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Washington

McWatters talks risk-based capital, reg burden at nomination

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WASHINGTON (3/14/14)--National Credit Union Administration board member nominee J. Mark McWatters said at his confirmation hearing Thursday that a risk-based capital approach
Click to view larger image NCUA nominee J. Mark McWatters (far right) greets Sen. Mike Crapo of Idaho, who is the ranking Republican member of the Senate Banking Committee, before that panel begins its confirmation hearing for McWatters and four other Obama nominees. Sen. Bob Corker (R-Tenn.) is in the background. (CUNA Photo)
"makes sense" for credit unions, but warned the "devil is in the details" of any proposal.
 
He told Senate Banking Committee members that examining the overall issue in general and the NCUA's proposal specifically would be high on his list of priorities if he is confirmed to join the NCUA board.
 
That proposal, issued in January, was one of many regulatory issues the potential NCUA board member brought up in response to a question from the committee's chairman, Sen. Tim Johnson (D-S.D.). Overregulation of small credit unions is another challenge, he said, adding that the NCUA has made some progress in this area, but more needs to be done.
 
The principle challenge for credit unions and the credit union system, McWatters stated, is to look to the future and anticipate the next systemic shock. This applies to both credit unions and banks, he noted, and said that while regulators look for future problems, they must also exercise judgment. "If you are always crying wolf, you'll be considered a flake," he said.
 
The greatest opportunity for credit unions, the NCUA nominee asserted, is to continue doing what they are doing now. Credit unions' membership and loan base are growing, and many low-income credit unions have the chance to expand their mandate to those who are underbanked and unbanked. Underbanked and unbanked Americans need financial services at a reasonable rate, McWatters added.
 
In his opening remarks, he briefly previewed his overall approach to regulation in his opening statement, saying his focus as a regulator "will remain straightforward: Don't neglect the fundamentals of capital, liquidity, and transparency, and always remember that the greatest threat to a financial system may reside where you least expect it--hidden within plain view."
 
McWatters also pledged to "work diligently to ensure the continued integrity and safety and
Click to view larger image McWatters testifies that his approach to regulating credit unions will be "straightforward." (CUNA Photo)
 soundness of our nation's credit union system in an ever-evolving marketplace...I will aim to balance competing viewpoints while maintaining the safety and soundness of the credit union system, safeguarding the Share Insurance Fund, enforcing consumer protection rules, and protecting taxpayers and credit union members from losses," he said.
 
Johnson said McWatters will hit the ground running with an eagerness to learn more about credit unions. He called for all nominees at Thursday's hearing to be confirmed quickly. Sen. Elizabeth Warren (D-Mass.) also commented on her work alongside McWatters on the TARP Congressional Oversight Panel. She commended McWatters as "smart, thoughtful and principled."
 
McWatters said he intends to work with NCUA board members, agency staff and external stakeholders "in an open and respectful manner, with the goal of finding a common ground and working cooperatively through any differences." This approach has worked for him in past positions, he said. In addition to his work on the TARP panel, McWatters has served as counsel for Rep. Jeb Hensarling (R-Texas) and as dean for graduate programs at Southern Methodist University's School of Law.
 
If confirmed, McWatters would replace board member Michael Fryzel, whose term ended Aug. 2. Fryzel will continue to serve until McWatters is confirmed.
 
The committee also reviewed the qualifications for Stanley Fischer, as a member and vice chairman of the Federal Reserve Board; Jerome Powell, as Federal Reserve Board governor; Lael Brainard, as a Fed governor; and Gustavo Aguilar, to be an assistant secretary for the U.S. Department of Housing and Urban Development.

NEW: FHLB membership parity bill, others, could bring some CU relief: CUNA

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WASHINGTON (3/14/14, UPDATED 9:59 a.m. ET)--Voting 55-0, the House Financial Services Committee passed a bill to broaden credit unions' ability to apply for Federal Home Loan Bank membership.
 
The bill is strongly supported by the Credit Union National Association to put the country's privately insured credit unions on the same footing as their federally insured counterparts where it come to membership in the Federal Home Loan Bank system.
 
The bill was one of three passed over two days, all strongly supported by CUNA, the state credit union leagues and credit unions across the country, that--when they become law--will potentially provide significant relief for  credit unions from their regulatory burden.
 
Together with National Flood Insurance Program reforms passed Thursday by the Senate and a bill to make changes to the  operating structure of the Consumer Financial Protection Bureau also approved this morning by House Financial Services--CUNA says the bills will help credit unions by cutting costs, increasing their voice in the regulatory process, and giving credit unions more flexibility to fund mortgage lending.
 
In a markup session Thursday for the FHLB bill, House Financial Services Committee Chairman Jeb Hensarling said approval of the bill (H.R. 3584) would correct a "drafting oversight" that occurred years ago.
 
The new bill, introduced by Rep. Steve Stivers' (R-Ohio), amends the Federal Home Loan Bank Act to authorize privately insured credit unions to become members of an FHLB.
 
CUNA urged committee leaders in a letter Wednesday to vote in favor of the Stivers' bill.
 
CUNA noted that the bill would create no additional risk of loss to any FHLB or to taxpayers. In the Thursday committee markup session Stivers underscored that there is only $11 billion total in privately insured credit union assets. And Rep. Joyce Beatty (D-Ohio), a bill co-sponsor, noted that the bill only affects credit unions in nine states and they represent less than 2% of all credit unions in the U.S.
 
The bill states that a privately insured credit union will be considered to have met the eligibility criteria for federal home loan bank membership if, six months after its application date, the state supervisor has failed to act upon the application.
 
If H.R. 3584 is approved by the full House, it would then move to the Senate for consideration.

CU Residential Loan Parity Act is H.R. 4226

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WASHINGTON (3/13/14)--Rep. Ed Royce (R-Calif.), as expected, introduced a credit union relief bill Thursday that would exempt loans for one- to four-unit non-occupied dwellings from the member business lending cap.
 
The "Credit Union Residential Loan Parity Act"--now also known as H.R. 4226-- is co-sponsored by Rep. Jared Huffman (D-Calif.).
 
Royce unveiled his intention to introduce the MBL-related bill when he addressed the 4,400 credit union advocates attending the Credit Union National Association's Governmental Affairs Conference late last month.
 
Royce has explained that his bill fixes a disparity between how credit unions and banks can account for certain loans.
 
"When a bank makes a loan to finance the purchase of a small apartment building it is called a residential real estate loan. When a credit union makes the same loan it is called a business loan," and thereby falls under the low 12.25%-of-assets MBL cap, Royce has noted.
 
He's estimated that enactment of his bill would allow credit unions to lend an estimated additional $11 billion to small businesses, and would free up "much needed private sector financing for commercial businesses and rental housing without costing taxpayers a dime."
 
The bill also authorizes the National Credit Union Administration to apply strict underwriting and servicing requirements for the loans.

'Thankful Thursday' continues CUs' social media support of tax status

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WASHINGTON (3/14/14)--Credit unions and their members continue to contact federal
Click to view larger image Click for larger view
lawmakers about preserving the credit union tax status--and this time it was to thank House Ways and Means Committee members for not touching credit unions in the committee's draft tax code reforms.

More than one-quarter of a million Twitter users were potentially exposed to the credit union message yesterday through the Credit Union National Association's latest social media blitz, "Thank You Thursday."  It was the latest innovation launched under CUNA's successful "DontTaxMyCreditUnion" campaign, which started in 2013.

CUNA created the "DontTaxMyCreditUnion" effort in anticipation of this year's release of a tax reform draft.  More than one million contacts to the U.S. Congress were generated under that program, first on July 23, then on Sept. 10--and then on the eve of Rep. Dave Camp's release of his tax reform discussion draft last month.

Maintaining the exemption in the Camp proposal was proclaimed a "big win" for credit unions by the press. Nevertheless, CUNA continues to urge credit union advocates to educate lawmakers and consumers alike about the good public policy reasons behind the credit union tax status. Even though the credit union federal tax exemption remained untouched, bank trades are pressing House Ways and Means Committee Chairman Camp to reconsider taxing credit unions.
 
To quickly send a Twitter message, credit union advocates can got to www.DontTaxMyCreditUnion.org and click on the "Tweet Your Legislators" icon at the top. A tweet to a member of the House Ways and Means Committee will automatically populate, or an advocate can create a personal message to legislators on Facebook or Twitter using the hashtag #DontTaxMyCU.

Senate passes Flood Insurance fixes

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WASHINGTON (3/14/14)--The Homeowner Flood Insurance Affordability Act (H.R. 3370) can now move on to President Barack Obama's desk to be signed into law after the Senate approved the bill on Thursday.
 
The Senate approved the bill on a 72-22 vote. The bill passed the House earlier this month by a 306-91 vote.
 
The bill, in part, would delay planned increases in National Flood Insurance Program (NFIP) premiums until the Federal Emergency Management Agency puts in place a plan to ensure they are implemented affordably.
 
A range of other NFIP fixes has been discussed in recent months. The National Credit Union Administration joined the Federal Reserve, the Farm Credit Administration, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to ask whether federal financial regulatory agencies should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers.
 
The joint agency proposal would:
  • Require regulated lending institutions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential improved real estate or a mobile home, not including business, agricultural and commercial loans, unless the institutions qualify for a statutory exception;
  • Result in new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement;
  • Clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage after a homeowner's private insurance lapses or becomes insufficient; and
  • Outline the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.

127 LICUs total more than $500K NCUA grants

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WASHINGTON (3/14/14)--The National Credit Union Administration has awarded $517,890 in grants to 127 low-income credit unions in the first 2014 round of its Community Development Revolving Loan Fund program.

The credit unions that receive these grants will be able to offer "more services to members, more resources to their communities and more education for young people interested in financial services careers," NCUA Chairman Debbie Matz said in an agency release.

This round of the grant program will provide:
  • Thirty-three credit unions with funds to help the development of new products and services for their members;
  • Forty credit unions with funds to help apply for Community Development Financial Institution certification; and
  • Fifty-four credit unions with funds to offer internships to local students.
The funds will be administered by the NCUA's Office of Small Credit Union Initiatives.

Grant applications representing a total of $2.3 million in funds were submitted by 320 credit unions.

The agency has received more than $12.8 million in grant funding from the U.S. Congress since 2001. Congress provided the NCUA with $1,144,746 in funding for this year's round.

For the NCUA release and a full list of 2014 first-round CDRLF grant recipients, use the resource links.

NCUA reminds CUs of March liquidity compliance deadline

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ALEXANDRIA, Va. (3/14/13)--The National Credit Union Administration has sent a reminder to credit unions that its new liquidity and contingency planning regulation will become effective March 31 (Letter to Credit Unions 14-CU-05).
 
The NCUA letter includes a supervisory letter and examination questionnaire for examiners to use when reviewing liquidity risk management at credit unions. These resources will give credit unions further insight into how the NCUA will examine for compliance, the agency said.
 
Under the final rule:
  • Credit unions with less than $50 million in assets would need to maintain a basic written emergency liquidity policy, but would not be required to take further action;
  • Credit unions with assets of $50 million or more would be required to develop contingency funding plans describing how their credit union would address liquidity shortfalls in emergency situations; and
  • Credit unions with assets of $250 million or more would be required to have access to a backup federal liquidity source for emergency situations.
The final rule does not include the Federal Home Loan Banks (FHLB) as an acceptable source of emergency liquidity, although eligible credit unions required to meet the federal source provisions would be free to borrow from a FHLB for nonemergency purposes. Without the FHLB, credit unions have two options to ensure a federal liquidity source for emergency situations: Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or access to the Federal Reserve's discount window.
 
The Credit Union National Association strongly supports the use of the home loan banks for liquidity.
 
CUNA has developed an eGuide section on the emergency liquidity rule, and the issue was also covered in the January 2014 edition of Credit Union Magazine and March 10 issue of News Now.
 
For the NCUA letter and CUNA resources, use the resource links.