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Inside Washington (03/31/2010)

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* WASHINGTON (4/1/10)--The Federal Deposit Insurance Corp. Advisory Committee on Economic Inclusion will meet today in Washington, D.C., to discuss safe transaction and savings products and strategic planning. Speakers on the agenda include Michael Barr, assistant secretary for financial institutions, Treasury Department, and Peter Tufano, Sylan C. Coleman professor of financial management, Harvard Business School. Alan Branson, chief operating officer, Enterprise Corp. of the Delta/Hope Community CU, Jackson, Miss., also is slated to speak on strategies for products to underserved and low-to-middle income consumers ... * WASHINGTON (4/1/10)--Lawmakers are debating the role that the Federal Deposit Insurance Corp. (FDIC) should take in resolving any troubled, systemically significant financial firm. A reform bill in the Senate addressing this issue has been criticized for giving FDIC too much leeway in the resolution process, but the Treasury and FDIC say flexibility is necessary to keep a major failure from affecting the economy. However, key Republicans are using the issue as an argument against the bill, sponsored by Senate Banking Committee Chairman Christopher Dodd (D-Conn.). The bill could come up for a vote April 12. Andrew Gray, FDIC spokesman, said the flexibility contained in the Dodd bill reflects current statutory authority in the FDIC’s resolution process. The legislation allows the FDIC to “package and market” a failed institution in a way that maximizes returns, he said (American Banker March 31). Dodd’s bill is not a “bailout” bill, according to a Dodd aide. Republicans have argued that reform legislation needs to prevent “too big to fail” situation and ensure taxpayers are not on the hook for helping failed banks ...

Regulator offers guidance on NFIP lapse

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WASHINGTON (4/1/10)--Following the March 28 expiration of the National Flood Insurance Program (NFIP), the Federal Emergency Management Agency (FEMA) has no authority to issue new flood insurance policies, issue increased coverage on existing policies, or issue renewal policies until the program has been reauthorized by Congress. The Federal Reserve (Fed) this week issued informal guidance to help institutions address certain issues that may arise during the lapse period, and that guidance will apply to this current lapse period and any future lapses of the NFIP. While the Fed guidance applies to its member banks at this time, the National Credit Union Administration may issue guidance soon on how the lapse affects compliance with Section 760 of its own regulations. According to the Fed’s guidance, lenders may continue to make loans that would normally be subject to the flood insurance provisions during an NFIP lapse period. However, lenders are expected to make flood determinations, provide timely and accurate notice to borrowers regarding flood insurance requirements and comply with other parts of the flood insurance regulations. Additionally, lenders are expected to evaluate safety and soundness and legal risks and to manage those risks during the lapse period. Finally, lenders are expected to put procedures in place to ensure that policies are expeditiously obtained after reauthorization for properties that are required to have flood insurance coverage. For the Fed's guidance, use the resource link.

CUNA urges Fed to change Reg E interpretation

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WASHINGTON (4/1/10)--The Credit Union National Association (CUNA) has urged the Federal Reserve to consider changing its interpretation of the recent Regulation E overdraft rules to allow credit unions and others to charge members an overdraft fee in certain, specific situations, even if the member does not opt-in to the program, as otherwise required under these new rules. These specific situations include instances where intervening transactions reduce the account balance after the debit transaction is authorized, but before it is paid, and when merchants request authorization for a transaction in an amount less than the actual total of the purchase, according to CUNA. Card network rules require credit unions and others to pay these transactions, even if they result in an overdraft and regardless of whether the member opts-in. CUNA also recommended that the Fed further clarify any potentially murky sections of its upcoming rules by publishing and maintaining a list of frequently asked questions. These overdraft rules were issued under Regulation E, the Electronic Fund Transfer Act and become effective on July 1, although fees may be charged without the opt-in for current accounts until August 15. The comment letter responds to the Fed's recently proposed clarifications to these rules that prohibit fees for overdrafts in connection with ATM and one-time debit card transactions, unless the consumer agrees or “opts-in” to these fees. The Fed also issued proposed clarifications to the recent changes to Regulation DD, the Truth in Savings Act (TISA), that impose disclosure requirements for overdraft plans, which also becomes effective on July 1. This proposal would clarify provisions with regard to the disclosure of overdraft and returned-payment fees. While Regulation DD does not apply to credit unions, the TISA requires the National Credit Union Administration (NCUA) to issue substantially similar rules. CUNA called on the Fed to allow credit unions and other financial institutions to refer to overdraft and returned-payment fees as “Total Overdraft Fees for Paid Items” instead of “Total Overdraft Fees” on their periodic statements, “which will further distinguish the paid overdraft items from items that are returned unpaid and that are also required to be disclosed.” For the full comment letter, use the resource link.

Gubernatorial candidate in Fla. supports MBLs

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WASHINGTON (4/1/10)--Florida CFO and Democratic candidate for governor Alex Sink this week became the latest public official to endorse increasing the cap on member business lending (MBL) for credit unions. Sink, in a letter to the National Credit Union Administration urged Chairman Debbie Matz to continue the fight for an MBL cap lift. Sink added that 90% of all commercial activity in Florida is related to small businesses. Credit unions “are an important partner in giving small businesses the tools they need to grow jobs” and build the economy, Sink wrote. There are currently 104 House sponsors for Rep. Paul Kanjorski’s (D-Penn.) H.R. 3380, which would increase the cap on member business lending by credit unions to 25% of assets and raise the de minimis threshold for those loans to $250,000. The Credit Union National Association (CUNA) has strongly supported this legislation, saying that the bill would help inject $10 billion into the economy and create over 108,000 new jobs at no cost to taxpayers. League of Southeastern Credit Unions President/CEO Patrick La Pine said that Sink’s support is “timely” for credit unions in Florida. “To have CFO Sink write a letter to the NCUA voicing the support of the state’s elected chief financial officer shows our credit unions that state leaders understand that credit unions are doing their part to lend money, help their members and that they can do more,” he said. CUNA is also engaged in an ongoing dialogue with the U.S. Treasury on the MBL issue. CUNA is also urging credit unions to use the current recess of the U.S. Congress to pursue meetings with lawmakers on their home turf.

Inside Washington (03/30/2010)

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* WASHINGTON (3/31/10)--Credit unions may want to let their business members know that the Small Business Administration (SBA) is warning small businesses to use caution if they are contacted by firms offering to help them apply for funds available through SBA programs. The SBA and Office of Inspector General have received several complaints from businesses about abusive marketing practices, scams, and exorbitant fees charged by firms offering to help them obtain a loan, grant or other federal funds. When using a third party to apply for SBA funding, businesses should remember they can get free assistance from SBA’s district offices and website, SBA said. They also should ask for references and confer with trusted colleagues when selecting service providers, and should establish and document what they are being charged, when they will be charged, what they must do and what services they will receive. The SBA Office of the Inspector General will investigate and respond to all complaints ... * WASHINGTON (3/31/10)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said Monday she supports charging big banks a fee to pay for future takeovers of systemically significant institutions (American Banker March 30). The House passed a financial reform package to create a resolution account of $200 billion. Bair said the account is not a “bailout fund”--but rather a taxpayer protection plan. A prefunded system also would be more “predictable” than assessing banks a fee after the takeover ... * WASHINGTON (3/31/10)--Banking industry representatives argue that creating a consumer protection agency could result in rules that conflict with safety and soundness standards, but some regulators said that such conflicts are rare (American Banker March 30). Brad Sabel, former New York Federal Reserve Bank official, said he did not recall a case where consumer protection regulations posed threats to institutions’ safety and soundness. Comptroller of the Currency John Dugan also noted in a recent speech that such conflicts would be rare. Bankers have argued that the agency could write rules, like forcing broad loan modicfications, that could lead to risky bank practices and more lending to uncreditworthy borrowers. However, reform bills in the House and Senate directs the consumer agency to consult with the primary financial regulator prior to writing a rule, and to allow plenty of time for public comments before finalizing a plan...

Congressional recess key time for grassroots MBL push

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WASHINGTON (3/31/10)--With Congress away from Washington until April 12, the central front for member business lending (MBL) advocacy has shifted to individual districts. Credit union members and representatives alike are participating in grassroots action, and the Credit Union National Association (CUNA)has sought to coordinate these activities with a trove of online resources. Items in the CUNA archive include background information for advocates and members of the press, letters both to and between members of Congress in support of MBLs. In the information that CUNA has shared with credit union backers, CUNA cites not only the safety and sound financial judgment that credit unions represent, but also addresses small businesses and their needs for funding. CUNA also notes the vast experience that many credit unions have regarding business lending, and cites statistics that demonstrate that while bank lending has decreased by 11% over the last year, the amount of business lending done by credit unions has grown by 15% over the same time period. CUNA has estimated that lifting the current member business lending cap of 12.25% to 25% of credit unions’ assets would allow credit unions to extend up to $10 billion in additional business loans to their members, helping them to create 108,000 jobs in the first year following enactment. As CUNA was urging credit unions to advocate for MBLs, a Wall Street Journal article outlined the credit union push for increased lending and the bankers' opposition to it. "The stars are aligned, and now is the perfect time for this to happen," CUNA Senior Vice President of Legislative Affairs John Magill told the Journal. Magill also noted commercial lender opposition to credit unions attempts to “impede” on their loan market share, “especially during the financial turmoil that has crippled more than 200 banks." National Credit Union Administration Board Member Michael Fryzel, speaking at the Illinois Credit Union League’s Legislative Conference, recently encouraged credit union advocates to share their story with their elected representatives.

CDFI Fund to hold conference call for CMF applicants today

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WASHINGTON (3/31/10)--The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund this week announced that it will hold a pair of conference calls for potential applicants to its Capital Magnet Fund (CMF). During the calls, which will take place today at 3 p.m. ET and 3 p.m. ET on Friday, potential applicants will be able to ask questions of CDFI Fund staff about the current round of the Capital Magnet Fund. The CMF is a competitive grant program for CDFIs and other nonprofits to attract private capital for development, preservation, rehabilitation, and purchase of affordable housing for low-income families. It is also meant to stir economic development activities or community service, which in conjunction with affordable housing activities may implement a concerted strategy to stabilize or revitalize a low-income area or underserved rural area. The CDFI Fund is currently searching for qualified application reviewers and recently extended the application deadline for FY 2010 examiners until March 31. For the full CDFI Fund release, use the resource link.

Fed article covers Reg Z escrow provisions

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WASHINGTON (3/31/10)--The Federal Reserve Board has amended Regulation Z, Truth in Lending, to require escrow accounts for all "higher-priced" first-lien mortgages that are secured by a consumer's principal dwelling, and the new escrow rules for these mortgages go into effect Thursday. The amendments, which were issued in 2008, establish new protections for consumers from unfair or deceptive home mortgage lending and advertising practices and were issued under the authority provided by the Home Ownership Equity Protection Act (HOEPA). The rules also impose limits on prepayment penalties and require escrow accounts for taxes and insurance, prohibit certain servicing practices, and prevent certain misleading and deceptive advertisements. Escrow accounts are required for condominium property taxes, but not for insurance if it is paid by the association under a master policy. (See related story: April 1 deadline for higher-priced mortgage loans) According to the Credit Union National Association, loans are classified as "higher-priced" if the annual percentage rate exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by 1.5%. Last year, the Federal Reserve Bank of Philadelphia released an article entitled "Escrow Accounting Rules: Are You in Compliance?" The article, which may be helpful for credit unions, provides information on escrow accounting methods, preparing escrow disclosure statements, and ensuring that annual analyses result in correct balances. For the full article, use the resource link.

Inside Washington (03/29/2010)

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* WASHINGTON (3/30/10)--The authority of the National Flood Insurance Program (NFIP) lapsed as of March 29. Unlike the short-term extensions that the U.S. Congress has been providing to the program for a number of months, it failed to take any action before going on recess until April 12. Until Congress restores NFIP authority, the program will not be able to issue new flood insurance policies, increase coverage on existing policies, or issue renewal policies. The Federal Emergency Management Agency (FEMA), which runs the NFIP, issued a memorandum last October on “Recommendations/Guidance for Possible NFIP Authority Lapse and Hiatus” in anticipation that a lapse in the flood insurance program might occur. FEMA says that agents should look to its October memo to determine the ramifications of the “hiatus.” This is not the first time that the NFIP authority has lapsed due to congressional inaction in recent years, and as the memo notes, Congress can retroactively extend NFIP authority. As reported by News Now Monday, Sen. Harry Reid (D-Nev.) cancelled a weekend cloture vote on H.R. 4851, the bill that would have extended authorization for the NFIP and federal unemployment insurance, as well as continue federal subsidies to COBRA health insurance recipients through April 30. Funding for the NFIP, unemployment insurance, and COBRA will lapse until Congress reconvenes on April 12. A vote on H.R. 4851 is now scheduled for April 12… * WASHINGTON (3/30/10)—Recess appointments announced by the White House on Saturday included Jeffrey Goldstein as Under Secretary for Domestic Finance and Michael Mundaca as Assistant Secretary for Tax Policy. The Goldstein appointment is of interest to credit unions because it is his department at Treasury within which many issues related to credit unions are discussed. In fact, Goldstein was in attendance prior to his appointment at a meeting between Assistant Treasury Secretary for Financial Institutions Michael Barr and the Credit Union National Association. Goldstein is Barr’s new boss. The new under secretary has served as manageing director of Hellman & Friedman LLC, a private equity investment firm with offices in San Francisco, New York and London, as well as managing director and CFO at the World Bank from 1999 to 2004. Mundaca, Treasury’s new tax assistant secretary, currently is senior policy adviser for the Treasury's Office of Tax Policy and the Acting Assistant Secretary for Tax Policy. He served at the Treasury during the Clinton administration and returned to the Treasury Department in 2007, as the Deputy Assistant Secretary for International Tax Affairs, where he served as Managing Director and CFO. The positions must be confirmed by the U.S> Senate... * WASHINGTON (3/30/10)—Although the Obama administration's latest foreclosure prevention plan, announced Friday, is getting high marks from many observers, but some consumer groups think the plan must become mandatory to have a significant impact on loan modifications. Under the initiative the U.S. Treasury Department’s Home Affordable Mortgage Program (HAMP) will push for writedown of a mortgage’s principal amount rather than reductions in interest rates and payments. Without a shift to make the new approach mandatory for servicers, some expect it will help only borrowers on the margins. However, the U.S. Treasury Department says that without new legislation, it does not have statutory authority to mandate participation. Still some said the new focus on unemployed borrowers is a good move toward improving the HAMP program…

Only flexible-rate home equity terms may be changed writes NCUA

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ALEXANDRIA, Va. (3/30/10)--While federal credit unions usually cannot adjust the terms of home equity plans, Regulation Z “does not prohibit rate changes that are set forth in a home equity agreement, such as stepped-rate or preferred rate plans,” the National Credit Union Administration (NCUA) said in a recently released legal opinion. According to NCUA Associate General Counsel Sheila Albin, federal credit unions “cannot change the annual percentage rate (APR) on a home equity plan unless the plan has a variable rate.” Federal credit unions “may add a floor rate to an existing home equity loan if the original agreement disclosed the possibility of adding the rate and any associated triggering event or the borrower agrees to the addition in writing,” she added. Reg Z “specifically prohibits FCUs from changing, by contract or otherwise, the annual percentage rates (APR) on home equity plans, unless the change is based on a publicly available index that is not under the [credit union’s] control.” For the full opinion, use the resource link.

Treasury extends CDCI app deadline to April 30

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ALEXANDRIA, Va. (3/30/10)--The U.S. Treasury on Monday extended the deadline for funding applications under its Community Development Capital Initiative (CDCI) until April 30. Eligibility for the CDCI program, which allows low-income credit unions (LICUs) that are certified as Community Development Financial Institutions (CDFIs) to obtain up to 3.5% of their assets as secondary capital, is determined by the National Credit Union Administration (NCUA) and the Treasury. According to an NCUA release, secondary capital plans are also required to take part in the CDCI program, and these plans must “meet the requirements per NCUA’s Rules and Regulations 701.34 (b)(1).” Secondary capital plans must be submitted by May 10. The National Federation of Community Development Credit Unions' recently opted to make $1 million in secondary capital available as matching funds for member community development credit unions (CDCUs) that might not be immediately eligible for CDCI investments in a bid to help more CDCUs qualify for CDCI funds.

Comment due May 28 on NCUA changes for merger director rules

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WASHINGTON (3/30/10)--The National Credit Union Administration (NCUA) on Monday published for public comment a series of proposed changes to rules that address the fiduciary duties of federal credit union directors, credit union-to-bank mergers, and charter and insurance conversions. Comment on the proposed rule changes, which would require federal credit union directors to "carry out their duties in good faith, and have, or gain, an understanding of basic finance and accounting practices," must be received by May 28. The NCUA proposal, which was approved by the Board at its March 18 open meeting, would also prohibit federal credit unions from "indemnifying its officials or employees for liability associated with misconduct that is grossly negligent, reckless, or willful in connection with a decision that affects the fundamental rights of members." The NCUA proposal also covers changes to its current standards governing "the information that credit unions seeking to convert must disclose to members," including the approval of conversion proposals, the certification of member votes on conversion proposals, and guidelines on how those votes must be completed. The Credit Union National Association's (CUNA) Mergers Task Force, chaired by Paul Mercer, will be reviewing the proposal for CUNA. For the full release, as published in the Federal Register, use the resource link.

CUs voice heard through CUNA Dahlstrom tells Spokane paper

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WASHINGTON (3/30/10)--Speaking in an interview published in the March 26 edition of the Spokane Journal of Business, Spokane Teachers CU President/CEO Steve Dahlstrom described the Credit Union National Association's (CUNA’s) role as a voice for credit unions, particularly the small cooperatives that comprise the “bulk” of CUNA’s membership. Dahlstrom recently began a term on the CUNA board of directors. One significant area where CUNA’s work has stood out is the ongoing battle over interchange fees, and, according to Dahlstrom, CUNA has the ability to oppose large retailers in Congress, a task that credit unions themselves could not take on. CUNA also provides much needed feedback to the National Credit Union Administration (NCUA) and other financial regulators and “helps its members interpret and implement regulations” and “ensure compliance,” Dahlstrom said. Dahlstrom in the interview also cited CUNA’s role in ensuring that credit unions “could spread out over several years the special assessments they're required to pay to restore to fiscal health the National Credit Union Insurance Fund, rather than having to make far bigger single lump payments, as was originally mulled by members of Congress.” Other focal points for CUNA and, now, for Dahlstrom, include potential changes to member business lending rules for credit unions, new credit card rules, and high-level changes to the way that corporate credit unions are structured and governed. Dahlstrom also gave his own opinion as a credit union leader in the interview, calling on the NCUA to simplify required account disclosures “so people can understand what it is they are reading more easily.” "We've erred on the side of disclosure to the point where it's hard to do what you want to do," he added. Dahlstrom's term on the board will run through CUNA's 2012 Annual General Meeting.

Inside Washington (03/26/2010)

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* ALEXANDRIA, Va. (3/29/10)—In a legal opinion letter posted late last week, the National Credit Union Administration (NCUA) wrote that Membership Capital Shares (MCS) maintained by a member of a corporate credit union are available during notice period to cover losses in excess of retained earnings and paid-in capital (PIC) after the owner of the MCS has notified the corporate of intent to withdraw the MCS. The letter, an extension of a 2009 opinion, in essence says a credit union can't protect its MCS investment from write-downs by announcing its intention to leave a corporate credit union’s membership since the MCS can still be impaired by losses during a waiting period. The new opinion came in response to a question from Richard Schulman, an attorney with Esp, Kreuzer, Cores & McLaughlin, LLP, Wheaton, Ill. The question, according to the NCUA letter, was framed within the context of adjustable balance MCS accounts, which are specifically permissible under NCUA regulations. 12 C.F.R. §704.3(b)(8). The letter, signed by John Ianno, NCUA associate general counsel, and dated Feb. 25, said in part, “In accordance with the rule, a corporate may establish and offer its members the choice of investing in an MCS account with a feature calling for adjustments to or from the balance based on fluctuations in an external index. Adjustments may be made at six-month intervals or longer, but not more frequently than once every six months. If the corporate selects an index other than the asset size of its member, it “must address the measure’s permanency characteristics in its capital plan. 12 C.F.R. §704.3(b)(8)(ii).” Use the link at the beginning of the brief to read more… * WASHINGTON (3/29/10)—The U.S. Department of the Treasury, in partnership with The White House Council on Women and Girls, is holding a symposium today to recognize the contributions of women in the fields of public and private finance, and to discuss effective ways to foster success in the future for women working in those sectors. The symposium will bring together senior Obama administration officials, private sector leaders, university presidents and women entering the field of finance. To reach a broader audience, the symposium will be available to “students around the country” via webcast. Such participants may gain some insights as panelists share stories of how each achieved success in the world of finance and answer questions from students interested in being the next generation of women leaders. Throughout today’s event, questions can be submitted live on Twitter by using the "#WIF" hash tag or by e-mailing WomenInFinance@do.treas.gov …

CUNA strongly backs CU exemption from FTC loan rescue rule

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WASHINGTON (3/29/10)--The Credit Union National Association (CUNA) in comments to the Federal Trade Commission (FTC) spoke in support of the FTC’s proposal to “protect consumers from unscrupulous entities who take advantage of consumers by offering loan modification and foreclosure rescue services that impose high costs without providing any benefits.” CUNA also said that it supports portions of the FTC’s proposed rule that would “exempt those that hold or service a loan secured by a home” from the burdens imposed by the new FTC protections. Currently, the FTC proposal exempts state-chartered credit unions, and federally chartered credit unions are not regulated by the FTC. The FTC proposal would restrict or prohibit practices that take advantage of vulnerable homeowners who seek loan modification or foreclosure rescue services. CUNA “strongly” encouraged the FTC to “retain” the state credit union exemption in the final rule to help ensure that “state-chartered credit unions are not needlessly subjected to new regulatory burdens that will add to their compliance costs.” “Credit unions have not been the source of problems for home loan borrowers and do not need additional rules to ensure they act in their members’ best interests,” CUNA added. For the full comment letter, use the resource link.

Matz urges CUs on Treasurys loan mod initiatives

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WASHINGTON (3/29/10)—National Credit Union Administration (NCUA) Chairman Debbie Matz on Friday urged credit unions "to work closely with any of their members who find their finances under pressure...now that an enhanced array of federal initiatives is available to mortgage lenders helping homeowners stay in their homes." "Credit unions should evaluate every possible remedy to help responsible borrowers–-especially those who are victims of the real estate market crash and those who are unemployed,” Matz added. Matz made her remarks in response to the U.S. Treasury announcement Friday on adjustments to its Home Affordable Modification Program (HAMP) and Federal Housing Administration (FHA) programs that will “expand flexibility for mortgage servicers and originators to assist more unemployed homeowners.” The changes, Treasury said, “will help the administration meet its goal of stabilizing housing markets by offering a second chance to up to three to four million struggling homeowners through the end of 2012.” The changes, according to the Treasury, will increase available assistance for unemployed homeowners that are searching for employment, provide mortgage servicers and lenders “more flexibility to reduce mortgage principal for underwater borrowers,” increase the incentives that are provided to servicers that take part in the Administration’s Making Home Affordable (MHA) program. The changes will also help ease “transitions to more sustainable housing for borrowers who do not succeed within the HAMP program” and will expand “opportunities to refinance into affordable FHA loans for underwater borrowers. Specifically, the Treasury said that unemployed borrowers that meet certain criteria “will have an opportunity to have their mortgage payments temporarily reduced to an affordable level for a minimum of three months, and up to six months for some borrowers, while they look for a new job.” The FHA refinancing programs, which are made available to borrowers who owe more than their home is worth, will be implemented “as quickly as possible” and the Treasury will soon provide greater details on this program. While some of the proposed improvements will be available sooner, the Treasury said it expects most if not all of the HAMP and FHA improvements to be fully implemented by the fall. The costs of these improvements will be borne by both private industry and the government, with the government portion of the cost being paid by a $50 billion allocation for housing programs under the Troubled Asset Relief Program (TARP), the Treasury said. The Credit Union National Association will be working with Treasury and NCUA and seeking more details of how the program will be implemented and will be provding more information to leagues and credit unions next week. For the full Treasury release, use the resource link.

Reg reform discussion to get a jumpstart after recess

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WASHINGTON (3/29/10)--While Sen. Chris Dodd (D-Conn.) formally introduced his financial regulatory reform package during a Senate Banking Committee hearing held early last week, the expected weeklong debate on the provisions of the bill never fully materialized, and the bill simply passed out of committee on a party-line vote. Dodd and ranking committee minority member Richard Shelby (R-Ala.) were the only two to speak during the hearing, and Shelby indicated that bipartisan dialogue would continue after the committee vote and before the package is taken up by the full Senate. The Credit Union National Association (CUNA) has also been making its own views on the regulatory reform package known, encouraging Dodd to consider adding language that gives his proposed Bureau of Consumer Financial Protection (BCFP) "the authority to delegate examination authority for large credit unions to the prudential regulator" rather than limiting the National Credit Union Administration's (NCUA) authority to credit unions with under $10 billion in assets. CUNA also promoted "permitting the BCFP to delegate examination authority for large credit unions to NCUA," exempting credit unions from portions of the bill that address remittances, and removing language that would amend the Federal Credit Union Act and, in fact, may “limit the ability of federal credit unions to offer other types of international money transfers as well as the ability of the NCUA to regulate international money transfers." Dodd late last week said he would restart dialogue on his regulatory reform bill next month once Congress's spring recess has been completed on April 12. The Senate Committee on Agriculture will also hold its own markup on derivatives legislation in mid-April. Additionally, both Dodd and House Financial Services Committee Chairman Barney Frank (D-Mass.) recently predicted that comprehensive regulatory reform would be signed by President Obama by Memorial Day.

Student-loan provisions gets House Senate okay

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WASHINGTON (3/29/10)--The House again passed comprehensive health care legislation late last week, and while some small portions of the original House bill have been removed, unrelated portions of the bill that revamped federal student loan programs and eliminated fees paid to private banks to act as intermediaries in student lending remained in the final document. As was reported earlier this week in News Now, the bill does not address private student lending. Rather, the bill redirects funds that would have been paid to private lenders that executed federally funded student loans into a federal direct lending program. Specifically, $61 billion in funds will be used to fund need-based Pell grants for prospective college students. The bill is expected to be signed into law on Tuesday. In other action that took place before the upcoming spring recess, Sen. Harry Reid (D-Nev.) cancelled a weekend cloture vote on H.R. 4851. That legislation would extend authorization for the National Flood Insurance Program (NFIP) and federal unemployment insurance and continue federal subsidies to COBRA health insurance recipients through April 30. Funding for the NFIP, unemployment insurance, and COBRA will lapse until Congress reconvenes on April 12. A vote on H.R. 4851 is now scheduled for that same date. H.R. 4938, which would permit the use of $40 million in previously appropriated funds to extend, among other items, federal government’s Small Business Loan Guarantee Program until April 30, has passed both chambers and is currently awaiting President Obama’s signature.

Geithner asks defense groups to support CFPA

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WASHINGTON (3/25/10)—The U.S. Treasury Department gathered military advocacy groups for a roundtable discussion Thursday to focus on consumer financial protections and how the Obama administration believes a new Consumer Financial Protection Agency would benefit military families. CUNA Deputy General Counsel Mary Dunn attended on behalf of Defense Credit Union Council CEO Arty Arteaga and CUNA. The meeting outlined how military families are often a target for unscrupulous lenders, such as some payday lenders that keep families trapped in an endless cycle of debt. Treasury Secretary Geithner took the opportunity of the meeting to urge support for an independent CFPA ; the House passed regulatory reform legislation calls for separate agency, while the Senate bill would house the agency within the Federal Reserve. He said military families, so often hard hit by abusive practices, deserve a consumer agency. A separate CFPA has drawn opposition from banking and other financial groups, but Geithner said he believes the administration is making headway in garnering support. CUNA has emphasized the need for CUs to continue to be examined by their prudential regulator if a new consumer protection body is created.

Inside Washington (03/25/2010)

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* WASHINGTON (3/25/10)—The Credit Union National Association issued a final rule analysis on a new rule from the Financial Crimes Enforcement Network (FinCEN) amending the Bank Secrecy Act's Information Sharing rules. The rule expands access to the information sharing procedure by allowing certain foreign law enforcement agencies, as well as state and local law enforcement agencies to utilize the system. The rule also clarifies that FinCEN may utilize the information sharing process on its own behalf and on behalf of other "appropriate Treasury components”… * WASHINGTON (3/26/10)—Speculation in Washington, D.C. is that recent success in the fight on Capitol Hill to pass health-care reform may give a boost to the chances of the Obama administration’s drive to pass financial regulatory reform. (American Banker March 25) Lawmakers from parties see momentum building behind the reform bill that has all but stalled out a number of times in the last months. The Senate Banking Committee approved the reform bill 13-10 late Monday and did so without a single favorable vote from Republican members. However, analyst are surmising that Republicans can’t treat this reform package as they did the health-care bill; opposing the financial regulatory reform bill could well be seen as taking the side of Wall Street rather than Main Street… * ALEXANDRIA, Va. (3/25/10)--National Credit Union Administration
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board member Michael Fryzel commended Teachers CU, of South Bend, Ind., for its focus on direct member contact through a variety of credit union-sponsored events, and on offering “outstanding financial service.” Fryzel noted, “More than 75 years ago a small group of teachers decided they wanted to help those in need of credit. They pooled their funds and began a credit union rich in both traditional and non-traditional member services.” The result of that effort is now Indiana’s largest credit unions with more than $2 billion in assets. Pictured (left to right): Teacher CU Senior Vice President of Affiliated Businesses Greg Danner, Senior Vice President of Sales & Marketing Paul Marsh, President/CEO Rick Rice, Fryzel; Teacher CU Board Chairman David Sage, Senior Vice President/CFO Amy Sink, Senior Vice President/Chief Counsel Val Miller, and Executive Vice President/COORick Nettesheim. (NCUA Photo)…

High Court Some student loans dischargeable in bankruptcy

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WASHINGTON (3/26/10)--Credit unions should “be vigilant” if members that hold student loans declare chapter 13 bankruptcy. Following a March 23 Supreme Court ruling, student loan debtors could no longer need to prove “undue hardship” in a court of law to be relieved of interest associated with their student loans debts if the credit union or other student loan creditor fails to object to the discharge of student loan interest proposed in a debtor's Chapter 13 plan. Under current law, student loans are not dischargeable unless the debtor can prove “undue hardship,” and the rules for what constitutes”undue hardship" are extremely rigid. While the Supreme Court's ruling does not effect the "undue hardship" requirement per se, the Court held that the Bankruptcy Court only needs to make the "undue hardship" determination if student loan creditor requests a hearing on that issue. In the case, United Student Aid Funds, Inc. v. Espinosa, the Supreme Court decided that the U.S. Department of Education could not seek to collect student loan interest in 2000. The debtor had completed his Chapter 13 plan in 1997, under which he paid off the principle of his student loans, and the Bankruptcy Court had declared the loans' accrued interest discharged at that time. The court held that the creditor's opportunity to object to the discharge of the debtor's student loan interest, in this case, took place in 1994 when, according to the Court, the student loan creditor “received notice” of the defendant’s bankruptcy plan. That plan, which “proposed repaying the principal on his student loan debt and discharging the interest once the principal was repaid,” was forwarded to the lender by the Bankruptcy Court, and the lender “did not object to the plan or to the debtor's failure to initiate" a hearing regarding whether repayment of the interest would constitute an "undue burden." Specifically, the lender did not respond to the plan. Overall, CUNA’s Michael Edwards said, the ruling means that credit unions should more closely scrutinize the bankruptcy plans filed by members with student loans to see if the debtor is proposing to discharge student loan principle or interest and, if so, object to the plan and request a hearing on the "undue hardship" issue. This ruling would potentially affect future bankruptcy cases involving federal- and state-chartered credit unions, as well as other financial institutions which make student loans. For the full Supreme Court ruling, use the resource link.

Bernanke Fed will exit markets when ready

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WASHINGTON (3/26/10)--Speaking before the House Financial Services Committee on Thursday, Federal Reserve Chairman Ben Bernanke said that while “the economy continues to require the support of accommodative monetary policies,” the Fed has been working to ensure that it has “the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus.” “We have full confidence that, when the time comes, we will be ready to do so,” he added. The Fed has terminated or is phasing out many of the “special lending facilities” that were established to “stabilize the financial system and encourage the resumption of private credit flows to American families and businesses” in the wake of the recent financial market destabilization. The closure of the Feds “emergency lending facilities” and many “adjustments to the terms of discount window loans” are in response to “the improving conditions in financial markets,” Bernanke said, and “they are not expected to lead to tighter financial conditions for households and businesses and hence do not constitute a tightening of monetary policy, nor should they be interpreted as signaling any change in the outlook for monetary policy.” However, Bernanke added, the Fed will “tighten” some “monetary conditions to prevent the development of inflationary pressures.” For Bernanke’s full testimony, use the resource link.

HAMP to modify up to 4M mortgages by 2012

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WASHINGTON (3/26/10)--Testifying before a House Committee on Oversight and Government Reform hearing on foreclosure prevention, Treasury Assistant Secretary for Financial Stability Herbert Allison said that the Administration’s Home Affordable Modification Program (HAMP) is on course to modify as many as 4 million mortgages by 2012. The program aims to help struggling homeowners by modifying their mortgages. According to numbers released last year, a total of 17 credit unions have taken part in the HAMP program. Seven of those credit unions are located in foreclosure-ravaged California. A total of 822,000 homeowners had taken part in the trial phase of the HAMP program as of February, and 32% of those homeowners have been approved for permanent loan modifications, according to Allison. Going forward, Allison said that the Treasury would issue regular reports on compliance activities related to HAMP. Allison also said that the implementation of HAMP “must continue to be improved” and that “program enhancements must continue” for HAMP to “reach its potential.” The Treasury is reportedly considering altering HAMP by imposing a moratorium on certain types of foreclosures, by forcing lenders to delay foreclosures by one month if they denied a borrower a mortgage modification and by considering allowing trial modifications to be extended beyond the current deadline.

CUNA WOCCU express concern over remittance provision

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WASHINGTON (3/26/10)--The definition of remittances in the recently introduced Senate financial regulatory reform package is “overly broad” and “would essentially make it impossible for credit unions to continue to offer any form of international electronic fund transfer services to their members, the Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) said in a March 25 letter to Senate Banking Committee Chair Chris Dodd (D-Conn.) The language will affect any form of international electronic fund transfer services credit unions offer their members, whether or not those transactions are truly “remittances” sent by an immigrant home to his or her family, CUNA added. CUNA encouraged Dodd to consider exempting credit unions or, more broadly, exempting transactions that are routed through programs administered by the major central banks, including Fedwire, Fed Global ACH, NACHA ACH, and the SWIFT system. Allowing these provisions to apply to credit unions “may have the effect of driving credit unions and small banks out of the international electronic funds transfer business, handing an oligopoly to the big banks, MoneyGram, Western Union, and other money transfer businesses,” CUNA said. About 109 U.S. credit unions participate in WOCCU's IRNet, a remittance service operated by WOCCU Services Group. The service, which works primarily with Hispanic clients, transmits remittances to eight countries and has taken part in over $2.9 billion in total transactions since its inception. Overall, $307 billion in remittances were sent from the U.S. to other nations in 2008, according to WOCCU estimates. Credit unions also participate in wire transfer services that are not specifically remittances, and CUNA in the letter said that these types of transactions will also be affected, as the language in Dodd’s bill will still cover these types of transactions “in a way that will lead most, if not all, U.S. credit unions to cease providing any form of international electronic funds transfer service to its members.” More specifically, CUNA noted that portions of the new regulations that affect remittances conflict with sections of the Uniform Commercial Code, a law adopted by all states concerning electronic funds transfers performed by banks and credit unions. The bill would also “increase costs for remittances, increase liability for remittance transfer providers and slow down the remittance process,” CUNA added. CUNA has also asked Dodd to remove portions of the bill that would amend the Federal Credit Union Act, as these amendments would simply reiterate current Federal credit union authority, “and may actually limit the ability of Federal credit unions to offer other types of international money transfers as well as the ability of the National Credit Union Administration to regulate international money transfers.” For the full CUNA letter, use the resource link.

House approves extending biz loan guarantee

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WASHINGTON (3/25/10)— The House voted 239-175 in favor of H.R. 4899, the Disaster Relief and Summer Jobs Act of 2010, yesterday afternoon. The bill, in part, extends the Stimulus Act's small business loan guarantees and fee reductions until the end of April. The guarantee and fee provisions are due to expire at the end of March. For the extension to take place, the Senate and House must pass identical bills, the result fo which would then have to be signed into law by the president. The House vote Wednesday follows by three weeks President Obama’s signing of a law to extend funding for the National Flood Insurance Program, certain other Stimulus Act small business loan guarantee programs, federal unemployment insurance, COBRA health insurance benefits, and other select federal programs. Most of those extensions, however, expire at the end of this month.

Gift card rules effective Aug. 22

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WASHINGTON (3/25/10)—Final rules to restrict the fees and expiration dates that may apply to gift cards, and to require that gift-card terms and conditions be clearly stated, become effective Aug. 22, according a Federal Reserve Board announcement. The rules, which implement the gift-card provisions if the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, are issued under the Fed’s Regulation E. They share their Aug. 22 effective date with other CARD Act rules, those recently proposed under Regulation Z that address penalty fees and the process to review rate increases every six months. These are the final two sets of rules expected to implement the CARD Act. The Fed’s CARD Act rules apply to credit unions and all other financial institutions. The final gift-card rules prohibit dormancy, inactivity, and service fees on gift cards unless:
* The consumer has not used the certificate or card for at least one year; * No more than one such fee is charged per month; and * The consumer is given clear and conspicuous disclosures about the fees.
An expiration date for funds underlying gift cards must be at least five years after the date the card was issued, or five years after the last date the card was re-loaded. The rules cover network-branded gift cards, which are redeemable at any merchant that accepts the card brand , as well as retail gift cards that can be used to buy goods or services at a single merchant or affiliated group of merchants. Use the resource links for more information.

Mica on K Street Does ban deplete a resource

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WASHINGTON (3/25/10)—In his most recent ‘K Street Insiders’ column in The Hill, Credit Union National Association (CUNA) President/CEO ponders some tough questions about lobbying and new restrictions that surround lobbyists’ involvement in other efforts. Mica comes down firmly in favor of lobbying reform and full transparency in the lobbying community. But he shares concern that a ban to keep lobbyists from serving on certain government boards and committees “deprives the government of a strong resource.” “There are many on K Street who want to continue serving and have deep expertise they want to share, which does not conflict with their lobbying roles,” Mica wrote. The new rules also ban anyone who has been a registered lobbyist in the last two years from serving the administration. They also prohibit an individual who leaves White House service from lobbying the administration for the duration of the Obama presidency. Mica said the new restrictions have brought some lobbyists to the question—one he is asked by others--of whether they should remain registered as such. He cited reports that since 2008 about 3,000 individuals have deregistered as lobbyists, with 1,700 of those occurring since April 2009. While Mica understands how some might come to this point, he says the bottom line is to do what is in the best interests of your trade association members or lobbying clients and to follow the new rules very closely to comply with the new law. The CUNA leader is among a select group of prominent Washington advocates tapped to write The Hill newspaper's regular column on and about lobbying.

Small CU Workshops continue this week

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ALEXANDRIA, Va. (3/25/10)—The 2010 Small Credit Union Initiative Workshops and Roundtables continue as the National Credit Union Administration (NCUA) hosts sessions in Philadelphia and Omaha, Neb., tomorrow. The agenda for each workshop, like the one in Philadelphia this week, offers sessions on topics such as regional issues facing credit unions, how to positively impact the bottomline, and regulatory hot topics. The workshops also offer an outreach panel featuring community organizations, which explores resources and partnerships for credit unions. That presentation is followed on the agenda by two breakout sessions, which focus on:
* Allowance for Loan Lease Losses (ALLL): guidance on ensuring that a credit union’s ALLL methodology is adequate in today’s economic environment; and * Alternatives to Predatory Lending: strategies to combat the influence of predatory lenders and to help with members’ financial education while learning new methods to successfully address forms of abusive lending.
The Roundtables, generally held in smaller metropolitan areas than the workshops, offer the same topical agenda but not usually the outreach panel or breakout sessions. The NCUA’s first workshop this year was held March 6 in Phoenix, Ariz., and 66 credit union representatives attended. At the second, on March 11 in Richmond, Va., there were 77 workshop registrants. After this week’s session, there are 25 remaining workshops and roundtable set up through November of this year. The sessions are organized under the auspices of the NCUA’s Small Credit Union Initiative Workshops. That office was established by the agency in 2004 at the urging of then-board member, now-chairman, Debbie Matz. Use the resource link below to access schedules, agendas, and registration information.

Inside Washington (03/24/2010)

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* ALEXANDRIA, Va. (3/25/10)--The National Credit Union Administration is now on Twitter. You can sign up to read agency “tweets,” or short postings, at www.twitter.com. After logging on, select to follow “TheNCUA” … * WASHINGTON (3/25/10)--The U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund has decided to take a little more time in its search for qualified individuals to review applications received under the FY 2010 funding round of the new Capital Magnet Fund (CMF). The CMF is a competitive grant program for CDFIs and other nonprofits to attract private capital for development, preservation, rehabilitation, and purchase of affordable housing for low-income families. It is also meant to stir economic development activities or community service, which in conjunction with affordable housing activities may implement a concerted strategy to stabilize or revitalize a low-income area or underserved rural area. The CDFI Fund extended to March 31 its deadline for potential reviewers to submit their resume for consideration. Read more here ... * WASHINGTON (3/25/10)—April 13 is the new date for a Senate Permanent Subcommittee on Investigations hearing to examine the causes of the nation’s financial crisis, a session that will focus particularly on what went wrong at Washington Mutual (WaMu). The hearing, "Wall Street and the Financial Crisis: The Role of High Risk Home Loans," was originally set for today. It is meant to target the WaMu failure as a case study of risky loans and their outcome. Former WaMu employees, including ex-president, chief executive and chairman Kerry Killinger, are expected to testify (American Banker March 24) … * WASHINGTON (3/25/10)—A popular USDA guarantee program is pushing up against its allocation limits and word that the agency could run out of money for its Guaranteed Rural Housing Program is spreading. (American Bnaker March 24). Interest in and use of the housing guarantee program has increased sharply over the past two years and if it depletes allocate funds, hundreds of lenders and secondary market buyers could feel an impact. If the program runs out of money, either the U.S. Congress could increase its allocation, or lenders could decide to increase upfront premiums on the loans, which would increase the pool of funds available for guarantees. The upfront premium now is 2% ...

Geithner Administration proposal on GSE reform out in April

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WASHINGTON (3/24/10)--U.S. Treasury Secretary Tim Geithner on Tuesday called for the government to “begin the process of fundamental reassessment and reform” of Fannie Mae and Freddie Mac. “A broad reform process of the housing finance system must be undertaken to achieve comprehensive and effective reform that delivers a more stable housing market with stronger regulation, more effective consumer protections and a clearer role of government with less risk borne by the American taxpayer,” Geithner added during prepared testimony delivered before the House Financial Services Committee. The Obama Administration will “develop a comprehensive reform proposal” for the roles of Governmental Sponsored Entities (GSEs) Freddie Mac and Fannie Mae “through public consultation with a wide variety of constituents, market participants, academic experts, and consumer and community organizations,” and the GSEs “will not exist in the same form as they did in the past.” The Treasury and the U.S. Department of Housing and Urban Development (HUD) on April 15 will submit their reform proposals for public comment, Geithner said, adding that the administration would then look to “work closely with the Congress, on a bipartisan basis, prior to finalizing a comprehensive reform plan.” In executing these reforms, the administration will look to align incentives, avoid allowing privatized gains to be funded by public losses, strengthen regulation, and diversify investor base and sources of funding. However, the administration will continue to support the availability of affordable single- and multiple-family real estate options. Some legislators at the hearing indicated that they would support including GSE-related reforms as part of regulatory restructuring legislation, and republicans on the committee said that the government should create an exit strategy from ownership of the GSEs. However, Geithner said that GSE reform can wait and must be done in context of overall housing finance reform. To read Geithner’s full testimony, use the resource link.

NCUA files suit against former New London FCU auditors

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ALEXANDRIA, Va. (3/24/10)--The National Credit Union Administration (NCUA) has followed up its recent lawsuit against Wells Fargo Investment Advisors by also filing suit against the former auditors of now defunct New London Security FCU, Ed Lorah & Associates, L.L.C. The NCUA began the first suit after it uncovered alleged fraud that was perpetrated by former A.G. Edwards (which is now owned by Wells Fargo) employee Edwin Rachleff. Rachleff embezzled $12 million in funds from the credit union through numerous false account statements that he filed between 1998 and 2008, and these statements eventually contributed to the failure of New London FCU, which created a $10 million loss for the NCUA’s share insurance fund. (See related story: NCUA seeks recoup of $10M following Conn.-based fraud case, Feb. 4, 2010.) The NCUA is also seeking $10 million in damages from Ed Lorah & Associates. The latest NCUA lawsuit alleges that “professional malpractice” and “breach of contract” by audit firm Beller Shepatin & Co., P.C., which has since merged with Ed Lorah & Associates, L.L.C., prevented New London FCU from detecting Rachleff’s fraudulent activities. “As a consequence of Beller Shepatin's professional malpractice, and breach of contract, the Credit Union was unable to prevent or mitigate the damages caused by the fraudulent investment account, ultimately losing virtually all of its assets,” the complaint adds. According to the NCUA complaint, Beller Shepatin & Co. “performed the services for which it was retained in a negligent and careless manner” and failed to comply with standard auditing practices, “to properly request confirmation of the accounts being audited,” to “adhere to proper standards by maintaining control over the entire confirmation process,” to “ascertain the independence and authenticity of the financial statements and documentation it received,” and to “detect, identify, and question the inconsistencies and differences in the account statements it received for the two separate Credit Union accounts at A.G. Edwards.” A summons to Ed Lorah & Associates was filed on March 19, and a date for the trial has not yet been set.

CDCUs eligible for deposits in new BEA round

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WASHINGTON (3/24/10)--The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund on Tuesday announced that it will make up to $25 million in awards available through its 2010 Bank Enterprise Award (BEA) Program. “The BEA Program complements the community development activities of insured depository institutions by providing financial incentives to expand investments in CDFIs and to increase lending, investment, and service activities within economically distressed communities,” the CDFI Fund said in its release. The CDFI Fund has awarded a total of $311 million in funds through “formula-based grants to applicants” since its inception in 1994. Applicants that participate in CDFI-related activities, equity investments, distressed community financing activities, and basic financial service activities for low- to moderate-income individuals “or the institutions serving them” are eligible for the funds. All applications must be submitted by May 5. While eligible applicants must be federally insured banks and thrifts, “those awarded BEA funds are encouraged to increase their financial assistance to Community Development Financial Institutions (CDFI), including credit unions,” the release added. For the full release, use the resource link.

Inside Washington (03/23/2010)

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* WASHINGTON (3/24/10)—A joint statement by federal financial regulators, including the National Credit Union Administration (NCUA), on funding and liquidity risk was given a May 21 effective date when the guidance was published this week in the Federal Register. The statement, released last week, reiterated “the importance of effective liquidity risk management for the safety and soundness of financial institutions.” (News Now March 18) It emphasized “the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets, and a formal, well-developed contingency funding plan as primary tools for measuring and managing liquidity risk” for financial institutions. According to the release, “the agencies expect each financial institution to manage funding and liquidity risk using processes and systems that are commensurate with the institution’s complexity, risk profile, and scope of operations.” The Credit Union National Association (CUNA) last year commented on joint federal regulatory guidance on funding and liquidity risk management, saying that the guidance, which clarified and summarized principles of sound liquidity risk management previously issued by the agencies, made sense for banking organizations, but would only be redundant to existing rules for credit unions… * WASHINGTON (3/24/10)—Credit scores and reports, and the role they play in the nation’s economy, are the subject of a hearing today scheduled by the House Financial Services subcommittee on financial institutions and consumer credit. A subcommittee release said the session will focus on how credit scores and reports are formulated, who purchases them and for what purpose. The hearing is also intended to provide a discussion of relevant issues of particular concern to consumers and several members of Congress, including the impact of rising medical debt on credit scores and reports and their use for hiring purposes. Witnesses are expected to include representatives from the Federal Reserve, the Federal Trade Commission and the three major credit bureaus… * WASHINGTON (3/24/10)—The U.S. Treasury Department is about to start asking institutions that received funds from its Troubled Asset Relief Program (TARP) to provide data on the compensation packages of their top 25 executives. Kenneth Feinberg, Treasury's special master for compensation, was expected to send out a letter yesterday to each of the 419 TAPR-receiving firms asking for information on 2008 year-end bonuses. The review, required under the 2009 law that created the position of “special master,” is a departure from the data collection to date, which has primarily consisted of reviews and pay setting at the seven firms receiving large sums of TARP aid. Some on Wall Street worry that Feinberg could target certain pay contracts and hold them up to public scrutiny unless the firms involved agreed to retroactively cut the pay (The Wall Street Journal March 23)… * WASHINGTON (3/24/10)—The House Financial Services Committee has postponed its March 25 scheduled markup of the FHA Reform Act to a date and time to be announced at a later date...

CUNA applauds NCUA legacy asset timetable

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ALEXANDRIA, Va. (3/24/10)—Credit Union National Association (CUNA) President/CEO Dan Mica yesterday commended the National Credit Union Administration's (NCUA's) projected timetable for solving the corporate credit union "legacy asset" issue. NCUA Chairman Debbie Matz Tuesday, at a Missouri CU Association meeting, revealed that credit unions may see some positive regulatory action on corporate credit union legacy assets by the end of June. Mica said of the chairman's announcement, "CUNA has stressed how crucial it is for the agency to solve the legacy assets issue in our comment letters, correspondence and conversations with NCUA. "The chairman's timetable of addressing this issue before the proposed corporate rule is finalized is commendable and indicates the agency’s willingness to listen and work toward a fair solution. CUNA will continue to work with her and the agency." In her announcement, Matz said it has taken months of work, but the agency is “close to proposing a plan that would remove the riskiest legacy assets from ongoing corporates, while carrying forward the most valuable pieces of the corporate system.” “The plan would empower retail credit unions to choose which corporates they will support. And it would ensure that those corporates begin with clean balance sheets,” Matz told her credit union audience. Legacy assets are primarily mortgage-backed and asset-backed securities that were bought by corporates before 2009 that have been severely devalued as a result of the turmoil in the overall mortgage market. Currently estimated losses on these legacy assets have already been expensed, but CUNA has in the past expressed two concerns with these legacy assets: First, if the actual losses turn out to be sufficiently less than expensed thus far, there should be an opportunity for the credit unions that took the losses to share in the gains, and, second, if the actual losses are greater than expensed thus far, that future capital contributors not be liable for those losses. In Missouri, Matz warned it is still a work “very much” in progress, but the agency envisions a plan that “could even allow retail credit unions to recover future earnings from legacy assets that out-perform current loss projections.” However, there are still “a multitude of questions about underwriting, funding, accounting, and much more” that would have to be worked out, she said. “There is no easy way to un-bundle over $50 billion worth of long-term assets, repackage them into marketable bonds, and move them from corporates’ balance sheets without realizing the losses. This effort is so huge--and so important--that we are dedicating 20 of our top staff to work on it.” Matz asked for credit union patience, but added her team is cautiously optimistic that a comprehensive resolution plan will be brought to the NCUA board by the end of June. In the meantime, NCUA is also reviewing over 800 comment letters on the agency’s proposed rule to strengthen corporate credit union regulation. “Based on the comment letters,” Matz assured, “we will not move forward with a final corporate rule until after we announce the plan for legacy assets. While the legacy assets plan will ensure that corporates begin with clean balance sheets, the final rule will ensure that corporates maintain those clean balance sheets. When the new safeguards are refined and implemented, corporates will be much better positioned to protect retail credit unions’ hard-earned capital.”

CU participants will find expanded VITA program

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ALEXANDRIA, Va. (3/23/10)--The National Credit Union Administration (NCUA) on Monday announced that it will expand its participation in the Internal Revenue Service (IRS) Volunteer Income Tax Assistance (VITA) partnership program Credit union members that participated in credit union-based VITA tax prep programs received $20.9 million in tax refunds last year, according to the NCUA. A total of 541 credit unions participated in the VITA program in 2009, the NCUA added.
National Credit Union Administration (NCUA) Chairman Debbie Matz (center) welcomes Internal Revenue Service (IRS) Wage and Investment Commissioner Richard E. Byrd, Jr., (left) and IRS Stakeholder Partnerships, Education and Communication Director Julie Garcia, to the NCUA to discuss the IRS Volunteer Income Tax Assistance Program, in which credit unions participate. (NCUA Photo)
VITA is an IRS program that helps low- and moderate-income taxpayers complete their annual tax returns at no cost. Credit unions and community organizations receive IRS provided training in the preparation of basic tax returns and establishment of tax preparation sites. In a statement, NCUA Chairman Debbie Matz strongly encouraged credit unions “to not only make full use of IRS initiatives such as the VITA program, but also to seek VITA grants and offer no-cost financial counseling and education to members.” “Credit unions are a reliable source of financial assistance and education for consumers, and VITA is a tangible complement to those efforts,” Matz added. Matz recently met with IRS Wage and Investment Commissioner Richard Byrd, Jr., and the NCUA and the IRS have pledged to increase their cooperation by collaborating to help low-income individuals “enhance their money management skills” and “meet their tax obligations.” The IRS hopes to “continue” its partnership with the NCUA, Byrd said. The NCUA will begin discussing the 2011 round of the VITA program in the near future, the release added.

NCUA named conservator of Calif.s Tracy FCU

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ALEXANDRIA, Va. (3/23/10)—The National Credit Union Administration (NCUA) has been named conservator of Tracy, Calif.-based Tracy FCU to ensure safe and sound credit union operations and continuing service to members. The NCUA announced the action late last week. In a release, the NCUA said that Tracy FCU, which holds $24 million in assets from 5,900 members, will “continue to conduct normal financial transactions” such as deposits, loan payments, and share drafts. All accounts at the credit union are covered up to $250,000. The NCUA has intervened in the affairs of six credit unions so far this year, resulting in three supervisory mergers, and three involuntary liquidations. The NCUA last week reported that there are 337 CAMEL Code 4 and 5 credit unions as of last month, with 111 credit unions in Tracy FCU’s bracket of $10 million to $100 million in assets.

Senate committee OKs reg reform House reviews housing reform

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WASHINGTON (3/23/10)--Congress's work week, for the House at least, started early with the late night healthcare vote taking place on Sunday. And a busy week in Congress continued on Monday evening as Chairman Christopher Dodd's (D-Conn.) Senate Banking Committee passed its financial reform package on to the full Senate. Dodd was the only Democrat to make an opening statement prior to the mark up, and the committee's ranking minority member, Sen. Richard Shelby of Alabama, was the only Republican to do so. Shelby's remarks included talk about continuing negotiations on the reform bill after the committee vote and before the package is taken up by the full Senate. As expected, the committee vote went on straight party lines with the Republican committee members simply voting against final passage. While there were over 400 potential amendments on the docket earlier in the day, it was widely reported Monday that lawmakers had reached some consensus on portions of the reform package. The mark up ended up taking a very brief 20 minutes. Treasury Secretary Timothy Geithner conveyed the Obama administration's viewpoint on Monday, saying that the government knows “all about the choices,” and just has to decide on whether or not it is going to act. “If we fail to act, America will lose this opportunity to set the global agenda, to define new high standards for all financial companies, and to lead the debate in shaping a level playing field on terms that play to our strengths. If we fail to act, American firms that operate globally will face a more balkanized system, with higher costs of doing business and riddled with pockets of lower standards designed to attract the exact types of risky behavior we are seeking to end,” he added. As currently constructed, Dodd’s bill would allow the National Credit Union Administration (NCUA) to maintain its independence and excludes credit unions with $10 billion or less in assets from the oversight authority of a proposed consumer watchdog. The Credit Union National Association (CUNA) last week encouraged Dodd to consider adding language that gives his proposed Bureau of Consumer Financial Protection (BCFP) "the authority to delegate examination authority for large credit unions to the prudential regulator" rather than limiting the NCUA authority to credit unions with under $10 billion in assets. CUNA also promoted "permitting the BCFP to delegate examination authority for large credit unions to NCUA." The Senate Small Business Committee will also be in action this week, holding a hearing on the proposed SBA budget for fiscal year 2010 on Tuesday. The House Financial Services Committee has another full week, with a hearing on housing finance reform, which will focus on the roles of the Federal Housing Administration, Ginnie Mae, Fannie Mae, Freddie Mac, Federal Home Loan Banks, private lenders, and securitizers, and will feature testimony from Geithner, scheduled for Tuesday. The full house committee will also hold a hearing entitled "Unwinding Emergency Federal Reserve Liquidity Programs and Implications for Economic Recovery" on Thursday. Related House subcommittees will discuss H.R.4868, the "Housing Preservation and Tenant Protection Act of 2010," and the impact of credit scores and credit reports on consumers during separate hearings set for Wednesday. Finally, the House Oversight and Government Reform Committee on Thursday will hold a full committee hearing on the Home Affordable Modification Program. H.R. 4849, the Small Business and Infrastructure Jobs Tax Act of 2010, and H.R. 4899, the Disaster Relief and Summer Jobs Act of 2010, will also be discussed by the full House before Congress leaves for spring recess at the end of the week.

Inside Washington (03/22/2010)

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* WASHINGTON (3/22/10)—A federal appeals court, ruling in favor of Freedom of Information Act requests by two news organizations, told the Federal Reserve Board to release documents related to individual borrowing from the discount window and other lending programs considered actions of “last resort.” In one ruling, the Second Circuit Court of Appeals backed a lower court that granted a request by Bloomberg LP's Bloomberg News for documents related to use of the Fed's discount window and other liquidity programs. In a separate action, that court overturned a lower court ruling that had denied a request by Fox News Network LLC’s Fox Business Network for Fed documents. The Fed is reviewing the appeal court decisions (American Banker March 22)… * WASHINGTON (3/23/10)—Banks should expect tougher rules on commercial real estate (CRE) lending from the Office of the Comptroller of the Current after the head of the agency, John Dugan, said that current regulatory guidance, issued four years ago, has failed to limit banks’ concentrations in such lending. That guidance advised banks to limit CRE concentration to 300% of total capital, and concentrations in land, land development and construction loans to 100% of capital. But trouble with CRE sector has continued to be a leading cause of failures, and regulators are looking at such things as writing tougher concentration caps, increased capital requirements, minimum underwriting standards and limits on banks that use wholesale funding to finance the loans (American Banker March 22)… * ALEXANDRIA, Va. (3/23/10)—National Credit Union Administration (NCUA) board member Michael Fryzel addressed the annual meeting of $39 million-in-assets Mid-Illini CU, Bloomington Ill., and marked the credit union’s seventieth anniversary by noting its dedication to member service, community events and financial education outreach efforts. “They are to be commended for their continued commitment to the credit union philosophy of people helping people. I am honored to be with them as they celebrate this important event,” Fryzel commented. Mid-Illini CU was founded in 1940 and serves members in Bloomington and its surrounding communities. An NCUA release noted that the credit union “has pursued a goal of lending responsibly, investing wisely, and putting member’s needs before profit.” Pictured from left to right: Tom Stewart, president Mid-Illini Credit Union, Fryzel, and Jim Isom, chairman of the board, Mid-Illini. Fryzel is a former state credit union regulator and was with the Illinois Department of Financial Institution from 1977 to 1989, heading the agency from 1982 to 1989…

Matz responds to CUNA urging to help CUs bear NCUSIF costs

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WASHINGTON (3/22/10)—Responding to the Credit Union National Association’s (CUNA’s) urging to help credit unions deal with unprecedented National Credit Union Share Insurance Fund (NCUSIF) costs, Debbie Matz wrote that the National Credit Union Administration (NCUA) will look at the operating level target in the Fall. Matz, the NCUA chairman, noted in a March 18 letter to CUNA that while the Federal Credit Union Act sets a range between 1.20% to 1.50% for the NCUSIF equity ratio, the agency’s currently established target is 1.30%. At an open board meeting Thursday, NCUA Chief Financial Officer Mary Ann Woodson reported that the ratio currently stands at 1.23% and once the 1% deposit required of insured credit unions is collected next month, the ratio will rise to 1.26%. In her letter to CUNA, Matz wrote that the agency plans to revisit the operating level target in the Fall as part of the agency’s annual budget process. “At that point, the board will make a decision on whether to replenish the NCUSIF to 1.30% or let the level continue to decline. “That decision will be based on our experience in 2010 tracking several key economic and institutional factors,” the chairman said. She reiterated her commitment to “the safety and soundness regime maintained by the NCUA, and the public confidence instilled by a strong and credible NCUSIF,” a commitment she said will not be compromised “despite challenges” faced by the credit union movement. CUNA recommends that the NCUA temporarily reduce the normal operating level of the NCUSIF from the current 1.3% to no lower than 1.2%, to reduce the amount of funds that credit unions must pay into the insurance fund. CUNA also proposes allowing insured credit unions to spread out their NCUSIF costs over several years, "even if the normal operating level is at or above 1.2%, consistent with a restoration plan to ensure the NCUSIF is properly funded." Also in her letter, addressed to CUNA President/CEO Dan Mica, Matz noted CUNA’s close work with NCUA staff to draft enhancements to Senate legislation that would, in part, increase the member business lending cap to 20% of assets, up from 12.25%. “Our respective staffs worked closely and productively on enhancements to a Senate proposal, and I am hopeful that Congress will enact legislation that gives NCUA the ability to formulate what I believe will be a stronger regulatory regime that prudently fosters broader consumer access to small business capital. The Senate bill, the Small Business Lending Enhancement Act (S. 2919), has a counterpart in the House known as the Promoting Lending to America's Small Businesses Act (H.R. 3380).

Comments in legacy assets loom behind discussions

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WASHINGTON (3/22/10)--While the National Credit Union Administration (NCUA) has received and is currently reviewing comment letters related to its proposed changes to the corporate credit union system, the issue of legacy assets remains unresolved. The NCUA estimated that there were $64 billion in total legacy assets as of early 2009. The Credit Union National Association (CUNA), in a recently published response to the NCUA’s corporate plan, said that proposed corporate credit union reforms would not succeed unless the NCUA also dealt with this issue. Among the many questions that CUNA has for the NCUA regarding this issue are whether the legacy assets will be “held and managed to the point of minimum loss, or sold as soon as the unrealized losses fall to the value” of the NCUA’s stabilization fund. CUNA also has asked whether the NCUA’s approach will require additional borrowing from the U.S. Treasury. NCUA Board Member Gigi Hyland, speaking at CUNA's Governmental Affairs Conference last month, said that the NCUA is working to address the legacy asset issue. CUNA is also forming its own working group to address these issues, and the makeup of that group will be announced in the near future.

Inside Washington (03/19/2010)

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* WASHINGTON (3/22/10)--Pending congressional action to reform financial institutions will be “very good for credit unions and credit union members,” National Credit Union Administration Chairman Debbie Matz told an Internet audience during an appearance on Reuters Inside, a Web-based venue featuring in-depth coverage of public policy issues. “Credit unions fill an important niche; they have seen a ‘flight to quality,’” Matz said. “The average credit union capital level is almost 10%.” To view the segment, use the link ... * WASHINGTON (3/22/10)--House Financial Services Committee Chairman Barney Frank (D-Mass.) Wednesday introduced the Housing Preservation and Tenant Protection Act to stem the loss of affordable renting housing units nationwide. The measures aim to curtail the loss of housing and prevent displacement of low-income tenants. “This bill does not force any owners who enter into this voluntarily to abrogate their rights, and we are committed to working with current owners of these affordable housing units,” Frank said. Since the 1950s, the Department of Housing and Urban Development has subsidized about 1.7 million rental units in more than 23,000 privately owned, multi-family properties that are typically affordable to low-income tenants ... * WASHINGTON (3/22/10)--The House plans to vote this week on a bill that would eliminate private lenders’ role in government-guaranteed student loans. The bill is part of a health care reform package that the House planned to tackle this past weekend and the Senate could deliberate this week. The bill could save $61 billion over 10 years, according to the Congressional Budget Office (American Banker March 19) ... * WASHINGTON (3/22/10)--Sen. Richard Shelby (R-Ala.) said he is worried the “too big to fail” principle would remain if a proposed $50 billion fund to help resolve failed banks is the Senate’s regulatory reform bill (American Banker March 19). Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) bill would require that all institutions with more than $50 billion in assets support the fund. Shelby told a banking association conference that when the money is there, it could be used in unintended ways. While he didn’t oppose the creation of a fund, he said a resolution authority should be established to make sure that the fund is available. Under Dodd’s bill, the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Treasury would have to agree to put an institution into liquidation after bankruptcy judges deem it insolvent ...

Senate Banking to start reg reform votes today

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WASHINGTON (3/22/10)--The Senate Banking Committee later today will hold its first markup session on Sen. Chris Dodd’s (D-Conn.) financial regulatory reform legislation. The hearing, which will take place in the Dirksen Senate Office Building at 5 p.m. ET, will focus on Dodd’s recently introduced Restoring American Financial Stability Act of 2010. That legislation would allow the Federal Reserve to continue to oversee both large banks and smaller state-chartered banks while also adding authority over some non-bank financial firms to the Fed's list of responsibilities. Dodd's proposal also allows the National Credit Union Administration (NCUA) to maintain its independence and excludes credit unions with $10 billion or less in assets from the oversight authority of a proposed consumer watchdog. Dodd’s bill in general would increase protections for consumers of both regulated and currently unregulated financial products and would create an Orderly Liquidation Fund to wind down damaged financial services providers in some cases. The Credit Union National Association (CUNA) last week encouraged Dodd to consider adding language that gives his proposed Bureau of Consumer Financial Protection (BCFP) "the authority to delegate examination authority for large credit unions to the prudential regulator" rather than limiting the NCUA authority to credit unions with under $10 billion in assets. CUNA also promoted "permitting the BCFP to delegate examination authority for large credit unions to NCUA."

Three banned from CU work

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ALEXANDRIA, Va. (3/22/10)--The National Credit Union Administration (NCUA) issued orders prohibiting the following individuals from participating in the affairs of any federally insured financial institution.
* Margaret S. Aldridge, a former employee of Coastal Waters FCU of Mobile, Ala., without admitting or denying fault, signed an order of prohibition to avoid the time and cost of administrative litigation; * David Wayne Gleason, a former employee of Mid-Tex FCU of Brownwood, Texas, without admitting or denying fault, signed an order of prohibition to avoid the time and cost of administrative litigation; and * Mandi Nicole Shook, a former employee of TexDot-WF CU of Wichita Falls, Texas, was convicted of embezzlement and sentenced to 12 months and a day imprisonment, five years supervised release, and ordered to pay restitution of $195,173.
Use the resource link below to view NCUA enforcement orders online.

Inside Washington (03/18/2010)

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* WASHINGTON (3/19/10)--The Office of the Comptroller of the Currency (OCC) says it sees some flaws in Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) financial reform bill. The bill intended to define how state consumer protection laws would be applied to national banks--but the OCC said it would be more difficult for a national bank to ignore a state law that the bank thinks interferes with business. It also would be easier for state attorneys to file class action suit against federal banks, said American Banker (March 18). Requirements in the Senate bill also could change the preemption process, OCC said. National banks currently can decide not to follow a state law, pending review from a court or regulator. The Senate bill would not allow a bank to do that without a decision from a court or the OCC, and the process that banks would have to go through to get clearance to ignore a rule could take months or years, the Banker said ... * WASHINGTON (3/19/10)--Federal Reserve Board Chairman Ben Bernanke rejected a proposed bill that would strip the Fed of its powers except over the nation’s largest banks (American Banker March 18). Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has proposed giving the Fed oversight only of holding companies with $50 billion or more in assets. Bernanke said oversight of smaller banks is vital for financial system stability and monetary policy. Paul Volcker, former Fed chairman, supported Bernanke. He said that the Fed needs to have oversight of banks and that setting a $50 billion-asset threshold could widen the problem of “too big to fail” ... * WASHINGTON (3/19/10)--The Financial Crimes Enforcement Network (FINcen) has issued a $110 million civil money penalty against Wachovia Bank, N.A., Charlotte, N.C. According to FINcen’s penalty agreement, Wachovia failed to implement adequate measures to detect and report money laundering involving at least 13 of its non-bank correspondent accounts. Such measures would have enabled Wachovia to obtain due diligence information on customers of the foreign non-bank entity and determine whether related transactions conducted in the U.S. were commensurate with the customers’ normal or expected conduct, or lacked any apparent business or lawful purpose, FINcen said ...

Mica urges MBL passage via major L.A. radio interview

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WASHINGTON (3/19/10)--Interviewed on a major news-talk Los Angeles radio station yesterday, Credit Union National Association (CUNA) President/CEO Dan Mica emphasized credit unions could make $10 billion in loans to help small businesses and create 108,000 new jobs if the U.S. Congress passes legislation raising the current statutory cap. And he said an upcoming jobs package would be a likely vehicle to advance the bill. Mica discussed the member business lending (MBL) issue with Frank Mottek, host of a popular one-hour business program on KNX 1070 radio, the CBS news affiliate in Los Angeles, the second largest news market in the country. Mica told Mottek that CUNA is working to attach the MBL legislation to a jobs measure in Congress. “Right now the second jobs package of the year is being put together,” the CUNA leader explained. With the help of California co-sponsors such as Reps. Ed Royce (R), Brad Sherman (D) and Sen. Barbara Boxer (D), Mica said, CUNA is “trying to see that (the MBL bill) is a part of the second package that should come up in the next few weeks.” The House MBL bill (HR 3380) was introduced by Reps. Royce and Paul Kanjorski (D-Pa.) and currently has 100 co-sponsors; the Senate bill (S. 2919) has 11 co-sponsors. The measures would raise the current MBL cap to 25% of assets from 12.25%. Asked by Mottek about obstacles to passage, Mica noted opposition is coming from some quarters of the community banking industry that do not want the competition. “Of course, our answer is A) we’ve been doing it for 90 years, B) we’re willing to do it, and C) you aren’t willing to do it so let us go ahead and help. If you feel that for business reasons you can’t make those kinds of loans or won’t, don’t stop us from trying to move forward.” Added Mica: “I hope folks who hear this will call their congressman and senators and let them know there ought to be a good, solid choice. No one is anti-bank. But (the banks) certainly shouldn’t try to shut down credit unions at a time when this country and California need them most." To hear an excerpt from the interview, use the resource link below.

Six-year plan outlined by NCUA

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ALEXANDRIA, Va. (3/19/10)—The National Credit Union Administration (NCUA) on Thursday outlined its goals for the next six years in a publicly released strategic plan for 2011 through 2016. The strategic plan features a list of set goals that the NCUA hopes to achieve, including ensuring a “safe, sound and healthy credit union system,” promoting credit union access “to all eligible persons,” furthering the development of a “transparent and effective” regulatory environment, issuing “clearly articulated and easily understood regulations,” and cultivating “an environment that fosters a diverse, well-trained and motivated staff.” The NCUA set specific factors that may help or hinder the achievement of their stated goals. The complexity of credit union products and services, the demand for those services, economic conditions, and potential accounting changes are among the factors that may affect the safety and soundness of the credit union system, the NCUA said. A lack of public awareness, a drop in the number of overall credit unions, and shifts in member needs can affect the availability of credit union services. Additionally, changes in legislation and other finance industry regulation can affect the NCUA’s goal of developing and issuing transparent and easily understood regulations. The Credit Union National Association, in its early comments on this list, suggested ensuring that NCUA staffers are specifically trained to recognize the differences between credit unions and banks. CUNA also suggested adding reducing the regulatory burden on credit unions to the NCUA’s list of stated goals.

NCUA proposes to tighten CU mergers conversion process

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ALEXANDRIA, Va. (3/19/10)—The National Credit Union Administration (NCUA) has proposed a significant rewrite of portions of Sections 701, 708a, and 708b of its rules to address the fiduciary duties of federal credit union directors, credit union-to-bank mergers, and charter and insurance conversions. At its March board meeting held on Thursday the NCUA proposed new rules that would require federal credit union directors to “carry out their duties in good faith, and have, or gain, an understanding of basic finance and accounting practices.” The NCUA would also prohibit federal credit unions from “indemnifying its officials or employees for liability associated with misconduct that is grossly negligent, reckless, or willful in connection with a decision that affects the fundamental rights of members.”
Click to view larger image At the Nationaol Credit Union Administration meeting Thursday agency staff briefed board members on a numver of proposals, including one to tighten the RegFlex prgaram and another to adjust merger and conversions rules. Here a staff member makes a presentation as she faces board member Michael Fryzel (left), Chairman Debbie Matz (center), and Vice Chairman Gigi Hyland. (CUNA Photo)
The Credit Union National Association (CUNA) has called on the NCUA to better explain what “indemnifying” would entail under these circumstances. Mergers and credit union-to-bank conversions would also be affected, with the NCUA proposing certain changes to its current standards governing “the information that credit unions seeking to convert must disclose to members.” This includes the approval of a conversion proposal, the certification of a member vote on that conversion proposal, and the guidelines on how that vote must be completed. Rules governing the disclosure of a merger plan to credit union members and the NCUA are also affected, and the NCUA has also proposed altering some of the steps that follow an approved merger or conversion vote. The NCUA board noted that these proposed changes are a response to alleged voter influencing by some credit union executives. CUNA has pledged to review the NCUA’s proposal to ensure that the proposed changes do not make the credit union-to-bank conversion process so burdensome that it is no longer an option for credit unions.

Some RegFlex provisions rescinded in NCUA plan

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ALEXANDRIA, Va. (3/19/10)--Addressing the National Credit Union Administration’s (NCUA) proposed plans to tighten some of its current regulatory flexibility standards, NCUA Chairman Debbie Matz said that while the NCUA would like to give credit unions as much discretion as possible, safety and soundness must also be considered. The NCUA on Thursday approved a proposed rule that would rescind some exemptions related to fixed assets, member business lending (MBL), stress testing of securities, and the discretionary control of investments. While there is a statutory 5% limit on fixed asset investments for credit unions that are over $1 million in assets, the RegFlex provisions permit some slackening of that limit in certain circumstances. The NCUA, citing its own call report data, argued that “investing in higher levels of non-earning assets can materially affect a credit union’s earnings ability and, therefore, its viability.” The collected call report data “shows a higher percentage of earnings problems among credit unions with more than 5% of shares and retained earnings invested in fixed assets,” with the “percentage of earnings problems” increasing as “the level of fixed assets increases.” The NCUA has found similar losses in the MBL portfolios of some credit unions, with significant increases in delinquencies and charge-offs, and has proposed requiring that all credit unions obtain a loan principal’s guarantee “as part of their own underwriting standards and best practices.” The NCUA has also proposed that all credit unions, including RegFlex credit unions, stress test their securities “as a matter of safety and soundness and responsible business practices.” The NCUA currently allows RegFlex federal credit unions to “delegate discretionary control over the purchase and sale of its investments to certain persons outside the FCU” in excess of the 100% net worth cap that non-RegFlex federal credit unions must comply with. The proposed rule would rescind the 100% net worth exemption for RegFlex federal credit unions. However, NCUA examinations and insurance director Melinda Love said that if the proposal becomes a final rule, credit union total investments above the cap would be grandfathered into the rule. Other portions of RegFlex addressing charitable contributions, nonmember deposits, zero-coupon securities, borrowing repurchased transactions, commercial mortgage related securities, and the purchase of assets from federally insured credit unions are currently being reviewed by NCUA staff, Staff Attorney Frank Kressman said. The Credit Union National Association said that it recognizes the need for regulatory safety and soundness, but will examine the NCUA’s proposals to develop recommendations on how well-run credit unions can maintain the regulatory flexibility that they deserve while maintaining the tools that the NCUA needs to address safety and soundness and other issues facing the credit union system.

CUNA seeks CU improvements in Dodds consumer protections

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WASHINGTON (3/19/10)--The Credit Union National Association (CUNA) encouraged Sen. Chris Dodd (D-Conn.) to consider adding language that gives his proposed Bureau of Consumer Financial Protection (BCFP) “the authority to delegate examination authority for large credit unions to the prudential regulator” rather than limiting the National Credit Union Administration’s (NCUA) authority to credit unions with under $10 billion in assets. Citing CUNA’s “historic concerns with legislative proposals that seek to divide credit unions by asset size,” CUNA in a letter to Dodd also promoted “permitting the BCFP to delegate examination authority for large credit unions to NCUA.” Such a move “would strike a balance that will ensure an appropriate level of examination for compliance with consumer laws” and ensure that “all credit unions have the opportunity to be examined by their prudential regulator.” “Permitting NCUA to use existing resources to supervise all credit unions for compliance with consumer protection law, and giving the BCFP back-up authority to examine credit unions, would permit the BCFP to devote more of its resources on less scrupulous financial services providers while maintaining the authority to intervene with a credit union in the event that it became necessary,” the letter added. Overall, CUNA spoke in support of the BCFP and many of the regulatory reforms proposed by Dodd’s bill, and called for greater protections for consumers of both regulated and, especially, currently unregulated financial products. However, CUNA in the letter expressed concern at portions of the bill that would require the BCFP “to collect depositor data by census tract,” as this could create an unneeded regulatory and reporting burden for credit unions. CUNA urged Dodd’s Senate Banking Committee “to either remove this language from the Committee Print or modify the language to require the BCFP to coordinate with the prudential regulators regarding the type and form of the data, as well as the method of collection, making every effort to reduce duplicative data collection requirements and overall regulatory burden.” CUNA has previously requested that any regulatory changes that are proposed help reduce the amount of burdensome regulation faced by credit unions, and CUNA commended Dodd for directing the BCFP “to ensure that outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed.” This single agency “would be able to identify and streamline duplicative regulatory requirements, thereby reducing regulatory burdens for credit unions as well as improving consumers’ comprehension of the terms and condition of mortgage loans,” the letter added. CUNA was also pleased by the “structure of the capitalization of the Orderly Liquidation Fund (OLF),” especially portions that ensure that credit union members would “not be asked to provide any funds for the initial capitalization of the OLF.” CUNA also commended Dodd for ensuring that only credit unions with over $50 billion in assets would be charged assessments if the OLF needs to be recapitalized. CUNA staff continues to pour over the 1,330 page bill, and may convey “additional technical concerns with the legislation as it proceeds through Committee consideration,” the letter added.

Schumer tells iBloombergi MBLs good in job stim bills

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WASHINGTON (3/19/10)—Sen. Charles Schumer, a supporter of increasing the credit union members business lending (MBL) cap, said this week he’d like to see a cap lift included in a package of job-stimulus proposals the Senate is currently considering. In response to a question posed by a Bloomberg reporter after the Senate passed a $17.6 billion jobs bill Wednesday, Schumer said he plans to push for increased MBL authority for credit unions as a way to help stimulate the economy and hiring. In an article on Schumer and MBLs, Bloomberg quotes John Magill, senior vice president for the Credit Union National Association (CUNA), who noted that the higher cap could create more than 100,000 new jobs and bring $10 billion into the economy at no cost to the taxpayer. “More lending means more capital for small businesses, and that translates into more jobs at a time when job creation is a national priority,” Magill also said. “Given the national conversation about jobs, that is an area where credit unions can help out if we’re given the opportunity to do so,” Ryan Donovan, CUNA’s vice president for legislative affairs, added. Schumer, a New York Democrat, is among co-sponsors supporting Senate legislation to allow credit unions to make loans to their small business members up to 25% of the credit union’s assets. The cap is currently 12.25% of assets. There is a comparable bill in the House. In the article “Schumer Wants Higher Cap for Credit Union Small-Business Loans,” Bloomberg noted that “(t)housands of credit union executives and members visited Capitol Hill” in February to state their case for increased small business lending to credit union members. Hill visits are a pillar of CUNA’s Governmental Affairs Conference, held Feb. 21-25 this year. The article also noted that bank executives continue to meet with lawmakers to oppose the credit union measure.

CUNA to keep up drive as jobs packages develop

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WASHINGTON (3/18/10)—The U.S. Senate yesterday passed a $17.6 billion jobs package, a bill that tackles tax provisions and which is expected to be one in a series of measures to create employment opportunities. The focus on jobs creation has been pivotal in gaining more support on Capitol Hill for legislation that would increase the credit union member business lending (MBL) cap to 25% of assets, up from the current 12.25% limit. The Credit Union National Association (CUNA) estimates that the increase could create as many as 108,000 new jobs and result in $10 billion in new business loans through credit unions in the first year after enactment. “CUNA, the leagues and credit unions have made significant progress over the last several weeks, which has led to more than 100 MBL co-sponsors in the House and 11 in the Senate,” noted CUNA Senior Vice President of Legislative Affairs John Magill. He added that there is growing recognition that MBL language would be a good fit for future jobs bills, as illustrated by a recent endorsement by Sen. Kristin Gillibrand (D-N.Y.). Gillibrand, earlier this year, said the MBL legislation "would free up lending at not-for-profit credit unions in every corner of America to small businesses" and is necessary "if we're going to create new jobs and rebuild our economy for the long term." She was speaking at Long Island, N.Y.-based Bethpage FCU. Gillibrand called the Senate MBL bill, the Small Business Lending Enhancement Act (S. 2919) "common-sense legislation" that would "give small businesses more of the capital they need to get off the ground, grow and get thousands of Americans back to work." The similar House bill is H.R. 3380, the Promoting Lending to America's Small Businesses Act. CUNA’s Magill said that CUNA continues its advocacy drive, aware that the Congress will continue to discuss job creation legislation as the year wears on. “CUNA will continue to work to get MBL legislation on one of those legislative vehicles." Richard Gose, CUNA’s senior vice president of political affairs, urged credit unions to continue to work with legislators to convince them of the importance of including MBLs in jobs legislation as a way to create jobs and increase credit to small businesses at no cost to the taxpayer.

Inside Washington (03/17/2010)

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* ALEXANDRIA, Va. (3/18/10)--The National Credit Union Administration (NCUA) on Thursday named Christopher Colford as senior advisor for communications to Chairman Debbie Matz. Colford will oversee Matz’s communications strategies and programs, according to the NCUA. In the release, Matz said that Colford is a “recognized expert in communications and public affairs” and a “gifted writer” that “brings communication management, speechwriting, editorial and public affairs expertise to NCUA.” A native of Elizabeth, N.J. Colford received a B.A. from Duke University and an M.A. from Harvard. Colford began his writing career as a Washington-based editorial writer and op-ed columnist for the Cleveland Plain Dealer before taking on various posts as a Capitol Hill communications director and a special assistant at the Securities and Exchange Commission.... * WASHINGTON (3/18/10)--Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) financial reform legislation could consolidate the Federal Reserve Bank’s structure by combining the 12 district banks (American Banker March 17). The Dodd bill would narrow the scope of banks the Fed supervises to 55 holding companies with more than $50 billion in assets. Now, the Fed supervises 4,974 companies and 844 individual state-chartered banks. The Federal Reserve Banks of Chicago and New York would oversee most institutions--while St. Louis and Kansas City would not regulate any institution. Kansas City currently supervises 810 bank holding companies and 172 state banks. With fewer district banks, the Federal Open Market Committee structure also could be reworked, Banker said ... * WASHINGTON (3/18/10)--The number of banks deemed systemically significant would change under Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) financial reform bill, according to financial observers. Dodd’s bill would place the Fed in charge of the 55 holding companies worth more than $50 billion each but give the rest of the institutions’ oversight to the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency (American Banker March 17). Neither agency has supervised holding companies before. Kip Weissman, partner at Luse Gorman, said the $50 billion cutoff would unfairly label too many banks as systemically significant. Ellen Seidman, former director of the Office of Thrift Supervision, said the bill was a compromise to try and keep the dual banking system and could work ...

NCUA proposes changes to RegFlex program today

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ALEXANDRIA, Va. (3/18/10)--Today's National Credit Union Administration (NCUA) open board meeting will be headlined by discussion of proposed changes to portions of the NCUA’s regulatory flexibility (RegFlex) program. The NCUA's five-year strategic plan and the fiduciary duties of federal credit union officials when considering merging or conversion of credit unions will also be discussed. The merger/conversion changes were first proposed in a notice of proposed rulemaking issued by the NCUA in early 2008. The goal of that ANPR was to determine if any new rules were needed for credit unions that merge or convert to another type of financial institution. The Credit Union National Association has recently set up a working group to address how the NCUA selects and pursues credit union mergers. The board will also be updated on the status of the National Credit Union Share Insurance Fund during the open portion of the meeting, with a closed NCUA board meeting set to follow.

Need for liquidity risk management underscored by regulators

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WASHINGTON (3/18/10)--The National Credit Union Administration and other federal financial regualtory agencies in a joint policy statement released on Wednesday reiterated “the importance of effective liquidity risk management for the safety and soundness of financial institutions.” The policy statement was co-signed by the Board of Governors of the Federal Reserve System, the Conference of State Bank Supervisors, the Federal Deposit Insurance Corp., the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The statement also emphasized “the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets, and a formal, well-developed contingency funding plan as primary tools for measuring and managing liquidity risk” for financial institutions. According to the release, “the agencies expect each financial institution to manage funding and liquidity risk using processes and systems that are commensurate with the institution’s complexity, risk profile, and scope of operations.” The policy statement also supplements some of its own recommendations with the “Principles for Sound Liquidity Risk Management and Supervision” that the Basel Committee on Banking Supervision issued in 2008. The Credit Union National Association (CUNA) last year commented on joint federal regulatory guidance on funding and liquidity risk management, saying that the guidance, which clarified and summarized principles of sound liquidity risk management previously issued by the agencies, made sense for banking organizations, but would only be redundant to existing rules for credit unions. CUNA at that time said that if the NCUA feels it is necessary to address liquidity risk issues, it should develop a Letter to Credit Unions that focuses on specific problems and addresses steps credit unions can take to address them under the agency's current liquidity risk management requirements. For the full release, use the resource link.

House Senate to work out flood insurance SBA extensions

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WASHINGTON (3/18/10)--The House on Wednesday approved H.R. 4851, the Continuing Extension Act of 2010, which would extend authorization for the National Flood Insurance Program (NFIP) and federal unemployment insurance and continue federal subsidies to COBRA health insurance recipients through April 30, via voice vote. The legislation, which was introduced by Sen. Sander Levin (D-Mich.) on Tuesday, will now move on to the Senate. If the legislation is not signed into law, the NFIP and COBRA will both expire at the end of this month. Legislators earlier this year agreed to temporarily extend these and other benefits through the end of March, after significant legislative wrangling. H.R. 4213, which would extend the NFIP, COBRA, some Stimulus Act small business loan guarantee programs, federal unemployment insurance, and other select federal programs, passed the Senate 62 to 38 last week and should be discussed in a congressional conference in the near future. However, the Credit Union National Association (CUNA) does not expect this conference to begin before the upcoming April recess. CUNA is working to include language that would increase the cap on credit union member business loans to 25% in an upcoming jobs bill. This legislation would result in $10 billion in new funding for small businesses and create over 100,000 new jobs at no cost to taxpayers, CUNA has estimated.

CUs lend bankers dont says Texas league ad in D.C.s iRoll Calli

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WASHINGTON (3/18/10)--The Texas Credit Union League took the fight for increased credit union member business lending to the pages of Washington-based Roll Call on Wednesday, encouraging lawmakers to back H.R. 3380 and S. 2919. The ad comes as the American Bankers Association holds its annual Government Relations Summit this week in Washington. Sure to be an agenda item on bankers' visits with federal lawmakers is opposition to increased MBL authority for credit unions.
Click to view larger image Click to view pdf
While “15 banks said no” to the Frescas, the family featured in the ad, their credit union approved them for the loan needed to start their own day care center. “Banks say no all day… Our credit union worked with us. They made it happen,” Joe Frescas said in the ad. The ad also highlights the lower charge off rates and responsible lending practices of many credit unions. According to the Texas league's Winter Prosapio, the league “wanted to remind legislators of the key role that credit unions are playing for small businesses during these tough economic times. Knowing that the bankers will be in Washington this week, we felt that it was important to do all we could to prevent any unwinding of the positive member business lending work that credit unions have made recently. “Our approach is to tell the story from the small business perspective. For them, the case for change is simple--we're just making sure their voice is heard,” Prosapio added. Credit union leagues from across the country stressed the importance of increasing the cap for credit unions’ member business lending practices to their elected representatives during the Credit Union National Association’s (CUNA) recently completed Governmental Affairs Conference. CUNA has also directly promoted lifting the current member business lending cap of 12.25% to 25% of a credit union’s total assets, a move that would increase the amount of funding available to small businesses by $10 billion, creating up to 100,000 new jobs within the first year following its enactment. This legislation would help stimulate the economy at no cost to taxpayers, CUNA has said.

April 1 deadline for higher-priced mortgage loans

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WASHINGTON (3/17/10)--New escrow requirements related to recent Federal Reserve amendments to Regulation Z will become effective on April 1 for site-built homes and October 1 for manufactured homes. The amendments, which were issued in 2008, establish new protections for consumers from unfair or deceptive home mortgage lending and advertising practices and were issued under the authority provided by the Home Ownership Equity Protection Act (HOEPA). While the majority of the provisions of the final rule became effective in October 2009, portions of the rule were delayed until 2010. Specifically, portions addressing the escrow requirements under “higher priced mortgages” were delayed. The "higher-priced mortgage" subset was established by these rules, and, under the new requirements, lenders that offer so-called “higher priced” mortgages are required to consider the borrower's ability to repay the loan and to verify a borrower’s income and assets. The rules also impose limits on prepayment penalties and require escrow accounts for taxes and insurance, prohibit certain servicing practices, and prevent certain misleading and deceptive advertisements. Additionally, lenders are required to provide Truth in Lending Act (TILA) disclosures within three business days after a mortgage application was received and before fees are charged. These escrow provisions require lenders making higher-price mortgage loans that are secured by a first-lien to set up an escrow account for property taxes and homeowners insurance. However, this escrow requirement does not apply to subordinate lien loans or to cooperatives, as long as the association pays for property taxes and insurance. Escrow accounts are required for condominium property taxes, but not for insurance if it is paid by the association under a master policy.

NCUA approves first new CU of 2010

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WASHINGTON (3/17/10)--The National Credit Union Administration (NCUA) on Tuesday approved the charter of Battle Creek, Mich.-based Inspire Community Development FCU, the first federal credit union to be chartered in 2010. Inspire, which is a community development credit union, will be available to 50,000 potential members that live, work, worship, volunteer, attend school and transact business within Battle Creek once it opens this May. The credit union is backed by Guardian Finance and Advocacy Services, a community organization that provides “financial stewardship and advocacy services” in 11 counties within southwestern Michigan, the NCUA said. According to the NCUA, Inspire will offer share accounts, club accounts, money market accounts, share certificates, and both conventional and payday loan alternatives at first. The credit union expects to offer “share draft accounts, youth savings accounts, vehicle loans, and line-of-credit loans” by 2013, the NCUA release added. The establishment of this new credit union is “an encouraging development for consumers in Michigan, and is the latest manifestation of the commitment of credit union leaders across the nation who are working to extend service to those in disadvantaged communities,” NCUA Chairman Debbie Matz said.

Compliance Answers to overdraft questions

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WASHINGTON (3/17/10)--The Credit Union National Association (CUNA) has added five questions to its “frequently asked questions” (FAQ) on Regulation E’s new overdraft rules requiring members to consent before being assessed fees on overdraft services for ATM and one-time debit card transactions. The Reg E amendments become effective on July 1, 2010. CUNA will address the new Reg E overdraft requirements, as well as related Truth in Savings changes that became effective at the beginning of 2010, during a March 18 audio conference call. The program will not only review the rules, but will look at some practical issues in developing a compliance program. Meanwhile, in the FAQs, CUNA answers whether credit unions are still authorized to charge a fee for transferring funds from another account or a line of credit to cover an overdraft created by ATM or debit card usage. The answer is “yes,” according to CUNA, but credit unions must comply with Truth in Savings and Truth in Lending rules, CUNA explains. The new FAQs also address questions about how the new overdraft restrictions affect nonsufficient fund fees and negative balance fees that are currently being charged by credit unions. In another answer, CUNA alerts credit unions that if they want all the opt-in decisions for existing accounts to become effective on the same date, then they should state clearly on the opt-in/consent form that the member’s decision will be effective on August 15 or whatever earlier date that the credit union may select. August 15 is the date by which existing accountholders can no longer be charged overdraft fees for ATM and one-time debit transactions unless they have consented to the service. To read the FAQs and register for the audio conference, use the resource links.

Inside Washington (03/16/2010)

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* WASHINGTON (3/17/10)--The Federal Deposit Insurance Corp. (FDIC) has made available a list of depository institutions in which the agency has been appointed receiver, liquidator or manager. The list, as updated in The Federal Register, may be relied upon as of record notice, the agency said. The list was updated Wednesday ...

April 14 is comment due date for Fed CARD Act proposal

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WASHINGTON (3/16/10)--The Federal Reserve Board's recently issued proposal that would implement the provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) that come into effect on Aug. 22 was published in the Federal Register Monday. Although the Fed issued the proposal earlier this month, publication in the Federal Register starts the clock on the 30-day comment period. The most recent proposal, which follows two earlier CARD Act proposals that are already effective, will prevent card issuers from charging inactivity fees, account closure fees, or multiple penalty fees based on a single violation. Otherwise, the proposal outlines three alternatives for calculating penalty fees that are based on costs to the institution, the ability to deter repeated violations, and a list of "safe harbor" fees that will be provided by the Fed at a later time, after it receives comments on what these fees should be. Card issuers will also be required to inform consumers of the reasons behind an increased interest rate and must review any rate increases that have been made since the start of 2009. These rate increases will have to be reviewed every six months and, if applicable, must be reduced. The Fed release will remain open for public comment until April 14. The Credit Union National Association (CUNA) has also published a comment call on the Fed proposal, and will be accepting comments until April 6. To see the full Fed release, as well as a comment call from CUNA, use the resource links below.

In Congress Dodd leads the week with reform bill

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WASHINGTON (3/16/10)-- Senate Banking Committee Chairman Christopher Dodd (D-Conn.) on Monday released long-awaited legislation aimed at reforming the financial regulatory structure in response to the financial crisis of 2008-2009. Dodd's bill incorporates ideas from both Republican and Democratic sides of the aisle, and specifically would allow the Federal Reserve to continue to oversee both large banks and smaller state-chartered banks while also adding authority over some non-bank financial firms to the Fed's list of responsibilities. Dodd’s proposal also allows the National Credit Union Administration to maintain its independence and excludes credit unions with $10 billion or less in assets from the oversight authority of a proposed consumer watchdog. However, Credit Union National Association (CUNA) President/CEO Dan Mica noted that CUNA will advocate for removing all credit unions from the oversight of the new agency. "We believe a strong case can be made that no credit unions need direct supervision by the new agency," Mica said after Dodd's afternoon press conference. While the introduction of Dodd’s financial regulatory reform bill will likely take top billing for credit unions this week in Congress, there will be plenty of other action on Capitol Hill. Credit unions may not be closely following the ongoing healthcare debate, but there is some speculation that the budget reconciliation process that is begun by the passage of any healthcare legislation may also be used to eliminate the Department of Education's Federal Family Education Loans Program in favor of a federal direct lending program. CUNA has opposed the elimination of the FFELP program and will continue to monitor this issue closely throughout the week. One item on the congressional agenda that will not directly affect credit unions, but is still of interest, is jobs legislation, which, after being juggled between the House and Senate, could be returned to the House by the Senate later this week. Two of the many House hearings taking place this week are scheduled for Wednesday, when the House Financial Services Committee will discuss public and assisted housing revitalization initiatives and the link between the Federal Reserve’s bank supervision and monetary policy.

Inside Washington (03/15/2010)

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* WASHINGTON (3/16/10)--The Federal Deposit Insurance Corp. (FDIC) is using an old tactic from the savings and loan crisis to deal with bank failures. On Friday, the agency announced it sold $1.8 billion in bonds upheld by mortgage-backed securities on the balances sheets of seven failed banks. More than 70 investors participating in the deal acquired no assets from the banks, but have FDIC-guaranteed notes the agency can repay from income on underlying assets (American Banker March 15). The agency has not participated in such a bond sale since the early 1990s, and it is the first sale involving debt guaranteed by the FDIC ... * WASHINGTON (3/16/10)--Fannie Mae and Freddie Mac’s chances of becoming permanent fixtures of the government are increasing because the Obama administration hasn’t yet put forth a plan about their futures, financial observers said (American Banker March 15). Treasury Secretary Timothy Geithner said he would provide an outline with more details on their future, and Department of Housing and Urban Development (HUD) Secretary Shaun Donovan said the administration would have a plan “soon.” The administration plans to propose the enterprises’ overhaul during a House Financial Services Committee hearing March 23. Brian Gardner, KBW Inc. analyst, said the longer the industry--Fannie and Freddie--are nationalized, the harder it will be to privatize them. The market and Congress also are not equipped to take the enterprises out of conservatorship. The government placed Fannie and Freddie under its control in September 2008. Howard Glaser, former HUD official, said the government is relying on Fannie and Freddie for “load-bearing support” and the market “can’t live without them” ...

Gillibrand seeks Senate support for MBLs

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WASHINGTON (3/16/10)--Sen. Kirsten Gillibrand (D-N.Y.) encouraged her Senate colleagues to “free up lending” at credit unions “in every corner of America” by including S. 2919 in future job creation bills. “If we’re going to create new jobs and rebuild our economy for the long term, small businesses need more access to credit,” Gillibrand said, adding that S. 2919, which would increase the current member business lending cap of 12.25% to 25%, “would give small businesses more of the capital they need to get off the ground, grow and get thousands of Americans back to work.” The “de minimis” threshold of for MBL loans would also be increased from $50,000 to $250,000 under the bill. Gillibrand in a release last week cited Credit Union National Association estimates which state that lifting the MBL cap for credit unions would create $10 billion in new small business funding, resulting in over 100,000 new jobs, in the first year following enactment, and at no cost to taxpayers. “With the current cap on member business lending, it’s small businesses that are paying the price,” according to William J. Mellin, president/CEO of the Credit Union Association of New York. “They have fewer options and, given the current credit crunch, many small businesses are finding they have no options at all.” Syracuse Fire Department FCU would itself be able to lend an additional $7 million to members with small businesses, lifting its own member business lending cap to $14 million, according to the release. In New York state, lifting the MBL cap would result in the creation of 7000 new jobs, the release added. Senator Gillibrand is working to include this legislation in the upcoming small business jobs package that will be drafted by Congress. New York State has 461 credit unions, 15 of which are in Central New York. According to the Credit Union National Association, this legislation would help create more than 7,000 jobs in New York without government expenditures. Gillibrand is one of 10 co-sponsors for S. 2919, which was introduced by Sen. Mark Udall (D-Colo.) A House version of MBL legislation, which was introduced by Rep. Paul Kanjorski (D-Pa.) late last year, currently has 99 co-sponsors.

White House group explores consumer financial issues

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WASHINGTON (3/15/10)—The White House last week held a financial capability meeting intended to seek ways to increase American’s access to safe, affordable financial institution accounts and to increase consumer awareness and core competencies in understanding and managing personal finances. The meeting, held under the auspices of the President's Advisory Council on Financial Capability and Senior Advisor to the President Valerie Jarrett, gathered key advocacy organizations and other financial services representatives from around the country. The administration is planning soon to ask for comments through the Federal Register on developing a national strategy to promote financial capability for consumers of all income levels, representing diverse cultural, educational and age groups. Represented at the meeting were the National Credit Union Administration, the Credit Union National Association (CUNA), the Financial Services Roundtable, the American Bankers Association Foundation and an array of governmental, charitable, community, business and financial organizations. Addressing the group wereDeputy Treasury Assistant Secretary for Financial Education and Financial Access Michelle Greene; White House Office of Public Engagement Director Tina Tchen; U.S. Department of Education Deputy Chief of Staff Mathew Yale, Deputy and Elizabeth Vale, also of the White House Office of Public Engagement. CUNA's Deputy General Counsel Mary Dunn and NCUA's Director of the Office of Consumer Protection Kent Buckham were the credit union representatives at the meeting.

Inside Washington (03/12/2010)

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* WASHINGTON (3/15/10)--The Obama administration has picked Janet Yellen, president of the Federal Reserve Bank of San Francisco, to serve as vice chair of the Federal Reserve Board of Governors, succeeding Donald Kohn, who will step down when his four-year term expires in June. To fill the others slots on the board, the administration has selected Peter A. Diamond, a Massachusetts Institute of Technology economist, and Sarah Bloom Raskin, Maryland commissioner of financial regulation (The New York Times March 12). Yellen, 63, previously chaired the White House Council of Economic Advisers and was a member of the Fed Board of Governors during the Clinton administration. She has a Ph.D in economics from Yale and has taught in the Haas School of Business at the University of California-Berkeley since 1980. Yellen also wrote “The Fabulous Decade: Macroeconomics Lessons from the 1990s,” with former Fed vice chair Alan Blinder. Yellen declined comment to The New York Times about the offer ... * WASHINGTON (3/15/10)--Legislation that would end private lenders’ role in government-guaranteed student lending is sparking debate. Six Democratic senators object to including the bill in a healthcare reform package because they say the move would not save the government as much money as originally estimated--$67 billion over 10 years, compared with the earlier estimate of $87 billion (American Banker March 12). The bill’s sponsors continue to move forward. Sen. Tom Harkin (D-Iowa), a key sponsor, said the government has subsidized banks and wasted taxpayer money for too long. Last year, the House approved a bill to end the Federal Family Education Loan Program, which lets lenders offer student loans through partial government guarantees. Senate leaders packaged it with healthcare reform to generate support ... * WASHINGTON (3/15/10)--David Stevens, Federal Housing Administration (FHA) commissioner, defended FHA’s plans to boost capital reserves without down payment increases. Increasing down payments would have negative effects on the broader housing market, Stevens said (American Banker March 12). The FHA wants to increase the up-front premium for the majority of borrowers by 50 basis points to 225 basis points of the loan amount. The hike would be effective in April. Stevens said raising the down payments would generate $500 million for the agency, while the basis point raise would generate $5.8 billion ... * WASHINGTON (3/15/10)--The Federal Deposit Insurance Corp. (FDIC) approved an extension of the Safe Harbor Protection for Treatment by the FDIC as conservator or receiver in the failure at an insured depository institution in connection with a securitization or participation. The safe harbor protection prevents FDIC from seizing the assets. Under the safe harbor, all securitizations or participations in process through Sept. 30 are permanently grandfathered. “We will continue to seek broad agreement on securitization reforms that can be implemented by all the regulatory agencies,” said FDIC Chairman Sheila Bair ...

Feb. federal loan-mod report shows jump

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WASHINGTON (3/15/10)--The U.S. Treasury and the Department of Housing and Urban Development (HUD) on Friday reported that the number of mortgages modified through the Obama Administration’s Home Affordable Modification Program (HAMP) increased by 45% in February. In total, the HAMP program modified 170,000 mortgages during February, with “an additional 91,800 permanent modifications" being approved by servicers, the release added. According to the report, “borrowers in active trial and permanent modifications have saved more than $2.7 billion through HAMP modifications,” with a median savings of $519 per borrower, “or 36% of the median before-modification payment.” The program has been most active in California, with Florida ranking a close second in the number of active trials and permanent mortgage modifications. The New York, Los Angeles, Chicago, and Miami metropolitan areas had the highest HAMP participation among larger cities. For the full report, use the resource link.

Compliance Answers on Reg CC notification check-holding issues

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WASHINGTON (3/15/10)--The Credit Union National Association (CUNA) has advised credit unions that they may provide a change notice in their newsletter if their current disclosures under Regulation CC are no longer accurate due to the recent elimination of nonlocal checks. However, CUNA, in this month’s Compliance Challenge, warns that that very newsletter may be released after the Reg CC compliance date of March 29. In that case, credit unions must determine the cost benefit of producing a separate mailing. Another option is to simply wait until after the compliance date to inform members. No matter what action a credit union takes, its employees should ensure that their new account disclosures are updated, post information about the changes in their funds availability policies online. In general, credit unions should make as many online notifications as possible, and make sure that information posted in their lobbies and ATMs is correct. Addressing the new check policy more directly, CUNA said that the “reasonable” timeframe for holding a check under one of the Regulation CC exceptions is one extra business day for cashier’s, teller’s, certified, and “on us” checks otherwise subject to next day availability, five extra business days for checks subject to second business day availability, and six extra business days for checks deposited in nonproprietary ATMs. Additional days can be applied to large deposits, re-deposited checks, repeated overdrafts, and other emergency conditions, but the credit union itself is responsible for determining whether or not a given situation requires a longer hold period. For CUNA’s Compliance Challenge, use the resource link.

Freddie Mac 30-year mortgage rates remain below 5

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WASHINGTON (3/15/10)--In its weekly release on the state of the home loan market, Freddie Mac disclosed that the average rate of 30-year fixed-rate mortgages was 4.95% for the week ended March 11, a slight drop from the previous week's average of 4.97%. Freddie Mac vice president/chief economist Frank Nothaft said that the easing of mortgage rates was related to the comparatively “light week of mixed economic reports.” Fifteen-year mortgages averaged 4.32% during the week, a slight drop from the 4.33% average reported during the previous week. Thirty-year and 15-year fixed rate mortgages averaged 5.03% and 4.64%, respectively, this time last year. Freddie Mac also released numbers on less conventional mortgages, noting that the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.05% for the week, with the 1-year Treasury-indexed ARM averaging 4.22%. Average rates for the 5 and 1 year mortgages averaged 4.99% and 4.80%, respectively, last year.

Inside Washington (03/11/2010)

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* WASHINGTON (3/12/10)--Anti-money laundering (AML) issues are resurfacing on Capitol Hill. On Wednesday, lawmakers raised concerns at a House Financial Services subcommittee meeting about the oversight of money services businesses (MSBs). The meeting was held to discuss a bill by Rep. Spencer Bachus (R-Ala.), which would create an office in the Treasury to monitor MSBs’ compliance with the Bank Secrecy Act (BSA), according to American Banker (March 11). The bill could help financial institutions by reducing pressure to monitor the businesses. MSBs currently are required to comply with BSA and other AML statutes. There are an estimated 200,000 MSBs, with 40,831 registered, according to the Financial Crimes Enforcement Network. Financial institutions are often wary about doing business with MSBs because of regulatory scrutiny and concern about anti-laundering violations, the Banker said ... * WASHINGTON (3/12/10)--Sens. Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.) said that they will introduce a bill that would implement the Volcker Rule. Named after former Federal Reserve Board Chair Paul Volcker, the rule aims to ban proprietary trading (American Banker March 11). Levin and Merkley said the Proprietary Trading Act would ban such trading by federally insured depository institutions and also prevent commercial banks from investing in hedge or private equity funds. Levin said by the fall of 2008 that financial firms suffered about $230 billion in losses from proprietary trading. The bill would conditionally exempt certain trading, including low-risk proprietary trading and risk-mitigating hedging ... * WASHINGTON (3/12/10)--The Obama administration has not outlined a plan for reforming Fannie Mae and Freddie Mac because it is focused on other issues. However, it plans to tackle reform in 2011, said Treasury Secretary Timothy Geithner (American Banker March 11). The administration plans to release more details on overhauling Fannie and Freddie during a House Financial Services Committee hearing March 23. The department also will release a list of questions on strategy for public comment, he said ... * WASHINGTON (3/12/10)--The Treasury’s Community Development Financial Institutions Fund (CDFI) is seeking comment on applications for its Native American CDFI Assistance program. The agency seeks input on whether offering separate applications for financial assistance and technical assistance (TA) components would reduce the burden on applicants; whether an applicant eligibility screen should be applied before the application deadline, allowing applicants to determine beforehand if they are qualified for an award; whether detailed Matching Funds documentation should be collected later in the application review process, and if so, what would be a reasonable time to expect an applicant to provide the data; the merit of reducing the narrative page limits in the application; the potential burden of requiring specific documents to support proposed uses of TA funds; and the potential burden of requiring other documentation to support the application. Comments are due May 10 ...

Reg-Flex 5-year plan on next NCUA agenda

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ALEXANDRIA, Va. (3/12/10)--The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. ET on Thursday, March 18, will discuss proposed rules addressing its regulatory flexibility program. Specifically, the NCUA will be considering a proposal to change parts of its regulatory flexibility (RegFlex) program. The NCUA board will also discuss the fiduciary duties of federal credit union officials when considering merging or conversion. The Credit Union National Association has recently set up a working group to address how the NCUA selects and pursues credit union mergers. The NCUA’s five-year strategic plan will also be considered during the meeting. Additionally, the board will be updated on the status of the National Credit Union Share Insurance Fund during the meeting. A closed meeting of the board--during which the NCUA will discuss supervisory activities and personnel matters--will follow the session.

New growth spurt in House MBL backers

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WASHINGTON (3/12/10)--The momentum behind increasing the member business lending cap for credit unions continued to grow this week, with a total of 10 new legislators signing on to support Rep. Paul Kanjorski’s (D-Pa.) H.R. 3380, the Promoting Lending to America's Small Businesses Act. The additions of Reps. Frank LoBiondo (R-N.J.), Wally Herger (D-Calif.), Suzanne Kosmas (D-Fl.), John Linder (R-Ga.), Mike Quigley (D-Ill.), Jim McDermott (D-Wa.), Collin Peterson (D-Minn.), Bill Posey (R-Fl.), Howard Berman (D-Calif.) and Judy Chu (D-Calif.) brought the total number of cosponsors for the legislation to 99. H.R. 3380, which was introduced by Kanjorski and Rep. Ed Royce (R-Calif.) late last year, would increase the MBL cap from 12.25% of assets to 25% of assets, creating as much as $10 billion in new capital for small businesses within the first year after enactment. This additional funding could create as many as 100,000 new jobs, according to Credit Union National Association estimates. These funds and jobs could be added to the American economy at no cost to taxpayers. Kanjorski has asked House leaders Nancy Pelosi (D-Calif.) and John Boehner (R-Ohio) to include the MBL legislation as part of any future job creation legislation. For a full list of H.R. 3380’s cosponsors, use the resource link.

CUNA watches for CU issues in Dodds new reforms

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WASHINGTON (3/12/10)—The Credit Union National Association’s (CUNA) vice president of legislative affairs, Ryan Donovan, said that CUNA is looking forward to the release of Senate Banking Committee Chairman Chris Dodd’s (D-Conn.) financial regulatory reform legislation on Monday, and will fully analyze the legislation once it is released. "When regulatory restructuring legislation was considered in the House, we followed a set of principles in evaluating the measure, and we will evaluate the new Senate bill based on the same set of principles," Donovan said. “Those principles include ensuring that the examination and enforcement of consumer protection regulation is conducted by the prudential regulator, that credit unions do not end up paying more for new regulation than they are paying now, and that any single consumer protection rule writing agency would work to streamline duplicative and burdensome regulation,” Donovan added. In a release published on Thursday, Dodd commended Sen. Bob Corker (R-Tenn.) for being a “strong partner” during the legislative process, adding that many of Corker’s ideas will be included in Dodd’s final proposal. While the Banking Committee members “have made significant progress” toward a consensus package, Dodd said that “a few outstanding issues remain. Our talks will continue, and it is still our hope to come to agreement on a strong bill all of the Senate can be proud to support very soon,” Dodd added. Dodd said that he would plan to bring his legislation up for debate in the Banking Committee during the week of March 22nd. Corker, who spoke during a Thursday press conference, said that most of the larger concepts in the legislation have been agreed on, with some differences on the consumer protection agency being the only remaining division, Reuters reported. Sen. Majority Leader Harry Reid (D-Nev.) was widely reported on Thursday as saying that he expected financial reform legislation to move through the Senate by Memorial Day.

Inside Washington (03/10/2010)

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* WASHINGTON (3/11/10)--The Federal Reserve Board announced that its Consumer Advisory Council will meet March 25. The council is slated to discuss proposed rules to implement the Credit Card Accountability, Responsibility and Disclosure Act; foreclosure issues; and short-term and small-dollar loan products. Alan Cameron, Idaho Credit Union League president, is a member of the council ... * WASHINGTON (3/11/10)--The Securities and Exchange Commission’s (SEC) chief economist, James Overdahl, will step down March 31 to join NERA Economic Counseling (Bloomberg News March 10). Overdahl became chief economist three years ago. SEC Chairman Mary Schapiro merged Overdahl’s office with another and adopted short-selling rules that hedge funds claimed ignored financial analysis. Overdahl has not said if the short-sale rule or reorganization affected his decision to step down ... * WASHINGTON (3/11/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said he is continuing to work toward a bipartisan financial reform bill but did not offer any new details (American Banker March 10). Sen. Bob Corker (R-Tenn.), who is working with Dodd on the bill, said the talks have been positive but complicated. He did not indicate whether he had earned the support of ranking member Sen. Richard Shelby (R-Ala.) on the bill. Lawmakers continue to debate the legislation, especially regarding concerns that the Fed would retain oversight of financial companies. Sen. Mike Crapo (R-Idaho) said that if the Fed has jurisdiction over only large institutions, it could create the problem of defining ‘too big to fail’ ... * WASHINGTON (3/11/10)--Regulators issued 1,143 formal enforcement actions against financial institutions in 2009--which more than doubles the 2008 tally (American Banker March 10). Informal actions by regulatory agencies also doubled, reaching 1,099 in 2009. The Federal Deposit Insurance Corp. (FDIC) had the most with 551, compared with 273 in 2009. The Federal Reserve Board quadrupled actions to 191. The Fed filed 467 informal actions in 2009, compared with 216 in 2008 ...

FTC requests comment on mortgage relief rule changes

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WASHINGTON (3/11/10)—The Federal Trade Commission (FTC) this week issued for public comment proposed rules that would change its current rules for for-profit companies that provide mortgage assistance relief services. The proposal excludes financial institutions that own or service loans. While the release does not specifically mention state-chartered credit unions, “the effect is the same,” Credit Union National Association (CUNA) Senior Assistant General Counsel Jeff Bloch said. CUNA last year specifically asked the FTC to exclude state-chartered credit unions from these rules. The FTC proposed rules also exempt federally chartered credit unions, as they are not under the FTC's authority for purposes of this rule. Though the FTC “is mindful that consumers at risk of foreclosure could benefit from assistance in refinancing,” the FTC is “concerned that services purported to help consumers obtain refinancing could be marketed deceptively as a means to avoid disclosure.” The proposed rule, which was published in the Federal Register, would prohibit mortgage assistance providers from “making false or misleading claims” and impose new recordkeeping, disclosure, and compliance requirements. The proposed rule also would prevent the providers from collecting advance fees for their services. The FTC in the release specifically asks the public how the proposed rules would “affect the provision of different types of mortgage assistance relief services,” as well as individual consumers and service providers. The FTC has also requested any evidence that points to consumers being misled in the “promotion and sale” of mortgage assistance relief services. Information on any other types of mortgage assistance that is being offered to consumers should also be provided in any responses to the Notice of Proposed Rulemaking. The FTC also asked “what changes, if any” should be made to increase potential benefits and decrease potential costs for both the industry and consumers. For the FTC release, use the resource link.

NCUA request to move WesCorp case to fed court granted

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ALEXANDRIA, Va. (3/11/10)--The National Credit Union Administration (NCUA) has transferred a lawsuit against Western Corporate (WesCorp) FCU's former directors and current and former officers from the Los Angeles Circuit Court, a state court, to the U.S. District Court for the Central District of California. The NCUA in late 2009 moved to intervene as plaintiff in a lawsuit that seven natural person credit unions that are members of WesCorp brought against several current and former employees and officials of WesCorp. The Los Angeles Superior Court granted NCUA's motion to intervene on Feb. 24. NCUA filed a notice of removal with that court on March 5, an action that automatically removed the case from state to federal court. The NCUA claimed that it was rightfully intervening in the case as a substitute plaintiff, because it had served as conservator for WesCorp since March and was the "successor to all the rights, titles, powers and privileges of the credit union and any of its members, accountholders, officers or directors" pursuant to Section 207 of the Federal Credit Union Act. Based on the language of Section 207, the NCUA has asked the court for a declaratory judgment that it is the sole proper plaintiff in this matter. In the suit, the credit unions--which include 1st Valley CU, Cascade FCU, Glendale Area Schools FCU, Kaiperm Northwest FCU, Northwest Plus CU, Stamford FCU and Tulare County FCU--have alleged negligence and breach of fiduciary duties in connection with WesCorp's substantial investments in residential mortgage-backed securities and collateralized debt obligations. WesCorp was taken over by the NCUA in early 2009 after mortgage-backed securities that were held in its portfolio decreased due to the recession and plummeting home values across the nation. WesCorp late last year reported $1.2 billion in total Other Than Temporary Impairment (OTTI) losses for 2009, bringing its total OTTI losses for 2008 and 2009 to $6.8 billion.

Mica Reform should include streamlining of fed regs

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WASHINGTON (3/11/10)--Financial regulatory reform should include some "streamlining" of federal regulation to keep credit unions and other financial institutions out of the bog of repetitive regulations, but must also ensure credit unions continue to have their own regulator, Credit Union National Association (CUNA) President/CEO Dan Mica told a gathering of Washington insiders at the National Journal’s “Power Breakfast” Wednesday.
Click to view larger image Regulatory reform legislation should place a premium on streamlining rules for credit unions and other financials, CUNA President/CEO Dan Mica remarked during a panel discussion on financial services reform. Considering Mica's comments are (from left) Bill Swindell of the daily newsletter Congress Daily; Jill Hershey of the Financial Services Roundtable; Camden Fine, president and CEO of the Independent Community Bankers of America; and, on Mica's left, Travis Plunkett of the Consumer Federation of America.
Mica also addressed the need for balance in financial regulatory reform, saying that one of the greatest potential roadblocks to legislative progress would likely be the “politics of the day.” However, the CUNA leader added, if the financial reform legislation simply piles on “a whole new set of regulations,” Congress and the legislation itself will “hit a major roadblock” in Washington. Mica made his points while speaking as a participant on one of two panels during a forum focusing on financial regulatory reform sponsored by the National Journal publishing group. Mica's panel was made up of representatives of advocacy groups on all sides of financial regulatory reform: The Independent Community Bankers Association, the Financial Services Roundtable, the Consumer Federation of America, and CUNA. In the first panel of the program, two key players in Senate financial regulatory reform, Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.), shared some insight into the mechanics of crafting a Senate bill. Both have been instrumental in the bill taking form in the Senate Banking Committee, where they have seats. Corker said the new legislation must give regulators the authority needed to address financial issues, regardless of which body is doing the overseeing. He also said that the Senate’s version of reform legislation, which is expected to be released soon, is well balanced. The sold out event was covered by Fox Business Channel and Bloomberg TV.

CDFI Fund seeks reviewers for CMF applications

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WASHINGTON (3/11/10)--The Community Development Financial Institutions (CDFI) Fund this week announced that it is seeking assistance in its upcoming review of Capital Magnet Fund (CMF) applicants for fiscal 2010. The CMF program provides “competitively awarded grants to CDFIs and qualified nonprofit housing organizations to finance affordable housing and related community and economic development activities,” according to the CDFI Fund. According to the release, application reviewers must have “considerable expertise in the finance and development of affordable housing as well as community facilities and economic development activities.” Employees, partners or affiliates of organizations that have applied for access to funding or could potentially receive funding from a CDFI may not serve as applicant reviewers. These reviewers, once selected, will evaluate the “business strategy, leveraging strategy, community impacts, and organizational capacity” of applicants, as well as other factors. The review process will begin in May and will last for around one month. The CDFI Fund may also seek out assistance for a second round of CMF application reviews that would begin around midyear. For more on the CMF review program, use the resource link.

Senate passes flood insurance SBA programs through 2010

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WASHINGTON (3/11/10)--H.R. 4213, the American Workers, State, and Business Relief Act of 2010, which would extend authorization for the National Flood Insurance Program, Stimulus Act small business loan guarantee programs, federal unemployment insurance, COBRA benefits, and other select federal programs, passed the Senate 62 to 38 on Wednesday and will now move on to the House for consideration. The legislation extends funding for flood insurance and small business provisions through the end of 2010. The New Markets Tax Credit will also be extended through Dec. 31. The bill also contains several other tax and business-friendly provisions. Inactivity in the Senate led to the temporary expiration of many of these programs earlier this month, but temporary extenders, which run through the end of this month, were passed shortly thereafter.

CUNA comment on corporates suggests new model

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WASHINGTON (3/10/10)--Credit Union National Association (CUNA) President/CEO Dan Mica in a comment letter to the National Credit Union Administration (NCUA) said that CUNA supports corporate credit unions but not the business model that many, but not all, used. The comment letter, which addressed the NCUA's proposal to drastically revise the regulation of corporate credit unions, was developed by CUNA's Corporate Credit Union Task Force. Responding to the views of credit unions around the country that they would not recapitalize a corporate credit union, CUNA's letter called for a new business model for corporate credit unions that would require relatively smaller amounts of capital and result in small balance sheets comprised mostly of the settlement balances of natural person credit unions. This approach would allow corporate credit unions to focus on key services for natural person credit unions, such as settlement, payment and liquidity. Corporate entities could also help meet the investment needs of credit unions by providing advisory or management services or by providing access to key investment services through a corporate credit union service organization, the letter suggested. “Few issues have been as disruptive to the entire credit union system as the corporate credit union investment problems that led to the establishment of the NCUA's Corporate Stabilization program. Natural person credit unions are in the process of paying approximately $9.5 billion, as presently estimated, for losses that resulted from the current business model. This includes an estimated $6 billion for the Corporate Stabilization, about $3 billion of lost reserves and undivided earnings of corporates, and upwards of $400 million in paid-in capital at corporates,” the letter added. Shifting corporate credit union business practices toward payment and settlement services "would protect credit union influence on the financial system and provide opportunities for economies of scale," CUNA's letter emphasized. Corporates could also meet the investment needs of natural person credit unions by operating or providing access to money market mutual funds and other investment funds and providing brokerage or financial advisory services. A move toward these types of services, which could be "provided through the entity, entities or through subsidiaries or vendors," would allow the existing corporates to avoid "undue regulatory intervention," according to CUNA. Corporates would still be able to "serve natural person credit unions' interests effectively, the letter added. While the NCUA's proposal provided a reasonable regulatory framework that would accommodate a new business model for corporate credit unions, CUNA in the letter also called on NCUA to make significant changes, including taking a leadership role in facilitating the transition to a new model. While the capital and prompt corrective action provisions are generally appropriate, CUNA said that the NCUA has reserved too much authority for itself to require additional capital beyond the levels in the proposal and to downgrade a corporate credit union's net worth for seemingly arbitrary reasons. While it felt that the requirements for disclosure of compensation of officials were too cumbersome, CUNA did speak in support of allowing up to 20% of the directors of a corporate credit union to come from outside the credit union system to provide additional expertise to the corporate. CUNA in the letter also announced that it will form a new working group to address potential issues caused by the pending corporate credit union system transitions. Further, the letter urges the agency to address the issue of corporate credit unions' legacy assets so that future capital will not be at risk for future losses related to those current mortgage and asset backed securities. CUNA commended NCUA Chairman Debbie Matz for addressing this issue, but asked the agency to issue a communication to credit unions on its potential plans for the legacy assets. The NCUA should also develop a plan for dealing with those assets that is in the best interest of credit unions before the final corporate rule is adopted, CUNA added. For the full comment letter, use the resource link.

House committee chair Frank CRA to be re-examined

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WASHINGTON (3/10/10)--Speaking during a Tuesday House Financial Services Committee hearing on community development financial institutions (CDFIs), Committee Chairman Rep. Barney Frank (D-Mass.) suggested that he and committee colleague Rep. Maxine Waters (D-Calif.) could soon re-examine and consider expanding the reach of the Community Reinvestment Act (CRA). Potential legislation that would extend the CRA beyond banks to other financial institutions, including credit unions, has several co-sponsors and could come up in Congress this year. The National Federation of Community Development Credit Unions last year spoke out against forcing credit unions under CRA standards, instead promoting voluntary initiatives such as its Community Development Partners Program. Assistant Treasury Secretary for Financial Institutions Michael Barr called for greater support for CDFIs, and Community Development Financial Institution Fund Director Donna Gambrell highlighted the CDFI Fund’s recently begun review of its authorizing statute. Rep. Spencer Bachus (R-Ala.), the ranking minority member of the committee, said that greater oversight of CDFI programs is needed. In a prepared statement, Bachus said that while CDFIs “have a proven track record of providing economic development dollars to underserved communities,” the success of CDFIs should not “lead to looser standards” and the government should “ensure that the CDFI Fund program is properly administered so that funds are provided to individuals and entities that both have productive uses for it and would otherwise not have access to financing.” Bachus also opposed redirecting funds from the Treasury’s Troubled Asset Relief Program into the CDFI Program.

Inside Washington (03/09/2010)

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* WASHINGTON (3/10/10)--The New York Times Tuesday reported that the Senate’s upcoming financial regulatory reform plan would limit the Federal Reserve’s regulatory powers to the largest of banks. The story, which was based on anonymous sources, said that under the new regulatory plan, which is expected to be released this week, the Fed would only cover banks with over $100 billion in assets, effectively limiting the Fed’s influence to 23 of the nearly 5,000 bank holding companies on U.S. shores. Banks that are not covered by the Fed will be overseen by a new regulator that is comprised of a potentially merged Office of the Comptroller of the Currency and Office of Thrift Supervision. State banks would fall under the purview of the Federal Deposit Insurance Corp. Sens. Chris Dodd (D-Conn.), Bob Corker (R-Tenn.) and Mark Warner (D-Va.) reportedly support the plan. Sens. Judd Gregg (R-N.H.) and Mike Johanns (R-Neb.) oppose the plan, according to the Times… * WASHINGTON (3/10/10)--Thirty-nine members of Congress have provided their support for the 2010 Credit Union Cherry Blossom Ten
Click to view larger image Click for larger view
Mile Run by signing up as honorary race chairs. The legislators represent 22 states and the District of Columbia. The run will be held April 11 in Washington, D.C. PSCU Financial Services is the lead corporate sponsor. The money earned from the race will benefit Children’s Miracle Network hospitals. Runners and other individuals have donated more than $150,000 in the online giving program for the 2010 run. Credit unions also will provide 500 volunteers who will serve on race day. Last year, the run had 133 sponsors, including 95 credit unions. Roughly 15,000 runners participated. This will be the ninth year credit unions have sponsored the event. Through the sponsorship, credit unions have donated $4 million to Children’s Miracle Network hospitals. The pictured map indicates which U.S. states have honorary chairs and where children’s hospitals are located. (Photo provided by PSCU Financial Services) ... * WASHINGTON (3/10/10)--Federal Deposit Insurance Corp. (FDIC) Sheila Bair said financial reform should include nonbanks. She spoke Monday to a business economists group. Reforms enacted after the thrift crisis of the 1980s contributed to safer industry practices, but the reforms “erred” because they excluded nonbanks and provided incentives for financial services to grow outside of the regulated sector, she said (American Banker March 9). The measures put in place to eliminate moral hazard encouraged risk-taking by nontraditional bankers in the “shadow banking system,” she added. Policymakers are debating financial reform and making sure it affects all aspects of the financial industry ...

Congress this week Senate awaits reform House committee bustling

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WASHINGTON (3/9/10)--With the Senate Banking Committee awaiting the release of the Senate version of a comprehensive financial regulatory reform bill, much of the committee action for credit unions will take place on the House side. The House Financial Services Committee will open its week on Tuesday by holding a hearing entitled, "Community Development Financial Institutions (CDFIs): Their Unique Role and Challenges Serving Lower-Income, Underserved and Minority Communities." Witnesses set to testify during this hearing include Community Development Financial Institution Fund Director Donna Gambrell, Assistant Treasury Secretary for Financial Institutions Michael Barr, and various other witnesses. Financial services subcommittees will also be active, with the subcommittee on financial institutions discussing the regulation of money service businesses and the capital markets, insurance and government sponsored enterprises subcommittee discussing the role of the homeowners defense act in mitigating and managing the consequences of natural disasters. The Financial Services capital markets subcommittee will also convene on Thursday to discuss corporate governance, and the House subcommittee on housing and community opportunity on Thursday will discuss the Federal Housing Administration Reform Act of 2010. Despite the light hearing calendar, the Senate will be busy discussing possible House amendments to a jobs bill that was passed by the Senate last week.

Compliance Challenge Can CUs give overdraft incentives

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WASHINGTON (3/9/10)--In this month's Compliance Challenge, the Credit Union National Association (CUNA) addresses a question regarding overdraft protection policies. In the Challenge, a credit union asks whether or not it can provide incentives such as gift cards to members that choose to opt in to its overdraft service for ATM and one-time debit card transactions. According to CUNA, while credit unions may offer incentives to members that opt-in to the overdraft service for ATM and one-time debit card transactions, the same incentive would also need to be extended to members that do not opt in to the overdraft program. Additionally, credit unions and other institutions may offer incentives to members or customers that enroll in overdraft services for check and ACH transactions, as these transactions are not covered by Regulation E overdraft rules. Regulation E also requires credit unions and other financial institutions to apply the same account terms, conditions, and features to all members or customers, regardless of their opt-in choice, and this rule would also apply in cases of debit card abuse. In the example provided in the Compliance Challenge, CUNA said that a credit union can only suspend the debit card of a member that has not opted in to its overdraft program, but violates its stated overdraft account rules, if that rule also applies to members or customers that have opted in to the overdraft program. To see the full Compliance Challenge, use the resource link.

Inside Washington (03/08/2010)

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* ALEXANDRIA, Va. (3/9/10)--This week is National Consumer Protection Week, a designation intended to emphasize the importance of thrift and the wise use of one’s financial resources and to highlight that message, National Credit Union Administration Chairman Debbie Matz issued a statement. “This week-long focus on the importance of consumer education and protection presents a perfect opportunity for credit unions to showcase their commitment to members,” Matz commented in a release. She lauded credit unions for their historic commitment to providing members with basic money management information. “But more can and should be done. I encourage credit unions to redouble their efforts to ensure that members are educated and aware consumers, and are well-equipped to navigate an increasingly complex financial landscape. Such an investment in consumers is credit union member service in action,” she said… * WASHINGTON (3/9/10)--Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, sent a letter to the four largest U.S. banks demanding immediate steps to write down second mortgages (The Wall Street Journal March 8). Frank sent the letter to CEOs at Wells Fargo and Co., JPMorgan Chase and Co., Citigroup Inc. and Bank of America Corp. Bank of America said it is committed to working with interested parties to develop more solutions to help homeowners modify first and second mortgages. Wells Fargo said it is helping as many customers as it can to find options to help pay their home equity loans. JPMorgan and Chase did not respond to the letter ... * WASHINGTON (3/9/10)--The Office of Thrift Supervision (OTS) is seeking comments on a proposal regarding applications for conversion from OTS-regulated, state chartered savings association to federal savings association; national bank, state savings bank or credit union to a federal savings association; and a state mutual holding company to a federal mutual holding company. The application is reviewed to determine whether it meets applicable eligibility requirements for the conversion and complies with applicable OTS policies. Applications also are reviewed to determine whether special conditions are needed to establish the institution’s authority to continue activities or investments permitted under state law but not authorized for a federal association, according to the Federal Register (March 8). Comments must be submitted by April 7 ...

SBA seeks comments on increased openness

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WASHINGTON (3/9/10)—Interested parties have until March 19 to send their ideas to the U.S. Small Business Administration on how the agency can become “more transparent, participatory, and collaborative.” The request for public comment is in accordance with the Obama administration’s “Open Government Initiative,” under which certain federal agencies are required to publish a plan, one that incorporates public comment, on becoming more transparent. Some commenters have already recommended that the SBA consider such things as improving functionalities of the agency website, offering specific data like performance metrics, and participating in online communities. Questions can be directed to opengov@sba.gov. Thirty-six government agencies, including the Federal Reserve Board and the Federal Deposit Insurance Corp., are listed on a government website as being required to seek public comment on becoming more open. The National Credit Union Administration is not on the list.

Inside Washington (03/05/2010)

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* WASHINGTON (3/8/10)--On Thursday, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) attempted to mitigate criticism regarding his proposal to place a consumer division in the Federal Reserve Board. Financial observers have said the division would equal the status quo (American Banker March 5). However, Dodd said he is advocating for an independent regulator in the Fed that isn’t controlled by the bank. Lawmakers have questioned Dodd’s logic regarding the proposal ... * WASHINGTON (3/8/10)--National Credit Union Administration (NCUA) Board Member Michael Fryzel visited Northern CU, Chicago. He met with CEO Ed Berg and Board Chairman Jim Poskozim. He also spoke with credit union staff and toured the corporate headquarters. “First Northern’s innovative approach to member service is impressive,” Fryzel said. “Despite the current economic recession, the credit union continues to have a positive impact on its community and is able to meet the needs of its members through its financial services and financial education efforts. First Northern also has established an excellent presence at its Rockford, Ill., branches where they are an active participant in the Bank on Rockford program.” Pictured are, from left: Poskozim, Fryzel and Berg. First Northern has $2.8 million in assets. (Photo provided by the National Credit Union Administration) ...

NCUA-Federation reach 122 in LICU funding call

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ALEXANDRIA, Va. (3/8/10)—In a jointly sponsored audio conference, the National Credit Union Administration (NCUA) and National Federation of Community Development Credit Unions reached 122 participants with specifics about the U.S. Department of the Treasury’s new Community Development Capital Initiative (CDCI). The CDCI program, announced Feb. 3, ix designed to increase lending in low-income communities. It gives Treasury a means to invest low-cost capital in specific financial institutions, including certain certified Community Development Financial Institution (CDFI) credit unions. Participants were told that time is of utmost importance, the application deadline is just weeks away. Low-income credit unions must apply for funding by April 2, and uncertified LICUs must apply for CDFI certification by April 16. “As the (program) rules are being finalized, NCUA wants to facilitate participation by the credit union community in every way possible,” noted NCUA Chairman Debbie Matz. “NCUA’s audio conference and the new efforts announced underscore my commitment to work closely with the industry in order to ensure the broadest and fullest benefit from this innovative program.” The new efforts announced by NCUA during the call include:
* The availability of technical assistance grants to assist eligible credit unions develop a Secondary Capital Plan for the purpose of meeting the application requirement for CDCI funding; and * A notice to eligible credit unions indicating whether, per NCUA’s preliminary analysis, the credit union will require matching funds in order to access CDCI funding.
The CDCI program enables low-income credit unions to apply for up to 3.5% of total assets, but not more than 50% of capital and unimpaired surplus. CDCI capital investments will carry an initial 2% rate, three percentage points lower than the rate offered by Treasury’s prior Capital Purchase Programs. Program inquiries may be directed to LICUCapital@ncua.gov. For application and program materials, use the resource links below.

CUNA to NCUA CUs need help dealing with NCUSIF costs

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WASHINGTON (3/8/10)--In a letter to National Credit Union Administration (NCUA) Chairman Debbie Matz, the Credit Union National Association (CUNA) called on the NCUA to “work within its current statutory authority to help credit unions bear the burden” of “unprecedented National Credit Union Share Insurance Fund (NCUSIF) costs.” While CUNA commended the NCUA for helping credit unions “spread out the costs associated with the funding of the Corporate Stabilization Fund,” CUNA suggested that the NCUA temporarily reduce the normal operating level of the NCUSIF from the current 1.3% to no lower than 1.2%. This move could reduce the amount of funds that credit unions must pay into the insurance fund, according to CUNA. CUNA also proposed allowing insured credit unions to spread out their NCUSIF costs over several years, “even if the normal operating level is at or above 1.2%, consistent with a restoration plan to ensure the NCUSIF is properly funded.” CUNA also commended Matz for her open communication with U.S. Treasury Secretary Tim Geithner on the issue of member business lending, and CUNA President/CEO Dan Mica said that this letter was referenced both in his conversation with Geithner and CUNA-backed House testimony that was delivered in late February. CUNA is developing a white paper on alternative capital for credit unions and will share that paper with the NCUA, the National Association of Credit Union Supervisors, and the credit union system once it is completed. CUNA will also comment on the NCUA’s recently proposed corporate credit union rule changes in a letter to be released next week. CUNA will also provide the NCUA with input on its current process for handling credit union mergers through its newly founded Mergers Task Force. CUNA’s recommendations will be provided to the NCUA by May 1.

2.6M-asset FCU in Pa. is liquidated

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ALEXANDRIA, Va. (3/8/10)—With $2.6 million in assets and 1,085 members, Lawrence County School Employees FCU(Lawrence FCU) of New Castle, Pa. was liquidated by the National Credit Union Administration Friday. This is the fourth federally insured credit union liquidation in 2010. First Choice FCU, also of New Castle, purchased and assumed a portion of Lawrence FCU’s assets, loans and shares, enabling Lawrence FCU’s members to receive uninterrupted service. The NCUA announcement said the agency retained the remaining assets, loans, and shares, and it attributed the liquidation to Lawrence FCU’s “declining financial condition.” The purchaser, $22.3 million-asset First Choice, is described as a full-service credit union with a broad array of financial services. It already served approximately 4,415 members who either live, work, worship, or attend school in Lawrence County or work for one of the companies in its field of membership.

UBIT task force says Bellco decision shows the way

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WASHINGTON (3/8/10)--The U.S. District Court’s summary judgment decision on one of the issues in the recently concluded Bellco CU case “represents ‘substantial authority’ under federal tax law” for the position that financial products and services that are sold by credit unions to their members are exempt from unrelated business income taxes, Foley & Lardner LLP has concluded. Judge Christine M. Arguello, who is presiding over the case, ruled last November that investment products that Bellco sold to its members, including stocks, bonds, mutual funds and annuities, were "substantially related" to Bellco's tax-exempt purposes, and therefore the income from those activities was, under the law, exempt from UBIT. The Foley & Lardner law firm, who represented Bellco in its case against the U.S. government, stated in its memorandum that credit unions would not be subject to civil tax penalties if they file UBIT tax returns “treating income from selling financial products and services to members as exempt from UBIT.” “Also, professional tax return preparers can prepare Form 990-T for a credit union treating income from selling financial products and services to members as exempt from UBIT without risking the separate civil tax penalty that can be imposed on preparers,” according to the release. However, the firm mentioned that it believes that the U.S. Internal Revenue Service “will still assert that financial product sales to members are unrelated business activities at credit unions” and “may well claim that additional tax is due if a credit union does not report income from such sales as unrelated business taxable income” on their income tax returns. Additionally, Bellco would not represent substantial authority if the summary judgment is successfully appealed. Since the judge has not yet rendered a decision on other issues in the case following a trial on those issues in December, an appeal is still possible. Also, the release noted that “the court in Bellco decided that income from selling financial products and services to non-members is subject to UBIT.” The memo was prepared at the request of the UBIT Steering Committee (consisting of representatives from the Credit Union National Association, the American Association of Credit Union Leagues, the National Association of State Credit Union Supervisors, and CUNA Mutual Group). The UBIT Steering Committee does not give tax advice, but said the Foley and Lardner memorandum contains general information that may be helpful to state-chartered credit unions' legal, tax, and accounting professionals in determining whether this decision constitutes “substantial authority” for their credit union to not pay, or to seek a refund of, UBIT paid on income from sales of brokerage or annuities products. Bellco last year challenged the IRS’s assertion that UBIT was due on three of its products, and sought $199,293 in tax refunds from the IRS.

Realtor group pens its support of MBL cap lift

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WASHINGTON (3/8/10)--The National Association of Realtors last week joined the growing chorus of supporters urging a lift of the credit union member business lending cap by strongly urging congressional representatives to "follow the lead" of Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) and increase "the ability of our nation's credit unions to make commercial loans and provide much needed financial support to our fragile economy." In a letter that was delivered to all House members, the NAR specifically spoke up in support of H.R. 3380, which would increase the current MBL cap of 12.25% to 25% of a credit union’s total assets and raise the “de minimis” threshold for MBLs to $250,000. The NAR was one of several business organizations included in a dear colleagues letter sent earlier this week by Reps. Ed Royce (R-Calif.) and Paul Kanjorski (D-Pa.). The legislators, along with 58 fellow congressional representatives, also last week urged House leaders Nancy Pelosi (D-Calif.) and John Boehner (R-Ohio) to include member business lending provisions in any potential job creation packages that pass through the House in the near future. Current estimates predict a total of 90 co-signors for any potential MBL legislation. CUNA has also advocated for lifting the MBL cap through grassroots action as well as House and Senate testimony in recent weeks, and late last month directly discussed MBLs and other credit union issues with U.S. Treasury Secretary Tim Geithner and other high-ranking Treasury officials.

Know-your-member rules are clarified

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VIENNA, Va. (3/8/10)—The Financial Crimes Enforcement Network (FinCEN) said it worked closely with federal regulators to hammer out new guidance for financial institutions regarding the beneficial ownership of accounts. On Friday, FinCEN released “Guidance on Obtaining and Retaining Beneficial Ownership Information,” which not only clears up some confusion associated with the rules, it also consolidates regulatory expectations. The guidance reiterates that credit unions and all financial institutions are obliged to know if a member or customer presents a risk under the Bank Secrecy Act (BSA), which calls upon financial institutions to help fight such crimes as money laundering, terror financing, tax evasion, and sanctions evasion. If an accountholder appears to be a heightened risk, an institution should conduct enhanced due diligence. According to a report by the Government Accountability Office (GAO), law enforcement officials are concerned that criminals are increasingly using United States shell companies to conceal their identity and their illicit activities, FinCEN notes. “Information on beneficial ownership in account relationships provides another tool for financial institutions to better understand and address money laundering and terrorist financing risks, protect themselves from criminal activity, and assist law enforcement with investigations and prosecutions. FinCEN Director James Freis, Jr. said of the new guidance, "While much of the document consolidates previously issued regulatory guidance, by synthesizing the disparate obligations, FinCEN is highlighting how the rules can be mutually reinforcing in mitigating risks." Use the resource link below to access the guidance.

Levin to serve as House Ways and Means chair

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WASHINGTON (3/5/10)--Rep. Sander Levin (D-Mich.) will take on chairmanship of the House Ways and Means Committee after House Democrats on Thursday elected to remove Rep. Pete Stark's (D-Calif.) name from consideration. House Speaker Nancy Pelosi, of California, on Wednesday announced that Stark would fill the chairmanship on an interim basis as Rep. Charles Rangel (D-N.Y.) takes a leave of absence from the panel. In a Thursday release, Levin said that he looks forward to "moving vigorously" on the Ways and Means Committee agenda, which includes "job creation, economic development, and health care." Moving on this agenda "means working collaboratively with Democrats on the Committee and the entire caucus, with Congressional leadership and the Obama Administration," Levin added. Levin, who signed on in support the Credit Union Regulatory Improvements Act in 2006 and has supported the tax status of federal credit unions during his time on the committee, has been a long-standing friend of the credit union movement. Levin was also among several candidates that were endorsed by the Michigan Credit Union League board of directors in 2006. Credit Union National Association Senior Vice President of Legislative Affairs John Magill said that CUNA "looks forward to a continued good working relationship" with Levin, "not only in Washington but with the leagues back in Michigan."

SBA to resume loans after temp. extender is signed

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WASHINGTON (3/5/10)--The U.S. Small Business Administration (SBA) has announced that it will be able to resume Recovery Act loans on March 10 after President Obama on Tuesday signed temporary funding legislation. The funding, which has been extended until March 28, "will support about $1.8 billion in small business lending," according to the SBA. New approvals of eligible loans with the higher guarantee and reduced fees made possible by the Recovery Act are expected to resume on March 10. "Loan applications from borrowers in SBAs Recovery Loan Queue will be funded first, followed by new loan applications," the SBA said. In a Thursday release, Small Business Administrator Karen Mills said that the SBA will "continue working with the President and with Congress to move forward with proposals for a longer extension" of the loan programs that have been successful in helping jump-start the economic recovery for Americas small businesses. H.R. 4691, the "Temporary Extension Act of 2010," extends funding for the National Flood Insurance Program, Stimulus Act small business loan guarantee programs, federal unemployment insurance, COBRA benefits, and other select federal programs. The SBA said that H.R. 4691 "does not affect other SBA Recovery Act programs, including the Americas Recovery Capital loan program" or microloans. H.R. 4213, which would extend flood insurance and small business provisions through the end of 2010, could be voted on this week.

Inside Washington (03/04/2010)

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* WASHINGTON (3/5/10)--The Treasury Department has released more details about how a proposed Volcker rule, named after former Fed chair Paul Volcker, would affect proprietary trading and cap financial institution size. The Obama administration wants to limit banks from holding more than 10% of the industry’s net liabilities (American Banker March 4). The curb would apply when a bank tries to acquire more institutions. The details released by the Treasury also defined proprietary trading as purchasing or selling, or acquiring or disposing of stocks, bonds, options, commodities, derivatives or other financial instruments for the company’s trading, not on behalf of a customer, for marketing-making activities or for facilitating a customer relationship ... * WASHINGTON (3/5/10)--Financial industry observers worry that lawmakers’ concerns over how to regulate consumer protection would actually leave holes in consumer protection plans and result in an uneven the playing field between banks and nonbanks. The latest proposal would create a division of the Federal Reserve Board that would write rules for all lenders but would have no enforcement or authority over nonbanks--such as payday lenders and check cashers (American Banker March 4). Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, questioned how lawmakers could create a consumer protection agency to regulate bank and nonbank products while not giving the authority to enforce rules against predatory products. The proposal is being discussed by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Bob Corker (R-Tenn.) ... * WASHINGTON (3/5/10)--“Saturday Night Live” comedians and veterans performed in a sketch that promoted the proposed Consumer Financial Protection Agency and was posted on funnyordie.com Wednesday. The sketch, directed by Ron Howard, features President Obama, played by Fred Armisen, dreaming about the proposed agency with appearances from six former U.S. presidents. The presidents, played by actors including Will Ferrell, Dana Carvey, Darrell Hammond, Dan Aykroyd, Jim Carrey and Chevy Chase, encourage Obama to enact the agency. At the opening of the sketch, Obama said that he wants to enact a consumer protection agency to protect consumers, and “lobbyists and Sen. [Richard] Shelby [R-Ala.] act like I want to change the national anthem.” The sketch’s actors also noted that banks and credit card companies are “ripping off” consumers ...

MBL drafters continue push for more support

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WASHINGTON (3/5/10)--In a letter circulated on Wednesday, Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.), the architects of H.R. 3380, which would increase the cap on member business lending for credit unions to 25%, continued to urge their House colleagues' to support the measure, saying that it makes "real economic and fiscal sense to enhance credit unions' ability to lend to their business-owning members." The legislation would also raise the "de minimis" threshold for member business loans to $250,000. Several trade groups, including the National Association of Realtors, the National Small Business Association, and the National Association of Mortgage Brokers, on Wednesday joined the chorus of supporters that are behind lifting the cap on member business lending (MBL) for credit unions by co-signing the letter. In the letter, Kanjorski and Royce cited Credit Union National Association estimates which predict that lifting the MBL cap would inject $10 billion in new capital into the economy and create as many as 100,000 new jobs at no cost to taxpayers. According to Kanjorski and Royce, "allowing credit unions to extend loans to credit-starved small businesses will add fuel to a self-sustaining economic expansion." "Congress just needs to flip on the switch," they added. Kanjorski and Royce also communicated the need for MBL support in a dear colleague letter earlier this week. That letter was signed by 58 members of the House. Individual small businessowners have also recently called on Congress to support increasing the member business lending cap by writing to their congressional representatives directly.

Fed plan would shield card users from penalties fees

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WASHINGTON (3/4/10)--The Federal Reserve (Fed) has proposed amending Regulation Z “to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider increases in interest rates.” The proposed rule is the third portion of the Fed's phased implementation of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. These portions of the CARD Act will become effective on Aug. 22. In a release announcing the potential changes, Fed Governor Elizabeth Duke said that the proposal "addresses two key costs of using a credit card--fees and interest rates." The rule, if approved, “would prevent credit card issuers from charging large penalty fees for small missteps by consumers and would require issuers to reevaluate rate increases imposed since the beginning of last year," she added. Specifically, the proposal would prevent card issuers from charging late payment and over limit fees in excess of the amount of the purchase which triggered the fee. Inactivity fees and, in some cases, multiple penalty fees would also be prevented under the proposal. Credit issuers would also be required to “inform consumers of the reasons for increases in rates” and “evaluate” any rate increases made since Jan. 2009. These rates could then potentially be reduced. The proposal will remain open for comment for thirty days after it is published in the Federal Register.

Flood insurance SBA programs extended to March 28

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WASHINGTON (3/4/10)--Funding for the National Flood Insurance Program, Stimulus Act small business loan guarantee programs, federal unemployment insurance, COBRA benefits, and other select federal programs was temporarily extended when President Obama signed H.R. 4691, the “Temporary Extension Act of 2010.” The legislation extends funding for flood insurance and small business provisions through March 28th. However, the legislation does not contain longer-term solutions to these issues. Under the legislation, the Small Business Administration will be provided $60 million in funding until March 28. The legislation also extends some fee reductions and eliminations associated with the small business loan programs contained in the Stimulus Act. While the House passed similar legislation last week, these and other federal programs expired last Sunday due to inactivity on the part of the Senate. H.R. 4213, which would extend flood insurance and small business provisions through the end of 2010, is awaiting a vote, and could be voted on this week.

NCUA says cease building plan to CU in S.D.

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ALEXANDRIA, Va. (3/4/10)--The National Credit Union Administration (NCUA) on Wednesday issued a cease and desist order against South Dakota-based Rapid City Telco FCU. The NCUA issued the order after the credit union’s plan to build a new central office created regulatory and safety and soundness concerns. Rapid City Telco has agreed to obey the order, according to the NCUA. The order was the first to be made in 2010. Rapid City Telco currently serves over 6,000 members through four branches.

Inside Washington (03/03/2010)

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* WASHINGTON (3/4/10)--President Barack Obama will not announce his nominations to fill vacancies on the Federal Reserve Board this week, according to an administration official speaking on condition of anonymity. Obama has not made any decisions or offers, the official said (American Banker March 3). On Monday, Fed veteran and vice chair Donald Kohn announced he would step down from the position when it expires in June. His resignation will leave a third opening on the seven-member board ... * WASHINGTON (3/4/10)--Offshore-banking legislation pending in the House may not require foreign financial institutions to have every customer verify that their account does not benefit a U.S. taxpayer, according to Treasury Department officials (Dow Jones March 3). Banks would be able to rely on existing information from anti-money-laundering safeguards to confirm the accounts are not tied to U.S. taxpayers, the newspaper said. No additional reporting to the U.S. Internal Revenue Services (IRS) would be needed. The bill aims to curb offshore tax evasion. A 30% withholding tax would be applied to all payments originating in the U.S. to foreign entities that did not enter into IRS disclosure agreements ... * WASHINGTON (3/4/10)--Sen. Carl Levin (D-Mich.) proposed Tuesday a reserve fund that a bank could use when collateral posted by small business borrowers drops in value. The reserve would be funded by contributions from small businesses and matching contributions from the government and states. The move would help community banks lend to small businesses (American Banker March 3). Similar legislation has been introduced in the House by Levin’s brother, Rep. Sander Levin (D-Mich.). The bill could pass in the House, but its fate in the Senate is unclear, observers said. The Credit Union National Association (CUNA) is advocating giving more credit to small businesses. CUNA would like to see lawmakers raise the member business lending cap at credit unions from 12.25% to 25% ... * WASHINGTON (3/4/10)--A tentative agreement between Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Bob Corker (R-Tenn.) would give the Federal Reserve Board power to enforce consumer protection. House Financial Services Committee Chairman Barney Frank (D-Mass.) called the deal “a bad joke” (American Banker March 3). Sen. Richard Shelby (R-Ala.) said the new consumer protection division would operate without the Fed’s input. Regulators also should have the power to veto consumer protection proposals, he said. Dodd and Corker’s plan also would allow regulators to appeal rules to a new systemic council that could override them with a two-thirds vote. Shelby said allowing the council to override rules was “silly.” The president would appoint a Senate-confirmed director of consumer protection that could write rules for all banks and nonbanks. However, the division could only enforce the rules against institutions with more than $10 billion in assets and large mortgage lenders. Banks with fewer assets would be examined by a primary regulator. When asked by reporters how the proposal was shaping up, Corker said the talks are “continuing to go well.” Sen. Dick Durbin (D-Ill.), the No. 2 Democrat in the Senate, said he was open to what Dodd suggests. A strong consumer protection agency is needed, Durbin said ...

New Ways and Means chair is MBL supporter

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WASHINGTON (3/4/10)— Rep. Fortney “Pete” Stark (D-Calif.), named yesterday as new chairman of the House Ways and Means Committee, is co-sponsor of a House bill (H.R. 3380) to increase the credit union business lending cap, notes Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill. Stark also recently signed a letter, circulated to House colleagues by the H.R. 3380’s primary sponsors, that urges House leadership to add similar MBL provisions to a jobs-creation legislative package. The current House proposes a 25%-of-assets MBL cap, up from the current 12.25% limit, and would increase the "de minimis" threshold for these loans to $250,000. After Pelosi’s announcement that Stark will fill in on an interim basis as Rep. Charles Rangel (D-N.Y.) takes a leave of absence from the top post of the powerful Ways and Means panel, CUNA’s Magill underscored that CUNA will reach out to Stark to strengthen a relationship and share credit union issues.

CUNA statement urges Senate action on MBLs

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WASHINGTON (3/3/10)--The Credit Union National Association (CUNA) continues to encourage legislators to support S. 2919, the Small Business Lending Enhancement Act, calling the member business lending (MBL) legislation "a job creation bill that would not cost the taxpayers a dime and would not increase the size of government." CUNA made the comments in a statement submitted for the record of a hearing Tuesday by the Senate Banking subcommittee on economic policy, entitled “Restoring Credit to Main Street: Proposal to Fix Small Business Borrowing and Lending Problems.” In the statement, CUNA urged support of S. 2919, which would increase the credit union MBL cap from 12.25% to 25% of a credit union’s total assets and would increase the "de minimus” threshold for member business loans from $50,000 to $250,000. CUNA has estimated that the increased MBL cap would free an extra
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Inside Washington (03/02/2010)

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* WASHINGTON (3/3/10)--Minority Leader John Boehner
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(R-Ohio) visited Kemba CU in West Chester, Ohio, on Monday. Credit union officials encouraged his support for raising member business lending caps for credit unions, and standing with credit unions against overdraft protection and interchange legislation. From left are: Tom Thole, Kemba CU board member; Raymond Schaefer, Kemba board chair; Boehner; Steve Behler, Kemba President/CEO; and Jerry Ziegelmeyer, Kemba board member. (Photo provided by Kemba CU) ... * WASHINGTON (3/3/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz and National Treasury Employees Union (NTEU) President Colleen M. Kelly signed an agreement Tuesday creating an NCUA/NTEU Partnership Council. This is the first such agreement between a federal agency and NTEU responding to President Obama’s order on labor management collaboration. The council, headed by Matz and Kelly, includes six NTEU members and six NCUA management officials. The partnership recognizes employees as NCUA’s primary resource, and encourages active participation to ensure the agency delivers high quality service to credit unions and the public. The partnership also will encourage and enhance involvement of NCUA employees in the decision making process regarding issues in the workplace. The first meeting will take place this month in Washington, D.C. ... * CLEVELAND, Ohio (3/3/10)--The Federal Reserve Banks announced Tuesday that they have completed the reduction in paper check processing infrastructure that began in 2003. With the discontinuation of paper check processing at the Atlanta office on Friday, all paper check processing is now handled at the Cleveland, Ohio, office. The Atlanta office serves at the banks’ location for electronic check processing. Since 2003, the banks have reduced the number of locations where paper checks are processed from 45 offices to a single office in Cleveland. The changes were made in response to the significant rate of adoption of Check 21-enabled services and the shift from paper checks toward electronic payments. (SEE RELATED: CUNA Compliance: CUs need to review check-hold disclosures ... * WASHINGTON (3/3/10)--Donald Kohn’s pending resignation from his post as vice chairman at the Federal Reserve board is bringing back concerns over the Fed’s independence from the Obama administration. After Kohn leaves, there will be three vacancies on the Fed board (American Banker March 2). The administration would then have the opportunity to have a long-term impact on the central bank by picking the next board members. President Barack Obama nominates board members for 14-year terms. Nominations are then confirmed by the Senate. The administration said Monday it would move quickly with Kohn’s successor. Kohn has worked for the Fed for 40 years and has been a board member since 2002 ... * WASHINGTON (3/3/10)--Comptroller of the Currency John Dugan said Monday that regulators and financial institutions must protect safety and soundness over credit availability. In a speech Monday before attendees of a banking industry conference, Dugan said that regulators should err on the side of safety and soundness over longer-term enhancements to capital and liquidity requirements (American Banker March 2). His comments come as a Senate Banking subcommittee was scheduled Tuesday to discuss small business lending and credit availability. On Friday, Dugan and other regulators testified before the House Financial Services Committee on the same topic. The Credit Union National Association also was present at the hearing to encourage lawmakers to lift the caps on member business lending at credit unions ...

Bipartisan group urges House leaders on MBL cap lift

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WASHINGTON (3/3/10)--A coalition of legislators earlier this week asked House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader John Boehner (R-Ohio) to “do more to support America’s small businesses by modifying the statutory limitations that have currently prevented many credit unions from doing more to advance the economic recovery.” The letter, which was signed by 58 members of the House, specifically supported legislation introduced by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) that would lift the current 12.25% asset cap on member business loans serviced by credit unions to 25% of a given credit union’s total assets. The legislation would also increase the “de minimis” threshold for these loans to $250,000. Reps. Carolyn Maloney (D-N.Y.), Fortney Stark (D-Calif.) and Chellie Pingree (D-Me.), who were three of 34 new co-sponsors who agreed to support lifting the MBL cap following visits by credit union representatives during last week’s Governmental Affairs Conference, signed on to the letter. While “many financial institutions have pulled back on making small business loans as a result of the financial crisis” and regulators have noted that “banks—both large and small—have shrunk their business loan portfolios,” the letter noted that “credit unions remain willing to lend to their small business-owning members.” The letter also cited Credit Union National Association estimates which predict that lifting the MBL cap would result in $10 billion in new capital for small businesses, creating as many as 100,000 new jobs at no cost to American taxpayers. While the amount of small business loans would double to a total of 10% if the MBL cap is raised, the banking industry would still dominate the business loan market, with 90% of the total share of loans. “Any future jobs-creation legislation that the House considers” should include MBL legislation, the letter added.

CDFI to review its 15 year-old authorizing statute

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WASHINGTON (3/3/10)--As it enters its fifteenth year of existence, the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund is “undertaking a holistic review” of its “entire authorizing statute,” and has asked the public to comment on its operations. The CDFI Fund is inviting “potential CDFI applicants, community development trade groups and members of the general public” to comment on the CDFU, with a specific request for input on the CDFI Fund’s “Financial and Technical Assistance awards, the Native American CDFI Assistance awards, the Bank Enterprise Awards, and CDFI certification, among other areas.” In the release, CDFI Fund Director Donna Gambrell encouraged the public “to provide detailed comments that will be used to formulate future policy and legislative proposals that will increase our support to CDFIs.” The comments, which will aid the CDFI Fund as it examines whether any “technical corrections, substantive changes, or new provisions” should be added to its authorizing statute, must be made by April 1. The CDFI Fund said it is also planning to gather additional commentary through a series of “national listening sessions” that will be held in economically distressed communities. For the full release, use the resource link.

CU concerns reflect systems issues From the GAC

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WASHINGTON (3/3/10)--While the broader concerns of the credit union movement were aired and, in some cases, allayed on stage at last month’s Credit Union National Association (CUNA) Governmental Affairs Conference (GAC), there was still much on the minds of conference attendees, who ranged from volunteers, to current CEOs, to recent retirees. The big ticket items for credit unions, such as potential action on interchange fees and overdraft protections, as well as the member business lending (MBL) cap, were all concerns for Schools First FCU’s Shelley Berryman, who said that these issues had particular relevance In her home state of California. MBLs, which have been an important focus of CUNA’s work in recent weeks, were also a primary issue for Nikkei CU CEO Erick Orellana, who said that his credit union, which is currently up against the 12.25% of assets cap imposed by existing regulations, would “open the flood gates” if that cap is lifted. And while Orellana said he is concerned by the state of the corporates, he said that his credit union does not depend on the corporates for investments, opting to use their access to payment systems. The corporate situation was also on the mind of Clinchfield FCU’s Sandy Lingerfelt, who said that she did not want to see her corporate credit union, which bore little to no responsibility for the current corporate credit union situation, punished for the misdeeds of other corporates. The sometimes overarching effects of regulations are a main concern for Wichita FCU Director John Davis, who told News Now that overregulation stifles some of the work his credit union tries to do, with a lack of interpretation, understanding, and enforcement of those regulations only serving to exacerbate his credit unions's issues. However, speaking as a newly-minted industry outsider, Robert Bianchini, who recently retired after many years of service with the Oklahoma and Rhode Island credit union leagues, said that, in spite of the recent “hard times” that have befallen the economy, credit unions have “wonderful opportunities” before them, particularly with respects to their relationship with small businesses. Small business lending is “a void begging to be filled,” Bianchini added. The opinoins are the result of random person-on-the-street interviews by News Now with credit union representatives waitng to meet the National Credit Union Administration board members at a reception during the GAC.

CUNA Compliance CUs need to review check-hold disclosures

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

FHFA extends home refi program into 2011

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

NCUA liquidates Mutual Diversified Employees FCU

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

Congress this week CUs watch Senate for action

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

CUNAs Hampel to Fox News CUs hamstrung by MBL cap

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

CU net worth strong shares grow says new NCUA data

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

Federation offers how-to tips on CDCI program

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

Inside Washington (03/01/2010)

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