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Compliance Oversight Lax At FHFA, Fannie, Freddie, OIG Says

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WASHINGTON (3/28/13)--The Federal Housing Finance Administration (FHFA) does not thoroughly oversee how Fannie Mae and Freddie Mac monitor their sellers' and servicers' compliance with consumer laws and regulations, the FHFA Office of the Inspector General (OIG) said in a report.

Specifically, the FHFA does not examine how those government sponsored entities (GSEs) monitor seller and servicer compliance with consumer protection laws, and Fannie and Freddie do not ensure that these counterparties' business practices follow all federal and state laws and regulations designed to protect consumers from unlawful activities such as discrimination, the OIG report noted. The FHFA instead relies on federal regulatory agencies that are responsible for enforcing laws that protect mortgage borrowers. Fannie and Freddie expect institutions they are involved with to comply with all laws, but rely mainly on self-certification by these institutions to determine their compliance, the report said.

Failing to adequately oversee consumer law compliance can subject Fannie and Freddie to increased economic risk, the OIG report warned.

The OIG recommended that the FHFA develop a risk-based plan to monitor the GSEs oversight of their counterparties' compliance with contractual representations and warranties, including those related to federal consumer protection laws. The FHFA said it is committed to the fair treatment of consumers, and agreed to develop a plan to address the issue cited in the report.

Credit Union National Association Deputy General Counsel Mary Dunn said CUNA will be weighing in with the FHFA on this issue. Noting that credit unions thoroughly comply with legal requirements, including consumer protection laws, Dunn said CUNA wants to "ensure that additional regulatory burdens are not imposed on credit unions in order to demonstrate compliance, since they are already subject to more than sufficient requirements in that regard.

"We will urge FHFA to coordinate with other regulators to avoid making the mortgage lending process even more cumbersome for consumers and creditors alike," she said.

For the FHFA OIG release, use the resource link.

'Unite for Good' Prompting Discussion And Ideas

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WASHINGTON (3/28/13)--More in the credit union community are commenting and offering suggestions on "Unite for Good," the new initiative to rally credit unions around a shared vision for growth and success. It's a development welcomed by Credit Union National Association President/CEO Bill Cheney, who debuted the initiative at CUNA's Governmental Affairs Conference last month.

This week, credit union consultant Scott Butterfield, principal with Your Credit Union Partner, discussed the Unite for Good initiative in a column appearing on the CU Insight news and opinion aggregation site. He agreed Unite for Good's service component must go beyond consumer satisfaction surveys and pricing advantages for credit unions to truly gain measurable market share.

"Seek out opportunities with the greatest potential impact, activities that improve the quality of life for consumers and communities," Butterfield advises credit unions, citing activities such as micro-enterprise lending, financial counseling for low- and moderate-income consumers, alternatives to predatory financial products, and programs that help members build financial assets.

"Unite for Good is spot on," Butterfield adds, "and I believe it represents the best opportunity to leverage our collective brand for advocacy, differentiation and growth. If we do this right, we have the opportunity to demonstrate in a very big way that the credit union brand is clearly different and better."

The Unite for Good initiative calls on credit unions to rally in support of a common vision where "Americans choose credit unions as their best financial partner." Achieving the vision requires working toward three key objectives: removing legislative and regulatory barriers that obstruct credit union progress; raising consumer awareness and understanding of credit unions; and fostering movement-wide service excellence.

CUNA's Cheney said ideas such as Butterfield's will add to and further enhance Unite for Good's list of specific actions that credit unions can pursue to advance the vision's three primary goals of removing barriers, raising awareness and fostering service excellence.

"Our list of actions for credit unions presents a range of important steps, but it's by no means all-inclusive," Cheney said. "In fact we hope our list prompts planning and discussions that result in new ideas coming forward for credit unions to consider. It is great to see that this is starting to happen."

For the list of Unite for Good action steps or to read Butterfield's full column, use the resource links.

FHFA Plan Will Give Homeowners New Foreclosure Avoidance Option

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WASHINGTON (3/28/13)--Starting July 1, homeowners will have a new foreclosure prevention option through Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) announced Wednesday.

To take part in the new program, known as the Streamlined Modification Initiative, the FHFA said homeowners must:

  • Be between nine and 24 months behind on their mortgage payments;
  • Have owned their home for at least one year, and
  • Have a mortgage loan-to-value ratio equal to or greater than 80%.
Loans that have been modified at least two times previously will not be eligible for the program, the FHFA added.

Under the program, many homeowners that are at least 90 days delinquent will be sent a streamlined modification solicitation offer by their mortgage servicer. The FHFA said this offer will include a trial period plan which:

  • Specifies the dollar amount of the new mortgage payment based upon a fixed interest rate;
  • Extends the mortgage payment terms to 40 years; and
  • Provides principal forbearance for certain underwater borrowers.
Mortgage holders that make three on-time payments during this trial period will then be able to permanently modify their mortgages. Borrowers will not be required to document their hardship or financial situations to take part in this modification program, the FHFA said.

The program is scheduled to run until August 1, 2015.

FHFA Acting Director Edward DeMarco said this program gives delinquent borrowers another path to avoid foreclosure. "We will still encourage such borrowers to provide documentation to support other modification options that would likely result in additional borrower savings," he added.

Foreclosure starts in the fourth quarter of 2012 fell to the lowest level seen since the third quarter of 2008, the FHFA noted in a separate release. More than 130,300 foreclosure prevention actions were taken during the fourth quarter of 2012, and the FHFA reported the number of delinquent mortgages held by Fannie Mae and Freddie Mac declined 14% in 2012. Mortgage delinquencies dropped in nearly every state, excluding New Jersey and New York, the FHFA added.

For more on the FHFA program and the 2012 fourth quarter mortgage data use the resource links.

NCUA Alert Warns Of Phishing Scam

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ALEXANDRIA, Va. (3/28/13)--The National Credit Union Administration has warned of a new phishing scam using the agency's name in an attempt to obtain consumer debit card account numbers.

The scammers have set up an automated message, claiming to be from the NCUA, which erroneously informs consumers that their debit card has been deactivated. The consumer is then instructed to press 1 on their phone, and enter their 16 digit account number, to reactivate their card.

Consumers should be aware this is not a call from NCUA, and if they receive it, should notify NCUA's Fraud Hotline, toll-free, at 800-827-9650 or 703-518-6550 in the Washington, D.C., area, the agency said.

The NCUA provides fraud alerts, and avoidance and detection resources, on the ncua.gov fraud information center.

For more, use the resource link.

CUNA To Testify At April 10 Hearing Focusing On CU Reg Burden

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WASHINGTON (3/28/13)--Credit Union National Association Executive Vice President of Government Affairs John Magill Wednesday underscored the importance that for the first time at a congressional hearing, credit unions will have the stage all to themselves: The House Financial Services financial institutions and consumer credit subcommittee has scheduled a hearing on credit union regulatory burden on April 10.

CUNA is scheduled to testify at the hearing. "We're breaking new ground here. Years ago, we would have been a side dish," Magill said. Even at a member business lending hearing in the last Congress, credit unions shared the day with banks. "Not so this time," he noted.

The credit union hearing is part of a 2013 series to study, in part, the impact of the Dodd-Frank Act, and will take place one week before an April 16 hearing on bank regulatory issues.

CUNA is working to select a witness for the credit union regulatory burden hearing. Additionally, CUNA has communicated routinely with financial services committee staff, providing specific and detailed suggestions for ways to ease the regulatory burden on credit unions. "We expect to elaborate on these ideas when we testify," Magill said.

The hearings are expected to be a precursor to a legislative package on regulatory relief with elements addressing the concerns of credit unions and community banks.

eBanking Letter To CUs Is Coming: NCUA

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WASHINGTON (3/28/13)--During a National Credit Union Administration webinar Wednesday that, in part, focused on concerns about the operational risks triggered by new technology, the agency's deputy director of the Office of Examination and Insurance said credit unions can expect a Letter to Credit Unions within the next few months that will address "eBanking."

The agency's Tim Segerson also said the NCUA is training its examiners in coming weeks on an "eBanking area work program," and that credit unions should expect examiners to integrate this into their examinations starting in the second half of 2013.

In response to a question at the end of the program,  Segerson said that credit unions that have their exams before examiners receive training on the developing topic will not have a special supervisory contact; the eBanking questionnaire will be used during regular examinations.

Another operational risk Segerson focused on involved fraud.  He said that the vast majority of National Credit Union Share Insurance Fund losses in relationship to the size of a credit union have to do with fraud losses through traditional lines of businesses of the credit union.  He cited the following "fraud hot spots":

  • Poor accounting controls/un-reconciled books;
  • Fictitious and fraudulent loans;
  • Un-cleared overdrafts;
  • Dormant/inactive share accounts;
  • Unrecorded shares (money "deposited," but never recorded); and
  • False expenditures.
On another exam topic, the NCUA OEI deputy director warned credit unions to expect examiners this year to more closely scrutinize the credit union's audit process to make sure that there is a "quality audit."

He noted that when the NCUA moved to a risk-focused exam program about 10 years ago, the agency decided to rely on the outside audits.  Now the agency will be taking a closer look to assure a credit union is relying on, and that management is responding to, points raised in the audit, especially with any findings and comments on the credit union's internal controls.

For more on the NCUA webinar, CUNA-member credit unions can use the resource link below to access a report on CompBlog.

Another 'Clean' Audit for NCUA Corporate Stabilization Fund

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ALEXANDRIA, Va. (3/28/13)--The National Credit Union Administration's Temporary Corporate Credit Union Stabilization Fund (TCCUSF) has again received a clean audit, the agency announced on Wednesday.

The audit, which was performed by KPMG LLP, covered the TCCUSF's 2012 financial statements. The NCUA in a release said the TCCUSF's financial condition remained stable, maintaining sufficient liquidity to meet its obligations, and its deficit net position continued to decline.

NCUA Chairman Debbie Matz said the clean audit is confirmation that the agency is fulfilling its financial reporting responsibilities. "We are operating the fund prudently and providing high-quality reporting that satisfies our need to maintain transparency as we manage the resolution of the corporate credit union crisis," she added.

"An independent auditor has given NCUA a clean financial statement audit opinion for the Stabilization Fund each year since Congress established it in 2009," Matz noted.

The NCUA said it would update the loss and remaining assessment estimate data on its website within a few days. Credit Union National Association Chief Economist Bill Hampel made an early reading of where these remaining assessments could end up. "Based on information included with the audit report it appears the remaining TCCUSF assessment range has dropped to between $1.6 billion and $3.9 billion, with a midpoint of $2.75 billion," he said.

This is a decline from the previous range of remaining assessments, which stood at $1.9 billion to $4.8 billion, with a midpoint of $3.35 billion, he noted.

"That's welcome news. The expected final losses continue to fall," Hampel said. "With these loss estimates, the midpoint could be fully paid with just over three assessments at last year's rate of 9.5 basis points. Or, if the assessments were spread evenly over the full nine remaining possible years of the fund, it would require annual assessments of about 2.5 basis points to collect the midpoint amount of $2.75 billion," he added.

For the NCUA release, and an NCUA Office of Inspector General review of the independence of the NCUA auditors, use the resource links.

Fed Launches Three-Year Study Of Consumer Finances

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WASHINGTON (3/29/13)--The Federal Reserve Board is about to launch its triennial investigation into consumer finances, an exercise that yields important information that credit unions and other financial services providers can plumb to identify consumers' needs.

The survey has been undertaken every three years since 1983 and results of this current effort will not be available until 2015.  It is being conducted for the Fed by NORC, a social science research organization at the University of Chicago, through December of this year.

The survey results unveiled in 2012, for instance, were a harbinger of student debt issues.

The 2007-2010 "Survey of Consumer Finances" revealed that nearly one in five U.S. households had college debt in 2010, double the debt in 1989 and up 15% from 2007.  Recently, the National Credit Union Administration, in its "NCUA Monthly Report," noted that most credit unions that offer private student loans have done so for "less than five years," thereby tracking the trend of consumers' need. On the other hand, some banks have taken a different track. For instance, it has been reported thatJPMorgan Chase stopped extending student loans to non-customers in July 2012 and that US Bank stopped almost a year ago.

The last Fed consumer report also exposed that in 2010 the typical middle-class family had financial assets of $27,300--including retirement savings but not pensions--which was 28% less than the $37,800 held in 2007.

Two-thirds of middle-class Americans acknowledged having made financial mistakes--often at a steep price.

Because they are not-for-profit financial cooperatives owned by their members, credit unions help consumers in many ways: with better savings rates, lower interest rates on loans, short-term loan alternatives to payday lending, special programs such as savings lotteries, contests, affordable mortgages, and providing business loans to new entrepreneurs, to name a few.  They also stand out in member-centric financial education.

For the new study, the Fed will choose participants at random from 127 areas, including metropolitan areas and rural counties across the U.S.  A representative of NORC will contacts each of the 13,000 potential participants personally to explain the study and request time for an interview.

Big Jump In Phone Banking, Fed Says

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WASHINGTON (3/28/13)--In case anyone wasn't sure whether people are using their phones for everything, the Federal Reserve Board yesterday released a report on the use of mobile financial services that showed 28% of all mobile phone users and 48% of smartphone users had used mobile banking in the past 12 months.

This is up significantly from the Fed's last report in December 2011 that showed 21% of mobile phone users and 42% of smartphone users engaged in mobile banking.

The Federal Reserve Board completed its first Survey of Consumers' Use of Mobile Financial Services in December 2011, and released a summary report in March 2012. The board conducted a second survey in late November 2012 to monitor trends in the use of mobile financial services, and to understand how the rapidly expanding use of this technology affects consumer decision making and the overall economy.

For more on the insights of the Fed survey, tune in to Friday's News Now.