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NCUA urges courts to continue its suits vs. Goldman RBS

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LOS ANGELES (2/14/12)--The National Credit Union Administration (NCUA) Friday filed consolidated briefs opposing motions to dismiss its lawsuits in federal courts in California and Kansas against Goldman Sachs & Co. and RBS Securities for selling residential mortgage backed securities (RMBS) that caused losses to U.S. Central FCU and the Western Corporate FCU.

Dismissals had already been tentatively ruled in the U.S. District Court for the Central District of California--Western Division (Los Angeles) in another suit NCUA had brought against RBS Securities (News Now Feb. 1).

In the case against Goldman Sachs, filed in that same court in Los Angeles over 13 RMBS certificates, NCUA's response reiterates its arguments that the loan originators "systematically disregarded their stated underwriting standards and routinely made loans where no or insufficient compensating factors existed." When the loans were repackaged into RMBS, "those deficiencies caused the certificates to be worth far less than their purchasers paid. In light of such pervasive disregard, the stated underwriting standards might as well not have existed."

NCUA also noted that "virtually every court addressing claims concerning similar RMBS offerings has denied motions to dismiss--16 in all…In six prior cases, underwriter Goldman raised and lost the identical arguments it advances here, against complaints with less-detailed allegations than NCUA's complaint."

The agency challenged the assertion that statutes of limitations have run on its claims. It also noted its federal claims are timely because they were brought within three years of NCUA's placing the credit unions into conservatorship and that Congress' "extender statute" allowed NCUA more time to bring the claims.

The crux of NCUA's arguments is that the securities documents materially represented compliance with the stated underwriting standards and that its allegations in the Goldman case are stronger than those upheld in numerous RMBS cases. The agency alleges actionable misrepresentations and omissions regarding loan-to-value ratios and credit enhancement, and said the credit unions could not reasonably have discovered the falsehoods before March 20, 2008.

It also said that two tentative rulings by the court in California on the RBS case are "erroneous, in light of the persuasive reasoning of numerous other courts" and in light that Goldman already has paid the largest fine in history to resolve RMBS fraudulent sales claims, while another RBS has "not (yet) been found to have engaged in such misconduct."

NCUA's response to the motion to dismiss its case against RBS Securities in the U.S. District Court for the District of Kansas, also filed Friday,  uses similar arguments, alleging "actionable misrepresentations and omissions about systematic disregard of underwriting standards" in the sale of securities to U.S. Central.

"Virtually all courts to address similar issues have held that an RMBS purchaser can state a claim under the securities laws by alleging that the loans backing an RMBS were originated in systematic disregard of the stated underwriting standards," said NCUA's response to the motion to dismiss the case in Kansas.

NCUA has filed a total of five lawsuits related to the RMBS: two against RBS Securities, one against Goldman Sachs, one against JP Morgan Chase, and one against Wells Fargo Securities LLC (formerly Wachovia Capital Markets LLC).

In addition to the tentative ruling from the court in California that indicates a dismissal is likely in the RBS Securities suit there, the U.S. District Court in Kansas overseeing the Wachovia case has ordered NCUA to show cause why that suit shouldn't be dismissed for lack of prosecution (News Now Feb. 6).

NCUA's suits against Citigroup and Deutsche Bank Securities were settled for a combined $165.5 million, with neither bank admitting any fault (News Now Nov. 15).

CUNA to IWash PostI CUs planning for end of GSEs

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WASHINGTON (2/14/12)--Credit unions already are planning for what could happen when the government winds down Fannie Mae and Freddie Mac, the most active buyers of residential mortgages on the secondary market. Losing the mortgage giants would impact smaller financial institutions, the Credit Union National Association (CUNA) told the Washington Post Sunday.

"Credit unions individually are fairly small in this business," said Bill Hampel, CUNA chief economist in the article. "But if there's no publicly supported vehicle to secondary markets, each credit union would be so small that they would not get good pricing or access. And that would cost credit union members."

CUNA is talking with the Treasury Department about the future of the two government-sponsored enterprises, but credit unions also are working on contingency plans, Hampel told the newspaper. 

One solution could be greater reliance on credit union service organizations (CUSOs), he said.  CUSOs enable institutions of all asset sizes to make loans by collectively managing the risks. 

Traditionally, credit unions keep most of their mortgage loans on their books. CUNA estimated that credit unions sold between 25% and 40% of their mortgage loans before the financial crisis, and those percentages increased when interest rates dropped and spurred demand for mortgages.

Since private investors are inactive in acquiring mortgages, credit unions and other originators are questioning how the industry will function without Fannie and Freddie or without government support.

Juli Anne Callis, CEO of National Institutes of Health (NIH) FCU, Rockville, Md., also was interviewed for the story. She noted that private investors haven't stepped up yet although there are discussions.

For the full article, click the resource link.

aSmarterChoice makes IMSN MoneysI Best money websites

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NEW YORK (2/14/12)--The "Find a Credit Union" site, which now points to credit unions'  aSmarterChoice, org, has made MSN Money's list for the "102 best money websites." Find a Credit Union was one of five sites in the saving and investing category, none of which were bank sponsored sites.

"Credit unions offer better rates on savings and on loans than most banks. If you're not already a member, this handy tool helps you find credit unions you may be eligible to join," said personal finance writer Liz Weston, in explaining why it's on her list.

Weston called the list "an incredibly personal list." "These are the sites I like, the ones I consistently turn to for good information, solid advice, unique perspectives, really cool tools and, in at least a few cases, good laughs," she wrote. "They're sites that consistently offer something their competitors don't, which makes them worth investing my scarcest resources: time and attention."

To view the full list use the link.  Find a Credit Union/aSmarterchoice is on page three.

Teenager killed in shootout with police outside CU

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WEST PALM BEACH, Fla. (2/14/12)--An 18-year-old who opened fire in the parking lot of a Florida credit union was shot and killed Friday afternoon by sheriff's deputies responding to a 911 call about a man firing shots in the air with a rifle.

Palm Beach County sheriff's office said the shooting took place at about 4 p.m. outside the West Palm Beach-based  Palm Beach County (PBC) CU when Christopher Brown, 18,  of Palm Springs, allegedly starting firing a rifle that had a high capacity magazine,  capable of storing  more than 50 rounds of ammunition (Palm Beach Post Feb. 10 and Feb. 11 and Feb. 10).

When deputies arrived, Brown allegedly fired shots at a deputy's cruiser, hitting it three times and flattening a tire, said Sheriff Ric Bradshaw (South Florida Sun Sentinel Feb. 11). The three deputies returned fire, and Brown died at the scene.

None of the deputies and no one inside the credit union were injured. The credit union was servicing about 10 members when the incident occurred.  Someone in the credit union made the initial 911 call, saying there was a man in the parking lot with a rifle.  One member told local reporters she was opening a savings account and thought the blasts were fireworks ( Feb. 10).

The sheriff's department said that the call possibly averted a larger tragedy. It was unknown whether Brown had intended to rob the credit union or why he was there.  A bomb squad was sent to check a backpack inside a car that was left running in the parking lot, but found nothing harmful in the backpack.

The deputies involved in the incident  have been placed on administrative leave, which is the routine procedure while the sheriff's office investigates the circumstances.

Pro Blockbuster award entries due April 11

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MADISON, Wis. (2/14/12)--The Credit Union National Association is accepting entries for Pro and Blockbuster Awards. The awards recognize outstanding league and league service corporation (LSC) communications efforts.

The deadline for submitting entries is April 11. Awards will be presented at the American Association of Credit Union Leagues (AACUL)/Governmental Affairs and Political Specialists (GAPS)/Communicators Conference in Washington, D.C., June 6-8.

This year marks the 34th year that the Pro and Blockbuster Awards have recognized outstanding league and LSC communications efforts.  Pro Awards honor the best in public relations and publications. Blockbuster Awards pay tribute to excellence in marketing and advertising. These awards are the highest communications awards bestowed on leagues and LSCs.

To enter, follow the entry guidelines described. Entries not submitted as directed may be disqualified.

All the information needed on the awards and how to submit entries is in the call for entries document sent to state leagues. Contact Richard Dines at or at 800-356-9655, ext. 6721, for more information.

Iowa CUs legreg conference kicks off today

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DES MOINES, Iowa (2/14/12)--The Iowa Credit Union League will hold its annual Legislative & Regulatory Issues Conference today and Wednesday in Des Moines.

More than 100 Iowa credit union representatives are expected to attend and learn more about the legislative and regulatory issues affecting the credit union industry.

Paul Begala, CNN political analyst, will be the keynote speaker today. He will dissect the Republican race for a presidential nominee, discuss Congress and the Obama administration, and examine whether a divided House and Senate will help or hinder both political parties as they look to grow their influence over the electorate ahead of the 2012 elections.

Other speakers include:

  • Bill Cheney, president/CEO of Credit Union National Association;
  • U.S. Rep. Tom Latham (R-Iowa);
  • Iowa Gov. Terry Branstad; and
  • JoAnn Johnson, superintendent of the Iowa Division of Credit Unions.
Additional sessions include a state legislative panel session led by Jack Kibbie (D-4) from the Iowa Senate and Stew Iverson (R-9) from the Iowa House of Representatives, and observations from Iowa's major reporters, including political reporters.

Ohio league valentine Why CUs love people like no other

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COLUMBUS, Ohio (2/14/12)--In recognition of Valentine's Day, the Ohio Credit Union League has offered six ways that credit unions love their members like no other financial institution.

"Most people would not use the word 'love' when describing their financial institution," said Paul Mercer, president of the league. "However, credit union members love the fact their financial well-being is what credit unions strive for, and that credit unions always have their best interest in mind. Members certainly feel the love in their wallets."

Here are six ways credit unions love their members:

  • Credit unions care about their members. Credit unions are not-for-profit financial institutions that exist to provide affordable financial products and services that better their members' lives. In fact, according to the Credit Union National Association, credit unions put $120 million dollars in the pockets of Ohioans last year (June 2010-June 2011) thanks to direct member benefits.
  • Credit unions love their members back. Credit unions return any profits they make back directly to theirs members. That translates to low interest rates on loans, better rates on saving, low fees, new products and convenient services.
  • Credit unions are not selfish. Not only do credit unions love their members, but they love the communities they serve. According to a survey by the league, 93% of credit unions in the state spent $674,000 to provide financial education in 2010.
  • Credit unions are romantic. Credit unions were created by working-class Americans who could not afford services provided by for-profit financial institutions. The grandparents or great-grandparents of many consumers helped found credit unions.
  • Credit unions are there when their members need them. Many credit unions belong to Shared Branching, a network of more than 4,400 branch locations nationwide. In Ohio, credit unions members can make fee-free transactions at more than 300 locations, making Shared Branching the fifth largest branch network in the state.
  • Credit unions don't break their members' hearts. Once a consumer joins a credit union, he or she is a member for life.

Iowa governor notes Dupacos small biz loan efforts

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DUBUQUE, Iowa (2/14/12)--Iowa Gov. Terry Branstad Friday  highlighted Dubuque-based Dupaco Community CU's role in helping an Iowa small business grow and create jobs.

Iowa Gov. Terry Branstad Friday noted Dupaco Community CU's role in helping the Unified Therapy Services grow and create jobs during a visit Friday to the award-winning business. From left: Rick Dusil, Dupaco business lending vice president; Gina Blean, Unified Therapy Services co-owner; Terry Branstad; Kelly Heysinger, Unified Therapy Services co-owner; Joe Hearn, Dupaco chief operating officer; and Bob Hoefer, Dupaco president/CEO.
Gina Blean and Kelly Heysinger, co-owners of Unified Therapy Services, met with Branstad and provided a tour of their business--a pediatric-focused outpatient therapy clinic.

Dupaco representatives Bob Hoefer, president/CEO; Joe Hearn, chief operating officer; Rick Dusil, business lending vice president; and David Klavitter, marketing senior vice president, participated in the Branstad event.

Unified Therapy Services launched in 2006 and has grown with the help of member business loans from Dupaco Community CU and assistance from the credit union's business lending team.

"I'm happy to see Iowa businesses grow, prosper and create jobs, with help from the Small Business Administration and Dupaco," said Branstad during his tour.

Blean and Heysinger were named the 2011 Iowa Small Business Persons of the Year by the U.S. Small Business Administration.

The clinic provides physical, occupational and speech language therapy services. Through several programs, Unified Therapy Services helps children dealing with everything from a sprained ankle or trouble pronouncing the "s" sound, to a diagnosis of autism or Down syndrome.

Unified Therapy Services started with three employees, and today has a staff of 26.

Dupaco Community CU President/CEO Bob Hoefer (middle) talks with Iowa Gov. Terry Branstad (right) during the governor's visit Friday with the 2011 Iowa Small Business Persons of the Year in Dubuque, Iowa. (Photos provided by Dupaco Community CU)
In the beginning, the clinic was in a leased 4,000-square-foot space. But Blean and Heysinger soon purchased a facility more than double that size. "And now we're outgrowing this," said Blean.

Branstad talked with employees of Unified Therapy Services upon arriving and also visited with patients.

Iowa Gov. Terry Branstad highlighted Dupaco Community CU role in helping an Iowa small business grow and create jobs in the state on Friday.

The Credit Union National Association and credit unions have been pressing for Congress to raise the member business lending limit to 27.5% of assets from the current 12.25% of assets. Doing so would provide $13 billion to lend to small business owners. Injecting that amount into the economy would create roughly 140,000 new jobs at no cost to the taxpayer.

CUNA also sponsored a Small Business Hike the Hill event in Washington, D.C. to support the MBL cap increase.

MnCUN column CUs ready to boost biz lending in 2012

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ST. PAUL, Minn. (2/14/12)--Minnesota credit unions increased their small-business lending in the fourth quarter 2011 amid stagnant bank lending, according to a column written by the  Minnesota Credit Union Network (MnCUN), which was published in an area business newspaper.

In a Finance & Commerce column titled, "Association Update: Credit unions prepared to boost lending in 2012," Mark Cummins, MnCUN president/CEO, contrasted credit unions' willingness to help small businesses with that of banks.

"Despite the need for businesses to grow, a Finance & Commerce article last week highlighted that bank lending stalled in the fourth quarter," Cummins wrote. "With the headline 'Lending goes nowhere in Q4,' the article stated that 'the obstacle to new loans remains largely about weak demand.' Even so, many credit unions have experienced the opposite, citing increased demand. Perhaps this issue deserves a second look.

"Credit unions are eager to increase their efforts to help Minnesota's small businesses obtain funds," he continued. "Minnesota credit unions' business lending activity increased by nearly 3% over the past quarter and 8% over the past year. They would like to increase their lending even more but are prevented from doing so by a cap that limits member business lending (MBL) activities to 12.25% of assets."

Credit unions nationwide have millions of dollars they could lend to job creators if Congress would repeal the regulations that prevent them from lending that money out, Cummins wrote.

"America's small businesses are the engine of growth for our nation's economy. Today, small businesses need more options, and credit unions are in a position to help," he concluded.

The Credit Union National Association (CUNA) and credit unions are pressing Congress to increase credit unions' MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said.

CUNA also sponsored a Small Business Hike the Hill event last week in Washington, D.C., in support of the MBL increase.

To read the column, use the link.

Fitch affirms Mid-Atlantic Corporates ratings after merger

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MIDDLETOWN, Pa. (2/14/12)--Fitch Ratings affirmed Mid-Atlantic Corporate FCU's ratings after the corporate's recent merger.

Mid-Atlantic Corporate in Middletown, Pa., and VACORP FCU, Lynchburg, Va., completed their merger and opened as a combined institution Feb. 6. Mid-Atlantic Corporate is the continuing charter and is maintaining its current location. Mid-Atlantic said that the merger, combining more than 800 credit union members and over $163 million in capital, creates one of the strongest corporates in the country (News Now Feb. 7).

Fitch affirmed the "A+" long-term Issuer Default Rating (IDR) and "F1+" short-term IDR of Mid-Atlantic Corporate (BusinessWire Feb. 9).

The ratings also reflect Mid-Atlantic's stronger capital, relative to other corporate credit unions, Fitch said.

Because of its successful capital-raising initiatives, Mid-Atlantic has met all the new regulatory requirements. The merged entity's total capital is roughly $176 million--including $16 million in retained earnings, Fitch said.

Mid-Atlantic is the fourth-biggest company in the U.S. corporate credit union network, with total assets of about $4 billion and serving more than 850 member credit unions.

CU System briefs (02/13/2012)

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  • SHEBOYGAN, Wis.  (2/14/12)--Sarah M. Gora, 33, of Sheboygan Falls, Wis., the former president of Midwest CU, was charged Friday with embezzling more than $100,000 from the credit union, falsifying loan documents and using a company credit card to purchase personal items (The Sheboygan Press Feb. 10). Gora was the only full-time employee at the Sheboygan-based credit union from June 2006 until March 2011. An internal audit revealed that $150,000 was taken from credit union funds and deposited into her account  in November 2010. Audits indicated that Gora allegedly violated rules by doubling the credit limit on her credit card and using it to make more than $62,000 in unauthorized charges. She allegedly paid the credit card balances by obtaining a car loan for $22,397 and refinancing the loan frequently over the years. She also allegedly applied for a home equity loan of $188,027, using her home for equity and completing the loan review and underwriting herself and allegedly providing false information about her credit score and the market value of the property. The home equity loan allegedly was used to pay off part of her car loan, which had risen to $62,156 …
  • YUMA, Ariz.  (2/14/12)--A Yuma, Ariz., couple was convicted Friday of a loan kickback scheme that helped cause the collapse of AEA FCU, which was placed into conservatorship in December by the National Credit Union Administration due to a large number of bad business loans ( Feb. 11). A Phoenix jury found William Liddle, former vice president of business lending at the credit union, guilty of 54 counts, including conspiracy and credit institution fraud. His wife Rhonda Liddle was convicted on 36 counts. William Liddle was accused of conspiring with businessman Frank Ruiz to approve suspicious business loans in return for nearly $1 million in kickbacks. The credit union is still operating. Sentencing was scheduled for May 21 for the Liddles. Ruiz will be sentenced in March …
  • ANNAPOLIS, Md. (2/14/12)--Maryland has recovered 43% of the jobs it lost during the recession, ncluding a net gain of 27,000 jobs in the first 11 months of 2011, Maryland Gov. Martin O'Malley told attendees at the Leadership Dinner of the Technology Council of Maryland Jan. 18. The event was sponsored by Tower FCU. O'Malley was introduced by Cyndy Scott, senior vice president of marketing at the credit union. Scott noted that Tower's growth parallels the governor's news. Tower experienced nearly 300% growth in the past decade, hired many employees and launched new technologies for members including Mobile Web Banking. (Photo provided by the Technology Council of Maryland) …

Corporate One Alloya to offer Fundtechs ACH platform

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COLUMBUS, Ohio and WARRENVILLE, Ill. (2/14/12)--Corporate One FCU, Columbus, Ohio, and Alloya Corporate FCU, Warrenville, Ill., will offer automated clearinghouse (ACH) transactions using Fundtech's platforms.

Both corporates said Fundtech's platform offers enhancements and pricing that is more favorable to their members.

"Price reductions will be most significant in one of the most fertile areas for credit unions growth--ACH for select-employee groups and small businesses," said Lee Butke, Corporate One's president/CEO.  "This is an area where credit unions can really see sizeable growth."

Also at both credit unions, Fundtech's platform replaces the APEX-ACH platform that was offered through U.S. Central FCU, the now-defunct wholesale provider of financial services to the corporate network.

"Our new ACH products provide a great framework to assist our members in moving off U.S. Central's platforms," said Kevin Brauer, Alloya senior vice president of member relations. "It also delivers an alternative for other credit unions seeking to change from their current providers."

Corporate One expects to have its members transitioned to the new platform by June 30.

Alloya said it expects to begin converting members in early summer.