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NCUA on appraisal documentation records retention

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ALEXANDRIA, Va. (2/21/08)—As part of a string of legal opinion letters released this week, the National Credit Union Administration (NCUA) advised credit unions about documentation required on real estate appraisals and records retention requirements. Each letter was in response to specific inquiries made by an individual credit union. A third letter on member business lending “direct experience” requirements (News Now Feb. 19) was posted on the agency Website at the same time. Regarding real estate appraisals, the NCUA said its rules do not require a credit union to have a checklist or narrative to document its review of an appraisal ( 12 C.F.R. Part 722). However, while not required, the practice is recommended in interagency guidance on independent appraisal and evaluation functions. In 2005, the NCUA, along with the other federal financial institution regulators, issued joint guidance, which stated in part that appraisal reviews should be documented in loan administration files, either in “checklist or narrative format.” It further stated that certain appraisals should be reviewed more comprehensively to assess the technical quality of the appraiser’s analysis prior to making a final credit decision, according to the NCUA. The NCUA opinion letter on records retention stated that a federal credit union may preserve original loan documents for outstanding loans to members, in an electronic format instead of a paper format. “The Electronic Signatures in Global and National Commerce (E-Sign) Act established a general rule of validity for electronic records and signatures for transactions, effective October 1, 2000, with records retention requirements effective March 1, 2001,” the letter said. It referred attention to Part 749 of the agency's rules and regulations, which describe obligations for federally insured credit unions to maintain a records preservation program and implements the E-Sign Act.

Compliance Advertising rates during volatile time

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WASHINGTON (2/21/08)—In a volatile rate environment, can a credit union marketing department make it’s best informed guess at where its board will set next week’s rates and advertise based on that prediction? The Credit Union National Association’s (CUNA’s) February Compliance Challenge quizzes, What’s a marketing department to do when a deadline for a newspaper ad runs ahead of a rumored rate change? The Challenge poses this situation: A credit union marketing department wants to place an ad in the local newspapers for Home Equity Lines of Credit (HELOC) the following week. Rumors running throughout the credit union indicate the board of directors may approve a reduction in the HELOC APR to 5.25% at its meeting early next week. The trouble is the ad deadline is now. May the marketing department assume that the board will reduce the APR for HELOCs to 5.25% and advertise that in the newspapers? No. No. No. The marketing department should not advertise a HELOC APR of 5.25% based upon an assumption because the board may not actually agree to reduce the rate at all or may not reduce the APR as low as 5.25%, CUNA compliance experts warn. Regulation Z (Section 226.16(a)), implementing Truth in Lending Act provisions, requires a credit union only to advertise credit terms that will actually be made available to members. For more on this and other credit union compliance issues, use the resource link below to take the Compliance Challenge.

Inside Washington (02/20/2008)

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* WASHINGTON (2/21/08)--Former depositors of Superior Bank, Hinsdale, Ill., were shut down by the U.S. Supreme Court Tuesday as they tried to reclaim losses they said the bank paid unfairly to shareholders. The court refused to hear the case, which depositors brought against the Pritzker family, a co-owner of the bank, and entitites such as the Federal Deposit Insurance Corp. The court’s decision not to hear the case upholds a decision an appeals court made last May in which plaintiffs were denied $20 million of the $31 million owed to the Pritzers after the bank went under in 2001 ... * WASHINGTON (2/21/08)--Lawmakers wrote a letter to Treasury Secretary Henry Paulson and Secretary of Education Margaret Spellings Friday urging them to ensure the liquidity of student loans available under the Federal Family Education Loan Program (FFELP). The lawmakers said they are concerned that lenders facing liquidity problems because of the credit crisis could affect long-term education financing. Nearly $60 billion in new FFELP loans will be needed for 6.7 million borrowers for the next school year. There have been several reports of lenders leaving FFELP because of the loans’ thin margins. College Loan Corp., one of the largest FFELP lenders, announced it will no longer participate in the program, the letter said ... * WASHINGTON (2/21/08--The Government Accountability Office (GAO) this week released its second of two reports that examines leveraging as it relates to federal housing and community and economic development programs. The report looks at the following programs: the Department of Housing and Urban Development’s (HUD) Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME), and HOPE VI programs; and the Treasury Department’s Community Development Financial Institutions (CDFI) Financial Assistance, Low-Income Housing Tax Credit, and New Markets Tax Credit programs. Specifically, the GAO said in a summary, the report examines the leverage measures HUD and Treasury reported for the selected housing and community and economic development programs, and the transparency of the data and methods used to calculate them. Also, the report studied the relevance of leverage measures in assessing the performance of the selected programs. The report also provided examples of how federal funds have been leveraged in the selected programs …