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Inside Washington (03/31/2009)

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* WASHINGTON (4/1/09)--Rep. Barney Frank’s (D-Mass.) bill to prevent risky mortgages could negatively impact the mortgage market, financial observers say. The bill would include a risk retention standard of 5%, provide liability protection to loans with 30-year fixed rates and provide a safe harbor for borrowers that meet certain guidelines (American Banker March 31). However, the bill also should provide safe harbors for borrowers with 15- to 20-year fixed-rate mortgages, said Scott Talbot, Financial Services Roundtable senior vice president. The legislation’s risk retention standard also could keep mortgage financing a bank-only business, according to Laurence Platt, K&L Gates LLP partner. Non-depository institutions will be put out of business because they won’t have the capital to hold the risk, he said ... * WASHINGTON (4/1/09)--The Obama Administration’s plan to help the secondary market for Small Business Administration loans is being jeopardized by the limits on executive compensation for companies participating in the Troubled Asset Relief Program. Because the program is funded by Treasury Department money, participants would have to abide by the compensation limits--and most have said they will not participate because of the limits, industry observers said. If those institutions do not participate, the program is unlikely to be successful (American Banker March 31). The administration is aware of potential participants’ concerns and is looking at options, said Anthony Wilkinson, president, National Association of Government Guaranteed Lenders. The program was scheduled to begin by this week, according to a fact sheet the Treasury released March 17 ... * WASHINGTON (4/1/09)--Two congressional members have expressed their intent to draft legislation to modernize the financial regulatory system. In a letter sent to President Barack Obama this week, Sen. Christopher Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.) announced that they would begin working on legislation to create a framework for regulation to enhance financial stability and protect consumers and investors. The two have already held a series of hearings, briefings and meetings on reform, they said. Dodd also said he would work with Sen. Richard Shelby (R-Ala.) to “build upon our bipartisan record” ... * WASHINGTON (4/1/09)--President Barack Obama Tuesday announced that he intends to nominate three individuals to posts at the Treasury Department: Helen Elizabeth Garrett as assistant secretary for tax policy, Michael S. Barr as assistant secretary for financial institutions and George W. Madison as general counsel. Garrett currently serves as vice president for academic planning and budget at the University of Southern California. Barr previously served as a special assistant to former Treasury Secretary Robert Rubin. Madison is a former executive vice president and general counsel of the Teachers Insurance and Annuity Association, College Retirement Equities Fund, and is a member of its executive management team ...

GAO FinCEN needs to further develop form revision

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WASHINGTON (4/1/09)--The Financial Crimes Enforcement Network (FinCEN) needs to further develop and document its form revision process, according to a Government Accountability Office (GAO) report released this week. Last year, FinCEN developed a new process for revising Bank Secrecy Act forms, including Suspicious Activity Reports (SARs). The revisions to the SAR form were intended to reduce the number of duplicate reports filed for a single suspicious transaction. The revised form would have provided necessary data blocks and instructions for completing a jointly filed SAR, although accompanying instructions limit joint filing to those suspicious activities that do not involve insider abuse (News Now April 27, 2007). However, implementation of the 2006 revision of the SAR form was delayed due to information technology limitations. In 2008, FinCEN developed a new process for revising BSA forms, including the SAR form. GAO said the limited documentation on the revised process does not provide details to determine how it will incorporate GAO best practices for enhancing and sustaining federal agency collaboration. The process also does not specify roles and responsibilities for stakeholders or depict monitoring, evaluating and reporting mechanisms. According to the report, "FinCEN could achieve some potential benefits--such as greater consensus from all stakeholders on proposed SAR revisions--by incorporating some of the key collaboration practices suggested by the GAO."

CUNA seeks balance in card protections

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WASHINGTON (4/1/09)—The Credit Union National Association (CUNA) said Tuesday it supports the intent of a Senate Banking Committee bill to protect consumers from abusive practices, but warned that a balance must be maintained to prevent unintended consequences to consumers. The committee voted 12 to 11 in favor of the bill (S. 414) that would amend the Consumer Credit Protection Act to ban abusive credit practices, enhance consumer disclosures and protect underage consumers. (See related story: Senate card bill includes NCUA emergency borrowing.) CUNA President/CEO Dan Mica sent a letter to Chairman Christopher Dodd (D-Conn.), prior to his committee’s vote, asking lawmakers’ caution to avoid unintended consequences which “would ultimately be adverse to consumers, including making credit more expensive and less available for consumers.” Mica noted new rules promulgated last year by the Federal Reserve Board, the Office of Thrift Supervision, and the National Credit Union Administration. Those rules restrict and prohibit a number of credit cards practices considered unfair or deceptive under the Unfair and Deceptive Acts and Practices Act (UDAP) and the Fed’s Reg Z. “Credit unions are just beginning the long process of working with their forms suppliers, data processors, statement providers and training resources to ensure they will be in compliance with the new Reg. Z rules and UDAP requirements by their effective date of July 1, 2010. “We encourage the committee to give the new rules time to work before imposing additional burden on credit unions,” Mica wrote.

Mica tests waters Higher borrowing longer write-off

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WASHINGTON (4/1/09)—An amendment to improve the National Credit Union Administration (NCUA) borrowing position with the U.S. Treasury, as well as allow credit unions to spread out their impending premium payment, is a “significant step” toward relief for credit unions, according to the Credit Union National Association (CUNA). After the Senate Banking Committee voted unanimously to adopt the amendment Tuesday, CUNA President/CEO Dan Mica sent a letter to its sponsors, Sens. Mike Crapo (R-Idaho) and Bob Corker (R-Tenn.), commending their actions. The language was added to a bill on best credit card practices. The amendment would: increased NCUA borrowing authority to $6 billion; triple that to $18 billion in times of emergency; and allow credit unions to spread out realizing the premium cost associated with NCUA’s corporate credit union stabilization efforts over five years. (See related story: Senate card bill includes NCUA emergency borrowing.) Mica wrote that CUNA, however, would welcome an opportunity to discuss whether a seven- or eight-year repayment period, similar to what the Federal Deposit Insurance Corp. has requested for banks, might be considered by Congress. He also tested the waters for a congressional appetite to consider a higher borrowing authority for the NCUA. The agency has requested $30 billion in borrowing authority, and has proposed legislation that would allow credit unions to spread realization of the premium over as many as seven years. The Mica letter noted that credit unions are being buffeted by circumstances in the economy that are beyond their control. They also are facing significant costs related to the NCUA’s actions concerning corporate credit unions, and are funding losses as a result of declines in the values of mortgage-backed securities in which corporates had invested when prudent. “We appreciate your efforts to address theses matters in this legislation and look forward to working with you on these issues,” Mica wrote.

Senate card bill includes NCUA emergency borrowing

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WASHINGTON (4/1/09)—Voting 12 to 11 in favor of a credit card best practices bill, the Senate Banking Committee passed legislation Tuesday that included consideration of amendments important to credit unions, including creating National Credit Union Administration (NCUA) emergency lending authority. S. 414 would amend the Consumer Credit Protection Act to ban abusive credit practices, enhance consumer disclosures and protect underage consumers. During the committee’s consideration of the bill, the panel voted unanimously to adopt the Crapo-Corker Federal Deposit Insurance Corp. (FDIC) and NCUA Borrowing Authority amendment. Offered by Republican Sens. Mike Crapo (Idaho) and Bob Corker (Tenn.), the amendment would increase NCUA's authority to borrow from the U.S. Treasury to $6 billion from $100 million and the FDIC's authority to $100 billion from $30 billion. Equally significant, or perhaps even more so, the amendment would establish for NCUA an emergency borrowing authority of $18 billion—or three times the $6 billion that would be available during normal times. While nowhere near the $30 billion requested by the agency, NCUA Chairman Michael Fryzel noted after the unanimous vote that the Crapo amendment represents the first time any language on NCUA emergency borrowing authority has appeared in this Congress. Addressing another huge issue for credit unions, the amendment also would provide express authority for NCUA to spread out the impending premium assessment on credit unions over five years, which the NCUA feels it cannot do under current law. Fryzel said the strong and accompanying discussion sent “a strong indication that the Senate wants to address the need for NCUA to have greater borrowing authority and have greater flexibility on premium assessments.” He said he is encouraged for future action on the NCUA-drafted Corporate Credit Union Stabilization Fund legislation, which would allow credit unions to spread the cost of the National Credit Union Share Insurance Fund (NCUSIF) replenishment over as many as seven years. The Credit Union National Association (CUNA) also called the amendment a significant step forward in providing credit unions relief from the immediate impact of the premium assessment to fund NCUA’s actions to stabilize the corporates. However, in letters to Crapo and Corker, CUNA President/CEO Dan Mica said CUNA would welcome an opportunity to discuss further legislative steps that cold be taken to address corporate credit union issues. (See related story: Mica tests waters: Higher borrowing, longer write-off.) Also of interest to credit unions, the banking panel considered, then withdrew, an amendment to clarify that the bill does not expand the Federal Trade Commission's mortgage-lending rulemaking powers to credit unions or other depository institutions. The amendment would also have specified that the bill does not increase state attorneys’ general authority to enforce the Truth-in-Lending Act, the amendment notes. That amendment, backed by CUNA, was also co-offered by Crapo and Corker. On the Senate floor during debate on an omnibus spending bill, senators including Christopher Dodd (D-Conn.), Daniel Inouye (D-Hawaii) and Byron Dorgan (D-N.D.) promised the FTC issue would be addressed. At the heart of S. 414 are provisions to crack down on abusive credit card practices. CUNA supports efforts to end discriminatory, predatory, deceptive and abusive lending practices. Such efforts should be balanced, however, to avoid unintended consequences that ultimately would be adverse to consumers, including making credit more expensive and less available for consumers. (See related story: CUNA seeks balance in card protections.)

CUNA supports Cherry Blossom Run for seventh year

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WASHINGTON (3/31/09)--More than 13,000 runners will course this weekend through the streets of Washington, D.C., as the Credit Union Cherry Blossom 10-Mile Run is held – fully supported by the Credit Union National Association (CUNA). This year marks the seventh straight year that CUNA has worked in support of credit union involvement in the race, proceeds of which benefit Children’s Hospitals throughout the nation. “One of our goals each year is to showcase to Congress and others in the Washington area the work credit unions do in support of their communities,” said CUNA President/CEO Dan Mica. “The Cherry Blossom Run has proven to be an ideal vehicle for this purpose. CUNA proudly supports the Cherry Blossom Run.” This year CUNA will again participate in a number of events related to the run, including:
*Co-sponsor the “Capitol Hill Competition,” a race-within-a-race for runners from congressional offices; *Participate in a Friday press conference at Children’s Hospital in Washington to promote the race to trade and local press; and *Send a team of volunteers to the race to serve in the “bag check” tent, where more than 10,000 runners will store their belongings while they race.
CUNA also serves as sponsor of the event and participates in a number of additional programs. For a short presentation on the people who participate in the annual event, use the resource link below.

Litigation efforts on hold options explored Mica

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WASHINGTON (3/31/09)—The legal team at the Credit Union National Association (CUNA) has determined that a variety of options are available to seek answers from the National Credit Union Administration (NCUA) about its actions involving corporate credit unions, and CUNA said it would not file a legal challenge at this time. CUNA President/CEO Dan Mica issued a statement that the association decided against challenging the NCUA’s appointment of conservators for U.S. Central FCU and Western Corporate FCU (WesCorp) because the 10-day timeframe for filing could force haste. Mica said CUNA is committed to keeping as many options open as possible in obtaining answers for credit unions from NCUA about how it reached the conclusions it did for conserving U.S. Central and WesCorp – including through Congress, the regulatory process and the courts. Mica said CUNA’s legal research has determined that other legal remedies are available that are likely to be more fruitful if CUNA decides to go to court. In addition, he said, these other remedies are not subject to the 10-day deadline that applies to challenges to conservatorships. This would avoid pressure to make the kind of hasty legal decisions that would have been necessitated by a decision to file a case today, Mica said. Mica emphasized that CUNA continues to believe there is much NCUA can do unilaterally to mitigate the financial impact of its Corporate Stabilization Program on natural person credit unions. “We hope that a combination of initiatives by NCUA, plus legislation if possible, will make litigation unnecessary,” Mica said. "But that remains an avenue open to us." CUNA General Counsel Eric Richard said Monday that NCUA’s legislative proposal to create a stabilization fund goes a long way to address the problems facing the corporate credit union system, as well as allowing natural person credit unions to spread out premium payments over several years. He said CUNA intends to work with the National Association of Federal Credit Unions to work to persuade the NCUA to expand its legislative proposal to include authority to allow the Central Liquidity Facility to lend money directly to corporate credit unions, and to raise NCUA’s borrowing authority above the $6 billion the agency has requested.

Congress to mark up TILA abusive card bills this week

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WASHINGTON (3/31/09)--Congress is expected to mark up two bills of interest to credit unions this week that involve abusive credit card practices and the Truth in Lending Act. S. 414 would amend the Consumer Credit Protection Act to ban abusive credit practices, enhance consumer disclosures and protect underage consumers. Several amendments of interest to credit unions could be offered, including:
* The Crapo-Corker FTC amendment, offered by Sens. Mike Crapo (R-Idaho) and Bob Corker (R-Tenn.), which would remove language that would expand the Federal Trade Commission’s authority with respect to mortgage lending and increase state attorneys’ general authority to enforce the Truth-in-Lending Act; and * The Crapo-Corker Federal Deposit Insurance Corp. (FDIC) and the National Credit Union Administration (NCUA) Borrowing Authority amendment by Sens. Crapo and Corker. The amendment would increase NCUA’s authority to $6 billion from $100 million and the FDIC’s authority to $100 billion from $30 billion.
H.R. 627, which would amend the Truth in Lending Act, also is scheduled for mark-up. The act would establish fair and transparent practices related to the extension of credit under an open-end consumer credit plan. Several amendments also could be added:
* Manager’s amendment. CUNA expects that an amendment will be offered to align the provisions of H.R. 627 to the Unfair and Deceptive Practices rules recently approved by NCUA and the Federal Reserve; and * A bi-partisan amendment extending the effective date of the legislation also could be offered, a key concern that CUNA raised it testimony on the legislation two weeks ago; and
Possible interchange amendments could be added to both pieces of legislation, which CUNA is closely monitoring.

Whats ahead in Congress this week

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WASHINGTON (3/31/09)--The Credit Union National Association (CUNA) is monitoring numerous hearings this week that are of interest to credit unions. CUNA also is keeping an eye on mortgage bankruptcy provisions in H.R. 1106, the Helping Families Save Their Homes Act. “We believe there is a desire among Senate leadership to move this legislation when the Senate reconvenes in mid-April,” said Ryan Donovan, CUNA vice president of legislative affairs. “We oppose the bill that passed the House and we are working to mitigate the effect that this legislation would have on credit unions if it were to become law.” CUNA continues to discuss the legislation with Senate leaders and moderate Democratic and Republican offices. H.R. 1106 also would make permanent the $250,000 deposit insurance coverage limits, extending the period of time within which National Credit Union Administration (NCUA) must replenish the National Credit Union Share Insurance Fund, and increase the NCUA's borrowing authority. CUNA expects, based on conversations with committee and leadership staff, that H.R. 1106 will be the vehicle for NCUA’s legislative proposal aimed at reducing the immediate cost of the corporate stabilization premium on credit unions. On Tuesday, the Senate Banking Committee is scheduled to hold a hearing on Troubled Asset Relief Program oversight. The House Homeland Security Committee’s Subcommittee on Emerging Threats, Cybersecurity and Science and Technology also will hold a hearing, “Do the Payment Card Industry Data Standards Reduce Cybercrime?” On Wednesday, the Senate Small Business Committee is scheduled to hold a confirmation hearing for Karen Mills to be administrator of the Small Business Administration. The House Judiciary Committee also will meet on several pending financial crimes bills including the “Fight Fraud Act of 2009” [not yet introduced]; H.R.1292, to amend Title I of the Omnibus Crime Control and Safe Sts. Act of 1968; H.R.1667, the “War Profiteering Prevention Act of 2009”; the “Financial Crimes Resources Act of 2009”; the “Money Laundering Correction Act of 2009”; and H.R.78, the “Stop Mortgage Fraud Act.” On Thursday, the House Judiciary Committee Subcommittee on Commercial and Administrative Law will hold a hearing entitled, “Are Credit Cards Bankrupting Americans?” The House Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit also is expected to meet on H.R. 1214, the Payday Loan Reform Act of 2009. CUNA is analyzing this bill and discussing it with its sponsor, Rep. Luis Gutierrez (D-Ill.), chairman. CUNA may file a statement for the record of this hearing. A previously scheduled mark-up in the House Financial Services Committee on H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009, has been postponed to a date to be determined. Congress also will mark up two bills dealing with the Truth in Lending Act and abusive credit card practices (SEE RELATED: Congress to mark-up TILA, abusive card bills this week).

Inside Washington (03/30/2009)

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* WASHINGTON (3/31/09)--The U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund Monday announced the appointment of José Villar to serve as its chief operating officer (COO), effective immediately. As the COO, Villar will serve as CDFI Fund Director Donna Gambrell’s principal executive for operations and program processes. He will primarily be responsible for managing day-to-day activities of the CDFI Fund and “ensuring that operational infrastructure can support enhanced business practices.” Prior to the CDFI Fund, Villar has held several positions within Treasury. Most recently, he served as the director of the Office of Financial Management, where he was responsible for managing the budget, accounting and procurement functions, and travel services for all of Treasury’s 32 program offices ... * ALEXANDRIA, Va. (3/31/09)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel last week highlighted the importance of an early start on financial education during a tour of
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a Virginia high school student-run branch. Fryzel visited Arlington Virginia FCU’s student-run Triple $ branch. The branch, named to stand for “Students Serving Students,” is part of the school’s business and finance curriculum. “It is always both rewarding and impressive to see hands-on, useful financial skills being taught to students. This branch is one of many I have had the opportunity to observe in action, and I am optimistic that the students learning lessons of today will become the savvy, financially literate consumers of tomorrow,” Fryzel said. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (3/31/09)--Starting in June, the Office of the Comptroller of the Currency (OCC) will gather more information from large banks--those that exceed $10 billion in assets--on derivatives, the agency said Friday. All commercial banks will be required to comply (American Banker March 30). The agency said it is collecting the information to get a better idea of the banks’ credit risk. Commercial banks reported a $9.2 billion trading loss for the fourth quarter of 2008, the agency said in a release. For 2008, banks reported an annual trading loss of $836 million, compared to trading revenues of $5.5 billion in 2007 ... * WASHINGTON (3/31/09)--“Healthier” banks may be the first to apply for the Treasury Department’s Public-Private Investment Program, causing it to have a rough start, financial industry observers said (American Banker March 30). The program needs to attract the participation of banks carrying bad assets on their books that prevent them from raising capital. Ken Zerbe, Morgan Stanley analyst, said most banks likely to use the program already have written down their toxic assets. Some of those banks include Marshall & Ilsley Corp., East West Bancorp. Inc. and First Horizon National Corp. Weaker institutions may not participate if they will take hard losses on their loans that affect their capital ratios, said Maclovio Pina, equity analyst with Morningstar Inc. The Federal Deposit Insurance Corp. (FDIC) said it may be open to allowing banks that have sold loans into the program to receive a stake in the funds that acquire the assets. If bankers see things are moving along, they may want to join, FDIC Chairman Sheila Bair said ...

CUNA follows up with FOIA on corporates

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WASHINGTON (3/31/09)—Following up two earlier requests for information, the Credit Union National Association (CUNA) has filed a formal Freedom of Information Act (FOIA) request with the National Credit Union Administration (NCUA) regarding its recent actions involving corporate credit unions. The FOIA request seeks information on the following:
* All records generated since Jan. 1, 2008 concerning the calculation of the estimated credit losses on mortgage and asset-backed securities announced in NCUA Letter No. 09-CU-06; * All records generated since Jan. 1, 2008 concerning the calculation of the $4.7 billion National Credit Union Share Insurance Fund (NCUSIF) liability estimate announced in NCUA Letter No. 09-CU-02, including but not limited to the assumptions used to make that calculation; * All records generated since Jan. 1, 2008 concerning the calculation of the $5.9 billion revised NCUSIF liability estimate announced in NCUA Letter No. 09-CU-06, including but not limited to the assumptions used to make that revised calculation; * The report submitted to NCUA by Pacific Investment Management Company, LLC concerning the value of mortgage and asset-backed securities held by corporate credit unions (the “PIMCO Report”); * All records generated since Jan. 1, 2008 concerning the methodology, models, and assumptions used by NCUA to value mortgage and asset-backed securities held by corporate credit unions and to determine NCUSIF’s required reserve for potential credit loss; * All records generated since Jan. 1, 2009 concerning the methodology, models, and assumptions used by PIMCO to value mortgage and asset-backed securities held by corporate credit unions and to determine NCUSIF’s required reserve for potential credit loss; * All communications since Jan. 1, 2008 between NCUA and the former or current officers and directors of U.S. Central FCU (U.S. Central) concerning the methodology, models, and/or accounting principles used to value U.S. Central’s mortgage and asset-backed securities; and * All communications since Jan. 1, 2008 between NCUA and the former or current officers and directors of Western Corporate FCU (WesCorp) concerning the methodology, models, and/or accounting principles used to value WesCorp’s mortgage and asset-backed securities.
The FOIA was filed Friday. The NCUA has 20 business days to respond, but extensions to that deadline are possible.

Reg E needs hybrid approach to opt-ins CUNA

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WASHINGTON (3/31/09)--The Credit Union National Association (CUNA) generally supports proposed changes to the Federal Reserve Board’s Regulation E that would impose restrictions on overdraft protection plans as they pertain to automated teller machine (ATM) and one-time debit card transactions. The Fed proposal will not apply for other types of transactions, such as checks, automated clearinghouse (ACH) transactions, and preauthorized electronic funds transfers. CUNA said in a comment letter that it backs efforts to provide more consumer protections for electronic funds transfers, but urged the regulator not to impose significant operational burdens on credit unions and other financial services providers. The Fed plan proposes an “opt-in” approach for overdraft plans, in which fees could not be charged unless the consumer chooses to participate in the plan. That approach, CUNA wrote, should be modified to a “hybrid” approach to avoid burdens to financial institutions, according to CUNA. Financial institutions should be allowed to use an opt-out system for existing accounts, while the opt-in alternative could be required for new accounts. “This will alleviate burdens for credit unions in making this transition, while insuring that the opt-in alternative will become more prevalent over time as new accounts are opened,” CUNA said. CUNA used the opportunity of the comment letter to reiterate its strong support of overdraft protection plans. Those plans provide a valuable service for consumers, especially for check transactions, as the overdraft fee is often equivalent to the returned-check fee and the use of the overdraft plan will avoid additional merchant fees and other adverse actions, CUNA said. CUNA also agreed with the Fed that financial institutions should not require consumers to choose overdraft services for checks, ACH, and other transactions on the condition that they elect this service for ATM and one-time debit card transactions. “However, these and other operational aspects of the rule will require significant time to implement and, therefore, credit unions will need at least one year after the proposal is finalized to implement these changes and compliance with this rule should not mandatory until that time,” the CUNA letter said.

ACCU adds voice to call for transparency

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WASHINGTON (3/31/09)--The Association of Corporate Credit Unions (ACCU) wrote recently that it is deeply concerned about the conservatorship actions the National Credit Union Administration took against two corporate credit unions and the “extreme degree of credit union capital depletion and overall system impact these actions dictate.” In a letter to NCUA Chairman Michael Fryzel, the ACCU added its voice to the call for more transparency with regard to how the agency arrived at its valuations of the securities analyzed. The information, ACCU Executive Director Brad Miller wrote, should include the average default and loss severities used in analysis so that the industry can see if the agency’s future assumptions are “reasonable and in line with the actual cash flow evidence of these securities.” “Also, we question the decision and timing to conserve U.S. Central and WesCorp given the movement on stimulus measures, the Treasury’s private-public asset purchase plan, proposed accounting rule changes, and other positive steps being taken to revive the economy that will improve the condition of corporate credit unions and the system as a whole,” Miller wrote. The NCUA announced March 20 that it had placed U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (WesCorp), San Dimas, Calif., into conservatorship. The Credit Union National Association (CUNA) and credit unions have been urging the NCUA to provide greater transparency regarding a report by Pacific Investment Management Company LLC (PIMCO) on the corporates. The PIMCO report was the basis, in part, of the NCUA's decision to place the two corporate credit unions into conservatorship. In addition to more seeking transparency, the ACCU letter also encouraged the NCUA to continue to pursue alternatives for spreading out the cost impact to credit unions. Miller wrote that his group would like to see further action to develop a mechanism that matches actual losses with insurance fund expenditures if and when they occur, instead of requiring credit unions to pre-fund projected expenditures based on security modeling assumptions that will continually change.

NCUA touts FinCENs CTR for consumers

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ALEXANDRIA, Va. (3/31/09)—A recently released Financial Crimes Enforcement Network (FinCEN) pamphlet to explain currency transaction report (CTR) requirements to consumers could be helpful to credit unions’ discussions with their members, the National Credit Union Administration (NCUA) noted recently. Bringing the FinCEN material to the attention of federal credit unions, the NCUA wrote that the educational pamphlet explains the CTR reporting requirement to members who may not be familiar with the credit union’s obligations under the Bank Secrecy Act (BSA). Federal law requires financial institutions to report currency transactions over $10,000 conducted by or on behalf of one person, and multiple currency transactions that aggregate to be more than $10,000 in one day. The federal law requiring these reports was passed to safeguard the financial industry. “This pamphlet does not alter a credit union’s BSA reporting requirements. The pamphlet explains that large currency transactions are not illegal, and that credit unions are required to obtain information from their members when conducting such transactions,” the NCUA communication said. It also noted that the pamphlet, “Notice to Customers: A CTR Reference Guide,” explains what constitutes structuring and explains that if a member attempts to structure transactions there are potential civil and criminal consequences. News Now reported the pamphlet's release March 4. There is no requirement to use the pamphlet, but credit unions may print the booklet from the FinCEN website. Use the resource link below to access the FinCEN material.

Flexible accounting stance may come from NCUA

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WASHINGTON (3/30/09)—If an accountant is willing to be flexible about when a credit union books the cost of their 1% premium being assessed to replenish the National Credit Union Share Insurance Fund (NCUSIF), the National Credit Union Administration (NCUA) said it will be okay with that. A senior NCUA staff member told the Credit Union National Association that the agency will not necessarily challenge a decision of a credit union’s CPA or auditor to take into consideration a recent legislative proposal by the NCUA when making an accounting decision about when to book the replenishment. The NCUA declared a premium would be collected from natural person credit unions later this year to cover the cost to the NCUSIF of the agency’s actions to stabilize corporate credit unions liquidity. The agency announced Thursday that it has drafted legislation to allow credit unions to spread the cost of the replenishment over as many as seven years. However, it will take an act of Congress to authorize the longer time frame. Addressing the uncertain situation faced by credit unions, the NCUA staff member made the following points:
* NCUA does not set accounting rules; * Based on what AICPA put out recently, credit unions can book their costs in 2008 or 2009; * For credit unions that choose to book in this year, the NCUA already has advised that the 1% deposit replenishment must be booked by March 31; * The premium will be assessed later in the year, likely September, and should be booked then; and * The legislation being sought by the NCUA is not a certainly and therefore should not affect the March 31 statements.
Most important, NCUA said that if a credit union's CPA or auditor approves taking the legislation into consideration in deciding whether the 1% replenishment must be recognized by March 31st, NCUA will not necessarily challenge it.

White House conference call adds detail to reg reform

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WASHINGTON (3/30/09)—The White House and U.S. Treasury Department Friday gave more detail on its financial regulatory reform platform during a by-invitation conference call. Those invited included the Credit Union National Association (CUNA) and other national financial services groups. Jeffrey Bloch, senior assistant general counsel of the Credit Union National Association, said the call focused on four components of the Obama administration’s restructuring efforts:
* Addressing systemic risk; * Protecting consumers/investors; * Eliminating gaps in the regulatory structure by reassigning resources and accountability; and * Fostering international cooperation since U.S. actions will affect global markets.
The bulk of the call, Bloch said, was dedicated to discussing systemic risk. The administration described the following six areas to be explored to address systemic risk:
* Single independent regulator for all systemic important entities. Named by Congress, the regulator would issue substantive rules and responsibilities. The regulator would focus on risk, not the legal form of the entity and payments/settlement systems would be strengthened, such as for derivatives and other activities not currently closely supervised. * Higher capital and risk management standards would be set for systemic important entities. Prompt Corrective Action requirements would be required at the holding company level. * Hedge funds over a certain size would have to register and provide info to the Securities and Exchange Commission (SEC), and uniform requirements would be imposed. Data would be collected to assess the risk of these funds to determine how systemically significant they are. * An addition of protection requirements for derivatives, such as credit default swaps. Dealers and others would be evaluated to determine their systemic importance, with a goal of increasing the amount of information reported and its transparency. There would also be more eligibility and suitability requirements with regard to derivatives. * New SEC requirements for money market mutual funds would be implemented. * Regulators would have stronger resolution authority for complex, non-bank entities.

CU emails to agency grassroots at work says Hyland

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ALEXANDRIA, Va. (3/30/09)—Credit union response to a Credit Unions National Association (CUNA) call to action on the on the need to spread out share insurance fund replenishment was “credit union grassroots at work,” said National Credit Union Administration (NCUA) board member Gigi Hyland Friday. CUNA specifically urged credit unions to contact the agency about the need to spread the costs of the NCUA’s corporate stabilization efforts over a longer period of time and to request enhanced transparency on information underlying the board’s corporate stabilization efforts. CUNA launched the action alert in advance of a special closed NCUA meeting Thursday morning scheduled to discuss possible actions to mitigate the costs to natural person credit unions of the agency's actions to stabilize the corporate credit union system. After the meeting, the NCUA announced a legislative proposal, which if enacted by Congress would create the Corporate Stabilization Fund. Through the fund, the costs of premiums and assessments could be spread over a period of up to 7 years. In her release, Hyland also pledged to continue reviewing other available alternatives to further mitigate the cost to credit unions. “These are difficult and challenging times for credit unions. While the agency must take appropriate supervisory action to assure the National Credit Union Share Insurance Fund is protected, we must also explore alternatives that alleviate the impact on credit unions,” she said.

NCUA starts stakeholder reports on corporate CUs

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ALEXANDRIA, Va. (3/30/09)--The National Credit Union Administration (NCUA) Friday began what it said would be periodic reporting to stakeholders on the status of the corporate credit union system. In its inaugural communication, the agency said normal operations and transactions have continued uninterrupted and liquidity remains stable at f U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp), after being placed in conservatorships last Friday. The update recapped the agency’s recent actions, such as the release of the two corporates’ boards of directors, CEOs, and one senior staff member have been released. It also said cross analysis of the value of held securities continues and that the release of specific comparisons can be expected soon. NCUA Chairman Michael Fryzel defended his agency’s action to place U.S. Central and WesCorp under conservatorships, an action that has been questioned as unnecessary by some. “(T)he cost of the corporate credit union stabilization program would have increased even if NCUA had not placed U.S. Central and WesCorp into conservatorship. “Barring a deepening of the recession beyond what was incorporated into the loss projections, and economic uncertainties do remain, the $5.9 billion reserve should be sufficient to cover expected credit losses of holding the distressed assets to maturity,” Fryzel said in the release. Highlighting another point of controversy, Fryzel said that while analysis by Pacific Investment Management Company LLC (PIMCO) was one factor in arriving at this reserve, it served to refine and supplement NCUA’s own calculations. Fryzel stated that NCUA selected PIMCO partly because it had not sold any of the bonds being analyzed and was not engaged in providing any other services to corporate credit unions. Fryzel noted that any firm with expertise to evaluate the bonds is a potential purchaser. However, he said there is not conflict of interest in PIMCO’s involvement because the NCUA intend to hold the securities to maturity, an action the chairman said was recommended by PIMCO. The Credit Union National Association (CUNA) has urged the NCUA to make public more information on PIMCO and any analysis that lead to the agency's actions to conserve two corporate credit unions last week.

Inside Washington (03/27/2009)

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* WASHINGTON (3/30/09)--A letter from the Credit Union National Association (CUNA) to federal regulators to request more information on corporate credit unions drew the attention of the Wall Street Journal last week. CUNA President/CEO Dan Mica wrote to the National Credit Union Administration (NCUA) requesting records of the securities held by the two corporate credit unions placed into conservatorships recently--U.S. Central FCU and Western Corporate FCU, known as WesCorp. The article noted CUNA welcomed the agency’s recent legislative proposal to spread out over seven years costs associated with the NCUA’s corporate stabilizations actions. But it also noted that Mica told the NCUA that credit unions are concerned about a lack of transparency, including how the NCUA arrived at estimates of losses and its decision to take control of the two corporates. The March 27 article noted CUNA’s willingness to “do everything possible to avoid a legal battle” with the regulator while still looking at all options. Affected parties must decide by today whether to legally challenge the conservatorships of the two wholesale credit unions… * WASHINGTON (3/30/09)--Sen. Christopher Dodd’s (D-Conn.) legislation to crack down on abusive credit card practices could come up for a committee vote Tuesday. His bill would define universal default and double-cycle billing as unfair (American Banker March 27). It also would require that credit cardholders under 21 take a credit course or have a parent co-sign on the account and ban interest on fees. The Federal Reserve Board has proposed similar card regulations, but Dodd’s proposal would be effective immediately, whereas the Fed’s would take effect in 2010. Consumer groups said the bill is overdue, while the banking industry said they would fight it ... * WASHINGTON (3/30/09)--An independent investigator of the Treasury Department indicated that it found cases where a bank regulator may have “ignored questionable backdating of capital injections” (Reuters March 27). The investigator found backdating while reviewing the IndyMac case, and indicated that an OTS official may have allowed the backdating to happen. On Thursday, the Office of Thrift Supervision (OTS) announced that Treasury Secretary Tim Geithner had removed Scott Polakoff, OTS acting director, and appointed John E. Bownman, deputy director and chief counsel, effective immediately. Polakoff is on leave pending a review by the Treasury of the OTS’ August 2008 actions related to post-period capital contributions, OTS said ... * WASHINGTON (3/30/09)--Though Treasury Secretary Timothy Geithner detailed his ideas for regulatory reform Thursday, he did not indicate which agency he thinks should oversee systemically significant institutions (American Banker March 27). Financial industry observers anticipate that the Federal Reserve Board would fill this role, but Geithner said there may be danger in giving one agency all of the power. The Treasury is looking at a range of suggestions, he added. Some lawmakers have said a new regulator should be created to oversee the institutions, but others, such as Rep. Barney Frank (D-Mass.), said doing so would take up too much time. The Treasury has introduced a bill that would place the Fed over systemically significant institutions, thought the Federal Deposit Insurance Corp. (FDIC) must consult with it before taking over an institution ... * WASHINGTON (3/30/09)--The Financial Services Committee Thursday approved H.R. 1664, the Grayson-Himes Pay for Performance Act of 2009, which would prohibit certain compensation payments by companies that received money under the Troubled Asset Relief Program (TARP). The bill prohibits compensation payments that are unreasonable or excessive, restricts all non-performance based bonuses, and repeals a provision in the American Recovery and Reinvestment Act that would prevent employees from receiving bonuses if their company has not paid back TARP money. Financial institutions subject to the requirements also would have to submit a report the Treasury Secretary annually showing how many employees would or will receive compensation above specific dollar amounts during the fiscal year. The House could take up the bill this week ...

Community development CUs oppose CRA for all CUs

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WASHINGTON (3/30/09)—The National Federation of Community Development Credit Unions (Federation) reiterated its decade-long opposition to extending the Community Reinvest Act (CRA) to credit unions, while backing its application to mortgage banks, securities firms, insurance companies, and other entities. Proposed legislation to expand the reach of CRA requirements specifically exempts low-income designated credit unions, such as community development credit unions (CDCUs), from coming under CRA, a fact the Federation noted in its position statement. However, the group underscored the exemption is appropriate for all credit unions because of financial cooperatives’ fundamental differences from other mortgage lenders, which include:
* Credit unions are non-profit, member-owned cooperatives. * They have no outside shareholders who demand ever-increasing quarter-over-quarter profits. * Excessive executive compensation has not been an issue with credit unions. * Credit unions have, for the most part, maintained a direct relationship with their borrowers, enabling many to rapidly restructure and modify mortgage loans.
“This contrasts markedly with institutions which are intimately and inextricably bound in the complex chain of securitization that has greatly hindered efforts to untangle the foreclosure crisis,” the Federation position paper said. It added, “In short, we believe that the basic philosophic and structural principles of the credit union movement can well serve as a template for the restructuring of the entire financial system.” The position paper emphatically endorsed CRA, saying it has been “immensely important to the revitalization of our nation’s distressed areas.” “We believe that CRA must, indeed, be expanded and modernized so that it reflects the migration of vast amounts of money to entities that are not subject to reinvestment regulations,” the Federation said. The Federation represents more than 200 credit unions in 46 states that serve low-income urban, rural, and reservation-based communities. They range from the smallest of depositories, with less than $1 million in assets, to credit unions with more than $1 billion in assets, which—the Federation noted--nonetheless serve predominantly low-income communities. The legislation referred to by the Federation is a bill introduced March 12 by Rep. Eddie Bernice Johnson (D-Tex.). The Credit Union National Association (CUNA) strongly opposes the application of CRA requirements to credit unions. CUNA Senior Vice President of Legislative Affairs John Magill has said: "CRA was enacted because banks were redlining—drawing circles around communities to which they would not lend. All available data suggests that credit unions, on the other hand, are out there lending to their members—even and especially in these tough times."

Predatory lending bill introduced in House

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WASHINGTON (3/30/09)—Co-sponsors of a new bill to crack down on predatory lending say H.R. 1728 is a tougher version of a bill in the last Congress designed to overhaul mortgage regulations. The new Mortgage Reform and Anti-Predatory Lending Act of 2009 is was scheduled for a vote tomorrow by the House Financial Services Committee, but that vote has been postponed. The bill is modeled after North Carolina’s predatory lending statute. In 1999, North Carolina passed the nation's first anti-predatory mortgage lending law. It is considered by many to be a model for preventing abusive lending practices, while preserving consumer access to credit. The Credit Union National Association (CUNA) strongly supports congressional action to protect consumers from abusive and deceptive lending practices. Yet, CUNA earlier has advised federal lawmakers that credit unions’ long history of favorable lending practices, and the range of regulation under which the movement operates, makes some provisions of such legislation more appropriate for the mortgage brokerage industry. The bill is sponsored by Reps. Barney Frank (D-Mass.), chairman of House Financial Services, Brad Miller (D-N.C.) and Mel Watts (D-N.C.). In a release announcing the bill, Watt said, “This bill represents an important step toward preventing the predatory and questionable practices that took hold in the mortgage lending industry in the past several years and undoubtedly contributed to our current housing crisis.” Specifically, according to the co-sponsors, the new measure will strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan’s interest rate and terms—known as yield-spread premiums. It also includes stronger language on “assignee liability,” intended to make mortgage securitizers, who package home loans into securities, more liable for fraudulent loans. A key element of the legislation prohibits lenders from underwriting loans that consumers do not have a reasonable ability to repay and prohibits practices that increase the risk of foreclosure for consumers. The bill also encourages the mortgage market to make it the norm to write 30-year, fixed-rate, fully documented loans, and move away from growth of “exotic” mortgages, which were a major factor in the current housing and foreclosure crisis. Use the resource link below to read legislation details.

Webcast on due diligence April 7 28

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WASHINGTON (3/30/09)--Credit unions and vendors seeking more information about due diligence can tune into a free webcast offered by VendorTrack April 7 or April 28. The webcast will be held both days at 1 p.m. CT. VendorTrack was created by CUNA Strategic Services. Under National Credit Union Administration requirements, credit unions must conduct due diligence on all third-party relationships. The webcast will discuss:
* How to increase exposure to credit unions that are potential customers; * Ways to help credit unions meet their due diligence requirements; * Methods to provide an efficient approach to request for proposals; and * How to upload and store sensitive due diligence-related documents on a single, secure site.
For more information, use the link.

New NCUA bill would spread out replenishment

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ALEXANDRIA, Va. (3/27/09)--The National Credit Union Administration (NCUA) announced Thursday that it has drafted legislation allowing credit unions to spread the cost of the National Credit Union Share Insurance Fund (NCUSIF) replenishment over as many as seven years. At issue is the cost to natural person credit unions of recent actions by the NCUA to stabilize the corporate credit union system. In January the NCUA issued a guarantee for uninsured shares at all corporate credit unions through February 2009, and established a voluntary guarantee program for uninsured shares of all corporate credit unions through Dec. 31, 2010. The agency also issued a $1 billion capital note to U.S. Central Corporate FCU (U.S. Central). The NCUA at the time also declared a premium assessment to restore the NCUSIF equity ratio to a statutory minimum of 1.20% and said the premium would be collected in 2009. As noted, the NCUA proposed legislation would allow credit unions to spread out the cost. The proposed legislation would create a mechanism, the Corporate Credit Union Stabilization Fund, to absorb losses associated with the corporate credit union stabilization actions and spread out the associated costs to federally insured credit unions over seven years. According to NCUA documents, the agency would use the Stabilization Fund to pay expenses associated with the ongoing problems in the corporate system. The fund may borrow money from the U.S. Treasury on a revolving basis. The NCUA noted its draft legislation would take a current $100 million borrowing authority for the NCUSIF and increase it to $6 billion. However, the draft bill stipulates that the maximum combined borrowing for the new stabilization fund and the NCUSIF would be capped at $6 billion at any one time. The stabilization fund would be required to repay the Treasury, with interest, all amounts borrowed, but has discretion to time each repayment and the amount of principal included with each repayment. The NCUA also said its new fund would make assessments on federally insured credit unions as it determined necessary to make each repayment. The Board must close the Stabilization Fund down seven years after the initial borrowing.

Objectives OK but CUNA has questions about NCUA plan

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WASHINGTON (3/27/09)—Credit Union National Association (CUNA) President/CEO Dan Mica said CUNA supports the objective behind a federal regulators’ draft bill, which is to spread out credit union costs associated with recent actions addressing corporate credit union stability, but has important questions to bring up to the agency. Mica was remarking on the National Credit Union Administration’s plan to ask Congress to form a Corporate Credit Union Stabilization Fund to absorb losses associated with agency actions to bolster the corporate system. The draft bill would allow federally insured credit unions to spread out the associated costs over seven years. (See related story: New NCUA bill would spread out replenishment.) “Ultimately,” Mica said Thursday, “we hope to work with NCUA to present to Congress and pass legislation that will give credit unions the resources and flexibility they need to replenish the share insurance fund.” “CUNA will also continue working with the agency,” he added. In a related event, the NCUA revealed its cost for a report by Pacific Investment Management Company LLC (PIMCO) on corporate credit unions. The PIMCO report was the basis, in part, of the NCUA's recent action –to conserve two corporate credit unions, U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (WesCorp), San Dimas, Calif. PIMCO is a PIMCO is a leading global investment management firm. Conflicting with earlier accounts, the NCUA said the PIMCO fee was $4.5 million and that it was .001% of the par value of the portfolio viewed. The NCUA said the credit union securities held exceeded $45 billion.

Inside Washington (03/26/2009)

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* WASHINGTON (3/27/09)--The Obama administration released its plan for financial regulation overhaul Thursday, which would establish a single agency to oversee systemically important firms and critical payment and settlement systems. It also would establish higher standards on capital and risk management for systemically important firms, require hedge funds above a certain size to register and require covered institutions to fund the resolution authority--which could take the form of a mandatory appropriation to the Federal Deposit Insurance Corp. out of the Treasury’s general fund. According to The New York Times (March 26), the proposal on hedge funds may prove to be the most controversial in the financial industry. Credit Union National Association President/CEO Dan Mica testified Tuesday at a Senate Banking Committee hearing, saying that credit unions need an independent regulator, one that understands the nuances and differences between credit unions and for-profit financial institutions. Mica also said that institutions who have not posed risks, such as credit unions, should be kept out of the new regulations (News Now March 25) ... * WASHINGTON (3/27/09)--The Federal Reserve Board would take the lead to determine which financial institutions are systemically risky, if legislation by the Treasury Department sent to Capitol Hill Wednesday is approved. The bill also would give the Federal Deposit Insurance Corp. (FDIC) resolution duties. Before the Fed could recommend closing down a firm, however, it would need the support of a federal regulator such as the FDIC, the Commodity Futures Trading Commission or the Securities and Exchange Commission (American Banker March 26). The FDIC also could place a firm into conservatorship, put it into a receivership or support it financially. The costs incurred by FDIC for creating a bridge company or buying its assets would be covered through asset sales and special assessments. Congress also would fund the FDIC ... * WASHINGTON (3/27/09)--Federal regulators sent mixed messages about lending standards during a House hearing Wednesday, indicating that communication between lawmakers and regulators on the matter needs to improve (American Banker March 26). House Financial Services Committee Chairman Barney Frank (D-Mass.) said lawmakers are partly to blame for the mixed messages. Lawmakers tell regulators to lend and not to lend. However, lenders must find a way to lend again without making bad loans, Frank said. There has to be a balance, added Timothy Long, national bank examiner at the Office of the Comptroller of the Currency (OCC). The OCC is working on making sure the problems that contributed to the credit crisis are not repeated, Long said. Several lawmakers also noted that bankers are not giving credit to worthy borrowers and many small businesses are in jeopardy because they cannot get funding. At a Senate Banking Committee hearing Tuesday, Sen. Charles Schumer (D-N.Y.) questioned why credit unions’ member business lending caps should be restricted at 12.25% when small businesses are having trouble securing credit (News Now March 25) ... * WASHINGTON (3/27/09)--The Federal Deposit Insurance Corp. (FDIC) announced Thursday that it is seeking public comment for the Legacy Loans Program. The program seeks to remove bad loans and assets from FDIC-insured institutions and put them up for sale. The FDIC also offered a conference call Thursday that provided an overview of the loans. The program was announced Monday ...

Online reporting TISA comment dates set

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WASHINGTON (3/27/09)—Comments to the National Credit Union Administration (NCUA) on its proposals regarding online reporting and Truth in Savings Act disclosures are due to the agency May 26. Both proposals were published in the Thursday Federal Register, setting the comment deadline. Also published was a final rule amending the NCUA’s Regulatory Flexibility (RegFlex) Program, setting the effective date as April 27. All three issues were addressed at the NCUA’s most recent open board meeting, which tool place March 19. The proposed online reporting rule would provide a web-based system to allow federally insured credit unions to submit reports and information online. The new system is expected to be implemented the third quarter of 2009. The NCUA has said it will send a letter to credit unions regarding the new system in early September and will make the system mandatory for credit unions with Internet access by Oct. 1. Regarding TISA disclosures, the NCUA’s rule is statutorily required to be “substantially similar” to the Fed’s. Therefore, the NCUA plan would, among other things, require credit unions to disclose on the periodic statement the dollar amounts charged for overdraft fees and returned item fees, both for the month and the year-to-date. Currently, only credit unions that promote or advertise the payment overdrafts are required to provide these disclosures. The NCUA final RegFlex rule increases the time period within which a federal credit union must partially occupy a completed new premises without obtaining a waiver from the NCUA. Previously, a RegFlex credit union had three years to at least partially occupy or it had to get a waiver. The new final rule increases that to six years, but only for acquisitions of unimproved land.

CUNA call-to-action targets CUs ire on corporates

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WASHINGTON (3/27/09)—A credit union call to action launched Wednesday by the Credit Union National Association (CUNA) generated thousands of communications to the federal regulator seeking more information on the decision to place two corporate credit unions (CCU) into conservatorship last week. An early estimate by CUNA showed about 20,000 emailed inquiries were fired off within 24 hours of the CUNA request for action. Credit unions were asked to urge each National Credit Union Administration (NCUA) board member to provide greater transparency regarding a report by Pacific Investment Management Company LLC (PIMCO) on corporate credit unions (CCU). The PIMCO report was the basis, in part, of the NCUA's action Friday to conserve two corporate credit unions, U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (WesCorp), San Dimas, Calif. PIMCO is a leading global investment management firm. CUNA also encouraged credit unions to push the NCUA to approve a mechanism to spread out the costs associated with recent agency actions addressing the corporate system. The NCUA had scheduled a special closed meeting for Thursday morning to address CCU issues. The agency unveiled draft legislation Thursday afternoon that would allow the insurance costs to federally insured credit unions associated with NCUA's actions regarding corporate credit unions to be spread out over time. (See related story: New NCUA bill would spread out replenishment.) CUNA has removed its call to action from its website.

CUNA urges NCUA board for more information

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WASHINGTON (3/27/09)—The Credit Union National Association (CUNA), citing the urgings of every credit union that that has weighed in, is directly asking the National Credit Union Administration (NCUA) to provide information on analysis that lead to the agency’s actions to conserve two corporate credit unions last week. Specifically, CUNA placed its request in writing for information on the assumptions, analysis, and findings in a Pacific Investment Management Company LLC (PIMCO) report and all data used in making the decisions on the conservatorships of U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU, San Dimas, Calif. CUNA, in its letter by President/CEO Dan Mica, reminded the three NCUA board members that the group has been seeking the information for “some time.” Alternatively, the Mica letter said, if the PIMCO information cannot be provided, CUNA requests the NCUA provide CUSIP numbers of all securities held by the corporate credit unions. CUNA said it intends to use the information to produce its own analysis to be used by the credit union system to evaluate loss at the corporates. Noting that credit unions feel “concern, outrage, anger, and frustration” with the current situation, Mica wrote that the CUNA board of directors has directed CUNA to work in “every possible cooperative way to resolve these issues in an agreeable and acceptable manner for credit unions.” “Simply put, credit unions have lost confidence and trust in their regulator and feel that our request for additional data, information, communication, and cooperation is being ignored,” Mica added. CUNA is willing to go further to obtain the information credit unions desire if necessary, the federal regulators were told. “(O)ur board has also directed me ‘to take all necessary actions including Congressional hearings, direct contact with the administration, and up to including all possible legal remedies,’ if we are not able to obtain the information credit unions are seeking,” Mica said. The NCUA has scheduled a special closed meeting for today on possible actions it might pursue, legislative as well as regulatory, to mitigate the costs to natural person credit unions of the agency’s actions to stabilize the corporate credit union system.

Parity for CUs at issue in Senate vote says CUNA

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WASHINGTON (3/26/09)—The U.S. Senate voted 49-48 against an amendment Wednesday that would have increased the Federal Deposit Insurance Corp. (FDIC) borrowing authority to as much as $500 billion. The final vote against the bill was, in part, caused by some lawmakers’objection that the amendment was not gemane to the bill being considered, H.R. 1388, which would reauthorize and reform the national service laws. However, Ryan Donovan, vice president of legislative affairs for the Credit Union National Association, said the amendment’s lack of parity for the credit union system also seemed to be at issue for some. "We understand from our conversations with a number of folks on Capitol Hill that one the reasons that the amendment was not agreed to had to do with the fact that a similar remedy for credit unions was not included in the language."

NCUA share insurance TV ads unveiled

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ALEXANDRIA, Va. (3/26/09)—The National Credit Union Administration (NCUA) is set to roll out a 10-week run of a television advertisement featuring a nationally known personal finance expert touting the safety and security of federally insured share deposits. In the 30-second spot, financial journalist Jane Bryant Quinn tells her audience that federally insured credit unions can help them sleep at night by assuring that their funds are safe and insured by the federal government up to $250,000. The commercial is slated to air during this weekend’s NCAA men’s basketball tournament, It will appear weekly, beginning March 29, during the award-winning Sunday Morning with Charles Osgood or Face the Nation broadcasts. From April 30 through May 29, it is scheduled to appear on the CBS early morning news between 5 a.m. and 9 a.m. Monday through Friday. What’s more, after the NCUA launches the TV ad today, it will back it up with a five-month video, print ad and electronic campaign. Television, the Internet, and transit buses will be used to spread the word that member accounts in federally insured credit unions are safe and secure. The NCUA encourages credit unions are encouraged to download commercial, which is available in HD video from NCUA’s website. Use the resource links below.

CUs urged Contact NCUA before corporate action today

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WASHINGTON (3/26/09)—Credit unions are asked to urge each National Credit Union Administration (NCUA) board member to provide greater transparency regarding a report by Pacific Investment Management Company LLC (PIMCO) on corporate credit unions (CCU). In a credit union action alert launched Wednesday, the Credit Union National Association (CUNA) also encouraged credit unions to push the NCUA to approve a mechanism to spread out the costs associated with recent agency actions addressing the corporate system. The NCUA has scheduled a special closed meeting for today that will address CCU issues. The agency is expected to review proposals that will allow the insurance costs to federally insured credit unions associated with NCUA's actions regarding corporate credit unions to be spread out over time. The PIMCO report was the basis, in part, of the NCUA’s most recent action –to conserve two corporate credit unions, U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (WesCorp), San Dimas, Calif. PIMCO is a PIMCO is a leading global investment management firm. CUNA has requested more information on the PIMCO analysis, but urges credit unions to join in the demand for more information. CUNA said it remains extremely concerned about the impact on credit unions of NCUA's decision Friday to place the two CCus into conservatorship, an action that brings a “huge cost” for the entire credit union system. The NCUA projects these actions raise the initial estimate of the corporate share guarantees from $4.7 billion to $5.9 billion. They likely will also impose additional impairment costs for credit union capital in WesCorp, U.S. Central, and perhaps other corporates. “Email each of the NCUA Board Members TODAY and urge them to approve a mechanism to spread out the costs and direct their staff to provide much more information to the credit union system from the PIMCO report,” CUNA urged.

Inside Washington (03/25/2009)

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* WASHINGTON (3/26/09)--Federal Reserve Board Chairman Ben Bernanke suggested giving more power to the Federal Deposit Insurance Corp. (FDIC) to regulate systemic risk during a House Financial Services Committee hearing Tuesday. The regulator does not have to be the same agency with resolution powers, he added. The Treasury and Fed both submitted proposals to create authority over struggling banks for systemically significant holding companies. House Financial Services Committee Chairman Barney Frank (D-Mass.) is drafting a bill to give the government resolution powers, but did not provide specifics on his legislation at the hearing (American Banker March 25). Treasury Secretary Timothy Geithner is expected to testify today before the Financial Services Committee and observers anticipate that the Obama administration will release more details on a plan to regulate systemic risk ... * WASHINGTON (3/26/09)--The role of CEO over Fannie Mae and Freddie Mac continues to change, and some observers say the position may be irrelevant. James Lockhart, director of the Federal Housing Finance Agency (FHFA), currently serves as conservator over the two enterprises. Fannie CEO Herbert Allison said he controls Fannie’s operations but he views FHFA as the controlling shareholder (American Banker March 25). Lockhart said his agency cannot run the enterprises itself. The CEO’s power will likely center on administrative tasks, according to Bert Ely, consultant in Alexandria, Va. A CEO is needed to run the enterprises, but the role is different than what it used to be--and that may make things simpler, added Brian Gardner, analyst for Keefe, Bruyette and Woods ... * WASHINGTON (3/26/09)--The Senate has confirmed Gov. Gary Locke of Washington as secretary of the Commerce Department. The Senate approved the nomination with a voice vote. President Barack Obama’s first two nominees--Sen. Judd Gregg (R-N.H.) and New Mexico Gov. Bill Richardson--withdrew (The New York Times March 25) ...

New tool added to CUNAs CCU resources

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WASHINGTON (3/26/09)—A video message that underscores the safety and soundness of the credit union system has been added to the Credit Union National Association’s (CUNA) resource center on corporate credit union issues. CUNA President/CEO Dan Mica appears on the video, which credit unions can link to on the CUNA homepage or post on their own websites, In under 60 seconds, Mica reminds listeners:
* The credit union system is well capitalized at close to 11%--significantly above the federal requirement of 7%; * Credit unions are making mortgage loans, auto loans, member business loans and are serving their communities; and * Federally insured share accounts are covered to $250,000.
Mica explains that the recent news of two conservatorships involves corporate—or “wholesale” credit unions. “They have had some difficulties, but they are not the every-day credit unions you and I use,” Mica assures. To get this video tool and the latest information on the National Credit Union Administration's (NCUA) corporate credit union stabilization efforts, click on "NCUA's corporate actions," written in red and boxed for easy access on CUNA’s home page. CUNA members can access:
* All archived News Now articles on the corporates; * CUNA analysis of the NCUA's actions; * Communications tools, such as talking points to help credit union members understand the issues and the new video; * An updated calculator to estimate cost of the NCUA corporate stabilization plan; and more.
Use the resource links below to see the video and to read the available materials.

Obama loan mod program topic of April audio

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WASHINGTON (3/26/09)--Credit unions can learn the benefits of participating in the Obama administration’s “Making Home Affordable Refinance and Modification Program” in an April 2 audio offered by the Credit Union National Association. The administration recently announced the details of its plan, which aims to help up to nine million families refinance their existing mortgage or modify their current loan. The program, announced Feb. 18, seeks to stabilize and strengthen the housing sector. Borrowers have two options to reduce their mortgage payments under the plan. One focuses on borrowers who are current on their payments but have not refinanced or taken advantage of lower interest rates because their home has decreased in value. The other option aims to help borrowers who are behind on their payments. During the audio, credit unions can:
* Hear about the structure and requirements of the new program from agency experts; * Explore the loan refinance program and understand how borrowers can refinance if a loan is owned or securitized by Freddie Mac and Fannie Mae, even if the loan balance is more than 80% of the current market value of the home and as long as the balance is no more than 105% of the market value; * Examine the loan modification option and how it’s geared to members who are behind or struggling to make their mortgage loan payments; and * Learn the requirements of each program, which members qualify, and the benefits to credit unions and members for participating in this program.
Industry experts scheduled to speak in the webinar include Laurie Maggiano, senior policy advisor in the Office of Financial Stability at the Department of Treasury, and representatives from Fannie Mae and Freddie Mac. For more information, use the links.

Audio Tuesday addresses COBRA under stimulus act

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WASHINGTON (3/26/09)--A Tuesday audio, “New COBRA Requirements Under the Stimulus Act: Are You Ready?” by the Credit Union National Association Center for Professional Development, will inform credit unions about changes to the Consolidated Omnibus Budget Reconciliation Act (COBRA) under the Obama administration’s stimulus plan. One COBRA change that will be noted in the audio is that Assistance Eligible Individuals (AEI) can receive a 65% subsidy of premiums they pay for group health continuation coverage for up to nine months. The subsidy is first paid by the employer, which then may recover it from the government by an offset in the payroll taxes it pays. The audio--led by Jeffrey Storch, industry expert with Boardman, Suhr Curry and Field LLP--also will provide information for credit unions on how to identify AEIs, provide the new required COBRA subsidy notice, and how to determine the subsidy amount and receive reimbursement. “Are You Ready?” will begin at 2 p.m. CT. For more information, use the link.

Inside Washington (03/24/2009)

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* WASHINGTON (3/25/09)--Fees charged to financial institutions in the Treasury’s program to relieve bad assets from banks’ balances sheets could actually bolster the Federal Deposit Insurance Corp.’s (FDIC) Deposit Insurance Fund, said FDIC Chairman Sheila Bair. Industry observers had questioned if the program would lead to higher insurance premiums--a claim that government officials said was unlikely. The FDIC’s reserves have dropped to $18.9 billion since the wave of bank failures. The agency would guarantee about $500 billion of debt for public or private funds that are buying the bad mortgage assets. It also would charge a fee for those funds, and the money would be placed into a reserve to build against future losses (American Banker March 23). The FDIC is seeking legislation that would give it more power to charge any assessment and include bank holding companies in the fees. Until a bill is passed, community banks are at risk, according to Chris Low, economist, FTN Financial. Community banks are upset because they are paying to bail out others even though they didn’t get involved with the “bad bets” ... * WASHINGTON (3/25/09)--Questions financial industry observers have about the Treasury’s plan to buy bad assets revolve around the auction process, which will be conducted by the Federal Deposit Insurance Corp. (FDIC). Observers ask if the agency would offer bids that are high enough to encourage bankers to sell illiquid assets (American Banker March 24). FDIC Chairman Sheila Bair said there is always risk, but that the structure has a better chance than other options she’s seen. Observers also asked Bair if banks would be forced to accept a price during bidding if they hesitated to participate. The process would be consultative, Bair said. Other unresolved questions include what loans are eligible for the program and how quickly the plan would be employed. The FDIC said it would soon release more details about the auction ... * WASHINGTON (3/25/09)--Concern over whether bad assets will remain on the Federal Reserve Board’s balance sheet permanently has been expressed by several financial industry observers. The Fed may be taking on risk by accepting the bad assets as loan collateral under the Term Asset-Backed Securities Loan Facility, but it’s a necessary evil, according to Kevin Jacques, former Treasury official (American Banker March 24). Cornelius Hurley, former Fed lawyer, said the Fed doesn’t have a history of dealing with bad assets and added he fears it will be stuck with them until the market improves. Peter Vinella, head of financial services at consulting firm LECG, said although some of the securities that were accepted as collateral after Jan. 1 have been downgraded, the Fed didn’t take on the worst assets--such as subprime mortgages ...

Mica on Fox CUs are the Most Solid Financial System

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WASHINGTON (3/25/09)--Following his Senate Banking Committee testimony yesterday, Credit Union National Association President/CEO Dan Mica appeared on Fox Business Network to underscore the overall strength and safety of the credit union system and promote lifting the statutory member business lending cap as a way to help job-generating small businesses. Interviewed live in the Rotunda of the Cannon House Office Building, Mica said he wants consumers to know that the natural person credit unions--“where you and I put our money”--are safe and sound, with accounts federally insured to $250,000. “We are the most solid financial services system left in the U.S. by any measure,” he added, noting that credit unions’ average capital ratio of nearly 11% is well above the federal “well-capitalized” standard of 7%.
Mica explained the conservatorship of two corporate credit unions, U.S. Central FCU and Western Corporate FCU (Wescorp), stemmed from problems due to “collateral damage” in today’s economy. “It’s what you’ve been talking about all day,” he told Fox. “The rest of the economy is crumbling and it has undercut some of their holdings.” To help credit unions shoulder the cost of the regulators’ action Mica said CUNA is pressing for legislation to spread out the time credit unions have to recognize the cost of the assessment from one year to five or eight years. “Banks already have that authority; we think we should have similar authority,” Mica said. He added that CUNA’s interest in TARP or U.S. Treasury Department funds is as a backup so credit unions are not the only institutions walled off from this option if needed. “We’re talking about parity, we’re talking about a backup, and about equal authority to spread out payments for an assessment for problems these two corporates had,” Mica said. On small business lending, Mica told the Fox audience that lifting the cap would allow credit unions to help small business, which generate 70% of the nation’s jobs. “If we can raise that cap, we can make $10 billion in loans to middle America, Main Street, without a penny from the government,” he said. (See related story: MBLs spotlighted as CUNA testifies on reg restructure.)

No new conservatorships on the horizon NCUA

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WASHINGTON (3/25/09)—In a CBS Radio News interview addressing the conservatorship of two corporate credit unions announced last week National Credit Union Administration (NCUA) officials said they do not foresee, at this time, a need to take similar action anywhere else within the corporate credit union network. The NCUA Friday took control of U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (Wescorp), San Dimas, Calif. CBS Radio News set up at U.S. Central FCU earlier this week to conduct an interview with the NCUA’s Keith Morton and John Kutchey. Kutchey is acting director of the Office of Examination and Insurance and Morton is director of the agency’s Region IV. The interview was conducted Monday afternoon by Barry Bagnato, who is working on “a broad array of stories concerning the recession” for CBS, according U.S. Central. U.S. Central reported that questions focused on:
* Why the conservatorship was necessary; * The impact of assessments on natural-person credit unions to replenish the National Credit Union Share Insurance Fund (NCUSIF); * The advance notice of proposed rulemaking (ANPR) seeking comment on the structure of the corporate system; * What happened to place U.S. Central in its current position; and * The possibilities other corporate credit unions could face conservatorship.
The NCUA officials explained that the value of mortgage-backed securities held in portfolio decreased because of the current recession and plummeting home values across the nation. Those securities were, however, highly rated when purchased, they added. Kutchey and Morton underscored that consumers will see few changes if any as a result of the NCUA's action. They added credit unions remain well capitalized, with some experiencing loan and asset growth at a time most financial institutions are struggling.

NCUA releases PIMCO FAQs on conservatorships

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ALEXANDRIA, Va. (3/25/09)—The National Credit Union Administration (NCUA) Monday released certain information regarding independent analysis of corporate credit union residential mortgage-backed securities (RMBS) and NCUA’s conservatorship of U.S. Central FCU and Western Corporate FCU. The analysis is from the Pacific Investment Management Company LLC (PIMCO). The NCUA also released an associated frequently-asked-questions (FAQs) document. The NCUA said it requested the PIMCO analysis to obtain “an independent, objective assessment” of potential losses resulting from holding RMBS to maturity. An independent review was necessary, the agency indicated, because:
* The portfolios with RMBS have highly complex structures that require considerable expertise to model and analyze; * The growing amount of unrealized losses on investment securities and the troubling amount of rating downgrades compelled NCUA to independently determine the amount of expected credit impairment; and * The NCUA developed concerns about the portfolio management abilities of the largest corporate credit unions and did not want to rely solely on the institutions’ own analyses.
The NCUA said the PIMCO report augments National Credit Union Share Insurance Fund analysis of the potential losses stemming from corporate credit union portfolios. The agency added that the FAQs explain why the NCUA conserved the corporate credit unions, and provides a wide range of information about their liquidity, what credit unions can do to support stabilization efforts, TARP funding, and the future structure of corporate credit unions. The Credit Union National Association (CUNA), which has been seeking more transparency from the agency regarding its action on corporates, said the information was good as far as it goes, but does not provide any real analysis of the numbers involved. CUNA Deputy General Counsel Mary Dunn said, “We will continue pressing NCUA for much more information so that credit unions can at least have a better understanding of the insurance costs and why NCUA is advising credit unions that capital in these two corporates and possibly others is impaired to the extent NCUA is indicating.” Use the resource links below.

MBLs spotlighted as CUNA testifies on reg restructure

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WASHINGTON (3/25/09)—Credit union member business lending (MBL) was
Click to view larger image CUNA President/CEO Dan Mica (foreground) faces Senate Banking Committee members at a hearing on financial regulatory restructuring, which also broached removing the member business lending cap for credit unions. Panel members include (from left) Sens. Mark Warner (D-Va.), Jon Tester (D-Mont.), Tim Johnson (D-S.D), Christopher Dodd (D-Conn.), chairman, Richard Shelby (R-Ala.), ranking member, and Robert Bennet (R-Utah). Seated to Mica's left: William Atridge, of the Independent COmmunity Bankers of America. (CUNA photo)
spotlighted during a Senate Banking Committee hearing Tuesday on modernizing the structure of financial regulations, at which the Credit Union National Association (CUNA) represented credit union views. In opening remarks, Sen. Charles Schumer encouraged CUNA President/CEO Dan Mica to address the issue of the cap that restrains credit union loans to small businesses, which Mica did in both testimony and remarks. Mica, testifying, reminded the Senate lawmakers that credit unions stand ready to add as much as $10 billion in credit if the cap is removed. On the regulatory issues, Mica told the Senate panel that credit unions need an independent regulator, one that understands the many-layered nuances that so distinctly separate not-for-profit credit unions from their for-profit counterparts. That regulator should be strong, tough, fair and competent, Mica said, but should not be dually responsible for credit unions and banks. He pointed out candidly that, with the history of banking industry attacks on credit unions, putting credit unions under the same regulator as banks would be like “throwing a chicken into the fox’s lair.” Mica, setting aside written remarks, made his points candidly to the Senate Banking Committee at its hearing addressing modernization of the financial regulatory structure. Among structural changes being considered is creation of a new and over-arching systemic risk regulator to be more fully attuned to risks that could arise across the markets. Proponents of such an overseer also argue it would prevent the growth of institutions deemed "too-big-to-fail," which threaten those markets. Mica, in his written testimony, urged Congress to keep credit unions, and other smaller institutions “that have shunned undue risk, out of this new regulatory scheme." In notable exchanges concerning the current 12.25%-of-assets MBL cap, Schumer pushed banking representatives on the witness panel for legitimate reasons not to—even temporarily—remove that limit. In a Q-and-A session, the New York Democrat asked banking representatives to give a good reason why, at a time when there’s “a failure of people being able to get new credit, and existing lines of credit are being pulled” from small businesses, credit unions should be restricted. When the question went largely unanswered, Schumer said he believed history shows the cap was not pushed by regulators but rather by credit unions’ competitors, the banks. Schumer said lawmakers are being flooded with calls from small businesses in good financial standing that have lost their lines of credit at banks that are tightening their lending to cope with financial losses. "We have to find new ways of lending," Schumer said. Schumer has announced his intentions to introduce a bill that would free up credit unions to provide more loans to member businesses, to help ease the credit crunch that Schumer says is caused in part by shrinking bank lending.

CU comment sought on FTC disclosure plan

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WASHINGTON (3/25/09)--The Credit Union National Association (CUNA) issued a comment call on a Federal Trade Commission (FTC) proposal that somewhat eases an agency rule requiring financial institutions without federal share or deposit insurance disclose this to customers. The comment period ends June 5. The FTC had issued a proposed rule in 2005 as part of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) to require such disclosure but it was not adopted--in part, because enactment of the 2006 Financial Services Regulatory Relief Act (FSRRA) addressed many of the concerns that were raised by CUNA and others in response to the proposed rule. The agency has now decided to issue a new proposal to incorporate the changes outlined in the FSRRA. The FSRRA continues to require financial institutions that lack federal insurance to disclose this to consumers. However, the proposed change would allow institutions under certain circumstances to provide notice instead of obtaining the signed acknowledgement. CUNA is especially interested in comments to these specific issues raised by the FTC proposal:
* What are the costs and burdens of the proposed rule and what changes should be made to increase benefits for consumers? * The rule does not include specific requirements regarding the size and format of the regulatory disclosures, other than that they be “simple and easy to understand.” Should this rule provide more specific requirements, and if so, what should they be?
Use the resource link below to read the complete comment call.

Abusive card tactics reg reform hearings this week

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WASHINGTON (3/24/09)--The Credit Union National Association (CUNA) will be following several hearings on both sides of the Capitol this week, with topics ranging from abusive credit card practices to regulatory reform. CUNA President/CEO Dan Mica also is scheduled to testify at a Senate Banking Committee today. (See related story: Mica to represent CUs at Senate Banking hearing today.) Hearings this week include:
* Tuesday’s Senate Judiciary Committee Subcommittee on Administrative Oversight and the Courts’ hearing on “Abusive Credit Card Practices and Bankruptcy”; * The Senate Small Business Committee’s Wednesday hearing on the Small Business Administration's budget for fiscal year 2010; * The House Financial Services Committee’s Wednesday hearing on “Exploring the Balance between Credit Availability and Prudent Lending Standards”; * The House Financial Services Committee’s Thursday hearing on “Addressing the Need for Comprehensive Regulatory Reform,” where Treasury Secretary Timothy Geithner is scheduled to testify; and * A hearing Friday for the House Financial Services Committee Subcommittee on Housing and Community Opportunity on the housing crisis in Los Angeles and preventing foreclosure and foreclosure rescue fraud. The hearing will be in Los Angeles.
A House Financial Services Committee hearing, “Seeking Solution: Finding Credit for Small and Mid-Sized Businesses in Massachusetts,” was held Monday in Boston. CUNA also is analyzing legislation--the Payday Loan Reform Act (H.R. 1214)--which focuses on payday loan fees and the “cycle of debt.” House Subcommittee on Financial Institutions Chairman Luis Gutierrez (D-Ill.) announced that a hearing on the matter is scheduled for April 2.

Inside Washington (03/23/2009)

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* WASHINGTON (3/24/09)--The Treasury Department Monday released information about its plan--the Public Private Partnership Investment Program --to handle toxic assets. The program will be designed around three principles: maximizing the impact of each taxpayer dollar, shared risk and profits with private sector participants, and private sector price discovery. “This approach is superior to the alternative of either hoping for banks to gradually work these assets off their books or of the government purchasing the assets directly,” the Treasury said in a statement. “Simply hoping for the banks to work legacy assets off over time risks prolonging a financial crisis. But if the government acts alone in directly purchasing legacy assets, taxpayers will take on the risk of such purchases ... * WASHINGTON (3/24/09)--The banking industry’s fourth-quarter net loss increased to $32.1 billion from $26.2 billion during the fourth quarter, according to the Federal Deposit Insurance Corp. (FDIC)’s quarterly banking profile, released Friday. The profile was updated from its original release Feb. 26. Other items of note: net income for all of 2008 was revised to $10.2 billion from $16.1 billion. The decline in the industry's total equity capital in the fourth quarter increased from $3.7 billion to $10.1 billion, but the additional goodwill write-downs had no effect on the industry's regulatory capital, because goodwill is not included in regulatory capital, FDIC said ... * WASHINGTON (3/24/09)--Some borrowers have failed to make even one payment on their new mortgages, which are insured by the government, the Department of Housing and Urban Development (HUD) said last week (National Mortgage News March 23). The defaults indicate fraud, said Lisa Gore, assistant special agent for the criminal investigation division in the HUD inspector general’s office. The investigation involved more than 100 loans, she told attendees of a financial industry conference last week ...

Mica in IBusiness WeekI Lifting MBL cap will boost economy

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WASHINGTON (3/24/09)--Credit Union National Association (CUNA) President/CEO Dan Mica recently spoke to BusinessWeek about the benefits of raising credit unions’ member business lending caps. Lifting the caps would boost the economy, while creating a small business “lending bubble” would be a mistake, Mica told the publication. “You have to draw that line very carefully,” Mica said. “But people who do lending for a living are very good at making the distinction between businesses that need extra help without being imprudent in their decisions.” Credit unions are the “best-capitalized” financial institutions left in America, and could put $10 billion into the economy if member business lending caps are raised, he said. The article also noted that Mica spoke with President Obama’s adviser Valerie Jarrett at a press conference March 16 about the caps, which limit credit unions’ member business lending to 12.25% of their assets. Credit unions would like to give small businesses more help, and credit unions have loan default rates of less than 2%, Mica added. “We have a record of lending to small companies, and we know how to do it,” Mica said. He noted that Sen. Charles Schumer (D-N.Y.) expressed his intent to draft a bill to lift the cap this year. For the full article, use the link.

CUNA offers consolidated CCU info

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WASHINGTON (3/24/09)—On the Credit Union National Association (CUNA) homepage, member credit unions can access comprehensive information related to corporate credit unions and regulatory actions taken on their behalf. To get the latest information on the National Credit Union Administration’s (NCUA) corporate stabilization efforts, click on “NCUA’s corporate actions,” written in red and boxed for easy access. CUNA members can access:
* All archived News Now articles on the corporates; * CUNA analysis of the NCUA’s actions; * Communications tools, such as talking points to help credit union members understand the issues; * An updated calculator to estimate cost of the NCUA corporate stabilization plan; and more.
Use the resource link below to read the available materials.

NCUA to consider corporate CU issues Thursday

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ALEXANDRIA, Va (3/24/09)—A special closed meeting has been called for Thursday morning by the National Credit Union Administration (NCUA)to look at possible plans to spread out the cost to natural person credit unions of the agency's corporate credit union stabilization efforts. The Credit Union National Association (CUNA) has been strongly advocating such action. An agenda states matters to be considered are:
* Consideration of supervisory activities. Closed pursuant to Exemptions (9)(A)(ii) and (B); and * Consideration of Proposed Legislation. Closed pursuant to Exemptions (9)(A)(ii) and (B).
The agency made clear that the items address corporate credit unions and actions taken to stabilize the liquidity in the corporate system. CUNA, through its Corporate CU Task Force, has been exploring options to mitigate the cost to natural person credit unions of the NCUA’s recent actions regarding the corporates. CUNA staff also has been pressing this point with the agency, as recently as at a meeting yesterday morning that CUNA initiated with NCUA Executive Director David Marquis, Examination and Insurance Director Melinda Love, and Central Liquidity Facility President Owen Cole. At that meeting CUNA General Counsel Eric Richard, Deputy General Counsel Mary Dunn and Chief Economist Bill Hampel urged the NCUA to go to Congress immediately to seek assistance in mitigating the costs of its action to credit unions by spreading out the costs over several years. Senior regulatory staff of the National Association of Federal Credit Unions also were in attendance. The agency also indicated it plans to approach the U.S. Treasury Department to see how credit unions may fit into the public-private asset acquisition plan announced yesterday by Treasury Secretary Timothy Geithner. (See "Inside Washington" for more details.) That is also in line with what CUNA has recommended to NCUA. On Friday, the agency announced it had places two of the corporates—U.S. Central FCU and Western Corporate FCU (Wescorp)—into conservatorship. Also, in January the NCUA announced a three-pronged initiative to bolster and enhance the liquidity positions of the corporates. The agency declared a premium assessment to restore the National Credit Union Share Insurance Fund (NCUSIF) equity ratio to 1.30%, and announced the premium would be collected in 2009. During a webinar on corporate credit union issues Monday, NCUA Executive Director David Marquis said the agency “remains committed” to finding a way to mitigate the costs. NCUA Chairman Michael Fryzel concurrently announced he had directed NCUA staff to explore two new avenues to augment NCUA’s Corporate Stabilization efforts. First, Fryzel said, the NCUA has held preliminary discussions with federal lawmakers regarding the creation of a “corporate Stabilization mechanism”, as an adjunct to the National Credit Union Share Insurance Fund (NCUSIF). The new mechanism would replenish the NCUSIF through an arrangement with the U.S. Treasury Department, while providing additional flexibility for credit unions to make their required contributions over a period of time, Fryzel said. Details of the proposal will be available pending the Board’s review and decision at Thursday’s closed meeting. The second NCUA action is to evaluate the latest Treasury initiative to deal with troubled assets—the program announced Monday. The new ‘Public-Private Investment Program,’ Fryzel said, “appears to hold some promise for corporate credit union holdings.”

Liquidity improves at six CCUs

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ALEXANDRIA, Va (3/24/09)—Some good news relating to the corporate credit union (CCU) system: There have been improvements in the liquidity position of the six largest CCUs, according to the National Credit Union Administration (NCUA). The NCUA revealed Monday that deposits in the six biggest CCUs increased $12.2 billion from Dec. 31, 2008 to Feb. 2 this year. At the same time, their external borrowings decreased even more dramatically from $27.9 billion $2.1 billion. Also of note, the NCUA’s Credit Union System Investment Program (CU SIP), an initiative designed to add liquidity to the corporate credit union system, has injected $8.2 billion in loans. (See related story: Mid-Atlantic Corporate reaffirms strength.) Corporate credit unions used the funds to pay down external borrowings, freeing collateral for future contingency liquidity needs. The NCUA noted the liquidity improvement during its Monday “Corporate Update” webinar.

Mica to represent CUs at Senate Banking hearing today

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WASHINGTON (3/24/09)—Credit Union National Association (CUNA) President/CEO Dan Mica is scheduled to testify today before the Senate Banking Committee during its second hearing this year on modernizing financial institution supervision. Mica will state the credit union case that a separate federal regulator is an imperative for credit unions because their structure and, in some ways, operations are so distinct from banks and thrifts. Mica will be seated on a panel of witnesses comprised of credit union, bank, and consumer group representatives. This hearing follows by less than a week the committee’s opening session on the issues. Last week, financial institution regulators, including National Credit Union Administration (NCUA) Chairman Michael Fryzel, testified. Fryzel told the banking panel that credit unions deserve and require a separate regulator because they are fundamentally different in structure and operation than other types of financial institutions. Other witnesses at today's hearing include:
* Gail Hillebrand, senior attorney, Consumers Union of U.S., Inc.; * William Attridge, president/CEO/COO, Community River Community Bank, for the Independent Community Bankers of America * Aubrey Patterson, chairman/CEO, BancorpSouth, Inc., for the American Bankers Association; and * Richard Christopher Whalen, SVP/managing director, Institutional Risk Analytics.

Wednesdays Power Breakfast to be broadcast live

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WASHINGTON (3/24/09)--Wednesday’s Power Breakfast, sponsored by the Credit Union National Association (CUNA) and the National Journal Group, is not only the first in the 2009 series--it will be the first to be streamed via live the Web. The breakfast begins at 8:30 a.m. ET. The topic is bipartisanship, and the event will be moderated by Ron Brownstein, political director, Atlantic Media Company. Panelists include:
* Sen. Mel Martinez (R-Fla.); * Sen. Bob Casey (D-Pa.); * Al From, CEO of the Democratic Leadership Council; and * Steve Bell, Bipartisan Policy Center scholar.
CUNA has sponsored the breakfast series for the past two years with the National Journal. For more information, use the link.

IAT effective date extended to Sept. 18

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WASHINGTON (3/24/09)--NACHA has extended the effective date of the International ACH Transaction (IAT) rules and formats to Sept. 18. The original effective date was Friday. NACHA encourages institutions to use the six-month extension for additional process documentation, testing with the ACH operators, and consumer education and training. The ACH rule changes are designed to improve institutions’ ability to identify the parties involved in international payments flowing through the ACH network, said Valerie Moss, director of compliance information at the Credit Union National Association. The rules will facilitate compliance with Office of Foreign Assets Control (OFAC) regulations. OFAC requires credit unions and others to block property and reject transactions involving any country, entity, or individual on OFAC's Specially Designated Nationals and Blocked Persons list.

Compliance When is e-Statement consent needed

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WASHINGTON (3/23/09)—Credit union compliance officers know that a credit union cannot automatically convert members to e-statements without first getting their consent. They know this because the Credit Union National Association (CUNA) Compliance Challenge folks told them in January. Never ones to leave a compliance stone unturned, the CUNA compliance experts follow up this month and ask credit unions: Does this opt-in requirement hold true for members who have already signed up for home banking but still receive paper statements? Hmmm? The answer is that it depends on exactly what the member agreed to when they signed up for home banking. If the member only signed up for online account access, then the credit union would still need to obtain their consent to receive e-statements. However, many credit unions have members that signed up for both account access and e-statements, but are still receiving paper statements too. In this case, the credit union’s goal is to encourage members to “go green” and “opt-out” of their paper statements. To find out how to do this, and to delve into nine other hot compliance topics, read the March Challenge. Use the resource link below to access it.

bNEWb CORPORATE CUs Corporate costs must be spread out Mica says

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WASHINGTON (3/23/09, UPDATED 11:30 a.m. ET)—The Credit Union National Association (CUNA) called on the federal credit union regulator and lawmakers to mitigate the costs of its decision to place two corporate credit unions into conservatorship. CUNA President/CEO Dan Mica, hearing the late Friday announcement, first emphasized that the institutions at issue are corporates that provide wholesale services to CUs and not the natural person CUs that consumers use on a daily basis. He also stressed that overall the credit union system is safe and sound and credit unions well-managed. Savings at credit unions are insured up to $250,000 per account, and backed by the full faith and credit of the United States. “However,” Mica said directly after the announcement, “the impact of this action on everyday credit unions must be mitigated to ensure they will continue to serve their members safely, soundly and efficiently. “It is imperative for NCUA to devise a mechanism to spread the cost to credit unions of this conservatorship over a number of years, rather than in just one big bite. In fact, that is precisely what the FDIC is doing for banks. CUNA is continuing to work with the agency to bring this about.” In fact, working to mitigate costs to credit unions of the NCUA’s actions involving corporates has been a CUNA priority since that agency announced its Corporate Stabilization Plan (CSP) in January. That plan, to back up the liquidity needs of the corporate credit union system, is to be funded through a special premium assessment on natural person credit unions—who are the members of the corporates. CUNA and its Corporate Credit Union Task Force have been working with regulators as well as lawmakers to pursue options to spread out the cost of the premium beyond the one-year period currently projected. CUNA has also been in touch with key Congressional contacts this weekend to pursue a legislative remedy to mitigate the costs and is urging NCUA to work with Congress. U.S. Central has approximately $34 billion in assets and 26 retail corporate credit union members. WesCorp has $23 billion in assets and approximately 1,100 retail credit union members. The NCUA said in its announcement that it placed the two corporates into conservatorship to protect retail credit union deposits and the interest of the National Credit Union Share Insurance Fund (NCUSIF), as well as to remove any impediments to the agency’s ability to take appropriate mitigating actions that may be necessary. Service continues uninterrupted at both U.S. Central Corporate Federal Credit Union and WesCorp, and members are free to make deposits and access funds. Just after its announcement Friday regarding the corporates, the NCUA said it will host a webcast this Monday, March 23, to provide an update on its corporate credit union stabilization program. The two-hour session will include a discussion of recent events, as well as provide an update on National Credit Union Share Insurance Fund reserve liability. Registration is open until 1:45 p.m. (EST) on Monday. Use the resource link below to register.

CUNA seeks fair value OTTI comments

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WASHINGTON (3/23/09)--The Credit Union National Association (CUNA) is seeking comment on two proposed staff positions by the Financial Accounting Standards Board (FASB) that would provide guidance on fair value measurements and impairment of securities. Comment is due to CUNA no later than Tuesday. The first staff position on the recognition and presentation of other-than-temporary impairment (OTTI) intends to provide greater clarity and consistency in accounting for and presenting impairment losses on securities. The changes would seek to make current guidance more operational and improve the presentation of OTTI in financial statements. The second staff position would provide guidelines for making fair-value measurements more consistent with the principles presented in FASB Statement No. 157, Fair Value Measurements. The guidance would employ a two-step process and apply to financial assets within the scope of accounting procurements that require or permit fair value. FAS 157, issued in 2006, creates a single definition and framework for measuring fair value in U.S. generally accepted accounting principles to increase consistency and comparability. Both positions, if approved, would be effective for interim and annual periods ending after March 15. For more information, use the links.

HSAs bring value to community says NCUAs Hood

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ALEXANDRIA, Va. (3/23/09)--Credit unions that provide health savings accounts (HSAs) to businesses and individuals in their fields of membership offer an exceptional advantage, according to National Credit Union Administration Vice Chair Rodney Hood. “Credit unions must embrace a proactive strategy to stay competitive in the marketplace while continuing to focus on education for both the credit union employees and the consumer,” Hood told attendees of the Members Health Network first annual credit union HSA roundtable at Allegacy FCU, Winston-Salem, N.C. “Given the close relationship between credit unions and their members, you are well-poised to spread awareness of HSAs before other larger financial institutions.” The roundtable brought together credit union leaders to discuss the HSA market, focusing on the opportunities facing credit unions to expand member services while advancing business development through HSA programs. Credit unions offering HSAs help businesses with HSA plans, education and employee satisfaction, and provide employees and individuals increased membership to offer more products and services, Hood said. As more credit unions begin to offer HSAs, they will be better positioned to be a full-service provider for businesses, he added.

Inside Washington (03/20/2009)

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* WASHINGTON (3/23/09)--Senate Banking Committee hearing participants Thursday indicated that the Federal Deposit Insurance Corp. (FDIC) may be a top candidate for regulating systemic risk. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said it might make more sense to give the FDIC the authority to resolve problems with systemic institutions because it has experience in that area. FDIC Chairman Sheila Bair and Federal Reserve Board Gov. Dan Tarullo both agreed. Tarullo noted that the Fed should at least have a consultative role (American Banker March 20). Bair said it would be simple to give the FDIC power to resolve bank holding companies. Dodd also asked regulators if all four banking agencies were needed. Comptroller of the Currency John Dugan said there are too many agencies, and other regulators said some consolidation could help. But Bair noted that a dual banking system has its benefits, such as “preserving the state charter” ... * WASHINGTON (3/23/09)--Arthur Murton, Federal Deposit Insurance Corp. (FDIC) director of insurance and research, said limiting the agency’s Deposit Insurance Fund in good economic times is a mistake (American Banker March 20). Congress should consider the rebate requirement or provide more flexibility to allow the fund to grow, he said. Limits on the fund will mean that the FDIC will have to charge higher premiums and will prevent the FDIC from rebuilding the fund in the future, Murton added. The FDIC must give back half of the premiums charged when the reserves ratio is more than 1.35%. All premiums more than 1.5% must be returned ... * WASHINGTON (3/23/09)--As the House approved a bill that would tax bonuses at a rate of 90% given by companies receiving $5 billion or more under the Troubled Asset Relief Program (TARP), House Financial Services Committee Chairman Barney Frank (D-Mass.) said more restrictions are coming (American Banker March 20). Frank is working on another bill to target executive compensation that could be voted on this week, he said. He did not provide details, however. The legislation passed Thursday by the House affects bonuses received after Jan. 1 and applies to workers earning more than $250,000 per year. The Senate is expected to vote on the bill this week ...

Inside Washington (03/19/2009)

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* WASHINGTON (3/20/09)--The House Thursday approved legislation to get back the bonus money paid to bankers whose employers received money from the government. The move was in response to American International Group’s $165 million bonus package (American Banker March 19). The legislation would apply to companies who received $5 billion or more from the Troubled Asset Relief Program (TARP). It would tax bonuses given after Jan. 1 at 90%. Firms receiving more than $5 billion from TARP include GMAC, PNC Financial Corp., U.S. Bancorp, Goldman Sachs, Morgan Stanley, Wells Fargo, JPMorgan Chase and Co., Bank of America, and Citigroup ... * WASHINGTON (3/20/09)--Ohio Credit Union League President Paul Mercer and Vice President of Governmental Affairs John Florian are in Washington, D.C., this week to advocate for Ohio credit unions as Congress examines issues affecting credit unions including mortgage cramdown, community reinvestment, overdraft protection and member business lending. The league visited with Reps. Steve Driehaus (D-Cincinnati); Jim Jordan (R-Urbana); Mary Jo Kilroy (D-Columbus); Zach Space (D-Dover); Betty Sutton (D-Chardon); Charlie Wilson (D-St. Clairsville); and Sen. Sherrod Brown (D-Cleveland). Also, Doug Fecher, CEO of Wright-Patt CU, Fairborn, Ohio, was scheduled to testify before a subcommittee of the U.S. House Committee on Financial Services Thursday on abusive credit card practices ...

Balance is key to consumer protections says CUNA

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WASHINGTON (3/20/09)--Balance, the Credit Union National Association (CUNA) testified Thursday, will be the necessary key to successful legislation addressing overdraft protection programs and credit card practices. Doug Fecher, who is president/CEO of Wright-Patt CU in Fairborn, Ohio, gave what he termed the perspective of Main Street, on behalf of credit unions, on current bills drafted to improve consumer protections for both the services. He was testifying before the House Financial Services subcommittee on financial institutions and consumer credit. Fecher said credit unions back the intent of legislation to protect consumers from abusive and deceptive practices. But, he insisted any law must create an equitable balance between those protections and the needs of service providers to be fairly compensated for the service and not subjected to unnecessary regulatory burdens.
Click to view larger image CUNA witness Doug Fecher, president/CEO of Wright-Patt CU in Fairborn, Ohio (left), and CUNA Senior Vice President of Legislative Affairs John Magill greet Rep. Carolyn Maloney (D-N.Y.) , author of credit card and overdraft protection bills. Fecher testified that balance is the key to successful consumer safeguards. (CUNA photo)
Legislation that does not go far enough does not really help the consumer, Fecher said. But, he warned federal lawmakers, legislation that goes too far will have unintended consequences that could have the opposite effect than that intended. For instance, Fecher said, as drafted the Consumer Overdraft Protection Fair Practices Act (H.R. 1456) could drive consumers into the grasps of the very high-cost services the legislation is intended to eliminate. The proposed bill would classify overdraft protection products as lending products under the Truth in Lending Act (TILA) and include a service fee for the program to be within the APR calculation. Therefore, Fecher testified, H.R. 1456 could force federal credit unions out of offering the bounce-protection plans, highly favored by consumers, by forcing them to bump up against their statutorily prescribed 18% usury ceiling. The bill also has the potential to present significant operational issues for credit unions, Fecher noted, by requiring written agreement with the member prior to the extension of any overdraft coverage--even for those already used to being covered by protection plans. Just as with overdraft legislation, Fecher said balance must be achieved under the Credit Cardholders Bill of Rights Act (H.R. 627), which has been re-introduced this year after failing to be passed by the 110th Congress. CUNA recognizes there are legitimate concerns about abusive credit card practices and backs efforts to end discriminatory, predatory, deceptive and abusive lending practices engaged in by some lenders. But, the CUNA witness told the subcommittee, lawmakers must be vigilant to assure their action avoids unintended consequences that are ultimately adverse to consumers, including making credit more expensive and less available. Sheila Albin, associate general counsel, National Credit Union Administration, also testified. She cited results of a 2005 Woodstock Institute research that found federally insured credit union credit card products tend to have fewer fees, lower fees, and clearer disclosures. That study concluded there is a clear difference between credit cards issued by banks and those issued by federally insured credit unions. Federally insured credit union credit card programs show credit card lending is sustainable without exorbitant penalties and misleading terms and conditions, Albin said. Other witnesses included:
* Sandra Braunstein, director, division of consumer and community affairs, Board of Governors of the Federal Reserve System; * Montrice Yakimov, managing director, compliance and consumer protection, Office of Thrift Supervision; * Kenneth Clayton, senior vice president/general counsel, American Bankers Association Card Policy Council; * Linda Echard, president/CEO ICBA Bancard, on behalf of the Independent Community Bankers of America; * Ed Mierzwinski, senior fellow, Consumer Program, U.S. PIRG; and * Travis Plunkett, legislative director, Consumer Federation of America.
Use the resource links below to read CUNAs complete testimony on H.R. 1456 and H.R. 627, as well as to access NCUAs remarks.

Fryzel tells Senate Banking Preserve NCUA independence

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WASHINGTON (3/20/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel Thursday underscored the public policy benefits of a distinct federal credit union regulatory and insurance entity in testimony before the Senate Banking Committee. The committee was conducting its first in a series of 2009 hearings on modernizing the regulatory structure for the country’s credit unions, banks and thrifts. The Credit Union National Association will testify next Tuesday at the committee’s second hearing. Fryzel told the banking panel that credit unions deserve and require a separate regulator because they are fundamentally different in structure and operation than other types of financial institutions. “Our strong belief is that these unique and distinct institutions require unique and distinct regulation,” testified Fryzel. The chairman did back, however, the concept of a federal oversight entity, charged with establishing general safety and soundness standards, issuing principles-based guidance and monitoring systemic risk. According to NCUA, under that proposal the NCUA and other regulators would remain responsible for enforcement, and an independent NCUA and National Credit Union Share Insurance Fund (NCUSIF) would be in place to preserve the credit union regulatory structure “that has been tested and proven to work for almost 40 years.” National Association of State Credit Union Supervisors (NASCUS) Chairman George Reynolds also testified, as did federal and state bank and thrift regulators. Reynolds, who is senior deputy commissioner of the Georgia Department of Banking and Finance, outlined four principles that his group says must be considered in regulatory modernization legislation: preserve charter choice and dual chartering, maintain states’ role in financial regulation, modernize the capital system for credit unions and recognize the value of state authority in consumer protection.

CUNA urges Hill for changes to NCUSIF powers

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WASHINGTON (3/20/09)—Credit unions and other institutions that continue to do the right thing for the nation during its current tough economic times, should not be disadvantaged in the political process, the Credit Union National Association (CUNA) told federal lawmakers Thursday.
Click to view larger image Caption: VyStar CU President/CEO Terry West (second from left) testifies on CUNA’s behalf before a Senate Banking subcommittee. West urges action to give the National Credit Union Share Insurance Fund greater authority both to facilitate its operations and to help credit unions handle their expenses. Also pictured are ICBA Senior Vice President Steve Verdier (left), William Grant for the American Bankers Association, and NAFCU’s David Wright. (CUNA Photo)
Representing CUNA before the Senate Banking subcommittee on financial institutions, Terry West said that it is imperative that the U.S. Congress enact legislation to give the National Credit Union Share Insurance Fund (NCUSIF) additional authority. West, president/CEO of VyStar CU in Jacksonville, Fla., said in formal testimony that the insurance fund needs authority to address insurance issues and manage insurance costs, both to facilitate its operations and to help credit unions handle their expenses. West, who is chairman of CUNA’s Corporate Credit Union Task Force, was testifying at the subcommittee hearing titled, "Current Issues in Deposit Insurance.” West testified that the current financial crisis, and the federal regulator's corporate credit union stabilization plan that the crisis has necessitated, make the following legislative actions particularly important for credit unions:
* Continue share and deposit insurance coverage to accounts up to $250,000, as was authorized on a temporary basis under the Emergency Economic Stabilization Act of 2008; * Increase authority for the NCUSIF to borrow up to $6 billion for the U.S. Treasury Department to facilitate its ability to spread out insurance costs to credit unions. The authority is critically important, CUNA said, in light of the costs credit unions face to support the National Credit Union Administration’s (NCUA) corporate liquidity plan; * Give NCUSIF power to allow credit unions to spread out premium expenses for a period of eight years. CUNA also urged the subcommittee to encourage NCUA to use existing authority to spread out costs; * Broaden the NCUA’s Central Liquidity Facility’s (CLF) authority to provide liquidity to the credit union system to include corporate credit unions, as well as natural person credit unions; and * Include specific statutory language clarifying that NCUA has the same systemic risk authority as does the Federal Deposit Insurance Corp.
West highlighted in his testimony that credit unions need the requested legislative support to continue to help the country out of its economic freeze. He said his credit union, and state and federal credit unions in communities across the nation, are working to address the country’s credit crunch. As banks cut back on lending, credit union loans rose by 7% in 2008 to over $575 billion, up $35 billion from the previous year, as noted by a recent Wall Street Journal article. That article also noted that bank loans in the country decline about $31 billion during that time period. In spoken remarks to the subcommittee, West stressed the urgency of addressing NCUSIF assessments on credit unions. “I told the senators that credit unions must be afforded a way to either spread out or reduce the assessments, as the impact on their bottom lines--and ultimately service to members--could be very significant,” West said following the hearing. “However, I was very appreciative that a number of the senators grasped the urgency of the situation. I think we may have gotten their attention.” The subcommittee also heard testimony from NCUA Executive Director David Marquis. During the session, Sen. Christopher Dodd (D-Conn.), who is chairman of the subcommittee’s parent Senate Banking Committee, brought up the idea of expansion of powers by the CLF. Both CUNA and the National Association of Federal Credit Unions (NAFCU) support legislation to allow the CLF to make loans to corporate credit unions and make capital available to natural person credit unions. Dodd asked Marquis about the plan, and he responded that NCUA supports the concept but there remain some issues to be ironed out. However, Marquis also told Dodd that NCUA staff will have a proposal on these issues to NCUA Chairman Michael Fryzel by Tuesday. He added that the chairman would have to “vet it with (NCUA) Board members.” Also testifying were:
* Art Murton, director of the division of insurance and research, FDIC; * David Wright, CEO, Services CU, Yankton, S.D., on behalf of NAFCU; * William Grant, chairman/CEO, First United Bank and Trust, Oakland, Md., on behalf of the American Bankers Association; and * Steve Verdier, senior vice president, Independent Community Bankers of America.
In a related story, NCUA Chairman Michael Fryzel testified Thursday morning before the full Senate Banking Committee, which is currently considering modernizations to the country’s financial institutions regulatory structure. (See story: Fryzel tells Senate Banking: Preserve NCUA independence.) Use the resource link below to access complete CUNA testimony.

NCUA expands RegFlex time to occupy land for expansion

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ALEXANDRIA, Va. (3/20/09)--RegFlex-qualifying federal credit unions will have up to six years to occupy unimproved land acquired for expansion without a waiver under a final rule approved by the National Credit Union Administration (NCUA) board Thursday. Previously, a RegFlex FCU had to partially occupy the premises within three years or it was required to obtain a waiver from NCUA. NCUA recognizes that “real estate transactions are complex, time consuming, and can involve a host of wide-ranging issues . . . [t]his is especially true in the unimproved land context considering the addition of construction-related issues.” A federally insured credit union automatically qualifies for RegFlex under 12 C.F.R. part 742 if it has had a composite CAMEL rating of 1 or 2 for its last two examinations and has been “well capitalized” under NCUA rules for the previous six quarters. FCUs may apply for a RegFlex designation if they either received a composite CAMEL rating of 3 or better in their previous examination or have been “well capitalized” for the previous six quarters.

Overdraft fee disclosure rule OKd by NCUA

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ALEXANDRIA, Va. (3/20/09)--A proposed rule that would require credit unions to disclose on periodic statements the dollar amounts charged for overdraft fees and returned items was approved by the National Credit Union Administration (NCUA) board at its monthly meeting Thursday. It also would require credit unions to provide account balance information through an automated system that discloses only the amount of funds available for withdrawal, without including the additional funds that would be available under and overdraft program. The rule would amend NCUA’s Truth in Savings Act (TISA) to align it with the Federal Reserve Board’s Regulation DD. Electronic disclosure provisions would be effective within 30 days of a final rule. However, the provisions changing disclosure requirements for overdraft fees would not be effective until Jan. 1, 2010, to maintain parity with Regulation DD. Also at the meeting, the NCUA presented its monthly report on t he National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF’s equity level is at 1.28% and is expected to increase to 1.30% and remain at that level through 2009, precluding the possibility of an NCUSIF dividend to federally insured CUs, NCUA said.

Online CU data system to launch in third quarter

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ALEXANDRIA, Va. (3/20/09)--Federally insured credit unions will be able to submit reports and information through a Web-based system expected to be deployed in the third quarter of this year. Corporate credit unions will be able to use the system starting in 2010, according to the National Credit Union Administration (NCUA). NCUA approved the system at its monthly board meeting Thursday. The system will replace the software NCUA currently uses. Credit unions unable to access online systems will submit their information via a paper form. NCUA will no longer issue software to submit the reporting data. All data will be submitted and viewed through an online Credit Union Profile and Call Report. NCUA also is proposing amendments to Sections 741.6, 748.1 and Appendix A to Part 749 in order to conform these regulatory provisions to the new online system, effective when the system is implemented. Section 741.6 would clarify when federally insured credit unions must update their Credit Union Profiles and add a provision addressing corporate credit unions and NCUA Form 5310. Section 748.1 would clarify the compliance report filing requirements for federally insured credit unions using the online system and those filing reports manually, and Appendix A to Part 749 would be updated to include the new Credit Union Profile form as a key operational record that credit unions should keep.

Registration open for FCU Act symposium

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ALEXANDRIA, Va. (3/20/09)--The National Credit Union Administration announced that registration is open for a symposium marking the 75th anniversary of the Federal Credit Union Act June 9-10 in Washington, D.C. The event will celebrate federal credit union history and provide a forum to discuss the future of federal credit unions. The agenda will feature panel and open discussions on topics including:
* Is the cooperative financial system still relevant? * The Future of the Corporate Credit Union System--A Facilitated Discussion; and * Crafting a vision for the next 75 years: Sustainability, Collaboration and Growth.
For more information, use the link.

CUs still lending want to do more CUNA

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WASHINGTON (3/20/09)—For the record of a congressional hearing titled “Perspectives from Main Street on Small Business Lending,” the Credit Union National Association (CUNA) urged lawmakers to consider credit unions as a key part of the solution to the credit crunch. Submitting a statement for the hearing record, CUNA President/CEO Dan Mica told key U.S. senators that although credit unions are being hit by a financial crisis they did not cause, they continue to provide credit to lend “and have the capacity to do more.” The letter went to Sens. Mary Landrieu (D-La.), chairman, and Olympia Snowe of Maine, ranking member, of the House Small Business subcommittee on entrepreneurship, which conducted the hearing. Mica pointed out in the letter that last year as the country’s residential mortgage credit markets came to a virtual standstill, credit unions actually increased their lending. “We hope you will consider credit unions as a key part of the solution to the credit crunch facing America’s small businesses,” Mica wrote. He added, however, that credit unions are legally and unnecessarily restricted from similarly alleviating the credit crunch that grips America’s small businesses by an arbitrary statutory cap on member business lending of 12.25% of a credit union’s total assets. “Banking lobbyists convinced Congress to enact this cap in order to restrain credit unions,” the CUNA leader said. “However, there is no economic or safety and soundness rationale for this cap.” Mica underscored that credit unions have lower net charge-off rates for loans than banks, and the difference is significantly lower for small business loans. The CUNA letter thanked both senators for their co-sponsored legislation in the 110th Congress that would have provided credit unions relief from the business lending cap by increasing the cap from 12.25% of total assets to 20%. Mica asked the senators to join their colleague, Sen. Charles Schumer (D-N.Y.), in his efforts to create legislation to eliminate the cap. Use the resource link below to read CUNA’s entire statement.

Inside Washington (03/18/2009)

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* WASHINGTON (3/19/09)--A push to create a federal regulator to oversee insurance companies is gaining ground after congressional members and financial industry observers criticized American International Group’s (AIG) $165 million bonus package. At a hearing this week, Sen. Richard Shelby (R-Ala.) said AIG’s lack of supervision have brought up questions about state supervision’s adequacy (American Banker March 18). It may make sense to consider regulating insurance companies nationally, he said. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) also said one system of rules, as opposed to a “spotty” system of 50 jurisdictions, may be more effective. Michael McRaith, director of the Illinois Department of Insurance, noted--in response to Shelby’s argument that states cannot handle insurance conglomerates alone--that the issue is whether the regulator is effective ... * WASHINGTON (3/19/09)--The Federal Deposit Insurance Corp. (FDIC) announced Tuesday that it will impose surcharges on guaranteed debt with a maturity of one year or more issued on or after April 1. For guaranteed debt that is issued by June 30, 2009, and matures by June 30, 2012, the surcharge will be 10 basis points annually for an insured depository institution and 20 basis points annually for all others. Surcharges will be added to current fees for guaranteed debt and deposited into the Deposit Insurance Fund instead of being set aside to cover potential Temporary Liquidity Guarantee Program losses. The charges should enable the FDIC to reduce the 20 Basis Point Special Assessment proposed by the board Feb. 27, FDIC Chairman Sheila Bair said ... * WASHINGTON (3/19/09)--Giving the Federal Reserve Board more power to oversee systemic risk may be a hard sell after a hearing Tuesday indicated that lawmakers have concerns about increasing the Fed’s oversight. House Financial Services Committee Chairman Barney Frank (D-Mass.) has said he would begin drafting a bill in May about the topic, but lawmakers expressed their doubts. Rep. Mel Watt (D-N.C.) said giving the Fed more power could conflict with its consumer protection responsibilities and monetary policy (American Banker March 18). Creating a new regulator may be more effective, he said. Rep. Mike Castle (R-Del.) said the Fed should give up some of its powers before taking on systemic risk ...

Former NCUA Chairman Callahan passes away

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WASHINGTON (3/19/09)—Former National Credit Union Administration (NCUA) Chairman Edgar Callahan passed away Wednesday in Sacramento, Calif., following a long illness, the NCUA reported. Marking Callahan’s passing, Credit Union National Association President/CEO Dan Mica called the former agency head a visionary in the credit union movement. Mica said Callahan foresaw an operating environment in which credit unions could serve their members with the least government interference as possible, while safety and soundness was assured. “As NCUA chairman, he proudly kept a sign outside of his office reading ‘we don’t run credit unions,’ and he made that his mantra. Today, we continue to strive toward Ed’s vision of a credit union movement sensibly regulated in its efforts to serve members in a safe and sound manner. CUNA appreciates his efforts as a regulator and his many contributions to the movement as a credit union leader himself,” Mica said. According to agency information, Callahan was nominated to a six-year term on the NCUA Board in the fall of 1981 and he served as chairman from Oct. 22, 1981, to May 3, 1985. Current NCUA Chairman Michael Fryzel called Callahan a “modern day pioneer in the credit union movement.” “He showed his concern and passion for credit unions as a regulator in Illinois, as chairman of NCUA, the founder of Callahan and Associates, CEO of Patelco Credit Union (San Francisco) and as a philosopher, a visionary, and a doer. “There is not a single aspect of day-to-day NCUA or credit union operations that does not bear his mark,” Fryzel said.

FASB issues plan for fair value guidance

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NORWALK, Conn. (3/19/09)--The Financial Accounting Standards Board (FASB) issued two proposed staff positions (FSPs) Tuesday evening intended to provide additional application guidance regarding fair value measurements and impairments of securities. The standards board expedited its consideration of the FSPs after getting some heat for Congress last week. At a hearing conducted by the House Financial Services subcommittee on capital markets, insurance and government-sponsored enterprises, Chairman Paul Kanjorski (D-Pa.) said he wanted FASB to work more quickly toward meaningful changes. Witness Bob Herz, FASB chairman, committed to having final guidance on the use of mark-to-market accounting in illiquid markets out within three weeks. FASB set a 15-day public comment period, ending April 1, for its proposed FSPs. If approved, both sets of guidance would be effective for interim and annual periods ending after March 15. FASB encourage its constituents to review the proposed FSPs and provide comment on whether they agree that the proposed FSPs would improve financial reporting. The board has scheduled an April 2 meeting to evaluate all comment letters and other input received on the FSPs. In summary,
* Proposed FSP FAS 157-e, called Determining Whether a Market Is Not Active and a Transaction Is Not Distressed, provides guidelines for making fair-value measurements more consistent with the principles presented in FASB Statement No. 157, Fair Value Measurements. * Proposed FSP FAS 115-a, FAS 124-a, and EITF 99-20-b, Recognition and Presentation of Other-Than-Temporary Impairments, is intended to provide greater clarity and consistency in accounting for and presenting impairment losses on securities.
Use the resource links below for more guidance details.

Mica in iAmerican Bankeri MBLs are CU tradition

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WASHINGTON (3/19/09)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday took on a myth he said is being spread by some bankers: that member business lending (MBL) is separate from credit unions’ traditional mission. In a letter to the editor of American Banker, Mica noted that a New Jersey banker recently wrote in that space that the federal tax exemption for credit unions should be revoked in exchange for passage of a bill lifting the cap on credit unions' MBLs. Barry Zadworny had argued that for credit unions, there should not be a "free lunch." “Aside from the fact that talk of a ‘free lunch’ rings extremely hollow from an industry whose institutions big and small have required unprecedented amounts of government assistance, Mr. Zadworny's point is premised on the false notion that credit unions stray from their traditional mission when engaging in member business lending,” Mica wrote. He noted that credit unions' traditional mission included member business lending without portfolio restrictions for almost 100 years, until 1998. "Credit unions are staying true to their mission. Lifting the arbitrary cap that now exists on member business lending, as Sen. (Charles) Schumer (D-N.Y.) proposes, will help credit unions further that mission,” Mica said. He was referring to Schumer’s announced plans to introduce legislation to lift the MBL cap because “banks are not lending to small businesses and credit unions will." He added that the senator’s point is buttressed by the Federal Reserve Board's Senior Loan Officer Survey, which shows a majority of banks have cut back on small-business lending (75% in the October '08 survey). Also, a recent white paper by the Competitive Enterprise Institute further concludes that expanding credit union small-business lending would yield much-needed economic stimulus. The CUNA letter also noted that the credit union federal tax exemption is premised on credit unions' structure as not-for-profit, member-owned financial cooperatives. That structure, Mica pointed out, does not change with the decision to offer member business loans.

CUNA delivers CU perspective to Hill today

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WASHINGTON (3/19/09)—The Credit Union National Association (CUNA) is scheduled to testify twice today, detailing credit union positions on deposit insurance issues and also on changes to credit card and overdraft protection plan programs. This afternoon, Terry West, chairman of CUNA's Corporate Credit Union Task Force, is scheduled to testify at the Senate Banking subcommittee on financial institutions' hearing entitled, "Current Issues in Deposit Insurance." West is CEO of Vystar CU, Jacksonville, Fla. Also a scheduled witness at this hearing, National Credit Union Administration (NCUA) Executive Director David Marquis will present his agency’s remarks. Earlier in the day, the full Banking Committee will launch a series of hearings on “Modernizing Bank Supervision and Regulation.” NCUA Chairman Michael Fryzel is scheduled to testify along with federal and state bank and thrift regulators. At the second in this series of hearings, scheduled for March 24, CUNA will testify. Meanwhile, also this afternoon, CUNA's views on bills to address unfair and abusive practices as relating to overdraft protection plans and credit card terms will be presented by Doug Fecher, president/CEO of Wright-Patt CU, Fairborn, Ohio. Fecher is scheduled to appear before the House Financial Services subcommittee on financial institutions and consumer credit, which is conducting a legislative hearing on H.R. 627, the Credit Cardholders' Bill of Rights Act, and H.R. 1456, the Consumer Overdraft Protection Fair Practices. NCUA Associate General Counsel Sheila Albin is also a scheduled witness. Copies of CUNA's written testimony will be posted on the CUNA Legislative Affairs Website when available. Use the resource link below for CUNA website.

CDFI plans billions in grants tax credits

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WASHINGTON (3/19/09)--Credit unions will benefit from a plan released Wednesday by the Treasury’s Community Development Financial Institutions (CDFI) Fund, which will award $100 million in grants and $3 billion in additional tax credit authority to support community-based financial institutions. The awards, available through the American Recovery and Reinvestment Act, will support underserved communities. The CDFI Fund plans to disburse awards within 120 days. The CDFI Fund will re-open its 2009 CDFI Program and Native American CDFI Assistance (NACA) Program award rounds to enable additional applicants to apply, and will offer current applicants the opportunity to request larger awards. The Recovery Act authorizes the CDFI Fund to allocate $3 billion of tax credit authority to qualified Community Development Entities (CDEs) under the New Markets Tax Credit (NMTC) Program: $1.5 billion to CDEs that applied for allocation authority under the 2008 NMTC allocation round; and $1.5 billion to CDEs that apply for allocation authority under the 2009 NMTC allocation round. The $3 billion in allocation authority is in addition to the $3.5 billion already allocated for the NMTC this year. The CDFI Fund estimates that the $6.5 billion in NMTC allocation authority will help to develop or rehabilitate 33 million square feet of real estate in low-income communities, supporting thousands of construction jobs.

Mica on Fox Time to show slivers of good news

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WASHINGTON (3/18/09)—Credit Union National Association (CUNA) President/CEO Dan Mica appeared on Fox Business Network Tuesday in advance of a Federal Open Market Committee (FOMC) announcement on rates and said it’s time for that body to share any available good economic news. The Federal Reserve Board’s 12-member FOMC yesterday began a two-day meeting, one of eight regularly scheduled each year. The committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses risks to its long-term goals of price stability and sustainable economic growth.
Click for videoCUNA President/CEO Dan Mica on Fox Business Network Tuesday. Click for member-only video. (Photo provided by CUNA)
In the television interview, Mica said that because of the psychological impact it could have, what the FOMC says may be as important as what it does. Mica said that when it comes to policy or psychology, the Fed and its FOMC should start targeting public attention on even “slivers” of good economic news. He noted, for instance, that in his home state of Florida, some counties are showing a stabilization in their housing markets. “There are slivers of good economic news showing up,” Mica underscored. Also appearing on the business program, Paul Bilou, a former Fed economist and now senior vice president of Nationwide, referred to the slivers as “green shoots,” a phrase Fed Chairman Ben Bernanke has used. He also said the FOMC will “send a message” and “provide confirmation over whether or not they see more green shoots sprouting up.”

Feds should encourage transparent reg review CUNA

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WASHINGTON (3/18/09)—The federal government should encourage broader public participation in the regulatory review process by improving its system for receiving, reviewing, and responding to comments regarding specific agency rulemakings or guidance documents, the Credit Union National Association (CUNA) said recently. CUNA said the current system of review performed by the Office of Management and Budget (OMB) and the Office of Information and Regulatory Affairs (OIRA) frustrates public participation. A formal comment procedure should be adopted and OIRA review should be expanded to cover more agencies within the executive branch, such as the Internal Revenue Service (IRS). CUNA also recommended that OIRA’s capacity should be increased so that its ability to review administrative issuances in a critical manner is commensurate with its agency mission. The comments were made in letters to OMB and OIRA on President Barack Obama’s potential new executive order regarding regulatory review of administrative rulemakings and guidance by the two agencies. CUNA told the agencies of its own frustrations with the current system as it has applied to efforts to express concerns about “specific, seriously deficient issuances under review.” For example, CUNA cited a 2007 request to OIRA to review several IRS informal guidance issuances in the form of Technical Advice Memoranda (TAMs). They addressed state-chartered credit union Unrelated Business Income Taxation (UBIT) liability. OMB informed CUNA that IRS guidance is exempt from OIRA review. Although the credit union industry had requested that IRS issue comprehensive, formal guidance in the form of a revenue ruling, IRS ultimately opted for the informal, case-by-case guidance in the form of TAMs. The tax agency’s approach, CUNA said, has resulted in an arbitrary and extremely restrictive view of credit unions’ exempt purpose that threatens to upset the dual federal and state chartering system for credit unions and is negatively impacting the U.S. credit markets. The IRS’s use of TAMs to expand credit union taxation, CUNA wrote, is just one example of a major policy decision that has been decided without centralized review or meaningful public participation. A centralized OIRA review of administrative issuances and a formal process for public participation is paramount because major policy decisions, such as expansion of credit union UBIT liability, should be made in a manner that is consistent with the Administration’s priorities, CUNA urged.

CUNA loan mod. seminar open now for sign up

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WASHINGTON (3/18/09)—Registration information is now available to credit unions interested in signing up for an April 2 audio conference call featuring the latest information on the Obama administration's loan modification and refinance program. The audio conference, offered by the Credit Union National Association (CUNA), will address Obama’s "Making Home Affordable Refinance and Modification Program," which is designed to help up to 9 million families refinance their existing mortgages or modify their current loans to stave off foreclosure. Under the loan modification plan, borrowers may be offered rate reductions to as low as 2%, have their loan term extended to up to 40 years, and possibly receive forbearance or a reduction in principal. Incentives are provided by the government for lenders, servicers, and borrowers to participate. Under the refinancing provisions, for loans owned or securitized by Freddie Mac and Fannie Mae, borrowers may refinance loans with balances up to 105% of the value of their house, up from the current limit of 80%. During the CUNA audio conference, participants will:
* Hear about the structure and requirements of this new program from the agency experts; * Explore the loan refinance program to understand how borrowers can refinance if a loan exceeds current market value of the home; * Examine the loan modification option and how it’s geared towards members who are behind or are struggling to make mortgage loan payments; and * Learn the requirements of each program, which members qualify, and the benefits to both the credit union and its members for participating in the program.
Key speakers will include Laurie Maggiano, senior policy advisor for the U.S. Treasury Department's Office of Financial Stability, who will address issues surrounding the loan modification program. Speakers from Fannie Mae and Freddie Mac, to be announced soon, will address the refinance aspects of the administration program. The 90-minute audio conference is scheduled for 3:30 p.m. (ET). Use the resource link to register.

Inside Washington (03/17/2009)

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* WASHINGTON (3/18/09)—The Financial Crimes Enforcement Network, known as FinCEN, noted recently that mortgage fraud Suspicious Activity Reports (SARs) jumped 44% over twelve months ending June 30 of last year. FinCEN said there were 62,084 mortgage-fraud SAR filings during that period. (American Banker March 17) They accounted for 9% of total depository institution SARs. The timing of the SARs filing changed a little bit during that time period—it ticked up a bit to 34% being filed before a loan was granted, compared to 31% in the prior 12-month period… * WASHINGTON (3/18/09)—After a decline in the size and number of institutions being supervised in its western region, the Office of Thrift Supervision (OTS) has realigned its regional structure. The agency expanded its central region, based out of Chicago, to include thrift institutions in Minnesota, Iowa, Nebraska, North Dakota and South Dakota. All thrifts in the OTS’ West region, and many in the Midwest region, will form the basis of the new Western region, headquartered in Dallas (American Banker March 17)…

FASB agrees to guidance for illiquid markets

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FAIRFIELD, Conn. (3/17/09)--The Financial Accounting Standards Board (FASB) Monday agreed to provide guidance on applying mark-to-market accounting rules in illiquid markets. At an open board meeting, FASB staff presented two proposals regarding fair value accounting and rules to address other than temporarily impaired (OTTI) assets. After discussion, the board directed the staff to make changes to the proposals and release a final version today. Once issued, there will be a 15-day public comment period. The proposed effective date is for periods ending after March 15. FASB has concerns, however, that may be too soon for some. They may not be able to prepare the information in time for March 31 reporting. FASB will request comments on whether the guidance should be effective for periods ending after June 15, with early adoption permitted. Use the resource link below to access the FASB summary of its actions.

Agency helps CUs discuss corporate stabilization

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ALEXANDRIA, Va. (3/17/09)—Credit unions just got help from their federal regulator on how to communicate to members about recent actions taken to stabilize the corporate credit union system. The National Credit Union Administration (NCUA) sent a letter to credit unions to share with members that explains such things as the agency Corporate Stabilization Plan (CSP), as well as how stabilization efforts may affect federally insured credit unions. The NCUA encouraged credit unions to post the letter in lobbies, on websites and regular or electronic mail to ensure the broadest and most effective distribution. Use the resource link below to access the letter. Letter to Members

FinCEN Mortgage fraud connected to other crimes

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VIENNA, Va. (3/17/09)--The Financial Crimes Enforcement Network (FinCEN) Monday released a report showing a connection between those reported under the Bank Secrecy Act (BSA) of suspected mortgage loan fraud and possible involvement in other financial crimes. "This study analyzes the possible interrelationship of illicit activity occurring across different financial sectors,” said FinCEN Director James Freis in a release accompanying the report. “Criminal actors may attempt to exploit any vulnerability to commit fraud and launder money through a range of financial institutions," he said, and added, "The interconnected nature of suspicious activity across multiple financial sectors covered by FinCEN's Bank Secrecy Act (BSA) regulations underscores the immense value of combining insights from the different sectors for the purpose of detecting and thwarting criminal activity." Those reported through financial institution’s Suspicious Activity Reports (SARs) for possible mortgage fraud may also be involved in such illegal activities as check fraud, money laundering, stock manipulation, structuring to avoid currency transaction reporting requirements, FinCEN said. From depository institution Suspicious Activity Reports (SARs), FinCEN identified approximately 156,000 mortgage fraud subjects, and found that 2,360 were reported for suspicious activity in 3,680 of the other SAR types. The agency noted that, through SARs, it had identified approximately 156,000 mortgage fraud subjects, and found that 2,360 were reported for suspicious activity in 3,680 of the other SAR types. In 2009, FinCEN is conducting additional analyses to examine the relationship between mortgage loan fraud and other financial fraud, and will further explore reported activities, locations, and subjects. FinCEN Summary of Report Results http://www.fincen.gov/news_room/nr/html/20090316.html FinCEN Report http://www.fincen.gov/news_room/rp/files/mortgage_fraud.pdf

CUNA to testify on three top CU issues

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WASHINGTON (3/17/09)—The Credit Union National Association (CUNA) is scheduled to testify three times in the next two weeks on some of the biggest issues facing credit unions and the financial services industry today. On Thursday afternoon, Terry West, chairman of CUNA's Corporate Credit Union Task Force, is scheduled to testify at the Senate Banking subcommittee on financial institutions’ hearing entitled, "Current Issues in Deposit Insurance." West is CEO of Vystar CU, Jacksonville, Fla. Also on Thursday afternoon, CUNA’s positions on bills to address unfair and abusive practices as relating to overdraft protection plans and credit card terms will be presented by Doug Fecher, president/CEO of Wright-Patt CU, Fairborn, Ohio. Fecher is scheduled to appear before the House Financial Services subcommittee on financial institutions and consumer credit, which is conducting a legislative hearing on H.R. 627, the Credit Cardholders' Bill of Rights Act, and H.R. 1456, the Consumer Overdraft Protection Fair Practices. Next week, on March 24, CUNA will be part of a panel of financial industry witnesses to testify before the Senate Banking Committee on "Modernizing Bank Supervision and Regulation." The committee has scheduled a series of hearing on the issues, which kicks off this Thursday with testimony from federal regulators. National Credit Union Administration Chairman Michael Fryzel is slated to be on that witness panel. Also on CUNA’s hearing radar for the week”
* On Tuesday, a House Financial Services Committee hearing entitled, "Perspectives on Regulation of Systemic Risk in the Financial Services Industry;" * On Wednesday, a Senate Banking Committee hearing entitled, "Lessons Learned in Risk Management Oversight at Federal Financial Regulators;" * On Thursday morning, the House Financial Services Committee subcommittee on capital markets, insurance and government-sponsored enterprises is may hold a session on the administration’s program designed to reduce the number of foreclosures by allowing eligible homeowners to refinance or modify the terms of their mortgages; * Also on Thursday morning, the House Ways and Means Committee subcommittee on oversight has scheduled a hearing entitled, "The Troubled Asset Relief Program: Oversight of Federal Borrowing and the Use of Federal Monies;" * Another on Thursday morning, the Senate Small Business Committee will hold a hearing entitled, "Perspectives from Main Street on Small Business Lending;" and * And on Friday, the House Financial Services Committee may conduct a hearing on financial fraud and enforcement.
Copies of CUNA's written testimony will be posted on the CUNA Legislative Affairs Website when available. Use the resource link below for CUNA website.

Senate cramdown bill delayed

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WASHINGTON (3/17/09)—Senate Majority Leader Harry Reid (D-Nev.) announced last night that the Senate will not consider its mortgage bankruptcy bill before the Spring District Work Period begins April 6. Proponents of legislation to allow bankruptcy courts to modify—or “cramdown”-- the terms of existing mortgages were working to get their bill passed before Congress’ Spring recess, according to Ryan Donovan of the Credit Union National Association (CUNA). Donovan, CUNA’s vice president of legislation affairs, confirmed that lawmakers backing the mortgage bankruptcy bill, such as Sen. Charles Schumer (D-N.Y.), have been “reaching out” to groups like CUNA who strongly oppose the bill. “Those lawmakers are exploring what might be done to get needed support for the bill. They are considering adding separate provisions to the legislation to soften opposition to the bill in total,” Donovan said. He acknowledged that Schumer has called CUNA President/CEO Dan Mica to ascertain if adding language to lift the cap on member business lending (MBL) would be enough of a sweetener to get CUNA to remove its opposition to the cramdown language. “We let him know that the MBL issues itself is not enough to gain our support in the absence of some major changes to the cramdown provisions,” Donovan said. He said CUNA reminded the senator that the group’s opposition to cramdowns is a “principled position” based on concerns that, as written, the bill could promote “gaming” of the mortgage system. Earlier this month, Schumer announced he is designing legislation to lift the MBL cap. The New York Democrat said in a letter to colleagues that lifting the current 12.25% of assets cap would help small businesses facing a "gaping void" in credit availability. Schumer is a member of the Senate Finance Committee and the Senate Banking Committee. “Sen. Reid’s announcement affords us more time to work for modifications,” Donovan said.

CUs want TARP back up for NCUSIF CUNA survey

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WASHINGTON (3/17/09)—A majority of credit unions responding to a nationwide survey by the Credit Union National Association (CUNA) said they back CUNA’s idea to employ a U.S. Treasury Department back up for the National Credit Union Share Insurance Fund (NCUSIF). CUNA announced Monday that 55% of respondents supported approach of employing a Treasury back up for the NCUSIF as it is tapped to pay for the National Credit Union Administration’s (NCUA) Corporate Stabilization Program (CSP). The responders agreed with the statement: “CUNA should advocate for a set-aside of TARP (Troubled Asset Relief Program) funds to backstop the NCUA’s guarantee of deposits by natural person credit unions in corporate credit unions, only to be accessed if at least $500 million of loss from corporates is first absorbed by the NCUSIF.” Thirty-six percent disagreed with the statement, and 9% were neutral. In another development, the CUNA Board of Directors, upon review of the survey results, voted at a recent to keep all options open in finding alternatives for mitigating costs of credit unions of the NCUA CSP. “We acknowledge strong opinions are held on these issues," said CUNA Chairman Kris Mecham, CEO of Deseret First Credit Union, Salt Lake City, Utah. "This was no easy decision for the CUNA board, but it is in the long-term interests of the credit union movement." In announcing survey results, CUNA noted that it is possible that no Treasury funds would ever be tapped, in that other alternatives identified by CUNA would further mitigate costs for credit unions. Among those alternatives:
* Use the CLF as a source of funding, for loans or capital support; * Improve the accounting treatment of assets that are other-than-temporarily-impaired (OTTI); * Pursue accounting issues that could allow the NCUSIF to recognize its insurance costs over time; * Obtain long-term deposits from CUs into corporates; and * Expand NCUA's Credit Union System Investment Program (CU SIP) to make it more attractive to credit unions.

Mica reminds White House CUs can help

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WASHINGTON (3/17/09)—Credit Union National Association (CUNA) President/CEO Dan Mica Monday delivered credit unions’ message directly to the White House: they are ready to help the country’s small businesses jumpstart the economy. Mica and CUNA Deputy General Counsel Mary Dunn attended President Barack Obama’s unveiling of his administration’s small business initiatives. Mica said the president made it clear he firmly believes an economic recovery will be driven in large part by America's small businesses, with their creation of new jobs. But President Obama noted, Mica said, that as the flow of credit has dried up during this recession, small business owners—even those who were prudent and responsible--have been set back by the behavior of others in our financial system who were not. “CUNA’s Mary Dunn, greeting the President, told him that credit unions want to help small businesses, too,” Mica said, adding he advocated for credit unions to work with senior White House staff. Mica reiterated that credit unions could lend up to $10 billion if a statutory 12.25% cap were lifted from their member business lending authority. Obama announced his program “Unlocking Credit for Small Businesses.” Under some of the program’s provisions:
* The U.S. Treasury Department will help provide a secondary market for small business loans by purchasing up to $15 billion in securities, and be prepared to purchase securities Pooled from the Small Business Administration’s (SBA) flagship 7 (a) guaranteed lending program; * The SBA will temporarily raise guarantees to up to 90% in the 7 (a) program, and temporarily eliminate certain SBA loan fees to reduce the cost of capital; and * The Treasury would require new reporting on lending to small businesses and promote greater efforts to extend small business loans.

Inside Washington (03/16/2009)

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* WASHINGTON (3/17/09)--President Barack Obama Monday ordered Treasury Secretary Timothy F. Geithner to "pursue every single legal angle" to block the ailing American International Group (A.I.G.) from paying its executives $165 million in bonuses after receiving substantial bailouts from the Treasury. "Under these circumstances, it's hard to understand how derivative traders like A.I.G. warranted any bonuses at all, much less $165 million in extra pay," Obama said, calling it an "outrage to the taxpayers who are keeping the company afloat." The administration is concerned a possible backlash against banks and Wall Street could be directed not only at financial institutions but also Congress and the White House, which could complicate the administration's efforts to win congressional approval of additional bailout packages (The New York Times March 16) … * WASHINGTON (3/17/09)--During an appearance Monday on the NBC "Today" program, House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) blasted American International Group's plan to pay $165 million in bonuses after it had received $173 billion in government bailouts. "The federal government is now 80% owner (of AIG)," Frank said, noting that bonuses "are going to people who screwed this thing up enormously… Since the federal government … now essentially owns that company, maybe it's time to fire some people," Frank said (Reuters and The Caucus Blog of The New York Times March 16) … * WASHINGTON (3/17/09)--The Federal Deposit Insurance Corp. (FDIC) is scrutinizing Community Reinvestment Act (CRA) compliance requirements more closely, say analysts. On March 5, FDIC announced five subpar CRA ratings. Three banks were told they need to improve. They were Salt Lake City-based CIT Bank, which was cited for buying $3.1 billion in subprime loans with predatory characteristics; Louisville-based Republic Bank and Trust Co., cited for tax refund anticipation loan violations; and Advanta Bank Corp., for "unfair and deceptive practices" in a cash-back award program. Analysts say this is a new precedent--that buying a product deemed predatory can adversely affect the CRA rating. Luke Brown, associate director of compliance policy at FDIC, said it is not drastically changing policy but added the current economic environment has led regulators to look more closely at compliance (Financial Planning.com and American Banker March 16) … * WASHINGTON (3/17/09)--The New York Federal Reserve Bank will begin accepting applications Tuesday for the first batch of loans under the Term Asset-Backed Securities Loan Facility (TALF), a program that loans to investors to provide liquidity for consumer lending. Investors planning to apply for TALF funds will have two extra days to apply for the funds, instead of just one day--today--the bank said Friday. Investors can now apply through 5 p.m. EDT Thursday. The Fed said in a press release it extended the application time at the request of potential borrowers who needed more time to collect documentation required for the application. Funds will be distributed on March 25, it said …

CUNA continues work to target cramdowns

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WASHINGTON (3/16/09)—The Credit Union National Association (CUNA) continues to work with key senators to modify House-passed changes to bankruptcy laws that would allow courts to force changes in terms of existing loans. Most recently, CUNA President/CEO Dan Mica has met with Sen. Richard Durbin (D-Ill.) to work toward narrowing the legislation. Durbin is Senate Majority Whip and a primary force behind the Senate effort to address the burgeoning problem of mortgage foreclosures through bankruptcy laws. CUNA has made it clear that credit unions acknowledge bankruptcy as a legitimate option for eligible borrowers who have no other way to address their indebtedness. However, CUNA opposed the House bill, H.R. 1106, as overly broad in its application, scope, and duration as it applies to all mortgage loans. CUNA maintains that it unfairly groups loans made with strong underwriting standards – such as those made by credit unions -- with a loan made in an unscrupulous manner. CUNA has also been working with Sen. Evan Bayh (D-Ind.) to more closely target the range of homeowners who could qualify for mortgage rewrites, or “cramdowns.” CUNA’s Mica noted Friday, "We have been opposed to wide-ranging cramdowns, we are opposed, but we have always said that we would be willing to find common ground."

Senate Banking launches reg reform hearings

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WASHINGTON (3/16/09)—The Senate Banking Committee will start a round of hearings this week that will focus on modernizing financial institution supervision and regulation. National Credit Union Administration Chairman Michael Fryzel and National Association of State Credit Union Supervisors (NASCUS) Chairman George Reynolds are scheduled to testify at the opening session Thursday. Reynolds is the Senior Deputy Commissioner of the Georgia Department of Banking & Finance. Also on that panel of regulators will be Comptroller of the Currency John Dugan, Federal Reserve Governor Daniel Tarullo, Federal Deposit Insurance Corp. Chairman Sheila Bair, Acting Director, Office of Thrift Supervision Scott Polakoff, and Commissioner of the Conference of State Bank Supervisors Timothy Karsky, of the North Dakota Department of Financial Institutions. The hearing is scheduled to cover subjects such as prudential and systemic risk regulation, consumer protection, and access to credit and risk management. The committee is next expected to convene financial industry witnesses, perhaps as early as next week.

Oral arguments set in Calif. overdraft case

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WASHINGTON (3/16/09)—The California Supreme Court has scheduled oral arguments in the case of Miller v Bank of America (BofA), a lawsuit with broad implications for California credit unions, credit unions doing business in the state, and for direct deposits. Oral arguments are scheduled to begin April 7. The subject of the case is whether overdraft fees can be assessed in California by federally chartered depository institutions against Social Security (SS) funds in a checking account. The case has been winding its way through the California courts for years, and ended up before the state supreme court under appeal by the plaintiff. BofA has argued that federal law and regulation preempt a California law that prohibits tapping SS money in an account. However, in December 2004 a judge for the Superior Court of San Francisco upheld an over-$1 billion-dollar jury award against BofA for violating state law. The court found that the bank’s practice of using customers’ funds from accounts that may contain SS funds to pay checking account overdrafts and insufficient funds fees violated the California Unfair Business Practices Act. Then, in November 2006, a California Court of Appeals reversed the lower court's ruling and award, and decided in favor of BofA. The plaintiff, Miller, then filed an appeal with the California Supreme Court, which agreed to hear the case. The Credit Union National Association and banking associations joined the case in 2007 through amicus briefs that argued banks and federal credit unions are not subject to the court's ruling because of the prevention provisions in the National Bank Act, Office of the Comptroller of the Currency (OCC) Regulations, and the Federal Credit Union Act.

Student loan program cut would hurt CUs CUNA

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WASHINGTON (3/16/09)—Elimination of the Federal Family Education Loan Program (FFELP), as proposed by the Obama administration, would jeopardize student lending at more than 1,000 credit unions throughout the country, warned the Credit Union National Association (CUNA) last week. In a letter to the top two members of the Senate Budget Committee, Chairman Kent Conrad (D-N.D.) and ranking member Judd Gregg (R-N.H.), CUNA noted that a small number of FFELP-participating credit unions, primarily those with university-based fields of membership, even have significant concentrations in student lending. “Credit unions that specialize in student lending provide a high quality service for their student members, and can provide much needed and individualized assistance if difficulties arise with regard to loan repayments. The elimination of FFELP will remove this valuable option for students,” CUNA President/CEO Dan Mica told the lawmakers. Mica said credit union student lending has already taken a hit because of last year’s amendments to the amendments to the Higher Education Act. While the final bill included changes CUNA sought, its additional layers of requirements posed a burden to some credit unions that forced them out of student lending. For the credit unions that offer student loans, it is an important service that their members value. The elimination of FFELP likely will lead to the end of credit union student lending. The complete CUNA letter can be accessed by the resource link below.

Fed Reg Z plan has clarification for CUs

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WASHINGTON (3/16/09)—The Federal Reserve Board has issued its proposal to implement new disclosure requirements for private education loans, and the plan carries a fix to a provision that could have been problematic for some credit unions. The proposal sets disclosure rules required under the 2008 Higher Education Opportunity Act, which requires lenders and colleges to adopt strict codes of conduct for their student lending programs. It applies to private loans made “expressly for postsecondary educational expenses but would not apply where educational expenses are funded by credit card advances, or real-estate-secured loans.” It doesn’t apply to education loans made, insured, or guaranteed by the federal government—which fall under separate rulemaking authority. The law prohibits lenders from the use of a name or logo of an educational institution in marketing student loans in a way that would imply the institution’s endorsement of the lender. If the institution’s name is used, it would require a disclosure that the institution does not endorse the creditor's loans and that the lender is not affiliated with the institution. This could have presented a problem and additional disclosure requirements for credit unions that use the names of colleges or universities. The Credit Union National Association (CUNA) sought and received statutory language to provide credit unions that are named for a university sufficient latitude to market their student loans. The Fed proposal clarifies that this will not be an issue for these types of credit unions. The public comment period will end 60 days after the proposal is published in the Federal Register, which could be as early as this week. Use the resource link below to read more of the Fed plan.

Inside Washington (03/13/2009)

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* WASHINGTON (3/16/09)—The Financial Accounting Standards Board (FASB) has scheduled discussion of fair value and mark-to-market accounting on its open meeting agenda today. The meeting, which is to start at 8 a.m. (ET) will be webcast and is accessible at www. fasb.org. At a House subcommittee hearing last week, FASB Chairman Bob Herz agreed to provide guidance on mark-to-market accounting on an expedited basis but Bob Herz agreed to provide guidance on mark-to-market accounting on an expedited basis, but it was unclear how far the guidance would go to address current pressures. Also at today’s meeting, the FASB intends to discuss how best to present other-than-temporary impairments in the financial statements… * WASHINGTON (3/16/09)—House Financial Services Committee Chairman Barney Frank (D-Mass.) said last week he intends to strengthen mortgage lending underwriting reform started in last year’s Congress, with bans on 100% securitization and harsher penalties for offering borrowers mortgages they can’t afford. (American Banker March 13) Frank said he also wants to task mortgage servicers with loan modifications to prevent foreclosures. Speaking to the National Community Reinvestment Coalition last week, Frank promised a house bill on subprime mortgages in April… * WASHINGTON (3/16/09)—The treasurers of seven states, along with the American Bankers Association, are asking the Federal Deposit Insurance Corp. (FDIC) to use its “systemic risk” clause when dealing with failing community banks with hefty municipal deposits. The parties argue that the agency should back state programs set up to cover uninsured municipal deposits. However, such a move would be a significant step for the FDIC, according to observers, because that agency is dealing with its own funding issues. The FDIC is already planning a special fee to bolster its Deposit Insurance Fund as reserves have fallen to $18.9 billion. (American Banker March 13)…

FASB commits to expedited mark-to-market guidance

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WASHINGTON (3/13/09)—At yesterday’s House subcommittee hearing on mark-to-market accounting, the chairman of the Financial Accounting Standards Board (FASB) committed to expediting guidance on that accounting rule and to having it out within three weeks. That pledge came in response to a demand by Chairman Paul Kanjorski, of the House Financial Services subcommittee on capital markets, insurance and government-sponsored enterprises, which conducted the hearing. Kanjorski said he wanted FASB to work more quickly toward meaningful changes. FASB Chairman Bob Herz said, however, that the guidance likely may simply advise practitioners on how to best apply the mark-to-market accounting standard in an illiquid market. Several subcommittee members threatened legislative change if the FASB does not act expeditiously enough. The hearing included testimony from bank regulators, accounting standard-setters, and private investor representatives. The requirement to mark assets to market comes from U.S. Generally Accepted Accounting Principles (GAAP), which federal banking regulators must generally follow. In his opening remarks, Rep. Barney Frank (D-Mass.), who is chairman of the parent financial services committee as well as a subcommittee member, noted that prior to the savings and loan crisis banking regulators had much more flexibility in applying accounting rules. He added that “it is very important that the (Office of the Comptroller of the Currency), and the other banking regulators that are absent today, consider adding back the discretion that was taken out years ago.” Reps. Frank, Ed Royce (R-Calif.), and Gary Ackerman (D-N.Y.) each asked Deputy Comptroller Kevin Bailey, of the Office of Comptroller of the Currency (OCC), what legislative action would be required for the OCC to ignore mark-to-market. Without directly responding, Bailey noted that banking regulators currently do have some flexibility when it comes to following accounting rules. “While the federal banking agencies use GAAP as a starting point in determining inputs to the regulatory capital rules, there are many important deviations that arise from the different goals of financial reporting and prudential regulatory capital requirements,” noted Bailey in his supplemental statement. Several Representatives, as well as panelists, mentioned the possibility of separating the impairment of an asset due to credit losses from losses due to liquidity; a proposal supported by the Credit Union National Association in its formal statement submitted for the hearing. (See related story: CUNA: Congress should direct new look at mark-to-market.) Kanjorski said he will hold a follow-up hearing after the Spring District Work Session to discuss the progress the FASB has made.

CUNA Congress should direct new look at mark-to-market

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WASHINGTON (3/13/09)—Mark-to-market accounting, with the current volatility in the markets, is having an opposite effect than it was designed for and the U.S. Congress should instruct the appropriate standards-setting body to develop a better approach for illiquid assets, wrote the Credit Union National Association (CUNA) Thursday. CUNA submitted a statement on credit union concerns for the record of a hearing on the practices and implications of mark-to-market accounting conducted by the House Financial Services subcommittee on capital markets, insurance, and government-sponsored enterprises. (See related story: FASB commits to expedited mark-to-market guidance.) CUNA wrote that the accounting practice in question was developed to enhance the accuracy of public financial disclosures. However, it actually skews reporting in the present economic environment when applied to certain instruments, CUNA warned. Mark-to-market accounting requires assets be valued at current market prices. Critics say this can force assets to be marked down to artificially low prices due to the current absence of a market for many asset classes, such as mortgage-backed securities (MBS). Natural person credit unions do not generally hold many assets that must be marked to market. However, more flexible investment authority for corporate credit unions has allowed such investments and writing those down under mark-to-market rules has a negative impact on the whole system, CUNA said. CUNA backed a recent statement by Federal Reserve Board Chairman Ben Bernanke that further review of accounting standards governing valuation and loss provisioning would be useful. Such review could result in modifications to the accounting rules that reduce their procyclical effects without compromising the goals of disclosure and transparency. Therefore, CUNA requested that Congress direct the Financial Accounting Standards Board (FASB) or the Securities and Exchange Commission (SEC) to address expeditiously the problems mark-to-market standards have created, including their application to assets that are other-than-temporarily impaired--or OTTI. Both FASB and the SEC have made recent recommendations on how financial institutions and others should account for illiquid assets, but neither goes far enough and anticipated further action will come too late to be of help, CUNA wrote. CUNA reiterated its recommendation to President Barack Obama that a White House Task Force be established to address mark-to-market concerns and added its endorsement of a plan to separate impairment of an asset due to credit losses from losses due to liquidity. Use the resource link below to read the entire statement.

FDICs survey on bank service to underserved released

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WASHINGTON (3/13/09)--The Federal Deposit Insurance Corp. (FDIC) has released results of its nationwide survey of FDIC-insured banks and their efforts to serve underserved individuals and families. A summary distributed by the California Department of Financial Insititutions (DFI) said the report showed room for improvement in the areas of focus, outreach and commitment. Most of the 685 banks responding to the survey, in fact 63%, said they offer basic financial education materials. However, the DFI noted, fewer participate “in the types of outreach efforts that are viewed by the industry as most effective to attract and maintain unbanked and underbanked individuals as long-term customers.” “Banks are concerned about the profitability of doing business with unbanked and underbanked individuals as well as perceived regulatory issues related to anti-money laundering laws and regulations,” according to the DFI. More favorable, the DFI also pointed out that more than half of the banks have offered limited extended hours and foreign language services at their retail branch operations in the last five years in efforts to make the bank more appealing or convenient for unbanked and underbanked customers. The survey, required of the FDIC by law, was conducted by Dove Consulting, a division of Hitachi Consulting. Participation was voluntary and 54% of the random sample of FDIC-insured banks and thrifts responded. Use the resource link below to access the report, complete with 16 cases studies of innovations to serve the underserved.

Truth in Savings among five NCUA agenda items

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ALEXANDRIA, Va. (3/13/09)—The National Credit Union Administration (NCUA) announced Thursday that it will issue a Truth in Savings proposal at its March 19 meeting and is expected to align itself with a Federal Reserve Board rule addressing overdraft protection plans. The Fed rule, effective July 1, 2010. requires financial institutions to:
* Disclose on a periodic statement the dollar amounts charged for overdraft fees and returned item fees, both for the month and year-to-date; and * Provide account balance information through an automated system that discloses only the amount of funds available for withdrawal, without including the additional funds that would be available under an overdraft program.
The Truth in Savings Act requires NCUA to issue rules that are substantially similar to the ones the Fed issues. Also on the NCUA open board meeting agenda:
* A request from Citadel FCU for a community charter expansion; * A proposed rule on credit union reporting (.Parts 741, 748 and 749 of NCUA’s rules and regulations); * A final rule on the agency’s Regulatory Flexibility Program (Part 742); and * The National Credit Union Share Insurance Fund monthly report.
The meeting is scheduled for 3 p.m. (ET), a break from the normal schedule of 10 a.m. (ET) meetings.

April 2 CUNA audio call set for loan mods

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WASHINGTON (3/13/09)—Credit unions can get the latest information on the Obama administration’s recently announced loan modification and refinance program via an April 2 audio conference call offered by the Credit Union National Association (CUNA). Key speakers will include Laurie Maggiano, senior policy advisor for the U.S. Treasury Department’s Office of Financial Stability, who will address issues surrounding the loan modification program. That plan is intended to allow borrowers who are struggling or unable to make their payment to modify their loans so that payments are affordable. Speakers from Fannie Mae and Freddie Mac, to be announced soon, will address the refinance aspects of the administration program, designed to help mortgaged homeowners who are current on their payments, but unable to refinance their loans because of decreased home values. Under the loan modification plan:
* Borrowers may be offered rate reductions to as low as 2%, extending the term of the loan up to 40 years, and possibly forbearing or reducing the principal. Incentives are provided by the government for lenders, servicers, and borrowers to participate.
Under the refinancing provisions:
* For loans owned or securitized by Freddie and Fannie, borrowers will be able to refinance loans with balances up to 105% of the value of their house, up from the current limit of 80%.
Registration information for the 90-minute, 3:30 p.m. (ET) audio conference will soon be available. Watch CUNA’s News Now for more details.

Inside Washington (03/12/2009)

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* WASHINGTON (3/13/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Credit
Click to view larger image Sen. Christopher Dodd (right) and CUNA President/CEO Dan Mica, at a Consumer Federation of America luncheon Thursday. (CUNA photo)
Union National Association (CUNA) President/CEO Dan Mica (right) attend a Consumer Federation of America luncheon March 12. Dodd was CFA's keynote speaker and was seated next to Mica prior to his remarks. Mica serves on the CFA board, where CUNA is a charter member. In his comments, Dodd emphasized that his legislative priorities include allowing cramdowns in mortgage bankruptcy, an issue he said the Senate will try to pass in the next few weeks. He added that he and other key Senators will continue working with CUNA to see if it's possible to find common ground with credit unions on the issue. Turning to Mica, Dodd also referenced his appearance at CUNA's Governmental Affairs Conference last month and acknowledged the good work done for consumers by the 140 credit unions in his home state of Connecticut and those throughout the nation ... * WASHINGTON (3/13/09)—Saundra Braunstein, the Federal Reserve Board’s director of consumer and community affairs, said she favors legislation to overhaul mortgage lending rules. However, she said a bill needs to include legal shields for lenders/ Testifying before a House Financial Services subcommittee this week, Braunstein said a bill should protect mortgage lenders from litigation if they comply with certain standards. (American Banker March 12)… * WASHINGTON (3/13/09)—At a press conference this week, U.S. Treasury Secretary Timothy Geithner aligned himself with key lawmakers and said the Federal Reserve Board would be the right agency to be granted the expanded role of systemic risk regulator. Geithner said regulatory reform should, in part, ensure that major institutions, posing the greatest potential risk to the stability of the system, fall under stronger oversight. It should include, he added, carefully designed constraints on leverage. (American Banker March 12) In a separate story, American Banker reported that while House Financial Services Committee Chairman Barney Frank backs a fast-paced legislative agenda that includes creation of the systemic risk regulator, his counterpart, Chairman Chris Dodd (D-Conn.) of the Senate Banking Committee, appears to be backing a slower approach…

NCUA suit seeks 11.8 million from Rachleff estate

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WASHINGTON (3/12/09)—The National Credit Union Administration (NCUA) has filed suit against the estate of the financial adviser to the now-closed New London Security FCU, seeking to recover $11.8 million in losses. The NCUA lawsuit, reported Wednesday by TheDay.com, alleges that the credit union’s financial adviser and board member Edwin Rachleff created fraudulent account statements that claimed the credit union was worth $11.8 million. Rachleff, who was 82 and a broker for A.G. Edwards who handled investments for the credit union, committed suicide by jumping from an apartment building. The death occurred after the credit union was closed and news reports at the time said Rachleff was despondent about failing eyesight. The NCUA liquidated New London Security in July 2008, stating the credit union, chartered in 1935, was insolvent and had no prospects for restoring viable operations. In a release a month later, the agency noted that the activities that necessitated the liquidation were under investigation by NCUA and federal criminal authorities since the July liquidation.

Fryzel notes agency Hill agenda

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WASHINGTON (3/12/09)—At a state and federal credit union regulators’ annual meeting this week, National Credit Union Administration (NCUA) Chairman Michael Fryzel said his agency continues to seek from Congress “all necessary tools for to deal with the stresses on the credit union industry.” Fryzel was addressing the annual NCUA/National Association of State Credit Union Supervisors (NASCUS) three-day National Regulators Conference in Chicago, Ill. He said his agency has been pressing its case for increased borrowing authority for the National Credit Union Share Insurance Fund, as well as an extension of the premium repayment period, with federal lawmakers. “Now, more than ever, credible, straightforward and level-headed approaches to Congress are essential. Neither NCUA nor the industry can afford to mischaracterize the situation facing credit unions. There are problems in the industry, but there are also solutions if we work together,” Fryzel told the gathering. A NASCUS release noted that nearly 80 state regulators attended the meeting with NCUA board members, regional directors and staff, and NASCUS representatives.

Plan to make BSA rules user-friendly backed by CUNA

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WASHINGTON (3/12/09)—The Credit Union National Association (CUNA) backed a plan by the Financial Crimes Enforcement Network (FinCEN) to better codify Bank Secrecy Act (BSA) information and said it will serve to simplify financial institution compliance. FinCEN proposes to move the Bank Secrecy Act regulations to a new Chapter X and organize the regulations within that chapter by financial industry to make it easier for institutions to find the appropriate regulatory requirements. In a comment letter to FinCEN, CUNA Federal Compliance Counsel Nichole Seabron noted the following points of the FinCEN plan:
* As outlined, Chapter X will be organized in a manner that specifies the regulatory obligations applicable to particular industry sectors; * Chapter X will feature consistent numbering and section divisions intended to make the regulatory requirements more accessible; and * FinCEN also proposes to add a standard definition for BSA, which does not exist in current regulation.
The proposed rule also would make minor technical changes to BSA regulations, such as updating mailing addresses and points of contact. CUNA supports FinCEN’s efforts to create more user-friendly BSA regulations and agrees that these proposed changes will facilitate use of the regulations.

Inside Washington (03/11/2009)

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* WASHINGTON (3/12/09)—The U.S. Supreme Court ruled 5 to 4 this week that a federal court lacked the authority to move a dispute between Discover Financial Services and a cardholder into arbitration. The decision involved a case brought by Discover, which was originally addressed in state court. It is a common practice for lenders to go through state courts to force delinquent borrowers to make good on their debts, but when borrowers act to dispute the lenders’ claim, the lender can force the dispute into arbitration. The lender then often seeks to switch to federal courts, which may be perceived as more amenable to the lender’s case. However, the Supreme Court ruling made it so lenders must now request to move a dispute to arbitration through the state courts. (American Banker March 11) Credit Union National Association (CUNA) Counsel for Special Projects Michael Edwards said of the decision, “This does not change a financial institution's ability to get a borrower to agree to binding arbitration, but it does mean that a financial institution will more frequently have to convince state courts that the binding arbitration provision in a borrower's loan or lease agreement is fair enough not to be voided by the court as 'unconscionable,' especially if the financial institution has already filed suit against the borrower in state court before asking for arbitration.” Generally, Edwards added, state courts are more skeptical of the fairness of binding arbitration than federal courts, and are, therefore, less likely to require that a dispute be moved to binding arbitration or to enforce an arbitrator's decision… * WASHINGTON (3/12/09)—An eight-year battle between bankers and the National Association of Realtors about the banks’ attempts to move into real estate brokerage activities has ended with the bankers acknowledging they have given up the fight. Congress has passed an appropriations bill that contains a permanent ban on the Treasury Department and Federal Reserve Board from finalizing a 2000 plan to authorize banks to get into the brokerage business. The American Bankers Association, leader in the push for real estate broker powers for banks, said it is giving up the issue and that it was not, at this time, any longer a priority issue for bankers (American Banker March 12)… * WASHINGTON (3/12/09)—Legislation was introduced this week called the Fannie Mae and Freddie Mace Full Disclosure Act. It would require the government-sponsored enterprises to pay registration fees and make public information required by the Securities and Exchange Commission. One of the bill’s chief sponsors, Rep. Adam Putnam (R-Fla.) said one of the many factors involved in the country’s current economic meltdown was a failure to require enough transparency and accountability from Fannie and Freddie. Rep. Ed Markey (D-Mass.) is the bill’s chief co-sponsor. (American Banker March 12)…

CUs get accounting guidance for corporate plan costs

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WASHINGTON (3/11/09)—The American Institute of Certified Public Accountants (AICPA) yesterday issued guidance on how credit unions may account for costs associated with the National Credit Union Administration’s (NCUA) Corporate Stabilization Plan. On Jan. 28, the NCUA announced a $1 billion capital infusion for U.S. Central FCU, and a deposit guarantee on uninsured shares at all corporates through February. For those corporates signing a supervisory agreement with the NCUA, it would continue the deposit guarantees through 2010. The agency’s initial estimate of the insurance liability as a result of the guarantee was $3.7 billion, based on corporate credit unions' holdings in impaired asset-backed securities. As a result, the NCUA announced that credit unions would be required to replenish .51% of their National Credit Union Share Insurance Fund (NCUSIF) deposit and pay a premium to bring the NCUSIF's equity level back to 1.3%. The good news in the AICPA opinion comes regarding credit union treatment of the replenishment of the 1% deposit and premium costs associated with the agency’s corporate stabilization efforts. The AICPA is providing flexibility on how to report both the impairment and the premium costs by offering different accounting approaches and no clear directive favoring one over the others. AICPA said credit unions have flexibility to work with their accountants and auditors to determine whether it is more appropriate to:
* Adjust their 2008 financial statements to reflect the insurance premium and deposit costs; * Adjust their 2008 statements for the deposit impairment only and report the premium in 2009; or * Reflect the premium and insurance costs on 2009 statements.
The AICPA guidance also provided advice to corporate credit unions with investments in U.S. Central FCU, and natural person credit unions with capital in those corporates. It described how to evaluate whether they need to write down such capital as a result of U.S. Central's other-than-temporarily-impaired (OTTI) charges of $1.2 billion for 2008, announced on Jan. 28. While the AICPA Technical Practice Aid is not an official ruling from the Financial Accounting Standards Board, it is guidance that accountants and practitioners may rely on in advising credit unions and other clients how and when to report financial issues. The Credit Union National Association (CUNA) Accounting Task Fork was among the interested parties that weighed in with the AICPA on the issues addressed in the AICPA aid. CUNA President/CEO Dan Mica sent a summary of these documents to leagues and credit unions last night.

Inside Washington (03/10/2009)

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* WASHINGTON (3/11/09)—Strong and effective regulation and supervision of banks is necessary for reducing systemic risks, but are not sufficient to guard against a future financial meltdown, Federal Reserve Board Chairman Ben Bernanke said in a speech this week. The current financial crisis, called the worst since the 1930s by the Fed chairman, was precipitated in part by failures of government oversight systems and private risk management. Those failures combined to let a flood of foreign money into the United States without ensuring it was prudently invested. The change needed to stave off future disasters, Bernanke said, is a broad reworking of government regulation of the country’s financial system, with an eye toward long-term changes (The New York Times March 10)… * WASHINGTON (3/11/09)—The Obama administration has nominated the following three people to key posts at the U.S. Treasury Department: Alan Krueger for assistant secretary of economic policy; Kim Wallace for assistant secretary for legislative affairs, and; David Cohen for assistant secretary of terrorist financing. Currently, all the nominees are counselors to the Treasury secretary. (American Banker March 10)…

PwC report summary on corporates unveiled

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ALEXANDRIA, Va. 3/11/09-–A PricewaterhouseCoopers LLP (PwC) report summary, with recommendations for stabilization and improvement of the corporate credit union system, was released by the National Credit Union Administration (NCUA) yesterday. The report identifies good practice models from the system as well as outlines proposed actions to address corporate system needs. The NCUA engaged PwC in November 2008 to review NCUA recommendations for realignment of the corporate credit union system. PwC worked with the agency to analyze stabilization and improvement recommendations. The firm also evaluated implementation challenges. Specifically, the report identifies issues and provides observations and recommendations in four areas: liquidity; capital; structure; and, risk management. The NCUA provided a summary, as requested by the Credit Union National Association (CUNA), but called the report “confidential.” CUNA has also requested that the NCUA provide upcoming results of a PIMCO report analyzing corporate credit unions' investments and their potential losses. PIMCO is a leading global investment management firm Regarding the PwC report, the three-member NCUA board issued the following joint statement: “The PricewaterhouseCoopers LLP confidential report followed a thorough analysis and input from all sources with critical knowledge of the corporate credit union system. “The report augments existing information and serves to validate staff evaluations that the board will use, along with comments received from the advance notice of proposed rulemaking, when considering whether to amend its regulation governing corporate credit unions.” Use the resource link below to access the summary.

Bounce protection foreclosures on Fed consumer panel

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WASHINGTON (3/11/09)—The Federal Reserve Board’s Consumer Advisory Council (CAC) has slated home foreclosures and a proposed rule on overdraft services among its discussion topics for its next meeting, March 26. Also on the agenda, according to the March 10 Federal Register, is community stabilization activities. The Consumer Advisory Council was established in 1976 and advises the Fed on its responsibilities under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. Members are appointed by the Board of Governors and serve staggered three-year terms, and the Council meets three times a year. Currently Alan Cameron, president/CEO of the Idaho CU League, is the only credit union representative on the 30-member panel. As time allows, the complete CAC agenda includes discussion of:
* Foreclosures and efforts to prevent them, including the Making Home Affordable program; * Neighborhood and community stabilization strategies and challenges in communities affected by foreclosures, including implementation of the Neighborhood Stabilization Program; * Credit availability for consumers and small businesses; and * The Fed’s proposed rules regarding financial institutions’ overdraft—or “bounce”—protection plans. The proposed amendments to Regulation E, would provide consumers with certain choices relating to the use of overdraft services and the assessment of overdraft fees; and, finally, * Reports by committees and other matters initiated by Council Members.
Parties wishing to submit views to the Council on the above topics may do so by sending written statements to Jennifer Kerslake, Secretary of the Consumer Advisory Council, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551.

Overdraft plans Hill and agency updates

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WASHINGTON (3/11/09)—Rep. Carolyn Maloney (D-N.Y.) is asking her House colleagues to support a 2009 version of her legislation intended to afford consumers more protections in financial institution overdraft protection services. The 2009 bill will be similar to Maloney’s Consumer Overdraft Protection Fair Practices Act (H.R. 946), which was introduced in 2007 but died with the closing session of the last Congress as it failed to get a House vote. That bill would have: ensured that consumers opt-in to potentially costly overdraft protections, rather than being forced into them without notification; required that consumers are alerted when they about to overdraw from their account at ATMs; and required that financial institutions provide full, written disclosure of their overdraft policies to customers or members. The Credit Union National Association (CUNA) staunchly backed the bill’s intention to eliminate abusive practices associated with some overdraft, or bounce, protection plans. However, CUNA opposed the bill's approach of classifying overdraft protection programs under the Truth in Lending Act, and including the service fee associated with overdraft protection programs as a finance charge included in an APR calculation. That approach, CUNA warned, could prevent credit unions from offering overdraft protection plans for fear of exceeding the 18% lending ceiling that applies to federal credit unions. CUNA also had criticized some operational aspects of the bill. CUNA continues to work with key Hill staff and committee members on the overdraft issue and believes Maloney’s bill this year will be pared down from its earlier version. Maloney is a member of the House Financial Services Committee, as well as chairman of the Joint Economic Committee. On the regulatory side, in December 2008, the National Credit Union Administration (NCUA) had proposed, in conjunction with the Federal Reserve Board and Office of Thrift Supervision, a couple of revisions affecting overdraft protections. They would have addressed such things as members' opt-out rights, disclosures and overdrafts due to debit holds. The overdraft plan was issued along with credit card reforms. However, when the Fed voted on its card reforms, it stripped out the overdraft language and issued a revised proposal. Comments are due March 30. The NCUA has said it would take no further action on the overdraft proposal because, if adopted, the Fed plan would cover the activities of federal credit unions. In a related story, the Fed Consumer Advisory Council, meeting March 26, has scheduled discussion on the overdraft proposed rules as one of its agenda items (see related story: 'Bounce’ protection, foreclosures on Fed consumer panel list). Use the resource link below to access CUNA’s comment call on the overdraft proposal.

Senate wraps up appropriations bill

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WASHINGTON (3/11/09)—The Senate completed its work last night on H.R. 1105, the ominibus spending bill. Important to credit unions, the legislation includes language that removes a cap on the Central Liquidity Facility lending authority through Sept. 30. The $410 billion spending bill is meant to fund most of the federal government for the remainder of the year after. Unable to complete consideration of the appropriations bill last week, the U.S. Congress passed a continuing resolution through March 11 to keep the government going. The final legislation gives the CLF continued authority to borrow up to 12 times its capital and surplus, a formula that roughly equals $41 billion that could be borrowed to meet credit union liquidity needs. The bill also includes a $1 million appropriation for technical assistance grants by the Community Development Revolving Loan Fund through FY 2010. The spending package now goes to the White House to await President Barack Obama’s signature.

CUNA opposes new bill with CRA for CUs

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WASHINGTON (3/11/09)-- Rep. Eddie Bernice Johnson is poised to introduce legislation that would, in part, apply Community Reinvestment Act (CRA) requirements on credit unions. The Credit Union National Association (CUNA) strongly opposes legislation extending CRA requirements to credit unions Johnson is scheduled to unveil her bill, called the Community Reinvestment Act Modernization Act of 2009, at a press conference tomorrow. The Texas Democrat has said her bill is intended to promote responsible lending and increased financial access to traditionally underserved communities. CUNA Senior Vice President of Legislative Affairs John Magill said Tuesday such legislation is “a solution in search of a problem.” “CRA was enacted because banks were redlining—drawing circles around communities to which they would not lend,” Magill said. “All available data suggests that credit unions, on the other hand, are out there lending to their members—even and especially in these tough times.” “Credit unions are -- and should be -- focused on meeting the needs of their members. This legislation would be a distraction from the good work credit unions do day in and day out,” Magill warned. “Credit unions should be applauded for the work they are doing—not burdened with unnecessary reporting requirements,” he added.

CUNA backs enhancements to Hope for Homeowners

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WASHINGTON (3/10/09)—The Credit Union National Association (CUNA) supports enhancements to the Hope for Homeowners (H4H) program as outlined in an interim final rule intended to draw more borrowers and lenders to that program. Under H4H, eligible homeowners may refinance their subprime mortgage loans into fixed-rate, FHA-backed loans. The H4H program also allows the subordinated lienholders to share in any future appreciation of the property as a means to encourage them to participate in the program. In a recent comment letter to the U.S. Department of Housing and Urban Development (HUD), which administers the FHA, CUNA especially endorsed a provision in the new interim final rule that would allow up-front payments to subordinated lienholders. The interim final rule would allow the subordinated lienholder to receive 3% of the subordinated loan balance if the cumulative loan-to-value ratio exceeded 135%, or 4% if this ratio was less than or equal to 135%. However, CUNA said that even with that enhancement, credit unions would continue to view the process of qualifying as an FHA-approved lender to be very burdensome. CUNA expressed a strong desire to work with the FHA to determine how the process may be streamlined to further facilitate credit union participation. Use the resource link below to read CUNA’s complete comment.

Upcoming hearings of CU interest

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WASHINGTON (3/10/09)—There are several hearings of interest to credit unions upcoming this week. The Credit Union National Association (CUNA) will be monitoring the following sessions:
* Today, the House Appropriations Committee subcommittee on financial services and general government will hold a hearing on "Treasury Action Related to the Financial Crisis;" * Also today, the Senate Budget Committee has scheduled a hearing on President Barack Obama's Fiscal Year 2010 budget proposal. A second day of hearings will be held on Thursday. Office of Management and Budget Director Peter Orzsag will testify on Tuesday; Treasury Secretary Geithner on Thursday; * On Wednesday morning, the House Financial Services Committee will mark-up S. 383, a bill that provides for a special inspector general for the U.S. Treasury Department's Troubled Asset Relief Program—or TARP. In the afternoon, that panel’s subcommittee on financial institutions and consumer credit will conduct a hearing on "Mortgage Lending Reform: A Comprehensive Review of the Mortgage Lending System”; and * The Joint Economic Committee will hold a hearing on TARP accountability and oversight on Wednesday.
Also, as noted in CUNA’s March 9 News Now, on Thursday, the House Financial Services subcommittee on capital markets, insurance and government-sponsored enterprises will examine mark-to-market accounting practices and its implications. CUNA will submit a statement for the record of this hearing.

Congress update Status of spending cramdown bills

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WASHINGTON (3/10/09)—Unable to complete consideration of the FY 2009 Omnibus Appropriations Act last week, the U.S. Congress passed a continuing resolution through March 11 to keep the government going. The Senate resumed consideration of the spending bill Monday and is expected to cast its final vote on it Wednesday. Important to credit unions, the legislation includes language that removes a cap on the Central Liquidity Facility lending authority through Sept. 30. The appropriations bill also includes language to expand the mortgage lending rule-making authority of the Federal Trade Commission, a move that is opposed by the Credit Union National Association (CUNA). A CUNA-supported amendment to strip this provision from the spending bill was withdrawn last week, but only after key lawmakers agreed to address this issue on the next available piece of legislation. CUNA also continued to work on the Senate side on compromise language to H.R. 1106, the Helping Families Save Their Homes Act, approved 234-191 in the House. This legislation includes language permitting bankruptcy courts to modify the terms of loans secured by a debtor's principal residence, and CUNA strongly advocates a narrowing of the courts’ “cramdown” authority. H.R. 1106, however, also includes language that would make permanent the $250,000 share and deposit insurance limit. It also would extend the amount of time the National Credit Union Administration (NCUA) has to replenish its share insurance fund when it drops before 1%, and would increase the NCUA borrowing authority. Those provisions have CUNA’s strong support. Also of note, Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) continue to design a House bill comparable to Senate legislation being drafted by Sen. Charles Schumer (D-N.Y.), to lift the cap on credit union member business lending. Last week Schumer announced his intention to introduce legislation raising the MBL cap as a way to provide additional credit to America's small businesses. Schumer said that credit unions have a long track record of scrutinizing borrowers, and have low delinquencies as a result. "Because deposits have been on the rise as people move their savings from the stock market to savings accounts, (credit unions) have cash on hand to loan to small businesses," he noted. The current MBL cap is set at 12.25% of assets. CUNA estimates that credit unions could lend $10 billion to small businesses in the first year after the cap is lifted.

Inside Washington (03/09/2009)

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* WASHINGTON (3/10/09)—The Senate Banking Committee has hired three staff members, according to the “Washington People” section of the March 9 American Banker. Charles Yi was hired as a senior policy adviser and counsel and will cover Troubled Asset Relief Program oversight, insurance and commercial banking law, regulatory modernization, and other legislative issues. Yi was a counsel to the House Financial Services Committee. Beth Cooper is now a committee professional working on affordable housing and community development. She was a congressional liaison for the National Association of Housing and Redevelopment Officials. Mitch Warren has been hired by the banking panel to handle transportation issues as a senior policy adviser. He previously worked for Majority Leader Harry Reid on Senate Environment and Public Works Committee issues, and transportation and other issues for the Senate Budget Committee. The “Washington People” section also noted that Sen. David Vitter (R-La) has added Travis Johnson to his staff as a legislative assistant working on Senate Banking Committee issues… * WASHINGTON (3/10/09)—Federal Reserve Bank of Kansas City President Thomas Hoenig said it is a misnomer to criticize the idea of public authorities taking over large institutions as being a nationalization of the country’s financial system. He said that step would be temporary and targeted at a limited number of failed institutions that needed cleaning up. The goal would be to return them to private ownership as quickly as possible. His comment appeared to be at odds with statements the same week by Federal Reserve Board Chairman Benjamin Bernanke who told the Senate Banking Committee that some companies are so large the government must do what is necessary to support them (American Banker March 9)… * WASHINGTON (3/10/09)—The Federal Deposit Insurance Corp. (FDIC) has said it is attempting to use its new premium structure to reduce the cost of bank failure or to at least move more of the potential high cost upfront. (American Banker March 9) Loss rates now are significantly higher than previous rates with estimated rates for the 16 failures so far in 2009 averaging 23% of the bank’s asset size. Lat year the loss rates for 24 failures, excepting Washington Mutual Inc., was around 25%. The FDIC’s final rule last month making changes to the premium structure are meant to temper the high cost. The rule takes aim at brokered funds and Federal Home Loan Bank advances, which the FDIC has identified as factors in the increased loss rates at failed banks…

CUNA works to add CUs to Dodd insurance bill

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WASHINGTON (3/9/09)--Including credit union provisions in legislation introduced by the chairman of the Senate Banking Committee to increase the borrowing authority for the Federal Deposit Insurance Corp. (FDIC) is being advocated by the Credit Union National Association (CUNA). “When the news broke Thursday, our staff immediately contacted the office of Chairman Chris Dodd to ask if the legislation would contain similar language for NCUA,” said CUNA Presiden/CEO Dan Mica. “We pointed out specifically that the House is poised to pass such language.” On Thursday, Dodd (D-Conn.) introduced a bill (S.541) to increase the FDIC borrowing authority from $30 billion to $100 billion, with additional authority to increase the borrowing authority to as much as $500 billion with the concurrence of Treasury and the Federal Reserve Board. The additional authority to $500 billion would only be available until the end of 2010. Mica said that, after discussions between CUNA and NCUA, the agency sent a formal communication to Dodd requesting additional borrowing authority for itself along the lines of that proposed for FDIC. “We will continue to discuss this legislation with Chairman Dodd’s staff in the hopes of having the bill amended to include credit unions during Senate consideration,” Mica said. “We are also reaching out to our allies in the House to ensure that, in the event that this legislation were to pass the Senate without including credit union provisions, those portions would be included during House consideration.”

NCUA Big response to March SIP offering

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ALEXANDRIA, Va. (3/9/09)—More than $7.7 billion has been issued to corporate credit unions in the first two subscriptions of the National Credit Union Administration’s Credit Union System Investment Program (CU SIP), the agency announced Friday. The corporates use the funds to pay down external borrowings, freeing collateral for future contingency liquidity needs. The NCUA said in a release that credit unions showed strong early support for CU SIP, and their continued support for corporate credit unions is significant. The March offering, in fact, was moderately oversubscribed, the agency said. The National Credit Union Administration is pleased to report that the Credit Union System Investment Program (CU SIP) has been extremely successful in the initial corporate stabilization phase due to the high level of support from natural person credit unions. Over $7.7 billion was issued to corporate credit unions in the first two subscriptions. The corporates have used the funds to pay down external borrowings, freeing collateral for future contingency liquidity needs. Credit unions’ strong early support for CU SIP, and their continued support for corporate credit unions is significant. The March offering was moderately oversubscribed. Due to the size of the initial two offerings, the NCUA Central Liquidity Facility limited awards for the third subscription to the amount requested by the issuing corporate credit union, the agency noted. Each natural person credit union submitting a subscription order and meeting the CU SIP criteria will be awarded some amount; however, at a reduced level from its initial request. The SIP program remains open and available for subsequent offerings, if there is a need in coming months.

Inside Washington (03/06/2009)

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* WASHINGTON (3/9/09)--The Credit Union Association of New York presented Rep. Nydia Velazquez (D-N.Y.) with a Legislator of the Year award during a visit to her Washington, D.C., office Feb. 25. The award recognizes a distinguished legislator who has shown outstanding commitment to issues important to New York credit unions. “Velazquez regularly expresses her support for credit unions,” said association President/CEO William Mellin. “As chair of the small business committee, she regularly called upon credit unions to provide a voice in how to best serve the nation’s small businesses.” (Photo provided by the Credit Union Association of New York) ... * WASHINGTON (3/9/09)--The Senate expressed willingness to compromise on legislation that the House approved Thursday that would allow bankruptcy judges to modify terms of troubled mortgages, otherwise known as cramdown (American Banker March 6). Senate Majority Whip Richard Durbin (D-Ill.) said he was open to compromise on the legislation. Brian Gardner, analyst with Keefe, Bruyette and Woods, said he predicted a Senate compromise also. The bill the House approved Thursday was slightly modified to encourage borrowers to seek loan modifications before declaring bankruptcy and also included language to require a borrower to wait 30 days between receiving help from a mortgage servicer and going bankrupt ... * WASHINGTON (3/9/09)--Senators doubted the Federal Reserve Board would be able to act as a systemic risk regulator, they said during a House Financial Services Committee meeting Thursday, given the central bank’s handling of the recent American International Group (AIG) bailout (American Banker March 6). During the meeting, lawmakers quizzed Fed Vice Chairman Donald Kohn about the bailout, saying they wondered if the central bank had made a mistake. Regulators need to better explain why they rescued AIG, Sen.Christopher Dodd (D-Conn.) said. Kohn said the only power the Fed had at the time to help AIG was to lend them money, instead of extending a line of credit to the insurance company ...

Kanjorski mark-to-market hearing this week

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WASHINGTON (3/9/09)—Rep. Paul Kanjorski (D-Pa.) plans a subcommittee hearing this week on mark-to-market accounting rules that have required financial institutions to report impairments of illiquid assets. Kanjorski, chairman of the House Financial Services subcommittee on capital markets, insurance, and government-sponsored enterprises, said his subpanel will examine the accounting rules that some contend have exacerbated the current troubles in the financial industry and in the broader economy. The mark-to-market standard requires companies to value assets held at current market values. Kanjorski, in a release, said that for assets that are frozen and have a diminished current market value but may recover value in the future, the standard has proven problematic. Companies are then forced to write-down billions in assets, which can lead to further write-downs elsewhere. “Illiquid markets have resulted in great difficulty in valuing sizable assets. Some have therefore complained about fair value accounting and sought to eliminate it. While companies need stability, investors still need accurate information. We therefore cannot allow for fantasy accounting that wishes away bad assets by merely concealing them,” Kanjorski said. His subcommittee will look at balancing companies’ needs for stability with investors’ needs for accurate information. The hearing is March 12. Witnesses had not been announced as of Friday afternoon. The Credit Union National Association (CUNA) will submit a statement for the record. Also, CUNA recently advanced a new idea to address problems created by accounting rules on fair value, mark-to-market and the reporting of assets that are "Other Than Temporarily Impaired." In a letter to President Barack Obama, CUNA urged the formation of a Presidential Task Force.

Upcoming bill to address CUNAs FTC concerns

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WASHINGTON (3/9/09)--The Credit Union National Association’s (CUNA) concerns about the expansion of the Federal Trade Commission’s (FTC) mortgage-lending rulemaking authority--contained in H.R. 1105, the Fiscal Year 2009 Omnibus Appropriations Act, which the Senate is expected to vote on today--will be addressed in upcoming legislation. "The Senate cannot fix the language in [H.R. 1105] because the House will not accept any amendments to the bill, so they are going to have to do it in a future bill,” said Ryan Donovan, CUNA vice president of legislative affairs. “Everyone seems to agree that the language in the omnibus is too broad and it will be fixed in the near future.” On Thursday, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) noted that he would ask senators to work with him to add an amendment to future legislation to clarify the FTC’s powers. CUNA supported an amendment by Sen. Mike Crapo (R-Idaho) to H.R. 1105 that would have addressed the FTC’s powers. The amendment was withdrawn Thursday because the intent of H.R. 1105 is not to expand the FTC’s powers to affect credit unions or other financial institutions. Rather, the bill intends to give state attorneys the power to bring civil actions against mortgage industry participants not supervised by federal banking agencies or are not federal credit unions, according to Sen. Byron Dorgan (D-N.D.), the bill’s author (Congressional Record Exchange March 5). CUNA supported Crapo’s amendment because it would have removed the proposed increased FTC authority and increased state attorneys’ general authority to enforce Truth-in-Lending violations. Currently those violations primarily are addressed by federal agency enforcement actions and in private lawsuits. Crapo noted Thursday that if the initial FTC proposed rule goes beyond scope, “it is my understanding that there is agreement that the Senate would immediately take up legislation and stop that from occurring. “It would be a terrible mistake to add another patchwork of conflicting authorities and interpretations of federal laws for insured depository institutions as it relates to home loans and other types of consumer finance transactions,” he said.

Corporate restructuring plan unveiled soon by CUNA

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WASHINGTON (3/9/09)--The Credit Union National Association (CUNA) Corporate CU Task Force plans to complete development of its statement on the future of corporate credit unions by mid-March. At its meeting last week, the task force focused on the role of the corporates and discussed the need for changes in the corporate credit union system in the areas of permissible services, capital, and corporate governance, among other issues. The discussion will form the basis of CUNA's comment letter to the National Credit Union Administration (NCUA) on its Advance Notice of Proposed Rulemaking on the corporate credit unions. Comments are due to NCUA April 6. The CUNA task force also received an update on CUNA's work to pursue alternatives to the funding of NCUA's Corporate Stabilization Program that will lessen credit unions' insurance costs associated with the program. During its discussions, the task force stressed that any such alternatives cannot eliminate the need for credit unions to incur some insurance costs to fund the Corporate Stabilization Program. However, it was resolved that CUNA should continue its efforts to encourage NCUA to develop alternatives as soon as possible that will mitigate credit unions' costs.

House approves cramdown bill

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WASHINGTON (3/6/09)--The U.S. House of Representatives yesterday voted 234-191 in favor of H.R. 1106, Helping Families Save Their Homes Act, which contains a mortgage cramdown provision that will affect credit unions. The provision would allow bankruptcy judges to modify the terms of existing mortgages, which the Credit Union National Association (CUNA) has said could lead to borrowers’ gaming of the system. The bill will now move to the Senate, where CUNA believes there is an opportunity to limit the scope, application and duration of the legislation. The cramdown portion of the bill was modified prior to the House vote, but the revised language is insufficient, CUNA said. It "only uses the President's plan as a guideline for the courts to follow, not a limitation on what type of loans the courts can cramdown or what the courts can do to those loans,” said Ryan Donovan, CUNA vice president of legislative affairs. Though CUNA does not support the cramdown provision of H.R. 1106, it does strongly support another provision that would make higher share and deposit insurance ceilings permanent.

Call report expense data change

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ALEXANDRIA, Va. (3/6/09)—There will be changes to the March 31 call report designed to enable credit unions to provide a more accurate picture of expenses related to the recent Corporate Stabilization Program, according to the National Credit Union Administration (NCUA). The NCUA said its new version of the 5300 Call Report will show the expense related to the stabilization action as a separate line item on the Income Statement within the Call Report. It will also show net income before and after the expense item. The two new accounts added are NCUSIF Stabilization Expense, Account 311 and Net Income (Loss) before NCUSIF Stabilization Expense, Account 660A. The agency said this will allow call report users to quickly ascertain the impact of the stabilization expense on the operating position of each credit union. The NCUA promised a letter to credit unions to be issued soon with additional details. In the NCUA announcement, Chairman Michael Fryzel said, “This modification is an improvement for credit unions, their members and NCUA. It will present a clearer, and I believe fairer, picture of the real financial condition of a credit union given the external factors that have affected the corporate network.: He added, “I am committed to continuing to provide reasonable and innovative regulatory approaches for credit unions during these difficult times, whether it is through last week’s Supervisory Letter regarding examiner flexibility or this Call Report enhancement.”

Inside Washington (03/05/2009)

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* WASHINGTON (3/6/09)--Minnesota credit union representatives met with their congressional members on Capitol Hill during the annual Hill hike event, which coincided with the Credit Union National Association’s Government Affairs Conference Feb. 21-26. Representatives met with Sen. Amy Klobuchar (D), Rep. Betty McCollum (D), Rep. Collin Peterson (D), Rep. Michele Bachmann (R) and Rep. Keith Ellison (D). Discussions focused on the economy, credit unions’ safety and soundness, mortgage cramdown legislation and member business lending. McCollum (pictured) said credit unions are stable and are a "high standard."(Photo provided by the Minnesota Credit Union Network) ... * ALEXANDRIA, Va. (3/6/09)--Addressing the North Carolina Credit Union League at a town hall forum Wednesday, National Credit Union Administration (NCUA) Vice Chair Rodney Hood underscored guidance released by the agency that addresses its Corporate Credit Union Stabilization Program. The letter, which was also sent to federal credit unions, discusses how the program may impact individual credit unions' earnings and net worth ratios. (See RELATED: Examiners to address corporate plan impact on CUs) ... * WASHINGTON (3/6/09)--The Credit Union National Association has released a summary of the guidelines and program description for President Barack Obama’s Making Home Affordable program, which aims to help homeowners making a good-faith effort to stay current on their mortgage payments. The summary also specifically notes how the program will affect credit unions ... * WASHINGTON (3/6/09)--If the Federal Reserve Board could issue its own debt, it could have the ability to fund more liquidity programs, according to financial industry observers. The idea of allowing the Fed to issue its own debt is gaining speed as the bank readies to inject billions of dollars in the market to boost banking lending (American Banker March 5). The other alternative would allow the Treasury to sell more debt and turn over the profits to the Fed. But if the Fed received money from the Treasury, Congress would be forced to increase the government’s debt ceiling. If the Fed was its own debt-issuer, no restriction would be imposed. According to Douglas Landy, former Fed lawyer, the central bank’s balanced sheet is maxed out ... * WASHINGTON (3/6/09)--While testifying before the Senate Finance Committee, Treasury Secretary Timothy Geithner provided new details about a proposal that the department plans to announce on creating a public-private partnership to buy toxic assets (American Banker March 5). The plan would “marry government financing,” using both the Federal Reserve Board and the Federal Deposit Insurance Corp. However, Geithner did not detail either agency’s roles. Government financing would be used to invigorate the markets, which would make private lending and borrowing more appealing. The program would use capital as a bridge to private capital, direct support to re-open credit markets and use government financing and private capital to unfreeze the markets, he said ... * WASHINGTON (3/6/09)--Guidance released by the Treasury Department Wednesday indicates that servicers participating in loan modifications through the Making Home Affordable program will need to take a step-by-step approach to help borrowers. According to the guidance, servicers will follow a sequence of steps to reduce borrowers’ monthly payment to no more than 31% of gross monthly income. The first step will require servicers to reduce the interest rate and then extend the term of the loan up to a maximum of 40 years and then, if needed, forbear principal ... * WASHINGTON (3/6/09)--The Federal Deposit Insurance Corp. (FDIC) could cut in half a special emergency assessment fee announced last week if the House approves a bill that would raise the agency’s borrowing authority to $100 billion from $30 billion. The House was expected to vote on the bill Thursday (American Banker March 5). In an earlier American Banker story, FDIC Chairman Sheila Bair noted that without the assessment fee, the Deposit Insurance Fund could become insolvent ...

Franks work continues on financial reform

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WASHINGTON (3/6/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) announced Thursday that he will continue to work on financial reform and regulatory restructuring, and move legislation to the House floor that would curtail abusive mortgage lending practices, and reform credit card and overdraft practices. Frank’s committee also will meet to examine creating a systemic risk regulator, enhancing the effectiveness and scope of prudential standards, streamlining front-line regulation, and strengthening consumer and investor protection. A March 20 hearing has been scheduled to examine if federal and state law enforcement agencies have all they need to pursue financial institutions and individuals that commit fraud, abuse their positions and violate the law. “While we will continue to work with the Obama Administration on stabilization, it is now essential that we continue work on our reform agenda and address the need for financial regulatory restructuring to diminish systemic risk and enhance market integrity,” Frank said in a release. The mortgage legislation would reform the mortgage origination process and ban predatory lending, similar to a 2007 effort that passed the House, but later failed in the Senate. Rep. Carolyn Maloney (D-N.Y.) has re-introduced legislation to abolish unfair and deceptive credit card industry practices by protecting cardholders from interest rate increases, misleading terms, excessive fees, and subprime cards for those who cannot afford them. Maloney re-introduced the legislation with Sens. Charles Schumer (D-N.Y.) and Mark Udall (D-Colo.)

CUNA CUs ready if MBL cap is lifted

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WASHINGTON (3/6/09)--Sen. Charles Schumer’s (D-N.Y.) intent to draft a bill that would lift the credit unions’ member business lending caps (MBL) is good news not only for credit unions, but for small businesses, which credit unions are ready to help, according to the Credit Union National Association (CUNA). Schumer, a member of the Senate Finance and Senate Banking Committees, announced Thursday that he is drafting legislation to lift the caps--which currently prevent credit unions from engaging in lending that is more than 12.25% of their total assets. Schumer cited CUNA's estimate that credit unions could lend $10 billion to small businesses in the first year after the cap is lifted. Lifting the cap would help small businesses facing a gaping void in credit availability, Schumer said in a letter to colleagues. “Credit unions also have a long track record of scrutinizing borrowers, and low delinquencies as a result,” Schumer said in a release. “Because deposits have been on the rise as people move their savings from the stock market to savings accounts, they have cash on hand to loan to small businesses." “Credit unions have stood ready to help small businesses, but many are chafing against the arbitrary statutory cap that exists under current law,” said John Magill, CUNA senior vice president of legislative affairs. Magill noted that Schumer has said the bill’s focus “must be on increasing lending to small businesses--the ‘lifeblood of our economy.’” Magill added: “His legislation would do just that, and with no cost to the American taxpayer.” The cap on member business lending has been in place for 10 years and credit unions have a long and safe record of making such loans, Magill said. More than one-quarter of the nation’s 8,147 credit unions offer member business lending, CUNA figures indicate, and those loans grew by 18% last year to $33 billion from $28 billion in 2007. The average loan size is $215,000. "Many credit unions have made it clear they would lend even more money if they could," Magill said. The National Credit Union Administration also has commended Schumer for his plans to draft legislation on MBL caps. “NCUA considers credit union member business lending to be a tangible and important benefit for small businesses, provided that the loans are properly regulated and made in a prudent manner consistent with safety and soundness standards,” said NCUA Chairman Michael Fryzel. “I commend Sen. Schumer for his recognition of the important role credit unions can play in helping members during these difficult economic times.” Member business lending caps were one of credit unions’ many talking points during an annual Hike the Hill event that coincided with the Governmental Affairs Conference in Washington, D.C. last week. During the Hill hikes, representatives from credit unions nationwide expressed to congressional members that they want the caps lifted to help small businesses thrive in a tough economy (News Now Feb. 26).

Regulators urge loan mod participation

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WASHINGTON (3/5/09)—The National Credit Union Administration (NCUA), along with the federal bank and thrift regulators, encouraged all federally regulated financial institutions to participate in the Obama administration’s newly detailed “Making Homes Affordable” loan modification program. The U.S. Treasury Department’s guidelines implement financial incentives for mortgage lenders to modify existing first mortgages and set standard industry practices for modifications. In its announcement yesterday, Treasury said its loan modification program also includes additional incentives for efforts to extinguish second liens on modified loans. Extinguishing second liens, the department said in its release, will make mortgages more affordable, improve loan performance, and help prevent foreclosures. The NCUA, in a joint statement with federal bank and thrift regulators, said the agencies strongly support the administration’s goal of promoting sustainable loan modifications for at-risk homeowners “that appropriately balance the interests of homeowners, servicers, and investors.” “The program also provides incentives for homeowners whose mortgages are modified to remain current on their mortgages after modification. Taken together, these incentives should help responsible homeowners remain in their homes and avoid foreclosure, thereby easing downward pressures on house prices in many parts of the country and averting the costs to families, communities, and the economy from avoidable foreclosures,” the joint statement said. The federal bank, thrift, and credit union regulatory agencies worked closely with Treasury in developing the guidelines, the statement noted. Use the resource link below to see program details.

Examiners to address corporate plan impact on CUs

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ALEXANDRIA, Va. (3/5/09)--The National Credit Union Administration (NCUA) has released a supervisory letter to its examiners designed to addresses the implementation of agency’s Corporate CU Stabilization Program. The letter discusses how the program may impact individual credit unions' earnings and net worth ratios. The same letter was sent to federal credit unions. “We are fully aware of the potential concerns and outcomes from such actions,” said the letter signed by John Kutchey, NCUA’s acting director of the Office of Examination and Insurance. Examiners are directed to consider the impact of the Corporate Stabilization Program when evaluating a credit union’s earnings. “Although the return on average assets will decline over the short-term, most natural person credit unions have the net worth to absorb the charge and retain sufficient levels of capital,” the NCUA supervisory guidance stated. “Examiners are encouraged to fully evaluate the earnings level and not take exception to the amount of earnings resulting from these NCUA Board actions,” it said. The supervisory letter noted the NCUA’s Jan. 28 action to stabilize the corporate credit union system. The NCUA:
* Guaranteed uninsured shares at all corporate credit unions through February 2009, and established a voluntary guarantee program for uninsured shares of all corporate credit unions through Dec. 31, 2010; * Issued a $1 billion capital note to U.S. Central Corporate FCU; and * Declared a premium assessment to be collected in 2009 to restore the NCUSIF equity ratio to 1.30%.
The agency said the impact of these actions on individual credit union financial statements will be twofold. It will cause an impairment of the NCUSIF deposit, requiring a write-down of a portion, presently estimated at 51% percent, of the credit union’s NCUSIF Deposit. It also will necessitate an assessment of a premium equal to 30 basis points of insured shares. The NCUA’s current estimate for the write-down of the NCUSIF deposit and the premium assessment is that it will produce a 62 basis-point reduction in the return on assets for 2009 and reduce the net worth by 56 basis points. Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said Wednesday that CUNA “continues to advocate aggressively, and on a daily basis with NCUA senior staff, for alternatives to mitigate the costs of the program to credit unions.” She noted that NCUA is working on such alternatives, according to its officials. “If the accounting and legal issues can be worked out and an alternative funding approach is adopted by NCUA as CUNA urges, the costs to credit unions could be spread out over time,” Dunn said.

CUNA wants new FTC mortgage powers vetted

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WASHINGTON (3/5/09)—A plan to broaden the Federal Trade Commission’s (FTC) mortgage-lending rulemaking authority should be thoroughly vetted in the congressional hearing process before it’s considered for a vote, said the Credit Union National Association (CUNA) Wednesday. As written, a section of H.R. 1105, the Fiscal Year 2009 Omnibus Appropriations Act, would greatly expand FTC authority over some aspects of mortgage lending. The Senate is currently considering the House-passed bill. CUNA wrote in support of an amendment to be offered by Sen. Michael Crapo (R-Idaho) that would strike the proposed increased FTC authority and increased state attorneys general authority to enforce all types of Truth-in-Lending violations. Currently those violations primarily are addressed by federal agency enforcement actions and in private lawsuits. Under Section 626 of H.R. 1105, state attorneys general would be empowered to consider not only HOEPA violations, but any Truth-in-Lending violations without the current three-year limitation applicable to HOEPA violations. Advocates of the plan say it would allow the FTC to crack down on deceptive sales practices of nonblank lenders. However, opponents saw it could, intentionally or otherwise, interfere with federal financial institutions’ regulatory structure. In the CUNA letter to Crapo supporting his amendment, CUNA President/CEO Dan Mica wrote, “At the very least, Section 626 involves complicated issues that should be subject to hearings before being enacted into law as a rider to an omnibus appropriations bill.” He added that hearings would “bring to light the concerns of those supporting the provision and help to show whether additional enforcement tools are indeed necessary.” Mica said the Federal Reserve Board also should be given an opportunity to describe its plans to propose later in the year changes to its mortgage lending disclosure regulations, which might suffice to address concerns. Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee, has also opposed the insertion of the FTC language into the appropriation bill. Dodd maintains that such a plan should be considered as part of a broader conversation on the overhaul of financial regulation.

Changes to cramdown bill insufficient says CUNA

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WASHINGTON (3/5/09)—The U.S. House of Representatives is expected to complete consideration of H.R. 1106 today, and the Credit Union National Association (CUNA) said that even with modifications made earlier this week, the bill’s mortgage cramdown language will be too broad. However, CUNA Vice President of Legislative Affairs Ryan Donovan said Wednesday that CUNA believes there still will be an opportunity to limit the scope, application, and duration of the legislation when it is considered in the Senate. The House bill, called the Helping Families Save Their Homes Act, contains language permitting judicial modification of mortgages, an action called a cramdown. While CUNA has serious concerns with the loan modification language of the bill, the credit union group strongly supports another provision that makes higher share and deposit insurance ceilings permanent. CUNA’s Donovan said that changes made to the cramdown provisions during House consideration of the bill this week do not go far enough in terms of directing bankruptcy judges to force interest rate modifications before cramming down the mortgage principal. “We had been hopeful that the amendment would include language prohibiting cramdown on modified mortgages that met the conditions of the President's foreclosure prevention plan,” Donovan said, referring to the plan unveiled by the U.S. Treasury Dept. yesterday. “Unfortunately, it appears the revised language only uses the President's plan as a guideline for the courts to follow, not a limitation on what type of loans the courts can cramdown or what the courts can do to those loans. “Therefore, while the revised language is better than what is currently in the bill, we will not be able to support the bill even with this language,” Donovan said. He noted CUNA’s work in the Senate, to narrow the cramdown authority in the bill, is fully in action.

Details to Obama loan mod plan released

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WASHINGTON (3/5/09)—The Obama administration released details Wednesday of its mortgage loan modification program first announced Feb. 18. Credit Union National Association (CUNA) Senior Assistant General Counsel Jeffrey Bloch noted that credit union members are starting to show strong interest in the program. He added credit unions may start to get a lot of member inquiries now that guidance has been released. “Although this program is voluntary, credit unions may now want to start reviewing their loan portfolios to see which loans are candidates for modification. That way they can be prepared for the next step, which is to execute the agreements with the U.S. Treasury Department that are required under this program,” Bloch said. Under the Obama administration’s “Making Home Affordable” program, as many as 7 to 9 million homeowners may get assistance to refinance their mortgages to avoid foreclosure, if they make a good-faith effort to stay current on their mortgage payments. The plan consists of three components: one to help responsible homeowners refinance into affordable mortgages, a comprehensive $75 billion loan modification program, and a plan to support lower mortgage rates by boosting confidence in Fannie Mae and Freddie Mac. Early CUNA analysis shows what the program details means to credit unions:
* Borrowers with existing Freddie Mac and Fannie Mae mortgages may refinance through those institutions even if the borrower has less than 20% equity in their house; * Federally insured credit unions, if they choose to make loan modifications on current or delinquent mortgages in order to get the benefits of the program, may do so according to the Treasury guidelines. Also, the National Credit Union Administration, as well as federal bank and thrift regulators, were asked to "encourage" federally insured institutions to participate in the program (see related Story: Regulators urge loan mod participation); * To be eligible under the Treasury plan, a loan must be for an owner-occupied residence. The loan’s balance must be lower than $729,750 for a single family unit, and the borrower must have a debt to income (DTI) ratio of more than 31%: * By reducing the interest rate on the modified loan, the lending institution must first reduce the borrower’s monthly mortgage payment to no more than 38% of the borrowers monthly income; and * The Treasury will match further reduction in monthly payments—below the 38% DTI ratio --dollar-for-dollar with the lender/investor, down to a 31% front-end DTI ratio for the borrower.
Holders and servicers of the modified mortgages will receive additional cash incentives, and a form of government subsidy on the modified mortgages. Also, eligible loans include those that credit unions hold in portfolio, as well as loans that have been securitized that the credit union services. For loans underlying “private label securitizations,” the guidelines require serivcers to “consider all eligible loans under the program guidelines unless prohibited by the rules of the applicable [pooling and servicing agreement] and/or other investor servicing agreements.” Use the resource links below for program details and to access a government site on financial stability.

Inside Washington (03/04/2009)

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* WASHINGTON (3/5/09)--The Federal Reserve and the Treasury said Tuesday that they will seek legislation to give the Fed the additional tools it will need to manage reserves while providing the funds necessary for the Term Asset-Backed Securities Loan Facility (TALF) and other credit-easing programs. Increasing TALF lending will expand the Fed’s balance sheet, the agencies said. TALF, which has the potential to generate up to $1 trillion of lending for businesses and households, was launched Tuesday ... * WASHINGTON (3/5/09)--Sen. Charles Schumer (D-N.Y.) said Tuesday that he may introduce a bill that would create a financial services regulator for consumer protection. Schumer is working with Sen. Richard Durbin (D-Ill.) on the legislation and indicated that the regulator would review financial products and services, and “watch out” for the average American (American Banker March 4). The agency would be part of regulatory overhaul legislation that Schumer said he hopes to pass by the end of the year ... * WASHINGTON (3/5/09)--More than 100 credit union representatives from Texas attended a meeting Feb. 25 with Sens. Kay Bailey Hutchison (R-Texas) and John Cornyn (R-Texas) on Capitol Hill during
Click to view larger image Click for larger view
an annual Hike the Hill event that coincides with the Credit Union National Association’s Governmental Affairs Conference in Washington, D.C. During the meeting, Hutchison said she opposed the Treasury Blueprint--released last year by former Treasury Secretary Henry Paulson--and said she was in favor of keeping the National Credit Union Administration separate and independent (The Advocate March 4). Cornyn said he favored lifting the member business lending cap for credit unions. Both said they oppose mortgage cramdown legislation, and government regulation or intervention in interchange fee income. Credit union representatives also met with other Texas congressional members during the Hill hike. From left are: Texas Credit Union League President/CEO Dick Ensweiler; Southwest Airlines FCU CEO Charles Rutan; City CU CEO Sharon Moore and Rep. Jeb Hensarling (R-Texas). (Photo provided by the Texas Credit Union League) ...

Mica in IThe HillI Unity needed to battle tough economy

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WASHINGTON (3/5/09)--Trade associations and lobbyists must work together to battle tough economic times, Credit Union National Association President/CEO Dan Mica said in his monthly column in The Hill newspaper. While a challenging economy can trigger fear and panic, the key to overcoming economic strains is to communicate effectively and work cooperatively, Mica said. As the economy worsens and budgets tighten, the strains on association membership only increase. Just as investors panic, so do associations, their leadership and members. A once-unified membership can suddenly point fingers and turn minor issues into major disagreements, he added. He also encouraged association leaders to:
* E-mail and call members frequently; * Provide webinars or video conference calls because many members or clients are cutting or reducing trips to Washington, D.C.; and * Anticipate “big stories” in the mass media instead of waiting for news to break. Tell members and clients that the news is coming their way.
A time of crisis, while challenging, can also be energizing because it pulls everyone together to create meaningful solutions. Quoting a friend of his, Mica said, “Humans are naturally wired so that their intuition does not guide them properly when it comes to making financial decisions. Intuition and fear always drive people to sell and wait until the stock market gets better. They lose the buying opportunity.” To avoid losing the "buying opportunity," Mica said: “It is important to sometimes ignore that human intuition and instead focus on the key facts and what needs to be done to rebuild our country.” Mica’s column, which appears each month in the “K Street Insiders,” is geared toward lobbyists and trade associations in Washington, D.C. To see the column, use the link.

Inside Washington (03/03/2009)

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* WASHINGTON (3/4/09)--The Obama administration’s loan modification plan, which was proposed last month, has redefault risk, financial industry observers say. The proposal would lower monthly mortgage payments to 31% of a borrower’s income but would not take into account the borrower’s debt-to-income ratio (American Banker March 3). Mortgages belonging to borrowers with a high ratio--more than 55%--may not be salvageable, according to Laurie Goodman, senior managing director, Amherst Securities Group. President Barack Obama is expected to release more plan details today. The Credit Union National Association is working toward targeted loan modifications to assist borrowers ... * WASHINGTON (3/4/09)--Sen. Richard Durbin (D-Ill.) said he may limit a mortgage cramdown bill to apply only to subprime loans (American Banker March 3). The most recent version of the bill was revised to make borrowers who could afford to repay their mortgages ineligible for judicial modifications, but it would still give bankruptcy judges the ability to determine which borrowers are eligible for modifications. The House is expected to vote on its version of the mortgage bankruptcy bill as early as Thursday ... * WASHINGTON (3/4/09)--The current approach to determining loan loss provision forces financial institutions to build reserves when it is most difficult, Comptroller of the Currency John Dugan told attendees of a banking conference this week. A more counter-cyclical approach allowing provisions to be made earlier in the credit cycle when times are good should be used, he said. Accounting standards for loan loss provisioning are based on an “incurred loss” model, which allows a bank to make a provision to the reserve only if it can document a loss. “We need to do a better job of telling banks and their auditors the degree to which they are permitted to use non-historical, forward-looking judgmental factors to justify provisions to the loan loss reserve,” he said. Disclosures also must be more robust. “If banks believe they need more flexibility to use their expert judgment to recognize losses in the credit cycle, then that judgment should be able to withstand the glare of investor scrutiny as an important check on the process,” he added ... * WASHINGTON (3/4/09)--The Federal Deposit Insurance Corp. (FDIC) and the Washington State Department of Financial Institutions have executed an information-sharing agreement relating to Money Services Businesses (MSB) supervision. The agreement was developed to limit regulatory redundancies by providing relevant supervisory information for MSB customers with relationships at FDIC-supervised financial institutions ... * WASHINGTON (3/4/09)--When Ben Bernanke, Federal Reserve chairman, told lawmakers Tuesday that they need to act on President Barack Obama’s budget quickly despite the anticipated $1.8 trillion deficit, he was met with anger from senators regarding American International Group’s failure (The New York Times March 3). Sen. Ron Wyden (D-Ore.) asked Bernanke when taxpayers will no longer be “on the hook” for AIG. Bernanke said he was upset by AIG’s failure but defended the Fed’s actions, saying that it had to stabilize the system. Bernanke agreed with senators that AIG-type institutions need to be more strictly regulated, but he said helping AIG was the best option. He also said that although economic indicators show little sign of improvement in the near term, the recently approved $787 billion economic stimulus package should help production and demand in the next two years. More will likely need to be done, though, he said ... * WASHINGTON (3/4/09)--If Fannie Mae and Freddie Mac’s conservatorships are permanent, their independence could be hindered, thus setting a precedent for the future nationalization of large banks, industry observers say. For the past few months, Fannie and Freddie have been ordered by regulators to oversee mortgage modifications, purchase more loans and refinance at-risk borrowers (The New York Times March 3). Regulators have said the actions were needed to stabilize the economy, but financial observers indicate the actions have had adverse effects. On Monday, David Moffett, former Freddie Mac CEO, resigned. Both enterprises are expected to announce record losses this week, and observers say policymakers have been able to influence the mortgage market through the takeover. The government’s involvement could lead to the same problems that caused the current economic crisis, according to Rep. Scott Garrett (R-N.J.), who said bad economic decisions are made when mortgage companies are used politically. Rep. Barney Frank (D-Mass.) said the government is committed to restructuring Fannie and Freddie, noting that some of what they accomplished will be returned to the private sector ...

CTR reporting pamphlet issued by FinCEN

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WASHINGTON (3/4/09)--The Financial Crimes Enforcement Network (FinCEN) has released a pamphlet on currency transaction reporting (CTR) as required by the Bank Secrecy Act. The pamphlet, “Notice to Customers: A CTR Reference Guide,” explains why financial institutions must require identification and personal information for transactions that trigger CTR, defines “structuring”--breaking up currency transactions to avoid reporting them to the government--and provides examples of structured transactions. Federal law requires financial institutions to report currency transactions over $10,000 conducted by or on behalf of one person, and multiple currency transactions that aggregate to be more than $10,000 in one day. The federal law requiring these reports was passed to safeguard the financial industry. To see the pamphlet, use the link.

CUs among TALF eligible

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WASHINGTON (3/4/09)—The U.S. Treasury Department and Federal Reserve Board Tuesday announced the launch of their Term Asset-Backed Securities Loan Facility (TALF), which will make up to $200 billion in three-year loans to eligible institutions. TALF is designed to kick-start securitized lending. Based on the eligibility criteria, credit unions will be among those institutions that can apply for TALF loans. TALF is intended to make credit available to consumers and small businesses at favorable terms by facilitating the issuance of asset-backed securities. Under the program, which will be executed through the Federal Reserve Bank of New York, an institution applying for a loan must use one of the following forms of collateral:
* Small Business Administration (SBA) securities; * Student loan securities; * Auto loan securities; or * Credit card securities.
Credit Union National Association (CUNA) Counsel for Special Projects Michael Edwards said participation, obviously, is subject to federal and state investment laws for credit unions. Edwards noted, “Federal credit unions, in general, can invest in SBA loan pools and Sallie Mae securities—but not generally in auto loan- or credit card-backed securities under National Credit Union Administration rules. “State laws on what types of investments credit unions are allowed to make are sometimes more liberal, but vary quite a bit state to state.” The way the program works, Edwards explained, is that a credit union or other company with eligible asset-backed securities uses those securities as collateral for a non-recourse loan of three-year duration. “The practical affect of the TALF program, because of its use of non-recourse lending, is to add a layer of government guarantee to these assets over and above any existing guarantee,” Edwards said. Since they are non-recourse loans, the TALF program can seize only the securities that back the loan if the loan is not repaid by the end of the three-year term. Edwards noted that the Treasury-Fed documents declare eligibility for “(a)ny U.S. company that owns eligible collateral…provided the company maintains an account relationship with a primary dealer.” He added that institutions interested in TALF loans should note that the securities must be backed by recently originated loans.

FinCEN to allow some SAR shared information

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VIENNA, Va. (3/4/09)—Under a plan unveiled by the Financial Crimes Enforcement Network (FinCEN) Tuesday, depository institutions would be allowed to share suspicious activity information with certain affiliates. FinCen’s proposed changes to its Suspicious Activity Report (SAR) rules are intended to:
* Clarify the scope of a statutory prohibition against the disclosure by a financial institution of a SAR; * Address a statutory prohibition against the disclosure by the government of a SAR; * Clarify that the exclusive standard applicable to the disclosure of a SAR is “to fulfill official duties consistent with Title II of the (Bank Secrecy Act) BSA”; * Modify the safe harbor provision to include changes made by the USA PATRIOT Act; and * Where possible, coordinate minor technical differences that exist between confidentiality, safe harbor, and compliance provisions of FinCEN rulemaking for different industries.
FinCEN said in its proposal document that it expects some of the federal financial institutions regulators to issues contemporaneous rules. It noted that the Office of the Comptroller of the Currency and Office of Thrift Supervision had such plans. FinCEN also said it is simultaneously issuing for notice and comment proposed guidance regarding the sharing of SARs with affiliates. It noted its proposed guidance interprets one of the provisions of its notice of proposed rulemaking and, accordingly, should be read in conjunction with this notice.

NCUA lists corporate guarantee program participants

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WASHINGTON (3/4/09)--The National Credit Union Administration announced Monday the participants in its Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP). The TCCUSGP was approved by the NCUA Board Jan. 28 as a temporary guarantee by the National Credit Union Share Insurance Fund (NCUSIF) of all shares (excluding paid-in-capital and membership capital accounts) at all corporate credit unions. The voluntary guarantee was effective Monday. It expires Dec. 31, 2010. The guarantee provides members who have NCUSIF-insured share accounts at corporates with excess coverage above the NCUSIF insurance limits. The guarantee applies to all share amounts above $250,000, and the NCUSIF insurance coverage applies to all share amounts below $250,000. Four corporates are not participating in the program: Eastern Corporate FCU, Midwest Corporate CU, Iowa Corporate Central CU and First Carolina Corporate CU. Corporates participating in the program are:
* Central Corporate CU; * Constitution Corporate FCU; * Corporate America CU; * Corporate Central CU; * Corporate One FCU; * First Corporate CU; * Georgia Central CU; * Kansas Corporate CU; * Kentucky Corporate FCU; * Louisiana Corporate CU; * Members United Corporate FCU; * Mid-Atlantic Corporate FCU; * Missouri Corporate CU; * Southeast Corporate FCU; * Southwest Corporate FCU; * SunCorp CU; * Treasure State Corporate CU; * Tricorp FCU; * U.S. Central FCU; * VACORP FCU; * Volunteer Corporate CU; * West Virginia Corporate CU; and * Western Corporate Federal CU.

Congress this week Mortgage bankruptcy back

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WASHINGTON (3/3/09)—Business in Washington, legislative and otherwise, may have gotten a little bit of a delayed start Monday morning because of the storm that pelted much of the East Coast, but the U.S. Congress moved forward with its heavy agenda for the week. That agenda in the House could include consideration of the mortgage “cramdown” bill that was yanked from the calendar last week. The Senate Monday, as expected, began consideration of H.R. 1105, the FY 2009 Omnibus Appropriations Act. This legislation was passed by the House last week. It includes language to remove the cap on the National Credit Union Administration’s Central Liquidity Facility lending authority. The House began consideration of several bills under suspension of the rules, which means they were considered noncontroversial in nature. The schedule for Monday may have shifted slightly as a result of the weather event, but Credit Union National Association Vice President of Legislative Affairs Ryan Donovan said it will work itself out because additional suspension bills were expected to be considered today. Come Tuesday or Wednesday, the House may resume consideration of H.R. 1106, the Helping Families Save Their Homes Act, which includes the “cramdown” provision that would allow bankruptcy judges to change terms of existing mortgages. (See related story: CUNA urges Pelosi delay on “cramdowns”) Donovan said it is unclear at this point what form additional amendments to the bill may take, but he does expect changes to be suggested. On the committee level, credit unions may be interested in the following hearings:
* On Tuesday, the Senate Banking Committee will hold a hearing on consumer protections in financial services; * On Wednesday, the House Financial Services Committee subcommittee on financial institutions and consumer credit will hold a hearing entitled, "TARP Oversight: Is TARP working for Main Street?"; * On Thursday, the Senate Banking Committee will hold a hearing on government intervention and implications for future regulation. Federal Reserve Vice Chairman Donald Kohn is expected to testify at this hearing; and * Also on Thursday, the House Financial Services Committee subcommittee on capital markets, insurance and government-sponsored enterprises will hold a hearing on perspectives on systemic risk, focusing on how to improve the ability of government to prevent private sector activities from putting at risk the stability of the U.S. economy.

Analysis of FDIC assessment shows bank cost CUNA

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WASHINGTON (3/3/09)—Analyzing the Federal Deposit Insurance Corp.’s (FDIC) recently announced assessment on banks, the Credit Union National Association (CUNA) notes that bankers will pay premiums of between 32-36 basis points this year, and then pay annually between 12-16 basis points in premiums. Further, CUNA notes the banks face future, additional “special assessments,” as they are being asked to pay this year, should the FDIC require it. The FDIC has given banks seven years to make the payments intended to keep the deposit insurance fund strong. If banks were required to pay the whole amount up front, as credit unions have been asked to do to fund the National Credit Union Administration’s (NCUA) corporate stability plan, the banks’ costs would be significantly higher than that faced by credit unions. CUNA President/CEO Dan Mica said Monday that, still, the premium payment still will not be easy for banks. “So far, the banks’ first year cost is about 40% of the total cost to credit unions. After the first three years, banks will have paid as much as CUs -- and still have another four years of premium payments to go,” Mica said.

Obama fair value task force sought by CUNA

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WASHINGTON (3/3/09)—The Credit Union National Association (CUNA) is advancing a new idea to address problems created by accounting rules on fair value, mark-to-market and the reporting of assets that are "Other Than Temporarily Impaired." In a letter to President Barack Obama, CUNA urged the formation of a Presidential Task Force on these accounting issues as soon as possible. CUNA President/CEO Dan Mica told the president that CUNA applauds his leadership in pursuing workable solutions to the multitude of significant problems facing the nation. “However, Mr. President, a major contributing factor to the nation’s financial crisis is the application of fair value and mark-to-market accounting standards during the current dislocated market,” Mica wrote. He noted that those accounting standards were originally intended to enhance accuracy of public financial information, but under current market conditions are having the opposite effect. Mica said a presidential task force could bring together the accounting profession, government policy makers and representatives of credit unions and others in the financial sector to develop feasible recommendations to enhance financial statement accuracy through more appropriate recognition of the present uncertain market. Mica said that CUNA feels efforts to date to address fair value accounting have been inadequate, including those by the Securities and Exchange Commission under the Bush administration. He also noted that the Financial Accounting Standards Board has announced a review, but that its efforts will not begin until June, following a comment period. Mica urged the formation of a task force as soon as possible.

NCUA staff shuffle

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ALEXANDRIA, Va. (3/3/09)—Effective March 1, National Credit Union Administration (NCUA) Region I Director Mark Treichel was named acting director of the agency’s Office of Corporate Credit Unions. The NCUA said Scott Hunt, who has been heading the department, will remain on detail there. The NCUA also said that, effective March 16, Region 2 Director Jane will be on detail as the Acting Regional Director of Region 5. Larry Blankenberger will be detailed to Region 2 as acting regional director. He is currently association regional director for Region 4.

Gambrell CDFI demand skyrockets

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WASHINGTON (3/3/09)—The economic and political changes witnessed over the past year, and a serious drop in lending originations by some in the mainstream lending community, have caused demand for Community Development Financial Institutions (CDFIs) to “skyrocket,” according to CDFI Fund Director Donna Grambrell. Gambrell, addressing the 2009 CDFI Institute here Monday, said she believed the most “tangible recognition of the good work that the CDFI Industry has done over the past few years” is the inclusion of funding provisions in the new stimulus legislation. That bill, The American Recovery and Reinvestment Act of 2009, carries an additional $100 million to enhance the lending capacity of CDFIs in order to provide distressed communities with affordable financial services and products. The U.S. Treasury Department’s CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. CDFIs are financial intermediaries such as certain credit unions, banks, loan funds, venture capital funds, corporation-based lenders and microenterprise development loan funds. The Credit Union National Association (CUNA) is also working to address the credit gap that is occurring because of current economic conditions. CUNA has petitioned the U.S. Congress and the Obama administration to consider lifting the credit union member business lending cap. CUNA has noted that the 12.25%-of-assets cap has been in place only 10 years and was “arbitrarily set in response to banking lobbyists who wanted to restrain credit unions.” Without that ceiling, CUNA has estimate, credit unions could lend up to $10 billion in new business loans during the first year after the credit union business lending cap was eliminated.

Mica on Fox Let CUs help economy

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WASHINGTON (3/3/09)—Fox Business Network Monday aired a segment called “Betting on Credit Unions,” in which Credit Union National Association (CUNA) President/CEO Dan Mica explained how credit unions could bring billions of dollars into the economy without costing taxpayers a dime.


On the Fox show “Money for Breakfast,” Mica underscored for the national TV audience that the credit union system is in good financial shape with solid capital levels, very low delinquency rates, and with savings and lending volumes increasing even in the troubled economy. The CUNA leader noted that credit unions have money to lend to small businesses and said if Congress would remove an arbitrary cap of 12.25% of assets, credit unions could quickly infuse $10 billion of credit into small businesses. “And it doesn’t cost taxpayers a dime,” Mica reminded. When the FOX host asked if credit unions could get themselves into leveraging problems as banks and other lenders did with subprime mortgages, Mica stated that credit unions “have always been mindful and conservative managers of people money.” He added that the credit union system is well capitalized at over 11%, against a government 7% requirement for being ranked well capitalized. Also participating on the Fox morning show, Scott Arney, CEO of Chicago Patrolmens FCU, answered the question: Why choose a credit union over a bank? Arne said credit unions “know exactly who they serve,” and noted that each member is a credit union owner. That structure, Arne added, translates into the self disciplined business philosophies of credit unions.

CUNA urges Pelosi delay on cramdowns

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WASHINGTON (3/3/09)—Time is needed to analyze the Obama administration’s proposals on mortgage bankruptcy and how they compare with the U.S. Congress’ approach to the issues, and the Credit Union National Association (CUNA) asked the House to delay consideration of its bill. In a letter sent Monday to House Speaker Nancy Pelosi (D-Calif.), CUNA President/CEO Dan Mica wrote, “We respectfully request sufficient time to analyze the President’s proposal and continue to work with proponents of judicial modification.” “Our hope,” Mica added, “is that the President’s proposal with respect to pre-bankruptcy loan modification and the legislative remedy providing for judicial modification can work in concert.” The House bill, which would allow bankruptcy courts to change existing mortgage terms, was postponed for consideration last week. However, it is scheduled to be brought up again in the House this week. In the CUNA letter to Pelosi, Mica noted that credit unions keep nearly three-quarters of all mortgages in portfolio. As a result, credit unions have more flexibility in working with their members, he added. “In fact, in a recent survey of credit union executives, the vast majority of respondents indicated that they are pro-actively offering services aimed at preventing foreclosures including loan payment deferrals, extension of maturities and reduction of interest rates, among other things,” Mica told the leader of the House.

Inside Washington (03/02/2009)

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* WASHINGTON (3/3/09)--The Treasury Department has released guidance to help financial institutions repay Troubled Asset Relief Program (TARP) funds. The guidance, presented in a frequently-asked-questions format, addresses where institutions should send funds and how much must be repaid--25% of the issue price of preferred stock--if institutions want to begin paying back TARP funds now ... * WASHINGTON (3/3/09)--Freddie Mac announced Monday that its CEO, David Moffett, has resigned from the organization. Freddie’s board of directors is working with the Federal Finance Housing Agency (FHFA) to appoint Moffett’s successor and expects to name an interim CEO by March 13. Moffett served as CEO since September and previously served as a senior adviser to the Carlyle Group in Washington, D.C. (The New York Times March 3) ... * WASHINGTON (3/3/09)--The Maine Credit Union League announced that all four members of Maine’s congressional delegation attended the league’s annual breakfast Feb. 24 during the Credit Union National Association’s Governmental Affairs Conference in Washington, D.C. During the breakfast, Sen. Olympia Snowe (R-Maine) thanked credit unions for being a stable source of lending and said she supported raising the cap on member business lending. Sen. Susan Collins (R-Maine) expressed her support of credit unions, saying they play a significant role in moving the economy forward. Rep. Mike Michaud (D-Maine) expressed support for raising lending caps and Rep. Chellie Pingree (D-Maine( said she looks forward to working with credit unions. From left are Snowe and Tucker Cole, president/CEO of Evergreen CU and the chair of the Maine CU League's Governmental Affairs Committee. (Photo provided by the Maine Credit Union League) ... * WASHINGTON (3/3/09)--According to the New Jersey Credit Union League (NJCUL), 22 New Jersey credit unions and 50 credit union leaders attended the Credit Union National Association’s Governmental Affairs Conference in Washington, D.C., last week. New Jersey credit union representatives met with the offices of their entire congressional delegation, with seven congressional members meeting credit unions in person. Some New Jersey representatives also toured Credit Union House. They included, from left, front row: Ray Del Nero, president/CEO of Merck EFCU; Yvette Segarra, manager of special events of NJCUL; Lou Vetere, president/CEO of Garden Savings FCU; Jim Merrill, senior vice president league service corp. of NJCUL; and Christina Olender, president/CEO of Parlin DuPont EFCU. From left, back row: Tom O’Shea, president/CEO of FAA Eastern Region FCU; Leo Ardine, president/CEO of United Teletech Financial FCU; Paul Gentile, president/CEO of NJCUL; Mike Reilly, president/CEO of Central Jersey FCU; and Shawn Gilfedder, president/CEO McGraw-Hill EFCU and league chairman. Photo provided by the New Jersey Credit Union League) ...

CUNA seeks transparency on corporate plan

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WASHINGTON (3/2/09)—The Credit Union National Association (CUNA) has asked the National Credit Union Administration (NCUA) to provide credit unions with more information on how the federal regulator reached its decisions regarding the Corporate Credit Union Stabilization Program. In separate letters to each NCUA board member sent Friday, CUNA also asked for greater transparency on future decisions the agency will have to make regarding the program. Additionally, CUNA President/CEO Dan Mica urged the NCUA to immediately provide to the credit union system upcoming results of a PIMCO report analyzing corporate credit unions’ investments and their potential losses. PIMCO is a leading global investment management firm. Mica noted that that analysis will be significant in determining the agency’s next steps on corporates, including a revised estimate of the cost to the National Credit Union Share Insurance Fund of the corporate credit union deposit guarantee. “In that regard,” wrote Mica, “we urge NCUA to provide a summary of PIMCO’s findings…immediately following the completion of the report, and be completely transparent about the assumptions and modeling relied upon by PIMCO, including how the estimates in the report were developed.” Regarding information on how the NCUA reached its original decisions on the corporate program, CUNA specifically requested:
* The data, assumptions, and analysis it relied upon to decide to implement the Corporate Stabilization Program; * The data, assumptions, and analysis it relied upon to estimate the cost of the corporate deposit guarantee; and * A summary of the PricewaterhouseCoopers report presented to the Board in January.