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CUNA Compliance CUs need to review check-hold disclosures

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WASHINGTON (3/2/10)—As of Feb. 27, the Federal Reserve Board consolidated all its check-processing operations into Cleveland, Ohio. This action eliminates all “nonlocal checks” under Regulation CC, which implements the Expedited Funds Availability Act. Reg CC governs when credit unions must make funds available that are deposited into share draft/checking accounts and what disclosure they must make about their check-hold policies. “All credit unions need to review their current Reg CC disclosures immediately and send out any necessary changes by March 29,” explains Mike McLain, CUNA’s assistant general counsel. “When Reg CC was first adopted more than 20 years ago, the Fed had 45 check processing regions -- today, it has one. “Credit unions have been adjusting their policies as ‘nonlocal checks’ have shrunk, but now is the time to make sure your account-opening disclosures are up-to-date, existing accountholders have current availability information, and lobby signs are correct.” March 29 is a magic date, McLain says, because Regulation CC says that depository institutions have to provide notice within 30 days after funds availability improves. Depending on how individual credit unions’ policies are structured and their disclosures written, they may have to send out a change notice to their membership. With the elimination of “nonlocal checks,” the fifth-business-day availability rule now only covers cash and checks deposited into ATMs not owned by the credit union. Next-day availability rules remain unchanged, as do the rules applicable to government checks and cashier, teller’s and certified checks. However, all other “local” checks are now generally subject to second-business-day availability, unless the credit union imposes one of six exceptions still allowed under Regulation CC. “To help credit unions understand the rules, CUNA has put together ‘Regulation CC: A Refresher,’” noted McLain. “It highlights what has changed and reminds credit unions what they should review right now in their Reg CC compliance programs. “ Our refresher also includes answers to 20 questions from a recent audio-conference CUNA sponsored, and a link to our updated summary of Reg CC requirements in CUNA’s eGuide to Federal Laws and Regulations. “And the Massachusetts CU League has been kind enough to share with everyone a great two-page chart it put together to summarize what maximum holds apply to what kinds of deposits.” Use the resource links below for more information.

FHFA extends home refi program into 2011

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WASHINGTON (3/2/10)—The Federal Housing Finance Agency on Monday announced that it has extended its Home Affordable Refinance Program (HARP) until June 30, 2011. HARP, which was set to expire on June 10 of this year, helps borrowers whose loan-to-value ratio is between 80% and 125% refinance without added mortgage insurance requirements. In comments accompanying the release, FHFA Acting Director Ed DeMarco said that the FHFA “has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the actions taken last year have not materially changed.” Under the HARP program, which began in April of last year, Fannie Mae and Freddie Mac helped refinance 190,810 mortgages in 2009. For the release, use the resource link.

NCUA liquidates Mutual Diversified Employees FCU

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ALEXANDRIA, Va. (3/2/10)—Santa Ana, Calif.-based Mutual Diversified Employees FCU on Friday was liquidated by the National Credit Union Administration (NCUA). Mutual Diversified’s members and assets, which totaled 748 and $6.1 million, respectively, as well as its shares, will be taken on by SchoolsFirst FCU, which is also based in Santa Ana. Mutual Diversified is the third federally-backed credit union to be shuttered in 2010 and was one of two federal credit unions shut down last Friday. SchoolsFirst, with 27 branches and 6 express centers throughout Southern California, currently serves 433,521 members and holds $8 billion in assets.

Congress this week CUs watch Senate for action

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WASHINGTON (3/2/10)--With a relatively slower week in the U.S. Congress, credit unions can set their eyes on a midweek Senate Banking economic policy subcommittee hearing entitled, "Restoring Credit to Main Street: Proposals to Fix Small Business Borrowing and Lending Problems." While there will not be a Credit Union National Association (CUNA) witness before the subcommittee, CUNA is planning to submit an official statement for the record. Though the legislative calendar for credit unions is sparse this week, CUNA will closely watch the continued development of the Senate’s version of regulatory restructuring bill. The legislation is expected to be released late this week, and CUNA will analyze and report on the legislation as soon as it is released. CUNA Vice President of Legislative Affairs Ryan Donovan told News Now that Senate negotiators have been working hard to reach agreement on how consumer protection regulation would be affected by the pending Senate legislation. A report from The Washington Post last night quoted "sources familiar with the negotiations" and said Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Bob Corker (R.-Tenn.) are nearing agreement on drafting a proposed new consumer protection authority under the Federal Reserve. While the House last year approved an independent Consumer Financial Protection Agency as part of its regulatory restructuring package, senators have been wrestling over whether to create an independent CFPA or include a body similar to the CFPA within the U.S. Treasury or another agency. Questions remain over which powers such an agency or office would have, Donovan added. Some small business concerns may also be addressed this week when the House takes up a small business tax bill that was passed by the Senate last week.

CUNAs Hampel to Fox News CUs hamstrung by MBL cap

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WASHINGTON (3/2/10)--Credit unions feel “hamstrung” by the current member business lending cap of 12.25% and can help more of their members while creating 100,000 new jobs if Congress raises it, Credit Union National Association (CUNA) Chief Economist Bill Hampel told Fox Business Network in a live interview Monday. Hampel said that credit unions are “quite willing and able to make loans, but more and more they are having to slow down their lending because of this cap.” “We’re seeing more and more small businesses who are being turned down for credit” by their banks. Hampel was invited to do the Fox interview after USA Today on Monday ran a prominent story on the reasons CUNA and credit unions are pushing to raise the MBL cap (see related News Now headline story). Hampel told Fox there is no public policy reason against lifting the MBL cap. “Credit unions have a history of making these loans safely” with a loss rate that is a fraction of the bank loss rate on the same types of loans. Opposition to lifting the MBL cap “is not a safety and soundness issue.” Rather, Hampel said, the main “pushback” that credit unions are getting “is from the banking industry who don’t want any competition for their lending,” Hampel said. Banks have no cause to object, Hampel argued. Credit unions now have about 5% of the small business loan market; doubling that by raising the MBL cap would give credit unions 10%, still leaving the banking industry dominating the market with 90% share. According to CUNA estimates, lifting the member business lending cap to 25% of a credit union's assets would also result in $10 billion in new capital for small businesses and could potentially create as many as 108,000 new jobs within one year. Further, CUNA estimates that 60% of the business loans of credit unions affected by the current statutory cap are in credit unions that are within one month to three years of having to sharply curtail business lending because of the cap.

CU net worth strong shares grow says new NCUA data

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ALEXANDRIA, Va. (3/2/10)—The National Credit Union Administration (NCUA) yesterday released end-of-year call report data for credit unions, figures that show a strong 10% net worth for credit unions at the end of 2009, but also show the economy has taken a toll on loan demand and delinquencies. Membership growth, however, was another strong positive in the reports. Membership in the nation’s 7,554 federally insured credit unions increased to nearly 90 million, and shares grew at a robust rate of 10.5%, as more Americans sought out credit unions as a safe place for financial services. “Credit union membership growth is impressive and encouraging. The ‘flight to safety’ that landed new deposits at credit unions during the economic downturn continues, as evidenced by credit union share growth in several categories,” noted NCUA Chairman Debbie Matz, in a release. “However,’ she added, “these positive developments are tempered by recognition of ongoing market stresses. This reality reinforces NCUA’s decision to increase examination staff and augment regulatory oversight to monitor and assist credit unions faced with persistent, adverse economic conditions.” High unemployment rates and a struggling economy were cited by the agency for the increase in delinquent loans as a percentage of total loans, which grew to 1.82%. The NCUA said credit unions continued to build provisions for loan losses as the ratio of net charge-offs to average loans grew to 1.21%, from 0.85%, during the year. Overall loan volume grew a paltry 1.1% and most of the growth, the NCUA noted, was in used automobile, credit card and first mortgage loans. Yet, net income returned to a positive $1.7 billion after a 2-year decline. This figure includes both National Credit Union Share Insurance Fund stabilization income and expense in 2009. “Data also suggests that, by improving cost management, credit unions reduced operating expenses and the return on average assets grew 24 basis points compared to year-end 2008,” the NCUA release noted. Details of major balance sheet items and member growth in federally insured credit unions from January through December 2009 include:
* Assets increased 9.08% to $884.8 billion from $811.1 billion; * Loans grew 1.1 % to $572.4 billion from $566.0 billion; * Shares increased 10.5% to $752.7 billion from $681.1 billion; * Investments increased 27.3% to $210.9 billion from $165.7 billion; * Net worth grew 1.9% to $87.7 billion from $86.1 billion; and * Membership increased 1.5% to 89.9 million from 88.6 million members.
The NCUA also reported:
* Because share growth significantly outpaced loan growth during 2009, the loan-to-share ratio declined to 76.05% from 83.1% posted at year-end 2008. This resulted in significant investment growth. * Within share accounts, regular shares, share drafts, and IRA/KEOGH accounts each posted double-digit increases, and money market shares grew a substantial 23.5%. Funds in federally insured credit union share certificates declined 0.2%. Lending saw used automobile loans gain 4.1%. First mortgage real estate loans and lines of credit grew 4.4% in 2009. Credit cards posted 6.6% increase, 2% lower than the 8.6% unsecured credit card debt posted in 2008. New automobile loans declined 7.7% and other types of real estate loans declined 4.3%. * To protect against potential losses, federally insured credit unions increased provisions for loan and lease losses by 34.1% during 2009 following a 120 %increase in 2008. Over $9.4 billion is now set aside to cover loan and lease losses. Delinquent loans grew 33.7 percent to a reported $10.4 billion.
Use the resource link below for the details for the December 2009 data.

Federation offers how-to tips on CDCI program

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WASHINGTON (3/2/10)—Low-income credit unions (LICUs) interested in participating in the new U.S. Treasury program intended to bolster service to economically hard-hit communities just got help in sorting out the details of that program. The National Federation of Community Development Credit Unions(federation) has developed a fact sheet covering nine frequently asked questions about the Treasury’s new Community Development Capital Initiative (CDCI). The program was announced Feb. 3 and is set up to provide long-term secondary capital loans to qualified LICUs and community banks. To qualify, a credit union must be both a Treasury-certified Community Development Financial Institution—CDFI—and have low-income designation form federal or state regulators. The federation document notes that while the program falls under the government’s TARP authority, it is “very different from TARP for banks,” which is often referred to as bailout money. CDCI is “not to bail out failing institutions,” the federation underscores. “It is a highly targeted program to enhance lending to low-income communities.” Other information from the federation includes:
* The funds take the form of deeply subordinated debt that is classified as net worth, subject to certain conditions. LICUs are the only credit unions that can accept this type of loan; * A credit union can apply for amounts up to 3.5% of its total assets; * The basic terms for the loans are: 2% for the first eight years, then increasing to 9% for an additional five years, if the credit union chooses to retain the loan; * Credit unions must be approved by the National Credit Union Administration (NCUA) to participate. The regulator must affirm the applicant is “viable,” although that term has not yet been defined; and * Credit unions that do not meet the to-be-defined standard for viability may still access the CDCI funds if they can raise dollar-for-dollar matching funds from non-federal sources.
Last month, the federation and the NCUA announced a March 4 joint audio conference on the CDCI, intended to be a “how-to” introduction to the program. No registration is required. The call-in number for the free, 60-minute audio conference, which begins at 2 p.m. (ET), is (877) 293-6129. To access the conference, provide Conference ID Number: 58577856. Use the resource links below for more information on the CDCI.

Inside Washington (03/01/2010)

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* WASHINGTON (3/2/10)--Donald Kohn, vice chairman of the Federal Reserve board, will step down from his post when his term ends in June (The Wall Street Journal March 1). Kohn, 67, has been a close adviser to Fed chairman Ben Bernanke and former chairman Alan Greenspan. Daniel Tarullo, who was named to the Fed board last year, could succeed Kohn as vice chair. Kohn has been at Bernanke’s side for many critical decisions during the financial crisis, the newspaper said. Bernanke noted that the Fed and the country owe a “tremendous debt of gratitude” to Kohn for his contributions. Kohn was appointed to the Fed board in 2002 and promoted to vice chair in 2006 ... * WASHINGTON (3/2/10)--A plan to restrict securitizations by the Federal Deposit Insurance Corp. (FDIC) is being criticized by industry observers, who claim that the action would hurt the secondary market. In December, the FDIC said it would consider conditions to protect assets from FDIC after a bank failure. Banks, including JP Morgan Chase and Co., Capital One Financial Corp. and Bank of America, oppose the FDIC plan. They said the conditions would not only harm the securitization market, but curb risk management and harm credit availability. The FDIC has received 34 comment letters from trade group noting that the proposal could scare investors and give non-banks a “competitive advantage” (American Banker March 1) ... * WASHINGTON (3/2/10)--Members of two House committees on Financial Services and Small Business criticized bank and thrift regulators for a drop in lending to businesses. However, leaders at top banking and thrift regulatory agencies said tight credit is resulting from the struggling economy and a drop in demand. Rep. Erik Paulsen (R-Minn.) said regulators are part of the lending problem because they restrict the ability of financial institutions to lend to small businesses (American Banker March 1). The Credit Union National Association (CUNA) testified at the hearing, urging Congress to allow increased member business lending for credit unions to help the credit and jobs market. Credit unions are currently capped at lending 12.25% of their assets. CUNA estimates that if the cap is lifted to 25%, credit unions could put $100 billion into the economy with 100,000 new jobs ...