesses of those government-sponsored institutions, the Congressional Budget Office (CBO) Wednesday released a study offering three alternative approaches for the future of the secondary mortgage market (American Banker Dec. 23). The study also reviewed the developments that led to the 2008 conservatorships of Freddie and Fannie. The report said because of their size and interconnectedness with other financial institutions, Freddie and Fannie posed “substantial systemic risk,” meaning that their failure could impose high costs on the financial system and the economy. The three alternatives for the future structure of the secondary market include: a hybrid public/private model in which the government would help ensure a steady supply of mortgage financing by providing explicit guarantees on privately issued mortgages or mortgage-backed securities (MBS) that met certain qualifications; a fully public model in which a federal entity would guarantee qualifying mortgages or MBSs; or an entirely private model with no special federal backing for the secondary mortgage market. For the report, use the link … * WASHINGTON (12/28/10)--The Treasury Department has updated the online resource center for the Small Business Lending Fund (SBLF) (American BankerDec. 23). Enacted into law as part of the Small Business Jobs Act of 2010, the SBLF encourages lending to small businesses by providing Tier 1 capital to qualified community banks with assets of less than $10 billion. Through the SBLF, community banks and small businesses can work together to help create jobs and promote economic growth in local communities across the nation. The SBLF, a pool of $30 billion, aims to stimulate small business lending by providing capital to participating community banks. The dividend rate on SBLF funding will be reduced as a participating community bank increases its lending to small businesses. The initial dividend rate will be, at most, 5%. If a bank’s small business lending increases by 10% or more, then the rate will fall to as low as 1%. Banks that expand their lending by amounts less than 10% can benefit from rates set between 2% and 4%. If lending does not increase in the first two years, however, the rate will rise to 7%. After 4 ½ years, the rate will increase to 9% if the bank has not already repaid the SBLF funding … * WASHINGTON (12/28/10)--The Federal Housing Finance Agency (FHFA) issued three final rules on Wednesday, including one that requires Fannie Mae and Freddie Mac to reduce the size of their portfolios by 10% annually. Under the second rule Fannie, Freddie and the Federal Home Loan Banks will each be required to promote diversity and the inclusion of women, minorities and disabled persons by establishing an Office of Minority and Women Inclusion. The third rule requires the FHFA to establish housing goals for bank purchases of mortgages. The Fannie Mae/Freddie Mac portfolio rule is unchanged from the FHFA's interim final rule that went into effect on Jan. 30, 2009. Under the rule, Fannie and Freddie may each hold mortgage assets up to $900 billion, but starting at the end of this year, they must reduce their portfolio holdings by 10% annually until they each reach $250 billion …

SAFE Act registration to begin in late Jan. NCUA says

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ALEXANDRIA, Va. (12/28/10)--The initial period for federal registration of residential mortgage loan originators under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) will begin on or around Jan. 31, the National Credit Union Administration (NCUA) announced late last week. This initial registration period will likely end in late July, the agency added. The NCUA, the Federal Deposit Insurance Corporation, the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Farm Credit Administration will individually confirm the start date just prior to the beginning of the registration period. A notice will also be published in the Federal Register, the NCUA added. Under the SAFE Act, employees of financial institutions, or their subsidiaries that act as residential loan originators, are required to register with the Nationwide Mortgage Licensing System and Registry. The SAFE Act requires mortgage originators to obtain a unique identifier, and to maintain their registration. Financial institutions that are subject to the SAFE Act requirements must require employees acting as residential mortgage loan originators to comply with the act's requirements to register and obtain a unique identifier, and must adopt and follow written policies and procedures designed to assure compliance with these requirements. For the full NCUA release, use the resource link.

NCUAs McKechnie to move on

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ALEXANDRIA, Va. (12/28/10)--National Credit Union Administration (NCUA) Director of Public and Congressional Affairs John McKechnie last week announced his pending departure from the agency, a move that could be completed as soon as next month. McKechnie moved to the NCUA from the Credit Union National Association, where he served as senior vice president of government affairs, in 2006. In his Wednesday announcement, McKechnie said that his NCUA tenure has been “terrifically exciting, challenging, stressful and, in the final analysis, very professionally rewarding.” He has not announced what his next career move will be. “This experience was akin to a graduate education, although the diploma might have to reflect several disciplines, notably law, finance, public administration, history, and psychology,” he added. McKechnie thanked NCUA staff, as well as former NCUA leaders JoAnn Johnson and Michael Fryzel and current NCUA Chairman Debbie Matz.

CU director fin-lit rules kick in next month NCUA

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WASHINGTON (12/28/10)--National Credit Union Administration (NCUA) rules that require federal credit union directors to have or gain an understanding of "basic finance and accounting practices” will come into effect on Jan. 27, the agency has said. The NCUA earlier this month introduced and approved a proposal that requires credit union directors to not only carry out their duties in good faith, but also have or gain an understanding of "basic finance and accounting practices." According to the NCUA, federal credit union directors who are added or elected before the Jan. 27 effective date must comply with the financial literacy requirements by July 27. The NCUA said that directors who are not yet well-versed in financial terminology or have not yet received financial literacy training should do so in 2011, the NCUA said. Directors who join credit unions after Jan. 1 must comply with the financial literacy standards within six months of their join date. The NCUA said that it will offer training via a workshop provided through its Office of Small Credit Union Initiatives. Just last week, the Credit Union National Association (CUNA) announced that it is offering a Board Financial Literacy Certificate in response to the new NCUA board financial literacy requirements. For the NCUA release and a link to CUNA’s Board Financial Literacy Certificate program, use the resource links.

CUNA Fed credit insurance disclosures may mislead consumers

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WASHINGTON (12/28/10)--The Credit Union National Association (CUNA), in a comment letter to the Federal Reserve filed Dec. 22, urged the Fed in the strongest terms to revise and improve proposed disclosures for credit protection products that, if adopted, “will be misleading to consumers and flow from faulty assumptions about credit insurance.” The proposed disclosures were issued for comments by the Fed in September as part of a comprehensive proposal on home secured credit. CUNA in the letter said that the Fed should not adopt the credit protection product proposal in its current form. CUNA and CUNA Mutual Group met with the Fed to discuss these disclosures earlier this month, and previously had raised serious concerns about the proposed disclosures, saying that they go well beyond insuring that consumers are informed about these products. Instead, CUNA said, the disclosures cast these products in a negative light and strongly discourage consumers from purchasing them. These concerns were stressed in the comment letter. In the letter, CUNA Deputy General Counsel Mary Dunn emphasized that “credit unions support fair and accurate disclosures that inform consumer about the terms of credit protection products.” However, she stated that credit protection products provided by credit unions “provide meaningful benefits to members,” including those who would not otherwise have access to such protection. She also noted that the products protect credit union from potential charge offs and loan losses. “In many instances, the proposed language is ambiguous, incomplete and fails to fully inform consumers about the features of credit protection products,” Dunn said. “We urge the board to revise dramatically the disclosure requirements for credit protection products so that compliance will not result in a death sentence to these products.” CUNA’s 14-page letter also addresses the proposal’s treatment of interest rates for variable-rate home equity lines of credit, principal prepayments, and adjustable-rate mortgage and refinancing disclosures. Fee disclosures, The Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act, and other issues are also covered in the comment letter. For the full comment letter, use the resource link.

Bachus Hensarling Could 10B exemption harm CUs

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WASHINGTON (12/23/10)—While well intentioned, the Federal Reserve’s proposed $10 billion in assets threshold for interchange rule exemptions could create “an unlevel playing field” for credit unions and other small issuers “by making their cards more expensive for merchants to accept,” Reps. Spencer Bachus (R-Ala.) and Jeb Hensarling (R-Texas) said in a recent letter to the Federal Reserve. The letter also questioned the speed with which the interchange legislation was moved through Congress, and recommended that the Fed extend the deadline for final rules beyond the current April 21 deadline. “Given the broad scope of this required rulemaking and the enormity of its potential impact on consumers and merchants alike, we doubt that such an extremely short timeframe will be sufficient to produce thorough and thoughtful final rules that consider the myriad perspectives of all affected parties,” the letter said. Bachus and Hensarling also noted that the House Financial Services Committee only held one hearing before the legislation was enacted earlier this year. The Fed, before moving forward with its rulemaking, should use “the full amount of time under its disposal” to review all available comments on the interchange proposal. Reviewing the comments, and allowing Congress to proceed with its own review of the intent and impact of the interchange proposal, would help the Fed to produce rules “without unduly causing harm to consumers or competition in the marketplace,” the letter added. The Fed proposal, which was released last Thursday, would cap debit card interchange fees that are paid by merchants to card issuers at 12 cents per transaction. Issuers with under $10 billion in assets would be exempt from the interchange changes. Bachus will begin his tenure as Chairman of the House Financial Services Committee when the 112th Congress begins in January. Hensarling will serve as vice-chair. Outgoing Financial Services Chair Rep. Barney Frank (D-Mass.) in his own letter to the Fed said that the implementation of still-pending interchange regulations, if not properly crafted, "may have unintended consequences" for credit unions and consumers. Credit Union National Association (CUNA) President/CEO Bill Cheney recently criticized the proposal, saying that the loss of interchange fee income for small issuers and the costs of having to belong to more payment networks will have a "horrendous impact" on credit unions that offer debit cards, as well as their ability to build net worth. Cheney also expressed skepticism at the effectiveness of the $10 billion exemption cap, noting that there is nothing in the Fed's proposal that creates an enforcement mechanism to protect small issuers. The Fed has left its proposal open for public comment until Feb. 22, and CUNA continues to develop comprehensive comments for the Fed.

NCUA tech amendments bill passed by House

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WASHINGTON (12/23/10)—The House on Wednesday approved a technical corrections bill that would provide the National Credit Union Administration (NCUA) with new tools to address both troubled individual credit unions and the larger corporate credit union crisis. The legislation, S. 4036, will alter the Federal Credit Union Act by permitting the NCUA to make payments to the Temporary Corporate Credit Union Stabilization Fund without borrowing from the U.S. Treasury. The National Credit Union Share Insurance Fund (NCUSIF) will also be addressed, as the legislation clarifies that the equity ratio of the NCUSIF is based solely on the unconsolidated financial statements of the NCUSIF. Credit Union National Association President/CEO Bill Cheney said that Congress, in passing the legislation, took important action that will help credit unions better serve their members through the current economic crisis. “Credit unions will be stronger, will be able to keep their workers employed, and will remain ready to help their members effectively deal with the financial turmoil of the day,” Cheney added. NCUA Chairman Matz said that the technical amendments will “significantly enhance the ability of NCUA to manage the NCUSIF and the Stabilization Fund in the most efficient way possible.” The legislation will also give credit unions the ability to count section 208 assistance as net worth for the purposes of prompt corrective action (PCA). A Comptroller General-led study of the NCUA is also required by the legislation. That study will seek to determine the reasons for the failures of any corporate credit union since 2008 and evaluate the adequacy of the NCUA's response to the failures of the corporates, including how taxpayers were protected, how moral hazards were avoided, whether potential costs were minimized in the resolution process, and "the ability of insured credit union to bear any assessments levied to cover such costs." The study will also evaluate the effectiveness of the NCUA’s PCA implementation and examine whether the agency has been effective in implementing recommendations made by its Inspector General and contained in Material Loss Review Reports. The Comptroller General will report to the Senate Banking Committee and House Financial Services Committee within six months after the legislation is enacted.

Fed proposes ARM-related amendments

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WASHINGTON (12/23/10)--The Federal Reserve (Fed) on Wednesday released an interim final rule that corrects requirements for interest-only loans to clarify that related disclosures should reflect the date of the interest rate change, rather than the date the first payment is due under the new rate. The interim final rule also clarifies the requirements for 5/1 adjustable rate mortgages (ARM). Specifically, it clarifies that for adjustable- or step-rate loans, the requirement to disclose the maximum interest rate and payment during the first five years must be based on the first five years after the first regular payment due date, rather than the first five years after consummation. For interest-only loans, the Fed’s new interim rule corrects requirements to clarify that related disclosures should reflect the date of the interest rate change, rather than the date the first payment under the new rate is due. It also revises the definition of “negative amortization loans” to clarify which transactions are covered by the special disclosure requirements for such loans, the Fed said. The interim rule also revises the definition of “negative amortization loans” to clarify which transactions are covered by the special disclosure requirements for such loans, the Fed said. The revised definition excludes loans that do not have a minimum required payment that results in negative amortization. The Fed release updates previous changes that the Fed made to Regulation Z in September of this year. Those changes required credit unions to disclose--in tabular format--the interest rate and corresponding monthly payment, including an estimated amount for escrow payments for taxes and property insurance and any mortgage insurance. Those changes also require special disclosures for adjustable-rate or step-rate mortgage loans, including the interest rate and payment at consummation, the maximum interest rate and payment at any time during the first five years after consummation, and the maximum interest rate and payment possible during the life of the loan. The interim final rule is effective on Jan. 30, 2011. However, the Fed added, compliance with its provisions is optional for transactions where an application for credit is received by the creditor before Oct. 1, 2011. The Credit Union National Association (CUNA) last month requested that the Fed withdraw an interim final rule that revises several Regulation Z mortgage loan disclosure requirements "as soon as possible" and "impose a general moratorium on the overall Regulation Z rulemaking process that is currently in progress." For the full Fed release, use the resource link.

Inside Washington (12/22/2010)

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* WASHINGTON (12/23/10)--The Federal Deposit Insurance Corp.’s (FDIC) acting general counsel said in an interview that federal regulators should create national servicing standards as part of soon-to-be-released risk retention guidelines--rather than waiting for Congress to legislate them (American Banker Dec. 22). Michael Krimminger, FDIC acting general counsel, said the Dodd-Frank Act instructs regulators to create risk retention rules that ensure high quality risk management practices, and service standards are a critical part of meeting that goal. The Federal Reserve Board and the Office of the Comptroller of Currency agree that there is a need for new servicing standards, but they argue that risk retention policies are not the place for them. Sources said the Treasury Department and the Securities and Exchange Commission agree with the FDIC’s approach … * WASHINGTON (12/23/10)--The Federal Trade Commission (FTC) has submitted a proposal to the Federal Reserve Board to strengthen the rules under the Home Mortgage Disclosure Act (HMDA). The HMDA requires some mortgage lenders to collect and report loan data that the government uses to analyze whether they are complying with fair lending laws. In response to a request for comments by the Federal Reserve Board, the FTC staff outlined the commission’s enforcement of fair lending laws and recommended changes to the HMDA’s Regulation C. Credit unions that engage in residential mortgage lending must comply with Regulation C. The FTC staff recommended that the board expand the number of mortgage lenders required to report loan data by modifying the criteria for determining who must report. These changes would not be overly burdensome to lenders and would provide regulators with better data to enforce fair lending laws, FTC staff said. Staff also suggested that the board require lenders to report on additional types of loans, such as reverse mortgages and home equity lines of credit, and to report additional data for reported loans. Also, the FTC staff recommended that the board make the mortgage data available to the public and useful to researchers while still protecting mortgage applicants’ privacy …

FACTA rules to apply to state CUs on Dec. 31

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WASHINGTON (12/23/10)—State-chartered credit unions will officially become subject to Federal Trade Commission enforcement of the Fair and Accurate Credit Transactions Act (FACTA) red flag rules on Dec. 31. The FACTA red flag rules require entities with “covered accounts” to establish and implement identify theft prevention measures. Federal credit unions and banks have been subject to similar red flag rules since late 2008, but the FTC repeatedly postponed the enforcement of its red flag rules to allow Congress to reconsider whether FACTA required too many businesses to adopt red flag identity protection programs. Among many opponents of the broad language of the 2003 law, the American Bar Association had sued the FTC for its interpretation of who is a “creditor” subject to its FACTA rules. President Barack Obama signed “The Red Flag Program Clarification Act” on Dec. 18 which eliminated a number of businesses that otherwise had to comply. The Credit Union National Association’s (CUNA) Senior Vice President for Compliance Kathy Thompson noted that state chartered credit unions remain subject to the FTC’s rules, and that the FTC will begin enforcement on January 1, 2011. “Many state credit union regulators for some time have been reviewing their state chartered credit unions’ identity theft programs in light of the FACTA requirements, and the FTC announced last May that it was postponing enforcement only through the end of 2010 to give Congress an opportunity to act,” she added. “I don’t think that any credit union will be scrambling to have a compliant red-flag ID theft program in place,” said Thompson. The red-flag rule aims to avert instances of identity theft by requiring financial institutions and entities not excluded by the new law to implement programs that identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. Consumer accounts or other accounts that financial institutions find to have a risk of identity theft are covered by the rule.

N.C.s McHenry to chair House TARP subcommittee

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WASHINGTON (12/22/10)--Rep. Patrick McHenry (R-N.C.) has been named to chair the new House Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs, beginning in January. McHenry was recently named chair by incoming House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) McHenry in a statement said that he looks forward to leading the subcommittee’s charge “to bring transparency, openness, and solutions for the challenges facing our financial system.” Issa in the same release said that McHenry would help lead the committee’s interface with the financial services industry and “ensure that both government and private enterprises are held accountable for how they spend taxpayer dollars.” McHenry, who has served as a congressman since 2004, is a member of the House Financial Services Committee. The North Carolina Credit Union League’s Senior Vice President of Association Services Dan Schline told NewsNow that McHenry has maintained a good relationship with credit unions both statewide and in his district, which includes Hickory, N.C. and other towns near Charlotte. “He’s certainly always accessible and willing to listen to our thoughts on issues of interest to credit unions,” Schline added.

Treasury finalizes iGo Directi deadline

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WASHINGTON (12/22/10)--The U.S. Treasury this week finalized a rule that will require all federal benefits that are filed on or after March 1, 2011 to be paid electronically via the Go Direct program. Those that currently receive paper checks will need to switch to direct deposit by March 1, 2013, the Treasury added. The Treasury has also created a Go Direct public education campaign to provide information on the benefit payment changes and to inform recipients of how they can change to direct deposit via an online portal or a toll-free helpline. Treasury Fiscal Assistant Secretary Richard Gregg in a release noted that eight in 10 federal benefit recipients already use direct deposit. “Now millions of additional retirees, veterans and other Americans will also receive their money in the safest, most reliable way--electronically," he added. The change to electronic benefit distribution “will provide significant savings to American taxpayers who will no longer incur the annual $120 million price tag associated with paper checks and will save Social Security $1 billion over the next 10 years," Gregg added. Social Security, Supplemental Security Income, Veterans Affairs, Railroad Retirement Board, Office of Personnel Management benefits and other non-tax payments will be made via the Go Direct program. The Treasury has also promoted Go Direct as one of many ways that senior citizens and other individuals can protect their money from financial crimes such as check theft and fraud. For the Treasury’s release, use the resource link.

Bachus Wasserman Schultz join GAC lineup

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WASHINGTON (12/22/10)--Just weeks after becoming House Financial Services Committee chairman when the 112th Congress convenes, Rep. Spencer Bachus (R-Ala.) will be among the speakers addressing the thousands of credit union representatives in attendance at the Credit Union National Association’s (CUNA) 2011 Governmental Affairs Conference. Bachus succeeds Rep. Barney Frank (D-Mass.) as head of the committee as the majority in the House changes to Republicans after the 2010 midterm elections. Bachus has announced new financial services committee members and other committee leadership appointees in recent weeks. A review of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and discussion of the Dodd-Frank regulatory reform bill are among the issues that Bachus plans to take on when he takes over early next year. Bachus has said that he and his fellow new committee leaders are “ready to hit the ground running." Bachus, who joined the House of Representatives in 1993 and has served as the ranking Republican on the Financial Services Committee for the past four years, has called credit unions "an integral part of our financial system" and has praised credit unions for their pro-consumer work and their straightforward credit practices. Rep. Debbie Wasserman Schultz (D-Fla.) also has joined the GAC’s lineup of speakers. Schultz was one of 105 House members who earlier this year urged the financial regulatory reform conference committee to keep language on interchange fees out of the final comprehensive financial regulatory legislative package. The GAC will open with a performance by classic rockers Three Dog Night, and will also feature a keynote speech by "Miracle on the Hudson" pilot Captain Chesley B. "Sully" Sullenberger III and political point-counterpoint between conservative commentator Mary Matalin and liberal Web leader Arianna Huffington. Political pundits and co-authors of The New York Times No. 1 best-seller "Game Change: Obama and the Clintons, Palin and McCain, and the Race of a Lifetime" Mark Halperin and John Heilemann, will also discuss their book, the historic 2008 and nascent 2012 presidential campaigns, and other pressing political topics during their GAC appearance. The GAC begins on Feb. 27. in Washington, D.C. To register for this year's GAC, use the resource link.

Inside Washington (12/21/2010)

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* WASHINGTON (12/22/10)--Large financial firms could be forced to award more than half of their executives’ pay as stock or deferred compensation, under a proposal under consideration by U.S. regulators (Reuters Dec. 21). The move would discourage the excessive risk-taking by giant companies that contributed to the financial crisis (The Wall St. Journal Dec. 21). The discussions among the Federal Reserve, Securities and Exchange Commission and other federal banking agencies are a result of the Dodd-Frank financial-overhaul law, which directs regulators to ban any bonus plan that “encourages inappropriate risks” at financial firms with more than $1 billion in assets …

Inside Washington (12/20/2010)

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* WASHINGTON (12/21/10)--Under the Federal Reserve’s proposed debit rules it is exclusivity arrangements rather than interchange pricing that remains unresolved for payment networks, including market leaders Visa Inc. and MasterCard Inc. When the Fed proposed a 12-cent limit on debit interchange fees Thursday, it said it seeks comments on two options that would create exclusive arrangements between issuers and networks. Under either arrangement, smaller PIN-debit networks would benefit at the expense of Visa and MasterCard. Jason Kupferberg, an analyst with UBS Securities, said observers thought that the Fed’s proposal would bring more clarity on exclusivity than on interchange, but just the opposite has occurred (American BankerDec. 20). Most of Visa’s and MasterCard’s revenue is derived from network fees that issuers pay them to carry their brands and process their transactions. “The proposed routing and exclusivity alternatives put retailer profits ahead of consumer protection, choice and convenience,” Visa said in press release issued Thursday … * WASHINGTON (12/21/10)--The Securities and Exchange Commission (SEC) has broadened its investigation into the mortgage industry, inquiring with big banks about the early stages of the securitization process of home loans. The SEC issued subpoenas to Bank of America Corp, Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co., the sources said. The SEC’s inquiry began earlier this year when it looked into the foreclosure practices of big banks following allegations that mortgage servicers used inadequate paperwork to evict delinquent borrowers from their homes. Now the SEC is investigating how those mortgages were packaged for sale to investors …

Prepaid debit cards could also see new regs

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WASHINGTON (12/21/10)--Legislation that would eliminate many hidden fees associated with prepaid debit cards and increase transparency regarding prepaid debit card fees was introduced late last week by Sen. Robert Menendez (D-N.J.) The legislation, which was co-sponsored by Sens. Richard Durbin (D-Ill.) and Jeff Merkley (D-Ore.) would focus on reloadable plastic cards that are often used as substitutes for checking accounts, debit cards, and credit cards. According to a release, the legislation would require full fee disclosures at the time of purchase, including a wallet-sized summary of all fees and a toll-free telephone number for customer service. The legislation would also ban the producers of these cards from charging overdraft fees, balance inquiry fees, customer service fees, inactivity fees, account closure fees, and other types of fees. Consumers would also be protected against loss or theft, and would have any funds attached to these cards backed by insurance in the event that the card provider goes bankrupt. The Consumer Financial Protection Bureau and the Federal Deposit Insurance Corp. would issue regulations within nine months of the legislation’s enactment. While the exact number that would be impacted isn’t known at this time, the legislation could impact credit unions, Credit Union National Association (CUNA) Senior Vice President for Compliance Kathy Thompson said. CUNA expects similar legislation to be re-introduced in the 112th Congress, and CUNA will meet with the legislation's sponsors to discuss their concerns. For the full release, use the resource link.

Rep. Frank shares interchange concerns for CUs

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WASHINGTON (12/21/10)--The implementation of still-pending interchange regulations, if not properly crafted, “may have unintended consequences” for credit unions and consumers, Rep. Barney Frank (D-Mass.) recently said in a letter to the Federal Reserve. Limitations on network restrictions, which the legislation has promoted for inclusion under the regulations, should not unduly increase costs for credit unions, community banks or government card programs, Frank added. He also urged the Fed to “ensure that any entity offering debit transaction routing services maintains strong consumer protections, including privacy, data security and fraud protections.” The Credit Union National Association (CUNA) also expressed its concerns to the Fed last week, with President/CEO Bill Cheney saying that the loss of interchange fee income for small issuers and the costs of having to belong to more payment networks will have a "horrendous impact" on credit unions that offer debit cards, as well as their ability to build net worth. The Fed proposal, which was released last Thursday, would cap debit card interchange fees that are paid by merchants to card issuers at 12 cents per transaction. Issuers with under $10 billion in assets would be exempt from the interchange changes. However, Cheney expressed skepticism at the effectiveness of the $10 billion exemption cap, noting that there is nothing in the Fed’s proposal that creates an enforcement mechanism to protect small issuers. The Fed has left its proposal open for public comment until Feb. 22, and CUNA continues to develop a more comprehensive comment letter.

Senate focus lands on MBLs in weekend session

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WASHINGTON (12/20/10)—Even as the Senate legislative calendar is compressed with the end of the year fast approaching, and is dominated by such urgent issues as deciding the fate of Bush-era tax cuts, credit union issues still came front and center of lawmakers’ attention this weekend. Sen. Mark Udall (D-Colo.) Sunday requested unanimous consent on the Senate floor for his bill, the Small Business Lending Enhancement Act. That bill would increase the member business lending (MBL) cap to 27.5% of a credit union’s assets, up from the current 12.25%. Under the unanimous consent procedure, it takes just one senator’s objection—even if just objecting to the procedure itself--to derail the legislation’s immediate progress. And that objection came from Sen. Richard Shelby (R-Ala.). However, Udall’s floor statement in favor of the legislation once again underscored for his Senate colleagues the economic benefits the MBL cap lift would provide. Udall noted, “The Credit Union National Association (CUNA) estimates that these sensible reforms would increase small-business lending by $10 billion within the first year of enactment, with an increase of nearly $200 million in my home state of Colorado alone, just as an example. “This new access to credit is also expected to produce over 100,000 jobs nationwide. To me, it sounds like a pro-business, pro-jobs policy that we can all agree on.” The senator from Colorado also reminded that the MBL increase has the backing of the Senate Banking Committee, the U.S. Treasury Department and the National Credit Union Administration. He added, “The National Small Business Association, the National Association of Realtors, and even the conservative Americans for Tax Reform, among others, have gotten behind our efforts and they’re urging us to pass this important provision.” CUNA commended Udall for his effort to win passage of the amendment to raise the statutory cap before Congress adjourns for the year—likely early. “His willingness to try again for passage in the final days of this Congress is indicative of how strongly he believes in the good his amendment would do not only for credit unions but for the nation’s small businesses and the economy as a whole,” CUNA President/CEO Bill Cheney said Sunday. Cheney said CUNA shares Udall’s expressed disappointment that an objection was raised preventing a Senate floor vote. “We will continue to advocate for raising the cap given small businesses’ pressing need for affordable capital and the nation’s need for measures that will create jobs without imposing costs on taxpayers or swelling the federal deficit. This fight is not over.” Although the Senate and House are poised to recess for the year, when the 112th Congress convenes in January capital reform will CUNA’s top priority while the trade group continues to work on MBL with key supporters, Cheney vowed.

Friday sees closing of Ariz. CU

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ALEXANDRIA, Va. (12/20/10)--AEA FCU, Yuma, Arizona, was placed into conservatorship because of a declining financial condition and the National Credit Union Administration (NCUA) assumed control of its operations Friday. In an announcement late in the day, the NCUA said the credit union was not adequately capitalized under standards set forth in the Federal Credit Act, and had earnings “insufficient to enable it to continue under present management.” The agency said the credit union’s difficulties sprang from problems in its loan portfolio. The agency announcement reminded that the decision to conserve a credit union enables the institution to continue normal operations with “expert management in place correcting previous service and operational weaknesses.” Service to AEA’s 49,130 members shall continue uninterrupted. The credit union has assets of $309 million, and provides financial service to people living in Yuma and La Paz counties.

Senate bill addresses NCUA resolution tools some net worth

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WASHINGTON (12/20/10)—A “technical corrections bill” passed by the Senate late last week could give the National Credit Union Administration (NCUA) new tools to deal with the corporate credit union situation and troubled credit unions. The bill (S. 4036) also orders a government study of the NCUA’s supervision of the corporate credit unions, as well as its implementation of prompt corrective action (PCA) rules for both corporate and natural person credit unions. The new NCUA resolutions tools would be created by S. 4036 through changes to the Federal Credit Union Act. If enacted, the bill would permit the NCUA to make payments to the Temporary Corporate Credit Union Stabilization Fund without borrowing from the U.S. Treasury—a step the NCUA seeks as a means to hold down costs to credit unions. Another provision of the legislation would give credit unions the ability to count 208 assistance as net worth for the purposes of prompt corrective action. would allow section 208 assistance provided by the NCUSIF to a credit union to count toward the credit union’s net worth, at the agency’s discretion. A third provision clarifies that the equity ratio of the share insurance fund—the National Credit Union Share Insurance Fund (NCUSIF)--is based solely on the unconsolidated financial statements of the NCUSIF. The study ordered by the bill would be conducted by the Comptroller General of the U.S. The Comptroller General would be charged with the following responsibilities:
* Determine the reasons for the failures of any corporate credit union since 2008; * Evaluate the adequacy of the NCUA’s response to the failures of the corporates, including how taxpayers were protected, how moral hazards were avoided, costs were minimized in the resolution process, and “the ability of insured credit union to bear any assessments levied to cover such costs”; * Evaluate, as mentioned above, the effectiveness of PCA implementation; and * Examine whether the agency has been effective in implementing recommendation made by its Inspector General contained in Material Loss Review Reports, or the adequacy of the NCUA’s reasons for not doing so.
The Comptroller General is ordered to report back to the Senate Banking Committee and House Financial Services Committee within six months after enactment. The bill is expected to pass the House with expediency and then will be sent to the President to be signed into law.

Inside Washington (12/17/2010)

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* WASHINGTON (12/20/10)--The president of the Consumers Bankers Association accused the Federal Reserve Board of price fixing in its proposal to restrict interchange fees on debit cards “Regulating interchange fees is price fixing and has no role in our free market economy. Presented as a pro-consumer provision to lower costs, the most likely result will be an increase in the cost of financial services for American consumers and the elimination of benefits and efficiencies valued by many debit card users,” CBA President Richard Hunt said in a statement. “The Fed’s proposal “will severely restrict the ability of debit card issuers to recoup their costs and earn a fair rate of return. This will have a great effect on banks of all sizes--small and large,” Hunt added. See related News Now story, “CUNA: Interchange rule confirms ‘worst fears’ about CU treatment” … * WASHINGTON (12/20/10)--The Federal Deposit Insurance Corp. (FDIC) Thursday announced the appointment of Jim Wigand as the director of the new Office of Complex Financial Institutions (CFI). Since 1997, Wigand has served as the deputy director for franchise and asset marketing in the division of resolutions and receiverships, where he oversaw the resolution of failing insured financial institutions and the sale of their assets. The CFI was created to assist the FDIC in carrying out its new responsibilities as outlined in the Dodd-Frank Wall Street Reform and Consumer Protection Act. It is responsible for the oversight of bank holding companies with more than $100 billion in assets and non-bank financial companies designated as systemically important by the new Financial Stability Oversight Council. The CFI carries out the FDIC’s joint responsibility with the Federal Reserve Board to oversee resolution plans for large bank and nonbank institutions. The CFI also is charged with implementing the FDIC's new authority for the orderly liquidations of bank holding companies and non-bank financial companies that fail … * WASHINGTON (12/20/10)--The Internal Revenue Service (IRS) Friday released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011. Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage-point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2% to 4.2% of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits. The new law also maintains the income-tax rates that have been in effect in recent years. Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, said the IRS. Notice 1036, released Friday, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. For Notice 1036, use the link ...

CUNA to Fed Interchange rule confirms CU fears

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WASHINGTON (12/20/10)—The Federal Reserve’s proposed rule on interchange fees, which was introduced late last week, confirms the Credit Union National Association’s (CUNA) “worst fears about the inadequacies of the purported protections” for credit unions and other smaller issuers of debit cards, CUNA President/CEO Bill Cheney has said. The Fed has left its proposal open for public comment until Feb. 22, and Cheney quickly responded to the interchange announcement via a Friday letter to Fed Chairman Ben Bernanke summarizing CUNA’s initial concerns. A more detailed comment letter is also under development. The Fed proposal could cap debit card interchange fees that are paid by merchants to card issuers at 12 cents per transaction. Issuers with under $10 billion in assets would be exempt from the interchange changes. (See related Dec. 17 story: Fed offers two plans for interchange fees) However, Cheney has cast doubt on the effectiveness of the proposed asset limit, noting the lack of any enforcement mechanism to protect small issuers, which are supposed to be exempted from the law’s provisions. The loss of interchange fee income for small issuers and the costs of having to belong to more payment networks will have a “horrendous impact” on credit unions that offer debit cards, as well as their ability to build net worth, Cheney added. Cheney also noted that the complex routing provisions contained in the proposal would burden smaller issuers with even greater costs. “Because of statutory requirements, credit unions can only build net worth (capital) from retained earnings,” he wrote. “Any significant reduction in interchange income will require higher fees paid by consumers. Thus, consumers will be left paying for the bonanza to merchants--which is not what Congress intended.”

Average mortgage rates reach seven-month high

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WASHINGTON (12/20/10)--The average rate on both 30-year and 15-year fixed-rate mortgages continued to rise last week, posting double digit basis point increases. As reported in Freddie Mac's mortgage rate survey for the week ended Dec. 16, both mortgage rates continued to rise for the fifth week, with 30-year mortgages averaging 4.83% and 15-year mortgages averaging 4.17%. Those mortgage rates averaged 4.61% and 3.96% during the week ended Dec. 9, respectively. Both five-year and one-year adjustable rate mortgages remained low, with average rates of 3.77% and 3.35% reported. Freddie Mac Vice President/Chief Economist Frank Nothaft noted that the mortgage rate averages were the highest reported since March. For the full release, use the resource link.

CAMEL 4-5 shares down significantly from peak

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ALEXANDRIA, Va. (12/17/10)—The level of shares represented by low-ranked CAMEL 4 and 5 credit unions has declined significantly since its peak in May when those institutions held 6.2% of total shares. The monthly National Credit Union Share Insurance Fund (NCUSIF) report for November showed that while, at 372, there are 21 more CAMEL 4 and 5 credit unions than in May, they represent 5.1% of total shares. The NCUSIF report, made public at the National Credit Union Administration open board meeting yesterday, also showed no share insurance losses the month. In addition, the NCUSIF maintained the equity ratio of 1.29% from the previous month. NCUA staff also noted that there are currently 1,792 CAMEL 3 credit unions, which represent 18.6% of insured shares. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent 23.7% of insured shares. The NCUA during the meeting also made some insurance-related changes, proposing that the agency temporarily provide full NCUSIF coverage for non-interest-bearing transaction accounts held by members or depositors. The insurance coverage will be separate from, and in addition to, other coverage provided by the NCUA’s existing share insurance rules, the agency said. The Dodd-Frank Act, which was enacted earlier this year, included a provision that provides temporary unlimited Federal Deposit Insurance Corporation (FDIC) and NCUSIF insurance coverage for non-interest and non-dividend bearing transaction accounts. This special insurance came into effect on July 21, and runs through December 31, 2012. The NCUA proposal would require credit unions that offer these non-interest/non-dividend transaction accounts to disclose the temporary insurance coverage to their members. However, these disclosures would not be required until later in 2011. The NCUA also moved to add Chief Economist John Worth to their NCUSIF Investment Committee. Worth joins Office of Examination and Insurance Director Melinda Love, Chief Financial Officer Mary Ann Woodson, and Office of Capital Markets Director Owen Cole on the committee.

Fed offers two plans for interchange fees

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WASHINGTON (12/17/10)--The Federal Reserve on Thursday issued for public comment its proposed rules addressing interchange fees. The proposal, which was required by the recently enacted Dodd-Frank financial regulatory reform package, will allow the Fed to set interchange fees. Card issuers with under $10 billion in assets would be exempt from the proposed rule changes. This exemption covers most, but not all, credit unions. Government administered debit cards would be exempt from interchange rules. The Fed has offered dueling frameworks for assessing the interchange fees. One framework would provide issuers with a safe harbor of 7 cents per transaction, and sets a maximum interchange fee cap of 12 cents per transaction. An alternative framework would simply cap the maximum interchange fee at 12 cents per transaction. These safe harbors and/or caps would be reevaluated by the Fed every two years. The Fed included costs related to switching and data processing, but did not include fraud prevention costs in its interchange rate determination. The Fed did examine fraud costs, however. The proposal also does not require payment networks to establish a two-tiered system. Card issuers would be permitted to use interchange fee revenues to recover costs related to transaction authorization, clearance, and settlement via interchange fees. However, income from the interchange fees would not be used to cover costs related to debit card production or distribution, general deposit accounts, overhead, and cardholder rewards programs. During the board meeting, Fed officials said that they could not predict how the new interchange rules, once implemented, would impact the finances of consumers or the competitive landscape for card issuers. Fed officials said it was "unlikely" that the Fed would release its final rule by the statutory implementation date of April 21. The proposal will remain out for public comment until Feb. 22. The Credit Union National Association (CUNA) has estimated that up to 67% of credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenues by 40%. CUNA President/CEO Bill Cheney on Thursday expressed strong concern about the interchange proposals potential cost to credit unions and their members. (See related story: More time, consideration needed on interchange rule: CUNA)

More time consideration needed on interchange CUNA

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WASHINGTON (12/17/10)—Addressing reporters yesterday in a national press teleconference, Credit Union National Association (CUNA) President/CEO Bill Cheney expressed strong concern about the potential cost to credit unions and their members of the Federal Reserve Board’s just-issued proposal to set debit interchange fees under the recently enacted Dodd-Frank financial reform law. Cheney took part in yesterday’s press call along with Jeff Tassey, executive director of the Electronic Payments Coalition, whose members include CUNA. The CUNA leader told reporters from national news publications, including The Wall Street Journal, USA Today and The Washington Post, that CUNA is very concerned about how the Fed plan could drive up transaction costs to consumers, a concern he said is noted by the Fed’s own document. Cheney said that CUNA acknowledges that the Fed was in a “difficult if not impossible position,” being charged under the law with setting interchange fees that would reflect “reasonable cost,” without being allowed to consider all issuers’ costs. Key costs the Fed did not consider in setting its rate are the costs related to fraud prevention and the actual cost of fraud, Cheney explained. The Fed’s documentation indicates that it did look at fraud prevention costs, but did not include those costs in the rate that it set. Instead, the Fed only included costs related to switching and data processing, he noted. “However, fraud prevention costs are critical to financial institutions such as credit unions,” Cheney added. “As the former chief executive of a credit union that operated a debit card program, I can attest that fraud prevention – combined with the costs of fraud itself – is the primary cost of providing debit card programs for credit union members. Somebody is going to have to pay those costs: Merchants don’t, and the proposed Fed rate (of between 7 to 12 cents per transaction) won’t. If anybody is going to shield consumers from higher fees, it is credit unions – but, at some point, adjustments are going to have to be made by credit unions to account for these costs,” he said. Card issuers with under $10 billion in assets are exempt from the proposed debit fee restrictions of 7 to 12 cents per transaction. This exemption covers most, but not all, credit unions, but Cheney said CUNA is concerned that small issuers may be placed at a significant competitive disadvantage under a two-tier system. He noted the Fed has acknowledged the proposal’s routing provisions may well undermine the exemptions, and added that the Fed’s proposal does not provide any enforcement provisions that would effectively prevent merchants from turning away debit cards from credit unions or other smaller issuers at the point of sale. Cheney urged credit unions to weigh in with the Fed while the proposal is out for comment and said CUNA would be doing the same. CUNA has also urged the Fed to slow down the regulatory process and has noted that the law was passed without public hearings. Expressing similar reservations, 13 senators this week signed a letter to the Fed to express their serious concerns about the harmful impact of this rule on consumers and the American economy.

NCUA addresses low-income members CUs

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ALEXANDRIA, Va. 12/17/10)--The National Credit Union Administration (NCUA) approved for a sixty-day comment period a proposal that would permit federal credit unions to use “statistically valid” random samples of member income data to prove their low-income status to the agency. Specifically, the NCUA would allow credit unions to randomly draw sample data on member incomes from loan files or surveys. Currently, sample data must be actual income data that is drawn from a minimum of 50% of a credit union’s membership, plus one additional credit union member. The NCUA currently determines a credit union’s low-income status via the results of its own geo-coding software which uses census data to determine the average income of a membership area. The use of sampling is an alternative way to obtain low-income designation; geo-coding will still be employed in some instances. The financial status of individual members was also addressed during the meeting, with the NCUA making final an earlier proposal that would amend the definition of “low-income members” to clarify that for purposes of determining a LICU designation, the comparison of credit union data, whether individual or family income data, must be with statistical data for the same category. The status of an individual credit union was also addressed during the meeting, with the NCUA deciding to uphold a regional determination that Tri-State FCU would not be permitted to expand its field of membership to include members of a local YMCA. The Board determined that the requirements for common bond association had not been met by the Penn.-based credit union. For more on the NCUA meeting, use the resource link.

New rule spans fiduciary duties CU conversions

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ALEXANDRIA, Va. (12/17/10)—To help federal credit union directors better carry out their fiduciary duties, the National Credit Union Administration is, for the first time, adopting a formal requirement that those directors not only carry out their duties in good faith, but also have or gain an understanding of “basic finance and accounting practices.” The rule, adopted by the agency at its Thursday open board meeting, also strips federal credit unions of the ability to indemnify officials or employees for liability associated with misconduct that is “grossly negligent, reckless, or willful” in connection with a decision that affects the fundamental rights of the credit union’s members. This rule on indemnification only applies to decisions affecting members’ “fundamental rights”--such as in a merger or conversion--and also only applies if a court has determined that the official or employee acted in a grossly negligent or reckless manner, or willfully engaged in misconduct. A separate proposed rule on indemnification that applies in more situations has not yet been finalized by the agency. Procedural and substantive requirements for converting a credit union to a bank through a merger are also addressed by the rule change. The revisions are designed to better protect the secrecy and integrity of the voting process and include such things as a new definition of the term “secret ballot.” The new definition is intended to prohibit credit union employees from helping members complete ballots or handling completed ballots. The new requirements, effective 30 days after publication in the Federal Register, applies to direct mergers as well as transactions where a credit union first converts to a mutual savings bank (MSB) and then merges with another bank without ever operating as a stand-alone MSB. Finally, the proposed amendments to Parts 708a and 708b revise existing rules to enhance the secrecy and integrity of the voting process in MSB and insurance conversions and require additional disclosures to members about the costs and effects of charter conversion. Use the resource link below to see the 74-page final rule document.

Inside Washington (12/16/2010)

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* WASHINGTON (12/17/10)--The U.S. Department of the Treasury Wednesday announced the hiring of senior leadership for the Consumer Financial Protection Bureau (CFPB) implementation team. Current Ohio Attorney General Richard Cordray was selected to lead the agency’s enforcement division. Leonard Chanin will lead the rule-writing team and David Silberman will head the card markets division. Chanin most recently served as deputy director of the Federal Reserve Board’s Division of Consumer and Community Affairs. Silberman last served as general counsel and executive vice president of Kessler Financial Services. Federal credit unions under $10 billion in assets must comply with CFPB regulations, but exam and enforcement authorization for those rules remains with the National Credit Union Administration (NCUA). Credit unions with more than $10 billion in assets fall under CFPB purview, but their safety and soundness oversight remains with NCUA … * WASHINGTON (12/17/10)--Sen. Sheldon Whitehouse (D-R.I) said Wednesday that he will seek legislation to mandate that bankruptcy courts foster better communication between servicers and homeowners (American Banker 12/16/10). As the impetus for his proposal, Whitehouse, who is chairman of Senate Judiciary subcommittee, cited a bankruptcy loss-mitigation court program in his state that forces servicers to provide borrowers an opportunity to speak with their mortgage companies. Whitehouse said his proposal would not give judges the authority to reduce mortgage debt, but would require communication, which he said can be enough to prevent foreclosure … * WASHINGTON (12/17/10)--Treasury Secretary Timothy Geithner said Wednesday that although the housing market remains weak, the government continues to help as many eligible home owners as possible. Geithner’s comments before a congressional oversight committee came one day after a Treasury report indicated that the Home Affordable Modification Program (HAMP) fell well short of its stated goals. HAMP will prevent 700,000 to 800,000 foreclosures, after initial projections that it would prevent 3 million to four million foreclosures. Despite falling short of forecasts, Geithner said HAMP was a part of a strategy that left the financial system able to support, rather than impede, economic growth. “The economy as a whole has made substantial progress since the recession ended last year,” Geithner said. “Real GDP (gross domestic product) has risen for five straight quarters, and private sector firms have started to hire again. The housing market remains weak, but there are signs that it is beginning to stabilize.” Geithner said the Treasury is working to create a new housing credit and applying downward pressure to mortgage rates through agreements with Fannie Mae and Freddie Mac … * VIENNA, Va. (12/17/10)--The Financial Crimes Enforcement Network (FinCEN) assessed a $12,000 civil money penalty against Baltic Financial Services, Inc. of Montclair, N.J., for non-compliance with Bank Secrecy Act (BSA) registration requirements. FinCEN charges that the money transmitter that provides unlimited money transmission services to and from Latvia failed to maintain its registration with FinCEN as an MSB. FinCEN says money services business (MSB) registration--which must be renewed every two years--is a critical part of the government’s efforts against money laundering, terrorist financing, and other financial crimes. FinCEN’s claim says Baltic Financial, for most of the period between January 2005 and September 2010, failed to maintain its registration despite “actual knowledge” of the registration obligation. Furthermore, FinCEN states, Baltic failed to respond in a timely manner when “repeatedly reminded” that its registration with FinCEN lapsed, and continued to engage in money transmission without the benefit of registering under the BSA. There is no fee associated with MSB registration …

NCUA asks Corp. CUs to speed biz plan development

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ALEXANDRIA, Va. (12/16/10)--The National Credit Union Administration (NCUA) in a letter encouraged corporate credit unions to submit their business plans “as early as possible,” and provided a timeline and other information “designed to enable corporate and natural person credit unions to undergo a smooth transition and ensure no disruption in member services” as they transition into an altered corporate credit union system. In a letter to credit unions sent this week, the NCUA provided an outline of the actions that credit unions will need to take due to the new rule, and the dates by which many of these actions will need to be completed. One key date is March 31, the date by which undercapitalized corporates must provide recapitalization plans and business plans to their members. The NCUA in the letter said that district examiners will work with corporates in some cases to obtain an early understanding of their proposed strategic and capital compliance plans to help expedite the review and approval process. The letter to credit unions and a fact sheet also specifically address corporate capital escrow accounts, capital priority and conversion, the priority of legacy assets, corporate chartering and merging, and various credit union service organization (CUSO) activities. One notable addition is a to-be-established process that will require corporates to maintain escrow accounts for accumulated capital. “If a corporate raises enough capital by Sept. 30, 2011 to meet NCUA’s new capital standards, which take effect Oct. 20, 2011, the pledged capital in escrow will be converted to regulatory capital. However, if a corporate’s capital subscription falls short by that Oct. 20 regulatory compliance deadline, all pledged capital in escrow will be returned to members,” the NCUA said. For the NCUA documents, use the resource links.

Sen. Inouye is latest to back MBL cap increase

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WASHINGTON (12/16/10)—Sen. Daniel Inouye (D-Hawaii) this week became the latest backer of Sen. Mark Udall’s (D-Colo.) S. 2919, the Small Business Lending Enhancement Act of 2009. Inouye joins Sens. Charles Schumer (D-N.Y.), Joe Lieberman (I-Conn.), Olympia Snowe (R-Maine), Barbara Boxer (D-Calif.), Susan Collins (R-Maine), Kirsten Gillibrand (D-N.Y.), Michael Bennet (D-Colo.), Bernie Sanders (I-Vt.), Arlen Specter (D-Pa.), Harry Reid (D-Nev.), Bill Nelson (D-Fla.), Ron Wyden (D-Ore.), and Sherrod Brown (D-Ohio) as cosponsors of S. 2919. Brown signed on to back the member business lending (MBL) legislation late last month. Udall’s bill, which was introduced late last year, would increase the cap on credit union member business lending to 25% of a credit union's total assets and raise the de minimis loan threshold from $50,000 to $250,000. Inouye also backed the MBL legislation, which came in the form of an amendment, earlier this year. The Credit Union National Association (CUNA) has estimated that expanding the capacity of credit unions to make business loans could result in $10 billion in new business loans through credit unions and at least 108,000 new jobs in the first year after enactment, with no additional costs to taxpayers. With this session of Congress likely to wrap up this week, CUNA continues to seek out a vehicle for the MBL legislation. That vehicle could come in next year’s 112th Congress if the legislation is not moved in the current lame duck session. CUNA Senior Vice President of Legislative Affairs John Magill has said that the MBL legislation could fit in to the House agenda if Republicans follow up on campaign promises of reducing government spending and helping small businesses create jobs.

Gift cards as meeting incentive NCUA says yes but...

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ALEXANDRIA, Va. (12/16/10)—In a legal opinion released this week, the National Credit Union Administration (NCUA) advised a federal credit union that sought to increase participation at its yearly meeting by giving $25 gift cards to members in attendance. According to the letter, the credit union believed that the gift card giveaways could increase meeting participation at a lower cost than similar giveaways such as free meals. The NCUA found that the gift card giveaway meets a federal credit union’s incidental powers authority, which holds that certain activities are permissible when it is “convenient or useful” to the performance of one of the credit union’s express powers. However, the NCUA said, “while the use of a gift card incentive is generally permissible under a federal credit union's incidental powers authority, a gift card incentive may be objectionable on safety and soundness or corporate waste grounds. “Any incentive offered by a federal credit union to increase participation at its annual meeting must be reasonable,” the NCUA added. The incentive should not be used to influence the outcome of a vote, if there is a vote held during the meeting, the NCUA added. The NCUA cited another credit union’s use of a prize raffle as evidence that the gift card giveaway would be permissible, However, the NCUA added, while the final cost of the raffle was determined in advance, the cost of the gift card giveaway may be less predictable. Specifically, the credit union cannot predict how many members will end up attending the annual meeting. In light of this potential cost variability, it is up to the credit union’s examiner and the NCUA’s regional director “to determine if the proposed $25 gift card incentive is objectionable on safety and soundness or corporate waste grounds,” the NCUA said. For the full letter, use the resource link.

Ohio league NCUA should revisit 2011 budget

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ALEXANDRIA, Va. (12/16/10)—The National Credit Union Administration (NCUA) should revisit its 2011 budget and “adjust it to reflect the difficult prioritization and fiscal restraint required of all organizations in this economy,” Ohio Credit Union League President Paul Mercer said in a recent letter to NCUA Chairman Debbie Matz. While Mercer in his letter noted that there are several ways in which the NCUA serves credit unions and their members well, the NCUA’s budget process “is not among them.” Mercer specifically criticized the NCUA for denying credit union professionals a voice in the budgetary process, a move that he speculated was taken to “facilitate the huge run up in staff and spending.” The NCUA’s budget, which was approved last month, represents a $25 million increase over the NCUA’s 2010 budget. The 2011 budget dedicates $7 million to pay and benefit increases and $750,000 to enhanced examination and supervisory programs. The NCUA announced this spending increase with little regard for current employment conditions, “the shift toward fiscal restraint by the Obama administration, and the growing micromanagement of credit union spending by NCUA examiners,” the letter said. Mercer in his letter noted that the NCUA’s total budget has increased by nearly $70 million since 2008, a 42% increase. The NCUA has also approved three consecutive budgets with yearly increases exceeding 12%, has added 244 full-time positions, and increased its salary/benefit spending by $44.8 million during that same period. The letter suggested that the NCUA emphasize increasing its own performance over increasing spending, develop ways to spread out the financial burdens that NCUA costs and other related costs place on credit unions, and roll back NCUA spending to pre-2009 levels within the next few years. Also this week, the Federal Deposit Insurance Corporation (FDIC) announced that it is slightly reducing its 2011 budget. However, the FDIC is also aiming for a 2% reserve ratio, which is higher than the NCUA’s targeted reserve ratio of 1.3%. Credit Union National Association President/CEO Bill Cheney has also questioned the NCUA’s 2011 budget in a letter to Matz, expressing CUNA’s concern about the size of the agency’s recently approved 2011 budget increase and employee pay raises. CUNA will continue to press the NCUA to re-evaluate its budget priorities and take steps to bring down its expenditures, Cheney added.

CUs can qualify for two SBA initiatives

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WASHINGTON (12/16/10)—Qualified credit unions and other lenders will soon have two new Small Business Administration (SBA) programs to back their loans to small businesses in certain markets. The SBA announced two initiatives Wednesday: the Small Loan Advantage and Community Advantage programs. They are aimed at increasing the number of lower-dollar SBA 7(a) loans going to small businesses and entrepreneurs in underserved communities, according to an SBA announcement. Credit unions may qualify to be SBA 7(a) lenders. The SBA’s most popular loan product--the 7(a) government-guaranteed loans--can be used for variety of general business purposes, including working capital and purchases of equipment and real estate. The agency said both Small Loan Advantage and Community Advantage will offer a streamlined application process for SBA-guaranteed 7(a) loans up to $250,000. The loans will come with the regular 7(a) government guarantee: 85% for loans up to $150,000 and 75% for those greater than $150,000. In conjunction with the implementation of these two new Advantage loan initiatives by March 15, the agency will end its existing Community Express pilot loan program on April 30. SBA Administrator Karen Mills Wednesday also named Catherine L. Hughes, chairperson and founder of Radio One, Inc. and a former SBA borrower, to chair the agency’s new Advisory Council on Underserved Communities. During the next few weeks, the SBA will accept nominations for the 20 members who will serve on the panel. It is anticipated that members will reflect a variety of key sectors, including business owners, banking and finance, community development, nonprofit and academia. Member nominations can be emailed to underservedcouncil@sba.gov.

Inside Washington (12/15/2010)

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*WASHINGTON (12/16/10)—Federal banks and thrift regulators announced new rules to expand the scope transactions that qualify for Community Reinvestment Act (CRA) rule consideration. The final rule, substantially similar to a proposal issued for comment in June, is intended to provide additional support to communities affected by high foreclosure levels. It encourages banks and thrifts to support eligible development activities in areas designated under the Neighborhood Stabilization Program (NSP) administered by the U.S. Department of Housing and Urban Development (HUD). Under the NSP, HUD has provided funds to state and local governments and nonprofit organizations for the purchase and redevelopment of abandoned and foreclosed properties. The new rule encourages depository institutions to make loans and investments, and provide services to support NSP activities in areas with HUD-approved plans. The rule becomes effective 30 days after its publication in the Federal Register Credit unions do not fall under CRA ... * WASHINGTON (12/16/10)--Rep. Randy Neugebauer (R-Texas), incoming chair of the House Financial Services Oversight Subcommittee, yesterday expressed “serious concern” regarding recent media reports that the Obama Administration is pressuring Fannie Mae and Freddie Mac to begin writing down mortgage principal to qualify underwater borrowers for lower-rate Federal Housing Administration (FHA) mortgages. In a letter to Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), Neugebauer asked for details and justification as to why Fannie and Freddie’s participation in the loan modification program would be in the best interest of taxpayers. “It is the responsibility of Congress and FHFA to ensure that taxpayer dollars are being spent in the most prudent manner,” Neugebauer wrote. “It appears that writing down loan principal for homeowners who are current on their mortgages simply because they may walk away from their homes does not fulfill our obligation to protect U.S. taxpayers” … * WASHINGTON (12/16/10)--Citing an agricultural sector that is susceptible to shocks from a number of sources, including volatile commodity prices, the Federal Deposit Insurance Corp. (FDIC) urged institutions to exercise prudent credit risk management practices. In a letter to banks, the FDIC said institutions should place a strong emphasis on borrower cash flow and repayment capacity without undue reliance on collateral. The agency also advised banks not to place undue reliance on cyclical factors such as appreciation of land prices when making credit decisions. “Institutions should be sensitive to evidence of speculation in agricultural land prices or commodities that are influencing the market and remain focused on repayment ability and borrower underwriting,” the letter said … * WASHINGTON (12/16/10)--The Senate Banking Committee approved President Barack Obama's nominee, Joseph Smith, as director of the Federal Housing Finance Agency by a vote of 16 to 6 on Tuesday (American Banker Dec. 15). Smith’s nomination still requires full Senate approval. Smith currently serves as the North Carolina commissioner of banks. The committee approval was not without objection. Sen. Richard Shelby (R-Ala.) said Smith had been evasive in answering questions during his confirmation hearing. Three Republicans did support Smith’s nomination: Sen. Bob Bennett of Utah, Bob Corker of Tennessee and Kay Baily Hutchison of Texas … * WASHINGTON (12/16/10)--The Home Affordable Modification Program (HAMP) will fall far short of expectations, according to a report issued by the Treasury Department Tuesday. HAMP will prevent only 700,000 to 800,000 foreclosures, far fewer than the 3 million to 4 million foreclosures that Treasury initially aimed to stop, and well short of the 8 million to 13 million foreclosures expected by 2012. The report said HAMP--which provides financial incentives to borrowers, lenders and services to modify troubled loans—failed in part because mortgages were more complicated than a one-to-one relationship between borrower and lender. For example, the report said many servicers fail to participate in the program because the servicers’ interests may at times conflict with those of lenders and borrowers. Although lenders suffer losses in foreclosures, servicers can turn a substantial profit from foreclosure-related fees. HAMP’s failure led key policymakers to join the call for nationwide mortgage servicing standards (American Banker Dec. 15). Sen. Ted Kaufman (D-Del.) said regulation should be developed to eliminate any conflict of interest …

NCUA adds NCUSIF matter to todays agenda

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ALEXANDRIA, Va. (12/16/10)—Discussion of an addition to the National Credit Union Share Insurance Fund (NCUSIF) Investment Committee has been added to the agenda for the National Credit Union Administration’s (NCUA) December meeting, which will take place later today. A final rule addressing credit union mergers and conversions, as well as fiduciary duties and indemnification of credit union directors, will also be considered during the meeting, which will begin at 10 a.m. ET. Potential amendments to the NCUA's low income definition, rules that address the accuracy of advertising and insurance status notices, and a share-insurance related rule will also be discussed during the meeting. A closed meeting will follow tomorrow. Supervisory and personnel matters will be discussed during that meeting. For the full NCUA meeting schedule, use the resource link.

Salt Lake Citys Beehive liquidated

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ALEXANDRIA, VA. (12/15/10)—Beehive CU of Salt Lake City, Utah, was closed yesterday after the state credit union regulator appointed the National Credit Union Administration the liquidating agent. Beehive’s assets, liabilities and members were immediately purchased or assumed by and Security Service FCU of San Antonio, Texas. At its closure, Beehive had approximately $145 million in assets and served 18,000 members. Established in 1954 to serve employees of Utah state government, Beehive becomes the 18th federally insured credit union liquidation in 2010. The acquiring credit union, Security Service, will provide uninterrupted service for former Beehive members. Security Service is a full-service credit union and has $5.9 billion in assets and 785,000 members. Beehive was in the news early in 2009 when it announced it had abandoned plans to convert to a thrift charter because the credit union “sensed” that the country’s economic turmoil would make federal regulators reluctant to approve a new bank charter.

Cheney CUs back interchange caution

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WASHINGTON (12/15/10)—Credit Union National Association (CUNA) President/CEO Bill Cheney in a dailycaller.com blog post said that America’s credit unions stand with the 13 senators that recently urged the Federal Reserve to allow greater time for consideration of a pending interchange fee proposal. Sens. David Vitter (R-La.), Thomas Carper (D-Del.), Judd Gregg (R-N.H.), Chris Coons (D-Del.), Pat Roberts (R-Kan.), Evan Bayh (D-Ind.), Mark Warner (D-Va.), Richard Shelby (R-Ala.), Robert Bennett (R-Utah), Jon Tester (D-Mont.), Mike Crapo (R-Idaho), Sam Brownback (R-Kan.), and Bob Corker (R-Tehn.) cosigned a letter that encouraged the Fed to "take sufficient time to gather and analyze all of the relevant facts" before issuing a proposal, and to "ensure that consumer interests are protected" in any rate standards that are set. The Fed is set to consider proposed rules on debit interchange fees during a Thursday open board meeting. That meeting will take place at 2:30 p.m. ET. The interchange provisions, which were passed as part of comprehensive financial regulatory legislation earlier this year, direct the Fed to write rules on interchange fees for debit card purchases. While the interchange provision exempts small credit unions and other financial institutions with under $10 billion in assets from any interchange changes, these institutions would still be impacted directly by whatever rates are established. Cheney also underwscored the senators’ point that the rule change would result in additional bank fees for consumers, and noted that while the interchange fee amendment exempts financial institutions with under $10 billion in assets from the terms of the rule, smaller institutions would still need to adjust their card programs to remain competitive. Cheney in his post said that these lower prices “won’t pay the freight for credit unions of offering their members debit cards,” adding that the cost will likely fall on “the wallets and pockets of the nation’s consumers, including the 92 million who are members of credit unions.” The Daily Caller is an online news and opinion site co-founded by 20 year print and broadcast journalist Tucker Carlson. For the full post, use the resource link.

NCUA guides CUs on nondeposit investment sales

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ALEXANDRIA, Va. (12/15/10)—The National Credit Union Administration (NCUA) in a letter to credit unions has advised federal credit unions to carefully review the financial statements and capital adequacy of eligible third party brokers. The NCUA in letter No. 10-FCU-03 specifically encouraged credit unions to determine if a given broker can provide the necessary services and adequately supervise its sales representatives at the given credit union’s location. Credit unions should also perform background checks via direct references and Financial Industry Regulatory Authority (FINRA) checks, the NCUA added. Directors of federal credit unions should adopt written policies and procedures concerning third party brokerage arrangements to ensure compliance with applicable law and regulation and to ensure consistency with these guidelines, and credit unions should consider engaging legal counsel to evaluate their policies, procedures, and contractual agreements, the NCUA added. Federal credit unions should also outline, in writing, the duties and responsibilities of each party in a third party brokerage arrangement, according to the NCUA. The guidelines also address sales by CUSOs that are wholly or partly owned by federal credit unions, sales by so-called “dual employees” of both credit unions and third party brokers, and sales resulting from a federal credit union bringing a registered third party broker to its members through a networking agreement or other means. For the full guidance, use the resource link.

Inside Washington (12/14/2010)

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* WASHINGTON (12/15/10)--Mike Brosnan has been named the Office of the Comptroller of Currency’s (OCC) senior deputy comptroller for large bank supervision. He replaces Doug Roeder, who announced his retirement in October (The American Banker Dec. 14). Brosnan returned to the OCC in 2008 as deputy comptroller for large bank supervision after spending four years as a senior executive with MBNA and then Bank of America, after its purchase of MBNA. Also joining the OCC leadership team are Vance Price and Sally Belshaw, who will assume the duties of portfolio managers for large banks as deputy comptrollers for large bank supervision. Most recently Belshaw served as examiner-in-charge of HSBC’s national banks, and Price served as examiner-in-charge of Capital One Financial … * WASHINGTON (12/15/10)--Joe Smith, the Obama administration’s nominee for Federal Housing Finance Agency director, said there are advantages to having government play a continued role in mortgage markets, but the ultimate decision should be left to Congress (The American Banker Dec. 14). Smith, who is commissioner of banks in North Carolina, was responding in writing to more than two dozen questions from Sen. David Vitter (R-La.). Smith said the government could make a positive difference in mortgage market segments such as multifamily rental housing and first-time homebuyers. He did not offer details on the Obama administration’s plan for developing for the housing market … * WASHINGTON (12/15/10)--The Federal Reserve Board yesterday approved a proposed rule that requires that capital requirements for insured banks to serve as a floor for other capital requirements. The proposed rule, part of Section 171 of the Dodd-Frank Act known as the Collins Amendment, replaces transitional floors in the advanced approaches rule with permanent risk-based capital floors equal to the capital requirements computed using the agencies’ general risk-based capital rules. The Basel II recommendations on banking laws and regulations allow reductions in risk-based capital requirements below those for insured banks, and require modification to be in compliance with Section 171. The proposal also modifies the agencies’ general capital requirements so the Federal Reserve has additional flexibility to craft capital requirements for nonbanks it supervises as a result of determinations by the Financial Stability Oversight Council. Other provisions of the Collins Amendment will be addressed in subsequent rulemakings, the Fed said. Comments are due 60 days from publication in the Federal Register. For The Notice of Proposed Rulemaking PDF, use the link ...

FinCEN reports mortgage related SARs climb 7

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WASHINGTON (12/15/10)--The Financial Crimes Enforcement Network (FinCEN) has reported that suspicious activity reports (SARs) filed during the first six months of 2010 show that reported cases of mortgage loan fraud increased by 7% during that time period. Around half of all SARs were filed by borrowers. FinCEN reported a total of 35,135 mortgage fraud-related SARs during the first half of 2010, and noted that the increase “can be attributed to increased attention to older loans spurred by repurchase demands.” FinCEN Director James Freis in a release said that “SARs are one of the most important sources of lead information for mortgage fraud investigations available to law enforcement.” The FinCEN reports, which cover the first and second quarters of 2010, also noted increases in bankruptcy references in SARs. A total of 7% of mortgage fraud-related SARs filed in 2010 mentioned bankruptcy, while 1% of SARs filed in 2006 and 2007 mentioned bankruptcy. References to “short sale(s)” and “broker price opinion(s)” appeared 827 times and 41 times, respectively, in SARs filed during the first quarter of 2010. FinCEN said that these terms can relate to a financial crime known as “flopping,” a crime in which foreclosed properties are sold at artificially low prices to nonexistent buyers. These false buyers will then sell these properties at a higher price and keep the profit, FinCEN said. The FinCEN reports also break down SAR filings by metropolitan area and county. For the full FinCEN reports, use the resource links.

Aranjo is one of two blocked from CU work

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ALEXANDRIA, Va. (12/15/10)--The National Credit Union Administration (NCUA) has prohibited former D. Edward Wells FCU employee Carol Aranjo from participating in the affairs of any federally insured financial institution. Aranjo formerly served as the CEO of the Springfield, Mass.-based community development credit union which was closed by the NCUA in 2003 after recognizing $3 million in losses. NCUA examiners uncovered evidence of money laundering during a 2003 examination, which led to the closure of the credit union. Aranjo was convicted of Conspiracy, Embezzlement, False Tax Return, Bank Fraud, False Entries and Obstruction of Examination, and was sentenced to 54 months imprisonment. Aranjo earlier this year asked a federal appeals court to overturn her 2008 fraud conviction, but her challenge was ultimately unsuccessful. Aranjo will pay $1.4 million in restitution, according to the NCUA. Her husband, Alphonse Smith, was convicted on 10 charges and served one year in prison. The NCUA this week also announced that Donna Kay Gainer, a former employee of Oklahoma City, Oklahoma-based Tinker FC, would be banned from participating in the affairs of any federally insured financial institution. Gainer, who was convicted of embezzlement, will serve five years of supervised release and will pay $32,789.71 in restitution, according to the NCUA. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link below to view NCUA enforcement orders online.

Corporate CU rule tweaks CUNA seeking CU comment

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WASHINGTON (12/14/10)—The Credit Union National Association (CUNA) is asking credit unions to weigh in on a recent National Credit Union Administration (NCUA) plan under which natural person credit unions would be prohibited from maintaining membership in more than one corporate at any time. The proposal allows a limited exception of multiple memberships during a brief period when a credit union transitions to a new corporate. The proposed restriction would only apply prospectively, and, therefore, would not prohibit a natural person credit union from maintaining membership in multiple corporates if the relationships existed prior to the effective date of a final rule. Among other things, the proposal would:
* Prohibit a natural person credit union from making any new investment—including a share or deposit account, loan, or capital investment—in a corporate of which the natural person credit union is not a member; *Allow corporates to charge their members reasonable one-time or periodic membership fees; *Require corporate credit unions to maintain a record of all board of director votes, including how each director voted; and * Incorporate certain sound audit, reporting, and audit committee practices from existing non-credit union guidance, such as the Federal Deposit Insurance Corporation regulations.
The pending proposal was approved for comment at the NCUA November board meeting and it follows a much more extensive final corporate credit union rule adopted by the agency in September. CUNA is seeking comment on a number of specific issues, including the following:
* NCUA issued the proposed rule to address certain issues that the September corporate rule did not cover. Do you agree with the timing of the proposed rule, or would it be preferable to allow more time between the September corporate rule and any follow-up rule to allow the industry and NCUA to better understand the impact and effectiveness of the changes made by the September corporate rule? * The proposal would limit a natural person credit union to membership in only one corporate at a time to reduce “rate shopping” among the corporates. Do you support such an approach? Do you agree with NCUA that “rate shopping” by natural person credit unions is negative, in the sense that it led to excessive risk-taking by the corporates? Can you suggest an alternative approach to address the risky behavior of some corporates? * The proposal would require corporate CUSOs to provide the corporate’s auditor, board of directors, and NCUA complete access to the corporate’s books and other documents that the auditor, directors, or NCUA deem pertinent. Do you support this proposed provision? Why or why not?
The NCUA is accepting public comments until Jan. 28, 2011. However, CUNA is seeking credit union remarks by Jan. 14.

Demand is strong for final 2010 NGN

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ALEXANDRIA, Va. (12/14/10)—The final National Credit Union Administration (NCUA) Guaranteed Note (NGN) offering of the year brought in a big close by yielding $1.16 billion. The student-loan-based offering closed Friday. The agency said in an announcement that with this final offering, it has completed 60% of the securitization designed to fund deposits assumed by the bridge corporate credit unions. The latest offering will pay 35 basis points over LIBOR, an indication, the NCUA noted, of strong investor interest. The NCUA reported that total 2010 proceeds from the securitizations equal more than $17.75 billion, and the agency noted it plans to resume NGN offerings in the first quarter of 2011. NCUA Chairman Debbie Matz said of the 2010 results, “The financial success of the securitization is not only enabling NCUA to manage the disposition of troubled corporate credit unions, it is also allowing the credit union industry to pay for the losses without diminishing service to consumers. I am encouraged by the results in 2010, and by the promise that the future holds for the credit union industry as it emerges from the market dislocations.” The NCUA NGNs will receive monthly payments of principal and interest from cash flows of related underlying securities, which are passed on to investors. Timely payment of principal and interest due on the notes is guaranteed by NCUA, and that guaranty is backed by the full faith and credit of the United States.

NCUA is proper plaintiff in New London suit agency claims

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ALEXANDRIA, Va. (12/14/10)—It is the National Credit Union Administration (NCUA) as liquidator, and not former members of New London Security FCU (NLSFCU), that has the right to pursue claims on behalf of the failed Connecticut credit union, according to a motion recently filed by the agency. The NCUA shut down the New London credit union in July 2008, later alleging that its longtime financial adviser, the late Edwin F. Rachleff, had been engaged over years in a multimillion-dollar embezzlement. Five individuals who lost investments when NLSFCU was shut down filed a $4 million lawsuit this July against the credit union's board and longtime manager, auditors, legal advisers, a brokerage firm and the widow of the credit union's longtime investment adviser, Rachleff. The NCUA, as liquidating agent for the NLSFCU, filed a motion late last month seeking to be substituted for the investors as the “real party of interest” in the lawsuit. The NCUA claimed that “by operation of law, the NCUA board, as the liquidating agency, succeeded to all rights, titles, powers and privileges of the credit union and of any members, accountholders, officers or directors of the credit union with respect to its assets.” The NCUA said the NLSFCU situation must go through the normal liquidation process and claimed that the investors, by filing suit, are seeking to jump ahead of other creditors. In its motion filed with the U.S. District Court of Connecticut, the NCUA told the court, that as liquidating agent the agency has filed suit against some of the same defendants, seeking the same recovery that the five investors seek in their action. All investor’s with uninsured share certificates will be paid out “if and when” the NCUA recovers “sufficient obligations and money due.” “In short, allowing the plaintiffs’ to pursue their action independently would interfere with the liquidating agent’s ability to effectively and properly perform its functions in liquidating the credit union pursuant to federal statute, and would be in direct contravention of Congress’ intent in enacting the Federal Credit Union Act, as amended, to ‘establish a comprehensive scheme for efficiently administering all claims resulting from failed [financial institutions].'” CUNA’s Michael Edwards said the NCUA’s motion is not surprising since the credit union was liquidated. “NCUA’s involuntary liquidation regulations are codified at 12 CFR part 709 and virtually all claims involving a liquidated credit union have to go through the administrative liquidation process; general unsecured creditors are behind secured creditors and the NCUSIF in terms of priority so they usually do not get anything but some recovery is theoretically possible,” he said.

Fed issues plan to extend TILA Consumer Leasing Act

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WASHINGTON (12/14/10)--The Federal Reserve Board Monday proposed two rules that would expand the coverage of consumer protection regulations to credit transactions, as well as double the dollar amount of consumer leases that would be covered. The proposed rules would amend Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) to implement a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank ACT). Starting July 21, 2011, the Dodd-Frank Act requires that the protections of the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA) apply to consumer credit transactions and consumer leases up to $50,000, compared with $25,000 currently. This amount will be adjusted annually to reflect any increase in the Consumer Price Index. TILA requires creditors to disclose key terms of consumer loans and prohibits creditors from engaging in certain practices with respect to those loans. Currently, consumer loans of more than $25,000 are generally exempt from TILA. However, private education loans and loans secured by real property, such as mortgages, are subject to TILA regardless of the amount of the loan. The CLA requires lessors to provide consumers with disclosures regarding the cost and other terms of personal property leases, such as an automobile lease. The Fed said comments must be submitted by Feb. 1, 2011. Use the resource link to read the Fed proposal and for more information on the affected regulations. The notices that will be published in the Federal Register are attached. Comments on the proposals must be submitted by the later of 30 days after publication in the Federal Register or February 1, 2011.

CU belt tightening should be reflected by agency CUNA

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WASHINGTON (12/14/10)—In light of the significant “belt tightening” of many credit unions and the Obama administration’s proposal to freeze civilian federal workers’ salaries for two years, the Credit Union National Association (CUNA) continues to urge the industry’s federal regulatory agency to take similar action. In a letter to National Credit Union Administration (NCUA) Chairman Debbie Matz, CUNA President/CEO Bill Cheney underscored that although credit unions are well capitalized generally, the past three years have been “very trying” for credit unions. “With elevated loan losses and expenses related to share insurance and corporate credit unions, credit unions earned very little net income in 2008 and 2009. This year net income has recovered somewhat, but is still far below ‘normal,’ especially considering the need for many credit unions to rebuild capital,” Cheney wrote. Cheney continued, “(W)e understand members of your staff are seeking more information about the (administration’s salary-freeze) proposal to determine its implications for the (NCUA), which as an independent federal agency may not be covered by the proposal.” Regardless of the staff’s determination, Cheney urged, the NCUA should agree at this time to implement a salary freeze to the fullest extent possible. At its November open board meeting, the NCUA approved a $25 million—or 12%--increase for its 2011 budget over its 2010 funding plan. The total budget for 2011 will be just over $225 million, and part of that would go to fund pay increases that could, in extreme cases—hover between 6% and 8%. In its letter to the NCUA chairman, CUNA noted the support CUNA, credit unions and the leagues have always shown for “a strong independent agency, which has access to sufficient resources in order to ensure safety and soundness objectives under the Federal Credit Union Act are adequately met…” That support is unwavering, CUNA said, despite the unusual situation that the greatest part of those resources come directly from credit unions. “In light of the belt tightening at credit unions and the new proposal from the administration, we believe it is appropriate and reasonable for NCUA to do all it can to contain its own costs,” Cheney wrote.

Inside Washington (12/13/2010)

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* WASHINGTON (12/14/10)--In the wake of the recent mortgage crisis, support is growing for national service standards to govern the foreclosure process (American Banker Dec. 13. The greatest challenge regulators and lawmakers face is determining if or to what extent such standards would preempt state foreclosure laws. Federal Reserve Board Gov. Dan Tarullo suggested national standards were needed at a hearing on Dec. 1. Tarullo said servicers had trouble complying with numerous state regulations regulating foreclosures. Cliff Rossi, an executive in residence at the University of Maryland’s Center for Financial Policy, suggested that by standardizing loan platforms, documentation and modification procedures, lawmakers could lend more uniformity to the process and ensure a minimum level of performance by servicers … * WASHINGTON (12/14/10)--Former Fed Chairman Paul Volcker said Friday he is happy some lawmakers failed in their efforts to strip the Federal Reserve Board of its bank regulatory responsibilities. The same can’t be said about retiring Sen. Jim Bunning (R-Ky.). Volcker said he believes the Federal Reserve board doesn’t spend enough time on regulation because monetary policy should only take up a limited amount of the board’s time. Volcker’s comments were made at the American Enterprise Institute at a conference on the history of the Fed. Volcker lauded a clause in the Dodd-Frank Act that created a second vice chairman at the Fed to oversee the central bank’s regulatory work. Bunning, who served as a member of the Senate Banking Committee, said during his farewell address in the Senate last week that Dodd-Frank failed to stop the Federal Reserve’s flawed monetary policy, which he said was the largest single cause of the current financial crisis and past financial crises … * WASHINGTON (12/14/10)--The U.S. Department of Housing and Urban Development (HUD) announced Friday that it is investigating the practices of certain mortgage lenders to determine if their home loan policies illegally deny qualified African American and Latino borrowers access to credit. The investigations are in response to 22 complaints the National Community Reinvestment Coalition filed with HUD alleging that the loan activities of the mortgage originators showed that their home lending practices deny Federal Housing Administration-insured loans to African Americans and Latinos with credit scores as high as 640. FHA guidelines allow mortgages to borrowers with credit scores above 580, provided the borrowers have down payments equaling 3.5% of the loan amount, or above 500, provided the borrowers have down payments equaling 10% of the loan amount …

Fin. Svcs. Chair Bachus announces new committee members

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WASHINGTON (12/13/10)--Incoming House Financial Services Committee Chairman Spencer Bachus (R-Ala.) on Friday announced the 12 new members that will join the committee when the 112th Congress begins in January. Bachus in a release said that the 12 new members are “strong advocates for American taxpayers and Main Street businesses.” The new members are:
* Rep. Francisco Canseco (R-Texas); * Rep. Robert Dold (R-Ill.); * Rep. Sean Duffy (R-Wisc.); * Rep. Michael Fitzpatrick (R-Penn.); * Rep. Michael Grimm (R-N.Y.); * Rep. Nan Hayworth (R-N.Y.): * Rep. Bill Huizenga (R-Mich.); * Rep. Robert Hurt (R-Va.); * Rep. Blaine Luetkemeyer (R-Mo.); * Rep. Steve Pearce (R-N.M.): * Rep. Steve Stivers (R-Ohio); and * Rep. Lynn Westmoreland (R-Ga.)

Senators urge greater interchange consideration by Fed

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WASHINGTON (12/13/10)--In an action strongly encouraged by the Credit Union National Association (CUNA), 13 senators late last week wrote to the Federal Reserve to voice their concerns over proposed interchange regulations. The letter, which was delivered to Fed Chairman Ben Bernanke on Thursday, encourages the Fed to “take sufficient time to gather and analyze all of the relevant facts” before issuing a proposal, and to “ensure that consumer interests are protected” in any rate standards that are set. Sens. David Vitter (R-La.), Thomas Carper (D-Del.), Judd Gregg (R-N.H.), Chris Coons (D-Del.), Pat Roberts (R-Kan.), Evan Bayh (D-Ind.), Mark Warner (D-Va.), Richard Shelby (R-Ala.), Robert Bennett (R-Utah), Jon Tester (D-Mont.), Mike Crapo (R-Idaho), Sam Brownback (R-Kan.), and Bob Corker (R-Tehn.) cosigned the letter. The interchange provisions, which were passed as part of comprehensive financial regulatory legislation earlier this year, direct the Fed to write rules on interchange fees for debit card purchases. While the interchange provision exempts small credit unions and other financial institutions with under $10 billion in assets from any interchange changes, these institutions would still be impacted directly by whatever rates are established. The letter noted that while many have assumed that the $10 billion threshold would in effect “level the playing field” for smaller institutions, the interchange amendment could make credit union and small bank cards more expensive for merchants to accept, putting smaller institutions at a competitive disadvantage. CUNA Senior Vice President of Legislative Affairs John Magill on Friday said that CUNA has been "actively working with a number of senators to weigh in on this issue. “Their views on taking an adequate amount of time in considering these proposals--considering the impact on small institutions such as credit unions--need to be carefully considered by the Fed governors before they take action," Magill added.

Inside Washington (12/10/2010)

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* WASHINGTON (12/13/10)--Mortgage rates jumped to a five-month high in the U.S., moving in step with bond yields as President Barack Obama sought to extend tax cuts (Bloomberg Dec. 9). The average for a fixed-rate mortgage for the week ending Dec. 9 increased to 4.61% from 4.46%, the fourth straight week Freddie Mac reported increases in fixed rates. The average 15-year rate jumped to 3.96% from 3.81%. President Obama’s agreement to extend tax cuts caused yields on mortgage-bond securities to reach six-month highs last week amid speculation that the budget deficit would increase and inflation accelerate. The surge in rates is a blow to consumers who looked to refinance at record-low rates. Mortgage application volume fell 0.9% for the week ended Dec. 3, the Mortgage Bankers Association reported. The drop of 16.5% the previous week was the largest decrease in a year. The association’s refinancing gauge declined 1.4% in its most recent report; new purchases increased 1.8% … * WASHINGTON (12/13/10)--Joseph Smith appears likely to be confirmed by the Senate as director of the Federal Housing Finance Agency (FHFA). The North Carolina banking commissioner faced little opposition during his Senate Banking Committee confirmation hearing Thursday (American Banker Dec. 10). Smith, who would oversee Fannie Mae and Freddie Mac as FHFA director, vowed to run the government-sponsored mortgage giants independently and said that their current conservatorship status was not a long-term solution for taxpayers. Both outgoing Banking Committee Chairman Chris Dodd (D-Conn.) and incoming Chairman Tim Johnson (D-S.D.) praised Smith and indicated his nomination would be approved by the panel and the full Senate next week. The FHFA also oversees the 12 Federal Home Loan Banks. Smith said the FHLBs would receive his “full attention” … * WASHINGTON (12/13/10)--A video webcast of the Dec. 9 Senate Banking Committee hearing, featuring National Credit Union Administration Chairman Debbie Matz, is now available for viewing online. For The State of the Credit Union Industry, use the link.

Interchange discussions will lead Dec. 16 Fed meeting

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WASHINGTON (12/13/10)—Interchange amendments will be on the agenda when the Federal Reserve holds its December open meeting this Thursday. The debit card interchange fee regulations, which will amend Regulation E, Electronic Fund Transfer Act, are required under the Dodd-Frank Act. The Fed meeting will take place at 2:30 p.m. ET and will be the first Fed meeting to be broadcast live on the internet. The debit card interchange provisions that were passed earlier this year as part of comprehensive financial regulatory legislation direct the Fed to write rules on the structure for interchange fees in connection with the debit card transactions involving larger issuers. While the interchange provision exempts small credit unions and other financial institutions with under $10 billion in assets, as well as certain government programs and prepaid cards, from any interchange fee structure rules, the impact of the Fed’s rule could nonetheless be severe for these entities. Larger issuers have also expressed grave concerns about how much their debit interchange fee income could decrease once the rule takes effect. Under the Dodd-Frank Act, the final debit interchange rule is supposed to be final by April 21, 2011. “No one outside of the Fed, except possibly key folks in Congress and the Administration, know how the Fed proposes to handle the complex issues presented under the Durbin interchange amendment,” Credit Union National Association (CUNA) President/CEO Bill Cheney said on Friday. CUNA, following the meeting, will work closely with leagues, credit unions and its interchange working group to coordinate a response to the Fed and other key policymakers, Cheney added. “We want to do everything we can to help ensure the rule is implemented as favorably as possible, despite the deficient language contained in the Dodd-Frank Act,” Cheney said. CUNA expects the interchange proposal to have a shortened comment period due to the approaching April 21 statutory deadline. Ahead of the Thursday meeting, CUNA encouraged the Fed to support congressional efforts to delay implementation and allow further consideration of interchange rules. However, if a delay is not an option, CUNA urged the Fed “to consider phasing in requirements to the greatest extent permissible” to “facilitate compliance and minimize disruption to the operations of issuers, networks, and processors.” Specifically, CUNA called on the Fed to use the authority granted to it by the interchange rule to “help ensure” that financial institutions with under $10 billion in assets are exempt from the terms of the new interchange regulations. The Fed could develop amendments or recommend legislative changes to Congress to “help ensure the exemption for small issuers is feasible,” the CUNA letter adds. The Fed should also allow merchants to have routing choices that will help limit their costs, a move that CUNA said could avoid situations in which merchants route debit card transactions “in a manner that disadvantages small issuers.” A group of 13 senators also voiced their concerns over proposed interchange regulations and encouraged the Fed to “take sufficient time to gather and analyze all of the relevant facts” before issuing a proposal. (See related story: Senators urge greater interchange consideration) For CUNA’s letter to the fed, use the resource link.

SBA extends Patriot Express loan program for 3 years

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WASHINGTON (12/13/10)--The Small Business Administration’s (SBA) Patriot Express loan program, a streamlined pilot loan product aimed at current and former servicemembers and their families, has been renewed for an additional three years, the SBA said on Friday. The loan program has provided more than $560 million in loan guarantees to just under 7,000 eligible recipients since it began in 2007, according to SBA figures. Several credit unions participate in the program. SBA Administrator Karen Mills in a release said that “the impact of this program over the last three-and-a-half years has meant thousands of veterans and their families have had the resources to pursue their dreams as entrepreneurs, and at the same time create jobs and drive economic growth at a critical time for our country. Renewing it means we can continue to fulfill our sacred commitment to the men and women who serve our country by giving them every opportunity for success.” Eligible borrowers may borrow up to $500,000 through the Patriot Express loan program, and the loans, which feature enhanced guarantees and interest rates, may be used for business start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases, according the SBA. For the SBA release, use the resource link.

Senators urge greater interchange consideration

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WASHINGTON (UPDATED: 1:15 P.M. ET)--In an action strongly encouraged by the Credit Union National Association (CUNA), 13 senators late last week wrote to the Federal Reserve to voice their concerns over proposed interchange regulations. The letter, which was delivered to Fed Chairman Ben Bernanke on Thursday, encourages the Fed to “take sufficient time to gather and analyze all of the relevant facts” before issuing a proposal, and to “ensure that consumer interests are protected” in any rate standards that are set. Sens. David Vitter (R-La.), Thomas Carper (D-Del.), Judd Gregg (R-N.H.), Chris Coons (D-Del.), Pat Roberts (R-Kan.), Evan Bayh (D-Ind.), Mark Warner (D-Va.), Richard Shelby (R-Ala.), Robert Bennet (R-Utah), Jon Tester (D-Mont.), Mike Crapo (R-Idaho), Sam Brownback (R-Kan.), and Bob Corker (R-Texas) cosigned the letter. The interchange provisions, which were passed as part of comprehensive financial regulatory legislation earlier this year, direct the Fed to write rules on interchange fees for debit card purchases. While the interchange provision exempts small credit unions and other financial institutions with under $10 billion in assets from any interchange changes, these institutions would still be impacted directly by whatever rates are established. The letter noted that while many have assumed that the $10 billion threshold would in effect “level the playing field” for smaller institutions, the interchange amendment could make credit union and small bank cards more expensive for merchants to accept, putting smaller institutions at a competitive disadvantage. CUNA Senior Vice President of Legislative Affairs John Magill on Friday said that CUNA has been "actively working with a number of Senators to weigh in on this issue. “Their views on taking an adequate amount of time in considering these proposals -- considering the impact on small institutions such as credit unions -- need to be carefully considered by the Fed governors before they take action," Magill added.

NCUA CU risk concentration regs out next year--Matz

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WASHINGTON (12/10/10)--The National Credit Union Administration (NCUA) is developing new regulations on natural person credit union risk concentrations, and those regulations will be released during the first quarter of 2011, NCUA Chairman Debbie Matz said during a Thursday Senate hearing. Matz added that the agency is currently drafting revisions to some due diligence standards, and may need to enhance its own Office of Capital Markets to deal with credit ratings issues. However, any action related to its Office of Capital Markets is not pending, Matz said.
Click to view larger image NCUA Chairman Debbie Matz, right, speaks with Sen. Tim Johnson (D-S.D.) ahead of Thursday's hearing on the state of the credit union industry. Matz covered the corporate credit union crisis, the NCUA's response to that crisis, and legislative priorities for credit unions during her testimony. (Photo provided by NCUA)
Matz on Thursday spoke before the Senate Banking Committee during a hearing on the status of the credit union industry. Matz was the sole witness during the hearing. A recent NCUA Office of the Inspector General report that concluded that more aggressive NCUA supervisory actions could have helped the NCUA avoid several credit union failures and prevented the National Credit Union Share Insurance Fund (NCUSIF) from taking on substantial losses was also discussed during the hearing. Matz told Sen. Richard Shelby (R-Ala.) that the NCUA has responded to the report, which was released late last month, by altering its communication strategy with potentially troubled credit unions. Rather than issuing repeated low level warnings to these credit unions, the agency will take more serious action if a given credit union has not responded to an NCUA warning within 90 to 120 days, Matz said. In prepared testimony submitted before the hearing, the NCUA requested that Congress amend the Federal Credit Union Act by changing the net worth definition to allow certain NCUA-established loans and accounts to count as net worth. The FCU Act could also be changed to clarify that the NCUSIF equity ratio is based on NCUSIF-only, unconsolidated financial statements, the NCUA added. The NCUA also suggested that the NCUSIF itself could also be streamlined by giving the agency the option of making premium assessments on federally backed credit unions in advance of anticipated expenditures, a move that the NCUA said could avoid the need to borrow from the U.S. Treasury. The NCUA also detailed its anticipated requests for the upcoming 112th Congress. One priority, according to the NCUA’s testimony, will be extending the statute of limitations for actions that the NCUA makes as conservator or liquidating agent of a credit union. The agency will also pursue the authority to perform its own examinations of third-party vendors that provide services to NCUSIF-backed credit unions, and noted in the release that the current vendor arrangement, which limits the NCUA’s authority, “presents risks such as threats to credit risk, security of systems, availability and integrity of systems, and confidentiality of information.” For the full NCUA release, use the resource link.

Matz backs MBL cap-lift during Thursday hearing

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WASHINGTON (12/10/10)—National Credit Union Administration (NCUA) Chairman Debbie Matz on Thursday backed increasing the member business lending cap for credit unions, saying that business lending, when done properly, is an important tool for credit unions and their members. Matz spoke during a Thursday Senate Banking Committee hearing on the state of the credit union industry. Matz was the sole witness during the hearing. Responding to questions from Sen. Richard Shelby (R-Ala.), Matz said that while some credit unions have had issues due to their business lending practices, the number of credit unions that have experienced these problems is small. Legislation that would lift the current MBL cap from 12.25% of total assets to 27.5% of total assets is currently active in Congress. Matz said that the NCUA would follow this legislation, once passed, with “rigorous regulations” to fight against any additional risks. Rather than opening the “flood gates” right away, Matz said that the NCUA would force many credit unions to start out with low levels of loans before they are permitted to increase the size of their MBL portfolios. The Credit Union National Association (CUNA) continues to look for an appropriate vehicle for Sen. Mark Udall’s pro-MBL cap lift legislation during this or the next Congress. Udall’s MBL legislation, if approved, would lift the MBL cap to 27.5% of assets, a move that CUNA has said would inject up to $10 billion in new, non-taxpayer-backed funds into the economy, creating as many as 100,000 new jobs.

Bachus introduces House finance subcommittee leadership

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WASHINGTON (12/10/10) --Incoming House Financial Services Committee Chair Rep. Spencer Bachus (R-Ala.) on Thursday announced his committee leadership appointees for the 112th Congress. Rep. Jeb Hensarling (R-Texas) will serve as Bachus’s Financial Services Committee vice chair, according to a Thursday release. Bachus also announced slight modifications to various subcommittee jurisdictions. Rep. Judy Biggert (R-Ill.) will chair the subcommittee on insurance, housing and community opportunity. That subcommittee’s jurisdiction will cover insurance, housing, and urban development, and oversight of the U.S. Department of Housing and Urban Development. The financial institutions and consumer credit subcommittee will be chaired by Rep. Shelley Moore Capito (R-W. Va.) and will cover financial institutions, federal deposit insurance, and safety and soundness. Reps. Scott Garrett (R-N.J.) and Ron Paul (R-Texas) will chair the capital markets and government-sponsored enterprises (GSEs) and the domestic monetary policy subcommittees, respectively. Rep. Gary Miller (R-Calif.) will chair the international monetary policy subcommittee, while Rep. Randy Neugebauer (R-Texas) will chair the oversight and investigations subcommittee. Bachus in a statement said that the committee appointees would honor their “commitment to aggressive oversight, reform of the GSEs, and monitoring the implementation of the Dodd-Frank Act. “We are ready to hit the ground running, and I look forward to continuing our work in the next Congress,” Bachus added.

Merger conversion rules on NCUAs final 2010 agenda

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ALEXANDRIA, Va. (12/10/10)—A final rule addressing credit union mergers and conversions, as well as fiduciary duties and indemnification of credit union directors, highlights the final National Credit Union Administration (NCUA) meeting of 2010. The meeting is scheduled for 10 a.m. ET on Dec. 16. The NCUA’s final rule follows an earlier proposal that addressed parts 701, 708a and 708b of the NCUA's Rules and Regulations. The Credit Union National Association in September commented on the proposal, urging the NCUA not to limit credit unions’ ability to make payments to an institution-affiliated party (IAP) to compensate them for any legal costs they have incurred in connection with administrative or legal proceedings by NCUA or a state regulator if the IAP was assessed a money penalty, removed from office, or the subject of a cease and desist order. Potential amendments to the NCUA’s low income definition and rules that address the accuracy of advertising and insurance status notices will also be discussed during the meeting. A proposed rule addressing Part 745 of the NCUA's rules and regulations, Share Insurance, Non-interest-bearing Transaction Accounts, will also be up for consideration. The NCUA will discuss Tri-State FCU's appeal of a previously denied field of membership expansion request, and will cover a change to the overhead reimbursement practices of its Central Liquidity Facility. The NCUA’s monthly report on the status of its insurance funds will also be delivered during the meeting. A closed NCUA session will take place on Friday, Dec. 17. The agenda for that meeting had not been released at press time. For the full NCUA meeting schedule, use the resource link.

Inside Washington (12/09/2010)

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* WASHINGTON (12/10/10)--The Federal Deposit Insurance Corp. scheduled a board meeting for 10 a.m. Tuesday to discuss the designated reserve ratio of the Deposit Insurance Fund (DIF), as well as risk-based capital rules and the 2011 corporate operating budget (American Banker Dec. 9). The board may adopt a 2% DIF target, which is the ratio of reserves to deposits. In October, the FDIC said it is not expected to reach the DIF target ratio, which is used to guide long-term funding, before 2027 … * WASHINGTON (12/10/10)--Dwight Fettig, formerly a senior aide to Sen. Tim Johnson (D-S.D.) will return to Johnson’s office to work as a senior policy adviser (American Banker Dec. 9). Johnson is slated to be the Senate Banking Committee chairman next year. Fettig is expected to be named the committee’s staff director. He served as legislative director for Johnson from 1997 to 2003, and from 1995 to 1996 when Johnson was in the House of Representatives. Fettig was most recently a partner with the law firm of Porterfield, Lowenthal & Fettig, LLC, Washington, D.C. He also has served as senior policy and legislative advisor at Arnold & Porter LLP and senior director of government and industry relations at Freddie Mac … * WASHINGTON (12/10/10)--President Barack Obama’s proposal to extend Bush-era tax breaks includes a tax cut for most Americans, but six million federal, state and local government employees would be excluded from that benefit (The New York Times Dec. 9). The Obama plan would end the Making Work Pay tax credit of $400 for workers with low and middle incomes. Instead, people of all incomes would see a 2% decrease in the payroll tax for Social Security. But government employees do not pay into Social Security. Instead they pay into public pension systems. Under the Obama proposal, government employees stand to lose the $400 tax cut, while not gaining the benefit of the payroll tax cut. More than 174 million workers paid into the Social Security in 2007, but about 5.7 million state and government employees contributed to alternative pension systems …

Matz to testify at todays Sen. Banking CU hearing

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WASHINGTON (12/9/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz will be the sole witness at a credit union-specific Senate Banking Committee hearing later today. The hearing, which is entitled "The State of the Credit Union Industry," will likely address the general health of natural-person credit unions, as well as the state of corporate credit unions and the NCUA's actions to restore liquidity. Matz in her testimony is expected to provide legislators with an overview of the financial condition of the industry and NCUA's regulatory and supervisory efforts to keep credit unions safe, sound and continuing to serve consumers. The hearing was originally scheduled to take place at 2:30 p.m. ET on Tuesday, but was moved due to scheduling conflicts. Representatives from the Credit Union National Association (CUNA) are not testifying during the hearing, but CUNA has submitted a statement for the record. (See related story: CUNA to Sen. Comm.: CUs serve as ‘shining example’) Discussion of Joseph Smith’s nomination to serve as Federal Housing Finance Agency (FHFA) director will follow the credit union hearing.

Bachus brings CU knowledge as Fin. Svcs. chair

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WASHINGTON (12/9/10)--Credit Union National Association (CUNA) President/CEO Bill Cheney this week congratulated incoming House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.), and CUNA has noted Bachus’s frequent support of credit unions. Bachus joined the House of Representatives in 1993, and has served as the ranking Republican on the committee for the past four years. Bachus has called credit unions “an integral part of our financial system,” and has praised credit unions for their pro-consumer work and their straightforward credit practices. He also sought CUNA's input to ensure that the "shared goals of charter preservation and credit union independence” were achieved as the Republican’s alternative regulatory reform legislation package was developed earlier this year, and worked to keep the recently enacted financial reforms from unjustly punishing credit unions. He has met with Alabama credit union representatives and members of the Southeastern League of Credit Unions several times, and is a frequent guest speaker at CUNA’s yearly Governmental Affairs Conference. Bachus was also a sponsor of 2008 legislation that would have eased field of membership and member business lending (MBL) restrictions in underserved areas for credit unions. However, that legislation did not become law. Generally, Bachus has fought against predatory lending practices, and authored legislation that lifted the federal deposit insurance level for credit unions and banks to $250,000. Bachus has indicated that he will put review of government-sponsored enterprises (GSEs) and the Dodd-Frank regulatory reform bill among the issues at the top of his agenda when he takes over early next year.

Fed 75 of noncash payments are made electronically

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WASHINGTON (12/9/10)—More than 75% of all U.S. noncash payments made during 2009 were made electronically, a 9.3% increase over 2006’s numbers, the Federal Reserve revealed in a study released on Wednesday. The study found that Americans made nearly 38 billion debit card transactions during 2009, a 12.8 billion payment increase over 2006’s numbers, and the largest increase by any payment type during the survey period.
Click to view larger image (image provided by Federal Reserve) Click for larger view
“Debit card usage now exceeds all other forms of noncash payments and, by number of payments, represents approximately 35 % of total noncash payments,” the survey said. The number of debit card transactions eclipsed the number of check transactions. The Fed reported a 14.8% increase in the number of debit transactions and a 7.2% decrease in checks paid between 2006 and 2009. The Federal Reserve Bank of Atlanta’s Richard Oliver said that the results of the study “clearly underscore this nation's efforts to move toward a more efficient electronic clearing system for all types of retail payments," and may also “reflect changing consumer behavior during difficult economic times." Credit unions paid 8.6% of all checks cashed nationwide during 2009, and those checks represented 2.3% of the total value of all checks cashed during that time period. The total number of checks paid by credit unions decreased by just over 8% in between 2006 and 2009, but the average value of those checks increased slightly from $326 in 2006 to $352 in 2009, the study found. The total number of checks paid by credit unions dipped to 2.1 billion in 2009, down from the total of 2.7 billion reported in 2006, the study added. The study noted that credit unions had higher numbers of debit card-carrying members, due to their emphasis on consumer service when compared to commercial banks. All types of electronic payments, barring credit cards, increased between 2006 and 2009, according to the study. For the full study, use the resource link.

CUNA to Sen. Comm. CUs serve as shining example

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WASHINGTON (12/9/10)--In a statement submitted to the Senate Banking Committee ahead of today’s hearing on the state of the credit union industry, Credit Union National Administration (CUNA) President/CEO Bill Cheney notes that while the credit union system still “faces significant challenges as a result of the worldwide financial crisis,” credit unions “have continued to lend when other creditors abandoned consumers and small businesses.” “Considering the considerable stresses that the financial sector has experienced over the last several years and the activities that caused and perpetuated the crisis, credit unions serving consumers should be viewed as a shining example of what generally went right when so much else went wrong,” Cheney adds. The Senate Banking Committee later today will hold a hearing on the status of the credit union industry, the first hearing of its kind in many years. National Credit Union Administration Chairman Debbie Matz will be the sole witness at the hearing. (See related story: Matz to testify at today's Sen. Banking CU hearing.) Credit unions are “eager to do more to serve their members, support their communities, and help the economy recover,” but, for the most part, cannot act without further aid from Congress and regulators, Cheney adds. The CUNA statement urges legislators to continue supporting credit unions’ tax exempt status. Credit unions “provide significant financial benefits” by saving their 92 million members nearly $7.5 billion per year, and those members would pay the price if credit unions lost their tax exemption, according to CUNA’s statement. CUNA in the statement also calls on Congress to act on increasing small business lending authority for credit unions, to allow credit unions to raise alternative sources of capital, and to ensure that interchange statutory provisions are implemented to protect small issuers. CUNA also encouraged legislators to “be mindful of the needs of credit unions” when they consider potential reforms of government sponsored enterprises Fannie Mae and Freddie Mac. The statement also notes the NCUA’s role in aiding credit unions, adding that the NCUA should ensure that “regulations do not overwhelm institutions with counterproductive requirements that frustrate rather than fulfill congressional directives.” The NCUA’s recently released budget increases were also noted, with CUNA saying that greater attention needs to be given “to holding down agency costs, allowing financial institution boards to exercise their sound business judgments, and ensuring institutions are allowed to innovate and respond to the changing needs of their members/consumers.”

Inside Washington (12/08/2010)

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* WASHINGTON (12/9/10)--Tax cuts could expire for more than 2,300 Subchapter S corporate banks if President Barack Obama is unable to gain support for his deal to extend Bush-era tax cuts for two years (American Banker Dec. 8). Banks electing Subchapter S status are taxed at the individual income rate level. If the cuts end, tax rates for those banks would increase by more than four percentage points to 39.6%, according to Paul Merski, a senior vice president and chief economist for the Independent Community Bankers of North America. Merski said the sole reason banks elect Subchapter S status is for the tax benefit. He estimated that community banks could save $500 billion in the next decade if tax breaks--including relief on capital gains and dividends--were extended …

Bachus selected to chair House Financial Services Committee

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WASHINGTON (12/8/10)--Rep. Spencer Bachus (R-Ala.) was selected Tuesday to serve as chairman of the House Financial Services Committee in the 112th Congress. Serving as ranking Republican on the committee the past four years, Bachus overcame a challenge from Rep. Ed Royce (R-Calif.) and was chosen by the Republican Steering Committee. The position traditionally goes to the most senior member of the majority party who does not lead another committee. Bachus is supportive of credit unions and is attuned to the regulatory burden of financial institutions. In earlier press reports he has indicated he will put review of government-sponsored enterprises (GSEs) and the Dodd-Frank regulatory reform bill among the issues at the top of his agenda. "We want to congratulate Rep. Bachus on his selection as committee chairman," said Credit Union National Association President/CEO Bill Cheney. "We look forward to working closely with him and certainly with Rep. Royce as well in the new Congress."

NFIP broadens PRP flood ins. coverage NCUA

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ALEXANDRIA, Va. (12/8/10)--The National Credit Union Administration (NCUA) has alerted credit unions that pending flood insurance changes set forth by the Federal Emergency Management Agency (FEMA) “could result in cost savings” for credit union real estate borrowers. FEMA recently agreed to extend preferred risk policies (PRP) to owners of properties that are located in so-called Special Flood Hazard Areas (SFHA). The PRPs, which are made available under the National flood Insurance Plan (NFIP), offer low-cost flood insurance to owners and tenants of eligible residential and non-residential buildings located in moderate to low flood risk areas, according to a FEMA release. The PRPs will allow these property owners to maintain lower-cost flood insurance policies for an extended period, the NCUA said. Insurers, not credit unions, will be charged with determining eligibility for these policies. However, credit unions will need to ensure that each borrower’s amount of flood insurance meets mandatory purchase requirements, the NCUA added. FEMA in May officially revised its PRP eligibility rules, allowing buildings that were “newly mapped into an SFHA due to a map revision on or after Oct. 1, 2008, and before Jan. 1, 2011” to be eligible for PRPs for a two-year period. Their PRP may extend until Dec. 31, 2012. Properties that will be classified as SFHAs due to map revisions that come into effect on or after Jan. 1 will be eligible for a PRP for two policy years following the effective date of the map revision, according to FEMA. Properties with PRP policies must shift onto standard policies once the two-year eligibility period has ended, FEMA said. Insurance companies will contact eligible policyholders at least 90 days before their policy expires, according to the release. For the NCUA release, use the resource link.

FinCEN looks to add to list of SARAML institutions

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WASHINGTON (12/8/10)--Non-bank residential mortgage lenders and originators would be required to follow the same suspicious activity report (SAR) regulations as credit unions and other financial institutions if proposed rules released by the Financial Crimes Enforcement Network (FinCEN) become law. The FinCEN rule would also require these financial entities to establish anti-money laundering (AML) programs similar to those of credit unions and other financial institutions. FinCEN Director James Freis said that bringing non-bank lenders and originators under the same SAR/AML regulations would protect “both their business interests and their customers from the abuses of fraud and financial crime." FinCEN rules currently require credit unions, banks and other insured depository institutions that originate mortgage loans to file SARs. FinCEN in a release said that the proposed rulemaking “would close a regulatory gap that allows other originators, such as mortgage brokers and mortgage lenders not affiliated with banks, to avoid having AML and SAR filing obligations.” According to the release, FinCEN believes that new regulations requiring non-bank residential mortgage lenders and originators to adopt AML programs and report suspicious transactions would be are “consistent with those business[es] due diligence and information collection processes to assess creditworthiness in lending, and could augment FinCEN's initiatives in this area.” The effectiveness of the AML/SAR changes may also be aided by the SAFE Act’s proposed development of a nationwide licensing system and registry for many mortgage professionals, FinCEN added. FinCEN will collect comments for 30 days after the notice is published in the Federal Register.

NCUA hosts troubled debt restructuring webinar

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ALEXANDRIA, Va. (12/8/10)—National Credit Union Administration (NCUA) Board Member Gigi Hyland will host a Jan. 6 webinar on troubled debt restructured (TDR) loans. The webinar, which will take place at 2 p.m. ET, will be moderated by Hyland and will feature input from auditing firm Crowe Horwath LLP. The NCUA webinar will discuss the definition of TDR loans, and will attempt to answer what constitutes financial difficulty and how impairment measurement works when dealing with TDRs. The webinar will also flesh out the definition of concessions when dealing with TDRs. TDR loans, which have very specific accounting and reporting requirements, sometimes occur as a result of loan modifications. The financial statement notes and call report data associated with TDRs are also unique. For the NCUA release, use the resource link.

Inside Washington (12/07/2010)

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* WASHINGTON (12/8/10)--The U.S. Treasury sold $10.5 billion worth of Citigroup Inc. shares late Monday, the last of its common-stock holdings in the bank, and a significant step in the government’s exit of its bailout of the financial giant (Bloomberg Dec. 7). The Treasury sold 2.4 billion shares at $4.35 each, a 10-cent discount to the stock’s closing price. Treasury received about 7.7 billion shares of Citigroup common stock at $3.25 per common share from the exchange offers in July 2009 in exchange for the $25 billion in preferred stock Treasury received in connection with Citigroup’s participation in the Capital Purchase Program. At time, the investment represented a 27% stake in Citibank. The average selling price for the entire 7.7 billion shares was $4.14, according to the Treasury. Treasury invested $45 billion in Citigroup pursuant to the Troubled Asset Relief Program. With this offering, Treasury has recovered all of the $45 billion plus roughly $12 billion in profits consisting of dividends, interest and gain on the sale of Citigroup common stock and other securities … * WASHINGTON (12/8/10)--The Federal Deposit Insurance Corp. (FDIC) will host two telephone seminars Dec. 14 and 16 about required coverage for noninterest transaction accounts (American Banker Dec. 7). Temporary, mandatory coverage for all non-interest-bearing checking deposits was established under the Dodd-Frank Act. Noninterest transaction accounts were previously covered by the FDIC’s Transaction Guarantee Program, which was launched during the financial crisis in 2008 and required fees to participate. Under Dodd-Frank, blanket insurance is free and would last through 2012 …

Fin Lit Education Commission intros national strategy

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WASHINGTON (12/7/10)--The Financial Literacy and Education Commission (FLEC) last week introduced its 2011 National Strategy for Financial Literacy, a framework that the group hopes will “provide the foundation for an overarching financial literacy strategy.” The FLEC is comprised of representatives from the National Credit Union Administration, the U.S. Treasury, the U.S. Department of Education, the White House, and 18 other governmental groups. The 2011 strategy focuses on the need for increased financial literacy and effective financial decisionmaking and the educational efforts needed to reach these objectives. The strategy cites policy, education, practice, research and coordination as “action areas” that the FLEC stakeholders can address to reach the stated objectives. The FLEC cites increasing awareness of and access to effective financial education, determining and integrating core financial competencies, improving financial education infrastructure, and identifying, enhancing, and sharing effective practices as ways that FLEC stakeholders can also reach those objectives. The Credit Union National Association (CUNA) earlier this year came out in support of these objectives, and thanked the FLEC for avoiding references to any specific type of financial institution in its developed financial education core competencies. CUNA also recommended that the commission enhance the list of core concepts by adding information on debt reduction, credit scores, financial planning, and credit rating establishment, among other issues. For the full FLEC release, use the resource link.

111th Congress nearing its end

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WASHINGTON (12/7/10)--With the 11th Congress starting to wind down, floor agendas in both the House and Senate this week are light and subject to change. The limited action will center on a continuing resolution to fund the government and the Food Safety Act. However, the Food Safety Act is facing issues due to a Senate addition, and Senate Republicans have vowed to oppose cloture on all bills that do not seek to extend the Bush-era tax cuts. Senate leaders and the President continue to discuss a compromise agreement to move these issues and other priorities forward. The most important event for credit unions is a hearing on the state of the credit union industry. The hearing, which is set to take place before the Senate Banking Committee, was rescheduled to Thursday. Originally set to take place today, the hearing will feature testimony from National Credit Union Administration (NCUA) Chairman Debbie Matz. Matz will be the only witness at the hearing, which is the first credit union-focused Senate Banking Committee hearing in several years. CUNA expects the hearing to focus on the corporate credit union situation, and will submit a statement for the record.

Inside Washington (12/06/2010)

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* WASHINGTON (12/7/10)--The Securities and Exchange Commission Friday voted unanimously to propose joint rules with the Commodity Futures Trading Commission (CFTC) that would further define a series of terms for the security-based swaps market. The proposal originates from the Dodd-Frank Act, which established a comprehensive framework for regulating the over-the-counter swaps market American Banker Dec. 6). The new law requires the registration of swap dealers, security-based swap dealers, major swap participants and major security-based swap participants. It also subjects these entities to several statutory requirements--including capital, margin and business conduct requirements. “Today’s proposals lay out objective criteria, but they are just a first step, as we seek public comment to help us appropriately address the market impacts and potential risks posed by these entities,” said Mary Schapiro, SEC chairman. The proposals will be open for comment for 60 days … * WASHINGTON (12/7/10)--The Federal Reserve has been conducting a detailed evaluation of put-back risk at large financial institutions, Fed Governor Dan Tarullo told the Senate Banking Committee last week (American Banker Dec. 6). The Fed is asking institutions that originated large numbers of mortgages or sponsored significant mortgaged-backed securities (MBS) to assess the risk involved in those offerings. Tarullo said that as losses in MBS have escalated, investors are pursuing legal claims against the financial firms that originated or were otherwise involved in the offerings. The essence of these claims is that mortgages in the securitization pools were misrepresented when sold. Observers told the Bankerthey wonder if this will cause banking regulatory agencies to raise capital, reserve and liquidity requirements …

Congressional CU hearing moved to Thursday

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WASHINGTON (12/7/10)--A Senate Banking Committee hearing on the "State of the Credit Union Industry" has been rescheduled for Thursday. National Credit Union Administration (NCUA) Chairman Debbie Matz will be the sole witness during the hearing. The hearing was originally scheduled for 2:30 p.m. ET today. Sources said that the hearing was moved from its original Tuesday slot due to scheduling conflicts, as the impeachment trial of a federal judge and other quorum calls would likely take up much of the time. A Senate banking subcommittee had also scheduled a hearing for Wednesday, so Thursday was the best chance for the hearing to be held. The U.S. Congress has not held a credit union industry-specific oversight hearing in several years. The Thursday hearing is likely to probe the general health of natural-person credit unions, as well as the state of corporate credit unions and the NCUA's actions to restore liquidity. In the NCUA's assessment, the chairman will give a broad overview of the financial condition of the industry and NCUA's regulatory and supervisory efforts to keep credit unions safe, sound and continuing to serve consumers.

Inside Washington (12/03/2010)

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* WASHINGTON (12/6/10)--Saying there was more disclosure and less understanding than ever, President Barack Obama’s top consumer adviser said on Thursday the newly formed Consumer Protection Bureau should seek to make financial products more understandable for consumers rather than serve as a clearinghouse for cumbersome regulation. Speaking before the Consumer Federation of America Elizabeth Warren said: “It is this simple: No customer should be asked to take out a loan without knowing the costs or the risks of the deal. And every customer should be able to compare different financial products straight up. Regulations should be about making sure that customers have the information they need to make the decisions that are right for them.” As an example, Warren cited the Credit Card Accountability Responsibility and Disclosure Act She said that although consumers are better offer after the legislation, complex pricing schemes drive up costs for both consumers and financial institutions. “Right now, there are a lot of lawyers who are working overtime to figure out how to render the CARD Act rules ineffective,” Warren said. “At the same time, consumers look over their credit card terms and still see pages of fine print and wonder what is buried in there.” Warren said the Consumer Protection Bureau has an opportunity to define clear goals and set a direction that is good for families, competition and the economy. CUNA SVP and Deputy General Counsel Mary Dunn also addressed the CFA conference. Credit unions with less than $10 billion in assets will be under CFPB rules, but the prudential federal regulator, the National Credit Union Administration, will enforce them ... * WASHINGTON (12/6/10)--The Internal Revenue Service Friday issued the 2011 optional standard mileage rates used to calculate the deductible costs of driving for business, charitable, medical or moving purposes. Beginning on Jan. 1, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 51 cents per mile for business miles driven; 19 cents per mile driven for medical or moving purposes; and 14 cents per mile driven in service of charitable organizations. A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates ...

NCUA notes proactive approach to crisis in 2008-09 report

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ALEXANDRIA, Va. (12/6/10)—The National Credit Union Administration (NCUA) in its 2008-2009 annual report noted that its “proactive approach” to the financial crisis that threatened both the credit union system and the economy as a whole “reaffirmed public trust in the credit union system’s safety and soundness, positioning credit unions to emerge from the crisis with public confidence intact.” The report, entitled Stability Through the Crisis, serves as the NCUA’s official report to the President and Congress, and covers the NCUA and credit union operations. The report also tabulates 10 years of financial trends for credit unions and the National Credit Union Share Insurance Fund, the NCUA said in a release. The NCUA added that the report also carries forward the complete audited financial statements of all funds managed by the NCUA. The proactive approach, according to the NCUA, included actions to stabilize the corporate credit union system such as increasing its Central Lending Facility (CLF) lending limit to $41.5 billion and creating the Temporary Corporate Credit Union Liquidity Guarantee Program. The NCUA also increased the federal member share account limit to $250,000 and helped the corporate system “continue to meet the needs of its member credit unions” by conserving the two largest corporates, U.S. Central FCU and Western Corporate FCU, in 2008. The agency followed up on those actions in 2009 by creating the Temporary Corporate Credit Union Stabilization Fund to help cover corporate losses and creating new corporate credit union rules to prevent such losses from happening again. The NCUA’s experience during the “years of crisis” showed “the value of rigorous regulation, diligent oversight, and a robust insurance fund,” NCUA Chairman Debbie Matz said. The NCUA’s increased supervision “contributed significantly to the credit union system’s ability to withstand the extraordinary economic shocks over the past two years. Working together, our proactive approach reaffirmed public trust in the safety and soundness of credit unions, and positioned the industry to emerge from the crisis in the coming years,” she added. For the full release, use the resource link.

Deficit dropping proposal fails to move forward

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WASHINGTON (12/6/10)--A comprehensive deficit reduction plan that could trim nearly $4 trillion from the $13.8 trillion U.S. national debt over the next nine years failed on Friday to secure the 14 votes needed to move on to Congress. The deficit reduction plan gained 11 of a possible 18 votes. President Barack Obama in a statement said that he and his economic team would study many of the proposals contained in the plan in the coming weeks as they develop their budget and priorities for 2011. Credit Union National Association Vice President of Legislative Affairs Ryan Donovan said that CUNA "does not expect Congress to consider the Commission's report before the end of the year." The plan, which was developed by Obama's fiscal commission, advocated cutting military spending, increasing the retirement age from 67 to 69, and other spending reforms. Most importantly for credit unions, the plan recommended significant cuts in tax expenditures related to home mortgages, healthcare, capital gains, and dividends. The credit union tax exemption also fell under the broader umbrella of “tax expenditures.” The plan, however, did not mention the credit union tax exemption by name. Credit Union National Association (CUNA) President/CEO Bill Cheney said that the credit union tax exemption “is one of the best investments that this nation makes for the more than 90 million Americans that are credit union members. But if the Deficit Commission’s plan becomes law, that solid investment would be wiped out -- which would be disastrous for all consumers.”

Fed Interchange proposal on its way

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WASHINGTON (12/6/10)—Federal Reserve Governor Elizabeth Duke last week hinted that a comprehensive proposal aimed at addressing interchange fees and debit card transaction routing would be released for comment “soon.” Duke, who made the remarks during a Federal Reserve Bank of Philadelphia Payment Cards Center Conference last week, did not give any further information on the date. However, Duke said that she is “aware of the high level of interest” in interchange fees and transaction routing, and recognizes the importance of the statute and its implementation for the future development of the payment card industry. Under the terms of the Dodd-Frank Act, the Fed is required to set the interchange fees paid to financial institutions by merchants. The Credit Union National Association (CUNA) has estimated that up to 67% of credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenues by 40%. CUNA is discussing the interchange issue with the Fed and has also reached out to Treasury officials to discuss how various debit card-based government benefit programs could be affected by the pending interchange regulations. Democratic Maine Reps. Mike Michaud and Chellie Pingree last month urged the Fed to recognize the pro-credit union protections that were built into the Dodd-Frank Act. "While the law is clear that small issuers with $10 billion in assets or below are exempt from the debit interchange transaction regulations, they are not exempt from the impact that regulations on institutions above $10 billion in assets will have on small issuers," the representatives said in a joint letter. For Duke’s full statement, use the resource link.

30- 15-year mortgage rates continue slow climb

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WASHINGTON (12/5/10)--The average rate on both 30-year and 15-year fixed-rate mortgages rose again last week, continuing a gradual rise from record lows that began in mid-November. As reported in Freddie Mac's most recent mortgage rate survey, the rate on 30-year mortgages averaged 4.46% and 15-year mortgages averaged 3.81%. Those mortgage rates averaged 4.40% and 3.71% last week, respectively. Both five-year and one-year adjustable rate mortgages remained low, but increased, with average rates of 3.49% and 3.25% reported. While the mortgage rates remained low, Freddie Mac Vice President/Chief Economist Frank Nothaft noted that house price indices are “trending downwards." For the full release, use the resource link.

Agencies issue guidelines on real estate appraisalsevaluations

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WASHINGTON (12/3/10)—The National Credit Union Administration (NCUA), in conjunction with other federal financial institution regulators, has emphasized that financial institutions are responsible for selecting appraisers and people performing evaluations based on their competence, experience, and knowledge of the market and type of property being valued. The NCUA and the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision in guidance released on Thursday also noted that financial institutions should demonstrate the independence of their processes for obtaining property values, and adopt standards for appropriate communications and information-sharing with appraisers and people performing evaluations. The NCUA and related regulators, who comprise the Federal Financial Instituions Examination Council (FFIEC) also called on financial institutions to maintain strong internal controls to ensure reliable appraisals and evaluations, and added that those institutions are responsible for monitoring and occasionally updating valuations of collateral for existing real estate loans and for transactions, such as modifications and workouts. The FFIEC guidelines, in the works for more then two years, replace guidance that was issued in 1994 and incorporate recent supervisory releases on appraisal practices. The new release also updates the guidance to better reflect changes in technology that have occurred during the last 16 years. “Financial institutions should review their appraisal and evaluation programs to ensure they are consistent with the guidelines,” an FFIEC release said. The new guidance was first proposed by the regulators in 2008, and CUNA in early 2009 said that credit unions were already taking "the necessary safeguards to ensure the integrity of the appraisal process" and were "meeting the expectations outlined in the guidelines." For the guidance, use the resource link.

Fed CUNA continue discussions of credit insurance proposal

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WASHINGTON (12/3/10)--Representatives from the Federal Reserve's Division of Consumer and Community Affairs told the Credit Union National Association on Thursday that they were interested in credit unions' concerns regarding proposed consumer disclosures for credit life insurance and credit disability insurance under the Truth in Lending Act. The Fed representatives during their meeting with CUNA Senior Assistant General Counsel Jeff Bloch, CUNA Counsel for Special Projects Michael Edwards and CUNA Mutual representatives Christopher Roe, Larry Blanchard, and Richard Fischer also expressed interest in possible alternatives to the proposed disclosures that would provide the information in a more clear and objective manner. CUNA and CUNA Mutual have criticized the proposed Fed disclosures, saying that they go well beyond ensuring that consumers are informed about these products, instead casting these products in a strictly negative light, and strongly discouraging consumers from purchasing them. Edwards stressed that the meeting regarding the Fed's credit life and credit disability insurance proposal is part of an ongoing process, and added that the Fed indicated willingness to continue its dialogue with CUNA and CUNA Mutual. The Fed also asked for additional information about credit insurance products and the related credit insurance consumer disclosures that are currently required by State insurance regulations. Bloch added that the credit life provisions are part of a more comprehensive Regulation Z mortgage loan proposal, and CUNA during the meeting stressed to the Fed staff that these provisions are the most problematic within this proposal. Credit insurance will pay a specified amount of a consumer's loans in the event of disability or death. Consumers have received an estimated $2 billion in benefits from credit insurance group products over the past five years, according to industry data. The Fed's proposal is open for comment until Dec. 23, and CUNA has encouraged credit unions to comment to the Fed. To comment to the Fed via CUNA's Operation Comment, use the resource link.

NCUA OIG 2011 plan notes continuing upcoming ML reveiws

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ALEXANDRIA, Va. (12/3/10)—The National Credit Union Administration’s (NCUA) Office of the Inspector General (OIG) released its annual plan for 2011 and announced that it will continue its material loss reviews of the currently conserved Members United Corporate FCU and Southwest Corporate FCU in 2011 to determine the causes of their failures and assess the NCUA’s own supervision of these credit unions. The NCUA earlier this year took control of $9.5 billion in assets Southwest and $7.4 billion in assets Members United has repackaged their legacy assets, along with the legacy assets of other previously conserved corporates, into guaranteed notes that are being sold on the open market. A pair of failed natural person credit unions, Beehive CU and Certified FCU, will also be examined by the OIG during 2011. As many as 12 additional material loss reviews may be undertaken during the year, the OIG said. The OIG plan added that the NCUA may also look into how many credit unions are exceeding the current member business lending cap and whether the NCUA’s current net worth requirements “adequately measure the safety and soundness of natural person credit unions.” The amounts of foreclosures that are retained by credit unions could also be analyzed by the NCUA OIG in 2011. The OIG also plans to examine the NCUA’s own programs in 2011 by reviewing the National Credit Union Share Insurance Fund, the NCUA’s Operating Fund, the Central Liquidity Facility, the Community Development Revolving Loan Fund, and the Temporary Corporate Credit Union Stabilization Fund. For the full OIG plan, use the resource link.

IRS releases small biz healthcare tax credit guidance

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WASHINGTON (12/3/10)--The U.S. Internal Revenue Service (IRS) has released guidance on a small business health care tax credit that “is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have.” The guidance, according to the IRS, “addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multiemployer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.” The IRS said that the tax credit is available to small businesses that pay a minimum of half of the health care premiums for their individual employees. The credit “is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers,” according to the IRS. The credit may be claimed for the 2010 through 2013 tax years “and for any two years after that,” the IRS said. The maximum credit, which totals 35% of premiums paid by an eligible small business and 25% of the premiums paid by an eligible tax exempt organization, will go to employers with 10 or fewer full time employees. The maximum credit will increase to 50% and 35%, respectively, in 2014. Businesses with 25 or more full time employees or that pay an average of $50,000 per year to their employees will not be eligible for the credit, according to the IRS. Credit unions that qualify for the credit will get the refundable tax credit by filing a newly revised Form 990-T, even if they don't file the 990-T for any other reason. CUNA will provide additional guidance in coming weeks on this new tax credit for tax-exempt organizations, which was included in the 2010 Affordable Care Act. For more on the credit and how to apply for the credit, use the resource link.

Inside Washington (12/02/2010)

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* WASHINGTON (12/3/10)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said in an interview last month that the agency will renew efforts to insure new charters, with an emphasis on “traditional” banking,” rather than commercial real estate investments and brokered deposits. Bair’s comments, reported in American Banker’s Editor at Large column Dec. 2, indicating a change in direction by the FDIC, which has approved just two banks for deposit insurance this year. Just nine charters were approved in 2009, a drop from 101 in 2008. Bair indicated the FDIC may not have been as cautious as it should have been in approving charters before the financial crisis. Going forward, she said the agency will look for banks with solid core deposits, diversified business plans and qualified management. In another interview, Christopher Spoth, senior deputy director in the FDIC’s division of supervision and consumer protection, echoed Bair’s thoughts when he said the agency would encourage traditional community bank proposals that focus on lending to local small businesses, and gathering deposits from the community. * WASHINGTON (12/3/10)--What con artists do best is trick consumers into parting with money or divulging personal information that can be used to commit fraud. To help test people's knowledge about financial scams, the Fall 2010 issue of FDIC Consumer News, published by the Federal Deposit Insurance Corp., features a quiz on common frauds and their warning signs. Other timely articles discuss FDIC insurance coverage, solutions to mortgage and other debt problems, “credit protection” offers, student loans, ways to save money at tax time, and automated overdraft payment programs. The Fall 2010 edition can be read or printed at FDIC Consumer News, or to find current and past issues of FDIC Consumer News, or request paper copies by contacting the FDIC's Public Information Center toll-free at 1-877-275-3342, or publicinfo@fdic.gov, or by writing to the FDIC Public Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, VA 22226. * WASHINGTON (12/3/10)--The Federal Reserve Board on Wednesday posted detailed information on its public website about more than 21,000 individual credit and other transactions conducted to stabilize markets during the recent financial crisis between December 2007 and July 2010 (American Banker Dec. 2).The disclosure was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Many of the transactions, conducted through a variety of broad-based lending facilities, provided liquidity to financial institutions and markets through fully secured, mostly short-term loans. Financial institutions of all sizes looked to the Fed for during the height of the financial crisis. For example, to sustain the mortgage and housing markets and lower longer-term interest rates, the Fed bought $1.25 trillion in agency-mortgage-backed securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae between January 2009 and March 2010. Financial firms taking part in this program included Barclays Capital, Merrill Lynch, PNB Paribas and Deutsche Bank Securities. The central bank also approved more than 4,000 transactions through its Term Auction Facility, with big bank such as Wells Fargo & Co., Chase Bank, and Bank of America Corp., taking part. Mid-size community banks Fifth Third Bank, Keybank and Sterling also participated in the program. * WASHINGTON (12/3/10)--Regulators will complete a study by mid-2011 to determine how much additional capital banks will have to hold under Basel III standards (American Banker Dec. 2). At a two-day meeting of the Basel Committee on Banking Supervision, regulators agreed to conduct the study to define how much extra systemically risky capital that banks would have to hold in addition to the capital and liquidity requirements under Basel III. The capital would be loss-absorbing even if the bank was in danger of failing. The committee gathered to finalize the Basel III rules, which were agreed upon in July by the committee’s oversight body, Central Bank Governors and Heads of Supervision. Leaders of the Group of 20 nations approved the Basel III rules at their annual summit in Seoul in last month. The final text of the rules will be published at the end 2010.

Fed National mortgage servicing standards should be considered

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WASHINGTON (12/2/10)--A national set of standards for mortgage servicers should be considered as a response to past and present mortgage industry issues, Federal Reserve Board Governor Daniel Tarullo said on Wednesday. Tarullo spoke before a Wednesday Senate Banking Committee hearing entitled "Problems in Mortgage Servicing From Modification to Foreclosure." Treasury official Phyllis Caldwell, Federal Deposit Insurance Corp. Chairman Sheila Bair, acting Federal Housing Finance Agency Director Edward DeMarco, and acting Comptroller of the Currency John Walsh also testified during the hearing. Overall, Tarullo said, “broader solutions are needed both to address structural problems in the mortgage servicing industry and to accelerate the pace of mortgage modifications or other loss mitigation efforts. Tarullo also called on both the U.S. Government and the broader finance industry to pay greater attention “to the lagging incidence” of home mortgage modifications. “Homeowners who try to obtain a modification of the terms of their mortgages are all too frequently subject to delay and disappointment, while those who simply stop paying their mortgages have found that they can often stay in their homes rent free for a time before the foreclosure process moves ahead. Moreover, many homeowners believe, reportedly on the basis of communications from servicers, that the only way they can qualify for modifications is by stopping their mortgage payments and thus becoming delinquent,” Tarullo added. “The dominance of foreclosures over modifications raises macroeconomic concerns,” Tarullo said, adding that foreclosures are costly to all concerned parties and “can delay a recovery in housing markets and the broader economy.” Caldwell also called for mortgage servicers to “increase efforts in helping borrowers avoid foreclosure through modification, as well as other alternatives to foreclosure, such as short sales.” More than 1.3 million of the 30 million mortgages guaranteed by Fannie Mae and Freddie Mac “are more than 90 days seriously delinquent,” according to DeMarco.

CUNA to meet with Fed on credit life insurance concerns

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WASHINGTON (12/2/10)-Representatives from the Credit Union National Association (CUNA) and CUNA Mutual will discuss proposed credit insurance disclosures with the Federal Reserve this morning as part of its ongoing effort to address concerns regarding Regulation Z changes. The meeting will cover credit union concerns regarding the Fed's comprehensive proposal that would impose new consumer disclosures for credit life insurance and credit disability insurance under the Truth in Lending Act. Similar disclosures are currently required by State authorities, as insurance usually falls under state jurisdiction. CUNA and CUNA Mutual have criticized the proposed Fed disclosures, saying that they go well beyond ensuring that consumers are informed about these products, instead casting these products in a strictly negative light, and strongly discouraging consumers from purchasing them. CUNA Senior Assistant General Counsel Jeff Bloch said that the credit life insurance proposal is “the most problematic part” of a comprehensive Fed mortgage loan proposal. Previously, the U.S. Internal Revenue Service questioned whether credit life insurance products and other related products were "substantially related" to credit unions' tax exempt purpose -- and should therefore be subject to Unrelated Business Income Taxation (UBIT) -- by arguing that these products were overpriced relative to theoretical alternative products. However, both federal courts which have reviewed the IRS's position concluded that credit insurance products promoted thrift and therefore should not be subject to UBIT. Credit insurance will pay a specified amount of a consumer's loans in the event of injury or death. Consumers have received an estimated $2 billion in benefits from credit insurance group products over the past five years, according to industry data. CUNA through a grassroots operation called "Operation Comment," is encouraging credit unions to report their concerns with the proposals to the Fed. CUNA Mutual has also taken on a similar operation. CUNA and CUNA Mutual will also hold an audio conference on these disclosures on Dec. 8. For more on the audio conference, use the resource link.

Inside Washington (12/01/2010)

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* WASHINGTON (12/2/10)--The final report from President Barack Obama’s fiscal commission released on Wednesday includes more politically sensitive issues for Americans, including cuts in military spending, a higher retirement age and tax reform (The Washington Post (Dec. 1). But so far, commission chairs—former U.S. Sen. Alan K. Simpson, a Republican, and Erskine B. Bowles, a Democrat and former White House Chief of Staff under President Bill Clinton--have been unable to garner support from the panel’s elected officials, an indication of the potential for political backlash that such issues hold (New York Times Dec. 1). A final vote by the panel’s 18 members had been delayed until Friday. The proposal includes cutting $1.6 trillion from Obama's proposed budgets by 2020 and reducing overall government spending to less than 22% of the nation's gross domestic product. The plan also proposes raising taxes by nearly $1 trillion by 2020 through reforms that could cost the average taxpayer $1,700 annually. While the report names tax expenditures as one debt decreasing measure, the credit union tax exemption is not specifically cited. Still, both Credit Union National Association President/CEO Bill Cheney and National Credit Union Administration Chairman Debbie Matz have addressed the tax issue, noting that removing credit unions’ tax exemption would be a grave mistake. Among the reforms on the table are elimination or reductions of the deduction for home mortgage interest; the tax-free treatment of employer-paid health insurance; and preferred rates for capital gains and dividends … * WASHINGTON (12/2/10)--Federal Reserve Bank of St. Louis President James Bullard on Monday voiced concern for funding of a consumer protection office established under regulatory reform laws, saying it was not based on a careful assessment of the bureau’s needs (Bloomberg.com Dec. 1). The Consumer Financial Protection Bureau is to be funded and housed within the central bank with an independent leader. The bureau has been given responsibility for writing consumer protection rules and regulations that apply to all banking institutions. The bureau’s rule-writing authority will extend to institutions that have not historically fallen under federal oversight. These institutions will include check cashers, payday lenders, money transmitters, pawn shops and other entities that are viewed as part of the “shadow” network of consumer credit. Harvard law professor Elizabeth Warren has been named by President Barack Obama as an adviser to help shape the new consumer agency. In a press release from the district bank, Bullard said the Fed’s only interaction with the new bureau is to fund it. He also expressed concern that a mechanism does not exist for changing the amount of funding in the future … * WASHINGTON (12/2/10)--Bentley University on Tuesday won the seventh annual national College Fed Challenge, a competition that encourages students to learn about the U.S. economy, monetary policymaking, and the role of the Federal Reserve System in the economy. The team from Waltham, Mass., represented the First Federal Reserve District and included Christina J. Harstad, Satyajeet Jadhavrao, Pranay Kumar Jain, Peter Jurik, David Norrish, Victoria Tran, and faculty advisors David Gulley and Aaron Jackson. The finals were held in the boardroom at the Board of Governors in Washington D.C. as the climax to district competitions in which more than 100 teams competed throughout the country. Other nation finalists were: second place, Lafayette College; third place, Northwestern University; fourth place, Rutgers University at Newark; and fifth place, Virginia Commonwealth University. The College Fed Challenge is a team competition for undergraduate students. Teams play the role of members of the Federal Open Market Committee, the Fed’s monetary policymaking body …

IRS says revised IRA documents coming soon

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WASHINGTON (12/2/10)—The Internal Revenue Service (IRS) has now officially indicated that it will be releasing revised model Individual Retirement Account (IRA) documents soon. The IRS last week released Revenue Procedure 2010-48, providing amendment guidance on model and prototype IRA documents and information on submitting prototype documents to the IRS for approval. Most credit unions use versions of the model IRA documents to establish IRAs for their members. In this guidance, the IRS states that although it will not require model document IRAs to be amended for the law changes listed in Rev. Proc. 2010-48, it “recommends adoption of the latest model IRAs.” The IRS expects to issue revised model documents shortly, but credit unions can continue to use the current versions of the model agreements until the revised versions are issued. Seventeen IRA-related law changes have occurred since the IRS last amended its model IRA documents. Many of these law changes are significant, including eliminating the Roth IRA conversion eligibility requirements, allowing Roth IRAs to accept rollovers from employer-sponsored plans, and allowing nonspouse beneficiaries to roll over employer-sponsored plan assets to IRAs. “We anticipate that credit unions will follow the IRS recommendation to adopt the latest model IRAs, as the current model IRA agreements are outdated due to the large number of law changes,” said Dennis Zuehlke, compliance manager for the Ascensus Middleton, Wisconsin-based IRA programs, which serve 80% of credit unions offering IRA programs. Providing up-to-date IRA documents is critical to IRA program compliance, and by adopting the latest model IRAs and amending existing IRA agreements, credit unions can provide their members with accurate IRA documents that reflect the current state of the law, Zuehlke said. The IRS is not requiring amendments to prototype IRA documents either, but does provide amendment guidance in Rev. Proc. 2010-48 and sample language (List of Required Modifications) on its website.

Rep. Maloney praises NYC CU in House statement

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WASHINGTON (12/2/10)--The East River Development Alliance’s (ERDA) 2010 founding of its namesake credit union, the first credit union chartered in New York, NY in 10 years, was hailed by Rep. Carolyn Maloney (D-N.Y.) on the House floor this week. Maloney stood before the House to recognize the ERDA’s positive contributions to the western areas of Queens, NY. The credit union, founded by ERDA and known as ERDA FCU, focuses on residents of the Woodside, Ravenswood, Astoria and Queensbridge neighborhoods of New York City, and, as stated by ERDA Founder and President Mitchell Taylor earlier this year, “makes resident empowerment and ownership real.” Maloney in her remarks praised the credit union for helping “more than 150 low-income New Yorkers find good jobs.” Maloney also cited New York City Mayor Michael Bloomberg’s 2010 statement that ERDA FCU is indicative of the big impact that can be achieved by credit unions working with public housing residents. The credit union officially opened for business in April of this year.