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CU System briefs (02/23/2011)

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* WHEELING, W. Va. (2/24/11)--The former CEO of the now defunct Central Valley FCU, Wheeling, W. Va., was sentenced Wednesday to nine years in prison for embezzling at least $5 million from the credit union. Bernie D. Metz, 58, pleaded guilty to embezzlement and money laundering charges in January 2010. She was arrested after it was discovered that more than $9 million was missing from the $17 million asset credit union. Officials said she diverted the proceeds to finance the building of a restaurant, home improvements, expensive cars for family members, and payment of credit card debt. Metz's husband, Everett, and their children will not face charges as a result of Metz's plea bargain. U.S. District Judge Frederick P. Stamp also ordered her to pay $4.85 million in restitution. After serving the prison term, she will be on supervised release for five years (News-Register Feb. 23) … * BANGOR, Maine (2/24/11)--Robert Ferguson, 48, of Lowell, Mass., was sentenced to 10 years and one month in prison for robbing ll banks and credit unions in Massachusetts, Rhode Island, Connecticut, New Hampshire and Maine between April and July 2010 (Bangor Daily News Feb. 22). The credit unions--Digital FCU, Tyngsboro, Mass.; Pawtucket CU, Warwick, R.I.; and Rockland FCU, North Attleboro, Mass.--were robbed in May. Ferguson, a bus driver, committed the robberies along his bus route. He pleaded guilty in October to four counts of bank robbery, two counts of credit union robbery, four counts of armed bank robbery and one count of armed credit union robbery. In each incident and sometimes armed with a realistic looking toy gun, he threatened to kill an employee. He personalized the crime on several occasions by telling managers of the financial institutions he followed them home and knew where they lived. He also was sentenced to five years of supervised release after the prison term and ordered to pay more than $81,000 in restitution … * ALTAMONTE SPRINGS, Fla. (2/24/11)--An ATM owned by CFE FCU and located in Altamonte Springs, Fla., was the site of two robberies by baseball-wielding bandits on Feb. 3 and Feb. 7. The robberies occurred at 8:25 p.m. and 9:50 p.m., respectively. In each incident, three men dressed in all black and wearing bandanas confronted customers. Both times the culprits were armed with a bat and ordered the customers to withdraw funds from the ATM. CFE FCU is based in Lake Mary, Fla., and has more than $1.1 billion in assets (Orlando Sentinel Feb. 22) … * LEAVENWORTH, Kan. (2/24/11)--Melinda K. Riddle, 38, of Leavenworth, Kan., has pleaded guilty to the theft of $56,000 from Mainstreet CU, where she worked during 2009. She was charged with theft and computer crime. Riddle admitted using the credit union's computers to withdraw money from members' accounts and from the credit union's accounts. She also obtained unauthorized loans and money from checks. Her sentencing is scheduled for April 1 (Associated Press Newswires Feb. 22) … * KANNAPOLIS, N.C. (2/24/11)--U.S. Rep. Larry Kissell (D-N.C.) helped Southern Select Community CU open its newly relocated branch in Concord, N.C., Feb. 14, reported the North Carolina Credit Union League (Weekly Update Feb. 18). In a press release to local media, Kissell called attention to the branch opening and indicated his support for credit unions and businesses. "Kissell has been a strong advocate for credit unions, allowing community members to safely invest their money local," said the press release. "Kissell has also pushed for increased access to capital for small businesses, which credit unions have played a vital role in providing," it continued. Southern Select Community CU President/CEO Huyla Jackson, noting that the Branchview location will help the credit union to deepen its commitment in Concord and serve members more conveniently, thanked Kissell for joining in the "special day of growth and celebration" (Weekly Update Feb. 18) …

Ask Governor show to feature CUs message

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HIGHTSTOWN, N.J. (2/24/11)--New Jersey credit unions will take their municipal deposit message to the airwaves today during NJ 101.5 FM’s “Ask the Governor” radio show during which Governor Chris Christie answers the questions of audience viewers. As a sponsor of the broadcast, credit unions will deliver the municipal deposit reform message four times during the one-hour show, which begins at 7 p.m. ET. Credit unions receive requests from municipalities, school boards and other county and local public entities to bid on depository relationships. These requests have multiplied in recent years as municipalities try to save taxpayer dollars, said the New Jersey Credit Union League (NJCUL) (The Daily Exchange Feb. 23). While municipal deposits are permitted in nearly one-half of the states, credit unions are specifically precluded from becoming eligible depositories for New Jersey local government entities under the state’s forty-year old Governmental Unit Depository Protection Act. NJCUL maintains that allowing local government entities to include credit unions among potential depositories would promote competition among providers of government banking services and save taxpayer dollars. Selecting a credit union as a depository would increase the likelihood that taxpayer dollars would be invested back to the respective communities through lending, promoting local economic development. “NJCUL is working hard to make sure everyone knows the benefits of municipal deposit reform, and this radio show is the first move in a push to make sure we get the support of New Jersey’s residents,” said Paul Gentile, NJCUL president/CEO.

Irish CUs to undergo series of stress tests

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DUBLIN, Ire. (2/23/11)--Ireland's Central Bank is sending financial examiners to 414 Irish credit unions holding nearly $16.4 billion in deposits to stress-test their capability to withstand different scenarios that could affect capital. The stress tests will take place over the next two months, said a Central Bank spokesperson (The Irish Examiner Feb. 21). The review covers all credit unions. However, work on the top 200 credit unions already is finished, said the Central Bank. Loan book reviews are due by the end of April, and stress-testing is scheduled for completion by the end of June. The analysis follows a review by Grant Thornton sponsored by the bank at the request of Finance Minister Brian Lenihan. Loan book reviews are part of the International Monetary Fund's bail-out program for financial institutions. The stress testing will determine the capacity of the capital position of individual credit unions to withstand certain stressed scenarios and to assess whether any additional capital is required, said the bank. The Irish League of Credit Unions has stopped conducting a series of public meetings because commitments were made to the league's position by Fine Gael and the Labor Party in their manifestos. Fine Gael's document matches the league's position almost word for word, said the article.

New Jersey BEST program gains speed

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NEW YORK (2/24/11)--The Building Economic Strength Together (BEST) program, an initiative to strengthen the connection between credit unions and the disabled community in New Jersey, recently completed its pilot year, and appears poised for growth in 2011. BEST, developed by the National Federation of Community Development Credit Unions (the federation), the National Disability Institute and Allies Inc., a New Jersey-based training group for the disabled, places disabled persons in credit union internships. The disabled community is widely unbanked or underbanked, according to Pamela Owens, director of education and training for the federation. “It’s a natural fit,” Owens said of the BEST program. “So many people with disabilities don’t have banking relationships and we’re a credit union organization. This program fits the credit union philosophy perfectly. It makes sense for everyone involved.” In its first year, the BEST program placed 20 interns at 13 credit unions in New Jersey. Four of those interns went on to accept permanent positions with the credit unions. Interns have worked in the credit unions human resources, marketing and accounting departments, and as tellers and member service representatives. Owens said that accommodating the interns was relatively easy because of Americans with Disabilities Act standards. The type of disability was not a factor in placing interns, either, she said. “It all comes down to the motivation of the intern and the willingness of the credit union to be accommodating,” Owens said. “I can honestly say the interns were extremely motivated and the credit unions went out of their way to accommodate them.” Owens told News Now BEST hopes to place 30 interns in 2011. On Monday, 11 interns will begin a two-week training program. On March 14, they will begin their internships at eight credit unions. Many of the credit unions are repeat participants from 2010. “We’ve had credit unions that have participated in three training cycles already,” Owens said. Job preparedness is one of the goals of the program, but just as important are its outreach efforts. “We want participants to know they can have checking and saving accounts and teach them how they can be financial independent,” Owens said. “We want to build the relationship between the disabled community and the credit union community.”

Mass. CUs set record in mortgage refis grow

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MARLBOROUGH, Mass. (2/24/11)--Sparked by a record number of mortgage refinancings in 2010, Massachusetts credit unions are experiencing a period of prolonged growth as they also benefit from a national trend of people turning to credit unions in the wake of the banking crisis. During the past decade, credit union assets in the state have been steadily growing, said Massachusetts Credit Union League President Daniel F. Egan Jr. (The Republican Feb. 13). “After the financial crisis, people have been paying more attention to the financial services industry, and many don’t like what they see,” Eagan told the newspaper. “These people are seeking alternatives.” Massachusetts credit unions saw a 4.6% increase in assets in 2009, and although the closing figures for 2010 haven’t been finalized, Egan told the paper he expects another year of healthy growth. “Credit unions’ growth is being fueled by their commitment to the local community,” he added. The article also mentioned three credit unions in the state: Freedom CU, Springfield; Holyoke (Mass.) CU and Polish National CU, Chicopee. To read the article, use the link.

Utah bill to redefine how CUs collect debt in default

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RIVERDALE, Utah (2/24/11)--A bill pending in the Utah Senate could determine if America First CU in Riverdale, Utah, will be able to collect tens of millions of dollars of unpaid debt in default it is owed by a Utah developer. Utah State Sen. Curt Bramble (R-16) introduced a bill--SB218--that if passed would overturn a Utah Supreme Court ruling and redefine how lenders can collect debts in default (The Salt Lake Tribune Feb. 22). Bramble told the newspaper he is revising the bill and could have a committee hearing as early as this week. At issue is a $36.4 million loan provided by the $5 billion-asset credit union to Anderson Development--one of the most prominent developers in the state--in 2007 to buy and develop 320 acres of land. As part of the deal, Gerald Anderson and Michael Hutchings--the two principals in Anderson Development--personally guaranteed payment, acting as co-signers of the loan, the paper said. When Anderson Development defaulted on the loan, America First filed a notice of default. However, instead of going through foreclosure and liquidating the land, the credit union tried to collect the $19 million balance from the guarantors--Anderson and Hutchings, the paper said. Hutchings is a former state judge. America First has been entwined in litigation with the two since 2009, the paper added. According to Scott Simpson, president of the Utah Association of Credit Unions, the credit union would not only have the loss associated with the specific loan but more important for financial institutions--specifically credit unions--is the bill's effect on the notion of a payment guarantee in the future. It would mean that a company could enter an agreement under a legal requirement and sign a payment guarantee, then be able to get out of the contract if the loan went into default. "The intrigue here is the bill only applies to credit union policy." Passage of the bill would be "very bad public policy," Simpson told News Now. "Not just credit unions are opposed to it. Banks and title-lending institutions are opposed as well," he concluded.

Belvoirs check product returns 1M to members

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WOODBRIDGE, Va. (2/24/11)--Since 2008, when it launched CUXcel, a checking account that offers a high dividend rate, with minimum balance requirement and rebates on ATM surcharge fees nationwide, Belvoir FCU has paid $1.02 million in returns to its members. To qualify for the highest dividend rate and ATM-fee rebates, members must meet four monthly requirements:
* Log into their online banking accounts; * Elect to receive electronic statements; * Have one direct deposit/electronic withdrawal into their checking account; and * Complete at least 15 debit card transactions.
By offering high dividends and rebating ATM fees, Belvoir FCU, Woodbridge, Va. is able to reward those members who fully use the credit union’s products and services.

Why CUs are getting into private student loans

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MADISON, Wis. (2/24/11)--Rising college education costs and an increase in students attending post-secondary institutions in the U.S. are fueling the demand for more private student loans, and credit unions reflect that trend. That assessment was made by Fynanz, a technology provider of custom private student lending programs and a CUNA Strategic Services provider. In the past two years, Fynanz garnered 4,600 new credit union member clients nationwide, Vince Passione, Fynanz CEO, told News Now. “We have seen since 2009 that this is a very good product for credit unions,” he said. “It’s a product that credit unions need and credit unions are using.” Last year, roughly $8 billion in private loans were issued in the U.S., with the average loan size being $12,000, and the typical student taking out two to three loans during an undergraduate college career, Fynanz said. There are three primary reasons why credits unions offer private student loans, Passione said:
* The loans fill members’ needs. In 2007, many lenders left the student financial-aid market because of the economic crisis. “Lots of capital left the market, so the supply went down while demand was going up,” he said. * The average age of a credit union member is 48 years old. Private student loans make it more likely that credit unions will attract younger members from Gen Y (19-24 year olds). * As credit unions start to look for new asset classes, this is a good product--a good return and a way to provide more service to members, Passione said.
What is sparking private student loan demand? “The main driver is the increase in college education costs,” Passione said. “The average cost for one year at a four-year private college is $35,460--with a 5.5 % compound annual rate of growth.” Also, the number of students going to colleges and universities is increasing, with about 19 million students enrolled nationwide last year. The enrollments don’t look like they are going down any time soon, Passione added. “Because more people are competing for grants and scholarships, there is more of gap between what is needed and what is available, which is driving private student loans,” he said. “Also, the unemployment rate is up and more people are in the market for higher education. More are going back to school because they are unemployed.” Passione sees two major trends in student lending: making payments while going to school and consolidation of student loans. The first trend is in-school loan servicing, in which a student makes a monthly while in school. Fynanz pioneered this concept, with a $25 monthly student payment, Passione said. There are three reasons for asking for a payment while the student is in school:
* It’s a reminder to the student they have a debt, and tells them what they borrowed and what it will cost to repay it at current interest rates. It tells them the conditions for paying off their debt. * A typical student is 19 years old and has no credit rating. The in-school payment helps the student build a credit rating. * Typically the loans are co-signed, so when the student makes a payment, then the co-signer gets a notice--which helps the co-signer remember the loan, so the co-signer (usually a parent) will help the student make payments.
Sallie Mae and First Marblehead, a bank and financial intermediary, recently adopted this concept, Passione said. The second trend is consolidation of student loans. Student loans are seasonal, issued at certain times of the year. Consolidation loans are cyclical, which helps create refinance opportunities to help students obtain better interest rates and helps them better manage their cash flow, just as a consumer would by refinancing a home, Passione said. What is the future of student lending? In addition to increasing educational costs and increasing enrollments, the U.S. economy is continuing to move from a manufacturing to a service economy, Passione said. “The unemployment rates of any people who hold college degrees--such as doctors and lawyers--will be less than for others who don’t in a full-fledged service economy,” he added. “The reason why is that most [U.S.] manufacturing jobs are gone.”

Relief fund set for CUs damaged in New Zealand earthquake

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CHRISTCHURCH, New Zealand (2/24/11)--Officials from the New Zealand Association of Credit Unions (NZACU), a member of World Council of Credit Unions (WOCCU), are still assessing damages caused to their member organizations by Tuesday's devastating earthquake that all but leveled Christchurch, the country's second largest metro area.
Click to view larger image Rescue workers and a helicopter work to extinguish a fire at a collapsed building in central Christchurch, New Zealand. The earthquake responsible is now considered one of the country's worst natural disasters. (AP Photo/New Zealand Herald/Mark Mitchell)
Given the widespread devastation in Canterbury Province, the news is better than might be expected, according to Henry Lynch, NZACU CEO. "We know of two credit unions damaged in Christchurch, but no lives were lost and no injuries occurred," said Lynch. "New Zealand Credit Union South (NZCUS) is our second largest member and Christchurch Emergency CU (CECU), which serves ambulance drivers and emergency medical personal, is one of the smallest." As expected, members of the $1 million asset CECU have been heavily involved in search and rescue efforts in the earthquake's aftermath. Meanwhile, $112 million asset NZCUS staff s have been arranging emergency cash loans for members affected by the quake and will soon begin an outbound calling program to each of its 23,864 members to see further assistance is needed, Lynch said. The 6.3-magnitude tremor, which struck the area Tuesday at 12:50 p.m. local time, killed at least 75 people and trapped hundreds more people in the rubble of destroyed buildings. Devastation within the earthquake zone has been widespread, according to Ramsey Margolis, executive director of the New Zealand Cooperatives Association. Communication in the zone is limited to text messaging and occasional e-mails, and homes and businesses throughout the region have been "munted," the New Zealand term for "destroyed." Fortunately, food and milk cooperatives have stepped forward to provide aid to earthquake victims, Margolis said. "Fonterra Cooperative Group members have diverted some of their milk collection tankers to bring in fresh water," Margolis said. "The meat co-ops are helping to feed people who've been displaced and farmers in general are offering to put people from the city up." Tuesday's earthquake--the second to hit the region in five months--caused significantly greater damage that the previous stronger one that struck in September because the epicenter was located closer to downtown Christchurch and occurred closer to the earth's surface. The quake destroyed Christchurch Cathedral, sending its steeple toppling into the street below, and broke off a 30-ton block of ice from the nearby Tasman Glacier. "It is just a scene of utter devastation," New Zealand Prime Minister John Key told local press. "We may well be witnessing New Zealand's darkest day." NZACU, which serves New Zealand's 21 credit unions, is taking steps to help its member institutions. The Worldwide Foundation for Credit Unions, part of WOCCU, has also stepped in and will work with NZACU's Canterbury Earthquake Relief Fund to channel donations to credit unions in need. WOCCU will contribute from its own disaster relief funds and invites interested individuals and credit unions to contribute to New Zealand credit union rebuilding and relief. "The global credit union movement has distinguished itself through unity and cooperation, especially in times of dire need," said Brian Branch, WOCCU executive vice president and COO. "New Zealand's credit unions have consistently been among the first to step forward to provide assistance to credit unions elsewhere in need. Now it is our turn to help them so that they, in turn, can better help their own members recover from this disaster." WOCCU will send its donation directly to the Canterbury Earthquake Relief Fund. Those interested in making a contribution to New Zealand's relief efforts can send their donation via check, credit card or wire to:

Worldwide Foundation for Credit Unions

5710 Mineral Point Rd.

Madison, WI 53705 USA

Donations may be made online with a credit card (use the link). For wire transfer information, contact: Valerie Breunig, Worldwide Foundation for Credit Unions, at 608-395-2055 or at vbreunig@woccu.org. Please indicate that your donation is for Canterbury Earthquake Relief Fund.

Mendo Lake CU awarded 110000 FHLB housing grant

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SAN FRANCISCO (2/24/11)--Mendo Lake CU, a $96 million asset credit union based in Ukiah, Calif., is the only credit union among 40 recipients of $36.6 million in Affordable Housing Program grants made in the second round of 2010 funding by the Federal Home Loan Bank of San Francisco. The funds will assist more than 60 projects that address the affordable housing needs of communities in eight states. Those projects will produce or preserve 3,123 housing units that are affordable to lower-income individuals and families. The total amount of awards under the program in 2010 is $69.1 million. Mendo Park will receive $110,000 for the TAY Wellness Housing Development, sponsored by Redwood Children's Services. The project will provide 12 rental units. The grants went to projects in Arizona, California, Colorado, Illinois, Michigan, Nevada, New Jersey, and Washington. The bank has set aside 10% of its annual income since 1990 to support the program and has awarded more than $660 million in subsidies for more than 99,000 units.